Defying Credit Crunch, HRPT Office Portfolio Reels in $250M Credit Facility

Entering into a new $250 million secured credit facility, HRPT Properties Trust has joined the ranks of those real estate companies that have managed to secure big-ticket loans in the midst of one of the most unfriendly lending environments in recent history.  The non-recourse credit facility, which matures April 24, 2012, and comes with an option for a one-year extension, is backed by a group of office assets owned by HRPT subsidiary Government Properties Income Trust. “As of December 31, 2008, there is 99 percent occupancy in the 29 government-tenanted buildings that secured this facility,” Timothy Bonang, HRPT director of investor relations, told CPN. The banks participating in the facility include joint lead arrangers Bank of America Securities L.L.C. and Wells Fargo Bank N.A.; Royal Bank of Canada; US Bank National Association; Citicorp North America Inc.; Morgan Stanley Bank N.A.; Regions Bank; and UBS Loan Finance L.L.C.  HRPT plans to use the net proceeds from the new facility to pay down outstanding debt under its revolving credit facility.  With Fannie Mae and Freddie Mac continuing to dole out funds, multi-family property owners are able to secure major loans. However, it has been a far different story for other commercial real estate sectors, including office. Financing for most is hard to come by, but as evidenced by the HRPT facility, it’s out there–if the portfolio is right. “There is still an appetite for secured lending on certain properties,” David Shapiro, senior analyst with BGB Securities Inc., told CPN. “According to initial estimates, HRP was envisioning that its Government entity could be worth up to $500 million, so this facility implies an estimated 50 percent loan-to-value. Our belief is, where the market is these days, loans are getting done at approximately 50 to 55 percent LTV. In this case, clearly the lenders are comfortable lending against the leases on those properties.” In addition to its nearly fully leased government-tenanted office properties, HRPT has something else working in its favor. “HRPT is not like Macklowe or General Growth Properties; it’s not one of the headline companies that overleveraged themselves at the peak of the credit bubble,” Shapiro said. “We think they’re going to be able to make it out the other end of the crisis.” The majority of the banks participating in HRPT’s new secured credit facility are recipients of billions in funds from the federal government’s Troubled Asset Repurchase Program, designed to unfreeze the frozen credit market by providing banks with the monetary foundation to begin lending again. HRP may be benefiting from the plan, but there are real estate companies that aren’t getting that warm and fuzzy feeling from the big banks. Fontainebleau Las Vegas L.L.C. falls in this category. The developer of the gargantuan Fontainebleau Las Vegas mixed-use casino resort filed a $3 billion suit last week against a group of lenders–a group that includes TARP-receiving Bank of America and JPMorgan Chase–for reneging on $800 million in prearranged financing.