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7/24/15
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Quantum Capital Partners has secured $34 mil in long-term debt to refinance 606 S. Olive Street, a 299k sf office building overlooking Pershing Square in Downtown Los Angeles.
The 24-story office building was built in 1968 for City National Bank, and at the time was one of the tallest buildings in Downtown Los Angeles. The building is currently 98 percent leased with 60 percent of the rent roll leased to the GSA and non-profit organizations.
The 15-year financing, which was fixed at 3.50 percent, was originated by John Hancock Life Insurance Company. The loan is amortized over 30 years.
The borrower, an LA-based investor operating as 606 Olive LLC, has owned the property since 2003. They faced a significant defeasance prepayment penalty if they refinanced the CMBS loan prior to May 2015. They were also fearful of the anticipated rise in interest rates during the first two quarters of 2015, according to Quantum Capital Partners Managing Directors Jonathan Hakakha and Mike Yim who arranged the financing.
“We were given the task late last year to secure a loan that could not close for approximately half a year,” said Hakakha. “Usually, we’re asked to close a loan as quickly as possible. With 606 Olive, it was the opposite. We identified a Life Company in John Hancock willing to offer a five-month forward rate lock so the borrowers would not only avoid the risk of rising interest rates, but close at a time that would avoid the prepayment penalty. “We rate locked at a very opportune time. During the five-month rate lock period, the 15-year interpolated Treasury Bill rose by 18 basis points. The cost of the forward rate lock was a fraction of that amount,” said Hakakha.
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