Note 5. Mortgage Loans Payable and Credit Facility

The Company has a $300 million unsecured credit facility which, as amended and restated on September 8, 2017, consists of (1) a $250 million revolving credit facility, expiring on September 8, 2021, and (2) a $50 million term loan, expiring on September 8, 2022. The revolving credit facility may be extended, at the Company’s option, for an additional one-year period, subject to customary conditions. Under an accordion feature, the facility can be increased to $750 million, subject to customary conditions and lending commitments. Interest on borrowings under the revolving credit facility component can range from the London Interbank Offered Rate (“LIBOR”) plus 135 basis points (“bps”) to 195 bps (135 bps at March 31, 2018) and interest on borrowings under the term loan component can range from LIBOR plus 130 to 190 bps (130 bps at March 31, 2018), each based on the Company’s leverage ratio. As of March 31, 2018, the Company had $98.7 million available for additional borrowings under the revolving credit facility.

Debt is composed of the following at March 31, 2018:

			March 31, 2018
						Contractual
	Maturity		Balance			interest rates
Description	dates		outstanding			weighted-average
Fixed-rate mortgages	2021-2026		$	127,242,000		4.4%
Unsecured credit facilities:
Variable-rate:
Revolving credit facility	Sep 2021	(a)		109,500,000		3.1%
Term loan	Sep 2022			50,000,000		3.1%
Fixed-rate (b):
Term loan	Feb 2021			75,000,000		3.6%
Term loan	Feb 2022			50,000,000		3.0%
Term loan	Sep 2022	(c)		50,000,000		2.8%
Term loan	Apr 2023			100,000,000		3.2%
Term loan	Sep 2024	(d)		75,000,000		3.3%
				636,742,000		3.4%
Unamortized premium				504,000
Unamortized debt issuance costs				(3,230,000	)
			$	634,016,000

(a)

The revolving credit facility is subject to a one-year extension at the Company’s option.

(b)

The interest rates on these term loans consist of LIBOR plus a credit spread based on the Company’s leverage ratio, for which the Company has interest rate swap agreements which convert the LIBOR rates to fixed rates. Accordingly, these term loans are presented as fixed-rate debt.

(c)

The current interest rate swap agreement expires in February 2019 at which time a new interest rate swap agreement will begin resulting in an effective interest rate of 3.2%, based on the Company’s current leverage ratio.

(d)

The current interest rate swap agreement expires in February 2020 at which time a new interest rate swap agreement will begin resulting in an effective interest ratio of 3.7%, based on the Company’s current leverage ratio.

The Company’s unsecured credit facility and term loans contain financial covenants including, but not limited to, maximum debt leverage, maximum secured debt, minimum fixed charge coverage, and minimum net worth. In addition, the facility contains restrictions including, but not limited to, limits on indebtedness, certain investments and distributions. Although the credit facility is unsecured, borrowing availability is based on unencumbered property adjusted net operating income, as defined in the agreements. The Company’s failure to comply with the covenants or the occurrence of an event of default under the facilities could result in the acceleration of the related debt and exercise of other lender remedies. As of March 31, 2018, the Company is in compliance with all financial covenants. Interest on borrowings under the unsecured credit facility and term loans are based on the Company’s leverage ratio.

Derivative Financial Instruments

At March 31, 2018, the Company had $11.7 million included in other assets and deferred charges, net on the consolidated balance sheet relating to the fair value of the interest rate swaps applicable to the unsecured term loans discussed above. Charges and/or credits relating to the changes in the fair value of the interest rate swaps are made to accumulated other comprehensive income (loss), noncontrolling interests (minority interests in consolidated joint ventures and limited partners’ interest), or operations (included in interest expense), as applicable. Over time, the unrealized gains and losses recorded in accumulated other comprehensive loss will be reclassified into earnings as an increase or reduction to interest expense in the same periods in which the hedged interest payments affect earnings. The Company estimates that approximately $1.1 million of accumulated other comprehensive loss will be reclassified as a charge to earnings within the next twelve months.

The following is a summary of the derivative financial instruments held by the Company at March 31, 2018 and December 31, 2017:

March 31, 2018

Designation/

Fair

Maturity

Balance sheet

Cash flow

Derivative

Count

value

dates

location

Qualifying

Interest rate swaps

11,742,000

2019-2024

Other assets and deferred charges, net

December 31, 2017

Designation/

Fair

Maturity

Balance sheet

Cash flow

Derivative

Count

value

dates

location

Qualifying

Interest rate swaps

6,394,000

2019-2024

Other assets and deferred charges, net

Qualifying

Interest rate swaps

511,000

2021

Accounts payable and accrued liabilities

The notional values of the interest rate swaps held by the Company at March 31, 2018 and December 30, 2017 were $350.0 million and $350.0 million, respectively.

The following presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations and the consolidated statements of equity for the three months ended March 31, 2018 and 2017, respectively:

		Gain recognized in other
		comprehensive (loss) income
		(effective portion)
Designation/		Three months ended March 31,
Cash flow	Derivative	2018			2017
Qualifying	Interest rate swaps	$	5,752,000		$	474,000

		(Loss) recognized in other
		comprehensive (loss) income
		reclassified into earnings (effective portion)
		Three months ended March 31,
	Classification	2018			2017
	Continuing Operations	$	(138,000	)	$	(866,000	)

As of March 31, 2018 the Company believes it has no significant risk associated with non-performance of the financial institutions which are the counterparties to its derivative contracts.