DEBT

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

DEBT

5. DEBT

The Company’s indebtedness is currently comprised of borrowings under its line of credit, term loan, and mortgage notes. Borrowings under the non-recourse mortgage notes are secured by mortgages or deeds of trust and related assignments and security interests in collateralized and certain cross-collateralized properties, which are generally owned by single purpose entities. A summary of the Company’s debt is as follows:

	Weighted-Average Effective Interest Rate as of					Balance as of
($ in thousands)	December 31, 2019		December 31, 2018		Maturity Date	December 31, 2019			December 31, 2018
Line of credit (1)	3.26	%	4.10	%	November 2023	$	107,000		$	119,000
Term loan (2)	2.85		—		February 2024	307,500			—
Fixed-rate mortgage notes (3)	3.71		—		August 2024 - December 2027	49,250			—
Total principal amount / weighted-average (4)	3.04	%	4.10	%		$	463,750		$	119,000
Less unamortized debt issuance costs						$	(4,602	)	$	(1,167	)
Add mark-to-market adjustment on assumed debt						1,063			—
Total debt, net						$	460,211		$	117,833
Gross book value of properties encumbered by debt						$	117,049		$	—

(1) The effective interest rate is calculated based on either: (i) the London Interbank Offered Rate (“LIBOR”) plus a margin ranging from 1.30% to 2.10%; or (ii) an alternative base rate plus a margin ranging from 0.30% to 1.10%, each depending on the Company’s consolidated leverage ratio. Customary fall-back provisions apply if LIBOR is unavailable. The line of credit is available for general corporate purposes including, but not limited to, the acquisition and operation of permitted investments by the Company. A pledge of equity interests in the Company’s subsidiaries that directly own unencumbered properties will be provided until such time as the Company elects to terminate such pledges, subject to satisfaction of certain financial covenants. As of December 31, 2019, total commitments for the line of credit were $315.0 million, the unused portion under the line of credit was $208.0 million, none of which was available.

(2) The effective interest rate is calculated based on either (i) LIBOR plus a margin ranging from 1.25% to 2.05%; or (ii) an alternative base rate plus a margin ranging from 0.25% to 1.05%, depending on the Company’s consolidated leverage ratio. The weighted-average effective interest rate is the all-in interest rate, including the effects of interest rate swap agreements. As of December 31, 2019, total commitments for the term loan were $415.0 million, the unused portion under the term loan was $107.5 million, of which $99.7 million was available. This term loan is available for general corporate purposes including, but not limited to, the acquisition and operation of permitted investments by the Company.

(3) Interest rates range from 3.59% to 3.75%. The assets and credit of each of the Company’s properties pledged as collateral for the Company’s mortgage notes are not available to satisfy the Company’s other debt and obligations, unless the Company first satisfies the mortgage notes payable on the respective underlying properties.

(4) The weighted-average remaining term of the Company’s debt was approximately 4.2 years as of December 31, 2019, excluding any extension options on the line of credit.

As of December 31, 2019, the principal payments due on the Company’s consolidated debt during each of the next five years and thereafter were as follows:

(in thousands)	Line of Credit (1)		Term Loan		Mortgage Notes		Total
2020	$	—	$	—	$	—	$	—
2021	—		—		—		—
2022	—		—		—		—
2023	107,000		—		—		107,000
2024	—		307,500		38,000		345,500
Thereafter	—		—		11,250		11,250
Total principal payments	$	107,000	$	307,500	$	49,250	$	463,750

(1) The term of the line of credit may be extended pursuant to a one-year extension option, subject to certain conditions.

Debt Covenants

The Company’s line of credit, term loan and mortgage note agreements contain various property-level covenants, including customary affirmative and negative covenants. In addition, the line of credit and term loan agreements contain certain corporate level financial covenants, including leverage ratio, fixed charge coverage ratio, and tangible net worth thresholds. The Company was in compliance with all covenants as of December 31, 2019.

Derivative Instruments

To manage interest rate risk for certain of its variable-rate debt, the Company uses interest rate swaps as part of its risk management strategy. These derivatives are designed to mitigate the risk of future interest rate increases by providing a fixed interest rate for a limited, pre-determined period of time. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the interest rate swap agreements without exchange of the underlying notional amount. Certain of the Company’s variable-rate borrowings are not hedged, and therefore, to an extent, the Company has on-going exposure to interest rate movements.

For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss is recorded as a component of accumulated other comprehensive income (loss) (“AOCI”) on the consolidated balance sheets and is reclassified into earnings as interest expense for the same period that the hedged transaction affects earnings, which is when the interest expense is recognized on the related debt. The gain or loss on the derivative instrument is presented in the same line item on the consolidated statement of operations as the earnings effect of the hedged item.

During the next 12 months, the Company estimates that approximately $0.7 million will be reclassified as a decrease to interest expense related to active effective hedges of existing floating-rate debt.

The following table summarizes the location and fair value of the cash flow hedges on the Company’s consolidated balance sheets as of December 31, 2019. The Company did not have any cash flow hedges as of December 31, 2018.

($ in thousands)	Number of Contracts	Notional Amount		Balance Sheet Location	Fair Value
As of December 31, 2019
Interest rate swaps	4	$	200,000	Other assets	$	2,190

The following table presents the effect of the Company’s cash flow hedges on the Company’s consolidated financial statements:

	For the Year Ended December 31,
(in thousands)	2019			2018		2017
Derivative Instruments Designated as Cash Flow Hedges
Gain recognized in AOCI	$	2,642		$	—	$	—
Gain reclassified from AOCI into interest expense	(452		)	—		—
Total interest expense and other presented in the consolidated statements of operations in which the effects of the cash flow hedges are recorded	8,290			—		—

6. NOTES PAYABLE TO STOCKHOLDERS

On December 1, 2016, the Company issued to each of the 125 separate investors in the private offering (as described in “Note 8”) a promissory note with a principal amount of approximately $3,003 that were due to mature on November 30, 2046. The purchase price for each note was approximately $3,003, for an aggregate amount of approximately $376,000. The Company paid interest on the unpaid principal amount of the notes at a fixed rate of 18.25% per annum per note payable semi-annually in arrears. On October 1, 2019, the Company repaid the notes in their entirety, including accrued interest. The Company issued the notes as part of the private offering in a private transaction exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 promulgated thereunder.

The debt issuance costs related to the notes payable and the associated accumulated amortization were written off in 2019 in connection with the repayment of the notes payable.