Pennsylvania Real Estate Investment Trust has tapped Wells Fargo Bank to provide a $175 million revolver and a $75 million construction loan, replacing a $150 million revolver that was provided by First Union. Edward Glickman, executive v.p. and cfo, said the REIT chose this structure for the $250 million credit so it could coordinate its construction financing with its credit line, a strategy that ran afoul of the covenants on its previous facility. The REIT will now use the revolver for the preconstruction costs of a development and the construction loan for the construction phase: it then will transfer the property back to the revolver. Wells Fargo got the nod because it offered the best pricing. The three-year revolver is priced at LIBOR plus 1.3-1.8% and the two-year construction loan is priced at LIBOR plus 195 basis points. FleetBoston Financial, Summit Bank, First Trust and Wilmington Trust-four banks that were part of its original bank group- also participated in the syndicate. During the construction facility's two-year term, the REIT can borrow up to $75 million for new projects. Each borrowing will be accounted for as a separate construction loan and will have a two-year maturity.
By including the construction line and the credit line in the same facility, the REIT expects be able to access financing and complete its developments more quickly. It obtained the larger line for its investment pipeline, which is geared toward developing shopping centers. "We think that's enough financing to build out our pipeline," Glickman said. It has four properties with a value of about $70 million in predevelopment stages.