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Credit Facilities
 3 Months Ended
Mar. 31, 2022
Debt Disclosure [Abstract]  
Credit Facilities Credit Facilities
    The Company had the following credit facilities outstanding as of March 31, 2022 and December 31, 2021:
Outstanding Facility
Amount as of
Effective Interest Rate (9)(10)
Credit Facility
Encumbered Properties (1)
March 31,
2022		December 31, 2021March 31,
2022		December 31, 2021Interest RateMaturity
(In thousands)(In thousands)
Credit Facility:
   Revolving Credit Facility$— $— — %— %VariableMar. 2023(8)
   Term Loan
150,000 150,000 3.98 %4.11 %Fixed(6)Mar. 2024
   Deferred financing costs(2,667)(2,994)
   Term Loan, net
147,333 147,006 
Total Credit Facility
92(2)$147,333 $147,006 
Fannie Mae Master Credit Facilities:
Capital One Facility
11(3)$212,266 $212,417 2.66 %2.51 %Variable(7)Nov. 2026
KeyBank Facility
10(4)142,389 142,628 2.70 %2.56 %Variable(7)Nov. 2026
Total Fannie Mae Master Credit Facilities
21$354,655 $355,045 
Total Credit Facilities113$501,988 $502,051 3.06 %(5)3.00 %(5)
________
(1)Encumbered properties are as of March 31, 2022.
(2)The equity interests and related rights in the Company’s wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base of the Credit Facility (as defined below) have been pledged for the benefit of the lenders thereunder.
(3)Secured by first-priority mortgages on 11 of the Company’s seniors housing properties located in Florida, Georgia, Iowa and Michigan as of March 31, 2022 with a carrying value of $345.4 million.
(4)Secured by first-priority mortgages on ten of the Company’s seniors housing properties located in Michigan, Missouri, Kansas, California, Florida, Georgia and Iowa as of March 31, 2022 with a carrying value of $254.5 million.
(5)Calculated on a weighted average basis for all credit facilities outstanding as of March 31, 2022 and December 31, 2021.
(6)Variable rate loan, based on LIBOR, all of which was economically fixed as a result of entering into “pay-fixed” interest rate swap agreements (the Company designates its “pay-fixed” interest rate swaps against all 30-day LIBOR debt, see Note 7 — Derivatives and Hedging Activities for additional details).
(7)Variable rate loan which is capped as a result of entering into interest rate cap agreements (see Note 7 — Derivatives and Hedging Activities for additional details).
(8)The company has the option to extend maturity one year to March 2024 subject to certain conditions.
(9)Effective interest rate below for variable rate debt gives effect to any “pay-fixed” swap entered into by the Company allocated to the loan for presentation purposes. If no “pay-fixed” swaps are allocated, the effective interest rate below represents the variable rate (or contractual floor if appropriate) and the applicable margin in effect as of March 31, 2022 and December 31, 2021. Interest rate caps are not considered unless the cap is currently in effect.
(10)The Company has interest “pay-fixed” swaps which are designated as cash flow hedges on outstanding combined borrowings. To present average rates in the table above, the Company historically allocated the $50.0 million notional amount of a “pay-fixed” swap to its Revolving Credit Facility with any remaining notional amounts applied to its Capital One Fannie Mae Facility. As of March 31, 2022 and December 31, 2021, all $50.0 million of the “pay-fixed” swap was allocated to the Capital One Fannie Mae Facility because there were no outstanding borrowings under the Revolving Credit Facility. All other “pay-fixed” swaps were allocated to the Capital One MOB mortgage loan and the Term Loan consistently for both March 31, 2022 and December 31, 2021.
As of March 31, 2022, the carrying value of our real estate investments at cost was $2.6 billion, with $0.9 billion of this asset value pledged as collateral for mortgage notes payable, $0.6 billion of this asset value pledged to secure advances under the Fannie Mae Master Credit Facilities and $0.9 billion of this asset value comprising the borrowing base of the Credit Facility. These real estate assets are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, unless, as applicable, the existing indebtedness associated with the property is satisfied or the property is removed from the borrowing base of the Credit Facility, which would impact availability thereunder.
Unencumbered real estate investments, at cost as of March 31, 2022 was $103.9 million, although there can be no assurance as to the amount of liquidity the Company would be able to generate from using these unencumbered assets as collateral for mortgage loans or adding them to the borrowing base of the Company’s Credit Facility. Pursuant to the August
10, 2020 amendment to the Credit Facility, any acquired properties must be added to the borrowing base of the Credit Facility, and any net proceeds from the dispositions of any unencumbered properties must be used to repay amounts outstanding under the Revolving Credit Facility.
Credit Facility
On March 13, 2019, the Company entered into an amended and restated senior secured credit facility (the “Credit Facility”), which consists of two components, a revolving credit facility (the “Revolving Credit Facility”) and a term loan (the “Term Loan”). In both March and August 2020, the Credit Facility was further amended, and the terms of the Credit Facility giving effect to those amendments are generally described below.
The Revolving Credit Facility is interest-only and matures on March 13, 2023, subject to a one-year extension at the Company’s option. The Term Loan is interest-only and matures on March 13, 2024. The total commitments under the Credit Facility are $630.0 million, including $480.0 million under the Revolving Credit Facility. The Credit Facility includes an uncommitted “accordion feature” that may be used to increase the commitments under either component of the Credit Facility by up to an additional $370.0 million to a total of $1.0 billion.
The amount available for future borrowings under the Revolving Credit Facility is based on either the value of the pool of eligible unencumbered real estate assets comprising the borrowing base, or satisfying a minimum debt service coverage ratio with respect to the borrowing base. The equity interests and related rights in the Company’s wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base of the Revolving Credit Facility have been pledged for the benefit of the lenders thereunder.
As of March 31, 2022, $150.0 million was outstanding under the Term Loan, and no amounts were outstanding under the Revolving Credit Facility. The unused borrowing availability under the Revolving Credit Facility was $227.5 million.
The Company is required to maintain a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $50.0 million. Pursuant to the terms of the Company’s amended Credit Facility certain other restrictions and conditions described below will no longer apply starting in a quarter in which the Company makes an election and, as of the day prior to the commencement of the applicable quarter, the Company has a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million, giving effect to the aggregate amount of distributions projected to be paid by the Company during the applicable quarter, and the Company’s ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5% and the Covenant Relief Period (as defined below) has terminated (the “Commencement Quarter”). The fiscal quarter ended June 30, 2021 was the first quarter that could have been the Commencement Quarter. The Company satisfied the conditions during the quarter ended March 31, 2022 in order to elect the quarter ending June 30, 2022 as the Commencement Quarter, but chose not to do so.
Until the first day of the Commencement Quarter, the Company must use all the net cash proceeds from any capital event (such as an asset sale, financing or equity issuance) to repay amounts outstanding under the Revolving Credit Facility, to the extent there are any such amounts outstanding. The Company may reborrow any amounts so repaid if all relevant conditions are met, including sufficient availability for future borrowings. There can be no assurance these conditions will be met at the time of any particular borrowing.
In addition, until the Commencement Quarter, the Company has the option to have amounts outstanding under the Revolving Credit Facility bear interest at an annual rate equal to either: (i) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.85% to 2.60%; or (ii) the Base Rate (as defined in the Credit Facility), plus an applicable margin that ranges, depending on the Company’s leverage, from 0.60% to 1.35%. Commencing on the first day of the Commencement Quarter, the Company will have the option to have amounts outstanding under the Revolving Credit Facility bear interest at an annual rate equal to either: (a) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.60% to 2.35%; or (b) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.35% to 1.10%. As of March 31, 2022 the Company had elected to use the LIBOR option for all of its borrowings under the Credit Facility.
Further, until the Commencement Quarter, the Company has the option to have amounts outstanding under the Term Loan bear interest at an annual rate equal to either: (i) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.80% to 2.55%; or (ii) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.55% to 1.30%. Commencing on the first day of the Commencement Quarter, the Company will have the option to have amounts outstanding under the Term Loan bear interest at an annual rate equal to either: (a) LIBOR, plus an
applicable margin that ranges, depending on the Company’s leverage, from 1.55% to 2.30%; or (b) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.30% to 1.05%. Pursuant to the terms of the Company’s Credit Facility, the “floor” on LIBOR was increased from 0.00% to 0.25%. As of March 31, 2022, the Company had elected to use the LIBOR option for all its borrowings under the Credit Facility.
As of March 31, 2022, the Term Loan had an effective interest rate per annum equal to 3.98%.
Until the Commencement Quarter, the Company may not pay distributions to holders of common stock in cash or any other cash distributions (including repurchases of shares of the Company’s common stock), subject to certain exceptions. These exceptions include paying dividends on the 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”) and the 7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series B Preferred Stock”), or any other preferred stock the Company may issue and paying any cash distributions necessary to maintain its status as a REIT. The Company may not pay any cash distributions (including dividends on Series A Preferred Stock or Series B Preferred Stock) if a default or event of default exists or would result therefrom. Beginning in the Commencement Quarter, the Company will be able to pay cash distributions to holders of common stock, subject to the restrictions described below. The Company may pay cash distributions beginning in the Commencement Quarter and the aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock or Series B Preferred Stock) for any period of four fiscal quarters may not exceed 95% of Modified FFO (as defined in the Credit Facility) for the same period based only on fiscal quarters after the Commencement Quarter. In addition, beginning in the Commencement Quarter, the Company will be permitted to repurchase up to $50.0 million of shares of its common stock (including amounts previously repurchased during the term of the Revolving Credit Facility) if, after giving effect to the repurchases, the Company maintains cash and cash equivalents of at least $30.0 million and the Company’s ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 55.0%.
The Credit Facility prohibits the Company from exceeding a maximum ratio of consolidated total indebtedness to consolidated total asset value, and requires the Company to maintain a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges and a minimum consolidated tangible net worth. The maximum ratio of consolidated total indebtedness to consolidated total asset value was 67.5% for the period from July 1, 2020 through June 30, 2021 and is 65% thereafter unless and until the Commencement Quarter, following which that ratio will be 62.5%. The minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges (the “Fixed Charge Coverage Ratio”) was 1.50 to 1.00 for the period from July 1, 2020 through March 31, 2021, 1.55 to 1.00 for the period from April 1, 2021 through June 30, 2021, and 1.60 to 1.00 thereafter, provided that from November 12, 2021 until the earlier of December 31, 2022 and such earlier date as the Company elects to terminate this relief (such period, the “Covenant Relief Period”), the Fixed Charge Coverage Ratio that the Company must satisfy based on the four most recently ended fiscal quarters will be reduced to 1.50 to 1.00 (see below for waiver issued on November 12, 2021). The minimum consolidated tangible net worth is the sum of (i) $1.2 million, plus (ii) 75% of any net offering proceeds (as defined in the Credit Facility) since the Credit Facility closed in March 2019. As of March 31, 2022, the Company had a minimum consolidated tangible net worth of $1.5 million.
The Company would have been in default of the Fixed Charge Coverage Ratio for the four fiscal quarter period ended September 30, 2021. Pursuant to the terms of the third amendment entered into on November 12, 2021 by the Company, the agent and the requisite lenders under the Credit Facility, the lenders waived any defaults or event of defaults under the covenant requiring the Company to maintain a Fixed Charge Coverage Ratio of 1.60 to 1.00 for the quarter ended September 30, 2021 and any further defaults of Events of Default (as described in the Credit Facility) resulting from the breach of the Fixed Charge Coverage Ratio covenant. In addition, as described above, the Fixed Charge Coverage Ratio the Company is required to maintain was amended from 1.60 to 1.00 to 1.50 to 1.00 for the Covenant Relief Period. There can be no assurance the Company’s lenders will consent to any amendments or waivers that may become necessary to comply with the terms of the Credit Facility in the future.
As of March 31, 2022, the Company was in compliance with the financial covenants under the Credit Facility. Based upon the Company’s current expectations, the Company believes it will be able to comply with these covenants during the next 12 months.
Fannie Mae Master Credit Facilities
On October 31, 2016, the Company, through wholly-owned subsidiaries of the OP, entered into a master credit facility agreement relating to a secured credit facility with KeyBank (the “KeyBank Facility”) and a master credit facility agreement with Capital One for a secured credit facility with Capital One Multifamily Finance LLC, an affiliate of Capital One (the “Capital One Facility”; the Capital One Facility and the KeyBank Facility are referred to herein individually as a “Fannie Mae Master Credit Facility” and together as the “Fannie Mae Master Credit Facilities”). Advances made under these agreements are assigned by Capital One and KeyBank to Fannie Mae at closing for inclusion in Fannie Mae’s Multifamily MBS program.
In connection with the Fannie Mae Master Credit Facilities, the Company was required to enter into interest rate cap agreements. Periodically, the Company renews these interest rate cap agreements upon their expiration. Currently, the Company has nine interest rate cap agreements with an aggregate current effective notional amount of $355.2 million which caps LIBOR at 3.50% with terms through April 2024. The Company does not apply hedge accounting to these agreements and changes in value are reflected in earnings. (See Note 7 — Derivatives and Hedging Activities for additional disclosure regarding the Company’s derivatives).
The Company may request future advances under the Fannie Mae Master Credit Facilities by adding eligible properties to the collateral pool, subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests.
Future Principal Payments
The following table summarizes the scheduled aggregate principal payments for the five years subsequent to March 31, 2022 and thereafter, on all of the Company’s outstanding debt (mortgage notes payable and credit facilities):
Future Principal
Payments
(In thousands)Mortgage Notes PayableCredit FacilitiesTotal
2022 (remainder)$827 $2,536 $3,363 
20233,987 (1)5,769 9,756 
20241,178 155,769 156,947 
20251,221 5,769 6,990 
2026391,442 5,289 396,731 
Thereafter190,199 329,523 519,722 
Total$588,854 $504,655 $1,093,509 
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(1)Includes the Palm Valley mortgage loan of $2.8 million which was repaid in full subsequent to March 31, 2022 prior to its maturity in June 2023, for additional information see Note 17 — Subsequent Events.
LIBOR Transition
In July 2017, the Financial Conduct Authority (which regulates LIBOR) announced its intentions to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to LIBOR in derivatives and other financial contracts. On March 5, 2021, the Financial Conduct Authority confirmed a partial extension of this deadline announcing that it will cease the publication of the one-week and two-month USD LIBOR settings immediately following December 31, 2021. The remaining USD LIBOR settings will continue to be published through June 30, 2023. The Company is not able to predict when there will be sufficient liquidity in the SOFR market. The Company is monitoring and evaluating the risks related to changes in LIBOR availability, which include potential changes in interest paid on debt and amounts received and paid on interest rate swaps. In addition, the value of debt or derivative instruments tied to LIBOR will also be impacted as LIBOR is limited and discontinued and contracts must be transitioned to a new alternative rate. While the Company currently expects LIBOR to be available in substantially its current form until at least through June 30, 2023 for the USD LIBOR rates currently relevant to the Company, it is possible that LIBOR will become unavailable prior to that time. This could occur, for example, if a sufficient number of banks decline to make submissions to the LIBOR administrator. To transition from LIBOR under the Credit Facility, the Company will either utilize the Base Rate (as defined in the Credit Facility), a SOFR-based rate as a benchmark rate as determined by the agent in
accordance with the terms of the Credit Facility, or an alternative benchmark otherwise established by the agent in accordance with the terms of the Credit Facility, which will be determined with due consideration to any evolving or then prevailing market practices for determining and implementing a rate of interest for U.S. dollar-denominated syndicated credit facilities. The Company has mortgages, credit facilities and derivative agreements that have terms that are based on LIBOR. Certain of those agreements have alternative rates already contained in the agreements while others do not. The Company anticipates that it will either utilize the alternative rates contained in the agreements or negotiate a replacement reference rate for LIBOR with the lenders and derivative counterparties.