Mortgage Notes Payable, Net

6 Months Ended

Jun. 30, 2020

Mortgage notes payable, net as of June 30, 2020 and December 31, 2019 consisted of the following:



		Encumbered Properties	Outstanding Loan Amount ⁽¹⁾						Effective Interest Rate		Interest Rate
Country	Portfolio	Encumbered Properties	June 30, 2020			December 31, 2019			Effective Interest Rate		Interest Rate	Maturity
			(In thousands)			(In thousands)
Finland:	Finland Properties	5	$	83,094		$	82,996		1.8%	⁽²⁾	Fixed/Variable	Feb. 2024

France:	Worldline	—	—			5,608			—	⁽³⁾	—	—
	DCNS	—	—			10,655			—	⁽³⁾	—	—
	ID Logistics II	—	—			11,776			—	⁽³⁾	—	—
	French Properties	7	78,601			—			2.5%	⁽⁴⁾	Fixed/Variable	May 2025

Germany:	Germany Properties	5	57,829			57,761			1.8%	⁽⁵⁾	Fixed/Variable	Jun. 2023

Luxembourg/ The Netherlands:	Benelux Properties	3	134,748			134,587			1.4%		Fixed	Jun. 2024
	Total EUR denominated	20	354,272			303,383

United Kingdom:	United Kingdom Properties	42	275,151			294,315			3.2%	⁽⁶⁾	Fixed/Variable	Aug. 2023
	Total GBP denominated	42	275,151			294,315

United States:	Penske Logistics	1	70,000			70,000			4.7%	⁽⁷⁾	Fixed	Nov. 2028
	Multi-Tenant Mortgage Loan I	12	187,000			187,000			4.4%	⁽⁷⁾	Fixed	Nov. 2027
	Multi-Tenant Mortgage Loan II	8	32,750			32,750			4.4%	⁽⁷⁾	Fixed	Feb. 2028
	Multi-Tenant Mortgage Loan III	7	98,500			98,500			4.9%	⁽⁷⁾	Fixed	Dec. 2028
	Multi-Tenant Mortgage Loan IV	16	97,500			97,500			4.6%	⁽⁷⁾	Fixed	May 2029
	Multi-Tenant Mortgage Loan V	12	204,000			204,000			3.7%	⁽⁷⁾	Fixed	Oct. 2029
	Total USD denominated	56	689,750			689,750
	Gross mortgage notes payable	118	1,319,173			1,287,448			3.4%
	Mortgage discount		—			(26		)
	Deferred financing costs, net of accumulated amortization ⁽⁸⁾		(16,012		)	(15,268		)
	Mortgage notes payable, net	118	$	1,303,161		$	1,272,154		3.4%

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⁽¹⁾	Amounts borrowed in local currency and translated at the spot rate in effect at the applicable reporting date.


⁽²⁾	80% fixed as a result of a “pay-fixed” interest rate swap agreement and 20% variable. Variable portion is approximately 1.4% plus 3-month Euribor rate in effect as of June 30, 2020.


⁽³⁾	These loans were refinanced in May 2020 as part of the French Refinancing (see below for further details). As a result, the Company terminated an interest rate swap agreement for two of these properties (see Note 7 — Derivatives and Hedging Activities).


⁽⁴⁾	90% fixed as a result of a “pay-fixed” interest rate swap agreement and 10% variable. Variable portion is approximately 2.3% plus 3-month Euribor. Euribor rate in effect as of June 30, 2020.


⁽⁵⁾	80% fixed as a result of a “pay-fixed” interest rate swap agreement and 20% variable. Variable portion is approximately 1.55% plus 3 month Euribor. Euribor rate in effect as of June 30, 2020.


⁽⁶⁾	80% fixed as a result of a “pay-fixed” interest rate swap agreement and 20% variable. Variable portion is approximately 2.0% plus 3-month GBP LIBOR. LIBOR rate in effect as of June 30, 2020.


⁽⁷⁾	The borrower’s (wholly owned subsidiaries of the Company) financial statements are included within the Company’s consolidated financial statements, however, the borrowers’ assets and credit are only available to pay the debts of the borrowers and their liabilities constitute obligations of the borrowers.

⁽⁸⁾

Deferred financing costs represent commitment fees, legal fees, and other costs associated with obtaining commitments for financing. These costs are amortized over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or paid down before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.

The following table presents future scheduled aggregate principal payments on the Company’s gross mortgage notes payable over the next five calendar years and thereafter as of June 30, 2020:



(In thousands)	Future Principal Payments ⁽¹⁾
2020 (remainder)	$	2,609
2021	12,772
2022	19,779
2023	316,985
2024	217,842
Thereafter	749,186
Total	$	1,319,173

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⁽¹⁾	Assumes exchange rates of £1.00 to $1.23 for GBP and €1.00 to $1.12 for EUR as of June 30, 2020 for illustrative purposes, as applicable.

The Company’s mortgage notes payable agreements require compliance with certain property-level financial covenants including debt service coverage ratios. As of June 30, 2020, the Company was in compliance with all financial covenants under its mortgage notes payable agreements.

The total gross carrying value of unencumbered assets as of June 30, 2020 was $1.5 billion, of which approximately $1.3 billion was included in the unencumbered asset pool comprising the borrowing base under the Revolving Credit Facility (as defined in Note 5 — Credit Facilities) and therefore is not available to serve as collateral for future borrowings.

French Refinancing

On May 14, 2020, the Company, through certain of its subsidiaries, entered into a loan agreement with HSBC France (“HSBC”) and borrowed €70.0 million ($75.6 million based on the exchange rate on that date) secured by the seven properties the Company owns in France. The maturity date of this loan is May 14, 2025 and it bears interest at a rate of 3-month EURIBOR (with a floor of 0.0%) plus an initial margin of 2.3% per year, with the interest rate for €63.0 million ($68.0 million based on the exchange rate on that date) fixed by an interest rate swap agreement. The amount fixed by swap agreement represents 90% of the principal amount of the loan and is fixed at 2.5% per year. The loan is interest-only with the principal due at maturity. At the closing of the loan, €25.0 million ($27.0 million based on the exchange rate on that date) was used to repay all outstanding indebtedness on four of the properties. Of the remaining proceeds, approximately €20.0 million ($21.6 million based on the exchange rate on that date) was used to repay amounts outstanding under the Revolving Credit Facility and the remaining balance is available for general corporate purposes.

Multi-Tenant Mortgage Loan V

On September 12, 2019, the Company, through certain wholly owned subsidiaries, borrowed $204.0 million from KeyBank National Association (“KeyBank”) secured by a first mortgage on 12 of the Company’s single tenant net leased office and industrial properties located in ten states. Approximately $86.5 million of the net proceeds from the loan was used to repay outstanding mortgage indebtedness related to the mortgaged properties. Of the remaining net proceeds, approximately $0.3 million was used to fund deposits required to be made at closing into reserve accounts and approximately $126.5 million was available for working capital and general corporate purposes. The loan bears interest at a fixed rate of 3.65% and matures on October 1, 2029. The loan is interest-only, with the principal balance due on the maturity date. From and after November 2, 2021, the loan may be prepaid at any time, in whole but not in part, subject to certain conditions and limitations, including payment of a prepayment premium for any prepayments made prior to July 1, 2029. Partial prepayments are also permitted under certain circumstances, subject to certain conditions and limitations.

Benelux Refinancing

On June 12, 2019, the Company, through certain wholly owned subsidiaries, borrowed €120.0 million (approximately $135.8 million based on the exchange rate on that date) from Landesbank Hessen-Thüringen Girozentrale, secured by three of the Company’s properties located in the Netherlands and Luxembourg. The loan bears interest at a fixed rate of 1.38% and matures on June 11, 2024. The loan is interest-only, with the principal due at maturity. At the closing of the loan, approximately €80.3 million (approximately $90.8 million based on the exchange rate on that date) of the net proceeds was used to repay all outstanding indebtedness encumbering two of the properties.

German Refinancing

On May 10, 2019, the Company, through certain wholly owned subsidiaries, borrowed €51.5 million (approximately $57.9 million based on the exchange rate on that date) from Landesbank Hessen-Thüringen Girozentrale, secured by five of the Company’s properties located in Germany. The loan is interest-only with the principal due at maturity, which is June 30, 2023. The maturity date may be extended at the Company’s option to February 29, 2024 subject to conditions. The loan initially bore interest at a rate of 3-month Euribor plus 1.80% per annum, but, following the replacement of an easement on one property, the loan began to bear interest at a rate of Euribor plus 1.55% per annum on October 1, 2019. The amount fixed by swap agreement represents 80% of the principal amount and the interest rate is fixed at 1.8%, for that portion. The net proceeds from the loan were used to repay all €35.6 million (approximately $40.0 million based on the exchange rate on that date) outstanding in mortgage indebtedness that previously encumbered three of the properties that secure the loan.

Multi-Tenant Mortgage Loan IV

On April 12, 2019, the Company, through certain wholly owned subsidiaries, borrowed $97.5 million from Column Financial, Inc. and Société Générale Financial Corporation, secured by 16 of the Company’s single tenant net leased office and industrial properties located in 12 states that were simultaneously removed from the borrowing base under the Revolving Credit Facility. At closing, approximately $90.0 million was used to repay outstanding indebtedness under the Revolving Credit Facility, with the remaining proceeds, after costs and fees related to the loan, available for working capital and general corporate purposes. The loan bears interest at a fixed rate of 4.489% and has a maturity date of May 6, 2029. The loan is interest-only, with the principal balance due on the maturity date. The Company may prepay the loan in whole or in part at any time, subject to certain fees and any unpaid interest depending on the timing and other circumstances of the prepayment.

Finland Refinancing

On February 6, 2019, the Company, through certain wholly owned subsidiaries, borrowed an aggregate of €74.0 million ($84.3 million based on the prevailing exchange rate on that date) secured by mortgages on the Company’s five properties located in Finland. The maturity date of this loan is February 1, 2024, and it bears interest at a rate of 3-month Euribor plus 1.4% per year, with the interest rate for approximately €59.2 million ($67.4 million based on the prevailing exchange rate on that date) fixed by an interest rate swap agreement. The amount fixed by swap agreement represents 80% of the principal amount of the loan and is fixed at 1.8% per year. The loan is interest-only with the principal due at maturity. At the closing of the loan, €57.4 million ($65.4 million based on the prevailing exchange rate on that date) was used to repay all outstanding indebtedness encumbering the five properties, with the remaining proceeds, after costs and fees related to the loan, available for working capital and general corporate purposes.