Mortgage Loans Payable and Unsecured Credit Facility

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Mortgage Loans Payable and Unsecured Credit Facility

Note 5. Mortgage Loans Payable and Unsecured Credit Facility

Debt and finance lease obligations are composed of the following at June 30, 2021:

		June 30, 2021
					Contractual
	Maturity	Balance			interest rates
Description	dates	outstanding			weighted-average
Fixed-rate mortgage
Franklin Village	Jun 2026	$	45,113,000		3.9%
Shops at Suffolk Downs (a)	June 2031		15,600,000		3.5%
Trexlertown Plaza (a)	June 2031		36,100,000		3.5%
The Point (a)	June 2031		29,700,000		3.5%
Christina Crossing (a)	June 2031		17,000,000		3.5%
Lawndale Plaza (a)	June 2031		15,600,000		3.5%
Senator Square finance lease obligation	Sep 2050		5,615,000		5.3%
			164,728,000		3.6%
Unsecured credit facilities (b):
Variable-rate:
Revolving credit facility  (c)	Sep 2021		12,000,000		1.7%
Term loan	Sep 2022		50,000,000		1.8%
Fixed-rate (d):
Term loan	Sep 2022		50,000,000		3.5%
Term loan	Apr 2023		100,000,000		3.5%
Term loan	Sep 2024		75,000,000		3.9%
Term loan	Jul 2025		75,000,000		4.8%
			526,728,000		3.6%
Unamortized issuance costs			(3,208,000	)
		$	523,520,000

(a) The mortgages for these properties are cross-collateralized.

(b) During the third quarter of 2021, the weighted average interest rate for the Company’s unsecured credit facilities will decrease 15 basis points (“bps”) as a result of a decrease in the Company’s leverage ratio.

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

(d) The interest rates on these term loans consist of the London Interbank Offered Rate (“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

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. The $300 million unsecured credit facility 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 LIBOR plus 135 bps to 195 bps (165 bps at June 30, 2021 and 150 bps as of this filing) and interest on borrowings under the term loan component can range from LIBOR plus 130 bps to 190 bps (160 bps at June 30, 2021 and 145 bps as of this filing), each based on the Company’s leverage ratio. Interest on borrowings under the unsecured credit facility and term loans is based on the Company’s 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. 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 Quarterly Report on Form 10-Q, the Company had $12.0 million outstanding and $112.1 million available for additional borrowings under its revolving credit facility, and was in compliance with all financial covenants.    

On May 5, 2021, the Company closed a non-recourse mortgage for $114.0 million. The mortgage matures June 1, 2031, bears interest at a fixed-rate of 3.49% and requires payment of interest only for the first five years followed by payments of principal and interest based on thirty-year amortization for the remainder of the term. The loan is secured by five shopping centers consisting of Lawndale Plaza, The Shops at Suffolk Downs, Christina Crossing, Trexlertown Plaza, and The Point.  These properties had no pre-existing debt and the proceeds from this new loan were used to reduce amounts outstanding under the Company’s revolving credit facility.

Derivative Financial Instruments

The fair values of the interest rate swaps applicable to the unsecured term loans discussed above are included in accounts payable and accrued liabilities on the consolidated balance sheet at June 30, 2021. 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), 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 $6.3 million of accumulated other comprehensive loss will be reclassified as a decrease to earnings within the next twelve months.

The following is a summary of the derivative financial instruments held by the Company at June 30, 2021 and December 31, 2020:

June 30, 2021
Designation/				Fair		Maturity	Balance sheet
Cash flow	Derivative	Count		value		dates	location
Qualifying	Interest rate swaps		5	$	13,208,000	2022-2025	Accounts payable and accrued liabilities
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

The notional values of the interest rate swaps held by the Company at June 30, 2021 and December 31, 2020 were $300.0 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 for the three and six months ended June 30, 2021 and 2020, respectively:

		(Loss) gain recognized in other
		comprehensive (loss) income
		(effective portion)
Designation/		Three months ended June 30,						Six months ended June 30,
Cash flow	Derivative	2021			2020			2021			2020
Qualifying	Interest rate swaps	$	(637,000	)	$	(2,226,000	)	$	1,756,000		$	(17,590,000	)
		Gain (loss) recognized in other
		comprehensive (loss) income
		reclassified into earnings (effective portion)
		Three months ended June 30,						Six months ended June 30,
	Classification	2021			2020			2021			2020
	Continuing Operations	$	(1,656,000	)	$	(1,638,000	)	$	(3,460,000	)	$	(1,988,000	)

As of June 30, 2021 the Company believes it has no significant risk associated with non-performance of the financial institutions which are the counterparties to its derivative contracts.