Apartment Income REIT (AIR) closed a new $1.4 billion credit facility, providing four-to-five-year money at a current all-in cost of 1.6%. The new term loans refund the company’s existing term loan with a current cost of 2.6%. The transaction lowers 2021 interest expense expectations by $2.5 million, increasing FFO by an equal amount, or $0.015 per share. AIR’s leverage remains unchanged because the facility was used to refund existing debt.
The facility is comprised of a $600 million revolving credit facility and $800 million of variable rate term loans. Term loan proceeds are being used to extend the maturity of AIR’s current $350 million term loan, to repay $213 million of property debt with a weighted-average interest rate of 3.7% and to reduce borrowings on AIR’s revolving credit facility. The $213 million property debt repayment increases AIR’s pool of properties unencumbered by debt by more than $530 million, making the total pool approximately $2.9 billion.
The $800 million of term loans are priced at a LIBOR spread of 100 basis points, with a LIBOR floor of 0%, which is 98 basis points lower than AIR’s previous term loan. Borrowing costs under the new revolving credit facility are 10 basis points lower than under AIR’s previous facility. To further AIR’s environmental, social and governance (ESG) initiatives, the facility allows for an additional one basis point margin reduction if certain ESG targets are achieved. The term of the revolver ends in April 2025, with two six-month extension options.
The term loans mature on the following schedule:
- $150 million in December 2023, with two one-year extension options
- $300 million in December 2024, with a one-year extension option
- $150 million in December 2025
- $200 million in April 2026
The term loans were structured to maintain AIR’s balanced maturity ladder and also to maximize flexibility through the ability to prepay freely and extend the maturity date of shorter duration loans.
The facility is held by 15 U.S. and international banks. PNC Capital Markets and Wells Fargo Securities led the syndication as joint bookrunners and lead arrangers. PNC Bank is also the administrative agent and sustainability agent for the facility and Wells Fargo is the syndication agent. Bank of the West, Regions Capital Markets and U.S. Bank are joint lead arrangers and co-syndication agents. Bank of America, Citibank, the Bank of Nova Scotia and TD Bank are co-documentation agents. JPMorgan Chase, Peoples United Bank, Zions First National Bank, Associated Bank, Morgan Stanley Bank and First Hawaiian Bank also are participating in the facility.
“We are very pleased with the execution and great work by PNC and Wells Fargo,” Paul Beldin, CFO of AIR, said. “The syndicate was oversubscribed and includes five banks new to the AIR credit, a powerful endorsement of AIR’s focused business model with low leverage and low execution risk.”