WAKEFIELD, MA-Looking to fund an acquisition in Denver—which is expected to close on Wednesday—Franklin Street Properties Corp. has closed an unsecured term loan with a group of banks. The total borrowed under the term loan is $220 million.
The term loan has a term of seven years that matures on August 26, 2020. It includes an accordion feature that allows for up to $50 million of additional borrowing capacity subject to receipt of lender commitments and satisfaction of certain customary conditions. The term loan bears interest at either a LIBOR based rate plus 145 to 220 basis points, depending on the company's total leverage ratio for the applicable period (LIBOR plus 165 basis points at August 26, 2013); or a rate equal to the bank's base rate plus 45 to 120 basis points, depending on the company's total leverage ratio for the applicable period (the bank's base rate plus 65 basis points at August 26, 2013). Although the interest rate on the term loan is variable, the company elected to fix the base LIBOR interest rate at 2.32% per year for seven years by entering into an interest rate swap. Based upon the company's total leverage ratio, as of August 26th, that puts the effective interest rate on the loan at 3.97% per year.
The Denver building, at 1001 17th Street, is a 20-story, multi-tenant office tower with a retail plaza. It occupies 656,000 square feet in the city's CBD and its occupancy percentages are moving up because some leases will start in the fourth quarter, CFO John Demeritt tells GlobeSt.com. The company is looking to add leases, he notes. Back in May, Franklin Street acquired 1999 Broaday, also in Denver.
The company sees the western city as a good place to be right now, Demeritt says. “We do like Denver; we acquired another building back in May. We think the city has a lot of economic potential because it has strong job growth and it's something of an energy market as well as a software company area as you move out of the city. Those are healthy sectors, or they will be.”
Adds George Carter, president and CEO, “We proactively decided to close this $220 million, seven-year, unsecured term loan with a fixed rate to assist us in our continuing growth plans. We anticipate using the net proceeds of this unsecured term loan to fund a portion of our pending acquisition of 1001 17th St., in Denver, which we expect to close on August 28, 2013.
“With this unsecured term loan in place," he continues, "100% of our total debt now is unsecured, approximately 65% of our total debt is fixed and approximately 35% of our total debt is variable. We are pleased to put this unsecured term loan in place and appreciate the confidence shown in FSP by each of the participating banks.”
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
