A number of commercial real estate companies are seeking and receiving lines of credit because they can get better terms than the lines they replace.
For example, Government Properties Income Trust, Newton, Mass., is replacing a $250 million secured revolving bank credit facility with a $500 million unsecured facility. The original line of credit had a maturity date of April 24, 2012. The new line matures Oct. 28, 2013, with an option to extend for one year.
Furthermore, it has a feature that allows for the maximum to be increased to $1 billion in certain circumstances.
Interest paid on drawings is set at Libor plus 210 basis points, subject to adjustments based on the company's credit ratings.
The joint lead arrangers for the line of credit are Wells Fargo Securities LLC and Banc of America Securities LLC. The number of participating lenders grew from eight to 19.
Equity One Inc., North Miami Beach, Fla., exercised its accordion feature and increased its unsecured revolving credit facility from $272 million up to $400 million. Plus, four new banks joined syndicate and several existing lenders increased their commitments.
Jackson, Miss.-based Parkway Properties Inc. had set a target aggregate commitment of $190 million. Instead, it found eight lenders willing to make a total $320 million unsecured revolving credit facility (although it is only taking its target amount).
While the amount offered exceeded its goal, Parkway is reducing the capacity of its current facility to one that is "sized to meet our needs while still providing future flexibility through an accordion option" of $50 million, said chief financial officer Richard Hickson.
In addition, Parkway got a commitment for a $10 million working capital facility.
These will replace a revolving credit facility and term loan set to mature on April 27, 2011. Associated with the old line is a $100 million interest rate swap which expires at March 31, 2011 and locks Libor at 3.653%. Parkway does not anticipate the swap will be extinguished prior to its scheduled expiration.
Wells Fargo Securities LLC and JP Morgan Securities LLC are the joint lead arrangers and joint book runners. PNC Bank is the sole provider of the working capital line.
"We elected to renew our credit facility early due to favorable market conditions and significant current demand for the credit from the lender community," said Parkway's president and chief executive Steven Rogers.
Developers Diversified Realty Corp., Beachwood, Ohio, refinanced its two senior unsecured revolving credit facilities.
The first is for $950 million with an accordion for $1.2 billion, replacing a $1.25 million line maturing in June 2011. JPMorgan Securities and Wells Fargo Securities arranged this line.
The other line, provide solely by PNC Bank, is for $64 million, replacing a $75 million line set to mature next June.
Both new lines have 40-month terms due to expire on Feb. 28, 2014.
"I am very pleased that we have closed this transaction almost nine months before maturity, as another important step in lowering our risk profile," said DDR president and CEO Daniel Hurwitz.
DDR modified its secured term loan, whose agent is KeyBank NA, and made a voluntary prepayment of $200 million on it, leaving an outstanding balance of $600 million. The pricing on the term loan remains unchanged at Libor plus 120 basis points and the final maturity remains Feb. 20, 2012.
David Oakes, DDR's chief financial officer, stated, "We are pleased to complete this major refinancing, which is consistent with our commitment to extending duration while also lowering our reliance on short-term bank debt. We are appreciative of the support shown by our strong bank relationships which allowed us to complete these transactions and do so at terms better than our expectations earlier in the year."
Chatham Lodging Trust, Palm Beach, Fla., closed on an $85 million secured line of credit, with an accordion to expand to $110 million. It has a three-year term, with an interest rate at Libor plus a margin based on the company's leverage ratio.
Barclays Capital and Regions Capital Markets are the lead arrangers.
Cleveland's Associated Estates Realty Corp. has closed on a $250 million unsecured credit facility. It has a three-year term with one-year extension option. PNC Capital Markets and Wells Fargo Securities were co-lead arrangers. It replaces a $150 million line of credit.
