Mortgage Notes Payable, Net

9 Months Ended

Sep. 30, 2020

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


		Encumbered Properties	Outstanding Loan Amount (1)				Effective Interest Rate		Interest Rate
Country	Portfolio		September 30, 2020		December 31, 2019					Maturity
			(In thousands)		(In thousands)
Finland:	Finland Properties	5	$	86,762	$	82,996	1.7%	(2)	Fixed/Variable	Feb. 2024

France:	Worldline	—	—		5,608		—	(3)	—	—
	DCNS	—	—		10,655		—	(3)	—	—
	ID Logistics II	—	—		11,776		—	(3)	—	—
	French Properties	7	82,072		—		2.5%	(4)	Fixed/Variable	May 2025

Germany:	Germany Properties	5	60,382		57,761		1.8%	(5)	Fixed/Variable	Jun. 2023

Luxembourg/ The Netherlands:	Benelux Properties	3	140,696		134,587		1.4%		Fixed	Jun. 2024
	Total EUR denominated	20	369,912		303,383

United Kingdom:	United Kingdom Properties	42	287,304		294,315		3.1%	(6)	Fixed/Variable	Aug. 2023
	Total GBP denominated	42	287,304		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
	Whirlpool Loan	6	88,000		—		3.5%	(8)	Fixed	Jul. 2027
	Total USD denominated	62	777,750		689,750
	Gross mortgage notes payable	124	1,434,966		1,287,448		3.4%
	Mortgage discount		—		(26)
	Deferred financing costs, net of accumulated amortization (9)		(17,254)		(15,268)
	Mortgage notes payable, net	124	$	1,417,712	$	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 September 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 September 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 September 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 September 30, 2020. This loan requires principal repayments beginning in 2020 based on amounts specified under the loan.

(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)Fixed as a result of “pay-fixed” interest rate swap agreements.

(9)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 September 30, 2020:


(In thousands)	Future Principal Payments (1)
2020 (remainder)	$	2,609
2021	12,772
2022	19,779
2023	319,537
2024	227,458
2025	82,072
Thereafter	770,739
Total	$	1,434,966

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(1)Assumes exchange rates of £1.00 to $1.29 for GBP and €1.00 to $1.17 for EUR as of September 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 September 30, 2020, the Company was in compliance with all other financial covenants under its mortgage notes payable agreements.

During the three months ended September 30, 2020, the borrower entities under the mortgage loan secured by all the Company’s properties located in the United Kingdom did not maintain the required loan-to-value ratios with respect to the mortgaged properties, and, as a result, a cash trap event under the loan occurred which was immediately cured when the Company executed, as required by the terms of the loan, an unsecured corporate guaranty of the borrower entities’ obligations under the loan. The guaranty remains in effect and contains a covenant that requires the Company to maintain unrestricted cash and cash equivalents (or amounts available for future borrowings under credit facility, such as the Credit Facility) in an amount sufficient to meet its actual and contingent liabilities under the guaranty. As of September 30, 2020, the Company was in compliance with the covenants under the Credit Facility and mortgage notes payable agreements.

The total gross carrying value of unencumbered assets as of September 30, 2020 was $1.4 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.

Whirlpool Loan

On July 10, 2020, the Company, through certain wholly owned subsidiaries, borrowed $88.0 million from a syndicate of regional banks led by BOK Financial. The loans are secured by six industrial properties triple-net leased to Whirlpool Corporation and located in Tennessee and Ohio that were simultaneously removed from the borrowing base under the Revolving Credit Facility. At closing, approximately $84.0 million was used to repay amounts outstanding under the Revolving Credit Facility, with the remaining proceeds of approximately $2.2 million, after costs and fees related to the loan, available for general corporate purposes. The loan bears interest at a floating interest rate of one-month LIBOR plus 2.9%, with the interest rate fixed at 3.45% by swap agreement. The loan is interest-only with the principal due at maturity on July 10, 2027. The Company may prepay the loan in whole or in part at any time, and mandatory prepayments are required to be made in connection with any release of a property from the loan.

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.