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PORTLAND-The 385,000-sf class A office building at 200 Market St. has been refinanced to the tune of $61 million. The owners, Russell Development Co. and Regence BlueCross and BlueShield of Oregon, used most of the proceeds from the new AIG loan for defeasance of the previous $50.25-million loan that was funded in 1998 by Goldman Sachs and securitized shortly thereafter.
The 200 Market Building offers 384,357 sf of class A space at the south end of the Portland CBD. Built in 1973, the 19-story building has averaged nearly 99% occupancy over the past 15 years and is currently 99% leased. Regence Blue Cross Blue Shield of Oregon is one of the main tenants in the building. Russell and Regence acquired the building in 1989 for $20 million and completely remodeled it for another $20 million. Tom Usher of Cushman & Wakefield has the leasing assignment.
As with the new loan, the old loan had a 10-year term based on a 30-year amortization schedule, which means only a small percentage of the total loan was actually paid off during the eight years it was in effect. The new loan is set up the same way, but also includes an interest-only period. Excess funds from the new loan likely will be used for building maintenance and tenant improvements.
The loan was arranged by John Petersen and Greg Wellington of the local office of CBRE | Melody. Petersen tells GlobeSt.com that the borrower locked in the interest rate on the new loan back in August but did not complete the defeasance process for the old loan until last month, when rates were significantly higher. As a result, the borrower not only saved on the interest rate of the new loan but also saved on the defeasance, which was done with treasuries through Chatham Financial Corp.
Petersen deferred specifics on the loan rate to John Russell of Russell Development Co., who could not be reached Wednesday for comment. In August when the rate was locked, the 10-year treasury was in the low 4% range. Assuming a point spread in the low 100s, the interest rate on the new loan is somewhere in the low 5% range.
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