Credit Facilities and Notes Payable

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Credit Facilities and Notes Payable

NOTE 8. CREDIT FACILITIES AND NOTES PAYABLE

The carrying value of the Company’s credit facilities, notes payable and other debt consists of the following as of the respective period ends:

	June 30,			December 31,
($ in thousands)	2022			2021
Credit facilities and notes payable, net
Senior secured credit facilities with financial institutions	$	921,396		$	747,514
Senior secured credit facility with a related party		30,728			81,926
Senior secured debt - other		—			33,320
Mezzanine secured credit facilities with third-party lenders		138,470			87,851
Mezzanine secured credit facilities with a related party		56,728			82,508
Debt issuance costs		(5,411	)		(6,923	)
Total credit facilities and notes payable, net		1,141,911			1,026,196
Current portion - credit facilities and notes payable, net
Total credit facilities, other debt and notes payable, net		1,054,455			861,762
Total credit facilities and notes payable - related party		87,456			164,434
Total credit facilities and notes payable, net	$	1,141,911		$	1,026,196

Senior Secured Credit Facilities

The Company utilizes senior secured credit facilities to provide financing for the Company’s real estate inventory purchases and renovation. The senior secured credit facilities are classified as current liabilities on the accompanying condensed consolidated balance sheets as amounts drawn to purchase and renovate homes are due as homes are sold, which is expected to be within 12 months. The following summarizes certain details related to the Company’s senior secured credit facilities (in thousands, except interest rates):

As of June 30, 2022	Borrowing Capacity		Outstanding Amount		Weighted- Average Interest Rate			End of Revolving / Withdrawal Period	Final Maturity Date
Facility with financial institution 1	$	600,000	$	313,265		3.10	%	June 2024	June 2024
Facility with financial institution 2		400,000		297,681		2.91	%	September 2023	March 2024
Facility with financial institution 3		500,000		310,450		3.34	%	December 2023	December 2024
Facility with a related party		85,000		30,728		6.00	%	December 2022	December 2022
Senior secured credit facilities	$	1,585,000	$	952,124

As of December 31, 2021	Borrowing Capacity		Outstanding Amount		Weighted- Average Interest Rate
Facility with financial institution 1	$	400,000	$	365,392		2.60	%
Facility with financial institution 2		400,000		375,063		2.60	%
Facility with financial institution 3		500,000		7,059		2.60	%
Facility with a related party		85,000		81,926		4.10	%
Senior secured credit facilities	$	1,385,000	$	829,440

As of June 30, 2022, the Company had four senior secured credit facilities, three with separate financial institutions and one with a related party, which holds more than 5% of our Class A common stock.

•Senior Secured Credit Facility with Financial Institution 1
In June 2022, the Company amended its senior secured credit facility with financial institution 1. The amended facility increased the borrowing capacity from $400.0 million ($100.0 million of which was uncommitted) to $600.0 million ($300.0 million of which is uncommitted) and extended the maturity date from August 2022 to June 2024. Further, under the amended senior secured credit facility with financial institution 1, borrowings accrue interest at a rate based on a Secured Overnight Financing Rate (“SOFR”) reference rate plus a margin.

•Senior Secured Credit Facility with Financial Institution 2
As of June 30, 2022, the committed borrowing capacity on the senior secured credit facility with financial institution 2 is $400.0 million. Borrowings on the senior secured credit facility with financial institution 2 accrue interest at a rate based on a LIBOR reference rate plus a margin.

•Senior Secured Credit Facility with Financial Institution 3
As of June 30, 2022, the borrowing capacity on the senior secured credit facility with financial institution 3 is $500.0 million ($200.0 million of which is uncommitted). In June 2022, the Company amended its senior secured credit facility with financial institution 3, which, among other things, amended the interest rate under the facility to be based on a SOFR reference rate plus a margin.

•Senior Secured Credit Facility with a Related Party
As of June 30, 2022, the borrowing capacity on the senior secured credit facility with a related party is $85.0 million and the Company has the option to borrow above the fully committed borrowing capacity, subject to the lender’s discretion. Effective January 1, 2022, borrowings on the senior secured credit facility with a related party accrue interest at a rate based on a LIBOR reference rate plus a margin of 4.0%, with a minimum interest rate of 6.0%.

The Company may also pay fees on its senior secured credit facilities, including a commitment fee and fees on certain unused portions of the committed borrowing capacity, as defined in the respective credit agreements.

Borrowings under the Company’s senior secured credit facilities are collateralized by the real estate inventory financed by the senior secured credit facility. The lenders have legal recourse only to the assets securing the debt and do not have general recourse against the Company with limited exceptions. The Company has, however, provided limited non-recourse carve-out guarantees under its senior and mezzanine secured credit facilities for certain of the SPEs’ obligations in situations involving

“bad acts” by an Offerpad entity and certain other limited circumstances that are generally under the Company’s control. Each senior secured facility contains eligibility requirements that govern whether a property can be financed. When the Company resells a home, the proceeds are used to reduce the corresponding outstanding balance under both the related senior secured credit facility and the mezzanine secured credit facility.

Mezzanine Secured Credit Facilities

The Company utilizes mezzanine secured credit facilities to provide financing for the Company’s real estate inventory purchases and renovation. The mezzanine secured credit facilities are classified as current liabilities on the accompanying condensed consolidated balance sheets as amounts drawn to purchase and renovate homes are due as homes are sold, which is expected to be within 12 months. These facilities are structurally and contractually subordinated to the related senior secured credit facilities. The following summarizes certain details related to the Company’s mezzanine secured credit facilities (in thousands, except interest rates):

As of June 30, 2022	Borrowing Capacity		Outstanding Amount		Weighted- Average Interest Rate			End of Revolving / Withdrawal Period	Final Maturity Date
Facility 1 with a related party	$	65,000	$	51,518		11.00	%	August 2022	August 2022
Facility with third-party lender 1		90,000		68,638		9.50	%	September 2023	March 2024
Facility with third-party lender 2		112,500		69,832		9.50	%	December 2023	December 2024
Facility 2 with a related party		14,000		5,210		11.00	%	December 2022	December 2022
Mezzanine secured credit facilities	$	281,500	$	195,198

As of December 31, 2021	Borrowing Capacity		Outstanding Amount		Weighted- Average Interest Rate
Facility 1 with a related party	$	65,000	$	58,767		13.00	%
Facility with third-party lender 1		90,000		86,262		9.50	%
Facility with third-party lender 2		112,500		1,588		9.50	%
Facility 2 with a related party		14,000		23,742		13.00	%
Mezzanine secured credit facilities	$	281,500	$	170,359

As of June 30, 2022, the Company had four mezzanine secured credit facilities, two with separate third-party lenders and two with a related party, which holds more than 5% of our Class A common stock.

•Mezzanine Secured Credit Facility 1 with a Related Party
As of June 30, 2022, the committed borrowing capacity on the mezzanine secured credit facility 1 with a related party is $65.0 million. Effective January 1, 2022, borrowings on the mezzanine secured credit facility 1 with a related party accrue interest at a fixed rate of 11.0%.

In July 2022, the Company amended its mezzanine secured credit facility 1 with a related party. The amended facility increased the borrowing capacity from $65.0 million to $97.5 million ($32.5 million of which is uncommitted) and extended the maturity date from August 2022 to June 2024.

•Mezzanine Secured Credit Facility with Third-Party Lender 1
As of June 30, 2022, the committed borrowing capacity on the mezzanine secured credit facility with third-party lender 1 is $90.0 million. Borrowings on the mezzanine secured credit facility with third-party lender 1 accrue interest at a fixed rate of 9.5%.

•Mezzanine Secured Credit Facility with Third-Party Lender 2
As of June 30, 2022, the borrowing capacity on the mezzanine secured credit facility with third-party lender 2 is $112.5 million ($45.0 million of which is uncommitted). Borrowings on the mezzanine secured credit facility with third-party lender 2 accrue interest at a fixed rate of 9.5%.

•Mezzanine Secured Credit Facility 2 with a Related Party
As of June 30, 2022, the borrowing capacity on the mezzanine secured credit facility 2 with a related party is $14.0 million and the Company has the option to borrow above the fully committed borrowing capacity, subject to the lender’s discretion. Effective January 1, 2022, borrowings on the mezzanine secured credit facility 2 with a related party accrue interest at a fixed rate of 11.0%.

The Company may also pay fees on its mezzanine secured credit facilities, including a commitment fee and fees on certain unused portions of the committed borrowing capacity, as defined in the respective credit agreements.

Borrowings under the Company’s mezzanine secured credit facilities are collateralized by a second lien on the real estate inventory financed by the relevant credit facility. The lenders have legal recourse only to the assets securing the debt, and do not have general recourse to Offerpad with limited exceptions. When the Company resells a home, the proceeds are used to reduce the outstanding balance under both the related senior secured credit facility and the mezzanine secured credit facility.

Maturities

As of June 30, 2022, certain of the Company’s senior secured credit facilities and mezzanine secured credit facilities mature within the next twelve months following the date these condensed consolidated financial statements are issued. The Company expects to enter into new financing arrangements or amend existing arrangements to meet its obligations as they come due, which the Company believes is probable based on its history of prior credit facility renewals and an assessment of the current lending environment. The Company believes cash on hand, together with proceeds from the resale of homes and cash from future borrowings available under each of the Company’s existing credit facilities or the entry into new financing arrangements will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these condensed consolidated financial statements are issued.

Covenants for Senior Secured Credit Facilities and Mezzanine Secured Credit Facilities

The secured credit facilities include customary representations and warranties, covenants and events of default. Financed properties are subject to customary eligibility criteria and concentration limits. The terms of these facilities and related financing documents require the Company to comply with a number of customary financial and other covenants, such as maintaining certain levels of liquidity, tangible net worth or leverage (ratio of debt to tangible net worth). As of June 30, 2022, the Company was in compliance with all covenants.