Debt Financing

12 Months Ended

Dec. 31, 2019

As of December 31, 2019 and 2018, the Company had approximately $865.7 million and $545.8 million of debt outstanding, respectively, with a weighted average years to maturity of 2.6 years and 2.9 years, and a weighted average interest rate of 2.54% and 2.85%, respectively. The following table describes the Company’s debt outstanding at December 31, 2019 and 2018 (in thousands, except interest rates):



Description	Origination or Assumption Date	Maturity Date	Maximum Capacity in Functional Currency		Interest Rate Description	Interest Rate as of December 31, 2019	Principal Outstanding at December 31, 2019				Principal Outstanding at December 31, 2018
Secured Mortgage Debt
Bishop's Square	3/3/2015	3/2/2022	€	55,200	Euribor + 1.30% ⁽¹⁾	1.30%	$	61,907			$	63,171
Domain Apartments	1/29/2016	1/29/2020	$	34,300	Libor + 1.60%⁽¹⁾	3.36%	34,300			⁽²⁾	34,300
Cottonwood Corporate Center	7/5/2016	8/1/2023	$	78,000	Fixed	2.98%	72,359				74,110
Goodyear Crossing II	8/18/2016	8/18/2021	$	29,000	Libor + 2.00%	3.71%	29,000			⁽³⁾	29,000
Rookwood Commons	1/6/2017	7/1/2020	$	67,000	Fixed	3.13%	67,000				67,000
Rookwood Pavilion	1/6/2017	7/1/2020	$	29,000	Fixed	2.87%	29,000				29,000
Montrose Student Residences	3/24/2017	3/23/2022	€	22,605	Euribor + 1.85% ⁽¹⁾	1.85%	25,352				25,869
Queen's Court Student Residences	12/18/2017	12/18/2022	£	29,500	Libor + 2.00%⁽¹⁾	2.75%	38,896				37,565
Venue Museum District	9/21/2018	10/9/2020	$	45,000	Libor + 1.95% ⁽¹⁾	4.02%	45,000				45,000
Fresh Park Venlo	10/3/2018	8/15/2023	€	75,000	Euribor + 1.50% ⁽¹⁾	1.50%	84,092				85,809
Maintal Logistics	2/21/2019	2/28/2024	€	23,500	Euribor + 1.10% ⁽¹⁾	1.10%	26,136				—
ABC Westland	5/3/2019	2/15/2024	€	75,000	Euribor + 1.50%⁽¹⁾	1.50%	82,655				—
Łódź Urban Logistics	9/20/2019	9/20/2024	€	13,600	Fixed ⁽³⁾	1.05%	15,211				—
Glasgow West End	9/26/2019	9/26/2024	£	43,200	Libor + 1.80%⁽¹⁾	2.55%	56,959				—
Gdańsk PL II	10/4/2019	9/20/2024	€	16,800	Fixed⁽⁴⁾	1.05%	18,790				—
Other Notes Payable
JPMorgan Chase Revolving Credit Facility	9/13/2019	11/15/2022	$	275,000	Variable	3.34%	$	104,000			$	—
Notes Payable							$	790,657			$	490,824
Affiliate Note Payable
Credit Facility with Hines	10/2/2017	12/31/2020	$	75,000	Variable	3.29%	75,000				55,000
Total Note Payable to Affiliate							$	75,000			$	55,000
Total Principal Outstanding							$	865,657			$	545,824
Unamortized discount ⁽⁵⁾							(104		)		(316		)
Unamortized financing fees ⁽⁶⁾							(4,126		)		(3,069		)
Total							$	861,427			$	542,439


(1)	On the loan origination date, the Company entered into an interest rate cap agreement as an economic hedge against the variability of future interest rates on this borrowing. See Note 6 — Derivative Instruments for further details.


(2)	As of December 31, 2019, this amount was included in liabilities associated with assets held for sale. In January 2020 the Company paid off the outstanding balance using proceeds from the sale of the Domain Apartments, which occurred in January 2020. See Note 14 — Subsequent Events for further details on the disposition of Domain Apartments.


(3)	In February 2020 the Company paid off the outstanding balance using proceeds from the sale of Goodyear Crossing, which occurred in February 2020. See Note 14 — Subsequent Events for further details on the disposition of Goodyear Crossing.


(4)	On the loan origination date, the Company entered into an interest rate swap contract effectively fixing the interest rate for the full term of the facility. See Note 6 — Derivative Instruments for further details.


(5)	The Company assumed notes payable in connection with its acquisition of Rookwood, which were recorded at the estimated fair value as of the date of acquisition. The difference between the fair value at acquisition and the principal outstanding is amortized over the term of the related notes.


(6)	Deferred financing costs consist of direct costs incurred in obtaining debt financing. These costs are presented as a direct

reduction from the related debt liability for permanent mortgages and presented as an asset for revolving credit arrangements. In total, deferred financing costs had a carrying value of $6.4 million and $3.1 million for the years ended December 31, 2019 and 2018. These costs are amortized into interest expense on a straight-line basis, which approximates the effective interest method, over the terms of the obligations. For the years ended December 31, 2019, 2018 and 2017, $1.4 million, $0.6 million and $0.3 million of deferred financing costs were amortized into interest expense in the accompanying consolidated statement of operations, respectively.

The Company often enters into mortgage agreements to provide secured financing for its acquisitions of real estate investments. These mortgage agreements are subject to certain conditions and contain customary covenants and events of default. Refer below for additional discussion on Financial Covenants relating to the Company’s mortgage-level debt.

JPMorgan Chase Revolving Credit Facility

On September 13, 2019 (as amended on November 15, 2019), the Operating Partnership entered into a credit agreement, which we refer to as the “Credit Agreement”, with JPMorgan Chase Bank, N.A. (“Chase”), as administrative agent for itself and various lenders named in the Credit Agreement, which provides for borrowings up to a maximum aggregate principal amount of $425.0 million denominated in U.S. dollars, British pound sterling, Euros, Australian dollars or Canadian dollars with aggregate foreign currency commitments constituting up to $137.5 million of that amount. The Credit Agreement has a maturity date of November 15, 2022, subject to two one-year extensions at our option.

On November 15, 2019, we made borrowings of $104.0 million at closing under the Credit Agreement. From November 15, 2019 through December 31, 2019, we made no additional borrowing or payments on the facility, resulting in an outstanding balance of $104.0 million as of December 31, 2019. From January 1, 2020 through March 30, 2020, the Company made $59.0 million in additional draws and made no additional payments under the Credit Agreement, which resulted in the Company having a $163.0 million outstanding balance under the Credit Agreement as of March 30, 2020.

Interest on our borrowings under the Credit Agreement will be payable based on either (a) the Alternate Base Rate plus the Applicable Rate or (b) the Adjusted LIBO Rate plus the Applicable Rate, subject to our election; provided, however, for revolving loans denominated in Australian dollars, Canadian dollars, Euros, or Japanese Yen, the Australian Bill Rate, the CDOR Rate, the EURIBOR Screen Rate or the Yen Rate, respectively, will be referred to in lieu of the Adjusted LIBO Rate. The Alternate Base Rate is equal to the greater of: (a) the Prime Rate, (b) Federal Funds Effective Rate plus 0.5%, or (c) an adjusted LIBOR rate for a one month period plus 1.0%. The Adjusted LIBO Rate is equal to the LIBO rate, which is derived from the London interbank offered rate (“LIBOR”), for the applicable interest period, as determined by JPMorgan, multiplied by the Statutory Reserve Rate determined by the Board of Governors of the Federal Reserve System of the United States of America, provided that, with respect to borrowings denominated in a foreign currency, the Adjusted LIBO Rate will be equal to the LIBO Rate. Customary fall-back provisions apply if LIBOR is unavailable. The Applicable Rate is based on our ratio of indebtedness to total asset value and will be determined as set forth in the Credit Agreement. The Applicable Rate for loans bearing interest determined by reference to the Alternative Base Rate will range from 0.35% to 1.05%, and the Applicable Rate for loans bearing interest determined by reference to the Adjusted LIBO Rate will range from 1.35% to 2.05%, in each case depending on the ratio and whether it is a revolving loan or a term loan.

Hines Credit Facility

On October 2, 2017, the Operating Partnership entered into an uncommitted loan agreement (as amended the “Hines Credit Facility”) with Hines for a maximum principal amount of $240.0 million. On November 30, 2017, the Operating Partnership amended the Hines Credit Facility to reduce the maximum principal amount to $75.0 million and further amended it in December 2018 to extend the maturity date as described below. Interest on each advance under the Hines Credit Facility is charged monthly at a variable rate, which is (i) Hines’ then-current borrowing rate under its revolving credit facility or (ii) if the Operating Partnership enters into a revolving credit facility (“the OP Facility”), the rate under such facility. Each advance under the Hines Credit Facility must be repaid within six months, subject to one six-month extension at the option of the Operating Partnership and subject to the satisfaction of certain conditions. Effective as of December 11, 2019, the Hines Credit Facility will terminate on the earlier of (a) the termination of the availability period as determined by Hines at its discretion (which will not impact the maturity date of any outstanding or previously approved advance under the loan agreement); (b) December 31, 2020; and (c) the date Hines accelerates the repayment of the loan agreement pursuant to any event of default.

Notwithstanding that each advance under the Hines Credit Facility matures six months after it is made, the Operating Partnership is required to repay each advance with any capital raised, unless the Operating Partnership enters into a revolving credit facility, at which point the Operating Partnership may use such proceeds from its public offering to repay the OP Facility, if any, prior to repaying any advances under the Hines Credit Facility. The Hines Credit Facility also permits voluntary prepayment of principal and accrued interest.

The Hines Credit Facility requires the maintenance of certain financial covenants beginning the earlier of (a) September 30, 2018 or (b) the effective date of the OP Facility, if any, which includes covenants concerning indebtedness to total asset value. In addition, the Hines Credit Facility contains customary affirmative and negative covenants, which, among other things, prohibit the Company and the Operating Partnership from: (i) merging with other companies or changing ownership interest; (ii) selling all or substantially all of the Company’s assets or properties; and (iii) if in default under the loan agreement, paying distributions to the Company’s stockholders other than as required to maintain the Company’s status as a real estate investment trust. The Hines Credit Facility also requires the Company to deliver to Hines certain quarterly and annual financial information.

For the year ended December 31, 2019, the Company made draws of $134.0 million and made payments of $114.0 million under the Hines Credit Facility. The Company had $75.0 million outstanding on December 31, 2019. From January 1, 2020 through March 30, 2020, the Company made no additional draws and made $64.0 million in additional payments under the Hines Credit Facility, which resulted in the Company having a $11.0 million outstanding balance under the Hines Credit Facility as of March 30, 2020.

Financial Covenants

The Company’s mortgage and other loan documents for the debt described in the table above contain customary events of default, with corresponding grace periods, including payment defaults, bankruptcy-related defaults, and customary covenants, including limitations on liens and indebtedness and maintenance of certain financial ratios. The Company is not aware of any instances of noncompliance with financial covenants on any of its loans as of December 31, 2019.

Principal Payments on Debt

The Company is required to make the following principal payments on its outstanding notes payable for each of the years ending December 31, 2020 through December 31, 2024 and for the period thereafter (in thousands).



	Payments Due by Year
	2020			2021			2022		2023		2024		Thereafter
Principal payments	$	255,625	⁽¹⁾	$	34,379	⁽²⁾	$	235,589	$	154,393	$	185,671	$	—


(1)	Includes Domain Apartments debt of $34.3 million that was paid off in January 2020 using proceeds from the sale of the Domain Apartments, which occurred in January 2020. See Note 14 — Subsequent Events for further details on the disposition of Domain Apartments.


(2)	Includes Goodyear Crossing II debt of $29.0 million that was paid off in February 2020 using proceeds from the sale of Goodyear Crossing II, which occurred in February 2020. See Note 14 — Subsequent Events for further details on the disposition of Goodyear Crossing II.

As of March 30, 2020, the Company is required to make $152.0 million in principal payments on its outstanding notes payable that mature through March 2021, $11.0 million of which relates to the Company’s credit facility with Hines. Although the mortgage loans are non–recourse, which would allow the Company to provide a deed in–lieu of payment, the Company expects to be able to repay all principal payments with cash on hand or proceeds raised from its current offering, utilize additional capacity on the Credit Agreement, or to be able to refinance the debt terms on the principal outstanding.

LIBOR is expected to be discontinued after 2021. As of December 31, 2019 the Company has three loans with a variable interest rate tied to LIBOR with maturities beyond 2021. The loan agreements provide procedures for determining a replacement or alternative rate in the event that LIBOR is unavailable. However, there can be no assurances as to whether such replacement or alternative rate will be more or less favorable than LIBOR. The Company intends to monitor the developments with respect to the potential phasing out of LIBOR after 2021 and work with its lenders to ensure any transition away from LIBOR will have minimal impact on its financial condition, but can provide no assurances regarding the impact of the discontinuation of LIBOR.