So, inflation is at a 30-year high, but interest rates have not increased much. It is actually all relative since they are much higher than when the 10-year Treasury hit a low of 0.54% in March 2020. But seriously, that was a bit silly, just like oil at a negative price per barrel.
If the inflation numbers stay high for a while, and end up not being “transitory,” something we heard several months ago but not so much lately, at some point that has to get embedded into interest rates. Which leads us to conclude that now is not a bad time to shore up your capital structure and borrow or refinance before rates rise.
Two REITs are taking advantage of the market conditions, both with regard to rates and spreads. Healthpeak Properties sold $500 million of seven-year notes with an interest rate of 2.125% and priced at a slight discount, resulting in a spread over the seven-year Treasury of about 70 basis points. Not bad. Wells Fargo Securities, J.P. Morgan, PNC Capital Markets, Credit Suisse and Goldman Sachs were the joint managers on the offering.
Up in Canada, in a private offering, Ventas sold C$475 million of 2.45% notes due in 2027, and C$300 million of 3.30% notes due in 2031. Part of the proceeds will be used for the redemption of the REIT’s 3.30% notes due in 2022. Nothing like planning ahead. The notes were issued by Ventas Canada Finance Limited, an indirect, wholly-owned subsidiary.
