NOTES PAYABLE, NET

As of December 31, 2017 and 2016, the Company’s notes payable, net, excluding a portion of the line of credit balance and term loan balance, which have been classified as held for sale, consisted of the following (amounts in thousands):



	Principal Balance						Interest Rates At
	December 31, 2017			December 31, 2016			December 31, 2017
Line of credit ⁽¹⁾	$	23,107		$	11,150		2.66	%
Secured term loan	—			24,277			—	%
Mortgage loans secured by properties under development ⁽²⁾	19,200			19,200			9.5% - 10.0%
Deferred financing costs, net ⁽³⁾	(84		)	(323		)	n/a
	$	42,223		$	54,304

(1)

The Company’s line of credit is a revolving credit facility with an initial maximum aggregate commitment of $30.0 million. Effective February 15, 2017, the Company’s line of credit was refinanced to increase the maximum aggregate commitment under the credit facility from $30.0 million to $60.0 million. The credit facility matures on February 15, 2020. Each loan made pursuant to the credit facility will be either a LIBOR rate loan or a base rate loan, at the election of the Company, plus an applicable margin, as defined. Monthly payments are interest only with the entire principal balance and all outstanding interest due at maturity. The Company will pay the lender an unused commitment fee, quarterly in arrears, which will accrue at 0.30% per annum, if the usage under the the Company’s line of credit is less than or equal to 50% of the line of credit amount, and 0.20% per annum if the usage under the Company’s line of credit is greater than 50% of the line of credit amount. The Company is providing a guaranty of all of its obligations under the Company’s line of credit and all other loan documents. As of December 31, 2017, the Company’s line of credit was secured by Topaz Marketplace, 8 Octavia Street, 400 Grove Street, the Fulton Shops, 450 Hayes, 388 Fulton, Silver Lake, Florissant Marketplace, Ensenada Square and The Shops at Turkey Creek. As of December 31, 2016, the Company’s line of credit was secured by Pinehurst Square East, Topaz Marketplace, 8 Octavia Street, 400 Grove Street, the Fulton Shops and 450 Hayes. For information regarding recent draws under the Company’s line of credit, see “– Recent Financing Transactions The Company’s Line of Credit” below.


(2)	Comprised of $10.7 million and $8.5 million associated with the Company’s investment in the Gelson’s Joint Venture and the Wilshire Joint Venture, respectively.


(3)	Reclassification of deferred financing costs, net of accumulated amortization, as a contra-liability.

During the years ended December 31, 2017 and 2016, the Company incurred and expensed approximately $1.8 million and $2.2 million, respectively, of interest costs, which included the amortization of deferred financing costs of approximately $0.5 million for both periods. Also during the years ended December 31, 2017 and 2016, the Company incurred and capitalized approximately $3.4 million and $2.8 million, respectively, of interest expense related to the variable interest entities, which included the amortization of deferred financing costs of approximately $0.5 million and $0.6 million for each period, respectively.

As of December 31, 2017 and 2016, interest expense payable was approximately $0.3 million and $0.4 million, respectively, including an amount related to the variable interest entities of approximately $0.2 million for each period.

The following is a schedule of future principal payments for all of the Company’s notes payable outstanding as of December 31, 2017 (amounts in thousands):



2018	$	19,200
2019	—
2020	33,856
Total ⁽¹⁾	$	53,056


(1)	Total future principal payments reflect actual amounts due to creditors, and excludes reclassification of $0.1 million deferred financing costs, net.

Recent Financing Transactions

Line of Credit

During the years ended December 31, 2017 and 2016, the following transactions occurred under the Company’s line of credit:

Year ended December 31, 2017:


•	On January 4, 2017, the Company drew $4.0 million and used the proceeds to acquire 388 Fulton.


•	On January 6, 2017, the Company consummated the disposition of Pinehurst Square East, located in Bismarck, North Dakota, for a sales price of approximately $19.2 million in cash, $18.4 million of which was used to pay down the Company’s line of credit.


•	On January 11, 2017, the Company drew $11.0 million and used the proceeds to acquire Silver Lake.


•	On January 27, 2017, the Company drew $1.0 million and used the proceeds for working capital.


•	On February 28, 2017, the Company drew $9.8 million and used the proceeds to pay off the mortgage loan related to Woodland West Marketplace.


•	On February 28, 2017, the Company drew $0.6 million and used the proceeds to pay certain costs for the refinancing of the Company’s line of credit.


•	On March 29, 2017, the Company drew $1.0 million and used the proceeds for working capital.


•	On April 17, 2017, the Company consummated the disposition of Woodland West Marketplace, located in Arlington, Texas, for a sales price of approximately $14.6 million in cash, $13.7 million of which was used to pay down the Company’s line of credit.


•	On June 28, 2017, the Company drew $1.3 million and used the proceeds for working capital.


•	On August 22, 2017, the Company drew $1.0 million and used the proceeds for working capital.

•

On October 31, 2017, the Company drew $26.0 million and used the proceeds to repay the existing secured financing that encumbered the following properties: The Shops at Turkey Creek, Morningside Marketplace, Florissant Marketplace, Ensenada Square and Cochran Bypass. The total amount of the repayment was $25.4 million, which included a payment of yield maintenance due upon prepayment of $1.4 million. In connection with that borrowing, the Company added the following property as additional collateral security under the terms of the Amended and Restated Credit Facility: The Shops at Turkey Creek, Morningside Marketplace, Florissant Marketplace and Ensenada Square.


•	On October 31, 2017, the Company consummated the disposition of Cochran Bypass, located in Chester, South Carolina, for a sales price of approximately $2.5 million in cash, $2.1 million of which was used to pay down the Company’s line of credit.


•	On November 1, 2017, the Company consummated the disposition of Morningside Marketplace, located in Fontana, California, for a sales price of approximately $12.7 million in cash, $12.0 million of which was used to pay down the Company’s line of credit.


•	On November 20, 2017, the Company paid down $4.0 million on its line of credit.


•	On December 14, 2017, the Company drew $5.0 million and used a portion of the proceeds to repay a $2.5 million working capital short-term loan (the “Bridge Loan”) from Glenborough Property Partners, LLC, an affiliate of the Advisor.

Year ended December 31, 2016:


•	On March 7, 2016, the Company drew $6.0 million and used the proceeds to invest in the Wilshire Joint Venture.


•	On April 4, 2016, the Company consummated the disposition of Bloomingdale Hills, located in Riverside, Florida, for a sales price of approximately $9.2 million in cash, $3.0 million of which was used to pay down the line of credit.


•	On June 9, 2016, the Company drew $7.5 million and used the majority of the proceeds to acquire 8 Octavia and 400 Grove.


•	On July 25, 2016, the Company drew $4.7 million and used the majority of the proceeds to acquire the Fulton Shops.


•	On September 29, 2016, the Company drew $1.0 million and used the proceeds for working capital.


•	On October 7, 2016, the Company paid down $2.0 million on its line of credit.


•	On December 22, 2016, the Company drew $7.2 million and used the proceeds to acquire 450 Hayes. Refer to Note 3. “Real Estate Investments” for additional information.


•	On December 27, 2016, the Company drew $2.0 million to be used for working capital.

Mortgage Loans Secured by Properties Under Development

In connection with the Company’s investment in the Wilshire Joint Venture and the acquisition of the Wilshire Property, the Company has consolidated borrowings of $8.5 million (the “Wilshire Loan”). The Wilshire Loan bears interest at a rate of 10.0% per annum, payable monthly, commencing on April 1, 2016. The loan was scheduled to mature on March 7, 2017, with an option for two additional six-month periods, subject to certain conditions as stated in the loan agreement. All conditions to extensions were met, and on March 7, 2017, the Company exercised the option to extend the loan until September 7, 2017. On August 29, 2017, the Company exercised the remaining option to extend the loan for an additional six months. The extension was scheduled to mature on March 7, 2018. The Company extended the loan, with the same terms, for an additional six months, effective March 7, 2018. The new maturity date is September 7, 2018. The loan is secured by, among other things, a lien on the Wilshire development project and other collateral as defined in the loan agreement.

In connection with the Company’s investment in the Gelson’s Joint Venture and the acquisition of the Gelson’s Property, the Company has consolidated borrowings of $10.7 million (the “Gelson’s Loan”). The Gelson’s Loan bears interest at a rate of 9.5% per annum, payable monthly, commencing on April 1, 2016. The loan was scheduled to mature on January 27, 2017, with an option to extend for an additional six-month period, subject to certain conditions as stated in the loan agreement. Those conditions were not met, but the Company negotiated a six month extension of the term on January 27, 2017 to mature on July 27, 2017. The Company negotiated a nine month extension of the term on July 27, 2017. The new maturity date is April 27, 2018. The loan is secured by, among other things, a lien on the Gelson’s development project and other joint venture collateral as defined in the loan agreement.

The Company is working on extending the Gelson’s Loan, and intends to complete this extension prior to the loan’s maturity date.