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UDR Prices Senior Notes Offerings, To Redeem 4.625% Notes

Zacks Equity Research

UDR, Inc. UDR recently priced a public offering of two series of senior unsecured notes. The company also announced the redemption of its outstanding 4.625% senior unsecured notes maturing on Jan 10, 2022.

Specifically, the 3.2% senior unsecured notes were priced at 103.319% of the principal amount (aggregating $100 million), plus accrued interest from Jul 2, 2019 to yield 2.817% at maturity. The securities are due on Jan 15, 2030.

The debt obligations will pay semi-annual interest on Jan 15 and Jul 15, with the first interest payment scheduled for Jan 15, 2020. This issuance will be combined to form a single series with the $300-million aggregate principal amount of senior unsecured issued on Jul 2, 2019. When the offering closes, principal amount of outstanding 2030 notes will total $400 million.

Additionally, 3.1% senior unsecured notes were priced at 99.557% of the principal amount, aggregating to $300 million. These notes will mature on Nov 1, 2034 and will also pay accrued interest from Oct 11, 2019 resulting in YTM of 3.137%. These securities too will pay semi-annual interest on May 1 and Nov 1 with the first payment on May 1, 2020.

The settlement of the offering is subject to the satisfaction of customary closing norms and is anticipated to occur on Oct 11, 2019. The company intends to channelize net proceeds from the 2034 notes to fund green projects. Further, net proceeds from the 2034 notes and 2030 notes will be utilized to redeem outstanding 4.625% senior notes.

Along with this note offering, the company also announced plans to redeem all of its $400-million principal amount of outstanding 4.625% senior unsecured notes. These notes have a maturity date of Jan 10, 2022.

By paying down its debt obligations, this offering is likely to provide flexibility to UDR. In addition, it reflects the company’s commitment to address its financial obligations in an efficient way. Moreover, since unsecured notes can be borrowed at lower rates, the new debt will result in lower cost of capital.

Notably, the current low interest-rate environment has encouraged a number of REITs, including Alexandria Real Estate Equities, Inc. ARE, Kilroy Realty Corporation KRC and American Tower Corporation AMT, among others, to tap the debt market, recently. 

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