Debt

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Debt

6. Debt

Mortgage Debt

The following table contains summary information concerning the mortgage debt of the Company as of March 31, 2022 (dollars in thousands):

Operating Properties		Type	Term (months)		Outstanding Principal (1)				Interest Rate (2)	Maturity Date
Arbors on Forest Ridge	(3)	Floating		84	$	13,130			2.13%	7/1/2024
Cutter's Point	(3)	Floating		84		16,640			2.13%	7/1/2024
Silverbrook	(3)	Floating		84		30,590			2.13%	7/1/2024
The Summit at Sabal Park	(3)	Floating		84		13,560			2.07%	7/1/2024
Courtney Cove	(3)	Floating		84		13,680			2.07%	7/1/2024
The Preserve at Terrell Mill	(3)	Floating		84		42,480			2.07%	7/1/2024
Versailles	(3)	Floating		84		23,880			2.07%	7/1/2024
Seasons 704 Apartments	(3)	Floating		84		17,460			2.07%	7/1/2024
Madera Point	(3)	Floating		84		15,150			2.07%	7/1/2024
Venue at 8651	(3)	Floating		84		13,734			2.23%	7/1/2024
The Venue on Camelback	(3)	Floating		84		28,093			2.13%	7/1/2024
Old Farm	(3)	Floating		84		52,886			2.13%	7/1/2024
Stone Creek at Old Farm	(3)	Floating		84		15,274			2.13%	7/1/2024
Timber Creek	(3)	Floating		84		24,100			1.71%	10/1/2025
Radbourne Lake	(3)	Floating		84		20,000			1.74%	10/1/2025
Sabal Palm at Lake Buena Vista	(3)	Floating		84		42,100			1.75%	9/1/2025
Cornerstone	(4)	Fixed		120		20,672			4.24%	3/1/2023
Parc500	(5)	Fixed		120		14,590			4.49%	8/1/2025
Hollister Place	(3)	Floating		84		14,811			1.79%	10/1/2025
Rockledge Apartments	(3)	Floating		84		68,100			2.02%	7/1/2024
Atera Apartments	(3)	Floating		84		29,500			1.93%	11/1/2024
Crestmont Reserve	(3)	Floating		84		12,061			1.63%	10/1/2025
Brandywine I & II	(3)	Floating		84		43,835			1.63%	10/1/2025
Bella Vista	(6)	Floating		84		29,040			1.77%	2/1/2026
The Enclave	(6)	Floating		84		25,322			1.77%	2/1/2026
The Heritage	(6)	Floating		84		24,625			1.77%	2/1/2026
Summers Landing	(7)	Floating		84		10,109			1.63%	10/1/2025
Residences at Glenview Reserve	(8)	Floating		84		26,270			1.89%	10/1/2025
Residences at West Place	(8)	Fixed		120		33,817			4.24%	10/1/2028
Avant at Pembroke Pines	(3)	Floating		84		177,100			1.88%	9/1/2026
Arbors of Brentwood	(3)	Floating		84		34,237			1.88%	10/1/2026
Torreyana Apartments	(6)	Floating		84		37,400			2.15%	12/1/2026
Bloom	(6)	Floating		84		58,850			2.15%	12/1/2026
Bella Solara	(6)	Floating		84		36,575			2.15%	12/1/2026
Fairways at San Marcos	(6)	Floating		84		46,464			2.29%	12/1/2027
The Verandas at Lake Norman	(9)	Floating		84		34,925			2.01%	7/1/2028
Creekside at Matthews	(9)	Floating		84		31,900			2.01%	7/1/2028
Six Forks Station	(10)	Floating		120		41,180			1.87%	10/1/2031
High House at Cary	(9)	Floating		84		46,625			2.17%	1/1/2029
					$	1,280,765
Fair market value adjustment						1,009		(11)
Deferred financing costs, net of accumulated amortization of $5,433						(5,534	)
					$	1,276,240

(1) Mortgage debt that is non-recourse to the Company and encumbers the multifamily properties.

(2) Interest rate is based on a reference rate plus an applicable margin, except for fixed rate mortgage debt. References rates used in our portfolio include one-month LIBOR and 30-Day Average Secured Overnight Financing Rate (“SOFR”). As of March 31, 2022, one-month LIBOR was 0.452% and SOFR was 0.15934%.

(3) Loan can be pre-paid in the first 12 months of the term in certain circumstances at par plus 5.00%. Starting in the 13^th month of the term through the 81^st month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last three months of the term.

(4) Debt in the amount of $18.0 million was assumed upon acquisition of this property and recorded at approximated fair value. The assumed debt carries a 4.09% fixed rate, was originally issued in March 2013, and had a term of 120 months with an initial 24 months of interest only. At the time of acquisition, the principal balance of the first mortgage remained unchanged and had a remaining term of 98 months with 2 months of interest only. The first mortgage is pre-payable and subject to yield maintenance from the 13^th month through August 31, 2022 and is pre-payable at par starting on September 1, 2022 until maturity. Concurrently with the acquisition of the property, the Company placed a supplemental second mortgage on the property with a principal amount of approximately $5.8 million, a fixed rate of 4.70%, and with a maturity date that is the same time as the first mortgage. The supplemental second mortgage is pre-payable and subject to yield maintenance from the date of issuance through August 31, 2022 and is pre-payable at par starting on September 1, 2022 until maturity. As of March 31, 2022, the total indebtedness secured by the property had a blended interest rate of 4.24%.

(5) Debt was assumed upon acquisition of this property and recorded at approximated fair value. The loan is open to pre-payment in the last four months of the term.

(6) Loan can be pre-paid in the first 12 months of the term in certain circumstances at par plus 5.00%.  Starting in the 13^th month of the term through the 81^st month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last three months of the term.

(7) Debt was assumed upon acquisition of this property and recorded at approximated fair value.  It can be pre-paid in the first 12 months of the term in certain circumstances at par plus 5.00%. Starting in the 13^th month of the term through the 81^st month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last three months of the term.

(8) Debt was assumed upon acquisition of this property and recorded at approximated fair value. The loan can be prepaid at the greater of par plus 1.00% of the unpaid principal balance or the product obtained by multiplying the present value of the principal being prepaid by the excess of the monthly fixed interest rate of the loan over a daily discount rate. The loan is open to pre-payment in the last three months of the term.  

(9) Loan can be pre-paid in the first 24 months of the term in certain circumstances at par plus 5.00%.  Starting in the 25th month of the term through the 36th month of the term, the loan can be pre-paid at par plus 2% of the unpaid principal balance. Starting in the 37th month of the term, the loan can be pre-paid at par plus 1% of the unpaid principal balance. The loan is open to pre-payment in the last three months of the term.

(10) Loan can be pre-paid in the first 24 months of the term in certain circumstances at par plus 5.00%. Starting in the 25th month of the term through the 116th of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last four months of the term.

(11) The Company reflected a valuation adjustment on its fixed rate debt for Parc500 and Residences at West Place to adjust it to fair market value on their respective dates of acquisition for the difference between the fair value and the assumed principal amount of debt. The difference is amortized into interest expense over the remaining terms of the mortgages.

The weighted average interest rate of the Company’s mortgage indebtedness was 2.10% as of March 31, 2022 and 1.81% as of December 31, 2021. The increase between the periods is primarily related to an increase in one-month LIBOR of approximately 35 basis points to 0.452% as of March 31, 2022 from 0.10125% as of December 31, 2021. As of March 31, 2022, the adjusted weighted average interest rate of the Company’s mortgage indebtedness was 2.95%. For purposes of calculating the adjusted weighted average interest rate of the outstanding mortgage indebtedness, the Company has included the weighted average fixed rate of 1.2128% for one-month LIBOR on its combined $1.4 billion notional amount of interest rate swap agreements, which effectively fix the interest rate on $1.4 billion of the Company’s floating rate mortgage debt (see Note 7).

Each of the Company’s mortgages is a non-recourse obligation subject to customary provisions. The loan agreements contain customary events of default, including defaults in the payment of principal or interest, defaults in compliance with the covenants contained in the documents evidencing the loan, defaults in payments under any other security instrument covering any part of the property, whether junior or senior to the loan, and bankruptcy or other insolvency events. As of March 31, 2022, the Company believes it is in compliance with all provisions. 

Credit Facility

The following table contains summary information concerning the Company’s credit facility as of March 31, 2022 (dollars in thousands):

	Type	Term (months)		Outstanding Principal			Interest Rate (1)	Maturity Date
Corporate Credit Facility	Floating		36	$	335,000		2.80%	6/30/2024
Deferred financing costs, net of accumulated amortization of $461					(2,021	)
				$	332,979

(1) Interest rate is based on Term SOFR plus an applicable margin.  Term SOFR as of March 31, 2022 was 0.3024%.

On March 25, 2022, the Company entered into a loan modification agreement by and among the Company, the OP, Truist Bank and the Lenders party thereto, which modified the Company’s existing credit facility, dated as of June 30, 2021 (as modified, amended and supplemented, the “Corporate Credit Facility”). As of March 31, 2022, there was $350.0 million available for borrowing under the Corporate Credit Facility. Subject to conditions provided in the Corporate Credit Facility, the commitments under Corporate Credit Facility may be increased up to an additional $150.0 million if the lenders agree to increase their commitments or if the lenders agree for the increase to be funded by any additional lender proposed by the Company, through the OP. The Corporate Credit Facility will mature on June 30, 2024 with respect to the revolving commitments, unless the Company exercises its option to voluntarily and permanently reduce all of the revolving commitments before the maturity date or elects to exercise its right and option to extend the facility with respect to the revolving commitments for a single one-year term. As of March 31, 2022, there was $335.0 million in aggregate principal outstanding under the Corporate Credit Facility.

Advances under the Corporate Credit Facility accrue interest at a per annum rate equal to, at the Company’s election, either Term SOFR plus a margin of 1.90% to 2.40%, depending on the Company’s total leverage ratio and a benchmark replacement adjustment of 0.1%, or a base rate determined according to the highest of (a) the prime rate, (b) the federal funds rate plus 0.50%, (c) Term SOFR plus 1.0% or (d) 0.0% plus a margin of 0.90% to 1.40%, depending on the Company’s total leverage ratio. An unused commitment fee at a rate of 0.15% or 0.25%, depending on the outstanding aggregate revolving commitments, applies to unutilized borrowing capacity under the Corporate Credit Facility. Amounts owing under the Corporate Credit Facility may be prepaid at any time without premium or penalty. The Corporate Credit Facility is guaranteed by the Company and the obligations under the Corporate Credit Facility are, subject to some exceptions, secured by a continuing security interest in substantially all of the assets of the Company. The Company is in compliance with all of the covenants required in its Corporate Credit Facility.

Deferred Financing Costs

The Company defers costs incurred in obtaining financing and amortizes the costs over the terms of the related loans using the straight-line method, which approximates the effective interest method. Deferred financing costs, net of amortization, are recorded as a reduction from the related debt on the Company’s consolidated balance sheets. Upon repayment of or in conjunction with a material change in the terms of the underlying debt agreement, any unamortized costs are charged to loss on extinguishment of debt and modification costs (see “Loss on Extinguishment of Debt and Modification Costs” below). For the three months ended March 31, 2022 and 2021, amortization of deferred financing costs of approximately $0.6 million and $0.6 million, respectively, is included in interest expense on the consolidated statements of operations and comprehensive income.

Loss on Extinguishment of Debt and Modification Costs

Loss on extinguishment of debt and modification costs includes prepayment penalties and defeasance costs incurred on the early repayment of debt, costs incurred in a debt modification that are not capitalized as deferred financing costs and other costs incurred in a debt extinguishment.

Schedule of Debt Maturities

The aggregate scheduled maturities, including amortizing principal payments, of total debt for the next five calendar years subsequent to March 31, 2022 are as follows (in thousands):

	Operating Properties		Credit Facility		Total
2022	$	1,040	$	—	$	1,040
2023		21,047		—		21,047
2024		394,956		335,000		729,956
2025		205,662		—		205,662
2026		423,149		—		423,149
Thereafter		234,911		—		234,911
Total	$	1,280,765	$	335,000	$	1,615,765