$110M in Financing Closes for 214 KSF DC Office Property
- Jul 09, 2013
The Washington Building, a 214,000-square-foot office destination in Washington, D.C., offers the elements lenders love, so CBRE Capital Markets had more than a few offers in the process of arranging $110.2 million financing for the Class A property on behalf of borrower Clarion Partners.
SunTrust Bank ultimately sealed the deal, coming through with a seven-year loan featuring a long-term rate of approximately 3.5 percent and an option to extend to 10 years, for Clarion, which owns the asset at 1440 New York Ave., NW, on behalf of a pension fund client.
From a lender’s perspective, the 11-story Washington Building is hard to ignore. Originally developed in 1927, the high-quality tower stands in a prime location–it sits just a stone’s throw from the U.S. Department of the Treasury, which is right next door to the White House–in one of the top office markets in the country, and its office square footage has been fully occupied by Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates for the last two decades. And it certainly doesn’t hurt that the law firm committed to staying put in the building in 2011 with the signing of a 15-year lease renewal and expansion. “The combination led to aggressive competition from life companies and banks, and, despite recent market turmoil, CBRE was able to secure a favorable interest rate,” Joe Donato, vice chairman with CBRE, said in a prepared statement.
Lenders’ preference for well-sponsored, well-leased, well-located, premier properties won’t go away any time soon, but change is afoot among borrowers.
“Since June 18th, U.S. Treasury yields have increased by approximately 50 bps and yields on new CMBS and corporate bond offerings widened by approximately 25 bps, which has caused the cost of borrowing to increase by approximately 75 bps,” Donato told Commercial Property Executive. “As such, borrowers are contemplating the merits of shorter term financing–5 to 7 years–to offset the increased cost of borrowing versus the security of locking in long term financing–10+ years–at rates which, although 75 bps higher, are still attractive from a historical perspective.”