How to use
Use this worksheet to compute the release price required to sell or refinance an individual asset out of a BTR or SFR portfolio loan. Each section walks the release-price formula, the paydown ratio mechanics, post-release DSCR and debt-yield headroom, and the sequencing logic for partial-sale or 1031-exchange programs.
Section 1. Release-price formula
Portfolio-loan release prices are typically computed as a paydown ratio applied to the released asset's allocated loan amount. The ratio is contractually defined and ranges from 110% to 125% on most agency, CMBS, and securitized SFR portfolio loans.
Section 2. Post-release DSCR and DY headroom
After the release, the remaining pool must clear the loan-document covenants. Test the post-release DSCR and debt yield against the loan covenants before locking the sale.
- Post-release loan balance = original balance − release price.
- Post-release NOI = original pool NOI − released-asset NOI.
- Post-release DSCR = post-release NOI / (post-release balance × debt-service constant).
- Post-release debt yield = post-release NOI / post-release balance.
- Both must clear loan-document floors (typically 1.20x to 1.25x DSCR, 7.5% to 8.5% DY for agency BTR; tighter on CMBS).
- If post-release tests fail, supplemental paydown required, increases effective release price and reduces net cash to sponsor.
Section 3. Execution-type comparison
Release-price mechanics differ across execution types. Map the mechanics before locking the loan structure, release flexibility is one of the most-overlooked structuring decisions on portfolio debt.
Portfolio-loan release-price mechanics by execution
| Execution | Typical ratio | Cap on releases | Special mechanics |
|---|---|---|---|
| Agency BTR (Fannie/Freddie) | 115% | 20% to 25% of pool | Defeasance or yield-maintenance on released portion |
| CMBS portfolio | 110% to 125% | 25% to 35% of pool | Defeasance required; substitution allowed in some pools |
| SFR single-borrower securitization | 115% to 125% | Pool-by-pool basis | Sequential or pro-rata paydown to bondholders |
| Bank / debt-fund portfolio loan | 110% to 115% | Lender discretion / negotiated | Open or closed prepay; substitution often available |
| SFR warehouse line | Advance-rate based | No cap (revolving) | Borrowing base recomputed continuously |
Section 4. Sequencing and 1031 mechanics
Multi-asset sales and 1031 exchanges out of a portfolio loan require careful sequencing. Releasing the wrong assets first can leave a remaining pool that fails covenants and forces expensive cures.
- Worst-asset-first sequencing, release the weakest assets first to improve remaining-pool quality.
- Best-asset-first sequencing, releases highest-allocated value first, frees the most cash, but stresses remaining-pool tests fastest.
- 1031 mechanics, release proceeds (less release price) flow to qualified intermediary; replacement property must carry equal-or-greater debt or trigger mortgage boot.
- Lender consent, release requests typically need 30 to 60 days lender review; some loans require lender consent for any release > 5% of pool.
- Substitution, some loans allow substitution of equivalent-quality assets in lieu of release; can preserve loan terms.
Section 5. Worked example
Walk a 200-home SFR portfolio with a $40M securitized loan, releasing 20 homes to a 1031 buyer.