$21m defeasance closed on Second Ave. building.

Commercial Defeasance, LLC recently structured and closed a $21,100,000 defeasance transaction on behalf of Broadway Management Company.

The defeased property, Diplomat Centre, is a 130,000 s/f class B office building. The property is located at 820 Second Ave. New York, NY. The defeasance enabled Broadway Management Company to sell the property to Second 820 Owner, LLC

Charles Herzka, chief operating officer of Broadway Management Company, said, "Our defeasance transaction could not have been smoother. Dawn Reinhardt, Nora Warren and the rest of the Commercial Defeasance team described the process to us, advised us as to what we had to do and kept us updated through the entire transaction."

In order to sell or refinance, a CMBS borrower must navigate the complex defeasance process, as nearly all fixed-rate conduit loans originated since 1998 prohibit a simple cash prepayment. Defeasance is a substitution of collateral in which a portfolio of government securities replaces the property as the collateral. Redemption of principal and interest from the securities pays all remaining debt service, so the note technically is still in place but is repaid from the securities purchased.