Allegiancy closes on $16.5 million refinancing for Fairfax Building in Richmond
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Allegiancy, a Richmond-based commercial real estate asset manager, has closed on a $16.5 million refinancing for the Fairfax Building in Richmond.
The company said in a press release that the transaction extends the maturity date of the mortgage and frees up nearly $500,000 in annual cash flow.
The Fairfax Building is a Class A, 148,812-square-foot suburban office building on Midlothian Turnpike in southwest Richmond. According to Allegiancy, the building is 98 percent leased and has maintained occupancy above 95 percent since its acquisition in 2006.
The loan on the property was set to mature in June 2016, so refinancing early incurred a pre-payment penalty. Yet looking ahead, Allegiancy asset managers said they determined that major lease expirations at the property, coupled with the high volume of commercial mortgage backed-securities (CMBS) maturing in 2016 and 2017, presented risks. When considering refinancing, Allegiancy determined that the benefits outweighed the costs.
“The Fairfax Building is 60 percent leased to two major tenants [Reckitt Benckiser Pharmaceutic and SunTrust] with leases expiring in 2017. This would have made a refinance at mortgage maturity nearly impossible. Therefore, the property needed to be refinanced far enough in advance of the lease expirations for a lender to be able to give credit for those leases,” Allegiancy President Chris Sadler said in a statement.
“Our financial analysis showed that the pre-payment penalty would be recovered in lower mortgage payments, due to a lower interest rate, in about 24 months,” he added.
