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Schroder REIT refinances amid risk of rising rates

The firm has refinanced a £129.6m loan and extended a £20.5m revolving credit facility.

UK-focused Schroder Real Estate Investment Trust has refinanced two debt facilities as it seeks to lock in reduced loan pricing ahead of potential interest rate increases.

The REIT has refinanced £25.9 million (€29.4 million) of a £129.6 million loan secured from insurer Canada Life. The maturity of this portion, which was due to expire in April 2023, has been extended by five years to have the same maturity as the rest of the loan.

The interest rate of the loan has been fixed for a further five years to “remove the risk of rising interest rates”, it said. The fixed interest rate cost has been reduced from a 4.77 percent to 3.09 percent on this portion of the loan, saving around £435,000 of interest per year.

The company has also increased a revolving credit facility with Royal Bank of Scotland from £20.5 million to £32.5 million. The additional loan amount available, with a margin of 1.6 percent, will provide further funding flexibility, to be used for acquisitions or capital expenditure across the portfolio, the REIT said.

The existing RCF, which had been due to expire in July 2019, has been extended by a five-year term. The company will also extend its interest rate caps in respect of the RCF to align with the new term of the facility and mitigate the potential risk of interest rate increases, it said.

“These transactions capitalise on current low interest rates and reposition the balance sheet for a lower cost and longer term,” Schroder REIT said. The overall cost of the company’s debt will be reduced from 4.4 percent to 4 percent, assuming the RCF is fully drawn.