Defeasance is most commonly seen on prepayments of securitized CMBS loans. Rather than a simple prepayment calculation, the defeasance is really a substitution of collateral. A portfolio of securities, usually Treasurys, replaces the underlying real estate as the collateral and provides the payments to cover the debt service.
The Pensford defeasance team is comprised of experienced professionals with more than 1,000 defeasances totaling more than $10B. We’ve worked on defeasances across the spectrum of size and complexity, from multi-property defeasances for an IPO to single asset financings. We guide our clients through the entire defeasance transaction, ensuring a seamless closing at the lowest possible cost.
Unlike our competitors, we never pay a referral fee to a Servicer. And unlike our competitors, we always share any residual value from the portfolio with our clients. We provide full transparency and will never have a conflict of interest with a client.
- Structuring the Defeasance Portfolio – we utilize extremely sophisticated trading software to generate the most efficient portfolio of securities available.
- Documentation – we coordinate the entire documentation process that frequently involves Borrower, Lender, Buyer, CPA’s, brokerage houses, and attorneys.
- Purchasing of Securities – using our extensive institutional contacts, we hold a competitive bidding process for the securities portfolio, ensuring our clients the lowest cost possible. We never receive a brokerage fee or commission.
- Residual and Float – we provide transparency around the residual value generated from the Defeasance process and return a portion of those savings to our clients.
- Successor Borrower – we establish the Successor Borrower entity, which assumes the liability for all financial obligations of the loan. This relieves our customers of any short-fall liability and allows for extinguishment of debt via the defeasance.
We know that closing the defeasance is critical to your refinance or sale. Pensford delivers a smooth closing at the lowest cost possible, allowing you to focus on the other important aspects of the transaction.