Monmouth Lands Larger, Extended Revolving Credit Facility

The New Jersey-based net-lease industrial REIT negotiated a total of $300 million in unsecured credit, along with an accordion feature, extended maturities and interest-rate swap.
Image via Pixabay user Lorenzo Cafaro

Monmouth Real Estate Investment Corp. has entered into an amended credit agreement that provides Monmouth with an additional $100 million of bank commitments and extends the current maturity date.

The new agreement also reduces the capitalization rate used for valuation from 6.5 percent to 6.25 percent, increasing the value of the borrowing base properties. Further, in connection with the amended agreement, overall pricing was improved by a range of 5 to 35 basis points, based on Monmouth’s leverage levels.

The agreement provides Monmouth with a $300 million unsecured credit facility comprising two tranches:

  • a $225 million unsecured revolving credit facility that, based on Monmouth’s overall current leverage, bears interest at a spread of 145 basis points over LIBOR;
  • a $75 million unsecured term loan that, based on Monmouth’s overall current leverage, bears interest at a spread of 140 basis points over LIBOR.

The amended agreement includes an accordion feature that will allow Monmouth to further increase the unsecured credit facility to $400 million, under certain conditions. The revolver currently bears interest at a rate of 3.21 percent and will mature on January 31, 2024, with two options to extend for additional six-month periods.

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The term loan will mature on January 31, 2025. To reduce floating interest rate exposure, Monmouth also entered into an interest rate swap agreement to fix LIBOR on the entire $75 million for the full duration of the term loan. At closing, the all-in rate on the $75 million term loan was 2.92 percent.

The agreement was arranged by BMO Capital Markets Corp, JPMorgan Chase Bank, N.A. and RBC Capital Markets, which served as joint lead arrangers and joint book runners. Bank of Montreal served as administrative agent, and JPMorgan and RBC acted as co-syndication agents.

In a prepared statement, Monmouth CFO Kevin Miller said that the new revolving credit facility and new term loan help give the REIT ample capital to fund its acquisition pipeline, which is currently $150.5 million and is expected to grow.

Active player in an active sector

Founded in 1968, Monmouth is one of the world’s oldest public equity REITs. It specializes in single-tenant, net-leased industrial properties, subject to long-term leases, primarily to investment-grade tenants.

True to that mission, last month Monmouth acquired a 615,750-square-foot distribution facility in Greenwood, Ind., in metro Indianapolis, for $81.5 million. The recently opened building is fully leased to Amazon for 15 years.

As Commercial Property Executive reported in September, data from Stan Johnson Co. indicates that the single-tenant, net-lease industrial market has faltered a bit so far this year, after an especially strong 2018. Still, investment demand remains strong, and this year’s sales volume is expected to finish between the 2015 and 2017 totals.