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Loans Payable and Secured Line of Credit
 9 Months Ended
Sep. 30, 2021
Loans Payable and Secured Line of Credit  
Loans Payable and Secured Line of Credit

Note 5 – Loans Payable and Secured Line of Credit

Corporate Credit Facility

In December 2019, we entered into a multiple draw credit agreement aggregating $70.0 million (the “Corporate Credit Facility”), which provided for an increase by $25.0 million subject to satisfaction of certain conditions and the consent of the lender (the “CCF Lender”).  Draws under the Corporate Credit Facility were originally permitted to be made during the 32-month period following the closing date of the Corporate Credit Facility (the “Closing Date”). The Corporate Credit Facility matures on December 19, 2024, subject to extensions until December 19, 2025 and June 19, 2026, respectively, under certain circumstances. The Corporate Credit Facility provided for the proceeds of the Corporate Credit Facility to 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 CCF Lender in its reasonable discretion, as well as in connection with certain property recapitalizations and in specified amounts for general corporate purposes and working capital.  See Note 13 – Subsequent Events for details on the Corporate Credit Facility amendment.

The Corporate Credit Facility had an outstanding balance of $35.75 million at both September 30, 2021 and December 31, 2020, excluding deferred finance fees of $3.2 million and $3.9 million, respectively.  Accrued interest, which is included in accounts payable and accrued expenses, totaled approximately $3.0 million and $1.5 million at September 30, 2021 and December 31, 2020, respectively.  

The Corporate Credit Facility bears interest at a rate per annum equal to the sum of (i) 5.25% and (ii) a scheduled interest rate of 4% (the “Cash Pay Interest Rate”) which increases by 0.125% every six-month period from the Closing Date, subject to increase during the extension periods. The effective interest rate at September 30, 2021 and December 31, 2020 was 9.63%.  A $2.45 million commitment fee was payable 50% on the initial draw and 50% as amounts under the Corporate Credit Facility 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 Corporate Credit Facility repayments. As of September 30, 2021, we had paid $1.85 million of the commitment fee.  The Corporate Credit Facility may be prepaid at any time subject to a prepayment premium on the portion of the Corporate Credit Facility being repaid. The Corporate Credit Facility 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 Corporate Credit Facility. Upon final repayment of the Corporate Credit Facility, a multiple on invested capital, or MOIC, amount equal to 30% of the Corporate Credit Facility 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 are less than the MOIC amount. The collateral for the Corporate Credit Facility consists of (i) 100% of the equity interests in our direct subsidiaries, to the extent such a pledge 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 Corporate Credit Facility provides that we and our subsidiaries 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 Corporate Credit Facility, we are permitted to repurchase up to $2.0 million of our common stock pursuant to board approved programs with Corporate Credit Facility proceeds, $1.5 million with other sources of cash and otherwise subject to the consent of the required lenders. The Corporate Credit Facility also provides for certain events of default, including cross-defaults to our other loans, and for a guaranty of the Corporate Credit Facility obligations by our loan party subsidiaries.

Pursuant to the terms of the Corporate Credit Facility, so long as the Corporate Credit Facility is outstanding and the CCF Lender is owed or holds greater than 50% of the sum of (x) the aggregate principal amount of the balance outstanding and (y) the aggregate unused commitments, the CCF Lender will have the right to appoint one member to our and each of our subsidiary’s board of directors or equivalent governing body (the “Designee”). At the election of the CCF 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.

In connection with the December 2020 transaction noted below, the Company entered into an amendment to the Corporate Credit Facility, pursuant to which, among other things, (i) we were permitted to enter into the Mezzanine Loan Agreement (as defined below), the amendment to the 77 Greenwich Construction Facility (as defined below) and related documents, (ii) the commitment made by the CCF Lender under the Corporate Credit Facility was reduced by $7.5 million, and (iii) the MOIC amount was amended to combine the Corporate Credit Facility and the Mezzanine Loan. In addition, the exercise price of the warrants issued in connection with the Corporate Credit Facility was amended from $6.50 per share to $4.50 per share (the “Warrant Agreement Amendment”) (see Note 10 – Stockholders Equity – Warrants for further discussion regarding the warrants).  See Note 13 – Subsequent Events for details on the Corporate Credit Facility amendment.

As of September 30, 2021, we were in compliance with all covenants of the Corporate Credit Facility, except for a cross-default due to the Senior Loan Defaults and Mezzanine Loan Defaults described below (the “CCF Defaults”).  Effective June 30, 2021 and October 1, 2021, the Company entered into forbearance agreements (together the “CCF Forbearance Agreement”), pursuant to which the CCF Lender agreed to forbear from exercising its rights and remedies with respect to the CCF Defaults, subject to certain conditions.   On October 22, 2021, in connection with the refinancing of the 77 Greenwich Construction Facility, the Company entered into an amendment to the Corporate Credit Facility.  As a result of the refinancing transaction, the CCF Defaults no longer exist.  See Note 13 – Subsequent Events for further information.

Loans Payable

237 11th Loans

In May 2018, in connection with the acquisition of 237 11th, we entered into two-year interest-only financings with an aggregate principal amount of $67.8 million, comprised of a $52.4 million mortgage loan and a $15.4 million mezzanine loan 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 mezzanine loan was repaid in full in February 2020.  In June 2020, the maturity of the mortgage loan was extended to June 2021 and was amended to include a delayed draw facility of $4.25 million.  In conjunction with the amendment, a LIBOR floor of 50 basis points was put in place, the spread was increased by 25 basis points to 2.25% and the exit fee was increased by 50 basis points to 1.0%.  In June 2021, we repaid the mortgage loan’s balance of $56.4 million in full and paid an exit fee of $567,000.

In June 2021, in connection with the refinancing of the mortgage loan, we entered into a $50.0 million senior loan (the “237 11th Senior Loan”) and a $10 million mezzanine loan (the “237 11th Mezz Loan” and together with the 237 11th Senior Loan, the “237 11th Loans”), provided by Natixis, bearing interest at a blended rate of 3.05% per annum. The 237 11th Loans have an initial term of two years and have three one-year extension options. The first extension option is not subject to satisfaction of any financial tests. $1.5 million of the 237 11th Senior Loan proceeds have been held back by Natixis to cover debt service and operating expense shortfalls, as well as leasing related costs.  There is an outstanding balance of $48.7 million from the 237 11th Senior Loan and $10.0 million from the 237 11th Mezz Loan at September 30, 2021.

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 lender to declare the 237 11th Loans due and payable, among other remedies. As of September 30, 2021, we were in compliance with all covenants of the 237 11th Loans.

In June 2021, we entered into an interest rate cap agreement as required under the New 237 11th Loans. The interest rate cap agreement provided the right to receive cash if the reference interest rate rose above a contractual rate. We paid a premium of approximately $32,500 for the 2.5% interest rate cap on the 30-day LIBOR rate on a notional amount of $60.0 million. The interest rate cap matures in July 2023.  We did not designate this interest rate cap as a hedge and are recognizing the change in estimated fair value in interest expense.

77 Greenwich Construction Facility

In December 2017, we closed on a $189.5 million construction facility for 77 Greenwich (the “77 Greenwich Construction Facility”).  We drew down proceeds as costs related to the construction of the new mixed-use building were incurred. There was an outstanding balance of approximately $159.4 million and $139.0 million on the 77 Greenwich Construction

Facility at September 30, 2021 and December 31, 2020, respectively.  The 77 Greenwich Construction Facility had a four-year term ending January 2022. The collateral for the 77 Greenwich Construction Facility was the borrower’s fee interest in 77 Greenwich, which was the subject of a mortgage in favor of the 77 Greenwich Lender, as well as related collateral and a pledge of equity in the borrower. The 77 Greenwich Construction Facility bore 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 September 30, 2021 and December 31, 2020 was 9.25%, respectively. The 77 Greenwich Construction Facility provided for certain loan proceeds to be advanced as an interest holdback and to the extent that the cash flow from 77 Greenwich was insufficient to pay the interest payments then due and payable, funds in the interest holdback would be applied by the 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 was prepayable in part in certain circumstances such as in the event of the sale of residential and retail condominium units. In December 2017, we entered into an interest rate cap agreement as required under the 77 Greenwich Construction Facility. The interest rate cap agreement provided the right to receive cash if the reference interest rate rose 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 interest rate cap matured in December 2020.  We did not designate this interest rate cap as a hedge and recognized the change in estimated fair value in interest expense.  In December 2020, we entered into an amendment to the 77 Greenwich Construction Facility, pursuant to which, among other things, the sales pace covenants were amended and extended to provide for a reduction in the gross value of condominium sales at 77 Greenwich and to afford more favorable cure rights than previously existed if a required sales threshold was not satisfied.  Additionally, the outside date by which we were required to have substantially completed construction of all improvements to 77 Greenwich was extended to November 30, 2021 and the liquidity requirements would be reduced based on construction progress.

In early April 2020, New York State required all non-essential construction projects be shut down due to the impact of the COVID-19 pandemic. As a result, the construction of 77 Greenwich was temporarily suspended.  Construction recommenced mid-April, initially on a modified basis, as certain work was deemed "essential" construction.  Since June 2020, a full crew has been on site and operating in accordance with applicable guidelines in response to the COVID-19 outbreak. Future delays in construction may result in a delay in our ability to complete the construction project on its original timeline and our ability to sell condominium units.  We are currently receiving our temporary certificates of occupancy (“TCOs”) in stages which we anticipate will continue through 2022, with TCOs having been received in March 2021 and June 2021, respectively, which covers floors 11-26 and 28, the lobby, mechanical rooms and portions of the cellar.  Floors 27, 29-34 and 36-39 have passed inspection and a TCO for these floors is currently pending with the Department of Buildings.

Upon the granting of our first TCO in March 2021 and 16 units under contract, our offering plan was declared effective.  We submitted our request to create separate tax lots to the department of finance and the tax lots were created. We closed on the sale of one residential condominium unit during the third quarter of 2021 and expect additional closings on the residential condominium units for which we have TCOs to continue throughout the fourth quarter of 2021 and beyond.  In connection with the December 2020 amendment, we paid down $8.0 million of the 77 Greenwich Construction Facility and funded certain reserves to the lender, a portion of which was funded by a release of certain cash collateral and the balance of which was funded by the Mezzanine loan (see below).

As of September 30, 2021, we were in compliance with all covenants, except for (i) an $8.0 million liquidity requirement, (ii) the required deposits to an interest reserve, (iii) the achievement of certain construction hurdles, (iv) certain sales pace covenant tests and (v) delivery of an amendment to our Transit Improvement Agreement with the New York City Transit Authority in connection with the construction of certain improvements to a subway entrance adjacent to 77 Greenwich (collectively, the “Senior Loan Defaults”).  Effective June 30, 2021 and October 1, 2021, the Company entered into forbearance agreements (together, the “77 Greenwich Forbearance Agreement”), pursuant to which the 77 Greenwich Lender agreed to forbear from exercising its rights and remedies with respect to the Senior Loan Defaults, subject to certain conditions.

As a result of the refinancing transaction in October 2021, the 77 Greenwich Construction Facility was repaid in full and the Senior Loan Defaults were deemed to have been waived.  See Note 13 – Subsequent Events for further information.

Mezzanine Loan

In December 2020, we entered into a mezzanine loan agreement with an affiliate of the CCF Lender (the “Mezzanine Loan Agreement”, and the loan thereunder, the “Mezzanine Loan”). The Mezzanine Loan was originally for the amount of $7.5

million and has a term of three years with two one-year extension options, exercisable under certain circumstances. The collateral for the Mezzanine Loan was the borrower’s equity interest in its direct, wholly-owned subsidiary, which owns 100% of the equity interests in the borrower under the 77 Greenwich Construction Facility.  The blended interest rate for the 77 Greenwich Construction Facility and the Mezzanine Loan, assuming the 77 Greenwich Construction Facility and the Mezzanine Loan are fully drawn, was 9.44% on an annual basis. Interest on the Mezzanine Loan is not payable on a monthly basis but instead is automatically added to the unpaid principal amount on a monthly basis (and therefore accrues interest) and is payable in full on the maturity date of the Mezzanine Loan. Upon final repayment of the Mezzanine Loan, a MOIC shall be due on substantially the same terms as provided for in the Corporate Credit Facility. The Mezzanine Loan may not be prepaid prior to prepayment in full of the 77 Greenwich Construction Facility, but if the 77 Greenwich Construction Facility is being prepaid in full, the Mezzanine Loan may be prepaid simultaneously therewith. Subject to the prior sentence the Mezzanine Loan may be prepaid in whole or in part, without penalty or premium (other than payment of the MOIC amount, if applicable, as provided above), upon prior written notice to lender under the Mezzanine Loan. In connection with the Mezzanine Loan, the Company entered into a completion guaranty, carry guaranty, equity funding guaranty, recourse guaranty and environmental indemnification undertaking substantially consistent with the Company’s existing guarantees made to the 77 Greenwich Lender in connection with the 77 Greenwich Construction Facility.

As of September 30, 2021, we were in compliance with the covenants of the Mezzanine Loan, except for the occurrence of a liquidity default under the Mezzanine Loan comparable to the liquidity default under the 77 Greenwich Construction Facility, other defaults substantially comparable to the Senior Loan Defaults, and a cross-default due to the Senior Loan Defaults (collectively, the “Mezzanine Loan Defaults”).  Effective June 30, 2021 and October 1, 2021, the Company entered into forbearance agreements (together, the “Mezzanine Loan Forbearance Agreement”), pursuant to which the lender had agreed to forbear from exercising its rights and remedies with respect to the Mezzanine Loan Defaults, subject to certain conditions.  On October 22, 2021, in connection with the refinancing of the 77 Greenwich Construction Facility, the Company entered into an amendment to the Mezzanine Loan which, among other things, increased the amount of the loan thereunder by approximately $22.77 million, of which $0.77 million reflects interest previously accrued under the original Mezzanine Loan. As a result of the refinancing transaction in October 2021, the Mezzanine Loan Defaults were deemed to have been waived. See Note 13 – Subsequent Events for further information.

Secured Line of Credit

Our $12.75 million secured line of credit is secured by the Paramus, New Jersey property.  In March 2021, we entered into an amendment to extend the maturity date to March 2022.  The secured line of credit, which prior to the amendment, bore interest at a rate of 200 basis points over the 30-day LIBOR, now bears interest at the prime rate, currently 3.25%.  The secured line of credit is pre-payable at any time without penalty. This secured line of credit had an outstanding balance of $11.95 million and $7.75 million at September 30, 2021 and December 31, 2020, respectively, and an effective interest rate of 3.25% and 2.14% as of September 30, 2021 and December 31, 2020, respectively.  

250 North 10th Note

We own a 10% interest in a joint venture with TF Cornerstone (the “250 North 10th JV”) formed to acquire and operate 250 North 10th, a recently built 234-unit apartment building in Williamsburg, Brooklyn, New York.  On January 15, 2020, the 250 North 10th JV closed on the acquisition of the property through a wholly-owned special purpose entity. Our share of the equity totaling approximately $5.9 million was funded through a loan (the “Partner Loan”) from our joint venture partner. The Partner Loan had a balance of $5.9 million at September 30, 2021 and December 31, 2020, respectively, bears interest at 7.0% and is prepayable any time within its four year term. Our partner has the option of having the Partner Loan repaid in our common stock if the price of our common stock exceeds $6.50 per share at the time of conversion.  See Note 12 – Investments in Unconsolidated Joint Ventures. 

Principal Maturities

Combined aggregate principal maturities of our loans, secured line of credit and note payable as of September 30, 2021, excluding extension options, were as follows (dollars in thousands):

​

​

​

​

​

​

​

Year of Maturity

    

Principal at September 30, 2021

 

Principal at December 31, 2020

2021

​

$

—

​

$

61,153

2022

​

 

171,325

​

 

139,025

2023

​

 

64,579

​

 

5,863

2024

​

​

43,250

​

​

43,250

2025

​

​

—

​

​

—

​

​

 

279,154

​

 

249,291

Less: deferred finance costs, net

​

 

(5,241)

​

 

(6,493)

Total loans, secured line of credit, and note payable, net

​

$

273,913

​

$

242,798

​

​

​

Interest

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Three Months Ended

    

Three Months Ended

    

Nine Months Ended

    

Nine Months Ended

    

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

​

​

2021

​

2020

​

2021

​

2020

​

Interest expense

​

$

5,473

​

$

4,418

​

$

15,743

​

$

12,554

​

Interest capitalized

​

 

(4,783)

​

 

(3,820)

​

 

(13,570)

​

 

(11,702)

​

Interest income

​

 

—

​

 

(53)

​

 

(1)

​

 

(57)

​

Interest expense, net

​

$

690

​

$

545

​

$

2,172

​

$

795

​

​