AvalonBay Communities Inc. plans to prepay all outstanding debt under its secured debt pool with Freddie Mac.
As of June 1, the aggregate principal amount of secured debt outstanding in connection with the 5.86%-per-annum fixed-rate debt pool due May 1, 2019, is roughly $556.3 million. The debt pool was originated in April 2009 and includes 12 collateral properties.
Prepayment of the debt pool will require the company to make a payment of a yield maintenance penalty, estimated to be roughly $34.0 million, as of June 9.
AvalonBay noted that the prepayment of the debt pool and the payment of the yield maintenance penalty were not contemplated in its prior earnings guidance.
The company expects the yield maintenance penalty to reduce its funds from operation for the second quarter and full year by 25 cents.
The yield maintenance penalty will be adjusted out of AvalonBay's second-quarter and full-year core FFO, and will have not have any effect on its core FFO per share.