In order to strengthen its liquidity position and pay back debt, Federal Realty Investment Trust (FRT - Analyst Report) closed the equity offering of 2.75% senior unsecured notes worth $275 million, maturing on Jun 1, 2023.
This real estate investment trust (REIT), in particular, intends to use the net proceeds to pay off its outstanding debt, redeem notes and for other corporate purposes.
The new senior notes were offered at 98.749% of the principal amount and carried a yield to maturity rate of 2.894%. Starting Dec 1, 2013, the interest on the notes will be payable on Jun 1 and Dec 1 of each year.
A consortium of banking giants supported Federal Realty in the offering. Wells Fargo Securities of Wells Fargo & Company (WFC - Analyst Report) and Merrill Lynch, Pierce, Fenner & Smith Incorporated of Bank of America Corporation (BAC - Analyst Report) acted as joint book-running managers for the offering. On the other hand, Deutsche Bank Securities Inc., PNC Capital Markets LLC, and U.S. Bancorp Investments, Inc. of U.S. Bancorp (USB - Analyst Report) acted as joint lead managers. As a matter of fact, these $275 million senior unsecured notes of Federal Realty’s have been rated 'A-' by Fitch Ratings.
Federal Realty owns Class A shopping centers in high-income areas of the country, with a concentration of assets in Washington D.C., Boston, Philadelphia, and Calif. Additionally, the company generally signs long-term leases with annual bumps; which is a good hedge against inflation. Such moves are expected to provide Federal Realty considerable upside potential and will boost its top-line growth going forward.
Federal Realty has one of the strongest balance sheets in the sector. As of Mar 31, 2013, the company had cash and cash equivalents of approximately $31.3 million, compared to $37.0 million as of Dec 31, 2012. Moreover, since its inception in 1962, Federal Realty has the unique reputation of increasing its dividend consecutively for 45 years – the longest in the REIT industry.
Currently, Federal Realty retains a Zacks Rank #3 (Hold).