Mortgage Loans Payable and Unsecured Credit Facilities

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Mortgage Loans Payable and Unsecured Credit Facilities

Note 8. Mortgage Loans Payable and Unsecured Credit Facilities  

Debt and finance lease obligations are composed of the following at December 31, 2020 and 2019:

		December 31, 2020				December 31, 2019
					Contractual				Contractual
	Maturity	Balance			interest rates	Balance			interest rates
Description	dates	outstanding			weighted-average	outstanding			weighted-average
Fixed-rate mortgage	Jun 2026	$	45,645,000		3.9%	$	46,679,000		3.9%
Finance lease obligation	Sep 2050		5,631,000		5.3%		5,665,000		5.3%
Unsecured credit facilities:
Variable-rate:
Revolving credit facility	Sep 2021 (a)		175,000,000		2.7%(b)		106,000,000		3.2%
Term loan	Sep 2022		50,000,000		1.9%		50,000,000		3.3%
Fixed-rate (c):
Term loan	Feb 2022		50,000,000		3.3%		50,000,000		3.0%
Term loan	Sep 2022		50,000,000		3.5%		50,000,000		2.8%
Term loan	Apr 2023		100,000,000		3.5%		100,000,000		3.2%
Term loan	Sep 2024		75,000,000		3.9%		75,000,000		3.7%
Term loan	Jul 2025		75,000,000		4.8%		75,000,000		4.6%
Term loan	n/a		-		-		75,000,000		3.6%
			626,276,000		3.4%		633,344,000		3.5%
Unamortized issuance costs			(2,002,000	)			(2,769,000	)
		$	624,274,000			$	630,575,000

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

(b) The interest rate on the revolving credit facility consists of LIBOR plus a credit spread based on the Company’s leverage ratio. The Company has an interest rate swap agreement expiring in February 2021, which converts the LIBOR rate to a fixed rate of 3.9% on $75.0 million of the facility, and a variable-rate of 1.8% on the remaining $100.0 million of the facility, resulting in a blended interest rate of 2.7% at December 31, 2020.

(c) 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. 

Unsecured Revolving Credit Facility and Term Loans

The Company has a $300 million unsecured credit facility that 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. On August 4, 2020, the Company amended its existing $300 million unsecured credit facility and term loans. After such amendments, the Company’s financial ratios and borrowing base are now all computed using the trailing four quarters as opposed to the current quarter annualized and interest rate swaps that are a hedge of existing debt are now excluded from the definition of debt. 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 LIBOR plus 135 basis points (“bps”) to 195 bps (165 bps at December 31, 2020) and interest on borrowings under the term loan component can range from LIBOR plus 130 to 190 bps (160 bps at December 31, 2020), each based on the Company’s leverage ratio.     

The details of the remaining unsecured term loans are as follows:

Amount		Maturity date	Interest range
$	50,000,000	February 2022	LIBOR + 130 bps to 190 bps
$	50,000,000	September 2022	LIBOR + 130 bps to 190 bps
$	100,000,000	April 2023	LIBOR + 165 bps to 225 bps
$	75,000,000	September 2024	LIBOR + 170 bps to 225 bps
$	75,000,000	July 2025	LIBOR + 170 bps to 225 bps

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. 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. Although the credit facility is unsecured, borrowing availability is based on unencumbered property adjusted net operating income for the trailing twelve months, as defined in the agreements. As of the date of filing this Form 10-K, the Company had $175.0 million outstanding and $56.7 available for additional borrowings under its revolving credit facility, and was in compliance with all financial covenants. Additionally, the COVID-19 pandemic may negatively impact the Company’s future ability to remain compliant with all financial covenants, including the ability to generate sufficient unencumbered property adjusted net operating income to support current borrowings. The Company’s unencumbered property adjusted net operating income was not significantly impacted by the COVID-19 pandemic until the quarter ended June 30, 2020.  Accordingly, not until the quarter ended March 31, 2021, will the unencumbered property adjusted net operating income for the trailing twelve months fully reflect the negative impact of the COVID-19 pandemic.  

Scheduled Principal Payments

Scheduled principal payments on a mortgage loan payable, finance lease obligation, unsecured term loans, and the unsecured credit facility at December 31, 2020, due on various dates from 2021 to 2050, are as follows:

	Mortgage Loan		Finance Lease		Revolving			Term				Unamortized
Year	Payable		Obligation		Credit Facility			Loans		Total		Issuance Costs			Total
2021	$	1,074,000	$	35,000		175,000,000	(a)	$	-	$	176,109,000	$	(647,000	)	$	175,462,000
2022		1,116,000		37,000		-			150,000,000		151,153,000		(499,000	)		150,654,000
2023		1,160,000		39,000		-			100,000,000		101,199,000		(274,000	)		100,925,000
2024		1,206,000		41,000		-			75,000,000		76,247,000		(207,000	)		76,040,000
2025		1,253,000		44,000		-			75,000,000		76,297,000		(115,000	)		76,182,000
Thereafter		39,836,000		5,435,000		-			-		45,271,000		(260,000	)		45,011,000
	$	45,645,000	$	5,631,000	$	175,000,000		$	400,000,000	$	626,276,000	$	(2,002,000	)	$	624,274,000

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

Derivative Financial Instruments

At December 31, 2020, the Company had $18.9 million included in accounts payable and accrued liabilities 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 $6.9 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 December 31, 2020 and December 31, 2019:

December 31, 2020
Designation/				Fair		Maturity	Balance sheet
Cash flow	Derivative	Count		value		dates	location
Qualifying	Interest rate swaps		7	$	18,927,000	2021-2025	Accounts payable and accrued liabilities
December 31, 2019
Designation/				Fair		Maturity	Balance sheet
Cash flow	Derivative	Count		value		dates	location
Qualifying	Interest rate swaps		2	$	136,000	2020-2023	Other assets and deferred charges, net
Qualifying	Interest rate swaps		6	$	7,180,000	2021-2025	Accounts payable and accrued liabilities

The notional values of the interest rate swaps held by the Company at December 31, 2020 and December 30, 2019 were $425.0 million and $425.0 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 2020, 2019 and 2018, respectively:

		(Loss) gain recognized in other
		comprehensive (loss) income
		(effective portion)
Designation/		Years ended December 31,
Cash flow	Derivative	2020			2019			2018
Qualifying	Interest rate swaps	$	(17,940,000	)	$	(13,090,000	)	$	2,185,000
		Gain (loss) recognized in other
		comprehensive (loss) income
		reclassified into earnings (effective portion)
		Years ended December 31,
	Classification	2020			2019			2018
	Continuing Operations	$	(6,062,000	)	$	1,196,000		$	667,000

As of December 31, 2020, the Company believes it has no significant risk associated with non-performance of the financial institutions which are the counterparties to its derivative contracts.