FRT Closes Senior Notes Offering - Analyst Blog


In order to strengthen its liquidity position and pay back debt, Federal Realty Investment Trust ( FRT ) closed the equity offering of 2.75% senior unsecured notes worth $275 million, maturing on Jun 1, 2023.

This real estate investment trust (REIT), in particular, intends to use the net proceeds to pay off its outstanding debt, redeem notes and for other corporate purposes.

The new senior notes were offered at 98.749% of the principal amount and carried a yield to maturity rate of 2.894%.  Starting Dec 1, 2013, the interest on the notes will be payable on Jun 1 and Dec 1 of each year. 

A consortium of banking giants supported Federal Realty in the offering. Wells Fargo Securities of Wells Fargo & Company ( WFC ) and Merrill Lynch, Pierce, Fenner & Smith Incorporated of Bank of America Corporation ( BAC ) acted as joint book-running managers for the offering.  On the other hand, Deutsche Bank Securities Inc., PNC Capital Markets LLC, and U.S. Bancorp Investments, Inc. of U.S. Bancorp ( USB ) acted as joint lead managers. As a matter of fact, these $275 million senior unsecured notes of Federal Realty's have been rated 'A-' by Fitch Ratings.

In Conclusion

Federal Realty owns Class A shopping centers in high-income areas of the country, with a concentration of assets in Washington D.C., Boston, Philadelphia, and Calif. Additionally, the company generally signs long-term leases with annual bumps; which is a good hedge against inflation. Such moves are expected to provide Federal Realty considerable upside potential and will boost its top-line growth going forward.

Federal Realty has one of the strongest balance sheets in the sector. As of Mar 31, 2013, the company had cash and cash equivalents of approximately $31.3 million, compared to $37.0 million as of Dec 31, 2012. Moreover, since its inception in 1962, Federal Realty has the unique reputation of increasing its dividend consecutively for 45 years - the longest in the REIT industry.

Currently, Federal Realty retains a Zacks Rank #3 (Hold).

BANK OF AMER CP (BAC): Free Stock Analysis Report

FED RLTY INV (FRT): Free Stock Analysis Report

US BANCORP (USB): Free Stock Analysis Report

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BAC , FRT , USB , WFC

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