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Steadfast Income REIT Refinances Variable Rate Debt with Fixed Rate Loans

October 1, 2019

Steadfast Income REIT Refinances Variable Rate Debt with Fixed-Rate Loans

October 1, 2019 | James Sprow | Blue Vault

Steadfast Income REIT refinanced a total of over $123 million of its variable rate debt and obtained fixed-rate debt in the form of Freddie Mac loans in an aggregate principal amount of $131.9 million.

On September 26, 2019, the REIT refinanced an existing variable rate loan with Newmark Knight Frank (“NKF”) with a new fixed-rate Freddie Mac loan with an aggregate principal of $48.75 million that accrues interest at 3.66% per annum, maturing October 1, 2029. Interest-only payments are payable monthly through October 1, 2024, with interest and principal payments due monthly thereafter. The REIT paid $243,750 in loan origination fees to NKF in connection with the refinancing and the Advisor earned a loan coordination fee of $100,000.

On September 27, 2019, the Company refinanced $79.8 million of existing variable rate loans with NKF and PNC Bank with three new fixed-rate Freddie Mac loans in an aggregate principal amount of $83,107,000. Each of the new loans has a ten-year term, with interest-only payments for the first five years. The fixed rates on the Freddie Mac loans range from 3.56% to 3.62%. The REIT paid $378,323 in the aggregate in loan origination fees to the lenders in connection with the refinancing, and the Advisor earned a loan coordination fee of $300,000.

As of June 30, 2019, the fair value of the REIT’s variable rate debt was $212.6 million. At June 30, 2019, the weighted-average interest rates of the REIT’s fixed-rate debt and variable rate debt were 3.90% and 4.50%, respectively. The weighted-average interest rate represents the actual interest rate in effect at June 30, 2019 (consisting of the contractual interest rate), using interest rate indices as of June 30, 2019, where applicable.

With the reported interest rates on the REIT’s variable and fixed-rate debt as of June 30, 2019, the refinancing of over $123 million of its variable rate debt will lower the REIT’s weighted average interest rate on its debt and reduce interest rate risk. The Company did have six interest rate caps in place as of June 30, 2019, with a notional amount of $203.27 million and a weighted average cap rate of 3.49%, and a one-month LIBOR of 2.40% at that date. Given the weighted average cap rate that was significantly above the LIBOR rate as of June 30, 2019, the caps were not designated as cash flow hedges and any changes in their fair value were recorded as interest expense. When interest rate caps are not binding, Blue Vault reports the debt as variable-rate debt.

Sources:  SEC, Blue Vault

 

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Gordon Dunne
September 30, 2019
    

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