Note 5. Secured Debt

The Company’s secured debt is summarized as follows:


	Carrying value as of:					Interest Rate			Maturity Date
Encumbered Property	December 31, 2013		December 31, 2012			Interest Rate			Maturity Date
Montgomery	$	2,693,364	$	2,768,704			6.42	%		7/1/2016
Seabrook		4,444,137		4,516,470			5.73	%		1/1/2016
Greenville		2,226,986		2,263,211			5.65	%		3/1/2016
Kemah		8,732,981		8,858,838			6.20	%		6/1/2016
Memphis		2,465,045		2,502,922			5.67	%		12/1/2016
Tallahassee		7,446,178		7,537,926			6.16	%		8/1/2016
Houston		1,981,095		2,018,754			5.67	%		2/1/2017
San Francisco (consolidated VIE)		10,256,163		10,387,192			5.84	%		1/1/2017
Lake Forest		18,000,000		18,000,000			6.47	%		10/1/2017
Las Vegas II		1,511,958		1,530,923			5.72	%		6/1/2017
Pearland		3,438,473		3,480,298			5.93	%		7/1/2017
Daphne		1,381,213		1,544,325			5.47	%		8/1/2020
Mesa		2,968,060		3,036,098			5.38	%		4/1/2015
Riverdale		4,800,000		4,800,000			4.00	%		5/14/2014
Prudential Portfolio Loan ^{(1) (2)}		31,044,708		31,547,772			5.42	%		9/5/2019
Dufferin – Toronto – Ontario, Canada ⁽³⁾		6,144,911		6,812,855			5.22	%		5/15/2014
Citi Loan ⁽⁴⁾		28,077,873		28,466,942			5.77	%		2/6/2021
Bank of America Loan – 1 ⁽⁵⁾		4,321,842		4,400,398			5.18	%		11/1/2015
Bank of America Loan – 2 ⁽⁶⁾		6,548,748		6,667,782			5.18	%		11/1/2015
Bank of America Loan – 3 ⁽⁷⁾		11,770,704		11,984,654			5.18	%		11/1/2015
Prudential – Long Beach ⁽⁸⁾		6,533,640		6,637,926			5.27	%		9/5/2019
SF Bay Area – Morgan Hill ⁽¹⁹⁾		—		2,928,860			5.75	%		4/1/2013
SF Bay Area – Vallejo		4,295,098		4,390,176			6.04	%		6/1/2014
Citi Las Vegas Loan ⁽⁹⁾		7,434,590		7,545,688			5.26	%		6/6/2021
ING Loan ⁽¹⁰⁾		21,265,500		21,587,669			5.47	%		7/1/2021
Ladera Ranch		6,691,304		6,821,300			5.84	%		6/1/2016
SF Bay Area – San Lorenzo		—		2,099,622			6.07	%		1/1/2014
Las Vegas V		1,628,783		1,667,485			5.02	%		7/1/2015
Second Restated KeyBank Loan ⁽¹¹⁾		—		51,666,666			4.67	%		12/24/2014	⁽¹¹⁾
Mississauga ⁽¹²⁾ – Ontario, Canada		6,763,769		6,841,134			5.00	%		10/31/2014
Chantilly ⁽¹³⁾		3,421,797		3,474,712			4.75	%		6/6/2022
Brampton ⁽¹⁴⁾ – Ontario, Canada		6,482,879		208,086			5.25	%		6/30/2016
Citi Stockade Loan – 1 ⁽¹⁵⁾		18,200,000		18,200,000			4.60	%		10/1/2022
KeyBank CMBS Loan ⁽¹⁶⁾		30,960,278		31,000,000			4.65	%		11/1/2022
Citi Stockade Loan – 2 ⁽¹⁷⁾		19,362,500		19,362,500			4.61	%		11/6/2022
Bank of America Loan – 4 ⁽¹⁸⁾		6,394,362		6,459,043			6.33	%		10/1/2017
Citi SF Bay Area – Morgan Hill Loan ⁽¹⁹⁾		3,000,000		—			4.08	%		3/6/2023
KeyBank Revolver ⁽²⁰⁾		71,000,000		—			1.67	%		10/25/2016
John Hancock Loan ⁽²¹⁾		16,682,984		—			6.36	%		6/1/2018
Net fair value adjustment		913,837		(576,173	)

Total secured debt	$	391,285,760	$	353,440,758

⁽¹⁾	This portfolio loan is comprised of 11 discrete mortgage loans on 11 respective properties (Manassas, Marietta, Erlanger, Pittsburgh, Weston, Fort Lee, Oakland Park, Tempe, Phoenix II, Davie and Las Vegas I). Each of the individual loans is cross-collateralized by the other ten.

⁽²⁾	Ten of the loans in this portfolio loan bear an interest rate of 5.43%, and the remaining loan bears an interest rate of 5.31%. The weighted average interest rate of this portfolio is 5.42%.

⁽³⁾	On January 12, 2011, we encumbered the Dufferin property with a Canadian dollar denominated loan which bears interest at the bank’s floating rate plus 3.5% (subject to a reduction in certain circumstances). The rate in effect at December 31, 2013 was 5.22%.

⁽⁴⁾

This portfolio loan encumbers 11 properties (Biloxi, Gulf Breeze I, Alpharetta, Florence II, Jersey City, West Mifflin, Chicago – 95th St., Chicago – Western Ave., Chicago – Ogden Ave., Chicago – Roosevelt Rd. and Las Vegas IV). The net book value of the encumbered properties as of December 31, 2013 was approximately $50.4 million. Such amounts are only available to satisfy the obligations of this loan.

⁽⁵⁾	This loan encumbers the Lawrenceville I and II properties.

⁽⁶⁾	This loan encumbers the Concord, Hickory and Morganton properties.

⁽⁷⁾	This loan encumbers the El Paso II, III, IV & V properties as well as the Dallas property.

⁽⁸⁾	This loan is cross-collateralized by the 11 properties discussed in footnote (1) to this table.

⁽⁹⁾	This loan encumbers the Las Vegas VII and Las Vegas VIII properties. The net book value of the encumbered properties as of December 31, 2013 was approximately $9.0 million. Such amounts are only available to satisfy the obligations of this loan.

⁽¹⁰⁾

This portfolio loan is comprised of 11 discrete mortgage loans on 11 respective properties (Peachtree City, Buford, Jonesboro, Ellenwood, Marietta II, Collegeville, Skippack, Ballston Spa, Trenton, Fredericksburg and Sandston). Each of the individual loans have an original term of 30 years and mature on July 1, 2041. ING has the option to require payment of the loan in full every five years beginning on July 1, 2021.

⁽¹¹⁾

Through October 28, 2013, this loan was collateralized by the Homeland Portfolio (Kennesaw, Sharpsburg, Duluth I, Duluth II, Duluth III, Marietta III, Austell, Sandy Springs, Smyrna, Lawrenceville II, Jacksonville I and Jacksonville II). This loan was a variable rate loan, such rate was based on 30-day LIBOR, which including the applicable spread equaled an interest rate of 4.67% as of October 28, 2013; however, we were required to purchase an interest rate swap with a notional amount of $45 million, and, inclusive of the interest rate swap, the effective fixed interest rate was 5.41%. For additional discussion, see “Second Restated KeyBank Loan” below. This loan was paid off in October 2013 in connection with entering into a revolving loan agreement with KeyBank National Association (the “KeyBank Revolver”). The KeyBank Revolver is further described below.

⁽¹²⁾	In December 2011, we entered into a Canadian dollar denominated construction loan with an aggregate potential commitment amount of approximately $9.2 million. Such loan bears interest at the bank’s floating rate, plus 2% (totaling 5.00% as of December 31, 2013).

⁽¹³⁾	The net book value of the Chantilly property as of December 31, 2013 was approximately $6.9 million. Such amounts are only available to satisfy the obligations of this loan.

⁽¹⁴⁾	In September 2012, we entered into a Canadian dollar denominated construction loan with an aggregate potential commitment amount of approximately $9.2 million. Such loan bears interest at the bank’s floating rate, plus 2.25% (totaling 5.25% as of December 31, 2013).

⁽¹⁵⁾

This portfolio loan encumbers 10 properties (Savannah I, Savannah II, Columbia, Lexington I, Stuart I, Lexington II, Stuart II, Bluffton, Wilmington Island and Myrtle Beach). The net book value of the encumbered properties as of December 31, 2013 was approximately $34.5 million. Such amounts are only available to satisfy the obligations of this loan.

⁽¹⁶⁾

This portfolio loan encumbers nine properties (Los Angeles – La Cienega, Las Vegas III, Las Vegas VI, Hampton, SF Bay Area – Gilroy, Toms River, Crescent Springs, Florence and Walton). The net book value of the encumbered properties as of December 31, 2013 was approximately $42.6 million. Such amounts are only available to satisfy the obligations of this loan.

⁽¹⁷⁾

This portfolio loan encumbers six properties (Mt. Pleasant I, Charleston I, Charleston II, Mt. Pleasant II, Charleston III, and Mt. Pleasant III). The net book value of the encumbered properties as of December 31, 2013 was approximately $37.2 million. Such amounts are only available to satisfy the obligations of this loan.

⁽¹⁸⁾	This loan encumbers the Ridgeland and Canton properties.

⁽¹⁹⁾	The SF Bay Area – Morgan Hill loan was paid off on March 5, 2013 using proceeds from the Citi SF Bay Area – Morgan Hill Loan. For additional discussion, see “Citi SF Bay Area – Morgan Hill Loan” below.

⁽²⁰⁾

On October 28, 2013, through our Operating Partnership and certain property-owning special purpose entities wholly-owned by our Operating Partnership, we entered into the KeyBank Revolver, which matures on October 25, 2016. Such loan encumbers the Homeland Portfolio properties, the Knoxville Portfolio properties and five other previously unencumbered properties (Gulf Breeze II, El Paso I, Toms River II, North Charleston and Phoenix I). This loan is a LIBOR based variable rate loan, and such rate is based on 30-day LIBOR, which including the applicable spread equaled an initial interest rate of 1.67% as of October 28, 2013 and remained at such interest rate as of December 31, 2013. The interest rate swap with a notional amount of $45 million that was originally entered into in connection with the Second Restated KeyBank Loan remains outstanding; inclusive of the interest rate swap, the effective fixed interest rate as of December 31, 2013 was approximately 2.4%. For additional discussion, see “KeyBank Revolver” below.

⁽²¹⁾	This loan encumbers the Midland I, Coppell, Midland II, Arlington and Weatherford properties.

As of December 31, 2013 and 2012, the Company’s secured promissory notes shown above were secured by the properties shown above, which properties had net book values of approximately $647 million and $587 million, respectively.

KeyBank Revolver

On October 28, 2013, we, through our Operating Partnership and certain property-owning special purpose entities wholly-owned by our Operating Partnership (collectively with the Operating Partnership, the “Borrower”), obtained a revolving loan from KeyBank, National Association (“KeyBank”) for borrowings up to $75 million (as amended, the “KeyBank Revolver”). In November 2013, $25 million of the KeyBank Revolver was syndicated to another participating lender. The initial amount funded at closing was $71 million (the “Initial Draw”), $45 million of which was used to pay off the outstanding principal amount under the Second Restated KeyBank Loan, and thereby release the 12 properties comprising the Homeland Portfolio that were serving as collateral for the Second Restated KeyBank Loan, and approximately $26 million of which was used to partially fund the acquisition of the Knoxville Portfolio described in Note 4. It is anticipated that future draws on the KeyBank Revolver will be used to help fund our future acquisitions of self storage facilities and for other general corporate purposes.

The KeyBank Revolver has an initial term of three years, maturing on October 25, 2016, with two one-year extension options subject to certain conditions outlined further in the credit agreement for the KeyBank Revolver (the “Credit Agreement”). Payments due pursuant to the KeyBank Revolver are interest-only for the life of the loan. The KeyBank Revolver bears interest at the Borrower’s option of either the Alternate Base Rate plus the Applicable Rate or the Adjusted LIBO Rate plus the Applicable Rate (each as defined in the Credit Agreement). The Applicable Rate will vary based on our total leverage ratio. We elected to have the Adjusted LIBO Rate plus the Applicable Rate apply to the Initial Draw, which equated an initial interest rate of 1.67%. The $45 million interest rate swap originally purchased in connection with the Second Restated KeyBank Loan will remain in place through December 24, 2014, thus fixing the rate on $45 million at approximately 2.4%, assuming the Applicable Rate remains constant.

During the first 18 months of the KeyBank Revolver, we may request increases in the aggregate commitment up to a maximum of $200 million in minimum increments of $10 million. We may also reduce the aggregate commitment in minimum increments of $10 million during the life of the loan, provided, however, that at no time will the aggregate commitment be reduced to less than $25 million unless the KeyBank Revolver is paid in full.

The KeyBank Revolver is secured by cross-collateralized first mortgage liens or first lien deeds of trust on the properties in the Homeland Portfolio, the properties in the Knoxville Portfolio, and five of our other self storage properties, and is cross-defaulted to any recourse debt of $25 million or greater in the aggregate or non-recourse debt of $75 million or greater in the aggregate. The KeyBank Revolver may be prepaid or terminated at any time without penalty, provided, however, that KeyBank and any other lender shall be indemnified for any breakage costs associated with any LIBOR borrowings. Pursuant to that certain guaranty dated October 28, 2013 in favor of KeyBank, we serve as a guarantor of all obligations due under the KeyBank Revolver.

Under certain conditions, the Borrower may cause the release of one or more of the properties serving as collateral for the KeyBank Revolver in connection with a full or partial pay down of the KeyBank Revolver, provided that there shall at all times be at least four properties serving as collateral.

The KeyBank Revolver contains a number of other customary terms and covenants, including the following (capitalized terms are as defined in the Credit Agreement):

•

the aggregate borrowing base availability under the KeyBank Revolver is limited to the lesser of: (1) 60% of the Pool Value of the properties in the collateral pool, or (2) an amount that would provide a minimum Debt Service Coverage Ratio of no less than 1.35 to 1.0; and

•

we must meet the following financial tests, calculated as of the close of each fiscal quarter: (1) a Total Leverage Ratio of no more than 60%; (2) a Tangible Net Worth of at least $250 million; (3) an Interest Coverage Ratio of no less than 1.85 to 1.0; (4) a Fixed Charge Ratio of no less than 1.6 to 1.0; (5) a ratio of varying rate Indebtedness to total Indebtedness not in excess of 30%; (6) a Loan to Value Ratio of not greater than sixty percent (60%); and (7) a Debt Service Coverage Ratio of not less than 1.35 to 1.0.

Second Restated KeyBank Loan

On December 27, 2011, in connection with the acquisition of the Homeland Portfolio (an $80 million portfolio of 10 properties in Atlanta, Georgia and two properties in Jacksonville, Florida), our Operating Partnership and various property owning SPEs entered into a second amended and restated secured credit facility with KeyBank with total commitments of $82 million (such facility replaced our then existing $30 million Restated KeyBank Credit Facility, which had approximately $20 million outstanding before the purchase of the Homeland Portfolio) and we drew down an additional approximately $56.6 million thereunder. On January 12, 2012, we drew down an additional approximately $5.4 million in connection with the repayment of the previously outstanding debt on our Crescent Springs, Florence and Walton properties, bringing the total amount outstanding to $82 million. Such credit facility, as amended (the “Second Restated KeyBank Loan”) was converted from a revolving credit facility to a term loan on August 15, 2012 and the principal balance was reduced on October 10, 2012, from $82 million to $55 million, through the use of the majority of the proceeds from the KeyBank CMBS Loan.

Beginning on November 30, 2012, we were required to make monthly payments in the amount of $1,666,667 until the outstanding principal balance of the Second Restated KeyBank Loan was reduced to $45 million, which occurred on April 5, 2013. The remaining $45 million was due to mature on December 24, 2014, subject to two, one-year extension options (subject to the fulfillment of certain conditions), and required monthly interest-only payments.

We were required to purchase an interest rate swap with a notional amount of $45 million, which requires us to pay an effective fixed interest rate of approximately 5.41% on the hedged portion of the debt. For the remaining amount outstanding, under the terms of the Second Restated KeyBank Loan, our Operating Partnership had the option of selecting one of three variable interest rates which had applicable spreads.

The Second Restated KeyBank Loan was secured by cross-collateralized first mortgage liens or first lien deeds of trust on all properties in the Homeland Portfolio and was cross-defaulted to any recourse debt of $25 million or greater in the aggregate or non-recourse debt of $75 million or greater in the aggregate. Our Operating Partnership could have the Second Restated KeyBank Loan, in whole or in part, at any time without penalty. Pursuant to that certain guaranty dated December 27, 2011 in favor of KeyBank, we served as a guarantor of all obligations due under the Second Restated KeyBank Loan.

KeyBank Bridge Loan

On December 27, 2011, in connection with the acquisition of the Homeland Portfolio, our Operating Partnership and certain property owning SPEs also obtained a bridge loan with total commitments of $28 million (the “KeyBank Bridge Loan”) from KeyBank ($10 million of which was previously committed with nothing outstanding under our previously existing KeyBank Working Capital Line, which was terminated) and drew down the entire committed amount.

The KeyBank Bridge Loan required monthly principal and interest payments and was repaid in full on August 7, 2012. Under the terms of the KeyBank Bridge Loan, our Operating Partnership had the option of selecting one of three variable interest rates, which had applicable spreads. Our Operating Partnership elected to have a 30-day LIBOR rate apply, which, including the applicable spread, equaled an interest rate of approximately 6.7% for the period outstanding during 2012.

Citi SF Bay Area – Morgan Hill Loan

On March 5, 2013, we entered into a loan agreement with Citigroup Global Markets Realty Corp. in the principal amount of $3 million. The proceeds from the loan were used to repay the then outstanding loan collateralized by the SF Bay Area – Morgan Hill property. The new loan matures on March 6, 2023 and bears a fixed interest rate of 4.08% per annum on a 30-year amortization schedule with required monthly payments of interest only for the first five years. The loan contains a number of customary terms and covenants.

The following table presents the future principal payment requirements on outstanding secured debt as of December 31, 2013:


2014	$	26,089,586
2015		30,827,135
2016		114,583,851
2017		44,044,243
2018		19,074,211
2019 and thereafter		155,752,897

Total payments		390,371,923
Unamortized fair value adjustment		913,837

Total	$	391,285,760

We record the amortization of debt premiums related to fair value adjustments to interest expense. The weighted average interest rate of the Company’s fixed rate debt as of December 31, 2013 was approximately 5.4%.