Erika Morphy is co-editor of Debt and Equity Journal, from which this article is excerpted.

Kennett Square, PA—Chatham Financial, a specialty finance firm that provides defeasance services, has structured a $150-million defeasance transaction for the L’Enfant Plaza in Washington, DC. The deal is not noteworthy for its size, although it is a large transaction, or for the building itself, one landmark out of many in the heart of the city. Rather, it is significant because the borrower, the JBG Cos., recovered more than $590,000 of residual value at the maturity of the defeasance.

Since early 2005, Chatham has been sharing 75% of the residual value of interest earned on securities that have been purchased to defease CMBS transactions. This amount could be miniscule, says Jodi Eppler, director of Chatham’s defeasance service, or it could be a significant number–depending on the size and term of the loan.

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