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Indebtedness
12 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
Indebtedness

10.

Indebtedness

The following table provides details of the Company’s indebtedness as of December 31, 2018 and 2017, excluding indebtedness related to assets held for sale (in thousands):

 

 

 

 

As of December 31,

 

 

 

 

2018

 

 

2017

 

Mortgages payable and other notes

   payable:

 

 

 

 

 

 

 

 

 

Fixed rate debt

 

 

$

358,843

 

 

$

368,873

 

Variable rate debt (1) (2)

 

 

 

174,046

 

 

 

174,058

 

Mortgages and other notes

   payable (3)

 

 

 

532,889

 

 

 

542,931

 

Premium (discount), net (4)

 

 

 

184

 

 

 

225

 

Loan costs, net

 

 

 

(2,429)

 

 

 

(3,658)

 

Total mortgages and other notes

   payable, net

 

 

 

530,644

 

 

 

539,498

 

Credit facilities:

 

 

 

 

 

 

 

 

 

Revolving Credit Facility (1) (2) (5)

 

 

 

 

 

 

 

First Term Loan Facility (1)

 

 

 

151,616

 

 

 

99,435

 

Second Term Loan Facility (1) (2)

 

 

 

275,000

 

 

 

275,000

 

Loan costs, net related to Term Loan

   Facilities

 

 

 

(1,003)

 

 

 

(1,692)

 

Total credit facilities, net

 

 

 

425,613

 

 

 

372,743

 

Total indebtedness, net

 

 

$

956,257

 

 

$

912,241

 

 

FOOTNOTES:

 

(1)

As of December 31, 2018 and 2017, the Company had entered into interest rate swaps with notional amounts of approximately $151.6 million and $99.4 million, respectively, which were settling on a monthly basis.  Refer to Note 12. “Derivative Financial Instruments” for additional information.  In February 2019, the Company extended the term of its First Term Loan to February 2020, refer to Note 18. “Subsequent Events” for additional information.  

 

 

(2)

As of December 31, 2018 and 2017, the Company had entered into interest rate caps with notional amounts of approximately $330.0 million and $330.0 million, respectively.  In addition, as of December 31, 2018 the Company had entered into interest rate caps with forward effective dates with notional amounts of approximately $151.6 million in order to hedge the Company’s exposure to interest rate changes in future periods. Refer to Note 12. “Derivative Financial Instruments” for additional information.

 

 

(3)

As of December 31, 2018 and 2017, the Company’s mortgages and other notes payable are collateralized by 37 and 38 properties, respectively, with total carrying value of approximately $0.8 billion and $0.8 billion, respectively.

 

 

(4)

Premium (discount), net is reflective of the Company recording mortgage note payables assumed at fair value on the respective acquisition dates.  

 

(5)

As of December 31, 2018 and 2017, the Company had undrawn availability under the Revolving Credit Facility of approximately $14.7 million and $28.4 million, respectively, based on the value of the properties in the unencumbered pool of assets supporting the loan, which includes certain assets held for sale.

10.

Indebtedness (continued)

 

The following is a schedule of future principal payments and maturity for the Company’s total indebtedness for the next five years and thereafter, in the aggregate, as of December 31, 2018 (in thousands):

 

2019

$

238,156

 

2020

 

404,822

 

2021

 

11,341

 

2022

 

282,496

 

2023

 

22,874

 

Thereafter

 

 

 

$

959,689

 

 

10.

Indebtedness (continued)

The Company has $238.2 million of indebtedness maturing in 2019, of which $151.6 million relates to the First Term Loan, which was extended through February 2020. In order to satisfy these maturing obligations, the Company determined it needs to access the debt markets to obtain capital.  As such, the Company is actively negotiating with its lenders on a long-term refinancing of the Credit Facilities.  In addition, the Company intends to execute on its strategic alternatives, as described in Note 1 “Organization,” including both the MOB Sale and the IRF Sale, which will further generate available liquidity.  In the event these sources of capital are not sufficiently available, the Company will need to identify alternative sources of capital.

The following table details the Company’s mortgages and other notes payable as of December 31, 2018 and 2017, excluding assets held for sale (in thousands):

 

 

 

Interest

Rate at

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

Maturity

 

December 31,

Property and Loan Type

 

2018 (1)

 

Payment Terms

 

Date (2)

 

2018

 

2017

Primrose II Communities;

   Mortgage Loan

 

3.81%

per annum

 

Monthly principal and interest payments based on a 30-year amortization schedule

 

6/1/20

 

$

21,047

 

$

21,541

Pacific Northwest Communities;

   Mortgage Loans (3)

 

4.30%

per annum

 

Monthly principal and interest payments based on a 25-year amortization schedule

 

1/5/22

 

 

202,978

 

 

208,990

Capital Health Communities;

   Mortgage Loans (4)

 

(4)

 

Monthly principal and interest payments based on a 25-year amortization schedule

 

1/5/22

 

 

60,902

 

 

62,767

Primrose I Communities;  

   Mortgage Loan (5)

 

4.11%

per annum

 

Monthly principal and interest payments based on a 30-year amortization schedule

 

9/1/22

 

 

48,753

 

 

49,899

Watercrest at Mansfield;

   Mortgage Loan (6)

 

4.68%

per annum

 

Monthly principal and interest payments based on a total payment of $143,330

 

6/1/23

 

 

25,163

 

 

25,676

 

 

 

 

Total fixed rate debt

 

 

 

 

358,843

 

 

368,873

Shores of Lake Phalen;

   Secured Term Loan

 

30-day LIBOR

plus 2.42%

per annum

 

Monthly interest only payments through June 2019

 

6/30/19

 

 

16,859

 

 

HarborChase of Shorewood;

   Construction Loan

 

 

30-day LIBOR

plus 3%

per annum

 

Monthly interest only payments through June 2017; principal and interest payments thereafter based on a 25-year amortization schedule

 

7/5/19

 

 

 

 

14,706

Wellmore of Lexington;

   Construction Loan

 

 

30-day LIBOR

plus 2.5%

per annum

 

Monthly interest only payments through September 2019

 

9/13/19

 

 

35,421

 

 

33,423

Watercrest at Katy

   Construction Loan

 

 

30-day LIBOR

plus 2.75% per annum

 

Monthly principal and interest payments based on a 30-year amortization schedule

 

12/27/19

 

 

21,552

 

 

26,300

Wellmore of Tega Cay;

   Construction Loan (7)

 

30-day LIBOR  

plus 2.65%

per annum

 

Monthly interest only payments for the first 12 months; principal and interest payments thereafter based on a 30-year amortization schedule

 

3/1/20

 

 

27,715

 

 

28,000

Palmilla Senior Living;

   Mortgage Loan (7)

 

30-day LIBOR

plus 2.0%

per annum

 

Monthly interest only payments through April 2017; principal and interest payments thereafter based on a 30-year amortization schedule

 

3/22/20

 

 

26,478

 

 

26,799

Waterstone on Augusta;

   Construction Loan

 

 

30-day LIBOR

plus 3.0%

per annum

 

Monthly interest only payments through September 2018; principal and interest payments thereafter based on a 30-year amortization schedule

 

9/1/20

 

 

18,830

 

 

18,302

10.

Indebtedness (continued)

 

 

 

Interest

Rate at

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

Maturity

 

December 31,

Property and Loan Type

 

2018 (1)

 

Payment Terms

 

Date (2)

 

2018

 

2017

Fieldstone at Pear Orchard;

   Construction Loan

 

 

30-day LIBOR

plus 2.9%

per annum

 

Monthly interest only payments through September 2018; principal payments thereafter based on a 25-year amortization schedule

 

10/15/20

 

$

10,791

 

$

10,900

Dogwood Forest of

   Grayson; Construction

   Loan

 

 

30-day LIBOR

plus 3.0%

per annum

 

Monthly interest only payments through December 2018; principal payments thereafter based on a 30-year amortization schedule

 

12/1/20

 

 

16,400

 

 

15,628

 

 

 

 

Total variable rate debt

 

 

 

 

174,046

 

 

174,058

 

 

 

 

Total mortgages and other notes payable, net

 

 

$

532,889

 

$

542,931

 

FOOTNOTES:

 

(1)

The 30-day and 90-day LIBOR were approximately 2.50% and 2.81%, respectively, as of December 31, 2018 and approximately 1.56% and 1.70%, respectively, as of December 31, 2017.

 

(2)

Represents the initial maturity date (or, as applicable, the maturity date as extended).  Certain of the Company’s mortgages and other notes payable agreements include extension options held by the Company under which the maturity dates may be extended beyond the date presented, subject to certain lender conditions and/or related fees.

 

(3)

In August 2017, the Company extended the maturity date on the existing loan of approximately $201.9 million from December 2018 to January 2022.  In addition, the Company received approximately $9.5 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022. The supplemental loan further accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity.  The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

 

(4)

In August 2017, the Company extended the maturity date on the existing loan of approximately $35.4 million from January 2020 to January 2022.  In addition, the Company received approximately $28.0 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022.  The existing loan accrues interest at a fixed rate equal to 4.25% per annum.  The supplemental loan accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity. The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

10.

Indebtedness (continued)

 

(5)

If prepaid prior to March 1, 2022, the Primrose I Communities Mortgage Loan is subject to a prepayment penalty in an amount equal to the greater of (i) 1% of the principal being repaid, or (ii) an amount calculated on the principal being repaid, multiplied by the difference between the Primrose I Communities Mortgage Loan interest rate, and a calculated yield rate tied to the rates on applicable U.S. Treasuries. If prepayment is made between March 1, 2022, and May 31, 2022, the prepayment penalty will be 1% of the outstanding principal balance of the Primrose I Communities Mortgage Loan. No prepayment fee is required if the Primrose I Communities Mortgage Loan is prepaid between June 1, 2022 and maturity.  Partial prepayment of a loan is not permitted.  The loan is transferable upon sale of the assets subject to lender approval.

 

 

(6)

The balance for this loan excludes a remaining premium of $0.2 million related to the mortgage note payable assumed being recorded at fair value on the acquisition date.

 

 

(7)

The Company entered into an interest rate cap with a remaining notional amount of $117.0 million, of which a portion has been designated to hedge these loans; see Note 12. “Derivative Financial Instruments” for additional information.

 

The following table details the Company’s mortgages and other notes payable included within the liabilities associated with assets held for sale as of December 31, 2018 and 2017 (in thousands):

 

 

 

Interest 

Rate at

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

Maturity

 

December 31,

Property and Loan Type

 

2018 (1)

 

Payment Terms

 

Date (2)

 

2018

 

2017

Novi Orthopaedic Center;

   Mortgage Loan

 

3.61%  

per annum

 

Monthly interest only payments through June 2018; principal and interest payments thereafter based on a 25-year amortization

schedule

 

6/15/20

 

$

19,581

 

$

19,825

ProMed Medical Building I;

   Mortgage Loan

 

 

3.64%  

per annum (3)

 

Monthly principal and interest payments based upon a 30-year amortization schedule

 

1/15/22

 

 

6,473

 

 

6,673

540 New Waverly Place;

   Mortgage Loan

 

 

4.08%  

per annum

 

Monthly principal and interest payments based upon a 25-year amortization schedule

 

5/31/28

 

 

6,452

 

 

6,665

LaPorte Cancer Center;

   Mortgage Loan

 

4.25%

per annum

(through 2020)

 

Monthly principal and interest payments based on a 25-year amortization schedule

 

6/14/28

 

 

7,335

 

 

7,571

 

 

 

 

Total fixed rate debt

 

 

 

 

39,841

 

 

40,734

Calvert Medical Office

   Properties; Mortgage Loan

 

30-day LIBOR

plus 2.50%

per annum

 

 

Monthly interest only payments for the first 18 months; principal and interest payments thereafter based on a 30-year amortization schedule

 

8/29/18

 

 

 

 

25,121

Welbrook Senior Living

   Grand Junction; Secured

   Term Loan

 

30-day LIBOR

plus 2.42%

per annum

 

Monthly interest only payments through June 2019

 

6/30/19

 

 

8,141

 

 

Medical Portfolio II Properties;

   Mortgage Loan (4)

 

90-day LIBOR

plus 2.35% at 0.25%

LIBOR  floor

 

Monthly principal and interest payments based on a 25-year amortization schedule

 

7/14/19

 

 

77,074

 

 

79,295

Northwest Medical Park;

   Mortgage Loan

 

30-day LIBOR plus 2.30%

per annum

 

Monthly principal and interest payments based upon a 25-year amortization schedule

 

10/31/19

 

 

6,628

 

 

6,765

Lee Hughes Medical Building;

   Mortgage Loan

 

 

30-day LIBOR

plus 1.85%

per annum

 

Monthly principal and interest payments based on a 30-year amortization schedule

 

3/5/20

 

 

17,043

 

 

17,572

10.

Indebtedness (continued)

 

 

 

Interest

Rate at

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

Maturity

 

December 31,

Property and Loan Type

 

2018 (1)

 

Payment Terms

 

Date(2)

 

2018

 

2017

Triangle Orthopaedic;

   Mortgage Loan (5)

 

30-day LIBOR

plus 2.25%

per annum

 

Interest only payments through March 2017; principal payments thereafter based on a 30-year amortization schedule

 

4/11/21

 

$

36,962

 

$

37,475

Cobalt Rehabilitation

   Hospital Surprise; Mortgage

   Loan

 

30-day LIBOR

plus 2.6%

per annum at

0.4% LIBOR

floor

 

Monthly interest only payments through May 2017; principal payments thereafter based on a 25-year amortization schedule

 

5/19/22

 

 

14,829

 

 

15,167

Knoxville Medical Office

   Properties and Claremont

   Medical Office; Mortgage

   Loan (6)

 

30-day LIBOR

plus 2.45%

per annum

 

Monthly principal and interest payments based on a 30-year amortization schedule

 

5/24/22

 

 

51,575

 

 

57,350

Cobalt Rehabilitation Hospital

   New Orleans; Mortgage Loan

 

30-day LIBOR

plus 2.45%

per annum at

0.55% LIBOR

floor

 

Monthly interest only payments through October 2017; principal payments thereafter based on a 25-year amortization schedule

 

10/19/22

 

 

19,055

 

 

19,421

MHOSH;Mortgage Loan (7)

 

30-day LIBOR

plus 2.20%

per annum

 

Interest only payments through June 2020; principal payments thereafter based on a 30-year amortization schedule

 

5/24/23

 

 

57,630

 

 

47,072

Southeast Medical Office

   Properties; Mortgage Loan (8)

 

30-day LIBOR

plus 2.0%

per annum

 

Interest only payments through January 2021; principal payments thereafter based on a 30-year amortization schedule

 

6/14/23

 

 

175,000

 

 

149,864

 

 

 

 

Total variable rate debt

 

 

 

 

463,937

 

 

455,102

 

 

 

 

Total indebtedness associated with assets held for sale

 

 

$

503,778

 

$

495,836

 

FOOTNOTES:

 

(1)

The 30-day and 90-day LIBOR were approximately 2.50% and 2.81%, respectively, as of December 31, 2018 and approximately 1.56% and 1.70%, respectively, as of December 31, 2017.

 

 

(2)

Represents the initial maturity date (or, as applicable, the maturity date as extended).  Certain of the Company’s mortgages and other notes payable agreements include extension options held by the Company under which the maturity dates may be extended beyond the date presented, subject to certain lender conditions and/or related fees.

 

 

(3)

Beginning January 2020, the interest rate transitions to variable rate based on 30-day LIBOR plus 2.20% per annum.

 

 

(4)

The Company entered into an interest rate swap with a remaining notional amount of $79.2 million; see Note 12. “Derivative Financial Instruments” for additional information.

 

 

(5)

The Company entered into an interest rate cap with a remaining notional amount of $117.0 million, of which a portion has been designated to hedge this loan; see Note 12. “Derivative Financial Instruments” for additional information.

 

 

(6)

In May 2017, the Company refinanced the loans related to the Claremont Medical Office property and the Knoxville Medical Office Properties of approximately $12.4 million and $37.2 million, respectively, into a combined loan. The original loans were scheduled to mature January 2018 and July 2018, respectively. The Company entered into an interest rate swap with a remaining notional amount of $51.6 million; see Note 12. “Derivative Financial Instruments” for additional information.

10.

Indebtedness (continued)

 

(7)

The Company entered into an interest rate cap with a remaining notional amount of $57.6 million; see Note 12. “Derivative Financial Instruments” for additional information.

 

 

(8)

The Company entered into an interest rate cap with a remaining notional amount of $125.1 million; see Note 12. “Derivative Financial Instruments” for additional information.

 

The following table provides the details of the fair market value and carrying value of the Company’s indebtedness as of December 31, 2018 and 2017 (in millions):

 

 

December 31, 2018

 

December 31, 2017

 

Fair

Value

 

Carrying

Value

 

Fair

Value

 

Carrying

Value

Mortgages and other notes payable, net

$

528.7

 

$

530.6

 

$

543.8

 

$

539.5

Credit facilities

$

426.6

 

$

425.6

 

$

374.4

 

$

372.7

Indebtedness associated with assets held for sale

$

751.8

 

$

748.3

 

$

748.7

 

$

750.1

 

These fair market values are based on current rates and spreads the Company would expect to obtain for similar borrowings.  Since this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to the Company’s mortgage notes payable is categorized as Level 3 on the three-level valuation hierarchy.  The estimated fair value of accounts payable and accrued liabilities approximates the carrying value as of December 31, 2018 and 2017 because of the relatively short maturities of the obligations.

 

In December 2014, the Company entered into a $230 million Revolving Credit Facility and a $175 million First Term Loan Facility.  Pursuant to the associated credit agreement, the Company has the ability to increase the borrowing capacity to $700 million under the accordion feature of the Credit Facilities.  The Company has exercised this accordion feature and increased our borrowing capacity to $445 million.  In December 2018, the Company exercised its second and final 12-month extension option on the Revolving Credit Facility, resulting in the term ending December 2019.  The First Term Loan Facility has an initial term through February 2019 plus one 12-month extension option through which the term can be extended through February 2020, which the Company exercised in February 2019, as described further in Note 18 – “Subsequent Events.”  The Credit Facilities bear interest based on 30-day LIBOR and a spread that varies with the Company’s leverage ratio.

 

In November 2015, the Company entered into a $250 million Second Term Loan Facility with an initial term through November 2020 and the ability to increase the Company’s borrowing capacity to $350 million under its accordion feature.  The Second Term Loan bears interest based on the 30-day LIBOR and a spread that varies with the Company’s leverage ratio. To date, the Company has exercised this accordion feature and increased the borrowing capacity to $275 million.

 

All of the Company’s mortgage and construction loans contain customary financial covenants and ratios; including (but not limited to) the following: debt service coverage ratio, minimum occupancy levels, limitations on incurrence of additional indebtedness, etc.  

The Credit Facilities contain affirmative, negative, and financial covenants which are customary for loans of this type, including (but not limited to): (i) maximum leverage, (ii) minimum fixed charge coverage ratio, (iii) minimum consolidated net worth, (iv) restrictions on payments of cash distributions except if required by REIT requirements, (v) maximum secured indebtedness, (vi) maximum secured recourse debt, (vii) minimum unsecured interest coverage and (viii) limitations on certain types of investments and with respect to the pool of properties supporting borrowings under the Credit Facilities, minimum debt service coverage ratio, minimum weighted average occupancy, and remaining lease terms, as well as property type, MSA, operator, and asset value concentration limits.  The limitations on distributions include a limitation on the extent of allowable distributions, which are not to exceed the greater of 95% of adjusted FFO (as defined per the Credit Facilities) and the minimum amount of distributions required to maintain the Company’s REIT status.  As of December 31, 2018, the Company was in compliance with all financial covenants.