XML 34 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
Notes Payable
 9 Months Ended
Sep. 30, 2017
Debt Disclosure [Abstract]  
Notes Payable
Notes Payable
The following table summarizes the balance of our indebtedness as of September 30, 2017 and December 31, 2016 (in thousands): 
 
 
September 30, 2017
 
December 31, 2016
Principal amount
 
$
666,979

 
$
502,476

Less: unamortized discount and debt issuance costs(1)
 
(2,770
)
 
(2,292
)
Carrying value
 
$
664,209

 
$
500,184

(1)
Excludes unamortized debt issuance costs related to our unsecured revolving credit facility, which are presented in the line item “Deferred loan costs, net” in the consolidated balance sheets.
The following table summarizes the components and significant terms of our indebtedness as of September 30, 2017, and December 31, 2016 (dollars in thousands):
 
September 30, 2017
 
December 31, 2016
 
 
  
 
  
 
  
 
Principal Amount
 
Unamortized Discount and Debt Issuance Costs
 
Principal Amount
 
Unamortized Discount and Debt Issuance Costs
 
Contractual
Maturity Date
  
Stated
Interest
Rate(1)
  
Effective Interest Rate (2)
  
Secured Debt
 
 
 
 
 
 
 
 
 
  
 

  
 

  
$60M Term Loan(3)
$
59,087

 
$
(145
)
 
$
59,674

 
$
(204
)
 
8/1/2019
(4) 
LIBOR+1.90%

  
3.95
%
 
Gilbert/La Palma(5)
2,803

 
(139
)
 
2,909

 
(145
)
 
3/1/2031
 
5.125
%
 
5.41
%
 
12907 Imperial Highway(6)
5,089

 
82

 
5,182

 
180

 
4/1/2018
 
5.950
%
 
3.32
%
 
1065 Walnut Street
—

 
—

 
9,711

 
192

 
2/1/2019
 
N/A


N/A

 
Unsecured Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$100M Term Loan Facility
100,000

 
(364
)
 
100,000

 
—

 
2/14/2022
 
LIBOR+1.20%

(7) 
3.18
%
(8) 
Revolving Credit Facility
50,000

 
—

 
—

 
—

 
2/12/2021
(9) 
LIBOR+1.10%

(7)(10) 
2.33
%
 
$225M Term Loan Facility
225,000

 
(1,469
)
 
225,000

 
(1,680
)
 
1/14/2023
 
LIBOR+1.50%

(7) 
2.86
%
 
$100M Notes
100,000

 
(595
)
 
100,000

 
(635
)
 
8/6/2025
 
4.290
%
  
4.37
%
 
$125M Notes
125,000

 
(140
)
 
—

 
—

 
7/13/2027
 
3.930
%
 
3.94
%
 
Total
$
666,979

 
$
(2,770
)
 
$
502,476

 
$
(2,292
)
 
 
  
 
  
 
 
(1)
Reflects the contractual interest rate under the terms of the loan, as of September 30, 2017.
(2)
Reflects the effective interest rate as of September 30, 2017, which includes the effect of the amortization of discounts/premiums and debt issuance costs and the effect of interest rate swaps that are effective as of September 30, 2017.  
(3)
This term loan is secured by six properties. Beginning August 15, 2016, monthly payments of interest and principal are based on a 30-year amortization table. As of September 30, 2017, the interest rate on this variable-rate term loan has been effectively fixed through the use of two interest rate swaps, one of which is an amortizing swap. See Note 7 for details.
(4)
One additional one-year extension available at the borrower’s option.
(5)
Monthly payments of interest and principal are based on a 20-year amortization table.
(6)
Monthly payments of interest and principal are based on a 30-year amortization table, with a balloon payment at maturity.
(7)
The LIBOR margin will range from 1.20% to 1.70% for the $100.0 million term loan facility, 1.10% to 1.50% for the revolving credit facility and 1.50% to 2.25% for the $225.0 million term loan facility depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value, or leverage ratio, which is measured on a quarterly basis.
(8)
As of September 30, 2017, the interest on the $100.0 million term loan facility has been effectively fixed through the use of two interest rate swaps. See Note 7 for details.
(9)
Two additional six-month extensions available at the borrower’s option.
(10)
The unsecured revolving credit facility is subject to an applicable facility fee which is calculated as a percentage of the total lenders’ commitment amount, regardless of usage. The applicable facility fee will range from 0.15% to 0.30% depending upon our leverage ratio.
The following table summarizes the contractual debt maturities and scheduled amortization payments, excluding debt discounts/premiums and debt issuance costs, as of September 30, 2017, and does not consider extension options available to us as noted in the table above (in thousands):
 
October 1, 2017 - December 31, 2017
$
263

2018
5,991

2019
58,266

2020
166

2021
50,175

Thereafter
552,118

Total
$
666,979

Loan Repayment
On March 20, 2017, we repaid the $9.7 million outstanding balance on the 1065 Walnut Street mortgage loan in advance of the February 1, 2019 maturity date. In connection with the repayment, we incurred prepayment fees of $0.2 million which is included in loss on extinguishment of debt in the accompanying consolidated statements of operations. The loss on extinguishment of debt also includes the write-off of the unamortized debt premium of $0.2 million.
Amended Credit Agreement
On February 14, 2017, we amended our $300.0 million senior unsecured credit facility by entering into a second amended and restated credit agreement (the “Amended Credit Agreement”), which provides for a $450.0 million senior unsecured credit facility, comprised of a $350.0 million unsecured revolving credit facility (the "Amended Revolver") and a $100.0 million unsecured term loan facility (the "Amended $100 Million Term Loan"). The Amended Revolver is scheduled to mature on February 12, 2021, and has two six-month extension options available, and the Amended $100 Million Term Loan is scheduled to mature on February 14, 2022. Under the terms of the Amended Credit Agreement, we may request additional lender commitments up to an additional aggregate $550.0 million, which may be comprised of additional revolving commitments under the Amended Revolver, an increase to the Amended $100 Million Term Loan, additional term loan tranches or any combination of the foregoing.
     Interest on the Amended Credit Agreement, is generally to be paid based upon, at our option, either (i) LIBOR plus an applicable margin that is based upon our leverage ratio or (ii) the Base Rate (which is defined as the highest of (a) the federal funds rate plus 0.50%, (b) the administrative agent’s prime rate or (c) the Eurodollar Rate plus 1.00%) plus an applicable margin that is based on our leverage ratio. The margins for the Amended Revolver range in amount from 1.10% to 1.50% for LIBOR-based loans and 0.10% to 0.50% for Base Rate-based loans, depending on our leverage ratio. The margins for the Amended $100 Million Term Loan range in amount from 1.20% to 1.70% for LIBOR-based loans and 0.20% to 0.70% for Base Rate-based loans, depending on our leverage ratio.
     If we attain one additional investment grade rating by one or more of Standard & Poor’s or Moody’s Investor Services to complement our current investment grade Fitch rating, we may elect to convert the pricing structure under the Amended Credit Agreement to be based on such rating. In that event, the margins for the Amended Revolver will range in amount from 0.825% to 1.55% for LIBOR-based loans and 0.00% to 0.55% for Base Rate-based loans, depending on such rating, and the margins for the Amended $100 Million Term Loan will range in amount from 0.90% to 1.75% for LIBOR-based loans and 0.00% to 0.75% for Base Rate-based loans, depending on such rating.
     In addition to the interest payable on amounts outstanding under the Amended Revolver, we are required to pay an applicable facility fee, based upon our leverage ratio, on each lender's commitment amount under the Amended Revolver, regardless of usage. The applicable facility fee will range in amount from 0.15% to 0.30%, depending on our leverage ratio. In the event that we convert the pricing structure to be based on an investment-grade rating, the applicable facility fee will range in amount from 0.125% to 0.30%, depending on such rating.
The Amended Credit Agreement is guaranteed by the Company and by substantially all of the current and to-be-formed subsidiaries of the Operating Partnership that own an unencumbered property. The Amended Credit Agreement is not secured by the Company’s properties or by equity interests in the subsidiaries that hold such properties.
The Amended Revolver and the Amended $100 Million Term Loan may be voluntarily prepaid in whole or in part at any time without premium or penalty.  Amounts borrowed under the Amended $100 Million Term Loan and repaid or prepaid may not be reborrowed.
The Amended Credit Agreement contains usual and customary events of default including defaults in the payment of principal, interest or fees, defaults in compliance with the covenants set forth in the Amended Credit Agreement and other loan documentation, cross-defaults to certain other indebtedness, and bankruptcy and other insolvency defaults. If an event of default occurs and is continuing under the Amended Credit Agreement, the unpaid principal amount of all outstanding loans, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable. 
On September 30, 2017, we had $50.0 million outstanding under the Amended Revolver, leaving $300.0 million available for additional borrowings.  
Note Purchase Agreement
On July 13, 2017, we entered into a Note Purchase and Guarantee Agreement (the “NPGA”) for the private placement of $125.0 million of senior unsecured guaranteed notes, maturing on July 13, 2027, with a fixed annual interest rate of 3.93% (the “$125 Million Notes”). On July 13, 2017, we completed the issuance of the $125 Million Notes.
Interest on the $125 Million Notes will be payable quarterly on the thirteenth day of January, April, July and October in each year, commencing on October 13, 2017. We may prepay at any time all or, from time to time, any part of the $125 Million Notes, in amounts not less than $2.5 million of the $125 Million Notes then outstanding at (i) 100% of the principal amount so prepaid and (ii) the Make-Whole Amount (as defined in the NPGA).     Our obligations under the $125 Million Notes are fully and unconditionally guaranteed by us and certain of our subsidiaries.
Debt Covenants
The Amended Credit Agreement, the $225 million unsecured term loan facility (the “$225 Million Term Loan Facility”), the $100 million unsecured guaranteed senior notes (the “$100 Million Notes”), and the $125 Million Notes all include a series of financial and other covenants that we must comply with, including the following covenants which are tested on a quarterly basis:
•
Maintaining a ratio of total indebtedness to total asset value of not more than 60%;
•
For the Amended Credit Agreement and the $225 Million Term Loan Facility, maintaining a ratio of secured debt to total asset value of not more than 45%;
•
For the $100 Million Notes and the $125 Million Notes, maintaining a ratio of secured debt to total asset value of not more than 40%;
•
Maintaining a ratio of total secured recourse debt to total asset value of not more than 15%;
•
Maintaining a minimum tangible net worth of at least the sum of (i) $760,740,750, and (ii) an amount equal to at least 75% of the net equity proceeds received by the Company after September 30, 2016;
•
Maintaining a ratio of adjusted EBITDA (as defined in each of the loan agreements) to fixed charges of at least 1.50 to 1.0; 
•
Maintaining a ratio of total unsecured debt to total unencumbered asset value of not more than 60%; and
•
Maintaining a ratio of unencumbered NOI (as defined in each of the loan agreements) to unsecured interest expense of at least 1.75 to 1.0. 
The Amended Credit Agreement, the $225 Million Term Loan Facility, the $100 Million Notes and the $125 Million Notes also provide that our distributions may not exceed the greater of (i) 95.0% of our funds from operations or (ii) the amount required for us to qualify and maintain our status as a REIT and avoid the payment of federal or state income or excise tax in any 12-month period.
Additionally, subject to the terms of the $100 Million Notes and the $125 Million Notes (together the “Notes”), upon certain events of default, including, but not limited to, (i) a default in the payment of any principal, make-whole payment amount, or interest under the Notes, (ii) a default in the payment of certain of our other indebtedness, (iii) a default in compliance with the covenants set forth in the Notes agreement, and (iv) bankruptcy and other insolvency defaults, the principal and accrued and unpaid interest and the make-whole payment amount on the outstanding Notes will become due and payable at the option of the purchasers.
Our $60.0 million term loan contains a financial covenant that is tested on a quarterly basis, which requires us to maintain a minimum Debt Service Coverage Ratio (as defined in the term loan agreement) of at least 1.10 to 1.00.  
We were in compliance with all of our required quarterly debt covenants as of September 30, 2017.