Debt

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

Debt

Note 5. Debt and Debt Held for Sale

The Company’s outstanding debt is summarized as follows:

Loan	June 30, 2024			December 31, 2023			Interest Rate	Maturity Date
Freddie Mac Utah Loans (1)	$	43,905,082		$	44,291,048		5.06%	2/23/2028
Freddie Mac Courtyard Loan (2)		61,574,226			62,049,449		4.86%	9/1/2028
KeyBank Bridge Loans (3)		25,416,550			25,716,550		9.45%	6/30/2025
Debt issuance costs, net		(696,483	)		(665,423	)
Debt, net		130,199,375			131,391,624
Fayetteville JPM Mortgage Loan (4)		—			29,500,000		N/A	N/A
Fayetteville Mortgage Loan (5)		34,500,000			—		7.58%	4/9/2025
Debt issuance costs held for sale, net		(118,129	)		(27,806	)
Debt related to real estate held for sale, net		34,381,871			29,472,194
Total debt, net	$	164,581,246		$	160,863,818

(1)Represents the aggregate of three separate mortgage loans for the three senior housing properties acquired in Utah. Fixed rate debt with interest only payments due monthly for the first two years, then principal and interest on a 30-year amortization schedule beginning March 2020.

(2)Fixed rate debt with interest only payments due monthly for the first four years, then principal and interest on a 30-year amortization schedule beginning September 2022.

(3)The variable rate reflected in the table was the rate in effect as of June 30, 2024. On July 31, 2024, we sold the Fayetteville property for $72.25 million. In conjunction with the sale we repaid the remaining balance of the loan and terminated it in accordance with the terms of the loan. Please see Note 11 – Subsequent Events for additional details.

(4)The fixed rate Fayetteville JPM Mortgage Loan was repaid and terminated in accordance with the terms of the loan on April 10, 2024. Please see Note 11 – Subsequent Events for additional details.

(5)On April 10, 2024, we entered into a variable rate loan on the Fayetteville Property and entered into an interest rate cap agreement to fix SOFR at 4.25% until the maturity of the loan. On July 31, 2024, we sold the Fayetteville property for $72.25 million. In conjunction with the sale we repaid the $34.5 million mortgage loan and terminated it in accordance with the loan. Please see Note 11 – Subsequent Events for additional details.

Fayetteville JPM Mortgage Loan

On June 28, 2017, we, through our Operating Partnership and a property-owning special purpose entity (the “JPM Borrower”) wholly-owned by our Operating Partnership, entered into a $29.5 million mortgage loan (the “Fayetteville JPM

Mortgage Loan”) with Insurance Strategy Funding IX, LLC (the “JPM Lender”) for the purpose of funding a portion of the purchase price for the Fayetteville Property.

The Fayetteville JPM Mortgage Loan had a term of seven years and required payments of interest only for such period, with the principal balance due upon maturity (July 1, 2024). The Fayetteville JPM Mortgage Loan bore interest at a fixed rate of 4.20%. The Fayetteville JPM Mortgage Loan was prepayable at any time, upon 30 days’ written notice, in whole but not in part, subject to payment of a prepayment penalty. If the prepayment occurs during the last 90 days of the term of the Fayetteville JPM Mortgage Loan, no prepayment penalty will be required.

We and H. Michael Schwartz, our Chairman of the board and a director (our “Chairman”), served as non-recourse guarantors pursuant to the terms and conditions of the Fayetteville JPM Mortgage Loan. The Fayetteville JPM Mortgage Loan contained a number of other customary terms and covenants. The JPM Borrower maintains separate books and records and its separate assets and credit (including the Fayetteville Property) are not available to pay our other debts. The fixed rate Fayetteville JPM Mortgage Loan was repaid and terminated in accordance with the terms of the loan on April 10, 2024.

Fayetteville Mortgage Loan

On April 10, 2024, we, through our Operating Partnership, and a property-owning special purpose entity (“Borrower”) wholly-owned by the Operating Partnership, entered into a $34.5 million mortgage loan (the “Fayetteville Mortgage Loan”) with JPMorgan Chase Bank, N.A., a national banking association. The Fayetteville Mortgage Loan repaid and replaced the Company’s existing $29.5 million Fayetteville JPM Mortgage Loan entered into on June 28, 2017. The Fayetteville Mortgage Loan has an initial term of one year with a maturity date of April 9, 2025, and contains two six-month extension options, subject to conditions as defined in the Fayetteville Mortgage Loan. The Fayetteville Mortgage Loan requires payments of interest only for such period, with the principal balance due upon maturity. The Fayetteville Mortgage Loan bears interest at a rate of the one-month Secured Overnight Financing Rate (“SOFR”) plus 2.25%. In conjunction with the Fayetteville Mortgage Loan, the Company entered into an interest rate cap agreement with a notional amount of $34.5 million, whereby SOFR was capped at 4.25% through the maturity of the Fayetteville Mortgage Loan, that the all in rate is capped at 6.5%.

We and H. Michael Schwartz, our Chairman of the board of directors and a director (our “Chairman”), serve as non-recourse guarantors pursuant to the terms and conditions of the Fayetteville Mortgage Loan pursuant to a guaranty agreement entered into in connection with the Fayetteville Mortgage Loan (the “Guaranty Agreement”). The Fayetteville Mortgage Loan contains a number of other customary terms and covenants. On July 31, 2024, we sold the Fayetteville property for $72.25 million. In conjunction with the sale, we repaid the remaining balance of the Fayetteville Mortgage Loan and terminated it in accordance with the terms of the Fayetteville Mortgage Loan. Please see Note 11 – Subsequent Events for additional details.

Freddie Mac Utah Loans

On February 23, 2018, we, through three property-owning special purpose entities wholly-owned by us (the “Freddie Mac Borrowers”), entered into three separate mortgage loans for an aggregate amount of $46.9 million (the “Freddie Mac Utah Loans”) with KeyBank National Association as a Freddie Mac Multifamily Approved Seller/Servicer (the “Freddie Mac Lender”) for the purpose of funding a portion of the aggregate purchase price for the three properties we acquired (Wellington, Cottonwood Creek, and Charleston).

The Freddie Mac Utah Loans have a term of 10 years, with the first two years being interest only and a 30-year amortization schedule thereafter, and bear interest at a fixed rate of 5.06%. The Freddie Mac Utah Loans are cross-collateralized and cross-defaulted with each other such that a default under one loan would cause a default under the other Freddie Mac Utah Loans.

The loans also contain a number of other customary representations, warranties, borrowing conditions, events of default, affirmative, negative and financial covenants, reserve requirements and other agreements, such as restrictions on our ability to prepay or defease the loans. The Freddie Mac Borrowers maintain separate books and records and their separate assets and credit (including the Wellington, Cottonwood Creek, and Charleston properties) are not available to pay our other debts.

Each Freddie Mac Utah Loan is secured under a multifamily deed of trust, assignment of rents and security agreement from the respective Freddie Mac Borrower in favor of the Freddie Mac Lender, granting a first priority mortgage on the respective property in favor of the Freddie Mac Lender.

We serve as non-recourse guarantors pursuant to the terms and conditions of the Freddie Mac Utah Loans. We are required to maintain a net worth equal to or greater than $15 million and subsequent to the repayment of the Utah Bridge Loan, a liquidity requirement equal to or greater than $3 million.

Freddie Mac Courtyard Loan

On August 31, 2018, we, through a property-owning special purpose entity (the “Freddie Mac Courtyard Borrower”) wholly owned by our Operating Partnership, entered into a mortgage loan of $63.2 million (the “Freddie Mac Courtyard Loan”) with KeyBank as a Freddie Mac Lender for the purpose of funding a portion of the purchase price of the senior housing property (the “Courtyard Property”) we acquired.

The Freddie Mac Courtyard Loan has a term of 10 years, with the first four years being interest only and a 30-year amortization schedule thereafter, and bears interest at a fixed rate of 4.86%. The Freddie Mac Courtyard Loan contains a number of customary representations, warranties, borrowing conditions, events of default, affirmative, negative and financial covenants, reserve requirements and other agreements, such as restrictions on our ability to prepay or defease the loans.

The Freddie Mac Courtyard Borrower maintains separate books and records and its separate assets and credit (including the Courtyard Property) is not available to pay our other debts. The Freddie Mac Courtyard Loan is secured under a multifamily deed of trust, assignment of rents and security agreement from the Freddie Mac Courtyard Borrower in favor of the Freddie Mac Lender, granting a first priority mortgage in favor of the Freddie Mac Lender.

We serve as non-recourse guarantors pursuant to the terms and conditions of the Freddie Mac Courtyard Loan. The Freddie Mac Courtyard Loan has an annual certification requirement for a net worth (as defined in the agreements) equal to or greater than $18.96 million and an initial liquidity requirement equal to or greater than $6.32 million. Once the KeyBank Bridge Loans are paid in full, the liquidity requirement will be reduced to $4.8 million. We are able to reduce each of the foregoing liquidity requirements by an additional amount equal to the amount of the 12-month trailing cash flows of all our properties, up to a maximum reduction of $1.5 million. As of June 30, 2024, we were in compliance with these covenants.

KeyBank Bridge Loans

Beginning with our acquisition of the Fayetteville Property, we have entered into various loans with KeyBank National Association (“KeyBank”) in order to fund a portion of the purchase price for our acquisitions. Such loans are in addition to the particular mortgage loan used to acquire the property, and such loans are with us, through our Operating Partnership, along with our Chairman and an entity controlled by him (the “Initial KeyBank Bridge Borrowers”). On February 23, 2018, the Initial KeyBank Bridge Borrowers and KeyBank entered into a second amended and restated credit agreement (the “Utah Bridge Loan”) in which the Initial KeyBank Bridge Borrowers borrowed $24.5 million for the purpose of funding a portion of the aggregate purchase price for the Wellington, Cottonwood Creek, and Charleston properties. On January 6, 2022, in conjunction with the sale of the Tallahassee property, the Utah Bridge Loan was repaid in full. On March 29, 2019, our Sponsor was added as an additional borrower under the Utah Bridge Loan and the Courtyard Bridge Loans (collectively with the Initial KeyBank Bridge Borrowers, the “KeyBank Bridge Borrowers”). See below for a description of the various loans with KeyBank (the “KeyBank Bridge Loans”).

Concurrent with our entry into the Freddie Mac Courtyard Loan, the Initial KeyBank Bridge Borrowers and KeyBank entered into a first credit agreement supplement and amendment (the “Courtyard Bridge Loans”) to the Utah Bridge Loan in order to add additional tranches. Accordingly, each of the Courtyard Bridge Loans and the Utah Bridge Loan are separate loans with separate maturity dates, but they are secured by the same pool of collateral and subject to the same general restrictions, as described within this section.

The terms of the Courtyard Bridge Loans were amended to add two additional tranches: (i) an initial loan of $27 million (the “Courtyard Initial Bridge Loan”) and (ii) a delayed draw commitment of up to $14 million (the “Courtyard Delayed Draw Commitment”). The KeyBank Bridge Borrowers utilized the Courtyard Initial Bridge Loan for the purpose of funding a portion of the purchase price for the Courtyard Property. The Courtyard Delayed Draw Commitment was utilized primarily to fund the costs and expenses associated with the construction of an additional 23 units of memory care, which was completed in November 2019.

The KeyBank Bridge Loans bear interest at a rate of 1-month SOFR plus 400 basis points which totaled approximately 9.45% as of June 30, 2024. Pursuant to the Courtyard Bridge Loans, the security for the Utah Bridge Loan was amended such that both loans are secured by the same pool of collateral, which now includes a pledge of distributions and other rights with respect to the equity interests in the subsidiaries that have a fee or leasehold interest in the Courtyard Property. In addition, on March 29, 2019, we executed an amendment such that (i) our Sponsor became an additional borrower, (ii) the collateral was amended such that it is additionally comprised of a pledge of equity interests owned by subsidiaries of our Sponsor in certain entities, as set forth in separate pledge agreements and (iii) certain of the covenants and restrictions were revised accordingly. Upon the repayment of the Utah Bridge Loan, the KeyBank Bridge Borrowers must continue to apply 100% of the net proceeds from certain capital events and we are required to apply the net proceeds from the issuance of equity interests in us, including the net proceeds from our Primary Offering, to the outstanding Courtyard Bridge Loans. Unless KeyBank otherwise consents, until the Courtyard Bridge Loans are repaid, we are required to defer payment of (i) acquisition fees otherwise payable to our Advisor and Sponsor in connection with the acquisition of the Courtyard Property and (ii) in the event of a default, asset management fees otherwise payable to our Advisor with respect to the Courtyard Property. The Courtyard Bridge Loans impose certain covenant requirements on us and the other parties to the Courtyard Bridge Loans, which, if breached, could result in an event of default under the Courtyard Bridge Loans. In connection with the foregoing, we also amended the previously executed note with KeyBank in order to evidence the Courtyard Bridge Loans, and we also entered into an Omnibus Amendment and Reaffirmation of Loan Documents, as amended on March 29, 2019 (the “Omnibus Amendment”). As a result of the Omnibus Amendment, we continue to serve as a guarantor pursuant to the terms and conditions of the Courtyard Initial Bridge Loan. As of June 30, 2024, we were in compliance with these covenants.

The Courtyard Bridge Loans were scheduled to mature on August 31, 2019, but were extended to April 30, 2020. On February 27, 2020, we amended the Courtyard Bridge Loans such that the loan maturity date was extended to April 30, 2021 and certain of the covenants were revised accordingly. On November 13, 2020, we entered into the Fifth Amendment, pursuant to which the loan maturity date was further extended to April 30, 2022 and certain covenants were revised. Beginning in May 2021, since the balance of the KeyBank Bridge Loans had not been reduced to $20 million, we were required to start paying a monthly fee of 0.05% of the loan balance above $20 million until such reduction is reached. Additionally, since the balance of the KeyBank Bridge Loans had not been reduced to $20 million by October 31, 2021, we were required to start making principal payments of $50,000 per month until such reduction is reached. Pursuant to the Fifth Amendment, we were also required to fund a reserve comprised of six months of interest payments, which may be utilized but must generally be replenished.

On November 9, 2021, we amended the KeyBank Bridge Loans such that the maturity date was further extended to April 30, 2023. On January 6, 2022, in conjunction with the sale of the Tallahassee property, we repaid all of the outstanding principal balance of approximately $12.0 million on the Courtyard Delayed Draw Commitment.

On October 28, 2022, the KeyBank Bridge Borrowers entered into the Seventh Amendment to the KeyBank Bridge Loans (the “Seventh Amendment”) that extended the maturity date of the KeyBank Bridge Loans from April 30, 2023 to April 30, 2024.

On March 13, 2024, we amended the KeyBank Bridge Loans (“Eighth Amendment”) such that the maturity date was further extended to June 30, 2025 and the previously established interest reserve of $0.9 million was released. The Eighth Amendment modifies certain collateral securing the KeyBank Bridge Loans and certain terms related thereto. On July 31, 2024, we sold the Fayetteville property for $72.25 million. In conjunction with the sale we repaid the remaining balance of the KeyBank Bridge Loans and terminated it in accordance with the terms of the loan. Please see Note 11 – Subsequent Events for additional details.

Future Principal Requirements

The following table presents the future principal payment requirements on outstanding debt (including debt related to real estate held for sale) as of June 30, 2024:

2024	$	1,324,965
2025		61,473,405		(1)
2026		1,952,215
2027		2,052,475
2028		98,592,798
Total payments		165,395,858
Debt issuance costs, net		(814,612	)
Total	$	164,581,246

(1)On July 31, 2024, we sold the Fayetteville property for $72.25 million. In conjunction with the sale we repaid the $34.5 million Fayetteville Mortgage Loan, and repaid the $25.4 million KeyBank Bridge Loan. Please see Note 11 – Subsequent Events for additional details.