Federal Realty Investment Trust (FRT), a real estate investment trust (REIT) that owns, manages and develops retail and mixed-use properties, has recently obtained a new $400 million unsecured revolving credit facility to repay its existing debt. The new credit facility replaced the erstwhile $300 million credit facility that was scheduled to mature in July 2011.
The new credit facility, which bears an annual interest of LIBOR plus 115 basis points, is scheduled to mature in July 2015. However, the credit facility has an accordion feature that provides an option to Federal Realty to extend its maturity by an additional year, as well as increase the borrowing capacity to $800 million.
With the deal, the company presently has no debt maturities before July 2012. Federal Realty has one of the strongest balance sheets in the sector. The company has paid uninterrupted dividends since its inception in 1962, and also has the unique distinction of increasing its dividend for 43 consecutive years – the longest in the REIT industry.
Rockville, Maryland-based Federal Realty owns, manages, and develops retail, mixed-use and street-retail properties. Its community and neighborhood shopping centers are anchored by supermarkets, drug stores or high-volume, value-oriented retailers, which provide consumer necessities.
Most of the Class A shopping centers owned by the company are located in high-income, infill areas of the country, with a concentration of assets in Washington DC, Boston, Philadelphia, and California. This provides a significant upside potential for the company, with retailers being more selective about expansion and favoring high-barrier, high-growth areas that fare relatively better.
We maintain our ‘Neutral’ recommendation and a Zacks #3 Rank for Federal Realty that translates into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Acadia Realty Trust (AKR), a competitor of Federal Realty.
