Debt

9 Months Ended

Sep. 30, 2020

The Company’s mortgage loans are collateralized by first-mortgage liens on certain of the Company’s properties. The mortgage loans are non-recourse except for instances of fraud or misapplication of funds. Mortgage and revolving credit facility debt consisted of the following (dollars in thousands):


Collateral	Interest Rate		Maturity Date	9/30/20 Property Carrying Value		Balance Outstanding on Loan as of
						September 30, 2020		December 31, 2019
Revolving Credit Facility (1)	3.09	%	March 8, 2022	$	393,215	$	173,000	$	90,000


Construction loan (2)	7.75	%	August 3, 2024	33,719		3,923		—
Residence Inn by Marriott New Rochelle, NY	5.75	%	September 1, 2021	21,835		12,717		12,936
Residence Inn by Marriott San Diego, CA	4.66	%	February 6, 2023	43,836		26,798		27,272
Homewood Suites by Hilton San Antonio, TX	4.59	%	February 6, 2023	28,887		15,290		15,563
Residence Inn by Marriott Vienna, VA	4.49	%	February 6, 2023	31,267		20,911		21,291
Courtyard by Marriott Houston, TX	4.19	%	May 6, 2023	30,376		17,237		17,559
Hyatt Place Pittsburgh, PA	4.65	%	July 6, 2023	34,058		21,157		21,520
Residence Inn by Marriott Bellevue, WA	4.97	%	December 6, 2023	62,765		43,220		43,857
Residence Inn by Marriott Garden Grove, CA	4.79	%	April 6, 2024	41,368		31,615		32,053
Residence Inn by Marriott Silicon Valley I, CA	4.64	%	July 1, 2024	76,651		63,674		64,406
Residence Inn by Marriott Silicon Valley II, CA	4.64	%	July 1, 2024	84,863		69,471		70,270
Residence Inn by Marriott San Mateo, CA	4.64	%	July 1, 2024	63,382		47,755		48,305
Residence Inn by Marriott Mountain View, CA	4.64	%	July 6, 2024	50,346		37,241		37,670
SpringHill Suites by Marriott Savannah, GA	4.62	%	July 6, 2024	33,639		29,477		29,817
Hilton Garden Inn Marina del Rey, CA	4.68	%	July 6, 2024	38,339		20,604		20,931
Homewood Suites by Hilton Billerica, MA	4.32	%	December 6, 2024	13,252		15,484		15,693

Hampton Inn & Suites Houston Medical Center, TX	4.25	%	January 6, 2025	15,938		17,478		17,717

Total debt before unamortized debt issue costs				$	1,097,736	$	667,052	$	586,860
Unamortized mortgage debt issue costs						(1,105)		(1,395)
Total debt outstanding						$	665,947	$	585,465

1.The interest rate for the revolving credit facility is variable and based on LIBOR (subject to a 0.5% floor) plus a spread of 2.5% if borrowings remain at or below $200 million and a spread of 3.0% if borrowings exceed $200 million. At September 30, 2020 and December 31, 2019, the Company had $173.0 million and $90.0 million, respectively, of outstanding borrowings under its $250.0 million revolving credit facility. The credit facility provides two six-month extension options that would extend the final maturity to March 8, 2023 if exercised.

2.On August 4, 2020, a subsidiary of Chatham entered into an agreement with affiliates of Mack Real Estate Credit Strategies to obtain a $40 million loan to fund the remaining construction costs of the Warner Center hotel development. The loan has an initial term of 4 years and there are two six-month extension options. The rate on the loan is LIBOR, subject to a 0.25% floor, plus a spread of 7.5%.

The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates. All of the Company's mortgage loans are fixed-rate. Rates take into consideration general market conditions, quality and estimated value of collateral and maturity of debt with similar credit terms and are classified within level 3 of the fair value hierarchy. The estimated fair value of the Company’s fixed rate debt as of September 30, 2020 and December 31, 2019 was $471.4 million and $501.5 million, respectively.

The Company estimates the fair value of its variable rate debt by taking into account general market conditions and the estimated credit terms it could obtain for debt with similar maturity and is classified within level 3 of the fair value hierarchy. As of September 30, 2020, the Company’s only variable rate debt is under its revolving credit facility. The estimated fair value of the Company’s variable rate debt as of September 30, 2020 and December 31, 2019 was $176.9 million and $90.0 million, respectively.

On May 6, 2020, the company amended its credit facility to provide it with certain relief from the effects of the COVID-19 pandemic. The amendment provides for the waiver of certain financial covenants through March 31, 2021 and allows Chatham to borrow up to the entire $250 million facility size during this period. During this covenant waiver period, Chatham will be required to maintain a minimum liquidity of $25 million which will include both unrestricted cash and credit facility availability. In connection with the amendment, Chatham added six hotels to the credit facility’s borrowing base which now has a total of 18 properties. The amendment provided Chatham’s credit facility lenders with pledges of the equity in the 18 borrowing base hotels. The amendment places additional limits on Chatham’s ability to incur debt, pay dividends, and make capital expenditures during the covenant waiver period. During the covenant waiver period interest will be calculated as LIBOR (subject to a 0.5% floor) plus a spread of 2.5% if borrowings remain at or below $200 million and a spread of 3.0% if borrowings exceed $200 million. As of September 30, 2020, the Company was in compliance with all of its modified financial covenants.

Future scheduled principal payments of debt obligations as of September 30, 2020, for the current year and each of the next five calendar years and thereafter are as follows (in thousands):


	Amount
2020 (remaining three months)	$	2,665
2021	22,121
2022	182,954
2023	143,084
2024	300,309
2025	15,919
Thereafter	—
Total debt before unamortized debt issue costs	$	667,052
Unamortized mortgage debt issue costs	(1,105)
Total debt outstanding	$	665,947

Accounting for Derivative Instruments

The Company has entered into interest rate cap agreements to hedge against interest rate fluctuations related to the construction loans for the Warner Center hotel. The Company records its derivative instruments on the balance sheet at their estimated fair values. Changes in the fair value of the derivatives are recorded each period in current earnings or in other comprehensive income, depending on whether a derivative is designated as part of a hedging relationship and, if it is, depending on the type of hedging relationship. The Company's interest rate caps are not designated as a hedge but to eliminate the incremental cost to the Company if the one-month LIBOR were to exceed 3.5%. Accordingly, the interest rate caps are recorded on the balance sheet under prepaid expenses and other assets at the estimated fair value and realized and unrealized changes in the fair value are reported in the combined statement of operations.