BRE Buying More Notes, Closes on $620M Facility

SAN FRANCISCO-Hot on the heels of acquiring $290 million of 2011 and 2013 senior notes BRE Properties on Wednesday commenced an offer for $300 million of 2009 and 2010 senior notes. Also this week, the apartment REIT closed on a $620 million secured credit facility that it intends to use for the repayment of outstanding debt obligations and general corporate purposes.

The cash tender offer is for any and all of its outstanding 5.75% Senior Notes due 2009 and any and all of its outstanding 4.875% Senior Notes due 2010. There is currently $150 million aggregate principal amount outstanding for each of set of notes.

The tender offer expires on Wednesday, April 15. BRE is offering to pay 100% of face value plus accrued and unpaid interest. Banc of America Securities LLC and J.P. Morgan Securities Inc. are the dealer managers for the offer.

The loan facility consists of two 10-year, $310-million loans originated by Deutsche Bank Berkshire Mortgage for repurchase by Fannie Mae. The first was drawn in full upon closing while the second loan is expected to be drawn on or about August 4, 2009.

There is an interest-only period for a portion of the term for both tranches, with annual payments of principal thereafter following a 30-year amortization schedule. The effective composite annual cost of debt is 5.6%, inclusive of rate-hedging transactions.

Collateral for the facility comprises 15 multifamily properties totaling 4,651 units. The facility provides for collateral substitutions and releases upon certain conditions.

BRE Properties has been working to concentrate its portfolio in coastal, supply-constrained markets of California and Seattle. It currently owns and manages 21,196 units in 72 properties in California, Arizona and Washington State. It owns joint venture interests in an additional 13 properties with a combined 4,080 units and has another 2,077 units in various stages of development.

In February, the company put two of its four remaining Sacramento assets on the market. The REIT retained Apartment Realty Advisors to market and sell 752 units at two properties, Overlook at Blue Ravine in Folsom, CA, and Arbor Pointe in Sacramento. Neither the assets nor the seller are distressed. BRE revealed its plan to exit the Sacramento some 18 months ago. BRE sold three Sacramento-area properties in the first half of last year at or below a 6% cap rate on trailing NOI. One year later, cap rates are cresting 7%, market sources tell GlobeSt.com.

In late March and early April, investors tendered $291 million (76%) of the 7.45% Senior Notes due 2011 and 7.125% Senior Notes due 2013. BRE paid 100% of the principal amount for the 2011 notes and 98% of the principal amount for the 2013 notes. The offer was for $250 million of 7.45% Senior Notes due 2011 and $130 million of 7.125% Senior Notes due 2013. In December, the company purchased $10.4 million of its $460 million of 4.125% convertible senior unsecured notes.