Finance Mortgage Banking
Jan 6, 2009
By: Barbra Murray, Contributing Editor
Student housing REIT Education Realty Trust Inc. has closed a $222 million secured credit facility, courtesy of Fannie Mae DUS lender Red Mortgage Capital Inc., and is wasting precious little time making use of the proceeds.
Drawing about $198 million in initial loans under the facility, Education Realty paid off $185 million of secured mortgage debt scheduled to mature in July of this year, and used the remaining $13 million to pay down its corporate revolving credit facility and to address other working capital demands.
The initial group of loans includes five-year variable rate loans totaling $50 million, in addition to a $72 million seven-year loan, a $60 million 10-year loan and a $16 million five-year loan, all three of which carry fixed interest rates averaging approximately 6.01 percent.
Securing a $200 million-plus line of credit these days is no small feat, even with a premier portfolio like that of Education Realty. However, the fact that the student housing sector of commercial real estate has a solid and relatively stable performance history certainly helped make the pursuit of funds in this economic climate less difficult for Education Realty than it would have been for, say, an office REIT with a group of equally high-quality assets.
"Both Fannie Mae and Freddie Mac have dedicated programs for financing student housing; they've studied the prototype and they like it because it is perceived to be less risky than conventional apartments, " Education Realty president & CEO Paul Bower told CPN. "Admittedly, we are in unique times, but through past economic cycles, student housing has weathered pretty well. It doesn't really suffer the ups and downs like the general economy does. We've been at this for 44 years now, so we can speak with authority about recessions and the viability of student housing through those times."
What keeps student housing afloat even in troubled waters? "Families save years for college and they make it a priority," Bower said. "Student housing is recession resistant, as opposed to recession proof. We may have a small drop in occupancy or difficulty raising rents, but ultimately we expect the same population."
The new credit facility is just part of the news with which Education Realty is ushering in 2009. The company has extended the maturity date of its $100 million secured revolving credit facility with KeyBank until March 30, 2010. Additionally, Education Realty announced that it has changed its quarterly common stock dividend policy, calling for a decrease in cash dividends. The move is expected to provide additional cash flow totaling an estimated $12 million this year.
Headquartered in Memphis, Education Realty is a self-administered, self-managed REIT engaged in the ownership, development and management of student housing properties across the country. Presently, the company has ownership and management interests in 65 communities in 21 states.
By: Barbra Murray, Contributing Editor
Student housing REIT Education Realty Trust Inc. has closed a $222 million secured credit facility, courtesy of Fannie Mae DUS lender Red Mortgage Capital Inc., and is wasting precious little time making use of the proceeds.
Drawing about $198 million in initial loans under the facility, Education Realty paid off $185 million of secured mortgage debt scheduled to mature in July of this year, and used the remaining $13 million to pay down its corporate revolving credit facility and to address other working capital demands.
The initial group of loans includes five-year variable rate loans totaling $50 million, in addition to a $72 million seven-year loan, a $60 million 10-year loan and a $16 million five-year loan, all three of which carry fixed interest rates averaging approximately 6.01 percent.
Securing a $200 million-plus line of credit these days is no small feat, even with a premier portfolio like that of Education Realty. However, the fact that the student housing sector of commercial real estate has a solid and relatively stable performance history certainly helped make the pursuit of funds in this economic climate less difficult for Education Realty than it would have been for, say, an office REIT with a group of equally high-quality assets.
"Both Fannie Mae and Freddie Mac have dedicated programs for financing student housing; they've studied the prototype and they like it because it is perceived to be less risky than conventional apartments, " Education Realty president & CEO Paul Bower told CPN. "Admittedly, we are in unique times, but through past economic cycles, student housing has weathered pretty well. It doesn't really suffer the ups and downs like the general economy does. We've been at this for 44 years now, so we can speak with authority about recessions and the viability of student housing through those times."
What keeps student housing afloat even in troubled waters? "Families save years for college and they make it a priority," Bower said. "Student housing is recession resistant, as opposed to recession proof. We may have a small drop in occupancy or difficulty raising rents, but ultimately we expect the same population."
The new credit facility is just part of the news with which Education Realty is ushering in 2009. The company has extended the maturity date of its $100 million secured revolving credit facility with KeyBank until March 30, 2010. Additionally, Education Realty announced that it has changed its quarterly common stock dividend policy, calling for a decrease in cash dividends. The move is expected to provide additional cash flow totaling an estimated $12 million this year.
Headquartered in Memphis, Education Realty is a self-administered, self-managed REIT engaged in the ownership, development and management of student housing properties across the country. Presently, the company has ownership and management interests in 65 communities in 21 states.
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