Duke Realty Corporation (DRE), a real estate investment trust (REIT), has recently renewed its existing $850 million unsecured revolving credit facility scheduled to mature in February 2013 in its concerted effort to strengthen its liquidity and reduce refinancing risk.
J.P. Morgan Securities LLC, a division of JPMorgan Chase & Co. (JPM), and Wells Fargo Securities, LLC, part of Wells Fargo & Company (WFC) were the joint Lead Arrangers and joint Book Runners for the transaction.
The renewed credit facility is scheduled to mature in December 2015 and has an accordion feature that would enable Duke Realty to extend the maturity by an additional year subject to the fulfillment of certain conditions. At the same time, the company can increase the borrowing capacity of the credit facility by $200 million – $400 million to $1.05 billion – $1.25 billion.
Besides extending the debt maturity and improving the borrowing capacity of the company, the renewed credit facility reduces capital outflow with a significantly low interest rate. The new credit facility bears an interest at LIBOR plus 125 basis points, while that of the erstwhile credit facility was LIBOR plus 275 basis points.
The renewed credit line provides greater financial flexibility to Duke Realty and increases its liquidity for potential acquisitions and development opportunities in core markets. Duke Realty is currently repositioning its portfolio and has exited certain markets in an attempt to concentrate in areas where it already has a strong presence.
The company has temporarily closed its operations in some of its newest markets including Austin, San Antonio, Seattle, and Newport Beach. The portfolio repositioning is likely to improve the internal growth metrics, enabling the company to emerge stronger once the real estate markets fully recover.
Duke Realty is one of the largest commercial real estate companies in the U.S. For over 35 years, the company has leveraged its local presence and its integrated platform to drive returns, and has established itself as a premier publicly traded real estate developer in the country.
We maintain our long-term ‘Neutral’ recommendation for Duke Realty, which currently retains a Zacks #3 Rank that translates into a short-term ‘Hold’ rating.
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