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.
|