Real estate investment trust (:REIT) - Franklin Street Properties Corp. (FSP) – has been successful in closing a $220 million, seven-year, unsecured term loan with a fixed rate. This enhanced financial capacity would help the company carry on with its growth policies.
Moreover, Franklin may avail up to another $50 million loan as per an accordion feature. This will be available on receipt of lender commitments and fulfillment of certain customary conditions.
In particular, Franklin planned to finance a part of the purchase of a property positioned in the central business district (CBD) of Denver, Colo. with this proceed. The company inked a deal last month to acquire this 655,565 rentable square foot office property located at 1001 17th Street, Denver for $217 million.
Notably, though the term loan’s interest rate is variable, the company participated in an interest rate swap that helped it fix the base LIBOR interest rate at 2.32% per annum for 7 years. As a result, the term loan’s effective interest rate comes to 3.97% per annum as of Aug 26, based on the company’s total leverage ratio.
We believe that opportunistic acquisitions and favorable funding would help the company ride on the growth trajectory. In fact, last month, Franklin came up with second-quarter 2013 FFO (funds from operations) of 24 cents per share, beating the prior-year quarter figure of 23 cents.
The results were aided by higher property income as a result of 3 acquisitions closed in the last 12 months and improved occupancy. Following this unsecured term loan, Franklin total debt is fully unsecured with 65% being fixed and 35% being at a variable rate.
Based in Wakefield, Mass., Franklin focuses on investing in select urban infill and CBD office properties mainly in top 5 markets of Atlanta, Dallas, Denver, Houston, and Minneapolis.
Franklin currently has a Zacks Rank #3 (Hold). Other REITs that are performing well and deserve a look include CubeSmart (CUBE), Douglas Emmett Inc. (DEI) and Highwoods Properties Inc. (HIW), all carrying a Zacks Rank #2 (Buy).
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