Fundamental Income Properties issued $314.9 million in asset-backed securities (ABS) backed by triple net lease contracts on commercial real estate properties, and drawing significant investor interest the deal was increased from the initial $250 million.
The bond offering, sold under Rule 144A, follows Fundamental Income's $328.9 million transaction completed in March of this year under the FI Master Trust program, its first securitization. The new deal is split into a $274.4 million, five-year tranche of Class A-1 notes rated 'AA' by Standard & Poor's, and $67.5 million of five-year, Class A-2 notes rated 'A'. The earlier deal was similarly structured and rated, although the class A-2 tranche took up a significantly larger portion of the transaction.
Atlas SP acted as lead bookrunner, while Bank of America and Barclays were comanagers. A spokesperson for the company said that investors in the deal were mostly insurance companies.
The bonds are supported by overcollateralization, and new collateral was added to further diversify the pool of assets. The proceeds will be used to repay short-term borrowings and general corporate purposes, according to the company.
Alexi Panagiotakopoulos, Fundamental Income's chief investment officer, said that the firm is filling a marketplace void as traditional sources of financing continued to lessen.
"Against this backdrop, sale leaseback financing is an especially compelling alternative for business owners looking to unlock the value of their static real estate holdings to efficiently finance their businesses," Panagiotakopoulos said in a statement.
He added that Fundamental Income continues to see strong demand from companies across a variety of industries. The Phoenix-based firm, backed by Brookfield Corp., a $850 billion global asset manager, has acquired and financed upwards of $1.5 billion in single-tenant properties across 43 states and 44 industries. The states with the highest concentration in the new deal's pool are Wisconsin (8.8%), Colorado (7.8%), and Texas (7.2%).
"The capital raised in this transaction, which was upsized due to strong institutional investor demand, allows us to continue supporting middle-market businesses at a time when both the availability and cost of other forms of capital are challenging," Chris Burbach, CEO of Fundamental Income, said in a statement.
Fundamental Income was founded in April 2020, with an initial equity commitment from Brookfield Asset Management.
