PHILADELPHIA-Locally based Pennsylvania Real Estate Investment Trust obtained an amendment to its $500-million credit facility with Wells Fargo Bank that lowers its interest rate and also extends the term. The applicable rate is subject to change, depending on PREIT's leverage, but, based on its current leverage ratio, the rate drops to 1.05% over Libor, versus the former rate of 1.75% over Libor.
Under the amendment, the interest rate ranges from 1.05% to 1.55% per annum over Libor, depending on the REIT's leverage. Previously, the range was between 1.5% and 2.5% over Libor. The new cap rate in calculating gross asset value is 8.25%, compared with a previous cap rate that ranged between 9% and 11%.
In addition, the amended facility will run until Nov. 20, 2007 with an option to extend for 14 months. Previously, the credit facility terminated on Nov. 20, 2006 and had a 12-month extension option. The facility fee also has the potential for a reduction under the amendment. The fee is now between 15 and 20 basis points of the total lender commitments under the facility, compared with a previous range of between 15 and 30 basis points multiplied by the unused portion of the facility.
The amount of the facility, $500 million, remains the same, and, under prescribed conditions, PREIT has the option to increase it to $650 million. Currently, $271 million is outstanding. Robert McCadden, PREIT's CFO, said the new terms provide greater financial flexibility and reflect the lender's confidence in the company's operating performance. PREIT's portfolio aggregates approximately 32.1 million sf and consists of 53 shopping mall and power center properties in 12 states.
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