Realty Income's $694M Deal in San Diego Unlocks Clean Energy at Favorable Rates
San Diego-based Realty Income has closed on $694 million in financing, which will support the region's long-term clean energy procurement and San Diego Community Power goals.
This municipal prepay transaction allows community choice aggregators to secure power at more favorable rates while benefiting from the stability of an investment-grade corporate counterparty.
It is Realty Income's first-ever transaction in the municipal prepay space, though it could reenter the market to further diversify its long-term capital sources, according to Jonathan Pong, chief financial officer and treasurer of Realty Income.
"One of our core values is to 'give more than we take,'" he told GlobeSt.com.
"Partnering with San Diego Community Power allows Realty Income to support clean, renewable energy that delivers meaningful benefits in the San Diego community where we are headquartered—advancing sustainability and decarbonization through a long-term, community-driven approach."
Realty Income's unsecured term loan on the transaction is due January 2036 with Aron Energy Prepay 60 LLC, an affiliate of The Goldman Sachs Group. The term loan is priced at an all-in fixed rate of 4.91%.
In conjunction with the closing, Realty Income executed a cross-currency swap for a portion of the proceeds ($500 million) in exchange for approximately €431 million (in addition to the related interest payments) over the term of the loan.
As a result of the swap, Realty Income achieved an effective blended borrowing rate of 4.34%.
San Diego Community Power is California's second-largest community choice aggregator (CCA) serving nearly 1 million customers in the San Diego region.
The non-profit currently serves approximately 965,000 municipal, residential, commercial and industrial accounts in the city's service area. San Diego Community Power's current customer load mix is approximately 42% residential, 37% medium- and large-commercial and industrial, 18% small commercial and 3% agricultural and lighting-based.
Realty Income is not issuing municipal bonds, nor guaranteeing or otherwise obligated to make any payments on such municipal bonds. Also, the REIT does not receive tax-exempt financing in connection with this transaction, while having no exposure to electricity markets or commodity price risk.
Source: GlobeSt/ALM