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Debt

12 Months Ended

Dec. 31, 2019

A summary of the Company’s outstanding consolidated indebtedness, including unamortized debt premiums and discounts, is as follows:



	December 31,
	2019			2018
Debt secured by owned properties:
Mortgage loans payable:
Unpaid principal balance	$	693,584		$	727,163
Unamortized deferred financing costs	(1,294		)	(1,757		)
Unamortized debt premiums	6,596			11,579
Unamortized debt discounts	(199		)	—
	698,687			736,985
Construction loans payable⁽¹⁾	—			22,207
Unamortized deferred financing costs	—			(480		)
	698,687			758,712
Debt secured by on-campus participating properties:
Mortgage loans payable ⁽²⁾	65,942			67,867
Bonds payable⁽²⁾	23,215			27,030
Unamortized deferred financing costs	(418		)	(525		)
	88,739			94,372
Total secured mortgage, construction and bond debt	787,426			853,084
Unsecured notes, net of unamortized OID and deferred financing costs⁽³⁾	1,985,603			1,588,446
Unsecured term loans, net of unamortized deferred financing costs⁽⁴⁾	199,121			198,769
Unsecured revolving credit facility	425,700			387,300
Total debt, net	$	3,397,850		$	3,027,599


⁽¹⁾	Construction loans payable relate to the construction loans partially financing the development of presale development projects. The properties are owned by an entity determined to be a VIE for which the Company is the primary beneficiary. The creditor of the construction loans does not have recourse to the assets of the Company.

⁽²⁾The creditors of mortgage loans payable and bonds payable related to on-campus participating properties do not have recourse to the assets of the Company.


⁽³⁾	Includes net unamortized original issue discount (“OID”) of $2.3 million at December 31, 2019 and $1.6 million at December 31, 2018, and net unamortized deferred financing costs of $12.1 million at December 31, 2019 and $10.0 million at December 31, 2018.


⁽⁴⁾	Includes net unamortized deferred financing costs of $0.9 million at December 31, 2019 and $1.2 million at December 31, 2018.

Mortgage and Construction Loans Payable

Mortgage loans payable generally feature either monthly interest and principal payments or monthly interest-only payments with balloon payments due at maturity. For purposes of classification in the following table, variable rate mortgage loans subject to interest rate swaps are deemed to be fixed rate, due to the Company having effectively fixed the interest rate for the underlying debt instrument. Construction loans payable generally feature monthly payments of interest only during the term of the loan and outstanding borrowings become due at maturity.

Mortgage loans payable, excluding debt premiums and discounts, consisted of the following as of December 31, 2019:



					December 31, 2019
	Principal Outstanding				Weighted		Weighted	Number of
	December 31,				Average		Average Years	Properties
	2019		2018		Interest Rate		to Maturity	Encumbered
Fixed Rate:
Mortgage loans payable ⁽¹⁾	$	756,397	$	683,615	4.45	%	6.2 Years	20
Variable Rate:
Mortgage and construction loans payable ⁽²⁾	3,129		133,622		4.24	%	25.6 Years	—
Total	$	759,526	$	817,237	4.44	%	6.3 Years	20


⁽¹⁾	Fixed rate mortgage loans payable mature at various dates from 2020 through 2045 and carry interest rates ranging from 3.76% to 6.43% at December 31, 2019.


⁽²⁾	The 2019 amounts represent mortgage debt at one of our on-campus participating properties not subject to an interest rate swap contract. This property is included in the number of properties encumbered by mortgage loans above. The 2018 amounts represent construction loans for two properties under pre-sale agreements and mortgage loans at one on-campus and one owned property.

During the year ended December 31, 2019, the following transactions occurred:



	Mortgage Loans Payable ⁽¹⁾			Construction Loans Payable
Balance, December 31, 2018	$	795,030		$	22,207
Additions:
Draws under advancing construction notes payable	—			31,611
Deductions:
Forgiveness of debt ⁽²⁾	(27,381		)	—
Pay-off of construction debt ⁽³⁾	—			(53,818		)
Scheduled repayments of principal	(8,123		)	—
Balance, December 31, 2019	$	759,526		$	—


⁽¹⁾	Balance excludes unamortized debt premiums and discounts.


⁽²⁾	The Company completed the transfer of Blanton Common to the lender in settlement of the property's mortgage loan in July 2019.


⁽³⁾	Debt for two presale development properties paid off on the respective acquisition dates.

In January 2019, the Company refinanced $70.0 million of variable rate debt on one wholly-owned property, extending the maturity to January 2024. The Company entered into an interest rate swap contract to hedge the variable rate cash flows associated with interest payments on this LIBOR-based mortgage loan, resulting in a fixed rate of 4.00%. Refer to Note 12 for information related to derivatives.

In August and November 2019, the Company acquired two properties, each subject to a presale agreement. Approximately $53.8 million of construction debt used to partially finance the development of the presale projects was paid off upon acquisition. Refer to Note 5 for more information related to acquisitions.

In October 2019, the company entered into an interest rate swap contract on $37.5 million of variable rate debt on one on campus participating property, to hedge the variable rate cash flows associated with interest payments on the LIBOR-based mortgage loan, resulting in a fixed rate for that portion of 3.76%. Refer to Note 12 for additional information.

In May 2017, the lender of the non-recourse mortgage loan secured by Blanton Common, a property located near Valdosta State University containing 860 beds which was included as part of the GMH student housing transaction in 2008, sent a formal notice of default and initiated foreclosure proceedings. The property generated insufficient cash flow to cover the debt service on the mortgage, which had a balance of $27.4 million at default and a contractual maturity date of August 2017. In May 2017, the lender began receiving the net operating cash flows of the property each month in lieu of scheduled monthly mortgage payments. In June 2017, the Company recorded an impairment charge for this property of $15.3 million. In August 2017, the property transferred to receivership, and a third-party manager began managing the property on behalf of the lender. In July 2019, the Company completed the transfer of the property to the lender in settlement of the property's mortgage loan and recognized a net gain from the extinguishment of debt totaling $21.0 million.

Bonds Payable

Three of the on-campus participating properties are 100% financed with outstanding project-based taxable bonds. Under the terms of these financings, one of the Company’s special purpose subsidiaries publicly issued three series of taxable bonds and loaned the proceeds to three special purpose subsidiaries that each hold a separate leasehold interest. The bonds encumbering the leasehold interests are non-recourse, subject to customary exceptions. Although a default in payment by these special purpose subsidiaries could result in a default under one or more series of bonds, indebtedness of any of these special purpose subsidiaries is not cross-defaulted or cross-collateralized with indebtedness of the Company, the Operating Partnership, or other special purpose subsidiaries. Repayment of principal and interest on these bonds is insured by MBIA, Inc. Interest and principal are paid semi-annually and annually, respectively, through maturity. Covenants include, among other items, budgeted and actual debt service coverage ratios. As of December 31, 2019, the Company was in compliance with all such covenants.

Bonds payable at December 31, 2019 consisted of the following:



Series	Mortgaged Facilities Subject to Leases	Original		Principal		Weighted Average Rate		Maturity Date	Required Monthly Debt Service
Series	Mortgaged Facilities Subject to Leases	Original		December 31, 2019		Weighted Average Rate		Maturity Date	Required Monthly Debt Service
1999	University Village-PVAMU/TAMIU	$	39,270	$	12,065	7.76	%	September 2023	$	302
2001	University College–PVAMU	20,995		8,885		7.62	%	August 2025	158
2003	University College–PVAMU	4,325		2,265		6.20	%	August 2028	28
	Total/weighted average rate	$	64,590	$	23,215	7.55	%		$	488

Unsecured Notes

In June 2019, the Operating Partnership closed a $400 million offering of senior unsecured notes under its existing shelf registration. These seven-year notes were issued at 99.704% of par value with a coupon of 3.300% and a yield of 3.347% and are fully and unconditionally guaranteed by the Company. Net proceeds from the notes totaled approximately $394.0 million, after deducting the underwriting discount and offering expenses which will be amortized over the term of the unsecured notes. The net proceeds were used to repay borrowings under the Company’s revolving credit facility.

As of December 31, 2019, the Company has issued the following senior unsecured notes:



Date Issued	Amount		% of Par Value	Coupon	Yield		Original Issue Discount		Term (Years)
April 2013	$	400,000	99.659	3.750%	3.791%		$	1,364	10
June 2014	400,000		99.861	4.125%	4.269%	⁽¹⁾	556		10
September 2015 ⁽²⁾	400,000		99.811	3.350%	3.391%		756		5
October 2017	400,000		99.912	3.625%	3.635%		352		10
June 2019	400,000		99.704	3.300%	3.680%	⁽¹⁾	1,184		7
	$	2,000,000					$	4,212


⁽¹⁾	The yield includes effect of the amortization of the interest rate swap terminations.


⁽²⁾	In January 2020, the Company issued $400 million of 10-year unsecured notes at a yield of 2.872% that mature in 2030. Proceeds from the issuance were used to repay $400.0 million of unsecured notes issued in September 2015 that were scheduled to mature in October 2020. Refer to Note 18 for additional information.

The notes are fully and unconditionally guaranteed by the Company. Interest on the notes is payable semi-annually. The terms of the unsecured notes include certain financial covenants that require the Operating Partnership to limit the amount of total debt and secured debt as a percentage of total asset value, as defined. In addition, the Operating Partnership must maintain a minimum ratio of unencumbered asset value to unsecured debt, as well as a minimum interest coverage level. As of December 31, 2019, the Company was in compliance with all such covenants.

Unsecured Revolving Credit Facility

In February 2019, the Company exercised the option under the existing credit agreement to increase the capacity of the unsecured revolving credit facility from $700 million to $1.0 billion. It may be expanded by up to an additional $200 million upon the satisfaction of certain conditions. The maturity date of the revolving credit facility is March 2022.

The unsecured revolving credit facility bears interest at a variable rate, at the Company’s option, based upon a base rate of one-, two-, three- or six-month LIBOR, plus, in each case, a spread based upon the Company’s investment grade rating from either Moody’s Investor Services, Inc. or Standard & Poor’s Rating Group. Additionally, the Company is required to pay a facility fee of 0.20% per annum on the $1.0 billion revolving credit facility. As of December 31, 2019, the revolving credit facility bore interest at a weighted average annual rate of 2.97% (1.77% + 1.00% spread + 0.20% facility fee), and availability under the revolving credit facility totaled $574.3 million.

The terms of the unsecured credit facility include certain restrictions and covenants, which limit, among other items, the incurrence of additional indebtedness and liens. The facility contains customary affirmative and negative covenants and also contains financial covenants that, among other things, require the Company to maintain certain maximum leverage ratios and minimum ratios of “EBITDA” (earnings before interest, taxes, depreciation and amortization) to fixed charges. The financial covenants also include a minimum asset value requirement, a maximum secured debt ratio, and a minimum unsecured debt service coverage ratio. As of December 31, 2019, the Company was in compliance with all such covenants.

Unsecured Term Loans

The Company is currently party to an Unsecured Term Loan Credit Agreement (the "Term Loan Facility") totaling $200 million which matures in June 2022. The agreement has an accordion feature that allows the Company to expand the amount by up to an additional $100 million, subject to the satisfaction of certain conditions. In November and December 2019, the Company entered into two interest rate swap contracts to hedge the variable rate cash flows associated with the LIBOR-based interest payments on the Term Loan Facility. The weighted average annual rate on the Term Loan was 2.54% (1.44% + 1.10% spread) at December 31, 2019. Refer to Note 12 for more information related to cash flow hedges of interest rate risk. The Term Loan Facility includes certain restrictions and covenants consistent with those of the unsecured revolving credit facility discussed above. As of December 31, 2019, the Company was in compliance with all such covenants.

In May 2018, the Company repaid a $300 million unsecured term loan and a $150 million unsecured term loan which were due to mature in September 2018 and March 2021, respectively, using the proceeds from the sale of a partial interest in a portfolio of seven owned properties and the portfolio sale of three owned properties (see Note 6). In connection with the pay-off of these term loan facilities, the Company accelerated the amortization of $0.9 million of deferred financing costs.

Debt Maturities

The following table summarizes the stated debt maturities and scheduled amortization payments, excluding debt premiums and discounts, for each of the five years subsequent to December 31, 2019 and thereafter:




2020	$	446,164
2021	196,996
2022	658,853
2023	408,599
2024	529,139
Thereafter	1,168,690
	$	3,408,441

The Company's payment of principal and interest were current at December 31, 2019. Certain of the mortgage notes and bonds payable are subject to prepayment penalties.