) has disclosed new financing activities as it inches closer to
the accomplishment of the Archstone deal in the current quarter.
The financing activities include securing a new $2.5 billion line
of credit, $750 million of term loan and termination of the $2.5
billion bridge loan facility.
These financing measures coupled with the sale of over $3.0
billion of non-core assets, position the company well to fund its
Archstone acquisition and accelerate its portfolio restructuring
Notably, the Archstone deal penned in November, entitles Equity
Residential to 60% of Archstone's assets and liabilities, while
the remainder will be acquired by
AvalonBay Communities Inc.
). Archstone is one of the largest investors, developers and
operators of apartment communities in the U.S.
New Financing Activities
The new $2.5 billion unsecured revolving credit deal, which
Equity Residential inked with a syndicate of 25 financial
institutions, matures in April 2018. It replaced the existing
$1.75 billion facility that was scheduled to mature in July 2014,
securing ample liquidity to support Equity Residential's growth
initiatives. Based on its current credit rating, the new facility
bears an interest rate of LIBOR plus a spread of 1.05% and annual
facility fee of 15 basis points.
Further, Equity Residential inked a new senior unsecured $750
million delayed draw term loan facility. Maturing on Jan 11, 2015
(subject to a one-year extension option exercisable by the
company), this facility has an interest rate of LIBOR plus a
spread (currently 1.20%).
It can be availed in one draw made on or before Jul 11, 2013 and
the company has the liberty to utilize the fund for the Archstone
purchase or for other corporate uses. Further, it terminated the
$2.5 billion bridge loan facility pledge that it obtained
simultaneously while it penned the Archstone deal contract last
Recently, Equity Residential disclosed that it has inked a deal
to sell a portfolio of assets worth $1.5 billion to a joint
The Goldman Sachs Group Inc.
) and Greystar Real Estate Partners LLC.
For Equity Residential, securing these credit facilities along
with the non-core asset sales assure ample liquidity to fund the
Archstone acquisition. It is a strategic fit as the Archstone
acquisition is likely to result in operational synergies for the
company, improving the overall quality of the portfolio with
assets in high-barrier, high-growth coastal markets.
Equity Residential currently has a Zacks Rank #3 (Hold).
Considering its fundamentals, we also have a long-term Neutral
recommendation on the stock.
AVALONBAY CMMTY (AVB): Free Stock Analysis
EQUITY RESIDENT (EQR): Free Stock Analysis
GOLDMAN SACHS (GS): Free Stock Analysis
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