4. Mortgage Loans

Griffin’s mortgage loans, which are nonrecourse, consist of:


	May 31, 2018		Nov. 30, 2017
Variable rate, due January 27, 2020 *	$	3,412	$	3,478
Variable rate, due October 3, 2022 *		4,321		4,367
Variable rate, due January 2, 2025 *		19,949		20,221
Variable rate, due May 1, 2026 *		13,665		13,844
Variable rate, due November 17, 2026 *		25,742		26,076
Variable rate, due August 1, 2027 *		10,404		10,523
3.97%, due September 1, 2027		12,008		12,115
Variable rate, due February 1, 2028 *		18,678		—
5.09%, due July 1, 2029		6,387		6,597
5.09%, due July 1, 2029		4,475		4,622
4.33%, due August 1, 2030		17,145		17,308
Variable rate, due March 1, 2027 *		—		11,826
Nonrecourse mortgage loans prior to debt issuance costs		136,186		130,977
Debt issuance costs, net		(2,221)		(1,774)
Nonrecourse mortgage loans, net of debt issuance costs	$	133,965	$	129,203

*Griffin entered into interest rate swap agreements to effectively fix the interest rates on these loans (see below).

As of May 31, 2018, Griffin was a party to several interest rate swap agreements related to its variable rate nonrecourse mortgage loans on certain of its real estate assets. Griffin accounts for its interest rate swap agreements as effective cash flow hedges (see Note 2). No ineffectiveness on the cash flow hedges was recognized as of May 31, 2018 and none is anticipated over the term of the agreements. Amounts in accumulated other comprehensive income (loss) will be reclassified into interest expense over the term of the swap agreements to achieve fixed interest rates on each variable rate mortgage. None of the interest rate swap agreements contain any credit risk related contingent features. In the 2018 six month period, Griffin recognized a gain, included in other comprehensive income, before taxes of $2,942 on its interest rate swap agreements. In the 2017 six month period, Griffin recognized a loss, included in other comprehensive loss, before taxes of $284 on its interest rate swap agreements. As of May 31, 2018, $201 was expected to be reclassified over the next twelve months from accumulated other comprehensive income to interest expense. As of May 31, 2018, the net fair value of Griffin’s interest rate swap agreements was $2,629, with $2,800 included in other assets and $171 included in other liabilities on Griffin’s consolidated balance sheet.

On March 29, 2018, a subsidiary of Griffin closed on a $13,800 construction to permanent mortgage loan (the “State Farm Loan”) with State Farm Life Insurance Company (“State Farm”), which is expected to provide a significant portion of the financing for the construction of an approximately 234,000 square foot build-to-suit industrial/warehouse building (“220 Tradeport Drive”) in New England Tradeport (“NE Tradeport”), Griffin’s industrial park located in Windsor and East Granby, Connecticut. Griffin expects to spend a total of approximately $17,100 related to the development of 220 Tradeport Drive, including all related site work, building construction, tenant improvements, leasing costs and financing costs. In the fourth quarter of fiscal 2017, Griffin entered into a long-term lease with one tenant for the entire building. The State Farm Loan will initially function as a construction loan, with Griffin drawing funds as construction of 220 Tradeport Drive progresses. Upon completion of 220 Tradeport Drive, expected in the second half of fiscal 2018, and the commencement of rent payments by the tenant (six months after lease commencement), the State Farm Loan will convert to a fifteen year nonrecourse permanent mortgage loan, which is expected to take place in fiscal 2019. The interest rate on the loan is 4.51%. During the construction period, only interest payments will be made. Monthly principal payments, which will begin after conversion to a nonrecourse permanent mortgage loan, will be based on a twenty-five year amortization schedule. The State Farm Loan may be increased up to $14,288 if the tenant in 220 Tradeport Drive opts to have Griffin make certain additional improvements to 220 Tradeport Drive. The first drawdown under the State Farm Loan took place subsequent to May 31, 2018.

On March 15, 2017, a subsidiary of Griffin closed on a $12,000 nonrecourse mortgage (the “2017 People’s Mortgage”) with People’s United Bank, N.A. (“People’s Bank”). On January 30, 2018, that subsidiary refinanced the 2017 People’s Mortgage with a new nonrecourse mortgage loan (the “2018 People’s Mortgage”) with People’s Bank. The 2017 People’s Mortgage had a balance of $11,781 at the time of refinancing. The 2018 People’s Mortgage is collateralized by the same two NE Tradeport industrial/warehouse buildings, aggregating approximately 275,000 square feet, that collateralized the 2017 People’s Mortgage. In addition, 330 Stone Road, an approximately 137,000 square foot industrial/warehouse building in NE Tradeport that was completed and placed in service near the end of fiscal 2017, was added to the collateral for the 2018 People’s Mortgage. At the closing of the 2018 People’s Mortgage, Griffin received additional mortgage proceeds of $7,000 (before transaction costs), net of the $11,781 used to refinance the 2017 People’s Mortgage. The 2018 People’s Mortgage has a ten year term with monthly principal payments based on a twenty-five year amortization schedule. The interest rate for the 2018 People’s Mortgage is a floating rate of the one month LIBOR rate plus 1.95%. At the time the 2018 People’s Mortgage closed, Griffin entered into an interest rate swap agreement with People’s Bank that, combined with an interest rate swap agreement with People’s Bank entered into at the time the 2017 People’s Mortgage closed, effectively fixes the interest rate of the 2018 People’s Mortgage at 4.57% over the mortgage loan’s ten year term. Under the terms of the 2018 People’s Mortgage, Griffin entered into a master lease for 759 Rainbow Road (“759 Rainbow”), one of buildings that collateralize the 2018 People’s Mortgage. The master lease would only become effective if the full building tenant in 759 Rainbow does not renew its lease when it is scheduled to expire in fiscal 2019. The master lease would be in effect until either the space is re-leased to a new tenant or the maturity date of the 2018 People’s Mortgage.