Realty Income Corp. has completed a new $250 million credit facility with a reduced borrowing rate, thanks to an improved borrowing environment for real estate investment trusts. "The reduced rate is associated with a tightening of pricing in the REIT industry lending market since we last did our facility in 1999," said Paul Muerer, executive, v.p., cfo and treasurer, who also speculated that the pricing improvement was based on a positive view of the company by the banks. The line is priced at an all-in drawn rate of LIBOR plus 120 basis points, while two previous lines stood at LIBOR plus 145 basis points. The new facility is attached to a ratings-based grid and Realty Income's BBB-/Baa3 ratings are in investment-grade land, Muerer explained. He added that the company's ratings have remained unchanged since being first-rated in 1996.
"We were pleased with three things," Muerer added. "One is the pricing and two is that we maintained our existing bank relationships." He explained that six out of seven banks chose to stay in on the facility, demonstrating a healthy relationship between the lenders and the company. Only Bank of the West chose not to rejoin the list of lenders, probably because of the bank's incongruent industry targets, he stated. Thirdly, "We fostered new lending relationships," he added. BANK ONE, Chevy Chase Bank, and US Bank are new lenders to the nine-bank syndicate. Wells Fargo Bank and Bank of New York co-lead the line. "The whole process was a pleasure," he said of the facility's implementation.
The $250 million, unsecured three-year revolver replaces a $200 million revolver led by BoNY and a $25 million revolver led by Bank of Montreal, both set to expire next year. Muerer said that Realty Income wanted to complete the deal by October to beat a year-end push in the loan market.