NOTE 10 – LOANS PAYABLE AND SECURED LINE OF CREDIT

Loans Payable

Corporate Loan

On December 19, 2019, we entered into a Credit Agreement (the “Credit Agreement”) with an affiliate of a global institutional management firm as initial lender (the “Lender”), and Trimont Real Estate Advisors, LLC, as administrative agent, pursuant to which the Lender agreed to extend credit to us in multiple draws aggregating $70.0 million, which may be increased by $25.0 million (the “Loan”), subject to satisfaction of certain conditions and the consent of the Lender. Draws under the Loan may be made during the 32-month period following the closing date of the Loan (the “Closing Date”). The Loan matures on December 19, 2024, subject to extensions until December 19, 2025 and June 19, 2026, respectively, under certain circumstances. The proceeds of the Loan may be used for investments in certain multi-family apartment buildings in the greater New York City area and certain non-residential real estate investments approved by the Lender in its reasonable discretion, as well as in connection with certain property recapitalizations and for general corporate purposes and working capital. The Loan was undrawn at closing and at December 31, 2019.

The Loan bears interest at a rate per annum equal to the sum of (i) 5.25% (the “PIK Interest Rate”) and (ii) a scheduled interest rate (the “Cash Pay Interest Rate”) based on six-month periods from the Closing Date, which Cash Pay Interest Rate, from the Closing Date until the six-month anniversary of the Closing Date, equals 4.0%, subject to increase during the extension periods. A $2.45 million commitment fee is payable 50% on the initial draw and 50% as amounts under the Loan are drawn, with any remaining balance due on the last date of the draw period, and a 1.0% exit fee is payable in respect of Loan repayments. The Loan may be prepaid at any time subject to a prepayment premium on the portion of the Loan being repaid. The Loan is subject to certain mandatory prepayment provisions, including that, subject to the terms of the mortgage loan documents applicable to the Company’s 77 Greenwich property, 90% or 100% of the net cash proceeds of residential condominium sales, depending on the circumstances, and 70% of the net cash proceeds of retail condominium sales at the Company’s 77 Greenwich property shall be used to repay the Loan. Upon final repayment of the Loan, a multiple on invested capital, or MOIC, amount equal to 130% of the initial Loan amount plus drawn incremental amounts less the sum of all interest payments, commitment fee and exit fee payments and prepayment premiums, if any, shall be due, if such amounts together with the aggregate amount of principal repaid are less than the MOIC amount. The collateral for the Loan consists of (i) 100% of the equity interests in our direct subsidiaries, to the extent such a pledge thereof is permitted by the organizational documents of such subsidiary and any financing agreements to which such subsidiary is a party, (ii) our cash and cash equivalents, excluding restricted cash and cash applied toward certain liquidity requirements under existing financing arrangements, and (iii) other non-real estate assets of ours, including intellectual property.

The Credit Agreement provides that we and our subsidiaries, as defined in the Credit Agreement, must comply with various affirmative and negative covenants including restrictions on debt, liens, business activities, equity repurchases, distributions and dividends, disposition of assets and transactions with affiliates, as well as financial covenants regarding corporate loan to value, net worth and liquidity. Under the Credit Agreement, we are permitted to repurchase up to $2.0 million of our common stock, par value $0.01 per share pursuant to board approved programs with Loan proceeds, $1.5 million with other sources of cash and otherwise subject to the consent of the required lenders. The Credit Agreement also provides for certain events of default. The Credit Agreement provides for a guaranty of the Loan obligations by the other loan party subsidiaries of ours.

Pursuant to the terms of the Credit Agreement, so long as the Loan is outstanding and the Lender is owed or holds greater than 50% of the sum of (x) the aggregate principal amount of the Loan outstanding and (y) the aggregate unused commitments, the Lender will have the right to appoint one member of our and each subsidiary’s board of directors or equivalent governing body (the “Designee”). At the election of the Lender, a board observer may be selected in lieu of a board member. The Designee may also sit on up to three committees of the board of directors or equivalent governing body of ours and each subsidiary of the Designee’s choosing from time to time. The Designee will be entitled to receive customary reimbursement of expenses incurred in connection with his or her service as a member of the board and/or any committee thereof but will not, except in the case of an independent director, receive compensation for such service.

237 11th Loans

In May 2018, in connection with the acquisition of 237 11th, wholly owned subsidiaries of ours entered into two-year interest-only financings with an aggregate principal amount of $67.8 million, comprised of a $52.4 million mortgage loan with Canadian Imperial Bank of Commerce and a $15.4 million mezzanine loan with RCG LV Debt VI REIT, LLC (the “237 11th Loans”), bearing interest at a blended average rate of 3.72% over the 30-day LIBOR, each with a one year extension option upon satisfaction of certain conditions. The 237 11th Loans are non-recourse to us except for environmental indemnity agreements, certain non-recourse carve-out and carry guaranties covering among other things interest and operating expenses, and in the case of the mortgage loan, a guaranty of 25% of the principal amount, decreasing to 10% of the principal balance upon the debt yield ratio becoming equal to or greater than 7.0%. The effective interest rate at December 31, 2019 and December 31, 2018 was approximately 5.48% and 6.22%, respectively. The 237 11th Loans are prepayable at any time in whole, provided that prepayment of the mortgage loan must be accompanied by prepayment of the mezzanine loan, and under certain circumstances in part, upon payment, in the case of the mortgage loan, of a 0.50% deferred commitment fee (unless the loan is refinanced with the mortgage lender in which case no such fee is payable), and, in the case of the mezzanine loan, with no fee. The mezzanine loan was repaid in full on February 20, 2020.

The collateral for the 237 11th mortgage loan is the fee interest of our subsidiary in 237 11th and the collateral for the 237 11th mezzanine loan is our equity interests in the mortgage loan borrower. The 237 11th Loans require us to comply with various customary affirmative and negative covenants and provide for certain events of default, the occurrence of which would permit the lenders to declare the 237 11th Loans due and payable, among other remedies. As of December 31, 2019, we were in compliance with all covenants of the 237 11th Loans.

77 Greenwich Construction Facility

On December 22, 2017, a wholly-owned subsidiary of ours closed on a $189.5 million construction facility for 77 Greenwich (the “77 Greenwich Construction Facility”) with Massachusetts Mutual Life Insurance Company as lender and administrative agent (the “77 Greenwich Lender”). We draw down proceeds as costs related to the construction are incurred for 77 Greenwich for the construction of the new mixed-use building. The plans call for the development of 90 luxury residential condominium apartments, 7,500 square feet of street level retail space, a 476-seat elementary school serving New York City District 2, including the adaptive reuse of the landmarked Robert and Anne Dickey House, and construction of a new handicapped accessible subway entrance on Trinity Place. There was an outstanding balance of approximately $104.9 million and $51.5 million on the 77 Greenwich Construction Facility at December 31, 2019 and 2018, respectively, of which at December 31, 2019, $7.0 million is collateralizing letters of credit securing our obligation with the New York City MTA to upgrade the subway entrance.

The 77 Greenwich Construction Facility has a four-year term with one extension option for an additional year under certain circumstances. The collateral for the 77 Greenwich Construction Facility is the borrower’s fee interest in 77 Greenwich, which is the subject of a mortgage in favor of the 77 Greenwich Lender. The 77 Greenwich Construction Facility bears interest on amounts drawn at a rate per annum equal to the greater of (i) LIBOR plus 8.25% and (ii) 9.25%. The effective interest rate at December 31, 2019 and December 31, 2018 was 10.01% and 10.60%, respectively. The 77 Greenwich Construction Facility provides for certain interest payments to be advanced as an interest holdback and to the extent that the cash flow from 77 Greenwich is insufficient to pay the interest payments then due and payable, funds in the interest holdback will be applied by the 77 Greenwich Lender as a disbursement to the borrower to make the monthly interest payments on the 77 Greenwich Construction Facility, subject to certain conditions. The 77 Greenwich Construction Facility may be prepaid in part in certain circumstances such as in the event of the sale of residential and retail condominium units. Pursuant to the 77 Greenwich Construction Facility, we are required to achieve completion of the construction work and the improvements for the project on or before a completion date that is forty-two (42) months following the closing of the 77 Greenwich Construction Facility, subject to certain exceptions.

In connection with the 77 Greenwich Construction Facility, we executed certain guaranties and environmental indemnities, including a recourse guaranty under which we are required to satisfy certain net worth and liquidity requirements including the Company maintaining liquidity of at least $15.0 million, consisting of unrestricted cash and, for up to 50% of the requirement, qualified lines of credit, and additional customary affirmative and negative covenants for loans of this type and our agreements with the SCA. In addition, the liquidity requirement will decrease to $10.0 million upon transfer of the school condominium to the SCA, which is anticipated to occur during the spring of 2020. We also entered into certain completion and other guarantees with the 77 Greenwich Lender and the SCA in connection with the 77 Greenwich Construction Facility. As of December 31, 2019, we were in compliance with all covenants of the 77 Greenwich Construction Facility.

On December 22, 2017, we entered into an interest rate cap agreement as required under the 77 Greenwich Construction Facility. The interest rate cap agreement provides the right to receive cash if the reference interest rate rises above a contractual rate. We paid a premium of approximately $393,000 for the 2.5% interest rate cap on the 30‑day LIBOR rate on a notional amount of $189.5 million.The fair value of the interest rate cap as of December 31, 2019 and 2018 was approximately zero and $497,000, respectively, and is recorded in prepaid expenses and other assets, net in our consolidated balance sheets. We did not designate this interest rate cap as a hedge and are recognizing the change in estimated fair value in interest expense. During the year ended December 31, 2019, the approximate $497,000 change in value of this instrument had been recorded as interest expense and subsequently capitalized to real estate, net.

West Palm Beach, Florida Loan

On May 11, 2016, our subsidiary that owns our West Palm Beach, Florida property commonly known as The Shoppes at Forest Hill, entered into a loan agreement with Citizens Bank National Association, as lender (the “WPB Lender”), pursuant to which the WPB Lender agreed to provide a loan in the amount of up to $12.6 million, subject to the terms and conditions as set forth in the loan agreement (the “WPB Loan”). The WPB Loan required interest-only payments and bore interest at 30-day LIBOR plus 230 basis points. The balance of the WPB Loan of $10.6 million was repaid when we sold the West Palm Beach, Florida property in November 2019.

Secured Line of Credit

Our $9.1 million line of credit with Sterling National Bank, which is secured by the Paramus, New Jersey property, was increased to $11.0 million in September 2017, and the maturity date was extended to February 22, 2019. The line of credit was further increased to $12.75 million in December 2018 and the maturity date was extended to March 21, 2021. The line of credit, which prior to December 2018 bore interest, for drawn amounts only, at 100 basis points over Prime, as defined in the underlying credit agreement, now bears interest at 200 basis points over the 30‑day LIBOR, and is pre-payable at any time without penalty. A portion of the line of credit is subject to an unused fee. This secured line of credit had an outstanding balance of $5.3 million and an effective interest rate of 3.76% as of December 31, 2019.

Principal Maturities

Combined aggregate principal maturities of our loans, secured line of credit and note payable as of December 31, 2019, excluding extension options, were as follows (dollars in thousands):


Year of Maturity	Principal
2020 (1)	$	73,057
2021		—
2022		104,880
2023		670
2024		—
		178,607
Less: deferred finance costs, net		(2,966)
Total loans, secured line of credit, and note payable, net	$	175,641

(1) Approximately $15.4 million was paid off in February 2020 (see Note 15 - Subsequent Events.)

Interest

Consolidated interest (income) expense, net includes the following (dollars in thousands):


	Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,
	2019		2018		2017

Interest expense	$	13,513	$	6,848	$	2,488
Interest capitalized		(13,513)		(6,848)		(2,488)
Interest income		(67)		(212)		(215)
Interest income, net	$	(67)	$	(212)	$	(215)