Defeasance Costs
Commercial Defeasance, LLC has assembled a strategic network of third-party service providers to simplify the defeasance process and lower the transaction costs. A defeasance transaction can include as many as 25 people, and our deal management teams actively coordinate all the parties involved. By working tirelessly to ensure that the closing occurs on the borrower’s schedule, we help our clients avoid costly delays.
The cost of a defeasance is comprised of the cost of the government securities and third party transaction fees. The cost to purchase the government securities is a function of the difference between the interest rate on the loan and the yield on the government securities. Unless the borrower purchases hedging instruments at an additional cost, the final securities price can not be determined until the securities are purchased at closing.
If you’re interested in locking in the cost of the securities in advance of closing, please contact us. Our affiliate, Custom Hedging Solutions, LLC (www.hedgewithease.com), can advise you regarding available hedging solutions.
Securities Purchase:
The single largest cost of any defeasance transaction is the cost to purchase the securities. Commercial Defeasance structures and optimizes each portfolio of government securities internally to incorporate the highest yielding collateral allowed under the loan documents and available in the marketplace. Our commitment to cost savings, use of advanced portfolio optimization technology and vast experience at structuring defeasance portfolios combine to yield a highly efficient portfolio of securities for our clients. Because we have the technology to monitor the broker's pricing relative to market pricing, we are the only company that confirms in writing that there will be no hidden broker fees in the securities cost. This transparency can help save each borrower thousands of dollars on the cost of the securities alone.
Click here to see why a negotiated, fixed broker fee arrangement is better than a so-called competitive bid process.
Average Third Party Fees
| Servicer – reviews and processes defeasance request |
$7,500 - $30,000 |
| Special Servicer - (if required) approves defeasance |
$0 - $5,000 |
| Custodian/Securities Intermediary - holds the securities and makes ongoing P&I payments |
$4,000 - $12,000 |
| Servicer's Counsel – drafts defeasance documents, provides REMIC opinion, and ensures all defeasance requirements are met |
$12,500 - $25,000 |
| Accountant – verifies that the securities are sufficient to meet the ongoing principal and interest obligations of the loan |
$3,500 |
| Successor Borrower – assumes securities and defeased loan obligations, provides required due diligence and opinions |
$4,000 - $11,000 |
| Rating Agency – (if required) reviews documentation and issues “no-downgrade” letter |
$0 - $15,000 |
| Commercial Defeasance – manages every step of the process |
$13,000 - $25,000 |
| Total |
$44,500 - $124,500 |
Note: Defeasance closing fee summary does not account for borrower legal fees, broker fees or title company escrow fees.
Contact us today... to Defease With Ease ®.