COLUMBIA, MD—Corporate Office Properties Trust has secured a $250 million term loan to prefund some of its upcoming debt maturities in 2016. At the same time, it has also secured an interest rate hedge to safeguard its financial planning.
The loan has a seven-year term with a delayed draw feature and a variable interest rate of LIBOR plus 1.40% to 2.35%, depending on COPT's credit rating.
The hedge fixes LIBOR at 190 basis points starting on September 1, 2016 for the term of the loan, effectively fixing Corporate Office Property Trust's interest rate at 3.70%.
COPT has already tapped $100 million in proceeds from loan to repay $100 million of term loan debt that scheduled to mature in March 2016. It plans to draw the remaining funds in July to refinance $150 million of $162.5 million secured debt that is payable at par on July 1, 2016. That secured debt bears interest at a fixed rate of 7.25%.
This loan, debt refinancing and interest rate hedge are part of the REIT's ongoing efforts to shore up its balance sheet and keep its debt financing costs as low as possible.
In the third quarter, the REIT transferred two properties to the lender extinguishing a $150 million mortgage -- a move that resulted in the large gain on debt extinguishment for the quarter and was the major difference between its FFO according to NAREIT and its FFO as adjusted for comparability, according to comments made by CFO Anthony Mifsud in the recent earnings call.
Now, COPT's debt maturity schedule is "well laddered with a weighted average debt maturity of 5.9 years," he said in the call.
Just to note that COPT is on top of the comments it makes in its earnings call, Mifsud also reminded listeners that the REIT has $162 million of secured debt pre-payable at par beginning on July 1. "The loan bears interest at 7.25% and we have several alternatives for refinancing that debt when it comes due," he said.
The REIT is also working on some $145 million of investment sales that it expects to see close by the end of the year, according to CEO Roger Waesche during the Q3 earnings conference call.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
