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NEWTOWN SQUARE, PA-GMH Communities Trust has completed the refinancing of four student housing properties with $90 million in mortgage financing from Wachovia. Each loan has a 10-year, interest-only term and carries a fixed 5.6% rate of interest.
After repaying $16.4 million of existing mortgage debt on the properties, the locally based specialty REIT realized net proceeds of $73.6 million. All of the proceeds were used to pay down debt on its line of credit, effectively reducing the interest rate on that amount by 1.72% at the time of the transaction. The credit line has variable Libor-based interest, which was 7.32% at the time of the refinancing.
The properties are: University Crescent in Baton Rouge, LA; University Oaks in Columbia, SC; University Centre in Kalamazoo, MI, and the Summit in Mankato, MN. All are wholly owned by GMH.
John DeRiggi, chief investment officer of GMH and president of College Park Communities, its student housing division, says this "is the first of three of our planned strategic initiatives to improve operational performance of our student housing portfolio while reducing overall indebtedness. This transaction provided us with liquidity to repay outstanding debt under our line of credit, reduce our average interest rate and further strengthen our balance sheet."
Other initiatives, announced during a conference call on Dec. 18, are plans to sell or joint venture as many as 25 of its 75 student housing properties. During the call, Gary Holloway Sr., president, chairman and CEO of GMH, said it would probably come down to the sale of nine or 10 and the joint venture of six or seven properties. GMH also operates a military housing division.
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