Duke Realty (NYSE:DRE) Corp. DRE announced the closing of refinancing of its revolving credit facility with sustainability-linked pricing incentive. The move has also helped the company lower its borrowing costs from the prior facility.
Particularly, the company’s operating partnership has amended and restated its $1.2-billion unsecured revolving credit facility. The facility will now mature in March 2025 and allows two six-month extensions. Further, it includes an uncommitted incremental facility that enables the facility to be enhanced by up to $800 million.
The move has also helped the company lower its borrowing costs as borrowings under the amended and restated facility will bear interest at the annual rate of LIBOR plus 0.775% compared with a rate of LIBOR plus 0.875% under the previous facility. The interest rate is, however, subject to a pricing grid for changes in the company’s credit rating. The credit facility also includes a feature of an incremental reduction in borrowing costs on achieving of certain sustainability linked metrics each year.
Notably, Duke Realty enjoys a strong balance sheet, ample liquidity and easy access to capital. It has no significant debt maturities until 2023 and its leverage metrics looks healthy. Moreover, the industrial REIT is witnessing decent operating performance amid the pandemic.
In fact, amid an e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, demand for logistics infrastructure and efficient distribution networks has been increasing. This is helping the industrial real estate market grow. In addition, over the long term, apart from the fast adoption of e-commerce, logistics real estate is anticipated to benefit from a likely increase in inventory levels post the global health crisis, offering scope to industrial landlords, including Duke Realty, Prologis (NYSE:PLD) PLD, Terreno Realty (NYSE:TRNO) Corporation TRNO and Rexford Industrial Realty, Inc. REXR, among others, to enjoy a favorable market environment.
Given Duke Realty’s solid capacity to offer modern, high-quality logistics facilities, the company is well poised to bank on this trend. The company is making efforts to improve its portfolio on developments and acquisitions in strategic markets with solid growth potential and therefore, efforts to bolster financial flexibility augur well.
The company announced eight development starts’ execution since the beginning of the current year through Mar 16, aggregating $373 million. These projects are in coastal Tier 1 markets, and in in-fill sites in other Tier 1 markets.
Encompassing a total of 3.7 million square feet, these new development starts are expected to get LEED certification. Moreover, beginning early 2022, these projects will likely contribute to earnings and realize substantial value creation, per management.
Duke Realty currently carries a Zacks Rank #3 (Hold). The company’s shares have gained 14%, outperforming its industry’s rally of 11.5% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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