Mack-Cali Realty Corporation announced a series of transactions designed to strengthen its balance sheet and create long-term cash flow as it implements its strategic plan to redefine itself.
The REIT has an aggressive plan to focus on waterfront and transit-based office holdings in the northeast, grow its luxury multi-family portfolio, focus only on key markets while exiting others, and undertaking capital improvements to key assets, including to its signature Harborside complex on the Jersey City Waterfront.
On Monday, the company refinanced and extended its $600 million unsecured revolving credit facility; entered into a $325 million delayed draw unsecured term loan; placed a $100 million mortgage on one of its multi-family communities located in Revere, MA; redeemed the remaining $135 million of its outstanding bonds scheduled to mature in August of 2019 and repaid a series of loans totaling approximately $200 million of high rate mortgage debt.
The company closed on senior unsecured credit facilities totaling $925 million with a group of 13 lenders, with Wells Fargo Securities, LLC; J.P. Morgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint bookrunners; and Capital One, National Association and U.S. Bank National Association as joint lead arrangers.
The credit facilities are comprised of a renewal and extension of the Company’s existing $600 million unsecured revolving facility and a new $325 million unsecured delayed-draw term loan.
The $600 million credit facility carries an interest rate equal to LIBOR plus 120 basis points and a facility fee of 20 basis points. The facility has a term of four years with two six-month extension options. The new $325 million delayed-draw term loan can be drawn over time within 12 months of closing with no requirement to be drawn in full. The loan carries an interest rate equal to LIBOR plus 140 basis points and a ticking fee of 25 basis points on any undrawn balance during the first 12 months after closing.
The term loan matures in three years with two one-year extension options. The interest rate on the revolving credit facility and new term loan and the facility fee on the revolving credit facility are subject to adjustment, on a sliding scale, based upon the Company’s unsecured debt ratings, or at the Company’s option, based on a defined leverage ratio.
The credit facilities also contain accordion features providing for expansion of the facilities up to a total of $1.2 billion.
The lending group for the credit facilities consist of JPMorgan Chase Bank, N.A. as administrative agent; Wells Fargo Bank, N.A. and Bank of America, N.A. as syndication agents; Capital One, National Association; U.S. Bank, National Association; Citibank, N.A.; PNC Bank, National Association and BMO Harris Bank, N.A., all as documentation agents, and The Bank of New York Mellon as Managing Agent.
Other participants in the credit facilities are Comerica Bank; TD Bank, N.A.; Associated Bank, National Association and Fifth Third Bank.
Also in January, the company closed on a $100 million mortgage loan, secured by Alterra at Overlook Ridge, its 722 unit multi-family community in Revere, MA.
The mortgage loan carries a fixed interest rate of 3.75% per annum and is interest only for its seven year term.
In December, Mack-Cali redeemed for cash all $135 million outstanding principal amount of its 7.75 percent Notes due in August 2019. The Notes were redeemed on December 29, 2016. The redemption price for the Notes was 115.3 percent of the principal amount, plus any accrued and unpaid interest.
Also during the fourth quarter of 2016, the company repaid mortgage debt on nine assets aggregating $200 million that carried interest rates ranging from 6.3% to 11.3%, The Company disposed of two of the assets and seven became unencumbered.
Pro forma, with the execution of these financing activities, the Company’s $2.5 billion total debt now carries a weighted average interest rate of 3.9 percent. Additionally, with remaining maturities of up to 12 years, the weighted average maturity of its indebtedness is now 4.4 years.
“The completion of these financings clearly demonstrates the capital markets’ strong commitment to Mack-Cali and will provide affordable capital to continue the Company’s business plans” said Tony Krug, Mack-Cali Chief Financial Officer.
Added Michael J. DeMarco, Mack-Cali president, “We appreciate the confidence our lending partners have in our strategy and look forward to a continued profitable partnership.”
The work to reshape the existing office portfolio through capital improvements is continuing. Over the next 12 to 18 months Mack-Cali plans to upgrade existing amenities and enhance offerings with six major capital investment programs.
The most prominent among these projects is the approximate $50 to $75 million transformation and reimagination of Harborside. The new design is inspired by the complex’s industrial past.
The transformed Harborside will feature high-end dining and shopping experiences in an open layout with easy access to the Waterfront Esplanade and spectacular views of the Hudson River and Manhattan skyline.
“Our evolving office portfolio is continuing to attract substantial tenant interest – especially in our core Hudson Waterfront holdings where our office and multi-family holdings continue to propel growth,” said Mitchell E. Rudin, Chief Executive Officer of Mack-Cali told investors last September.
“We are committed to implementing operating initiatives that deliver real results and strengthen our balance sheet.”
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