Houston-based Camden obtained the secured credit facility from Red Mortgage Capital Inc. of Columbus, OH. The facility includes a $175-million variable-rate loan funded with a Fannie Mae discount mortgage-backed security. It is priced at 4.2% per annum for a 10-year term, with the interest rate resetting every 90 days after Oct. 1. Camden's capital package also includes a $205-million loan, with a 5.625% fixed-rate interest and 10-year term. There is a one-year option to extend at a variable rate.
At yesterday's annual meeting, Camden's CEO Richard Campo says the REIT is in good shape financially--with a zero balance on its line of credit. "We'll use the new credit facility to pay down some of the property mortgages, which should lead to more cash on the balance sheet by year end," he told analysts and shareholders.
Rod Petrik, managing director with Baltimore-based Stifel Nicolaus & Co., says the facility will do more than knock down a few mortgages. "What they're doing is creating flexibility and capacity in this market," he explains to GlobeSt.com. "There are two reasons why a REIT does this: because they have to or because they can. Camden is doing it because they can."
Petrik says multifamily REITs and other apartment real estate investment companies have been somewhat more successful in raising capital in the current market because of their abilities to turn to Fannie Mae and Freddie Mac. "When you look at the terms that Camden is getting on this, it's attractive and something that shopping center companies and office companies wish they would have," he notes.
But, the deal isn't just beneficial for Camden. "Traditionally, Fannie has had trouble making inroads with multifamily REITs because banks were so competitive," Petrik explains. "But given the credit crunch, Fannie is looking at increasing market share with some large, well-capitalized apartment companies." Camden actually is following in the footsteps of Chicago-based Equity Residential Properties Trust and AvalonBay Communities Inc of Alexandria, VA, both of which have closed on similar facilities during the past year.
Fannie and Freddie are gaining more of a foothold in REITs, but Petrik doesn't believe the deal volume will be huge. He explains that the agencies are dealing with fixed portfolios and they're reinvesting interest and amortization coming from those assets. "It's not like you'll see $65 billion of underwriting in the next 12 months," he adds. "I think they want to put their money only with well-capitalized partners like Equity, AvalonBay and Camden."
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