NOTE 11.

LONG-TERM DEBT

Credit Facility. On February 27, 2012, the Company entered into a Credit Agreement (the “Agreement”) with Bank of Montreal (“BMO”) as Administrative Agent, Letter of Credit Issuer, and Lender. The Agreement consisted of a $46.0 million revolving credit facility with a maturity date of February 27, 2015 (the “Credit Facility”). The indebtedness outstanding under the Agreement accrued interest, prior to the amendments of the Agreement, at a rate ranging from the 30-day London Interbank Offer Rate (“LIBOR”) plus 175 basis points to LIBOR plus 250 basis points based on the total balance outstanding under the Credit Facility as a percentage of total asset value of the Company. The Credit Facility is unsecured and is guaranteed by certain subsidiaries of the Company.

The Credit Facility replaced the Company’s $25.0 million revolving credit facility with SunTrust Bank, which had a maturity date of September 27, 2014. Approximately $9.7 million of the initial disbursement under the Credit Facility was used to pay off the outstanding balance of the existing credit facility with SunTrust Bank and approximately $5.6 million was used to pay off a related term loan with SunTrust Bank, which had a maturity date of July 1, 2012. The indebtedness under the prior SunTrust revolving credit facility and term loan were secured by certain assets of the Company. The Company wrote off $245,726 of deferred loan costs in the first quarter of 2012 as a result of this early extinguishment of debt.

In September 2012, the Company entered into the First Amendment to the Agreement (“Amendment”) and added a second participating lender to the Agreement. Pursuant to the Agreement’s accordion feature, this Amendment expanded the Credit Facility to $62.0 million. The Amendment also modified some of the restrictive covenants contained in the original Agreement. These changes to the restrictive covenants were not material in nature.

On February 14, 2013, the Company added a third participant lender to the Agreement, and pursuant to the accordion feature, the Credit Facility was expanded to $66.0 million.

On March 29, 2013, the Company entered into the second amendment to the Agreement (“Second Amendment”). The Second Amendment, expands the accordion feature allowing the Company to increase the Credit Facility up to $125 million and reduces the interest rate by 25 basis points, so that it now ranges from LIBOR plus 150 basis points up to LIBOR plus 225 basis points, based on the total balance outstanding under the Credit Facility as a percentage of total asset value of the Company. The Second Amendment also extends the maturity date to March 31, 2016 from February 27, 2015, and reduces the limitations on the Company’s ability to make certain investments. The weighted average interest rate on the Credit Facility was 1.667% and 1.966% as of December 31, 2013 and 2012, respectively.

The Agreement contains restrictive covenants customary for this type of transaction, including, but not limited to, limitations on the Company’s ability to: (a) incur indebtedness; (b) make certain investments; (c) incur certain liens; (d) engage in certain affiliate transactions; and (e) engage in certain major transactions such as mergers. In addition, the Company is subject to various financial maintenance covenants, including, but not limited to, a maximum indebtedness ratio, a maximum secured indebtedness ratio, and a minimum fixed charge coverage ratio. The Agreement also contains affirmative covenants and events of default, including, but not limited to, a cross default to the Company’s other indebtedness and upon the occurrence of a change of control. The Company’s failure to comply with these covenants or the occurrence of an event of default could result in acceleration of the Company’s debt and other financial obligations under the Agreement.

Mortgage Notes Payable. On February 22, 2013, the Company closed on a $7.3 million loan originated with UBS Real Estate Securities Inc., secured by its interest in the two-building office complex leased to Hilton Resorts Corporation, which was acquired on January 31, 2013. The new mortgage loan matures in February 2018, carries a fixed rate of interest of 3.655% per annum, and requires payments of interest only prior to maturity.

On March 8, 2013, the Company closed on a $23.1 million loan originated with Bank of America, N.A., secured by its interest in fourteen income properties. The new mortgage loan matures in April 2023, carries a fixed rate of 3.67% per annum, and requires payments of interest only prior to maturity.

Long-term debt consisted of the following:


	December 31, 2013
	Total		Due Within One Year
Credit Facility	$	32,827,032	$	—
Mortgage Note Payable (originated with UBS)		7,300,000		—
Mortgage Note Payable (originated with BOA)		23,100,000		—

Total Long-Term Debt	$	63,227,032	$	—

Payments applicable to reduction of principal amounts will be required as follows:


Year Ending December 31,	Amount
2014	$	—
2015		—
2016		32,827,032
2017		—
2018		7,300,000
Thereafter		23,100,000

Total Long-Term Debt	$	63,227,032

At December 31, 2013, there was approximately $33.2 million of available borrowing capacity under the Credit Facility, which has a current commitment level of $66.0 million, subject to the borrowing base requirements.

In conjunction with required tenant improvements related to the acquisition of the two-building office complex leased to Hilton Resorts Corporation in January 2013, the Company secured a $723,000 letter of credit with BMO. As of December 31, 2013, the letter of credit was unused. Subsequent to year end, upon final disbursement of the required tenant improvement obligation, the letter of credit was successfully terminated.

For the year ended December 31, 2013, interest expense was $1,624,064 with $1,581,433 paid during the period. For the year ended December 31, 2012, interest expense was $536,017 with $491,048 paid during the period. For year ended December 31, 2011, interest expense was $655,275 with $684,008 paid during the period. No interest was capitalized during the year ended December 31, 2012, while $8,172 and $28,733 of interest was capitalized during the years ended December 31, 2013 and 2011.

The amortization of loan costs incurred in connection with the Company’s long-term debt is included in interest expense in the consolidated financial statements. These loan costs are being amortized over the term of the respective loan agreements using the straight-line method, which approximates the effective interest method. For the years ended December 31, 2013, 2012 and 2011, the amortization of loan costs totaled $202,500, $112,666 and $67,704, respectively. Previously, loan cost amortization was included in depreciation and amortization in the consolidated financial statements. The consolidated financial statements have been reclassified for all periods presented to conform to the current presentation.

The Company was in compliance with all of its debt covenants as of December 31, 2013 and 2012.