8-KOther Events

EQUITY RESIDENTIAL 8-K Report, Corporate Update (Nov 5, 2013)

Filed November 5, 2013For Securities:EQR

Summary

This 8-K filing by Equity Residential (EQR) reports on significant financing activities undertaken by its operating subsidiary, ERP Operating Limited Partnership. Specifically, on October 31, 2013, ERP's subsidiaries secured $800 million in new loans from an insurance company. These loans carry a fixed annual interest rate of 4.21% and feature interest-only payments for the first ten years, with the principal due in November 2023. The primary purpose of this new financing was to facilitate the repayment of a substantial portion of a previously assumed secured loan. The company used the proceeds to pay down $825 million of a $1.27 billion loan that was part of the Archstone apartment community acquisition earlier in 2013, incurring approximately $150 million in prepayment costs. This strategic move refinances a portion of the debt associated with a major acquisition, extending the maturity profile and securing a fixed interest rate.

Key Highlights

  • 1ERP Operating Limited Partnership, a subsidiary of Equity Residential, obtained $800 million in new loans on October 31, 2013.
  • 2The new loans have a fixed annual interest rate of 4.21%.
  • 3The loans feature interest-only payments for the initial ten-year period, with principal due on November 10, 2023.
  • 4Proceeds were used to repay $825 million of a secured loan previously assumed as part of the Archstone acquisition.
  • 5The repayment of the secured loan incurred approximately $150 million in cash prepayment costs.
  • 6The new loans are secured by 13 properties and are generally non-recourse to ERP Operating Limited Partnership.
  • 7Prepayment of the new loans is restricted until December 10, 2014, after which customary penalty provisions apply.

Frequently Asked Questions

The $800 million loan was obtained to repay $825 million of a larger $1.27 billion secured loan that Equity Residential's subsidiary, ERP Operating Limited Partnership, had assumed as part of the Archstone apartment community portfolio acquisition in February 2013. This effectively refinances a portion of that acquisition debt.

The loans have an aggregate principal amount of $800 million, a fixed annual interest rate of 4.21%, and require monthly interest-only payments. The principal balance is due on November 10, 2023. The loans are secured by 13 properties and are generally non-recourse to ERP Operating Limited Partnership.

The repayment of the $1.27 billion secured loan, specifically the $825 million portion using the new loan proceeds, incurred approximately $150 million in cash prepayment costs.

Yes, the new loans cannot be prepaid prior to December 10, 2014. After that date, prepayments are permitted but subject to customary prepayment penalty provisions.