Essex Portfolio, L.P., the operating partnership of Essex Property Trust Inc (ESS) recently priced $300 million worth of senior unsecured notes at an interest rate of 3.25% per annum. The operating partnership of the real estate investment trust (REIT) expects to utilize the net proceeds from the offering to pay off the outstanding debt, in part or full, under the unsecured credit facilities and for general corporate purposes.
These notes are scheduled to mature in May, 2023 and were priced at 99.152% of par value with a yield to maturity of 3.35%. Notably, the interest is payable semi-annually on the 1st day of May and Nov each year. The first interest payment is due on Nov 1, 2013. The debt offering is expected to close on Aug 15, 2013, subject to customary closing conditions.
The joint book-running managers of the offering include Citigroup, J.P. Morgan Securities LLC of JPMorgan Chase & Co. (JPM) , Wells Fargo Securities, LLC of Wells Fargo & Company (WFC) , Mitsubishi UFJ Securities (USA), Inc. and U.S. Bancorp Investments, Inc of U.S. Bancorp (USB) .
Notably, during fourth quarter 2012, Fitch upgraded Essex Property's credit rating to BBB+ with a stable outlook from BBB with a positive outlook. Consequently, the pricing on the company's Line of Credit and Term Loan was reduced to 107.5 basis points over Libor and 120 basis points over Libor, respectively. Also, in Jan 2013, Essex Property expanded its unsecured line of credit facility capacity from $500 million to $600 million.
We believe that Essex Property's focus on maintaining a balanced and flexible balance sheet with ample liquidity would enable it to operate efficiently, tide over the near term constraints and capitalize on potential acquisition and investment opportunities. This, in turn, would help augment its top line. Moreover, paying back of debt would reduce its interest expenses.
Based in Palo Alto, Calif., Essex Property acquires, develops, redevelops and manages apartment communities, primarily in highly desirable, supply-constrained markets. Essex Property currently owns 165 multi-family properties with an additional 9 properties in various stages of development.
Essex Property currently carries a Zacks Rank #2 (Buy).
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