The refinancing significantly reduces the REIT's interest payments. With the new loan priced at 285 basis points over one-month LIBOR, the initial rate is 5.03%, with a cap of 6.6%. The loan on the 52-story building along the Chicago River also is interest-only, and two one-year extensions are possible.
The previous $150.8-million first mortgage from Westdeutsche ImmobilienBank carried an 8% interest rate. However, a $30.3-million mezzanine loan bore a hefty 11.75% interest rate. The REIT also will use $8.96 million to retire debt from Security Capital Preferred Growth Inc., which costs Prime Group 12.75%.
"The cash flow effect from the Lehman loan amounts to a total decrease in capital outlays during 2003 of $12.4 million, which includes principal, interest, and escrow reductions," says co-president and CFO Louis G. Conforti. "It also illustrates our ability to negotiate in a fair and equitable fashion with lending institutions."
In addition to paying down debt, Prime Group says it will escrow $2.5 million for real estate taxes, insurance and capital improvements.
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