Washington REIT (WRE) Amends Term Loan And Credit Facility

Washington Real Estate Investment Trust, also known as Washington REIT, (NYSE:WRE) , announced an amended credit agreement that expands and extends the company’s existing $600-million unsecured revolving credit facility to $700 million. Further, the company replaced an existing $150-million unsecured term loan with a $250-million unsecured term loan. The move enhances Washington REIT’s balance sheet and will support its growth plans.

Importantly, the previous credit facility, which was set to expire on Jun 22, 2019, is now slated to mature in four years on Mar 29, 2022, unless one of the two six-month extension options is exercised to further extend the loan. Moreover, the newly refinanced loan will bear interest at a rate of LIBOR plus a margin that will be determined by the company’s then unsecured debt rating.

In addition, the company has refinanced a seven-year $150-million loan due on Jul 21, 2023, with a $250-million loan with a term of five years. In fact, the company has entered into an interest rate swap arrangement that has reduced the interest spread by 55 basis points (bps).

Specifically, Washington REIT will pay a fixed rate of 2.31% per annum on the $150-million part of the term loan and 3.71% per annum on the remaining $100 million. While swap relating to the $150-million portion is currently in effect, the 3.71% swap will be effective from Jun 29, 2018.

Moreover, Washington REIT can exercise an accordion feature, conditioned on lender approval that can increase its aggregate credit facility top $1.5 billion. The company plans to use $100 million from the expanded term loan to pay down a portion of the revolving credit facility.

Per management, this refinancing activity provides it with an appealing source of capital and boosts flexibility. It has enabled the company to use available capital optimally and will likely benefit shareholders.

The refinancing is a strategic fit for this company as it has reduced interest expenses and extended maturities of loans. Furthermore, the well-favored financial covenants available to the company reflect its improved access to the debt markets and helps meet the firm’s financial obligations in an efficient way.

The company currently carries a Zacks Rank #3 (Hold). In the past month, the company’s shares have gained 6.5%, while its industry registered growth of 2.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

A few better-ranked stocks from the real estate space include Arbor Realty Trust (NYSE:ABR) , Investor Real Estate Trust (NYSE:IRET) and Extra Space Storage Inc. (NYSE:EXR) . All three stocks carry a Zacks Rank of 2 (Buy).

Arbor Realty Trust’s Zacks Consensus Estimates for 2018 funds from operations (FFO) per share have remained unchanged at 90 cents over the past month. Its share price has risen 2.9% in three months’ time.

Investor Real Estate Trust’s Zacks Consensus Estimates for fiscal-year 2018 FFO per share have been revised upward by a cent to 36 cents over the past month. Its share price has increased 9.1% in a months’ time.

Extra Space Storage’s FFO per share estimates for 2018 have been revised upward 0.4% to $4.59 over the past week. The stock has gained 1.8% during the past three months.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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