Boykin Lodging has entered into an USD83 million (notional) interest-rate swap with Fleet National Bank. The notional size of the swap matches the outstanding floating-rate debt on the Cleveland real estate investment trust's USD108 million term loan, provided by Lehman Brothers, said Paul O'Neil, cfo and treasurer. "Rates have dropped significantly over the last several months and we thought that this was the best time to lock in attractively low rates and minimize interest rate volatility," he noted. "We are a real estate company, not a bank, so we didn't want to have to bet on rate movement," he added.
Under the terms of the two-year swap, Boykin will pay 7.32% and receive a margin over one-month LIBOR. The REIT selected Fleet as its counterparty because it offered the most favorable terms, said O'Neil, declining to elaborate. Lehman Brothers, which funded the term loan, was also considered. Fleet is one of the participating lenders in Boykin's USD100 million revolving credit line, led by Wells Fargo Bank.
With the completion of this interest-rate swap, about 66% of Boykin's debt is fixed-rate, with an average interest rate of approximately 7.1%, O'Neil said. The REIT, which owns 32 full-service upscale commercial resort hotels in the U.S., including Doubletree, Marriott, Hilton and Radisson, has total assets of approximately USD600 million, of which approximately 51% represents debt.
