LaSalle Hotel Properties has a new $300 million senior unsecured credit facility that will give the real estate investment trust immediate access to funds for future property acquisitions. "With $300 million in capital you can really go after what we call the bigger game hotels, two or three hundred million properties," said Raymond Martz, LaSalle's cfo, adding LaSalle believes significant opportunities will emerge during the next 12 to 18 months.
The new facility gives LaSalle the possibility to borrow on a variable rate in addition to its fixed rate debt. The variable rate can be adjusted on a 30, 60 and 90 day basis while "with a fixed rate you might be locked in for years," Martz noted. LaSalle always tries to keep about 40% of its borrowings on a variable rate. "We are not going to make a bet on the interest rate curve and we are not going to add additional fixed costs to our business," he added. After the Sept. 11 terrorist attacks, a combined fixed-variable strategy allowed the company to have one of the lowest borrowing costs in the entire industry, he noted. With an unsecured facility LaSalle will also cut costs by saving on mortgage recording taxes.
The new facility replaces a $215 million revolver. Pricing of the facility has stayed unchanged and varies on a grid tied to leverage from LIBOR plus 1 1/2% to LIBOR plus 2 3/4%. LaSalle has no immediate plans to draw on the facility, but considered it a good time to borrow given the company's favorable financial situation.
The new revolver is led by Bank of Montreal and Bank of America. The two banks also led LaSalle's previous facility. "We could have played the game where you try to go to your lowest bidder, or you try to play one bank against another bank, but we don't like to play that game," Martz said. Instead, LaSalle relies on relationships. "We think it is important to reward the bankers that stood by us during the good and bad times." All the existing lenders rolled over into the new revolver.