The Right Strategy
Our Client had been presented with a Commitment Letter from its bank for financing on its retail center. The Client thought it would be prudent to fix the rate and asked Swap Negotiators to assist in this process. As a part of our due diligence, we performed an analysis on the proposed swap pricing and found out that the bank had included a high profit spread and had also built the cost of the floor into the swap. We understood that the Client was looking at this property as a possible short term hold and explained that the floor and the spread would substantially drive up any early termination costs resulting from the sale.
The Client determined that the risk of prepayment was greater than the risk of rate movement and did not enter into the swap. Because there was no transaction, there were no fees charged.
Retail Center, Kissimmee, FL