Realty Income is entering the municipal prepay market through a financing partnership with San Diego Community Power, marking a strategic expansion of its capital markets toolkit as it looks to diversify funding sources and lower its cost of capital.
The transaction, expected to launch this month, makes the San Diego-based REIT the first non-financial corporate to participate in the structure, which historically has been used by banks and insurance companies.
“This transaction represents a strategic expansion of Realty Income’s capital markets toolkit and highlights our disciplined approach to accessing diversified, long-duration sources of fixed-rate debt,” said Jonathan Pong, CFO at Realty Income.
The structure allows San Diego Community Power to issue municipal bonds and prepay for electricity through Aron Energy Prepay 60 LLC, an affiliate of Goldman Sachs. Aron Energy then lends a portion of the proceeds to Realty Income through an unsecured term loan
