Realty Income Corporation (O - Snapshot Report), a real estate investment trust, recently announced that it has entered into a new unsecured acquisition credit facility worth $1.0 billion. The new facility replaces the company’s existing $425 million facility and is scheduled to mature on May 10, 2016. The new credit facility carries an option of extending to the total commitment up to $500 million.
Wells Fargo and Securities LLC, a subsidiary of Wells Fargo & Company (WFC - Analyst Report), is the sole lead arranger and administrative agent for the credit facility. While the co-syndication agents are Bank of America Corp. (BAC - Analyst Report), and Regions Bank.
The new credit facility’s interest rates are at historically low levels. The company’s good credit rating comes with a borrowing rate of LIBOR plus 107.5 basis points (bps) along with a facility commitment fee of 17.5 bps. Additionally, the all-in drawn price will be 125 bps over LIBOR, which reduced 95 bps from the previous all-in drawn pricing.
Management intends to utilize the fund for expanding the size of its real estate portfolio, thereby increasing the shareholders’ value by hiking the dividend.
Following the end of first quarter 2012, Realty Income has entered into agreements to acquire 250 new properties for approximately $514 million. The properties will be leased to four different tenants and will operate in markets included in company’s real estate portfolio. To date, the company has declared 503 consecutive monthly dividend payments.
As of March 31, 2012, Realty Income had $43.0 million of outstanding debt under company’s acquisition credit facility and cash and cash equivalents of $5.2 million.
As of March 31, 2012, the company owned 2,631 properties in 49 states, leased to 137 retail chains and other commercial business enterprises operating in 38 countries. Apart from improving the size and quality of its portfolio through strategic acquisitions of high-quality properties, the company plans to continue selling non-core properties that do not fit with its long-term strategy.
Realty Income currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Kimco Realty Corp. (KIM - Analyst Report) also holds a Zacks #3 Rank.