PHILADELPHIA--(BUSINESS WIRE)--Pennsylvania Real Estate Investment Trust (NYSE: PEI) announced today that it has amended and extended its 2010 Credit Facility (the “Facility”) with its bank group, led by Wells Fargo Bank, and refinanced the mortgage loans on two power center properties.
The amendment increases the revolving portion of the Facility by $100 million, reduces the current applicable interest rate by 90 basis points, extends the term of the Facility by one year to March 10, 2014 and eliminates the mandatory Facility pay-down requirements from capital events, among other changes. The amendment also modifies some of the financial covenants under the Facility, reducing the maximum permitted leverage and increasing the minimum corporate debt yield.
Specifically, the revolving portion of the Facility is now $250 million. As of June 30, 2011, the outstanding balance of the revolving portion of the Facility was $70 million. The amount outstanding under the term loan portion of the Facility has been reduced by $100 million to $240 million.
The interest rate range under the Facility was lowered to between 2.75% and 4.00% per annum over LIBOR, depending on the Company’s leverage. Previously, the interest rate range was between 4.00% and 4.90% per annum over LIBOR. Initially, the new rate in effect is 4.00% per annum over LIBOR.
Modifications to the financial covenants under the Facility reduce the maximum permitted leverage ratio to 70% from 75%, and require the Corporate Debt Yield, as defined, to be at least 9.50% until March 30, 2012, then at least 9.75% for the next year, and at least 10.00% after March 31, 2013. The maximum amount that may be borrowed under the Facility now is subject to a minimum debt yield of 9.75% based on the net operating income of the collateral properties.
The range of interest rates may be further reduced at the option of the Company to between 2.00% and 3.00% per annum over LIBOR, and the Company will have an option to extend the maturity date of the Facility by one year to March 10, 2015, under specified conditions and subject to certain amendments to the financial covenants set forth in the Facility.
The Company also announced the refinancing of the mortgage loans on Red Rose Commons, in Lancaster, Pennsylvania, and The Court at Oxford Valley, in Langhorne, Pennsylvania, two power center properties in which it holds 50% partnership interests. The 10-year mortgage loans are non-recourse with an average fixed rate of 5.42%. The total proceeds from both loans were approximately $90 million, of which PREIT’s share was approximately $45 million. The partnerships used a portion of the proceeds to repay previous mortgage loans on these properties of approximately $56 million that carried an average interest rate of 7.16%.
About Pennsylvania Real Estate Investment Trust
Pennsylvania Real Estate Investment Trust, founded in 1960 and one of the first equity REITs in the U.S., has a primary investment focus on retail shopping malls. Currently, the Company's portfolio consists of 49 properties, including 38 shopping malls, eight strip and power centers, and three development properties. The Company's properties are located in 13 states in the eastern half of the United States, primarily in the Mid-Atlantic region. The operating retail properties have approximately 33 million total square feet of space. PREIT is headquartered in Philadelphia, Pennsylvania. The Company's website can be found at www.preit.com. PREIT is publicly traded on the NYSE under the symbol PEI.
Forward Looking Statements
This press release contains certain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts. These forward-looking statements reflect our current views about future events, achievements or results and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements. In particular, our business might be materially and adversely affected by uncertainties affecting real estate businesses generally as well as the following, among other factors: our substantial debt and our high leverage ratio; constraining leverage, interest and tangible net worth covenants under our 2010 Credit Facility, as amended, as well as limits on our ability to pay distributions on our common shares; our ability to refinance our existing indebtedness when it matures, on favorable terms, or at all; our ability to raise capital, including through the issuance of equity or equity-related securities if market conditions are favorable, through joint ventures or other partnerships, through sales of properties, or through other actions; our short- and long-term liquidity position; the effects on us of dislocations and liquidity disruptions in the capital and credit markets; current economic conditions and their effect on employment, consumer confidence and spending; tenant business performance, prospects, solvency and leasing decisions; the value and potential impairment of our properties; increases in operating costs that cannot be passed on to tenants; our ability to maintain and increase property occupancy, sales and rental rates, including at our redeveloped properties; risks relating to development and redevelopment activities; changes in the retail industry, including consolidation and store closings; the effects of online shopping and other uses of technology on our retail tenants; general economic, financial and political conditions, including credit market conditions, changes in interest rates or unemployment; concentration of our properties in the Mid-Atlantic region; changes in local market conditions, such as the supply of or demand for retail space, or other competitive factors; potential dilution from any capital raising transactions; possible environmental liabilities; our ability to obtain insurance at a reasonable cost; and the existence of complex regulations, including those relating to our status as a REIT, and the adverse consequences if we were to fail to qualify as a REIT. Additional factors that might cause future events, achievements or results to differ materially from those expressed or implied by our forward-looking statements include those discussed in our Annual Report on Form 10-K for the year ended December 31, 2010 in the section entitled “Item 1A. Risk Factors.” We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.
Additional information about PREIT is available on www.preit.com.