NOTE 12. LONG-TERM DEBT

As of September 30, 2017, the Company’s outstanding indebtedness, at face value, was as follows:


	Face		Maturity	Interest
	Value Debt		Date	Rate
Credit Facility	$	41,000,000	September 2021		30 ‑day LIBOR plus 1.50% -2.20%
Mortgage Note Payable (originated with UBS) (1)		7,300,000	February 2018		3.655%
Mortgage Note Payable (originated with Wells Fargo) (2)		30,000,000	October 2034		4.330%
Mortgage Note Payable (originated with Wells Fargo) (3)		25,000,000	April 2021		30 ‑day LIBOR plus 1.90%
4.50% Convertible Senior Notes due 2020, net of discount		75,000,000	March 2020		4.500%
Total Long-Term Face Value Debt	$	178,300,000

(1)Secured by the Company’s interest in the two-building office complex leased to Hilton Resorts Corporation.

(2)Secured by the Company’s interest in six income properties. The mortgage loan carries a fixed rate of 4.33% per annum during the first ten years of the term, and requires payments of interest only during the first ten years of the loan. After the tenth anniversary of the effective date of the loan, the cash flows, as defined in the related loan agreement, generated by the underlying six income properties must be used to pay down the principal balance of the loan until paid off or until the loan matures. The loan is fully pre-payable after the tenth anniversary of the effective date of the loan.

(3)Secured by the Company’s income property leased to Wells Fargo located in Raleigh, North Carolina. The mortgage loan has a 5-year term with two years interest only, and interest and a 25-year amortization for the balance of the term. The mortgage loan bears a variable rate of interest based on the 30-day LIBOR plus a rate of 190 basis points. The interest rate for this mortgage loan has been fixed through the use of an interest rate swap that fixed the rate at 3.17%. The mortgage loan can be prepaid at any time subject to the termination of the interest rate swap.

The Company’s revolving credit facility (the “Credit Facility”), with Bank of Montreal (“BMO”) serving as the administrative agent for the lenders thereunder, is unsecured with regard to our income property portfolio but is guaranteed by certain wholly-owned subsidiaries of the Company. The Credit Facility bank group is led by BMO and also includes Wells Fargo and Branch Banking & Trust Company. On September 7, 2017, the Company executed the second amendment and restatement of the Credit Facility (the “Revolver Amendment”). Pursuant to the Revolver Amendment, the Credit Facility matures on September 7, 2021, with the ability to extend the term for 1 year.

As a result of the Revolver Amendment, the Credit Facility has a total borrowing capacity of $100.0 million with the ability to increase that capacity up to $150.0 million during the term. The Credit Facility provides the lenders with a secured interest in the equity of the Company subsidiaries that own the properties included in the borrowing base. The indebtedness outstanding under the Credit Facility accrues interest at a rate ranging from the 30-day LIBOR plus 150 basis points to the 30-day LIBOR plus 220 basis points based on the total balance outstanding under the Credit Facility as a percentage of the total asset value of the Company, as defined in the Credit Facility. The Credit Facility also accrues a fee of 15 to 25 basis points for any unused portion of the borrowing capacity based on whether the unused portion is greater or less than 50% of the total borrowing capacity.

At September 30, 2017, the current commitment level under the Credit Facility was $100.0 million. The available borrowing capacity under the Credit Facility was approximately $59.0 million, based on the level of borrowing base assets. As of September 30, 2017, the Credit Facility had a $41.0 million balance. As a result of the income property acquisition completed on October 27, 2017 (as described in Note 21, “Subsequent Events”), the amount outstanding on the Credit Facility was approximately $60.5 million and the available borrowing capacity was approximately $39.5 million.

The Credit Facility is subject to customary restrictive covenants 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 Credit Facility 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 Credit Facility.

In addition to the Credit Facility, the Company has certain other borrowings, as noted in the table above, all of which are non-recourse.

The Company’s $75.0 million aggregate principal amount of 4.50% Convertible Notes will mature on March 15, 2020, unless earlier purchased or converted. The initial conversion rate was 14.5136 shares of common stock for each $1,000 principal amount of Convertible Notes, which represented an initial conversion price of approximately $68.90 per share of common stock. Since July of 2016, when the Company’s Board of Directors implemented a quarterly dividend in place of the previous semi-annual dividend, the conversion rate has been adjusted with each successive quarterly dividend and is currently, after the third quarter 2017 dividend, equal to 14.5439 shares of common stock for each $1,000 principal amount of Convertible Notes, which represents an adjusted conversion price of approximately $68.76 per share of common stock.

The conversion rate is subject to adjustment in certain circumstances. Holders may not surrender their Convertible Notes for conversion prior to December 15, 2019 except upon the occurrence of certain conditions relating to the closing sale price of the Company’s common stock, the trading price per $1,000 principal amount of Convertible Notes, or specified corporate events including a change in control of the Company. The Company may not redeem the Convertible Notes prior to the stated maturity date and no sinking fund is provided for the Convertible Notes. The Convertible Notes are convertible, at the election of the Company, into solely cash, solely shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock. The Company intends to settle the Convertible Notes in cash upon conversion, with any excess conversion value to be settled in shares of our common stock. In accordance with GAAP, the Convertible Notes are accounted for as a liability with a separate equity component recorded for the conversion option. A liability was recorded for the Convertible Notes on the issuance date at fair value based on a discounted cash flow analysis using current market rates for debt instruments with similar terms. The difference between the initial proceeds from the Convertible Notes and the estimated fair value of the debt instruments resulted in a debt discount, with an offset recorded to additional paid-in capital representing the equity component. The discount on the Convertible Notes was approximately $6.1 million at issuance, which represents the cash discount paid of approximately $2.6 million and the approximate $3.5 million attributable to the value of the conversion option recorded in equity, which is being amortized into interest expense through the maturity date of the Convertible Notes. As of September 30, 2017, the unamortized debt discount of our Convertible Notes was approximately $3.2 million.

Long-term debt as of September 30, 2017 and December 31, 2016 consisted of the following:


	September 30, 2017				December 31, 2016
			Due Within				Due Within
	Total		One Year		Total		One Year
Credit Facility	$	41,000,000	$	—	$	34,300,000	$	—
Mortgage Note Payable (originated with UBS)		7,300,000		7,300,000		7,300,000		—
Mortgage Note Payable (originated with Wells Fargo)		30,000,000		—		30,000,000		—
Mortgage Note Payable (originated with Wells Fargo)		25,000,000		—		25,000,000		—
4.50% Convertible Senior Notes due 2020, net of discount		71,769,432		—		70,880,581		—
Loan Costs, net of accumulated amortization		(1,417,902)		—		(1,235,380)		—
Total Long-Term Debt	$	173,651,530	$	7,300,000	$	166,245,201	$	—

Payments applicable to reduction of principal amounts as of September 30, 2017 will be required as follows:


Year Ending December 31,	Amount
2018		7,300,000
2019		—
2020		75,000,000
2021		66,000,000
2022		—
Thereafter		30,000,000
Total Long-Term Debt - Face Value	$	178,300,000

The Company intends to repay the $7.3 million Mortgage Note Payable originated with UBS at or prior to its maturity in February 2018 and expects to add the related Hilton income property assets to the borrowing base of the Credit Facility.

The carrying value of long-term debt as of September 30, 2017 consisted of the following:


	Total
Current Face Amount	$	178,300,000
Unamortized Discount on Convertible Debt		(3,230,568)
Loan Costs, net of accumulated amortization		(1,417,902)
Total Long-Term Debt	$	173,651,530

The following table reflects a summary of interest expense incurred and paid during the three and nine months ended September 30, 2017 and 2016:


	Three Months		Three Months			Nine Months		Nine Months
	Ended		Ended			Ended		Ended
	9/30/2017		9/30/2016			9/30/2017		9/30/2016
	($000's)		($000's)			($000's)		($000's)
Interest Expense	$	1,771	$	1,684		$	5,164	$	5,151
Amortization of Loan Costs		125		488	(1)		350		716	(1)
Amortization of Discount on Convertible Notes		301		282			889		834
Capitalized Interest		(124)		—			(124)		—
Total Interest Expense	$	2,073	$	2,454		$	6,279	$	6,701

Total Interest Paid	$	2,588	$	2,589		$	6,026	$	6,048

(1)Includes approximately $367,000 of unamortized loan costs which were written off and included in interest expense related to the $23.1 million mortgage loan assumed by the buyer upon closing the Portfolio Sale on September 16, 2016.

The Company was in compliance with all of its debt covenants as of September 30, 2017 and December 31, 2016.