Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable, net secured by real property as of December 31, 2018 and 2017:



	December 31, 2018
			Interest Rate Range				Weighted Average Interest Rate
Type	Number of Instruments	Maturity Date Range	Minimum		Maximum		Weighted Average Interest Rate		Principal Outstanding
Mortgage notes payable - fixed	20	5/1/2019 - 10/1/2056	3.19	%	5.48	%	3.95	%	$	361,723,899
Mortgage notes payable - variable⁽¹⁾	10	7/1/2023 - 11/1/2027	1-Mo LIBOR + 1.77%		1-Mo LIBOR + 2.38%		4.69	%	283,046,390
Total mortgage notes payable, gross	30						4.27	%	644,770,289
Premium, net⁽²⁾									302,530
Deferred financing costs, net⁽³⁾									(3,934,705		)
Total mortgage notes payable, net									$	641,138,114



	December 31, 2017
			Interest Rate Range				Weighted Average Interest Rate
Type	Number of Instruments	Maturity Date Range	Minimum		Maximum		Weighted Average Interest Rate		Principal Outstanding
Mortgage notes payable - fixed	32	4/1/2018 - 10/1/2056	3.19	%	5.75	%	3.89	%	$	416,673,854
Mortgage notes payable - variable⁽¹⁾	14	10/1/2018 - 1/1/2026	1-Mo LIBOR +2.02%		1-Mo LIBOR + 2.50%		3.86	%	372,481,000
Total mortgage notes payable, gross	46						3.87	%	789,154,854
Premium, net⁽²⁾									673,653
Deferred financing costs, net⁽³⁾									(4,264,667		)
Total mortgage notes payable, net									$	785,563,840

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(1)	See Note 12 for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.


(2)	Accumulated amortization related to debt premiums as of December 31, 2018 and 2017 was $960,519 and $2,468,041, respectively.


(3)	Accumulated amortization related to deferred financing costs as of December 31, 2018 and 2017 was $2,929,134 and $3,951,049, respectively.

Refinancing Transactions

On June 29, 2016 and June 30, 2016, 14 wholly-owned subsidiaries of the Company terminated the existing mortgage loans with their respective lenders for an aggregate principal amount of $283,313,677 and entered into new loan agreements (each a “Loan Agreement”) with, as applicable, PNC Bank, National Association (“PNC Bank”), and Newmark Knight Frank (formerly known as Berkeley Point Capital LLC) (“Newmark”) for an aggregate principal amount of $358,002,000 (the “June Refinancing Transactions”). On July 29, 2016, nine wholly-owned subsidiaries of the Company also entered into a credit agreement (the “Credit Agreement”) with PNC Bank in connection with the refinancing of certain additional mortgage loans as further detailed below. Further, on August 30, 2016 and September 29, 2016, three wholly-owned subsidiaries of the Company terminated the existing mortgage loans with an aggregate principal amount of $61,575,025 and entered into new mortgage notes for an aggregate principal amount of $63,620,600 (together with the June Refinancing Transactions, the “Refinancing Transactions”).

In the June Refinancing Transactions, each Loan Agreement was made pursuant to the Freddie Mac Capital Markets Execution Program (“CME”), as evidenced by a multifamily note. Pursuant to the CME, the applicable Lender originates the mortgage loan and then transfers the loan to the Federal Home Loan Mortgage Association. Each Loan Agreement provides for a term loan with a maturity date of July 1, 2023, unless the maturity date is accelerated in accordance with the terms of the loan. Each loan accrues interest at the one-month London Interbank Offered Rate (“LIBOR”) plus 2.31%. Interest and principal payments on the loans are payable monthly in arrears on specified dates as set forth in each Loan Agreement. Monthly payments are due and payable on the first day of each month, commencing August 1, 2016.

Revolving Credit Facility

The Company entered into a revolving credit facility with PNC Bank to borrow up to $20,000,000. On July 18, 2014, the Company and PNC Bank amended the revolving credit facility to, among other things, increase the potential borrowing limit from $20,000,000 to $35,000,000. The amended and restated credit facility consisted of a Tranche A and a Tranche B, and provided certain security for borrowings under the amended and restated credit facility. The maximum amounts that could be borrowed under Tranche A and Tranche B were $20,000,000 and $15,000,000, respectively. For each advance under the amended and restated revolving credit facility, the Company had the option to select the interest rate from the following options: (1) Base Rate Option (as defined in the amended and restated credit facility) plus (i) with respect to Tranche A, 0.75% and (ii) with respect to Tranche B, 2.0%; or (2) LIBOR Option, which was a rate per annum fixed for the LIBOR Interest Period (as defined in the amended and restated credit facility) equal to the sum of LIBOR plus (i) with respect to Tranche A, 1.6% and (ii) with respect to Tranche B, 3.0%. The Company elected for each draw the LIBOR Option. Additionally, the Company incurred a commitment fee equal to 0.25% of the average daily difference between the $35,000,000 maximum available balance and the aggregate outstanding principal balance. The amended and restated revolving credit facility had a maturity date of July 17, 2016, subject to extension. On June 30, 2016, the Company repaid all outstanding amounts due and terminated the amended and restated revolving credit facility.

Credit Facility

On July 29, 2016, nine wholly-owned subsidiaries of the Company entered into the Credit Agreement and a multifamily note with PNC Bank (the Credit Agreement, multifamily note, loan and security agreements, mortgages and guaranty entered into in connection with the credit facility are collectively referred to herein as the “Loan Documents”) that provide for a new credit facility in an amount not to exceed $350,000,000 to refinance certain of the Company’s existing mortgage loans. The credit facility has a maturity date of August 1, 2021, subject to extension, as further described in the Credit Agreement. Advances made under the credit facility are secured by the properties set out in the schedule below (each, a “Collateral Pool Property” and collectively, the “Collateral Pool Properties”), pursuant to a mortgage deed of trust with the nine wholly-owned subsidiaries of the Company in favor of PNC Bank.

The credit facility accrues interest at the one-month LIBOR plus (1) the servicing spread of 0.05% and (2) the net spread, based on the debt service coverage ratio, of between 1.73% and 1.93%, as further described in the Credit Agreement. Interest only payments on the credit facility are payable monthly in arrears and are due and payable on the first day of each month, commencing September 1, 2016. The entire outstanding principal balance and any accrued and unpaid interest on the credit facility are due on the maturity date. The Company’s nine wholly-owned subsidiaries may voluntarily prepay all or a portion of the amounts advanced under the Loan Documents. Notwithstanding the foregoing, in the event a Collateral Pool Property is released or the Credit Agreement is terminated, a termination fee is due and payable by the Company’s nine wholly-owned subsidiaries. In certain instances of a breach of the Credit Agreement, the Company guarantees to PNC Bank the full and prompt payment and performance when due of all amounts for which the Company’s nine wholly-owned subsidiaries are personally liable under the Loan Documents, in addition to all costs and expenses incurred by PNC Bank in enforcing such guaranty. Between November 15, 2017 and May 31, 2018, seven of the Collateral Pool Properties were either disposed or refinanced, with the advances made to each of the seven Collateral Pool Properties being repaid in full.

As of December 31, 2018 and 2017, the advances obtained under the credit facility on July 29, 2016, are summarized in the following table:



	Amount of Advance as of December 31,
Collateralized Property⁽¹⁾	2018			2017
Carrington Park at Huffmeister	$	—		$	20,430,500
Carrington Place	27,535,500			27,535,500
Carrington at Champion Forest	25,121,250			25,121,250
Oak Crossing	—			17,980,000
	52,656,750			91,067,250
Deferred financing costs, net on credit facility⁽²⁾	(293,290		)	(845,152		)
Credit facility, net	$	52,363,460		$	90,222,098

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(1)	Each property is pledged as collateral for repayment of all amounts advanced under the credit facility.


(2)	Accumulated amortization related to deferred financing costs for the credit facility as of December 31, 2018 and 2017, was $294,250 and $390,241, respectively.

Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of December 31, 2018:



			Maturities During the Years Ending December 31,
Contractual Obligation	Total		2019		2020		2021		2022		2023		Thereafter
Principal payments on outstanding debt obligations⁽¹⁾	$	697,427,039	$	51,047,863	$	41,811,837	$	70,095,167	$	31,701,112	$	216,630,812	$	286,140,248

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(1)	Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the deferred financing costs and debt premiums associated with certain notes payable.

The Company’s notes payable contain customary financial and non-financial debt covenants. As of December 31, 2018 and 2017, the Company was in compliance with all financial and non-financial debt covenants.

For the years ended December 31, 2018, 2017 and 2016, the Company incurred interest of $33,158,759, $44,114,130 and $40,631,593, respectively. Interest expense for the years ended December 31, 2018, 2017 and 2016, includes amortization of deferred financing costs of $1,056,249, $1,839,952 and $1,723,186, amortization of loan premiums and discounts of $270,792, $1,129,960 and $1,243,385, net unrealized loss (gain) from the change in fair value of interest rate cap agreements of $157,268, $604,545 and $(61,698), capitalized interest of $0, $0 and $80,166 and costs associated with the refinancing of debt of $398,781, $0 and $1,221,254, respectively. The capitalized interest was included in real estate on the consolidated balance sheets.

Interest expense of $2,520,324 and $2,766,036 was payable as of December 31, 2018 and 2017, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.