DEBT (Tables)

12 Months Ended

Dec. 31, 2019

As of December 31, 2019 and 2018, the Company’s mortgage notes payable consisted of the following:



Collateral	2019 Principal Balance			2018 Principal Balance			Contractual Interest Rate (1)	Effective Interest Rate (1)	Loan Maturity
Accredo Health/Walgreens properties	$	6,853,442		$	6,996,469		3.95%	3.95%	7/1/2021
Six Dollar General properties	3,819,264			3,885,334			4.69%	4.69%	4/1/2022
Dana property	4,551,250			4,632,398			4.56%	4.56%	4/1/2023
Northrop Grumman property	5,666,866			5,809,367			4.40%	4.40%	3/2/2021
exp US Services property	3,385,353			3,446,493			(3)	4.25%	11/17/2024
Harley property	6,748,029			6,868,254			4.25%	4.25%	9/1/2024
Wyndham property (2)	5,716,200			5,820,600			One-month LIBOR + 2.05%	4.34%	6/5/2027
Williams Sonoma property (2)	4,530,600			4,615,800			One-month LIBOR + 2.05%	4.34%	6/5/2022
Omnicare property	4,273,552			4,349,963			4.36%	4.36%	5/1/2026
EMCOR property	2,862,484			2,911,577			4.35%	4.35%	12/1/2024
Husqvarna property	6,379,182			6,379,182			(4)	4.60%	2/20/2028
AvAir property	14,575,000			14,575,000			(5)	4.84%	3/27/2028
3M property	8,290,000			8,360,000			One-month LIBOR + 2.25%	5.09%	3/29/2023
Cummins property	8,458,600			8,530,000			One-month LIBOR + 2.25%	5.16%	4/4/2023
24 Hour Fitness property (6)	6,283,898			8,900,000			4.64%	4.64%	4/1/2049
Texas Health property (7)	4,400,000			4,842,500			4.00%	4.00%	12/5/2024
Bon Secours property	5,250,000			5,250,000			5.41%	5.41%	9/15/2026
Costco property	18,850,000			18,850,000			4.85%	4.85%	1/1/2030
Taylor Fresh Foods property (8)	12,350,000			—			3.85%	3.85%	11/1/2029
Levins property (8)	2,079,793			—			One-month LIBOR + 1.93%	3.74%	1/5/2021
Island Pacific Supermarket property (8)	1,891,225			—			One-month LIBOR + 1.93%	3.74%	1/5/2021
Dollar General property (8)	2,324,338			—			One-month LIBOR + 1.48%	3.38%	3/5/2021
Rite Aid property (8)	3,659,338			—			One-month LIBOR + 1.50%	3.25%	5/5/2021
PMI Preclinical property (8)	4,118,613			—			One-month LIBOR + 1.48%	3.38%	3/5/2021
EcoThrift property (8)	2,639,237			—			One-month LIBOR + 1.21%	2.96%	7/5/2021
GSA (MSHA) property (8)	1,796,361			—			One-month LIBOR + 1.25%	3.00%	8/5/2021
PreK Education property (8)	5,140,343			—			4.25%	4.25%	12/1/2021
Dinan Cars property (8) (10)	2,710,834			—			One-month LIBOR + 2.27%	4.02%	1/5/2022
Solar Turbines/Wood Group/ITW Rippey properties (8)	9,434,692			—			3.35%	3.35%	11/1/2026
Dollar General property (8)	611,161			—			4.50%	4.50%	4/1/2022
Gap property (8)	3,643,166			—			4.15%	4.15%	8/1/2023
L-3 Communications property (8)	5,284,884			—			4.69%	4.69%	4/1/2022
Sutter Health property (8)	14,161,776			—			4.50%	4.50%	3/9/2024
Walgreens property (8)	3,000,000			—			7.50%	7.50%	5/6/2020
Total mortgage notes payable	195,739,481			125,022,937
Plus: unamortized mortgage premium, net of discount (9)	489,664			—
Less: unamortized deferred financing costs	(2,189,938		)	(2,313,629		)
Mortgage notes payable, net	$	194,039,207		$	122,709,308

(1)

Contractual interest rate represents the interest rate in effect under the mortgage note payable as of December 31, 2019. Effective interest rate is calculated as the actual interest rate in effect as of December 31, 2019, consisting of the contractual interest rate and the effect of the interest rate swap, if applicable. For further information regarding the Company’s derivative instruments (see Note 8).

(2)

The notes on each of the Williams Sonoma and Wyndham properties (collectively, the “Property”) located in Summerlin, Nevada were originated by Nevada State Bank (“Bank”). The notes are collateralized by a deed of trust and a security agreement with assignment of rents and fixture filing. In addition, the individual loans are subject to a cross collateralization and cross default agreement whereby any default under, or failure to comply with the terms of any one or both of the notes is an event of default under the terms of both notes. The value of the property must be in an amount sufficient to maintain a loan to value ratio of no more than 60%. If the note to value ratio is ever more than 60%, the borrower shall, upon the Bank’s written demand, reduce the principal balance of the notes so that the note to value ratio is no more than 60%.


(3)	The initial contractual interest rate is 4.25% and starting November 18, 2022, the interest rate is T-Bill index plus 3.25%.


(4)	The initial contractual interest rate is 4.60% for the first five years and the greater of 4.60% or five-year Treasury Constant Maturity (“TCM”) plus 2.45% for the second five years.


(5)	The initial contractual interest rate for the note payable outstanding as of December 31, 2019 is 4.84% for the first five-years and the greater of 4.60% or five-year TCM plus 2.45% for the second five-years.


(6)	The loan refinancing on March 7, 2019 reduced the principal amount and the interest rate and it extended the maturity. The interest rate for the note payable outstanding as of December 31, 2019 adjusts in the 133rd, 253rd and 313th months.


(7)	The prior year loan was repaid on the March 13, 2019 maturity date. On December 16, 2019, the Company obtained a mortgage note payable with a new note for $4,400,000 through a nonaffiliated lender. The note is secured by the Texas Health property and it matures on December 5, 2024.


(8)	The loan was acquired through the Merger on December 31, 2019.


(9)	Represents unamortized net mortgage premium acquired through the Merger.

(10)

The Company negotiated a lease termination with Dinan Cars effective January 31, 2020 in exchange for a termination payment of $783,182. Lease termination proceeds from Dinan Cars were used to reduce the principal balance under this mortgage by $650,000 and establish a payment reserve with the remaining $133,182. In connection with the principal prepayment, we terminated the related swap agreement on February 4, 2020 at a cost of 47,000.

Mortgage Notes Payable

The following summarizes the face value, carrying amount and fair value of the Company’s mortgage notes payable as of December (Level 3 measurement):



	2019						2018
	Face Value		Carrying Value		Fair Value		Face Value		Carrying Value		Fair Value
Mortgage notes payable	$	195,739,481	$	194,039,207	$	200,535,334	$	125,022,937	$	122,709,308	$	123,821,490

Schedule of Credit Facilities

Unsecured Credit Facility



	December 31,
	2019			2018
Unsecured Credit Facility	$	7,740,000		$	9,000,000
Less unamortized deferred financing costs	(90,139		)	(2,000		)
	$	7,649,861		$	8,998,000

Future principal repayments

The following summarizes the future principal repayments of the Company’s mortgage notes payable, unsecured credit facility and short-term notes payable as of December 31, 2019:



	Mortgage Notes Payable			New Credit Facility			Short-term Notes Payable		Total
2020	$	6,262,287		$	7,740,000		$	4,800,000	$	18,802,287
2021	33,031,199			—			—		33,031,199
2022	24,479,249			—			—		24,479,249
2023	26,222,084			—			—		26,222,084
2024	27,256,880			—			—		27,256,880
Thereafter	78,487,782			—			—		78,487,782
Total principal	195,739,481			7,740,000			4,800,000		208,279,481
Plus: unamortized mortgage premium, net of discount	489,664			—			—		489,664
Less: deferred financing costs, net	(2,189,938		)	(90,139		)	—		(2,280,077		)
Total	$	194,039,207		$	7,649,861		$	4,800,000	$	206,489,068

Interest Expenses Reconciliation

The following is a reconciliation of the components of interest expense:



	Years Ended December 31,
	2019		2018
Mortgage notes payable:
Interest expense	$	5,698,605	$	4,065,686
Amortization of deferred financing costs	601,659		897,535
Loss on interest rate swaps (1)	843,174		261,198
Unsecured credit facility:
Interest expense	190,130		323,409
Amortization of deferred financing costs	36,542		30,000
Forfeited loan fee	12,500		—
Total interest expense	$	7,382,610	$	5,577,828


(1)	Includes unrealized loss on interest rate swaps of $970,210 and $149,714 for years ended December 31, 2019 and 2018, respectively (see Note 8). Accrued interest payable of $22,282 and $7,649 at December 31, 2019 and 2018, respectively, represents the unsettled portion of the interest rate swaps for the period from origination of the interest rate swap through the respective balance sheet dates