Vornado (VNO) Extends Maturity of $1.25B Credit Facility
Vornado Realty Trust VNO announced the extension of one of the two $1.25-billion revolving credit facilities through its operating partnership, Vornado Realty L.P. The extended credit facility will improve the company’s liquidity position.
The debt, previously due in November 2018, is now scheduled to mature in January 2022. Two six-month extension options enable the company to stretch the maturities of the assumed debt.
The arrangement has also enabled the company to access debt markets at favorable terms. The extended loan carries an annual interest rate of LIBOR plus 100 basis points (bps). It will replace the previous facility bearing a higher annual interest rate of LIBOR plus 105 bps. However, the facility fee remains at 20 bps.
Nonetheless, the interest rate and facility fees on the other $1.25-billion credit facility of Vornado remain unchanged. The borrowing is due in February 2021 and carries two 6-month extension options.
The inflated credit facility will complement the company’s efforts to expand its industrial portfolio. This, along with the company’s robust operating platform and strong balance sheet position, will likely help it execute strategic priorities, and drive net asset value and dividend growth.
Vornado has been actively strengthening its balance sheet with the help of refinancing activities. Recently Vornado and SL Green Realty Corporation (SLG) closed a loan refinancing worth $1.2 billion for the Manhattan-based office building, 280 Park Avenue.
The interest-only loan is slated to mature in September 2024, as extended, and carries a rate of LIBOR plus 1.73%. It replaced a previous LIBOR plus 2% loan of $900 million, which was scheduled to mature in May 2023. (Read more: Vornado and SL Green Refinance $1.2 Billion Loan)
These strategic efforts offer Vornado a cheaper line of credit and help reduce interest costs. Moreover, extended maturities of the assumed debt will help it improve its maturity profile and enjoy greater liquidity for day-to-day operations.
Vornado’s low debt-to-equity ratio as compared to the industry average and the extended maturities of assumed debt will help the company execute its short- and long-term business plans.
Vornado currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, over the past 30 days, the company’s third-quarter and full-year 2017 funds from operations (FFO) per share estimate moved down to 83 cents and $4.22 respectively.
Furthermore, Vornado’s shares have lost 25% year to date, underperforming 5.3% growth recorded by its industry.
Other Stocks to Consider
Other top-ranked stocks in the REIT space include DCT Industrial Trust DCT, Digital Realty Trust, Inc. DLR and PS Business Parks, Inc. PSB. All these stocks carry a Zacks Rank of #2.
Both DCT Industrial and Digital Realty have expected long-term FFO growth rates of 4.1% and 5.6%.
PS Business Parks expects a long-term FFO growth rate of 5%.
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