NOTE 13. LONG-TERM DEBT

As of September 30, 2019, the Company’s outstanding indebtedness, at face value, was as follows:


	Face		Maturity	Interest
	Value Debt		Date	Rate
Credit Facility	$	154,845,349	May 2023		30 ‑day LIBOR plus 1.35% -1.95%
Mortgage Note Payable (originated with Wells Fargo) (1)		30,000,000	October 2034		4.330%
Mortgage Note Payable (originated with Wells Fargo) (2)		24,056,283	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	$	283,901,632

(1)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.

(2)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. Amortization of the principal balance began in May 2018.

Credit Facility. 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 “2017 Amended Credit Facility”).

On May 24, 2019, the Company executed the second amendment to the 2017 Amended Credit Facility (the “2019 Revolver Amendment”). As a result of the 2019 Revolver Amendment, the Credit Facility has a total borrowing capacity of $200.0 million with the ability to increase that capacity up to $300.0 million during the term, subject to lender approval. The Credit Facility provides the lenders with a security 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 135 basis points to the 30-day LIBOR plus 195 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 2017 Amended Credit Facility, as amended by the 2019 Revolver Amendment. 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. Pursuant to the 2019 Revolver Amendment, the Credit Facility matures on May 24, 2023, with the ability to extend the term for 1 year.

At September 30, 2019, the current commitment level under the Credit Facility was $200.0 million. The available borrowing capacity under the Credit Facility was approximately $36.9 million, based on the level of borrowing base assets. As of September 30, 2019, the Credit Facility had a $154.8 million balance outstanding.

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 in 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.

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

Convertible Debt. 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 and subsequent increases to the quarterly dividend, the conversion rate has been adjusted with each successive quarterly dividend and is currently, after the third quarter 2019 dividend, equal to 14.6571 shares of common stock for each $1,000 principal amount of Convertible Notes, which represents an adjusted conversion price of approximately $68.23 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, 2019, the unamortized debt discount of our Convertible Notes was approximately $641,000.

Long-term debt as of September 30, 2019 and December 31, 2018 consisted of the following:


	September 30, 2019				December 31, 2018
			Due Within				Due Within
	Total		One Year		Total		One Year
Credit Facility	$	154,845,349	$	—	$	120,745,579	$	—
Mortgage Note Payable (originated with Wells Fargo)		30,000,000		—		30,000,000		—
Mortgage Note Payable (originated with Wells Fargo)		24,056,283		—		24,557,468		—
4.50% Convertible Senior Notes due 2020, net of discount		74,358,578		—		73,348,731		—
Loan Costs, net of accumulated amortization		(1,173,179)		—		(1,026,967)		—
Total Long-Term Debt	$	282,087,031	$	—	$	247,624,811	$	—

Payments applicable to reduction of principal amounts as of September 30, 2019 will be required as follows:


Year Ending December 31,	Amount
Remainder of 2019	$	—
2020		75,000,000
2021		24,056,283
2022		—
2023		154,845,349
2024		—
Thereafter		30,000,000
Total Long-Term Debt - Face Value	$	283,901,632

The carrying value of long-term debt as of September 30, 2019 consisted of the following:


	Total
Current Face Amount	$	283,901,632
Unamortized Discount on Convertible Debt		(641,422)
Loan Costs, net of accumulated amortization		(1,173,179)
Total Long-Term Debt	$	282,087,031

The following table reflects a summary of interest expense incurred and paid during the three and nine months ended September 30, 2019 and 2018:


	Three Months Ended				Nine Months Ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
	($000's)		($000's)		($000's)		($000's)
Interest Expense	$	2,801	$	1,921	$	7,886	$	6,107
Amortization of Loan Costs		111		103		324		390
Amortization of Discount on Convertible Notes		342		321		1,010		947
Total Interest Expense	$	3,254	$	2,345	$	9,220	$	7,444

Total Interest Paid	$	3,075	$	2,798	$	8,142	$	6,989

The Company was in compliance with all of its debt covenants as of September 30, 2019, but for a covenant in its Credit Facility that pertains solely to the Company’s stock buyback program. The covenant, set forth in Section 8.8(n) of the Credit Facility, is a secondary fixed charge coverage ratio which incorporates stock buyback activity and incremental land sales, on a rolling twelve-month basis, into the fixed charge coverage ratio and requires that a 1.5x ratio be maintained (the “Buyback Fixed-Charge Coverage Ratio”). As of September 30, 2019, the Buyback Fixed-Charge Coverage Ratio was below the required 1.5x due primarily to (i) the Company’s second quarter 2019 stock buyback activity, including the significant share repurchase transaction in April 2019 in connection with the liquidation by the Company’s then-largest shareholder of its position in Company stock, and (ii) certain land sales transactions anticipated for the third quarter of 2019 not having occurred. The Credit Facility lenders executed a written waiver of the Buyback Fixed-Charge Coverage Ratio covenant effective as of September 30, 2019. Based on the Company’s closing of the Land Venture Transaction (as defined below in Note 22, “Subsequent Events”), the Company estimates that it will be in compliance with this covenant through year-end 2019. The Company was in compliance with all of its debt covenants as of December 31, 2018.