Corporate Office Properties Trust OFC – COPT – a Columbia-based office real estate investment trust or “REIT” has entered into a seven-year term loan agreement to pre-finance its 2016 debt obligations. Notably, the agreement facilitates the company to raise a total amount of $250 million.
Further, the term loan comes with a delayed draw feature, which allows COPT to withdraw pre-specified amounts of the total available loan facility at contractual intervals. In fact, the company has already withdrawn $100 million to repay a prior term-loan debt that was scheduled to mature in Mar 2016. Moreover, the remaining $150 million will be drawn in July to partially refinance a secured debt due on Jul 1, 2016.
Additionally, the term loan has a variable interest rate, which is pegged at LIBOR plus a spread within 1.40−2.35%. Notably, such spread is subject to change in the company’s credit rating.
More importantly, the company has entered into an interest rate hedge to fix LIBOR at 190 basis points (commencing Sep 1, 2016), thereby limiting its exposure to fluctuations in LIBOR. Further, based on the company’s current credit rating, the term loan commands an interest of 3.70%.
We believe the new term loan will help COPT to meet its debt obligations at favorable rates.
This Zacks Rank #3 (Hold) stock focuses on office and data center properties that are mainly placed in big office parks positioned near knowledge-based government demand drivers as well as in submarkets in the Greater Washington, DC/Baltimore area. The company had 164 office properties in its portfolio, spanning 17.5 million rentable square feet, as of Sep 30, 2015.
Investors interested in the REIT space can consider Arbor Realty Trust Inc. ABR, Mack-Cali Realty Corp. CLI and Hersha Hospitality Trust HT. All these stocks sport a Zacks Rank #1 (Strong Buy).
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