LOANS PAYABLE AND SECURED LINE OF CREDIT

12 Months Ended

Dec. 31, 2022

LOANS PAYABLE AND SECURED LINE OF CREDIT

LOANS PAYABLE AND SECURED LINE OF CREDIT

NOTE 11 – 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,” or “CCF”), which may be increased 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 allowed during the 32-month period following the closing date of the Corporate Credit Facility (the “Closing Date”). The CCF matures on December 19, 2024, subject to extensions until December 19, 2025 and June 19, 2026, respectively, under certain circumstances. The CCF provided for the proceeds of the CCF 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.

In connection with the closing of the 77 Mortgage Loan and amendment to the Mezzanine Loan described below, we entered into amendments, dated as of October 22, 2021 and November 10, 2021, to our CCF pursuant to which, among other things, the parties agreed that (a) no additional funds will be drawn under the CCF, (b) the minimum liquidity requirement was made consistent with the 77 Mortgage Loan Agreement until May 1, 2023, (c) the Company will prepay the outstanding principal balance of the CCF in an amount no less than $7.0 million on or prior to May 1, 2023 and (d) the multiple on invested capital (the “MOIC”) provisions were revised to provide that (i) the MOIC amount due upon final repayment of the CCF loan was amended to be consistent with the Mezzanine Loan such that if no event of default exists and is continuing under the CCF at any time prior to June 22, 2023, the amount due will be combined with the Mezzanine Loan, to the extent not previously paid, if any, and (ii) the amount of the CCF used to calculate the MOIC was reduced to $35.75 million. We entered into an amendment in November 2022, which eliminated the minimum liquidity requirement.

The CCF had an outstanding balance of $35.75 million at both December 31, 2022 and 2021, excluding deferred finance fees of $1.3 million and $2.9 million, respectively.  Accrued interest, which is included in accounts payable and accrued expenses, totaled approximately $6.1 million at December 31, 2022, of which approximately $419,000 was paid during the first week of January 2023, and $3.8 million at December 31, 2021, of which approximately $413,000 was paid during the first week of January 2022.  We are in discussions with the CCF Lender regarding the deferment of upcoming interest payments and a $7.0 million amortization payment due on May 1, 2023.   As of December 31, 2022, we were in compliance with all covenants of the CCF.

The CCF 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 December 31, 2022 and 2021 was 10.0% and 9.5%, respectively.  A $2.45 million commitment fee was payable 50% on the initial draw and 50% as amounts under the CCF 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 CCF repayments. As of December 31, 2022, we had paid $1.85 million of the commitment fee.  With the reduction in the committed amount under the CCF, no further commitment fee is due.  The CCF may be prepaid at any time subject to a prepayment premium on the portion of the CCF being repaid. The CCF 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 CCF. Upon final repayment of the CCF, the MOIC amount equal to 30% of the initial CCF 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 CCF 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 CCF 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 and net worth. Under the CCF, we are permitted to repurchase up to $2.0 million of our common stock pursuant to board approved programs with CCF proceeds, $1.5 million with other sources of cash and otherwise subject to the consent of the required lenders. The CCF also provides for certain events of default, including cross-defaults to our other loans, and for a guaranty of the CCF obligations by our loan party subsidiaries.

Pursuant to the terms of the CCF, so long as the CCF 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 CCF, 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 CCF was reduced by the $7.5 million, and (iii) the MOIC amount was amended to combine the CCF and the Mezzanine Loan. In addition, the exercise price of the warrants issued in connection with the CCF was amended from $6.50 per share to $4.31 per share (the “Warrant Agreement Amendment”) (see Note 12 – Stockholders Equity – Warrants to our consolidated financial statements for further discussion regarding the warrants).

Loans Payable

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.

As a result of the refinancing transaction in October 2021, the 77 Greenwich Construction Facility was repaid in full, see 77 Mortgage Loan below.

77 Mortgage Loan

In October 2021, a wholly-owned subsidiary of ours (the “Mortgage Borrower”) entered into a loan agreement with Macquarie PF Inc., a part of Macquarie Capital, the advisory, capital markets and principal investment arm of Macquarie Group, as lender and administrative agent (the “77 Mortgage Lender”), pursuant to which 77 Mortgage Lender agreed to extend credit to Mortgage Borrower in the amount of up to $166.7 million (the “77 Mortgage Loan”), subject to the satisfaction of certain conditions (the “77 Mortgage Loan Agreement”). The 77 Greenwich Construction Facility had an aggregate balance of $159.4 million at the time it was repaid in full at closing of the 77 Mortgage Loan.  We borrowed $133.1 million on the closing date of the 77 Mortgage Loan and the balance of the funds used to repay the facility were obtained from an increase in the Mezzanine Loan, the Berkley Partner Loan as well as funds raised through the Private Placement.   At loan closing in October 2021, $33.6 million was available to be used to, among other things, complete construction of 77 Greenwich and fund carry costs while the residential condominium units are being sold.  

The 77 Mortgage Loan has a two-year term, maturing on October 1, 2023, with an option to extend for an additional year, if the loan balance is $70.0 million or less and we purchase a new interest rate cap.  The 77 Mortgage Loan is secured by the Mortgage Borrower’s fee interest in 77 Greenwich. The 77 Mortgage Loan bears interest at a rate per annum equal to the greater of (i) 7.00% in excess of LIBOR and (ii) 7.25%; provided that, if, on April 22, 2023, the outstanding principal balance of the 77 Mortgage Loan, together with any accrued and unpaid PIK Interest and unpaid Additional Unused Fee (as those terms are defined below) is equal to or greater than $91.0 million, the rate per annum will be equal to the greater of (i) 9.00% in excess of LIBOR and (ii) 9.25%. If cash flow from 77 Greenwich (including proceeds from the sales of residential condominium units) is insufficient to pay interest payments when due, any accrued but unpaid interest will remain unpaid and interest will continue to accrue on such unpaid amounts (“PIK Interest”) until the cumulative PIK Interest and Additional Unused Fee accrues to $4.5 million (the “Threshold Amount”), after which all such amounts in excess of the Threshold Amount shall be paid in cash on a monthly basis until such amounts are less than the Threshold Amount. As advances of the 77 Mortgage Loan are made to Mortgage Borrower and the outstanding principal balance of the 77 Mortgage Loan increases, net proceeds from the sales of condominium units will be paid to 77 Mortgage Lender to reduce the outstanding balance of the 77 Mortgage Loan. A 1% per annum fee (the “Additional Unused Fee”) on a $3.0 million portion (the “Additional Amount”) of the 77 Mortgage Loan, is payable on a monthly basis on the undrawn portion of such Additional Amount. To the extent the 77 Mortgage Loan is not fully funded by October 22, 2022 (April 22, 2023 in the case of amounts with respect to construction work related to the new handicapped accessible subway entrance on Trinity Place), 77 Mortgage Lender may in its discretion force fund the remaining balance other than the Additional Amount into a reserve account held by 77 Mortgage Lender and disbursed in accordance with the terms of the 77 Mortgage Loan Agreement. The 77 Mortgage Lender elected to force fund the 77 Mortgage Loan in October 2022.  The 77 Mortgage Loan is prepayable without penalty, subject to 77 Mortgage Lender receiving a minimum total return of $15.26 million, or if an advance has been made of the Additional Amount, the sum of $15.26 million, plus 10% of the Additional Amount that has been disbursed, in each case, inclusive of interest and fees, and must be prepaid in part in certain circumstances such as in the event of the sale of residential and retail condominium units. Mortgage Borrower is required to achieve completion of the construction work and the improvements for the Project on or before July 1, 2022, subject to certain exceptions. The 77 Mortgage Loan Agreement also includes additional customary affirmative and negative covenants for loans of this type, with the first sales pace covenant in April 2023.  Based on sales closed through March 31, 2023, we met this sales covenant.  In November 2022, we amended the 77 Mortgage Loan to, amongst other things, extend the Final Completion date to September 29, 2023 and eliminate the liquidity requirement. At that time, we drew down $3.0 million under the letter of credit to fund an interest reserve and $1.0 million to pay down the PIK balance. The Company determined that the 77 Mortgage Loan was considered a troubled debt restructuring due to a decrease in the post restructuring effective interest rate. The Company determined that the 77 Mortgage Loan will be treated as a modification with no gain or loss recognized during the year ended December 31, 2022 as the carrying amount of the loan was not greater than the respective undiscounted cash flows of the modified loan.

In connection with the 77 Mortgage Loan Agreement, we entered into guarantees with the 77 Mortgage Lender pursuant to which we guaranteed the completion and payment of costs and expenses related to the construction; the payment of accrued and unpaid interest and other fees, costs, expenses and payments due and payable with respect to the 77 Mortgage Loan or 77 Greenwich; and the payment when

due of all amounts due to 77 Mortgage Lender, as a result of “bad-boy” provisions. Mortgage Borrower and the Company also entered into an environmental compliance and indemnification undertaking for the benefit of 77 Mortgage Lender.

As of December 31, 2022, the 77 Mortgage Loan had a balance of $120.5 million, which includes $4.7 million in PIK interest.  In 2022, the 77 Mortgage loan was paid down by approximately $47.8 million through closed sales of residential condominium units.  As of December 31, 2022, we were in compliance with all covenants under the 77 Mortgage Loan.

As of December 31, 2022, we had received our TCOs for the condominium units on floors 11-35 (except the units noted below), lobby, Cloud Club (lounge, terrace, game room, dining room, kitchen and kids play room), mechanical rooms, and portions of the cellar (including the bike and storage rooms.)  As of March 1, 2023, we had received TCOs for 100% of the residential units.  Upon the granting of our first TCO in March 2021 and having 16 units under contract, our offering plan was declared effective.   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).

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. At closing 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. As of December 31, 2022, the blended interest rate was 10.2%.  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 will be due on substantially the same terms as provided for in the CCF. 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 the 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.

In October 2021, the Mezzanine Loan Agreement was amended and restated to, among other things, (i) increase 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, (ii) reflected the pledge of the equity interests in the Mortgage Borrower to the Mezzanine Lender as additional collateral for the Mezzanine Loan and (iii) conform certain of the covenants to those included in the 77 Mortgage Loan Agreement, as applicable. Additionally, the existing completion guaranty, carry guaranty, recourse guaranty and environmental indemnification executed in connection with the original Mezzanine Loan Agreement were amended to conform to the mortgage guarantees and mortgage environmental indemnity made in connection with the 77 Mortgage Loan (and the existing equity funding guaranty was terminated). In November 2022, we amended the Mezzanine Loan Agreement to, amongst other things, extend the Final Completion date to September 29, 2023 and eliminate the liquidity requirement.

As of December 31, 2022, the Mezzanine Loan had a balance of $30.3 million and accrued interest totaled approximately $5.8 million.

As of December 31, 2022, we were in compliance with the covenants of the Mezzanine Loan.

237 11^th Loans

In May 2018, in connection with the acquisition of 237 11^th, we entered into two-year interest-only financings with an aggregate principal amount of $67.8 million, which was comprised of a $52.4 million mortgage loan and a $15.4 million mezzanine loan. The mezzanine loan was repaid in full in February 2020.   In June 2021, we repaid the mortgage loan’s balance of $56.4 million in full and paid an exit fee of $567,000.  

Simultaneously, in June 2021, in connection with the refinancing of the mortgage loan, we entered into a $50.0 million senior loan (the “237 11^th Senior Loan”) and a $10 million mezzanine loan (the “237 11^th Mezz Loan” and together with the 237 11^th Senior Loan, the “237 11^th Loans”), provided by Natixis, bearing interest at a blended rate of 3.05% per annum. The LIBOR-based floating rate 237 11^th Loans have an

initial term of two years and three one-year extension options. The first extension option is not subject to satisfaction of any financial tests, but requires a new interest rate cap be purchased by the Company.  $1.5 million of the 237 11^th Senior Loan proceeds were initially held back by Natixis to cover debt service and operating expense shortfalls, as well as leasing related costs.  

In December 2022, we amended the 237 11^th Loans to allow for the funding of the undrawn operating expense shortfall holdback, force fund the undrawn portion of the leasing related costs and convert the loan benchmark from LIBOR to SOFR. The Company determined that the 237 11th Loans are considered a troubled debt restructuring due to a decrease in the post restructuring effective interest rate. The Company determined that the 237 11^th Loans will be treated as modifications with no gain or loss recognized during the year ended December 31, 2022 as the carrying amount of each loan was not greater than the respective undiscounted cash flows of the modified loans.  As of December 31, 2022, there was an outstanding balance of $50.0 million on the 237 11^th Senior Loan and $10.0 million on the 237 11^th Mezz Loan.  We are currently exploring a potential refinancing of our 237 11^th Loans.

In June 2021, we entered into an interest rate cap agreement as required under the 237 11^th 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.

The 237 11^th 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 11^th Loans due and payable, among other remedies. As of December 31, 2022, we were in compliance with the covenants of the 237 11^th Loans, except for the minimum liquidity requirement.  The lender has agreed in principle to waive this requirement through the initial maturity date of the loan of July 9, 2023 and the parties are working on documentation.

The Berkley Partner Loan

In October 2021, we entered into a loan agreement with our partner in The Berkley JV, pursuant to which our partner agreed to lend us up to $10.5 million principal amount, $500,000 of which is available only to be applied to interest payments, secured by our interest in the joint venture entity, maturing in one year. The loan bore interest at a rate of 10% per year, with a portion deferred until maturity.  This loan had a balance of $10.1 million when it was repaid in full in April 2022 in connection with the sale of the Berkley.  

Secured Line of Credit

Our $11.75 million secured line of credit is secured by the Paramus, New Jersey property.  The secured line of credit, which was scheduled to mature on March 23, 2023, was extended to May 22, 2023.  The Paramus property had been under contract for sale pursuant to a purchase and sale agreement, which was subject to site plan approval.  The agreement was terminated by the buyer in January 2023.  The Company is in discussions with the lender regarding a further extension. The secured line of credit bears interest at the prime rate. The secured line of credit is pre-payable at any time without penalty. This secured line of credit had an outstanding balance of $9.75 million and $12.75 million at December 31, 2022 and 2021, respectively, and an effective interest rate of 7.5% and 3.25% as of December 31, 2022 and 2021, respectively.

Note Payable (250 North 10^th Note)

We owned a 10% interest in a joint venture with TF Cornerstone (the “250 North 10^th JV”) formed to acquire and operate 250 North 10^th, a 234-unit apartment building in Williamsburg, Brooklyn, New York.  On January 15, 2020, the 250 North 10^th 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 December 31, 2022 and 2021, respectively, bore interest at 7.0% and was prepayable any time within its four year term.  We sold our interest in the joint venture to our joint venture partner in February 2023.  See also Note 14 – Investments in Unconsolidated Joint Ventures.

Principal Maturities

Combined aggregate principal maturities of our loans, secured line of credit and note payable as of December 31, 2022, excluding extension options, were as follows (dollars in thousands):

Year of Maturity	Principal
2023	$	226,429
2024		35,750
2025		—
2026		—
2027		—
		262,179
Less: deferred finance costs, net		(3,375)
Total loans, secured line of credit, and note payable, net	$	258,804

Interest Expense, net

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

	Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,
	2022		2021		2020
Interest expense	$	20,616	$	21,238	$	17,174
Interest capitalized		(4,915)		(13,314)		(15,577)
Interest income		—		(2)		(57)
Interest expense, net	$	15,701	$	7,922	$	1,540