Spitzer Enterprises Secures Rare IO CMBS for CBD Office

WASHINGTON, DC-Spitzer Enterprises has secured a $134.3 million mortgage to refinance its 13-story, 417,383-square foot office located on 1615 L St., NW. Rael Gervis of Meridian Capital Group, LLC negotiated the financing--a 10-year CMBS loan featuring a fixed-rate of 4.61% and interest-only payments for the full term.

In a prepared statement, Gervis referred to the "very favorable terms" of the CMBS "despite the volatile interest rate environment."

While the strong sponsorship and solid property location no doubt played a role in the transaction, such transactions are becoming more common in the CMBS space in what is turning out to be a very good year in terms of origination levels—and, as this transaction illustrates, structures and terms.

In recent months there has been a slow but steady emergence of interest-only CMBS loans, according to David Kessler, director of the National Commercial Real Estate Practice and Co-Managing Partner of CohnReznick's Bethesda office. Kessler points to an interesting statistic to highlight interest-only CMBS loan growth: "for the half of 2013, the percentage of IO increased 20% year over year for multifamily and 7% for office and retail."

Kelly M. Wrenn, a partner at Ballard Spahr LLP dubs the re-emergence of IO CMBS as " a function of the increased competition among CMBS shops, at least in part."

"The offering of IO to prospective borrowers is a function of CMBS' attempts to win deals. I have seen IO deals with a period of two years and in one case I have heard of a five-year period."

And now he's seen one for 10 years.