BOSTON—Boston Properties has spent $667.4 million to retire the outstanding mortgage debt on the former John Hancock Tower here on Clarendon Street.

The REIT defeased the mortgage loan of $640.5 million, which bore a fixed interest rate of 5.68%. The mortgage was scheduled to mature on Jan. 6, 2017. The $667.4-million required to pay off the loan early for the financing secured by 100 and 200 Clarendon St. was based on the purchase price of U.S. government securities that will generate sufficient cash flow to fund continued interest payments on the loan from the effective date of the defeasance through, and the repayment of the loan on, Oct. 6, 2016, which is the date the company could repay the loan at par. In connection with the defeasance, the mortgage and other liens on the property were extinguished and all existing collateral, including various guarantees, were released, the company states. The adjoining parking garage to the property was also part of the mortgage financing.

As a result of the defeasance, Boston Properties expects to recognize a loss from the early extinguishment of debt of approximately $23.5 million, or $0.14 per common share, in the fourth quarter of 2015.

Boston Properties' CFO Mike LaBelle tells Globest.com that the company is focused on its 2016 and 2017 debt maturities that carry above-market interest rates and are continuing to evaluate options for refinancing or repaying those maturities to secure future interest savings if possible.

"This defeasance and our ongoing interest rate hedging program are important components of our strategy," he says. "Further, we anticipate additional borrowings in the near term to replenish our cash balances as a result of the defeasance."

However, LaBelle says that he expects the defeasance of 100 and 200 Clarendon St. will likely be the only defeasance transaction it will undertake in connection with its efforts to refinance loans coming due next year and in 2017.

John Hancock was a major tenant at the tallest office tower in New England. Its last lease at the property expired at the end of the first quarter of 2015. The 62-story office building, now known as 200 Clarendon St., totals 1.73 million square feet and includes the 200,000-square-foot 120 James St. that offers boutique-styled space along with a lobby and elevator access to the larger floor plates in the 200 Clarendon St. tower.

The building was constructed in 1976 and Boston Properties acquired the property, which also includes an adjacent 2,013-space, eight-story parking garage, in 2010 for $930 million from a partnership of Normandy Real Estate Partners and Five Mile Capital Partners. According to a story published in Globest.com about the transaction, the deal included the assumption of the $640.5-million note. Normandy and Five Mile Capital purchased the building at auction a year-and-a-half earlier for $660.6 million.