NOTES PAYABLE

6 Months Ended

Jun. 30, 2020

Wells Fargo Line of Credit

On February 27, 2018, the Company, as guarantor, and certain of the wholly owned subsidiaries of the Operating Partnership, as co-borrowers, entered into an amended and restated secured revolving credit facility (the “Wells Fargo Line of Credit”) with Wells Fargo Bank, National Association, as administrative agent, and other lending institutions that may become parties to the credit agreement. The Wells Fargo Line of Credit has an initial three-year term maturing February 27, 2021. The Company has two one-year extension options following the initial term subject to satisfaction of certain conditions and payment of applicable extension fees. The Company expects to refinance or extend the Wells Fargo Line of Credit prior to its maturity date using available cash flows to meet the requirements for extension.

The interest rate under the Wells Fargo Line of Credit is based on the 1-month London Inter-bank Offered Rate ("LIBOR") with a spread of 160 to 180 basis points depending on the debt yield as defined in the agreement. The Wells Fargo Line of Credit has a maximum capacity of $100,000 and is expandable by the Company up to a maximum capacity of $200,000 upon satisfaction of specified conditions. Each requested expansion must be for at least $25,000 and may result in the Wells Fargo Line of Credit being syndicated. As of June 30, 2020, the outstanding balance under the Wells Fargo Line of Credit was $77,600 and the weighted average interest rate was 1.89%. As of December 31, 2019, the outstanding balance was $81,600 and the weighted average interest rate was 3.33%.

At any time, the borrowing capacity under the Wells Fargo Line of Credit is based on the lesser of (1) an amount equal to 65% of the aggregate value of the properties in the collateral pool as determined by lender appraisals, (2) an amount that results in a minimum debt yield of 9% based on the in-place net operating income of the collateral pool as defined, or (3) the maximum capacity of the Wells Fargo Line of Credit. Proceeds from the Wells Fargo Line of Credit can be used to fund acquisitions, redeem shares pursuant to the Company's redemption plan and for any other corporate purpose. As of June 30, 2020, the Company's maximum borrowing capacity was $89,310.

The Wells Fargo Line of Credit agreement contains customary representations, warranties, borrowing conditions and affirmative, negative and financial covenants, including that there must be at least five properties in the collateral pool at all times and that the collateral pool must also meet specified concentration provisions, unless waived by the lender. In addition, the Company, as guarantor, must meet tangible net worth hurdles. Subsequent to June 30, 2020, the Company, as guarantor, and certain of the wholly owned subsidiaries of the Operating Partnership, as co-borrowers, entered into a second amendment to the Wells Fargo Line of Credit which pre-emptively amended certain financial covenants in the event the coronavirus pandemic were to have a negative effect in the future on our properties encumbered by the Wells Fargo line of credit. The Company was in compliance with all financial covenants as of June 30, 2020.

The following is a reconciliation of the carrying amount of the Wells Fargo Line of Credit at June 30, 2020 and December 31, 2019.


	Balance at
Lender	June 30, 2020		December 31, 2019
Wells Fargo	$	77,600	$	81,600
Deduct: Deferred financing costs, less accumulated amortization	(176)		(309)
Line of credit, net	$	77,424	$	81,291

Mortgage Loans

Certain wholly owned subsidiaries of the Company are obligors on various mortgage loans. Such mortgage loans contain fixed interest rates, allow for one-time transfer to another borrower subject to lender discretion and payment of applicable fees, and allow for full prepayment at certain times with payment of applicable penalties, if any. The following is a reconciliation of the carrying amount of the mortgage loans payable at June 30, 2020 and December 31, 2019.


		Balance at
Lender	Encumbered Property	June 30, 2020		December 31, 2019		Interest Rate		Maturity Date
Hartford Life Insurance Company	Commerce Corner	$	12,617	$	12,747	3.41	%	December 1, 2023
Nationwide Life Insurance Company	Flats at Carrs Hill	14,500		14,500		3.63		March 1, 2026
State Farm Life Insurance Company	Elston Plaza	17,600		17,600		3.89		July 1, 2026
Transamerica Life Insurance Company	Wallingford Plaza	6,950		6,950		4.56		January 1, 2029
Nationwide Life Insurance Company	Providence Square	29,700		29,700		3.67		October 5, 2029
JPMorgan Chase Bank	Seattle East Industrial	45,140		45,140		3.87		January 1, 2030
		$	126,507	$	126,637
Deduct: Deferred financing costs, less accumulated amortization		(877)		(939)
Mortgage loans payable, net		$	125,630	$	125,698

Aggregate future principal payments due on the Wells Fargo Line of Credit and mortgage loans payable as of June 30, 2020 are as follows:


Year	Amount
Remainder of 2020	$	132
2021	78,103
2022	717
2023	12,388
2024	474
Thereafter	112,293
Total	$	204,107