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LOANS AND MORTGAGES PAYABLE
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
LOANS AND MORTGAGES PAYABLE

NOTE 7 – LOANS AND MORTGAGES PAYABLE

 

Loans Payable

 

The Company may purchase securities on margin. The interest rates charged on the margin loans at December 31, 2022 and 2021 was 5.0% and 0.75%, respectively. These margin loans are collateralized by the Company’s securities portfolio and are due on demand. The Company must maintain a coverage ratio of approximately 2 times. At December 31, 2022 and 2021, there were no margin loans outstanding.

 

The Company has revolving credit agreements totaling $73.5 million with 21st Mortgage Corporation (“21st Mortgage”), Customers Bank and Northpoint Commercial Finance to finance inventory purchases. Interest rates on these agreements range from 4.15% to prime with a minimum of 6%. As of December 31, 2022 and 2021, the total amount outstanding on these lines was $64.1 million and $10.9 million, respectively, with a weighted average interest rate of 7.70% and 4.38%, respectively.

 

In June 2020, the Company expanded its revolving line of credit with OceanFirst Bank (“OceanFirst Line”) from $15 million to $20 million. This line is secured by the Company’s eligible notes receivable. Interest was reduced from prime plus 25 basis points to prime with a floor of 3.25%. The amendment also extended the maturity date from June 1, 2020 to June 1, 2022, which was extended to June 1, 2023. As of December 31, 2022 the amount outstanding on this revolving line of credit was $10 million and the interest rate was 7.50%. As of December 31, 2021, the amount outstanding on this revolving line of credit was $6 million and the interest rate was 3.25%.

 

On October 7, 2020, the Company entered into a revolving line of credit with FirstBank secured by rental homes and rental home leases in several of our manufactured home communities. This facility allows for proceeds of $20 million and is expandable to $30 million with an accordion feature. The facility has a maturity date of November 29, 2022, which was extended to November 29, 2023. Interest is payable at prime plus 25 basis points with a floor of 3.5%, adjusted on the first day of each calendar quarter. As of December 31, 2022 the amount outstanding on this revolving line of credit was $5.1 million and the interest rate was 6.5%. As of December 31, 2021, the amount outstanding on this revolving line of credit was $5 million and the interest rate was 3.5%.

 

 

Unsecured Line of Credit

 

On November 29, 2018, the Company entered into a First Amendment to Amended and Restated Credit Agreement (the “Amendment”) to expand and extend its existing unsecured revolving credit facility (the “Facility”). The Facility is syndicated with two banks led by BMO Capital Markets Corp. (“BMO”), as sole lead arranger and sole book runner, with Bank of Montreal as administrative agent, and includes JPMorgan Chase Bank, N.A. (“J.P. Morgan”) as the sole syndication agent. The Amendment provided for an increase from $50 million in available borrowings to $75 million in available borrowings with a $50 million accordion feature, bringing the total potential availability up to $125 million, subject to certain conditions including obtaining commitments from additional lenders. The Amendment also extended the maturity date of the Facility from March 27, 2020 to November 29, 2022, with a one-year extension available at the Company’s option, subject to certain conditions including payment of an extension fee. Availability under the Facility is limited to 60% of the value of the unencumbered communities which the Company has placed in the Facility’s unencumbered asset pool (“Borrowing Base”). The First Amendment increased the value of the Borrowing Base communities by reducing the capitalization rate applied to the Net Operating Income (“NOI”) generated by the communities in the Borrowing Base from 7.5% to 7.0%. On February 5, 2021, the Company entered into a Second Amendment to Amended and Restated Credit Agreement with BMO to further reduce the capitalization rate from 7.0% to 6.5%.

 

On November 7, 2022, the Company entered into the Second Amended and Restated Credit Agreement (the “Amendment”) to expand and extend its existing unsecured revolving credit facility (the “Facility”). The expanded Facility is syndicated with two banks, BMO and JPMorgan, as joint arrangers and joint book runners, with Bank of Montreal as administrative agent. The Second Amended Credit Agreement provides for an increase from $75 million in available borrowings to $100 million in available borrowings with a $400 million accordion feature, bringing the total potential availability up to $500 million, subject to certain conditions including obtaining commitments from additional lenders. The Second Amended Credit Agreement also extends the maturity date of the Facility from November 29, 2022 to November 7, 2026, with a further one-year extension available at the Company’s option, subject to certain conditions including payment of an extension fee. Availability under the amended Facility is limited to 60% of the value of the unencumbered communities which the Company has placed in the Facility’s unencumbered asset pool (“Borrowing Base”). The value of the Borrowing Base communities is based on a capitalization rate of 6.5% applied to the Net Operating Income (“NOI”) generated by the communities in the Borrowing Base.

 

Interest rates on borrowings are based on the Company’s overall leverage ratio and is equal to the Secured Overnight Financing Rate (“SOFR”) plus 1.50% to 2.20%, or BMO’s prime lending rate plus 0.50% to 1.20%. Based on the Company’s current leverage ratio, borrowings under the Facility will bear interest at SOFR plus 1.60% or at BMO’s prime lending rate plus 0.60%, which results in an interest rate of 5.88% and 1.60% at December 31, 2022 and 2021, respectively.

 

As of December 31, 2022 and 2021, the amount outstanding under this Facility was $75 million and $25 million, respectively.

 

The aggregate principal payments of all loans payable, including the Credit Facility, are scheduled as follows (in thousands):

  

      
Year Ended December 31,    
2023  $79,226 
2024   0 
2025   0 
2026   75,000 
2027   0 
Thereafter   0 
      
Total Loans Payable   154,226 
Unamortized Debt Issuance Costs   (695)

Total Loans Payable, net of Unamortized Debt Issuance Costs

  $153,531 

 

 

Series A Bonds

 

On February 6, 2022, the Company issued $102.7 million of its new 4.72% Series A Bonds due 2027, (“2027 Bonds”), in an offering to investors in Israel. The Company received $98.7 million, net of offering expenses. The 2027 Bonds are unsecured obligations of the Company denominated in Israeli shekels (NIS) and were issued pursuant to a Deed of Trust dated January 31, 2022 between the Company and Reznik Paz Nevo Trusts Ltd., an Israeli trust company, as trustee. The 2027 Bonds pay interest at a rate of 4.72% per year. Interest on the 2027 Bonds is payable semi-annually on August 31, 2022, and on February 28 and August 31 of the years 2023-2026 (inclusive) and on the final maturity date of February 28, 2027. The principal and interest will be linked to the U.S. Dollar. In the event of a future downgrade by two or more notches in the rating of the 2027 Bonds or a failure by the Company to comply with certain covenants in the Deed of Trust, the interest rate on the 2027 Bonds will be subject to increase. However, any such increases, in the aggregate, would not exceed 1.25% per annum.

 

Under the Deed of Trust, the Company has the right to redeem the 2027 Bonds, in whole or in part, at any time on or after 60 days from February 9, 2022, the date on which the 2027 Bonds were listed for trading on the Tel Aviv Stock Exchange (the “TASE”). Any such voluntary early redemption by the Company will require payment of the applicable early redemption amount calculated in accordance with the Deed of Trust. Upon the occurrence of an event of default or certain other events, including a delisting of the 2027 Bonds by the TASE, the Company may be required to affect an early repayment or redemption of all or a portion of the 2027 Bonds at their par value plus accrued and unpaid interest. The Deed of Trust permits the Company, subject to certain conditions, to issue additional 2027 Bonds without obtaining approval of the holders of the 2027 Bonds.

 

The 2027 Bonds are general unsecured obligations of the Company and rank equal in right of payment with all of the Company’s existing and future unsecured indebtedness. The Deed of Trust includes certain customary covenants, including financial covenants requiring the Company to maintain certain ratios of debt to net operating income, to shareholders equity and to earnings, and customary events of default. As of December 31, 2022, the Company is in compliance with these covenants. The 2027 Bonds were offered solely to investors outside the United States and were not offered to, or for the account or benefit of, U.S. Persons (as defined in Regulation S under the Securities Act of 1933).

 

Mortgages Payable

 

Mortgages Payable represents the principal amounts outstanding, net of unamortized debt issuance costs. Interest is payable on these mortgages at fixed rates ranging from 2.62% to 6.35%. The weighted average interest rate was 4.0% and 3.8% as of December 31, 2022 and 2021, respectively, including the effect of unamortized debt issuance costs. The weighted average interest rate as of December 31, 2022 and 2021 was 3.9% and 3.8%, respectively, not including the effect of unamortized debt issuance costs. The weighted average loan maturity of the Mortgage Notes Payable was 5.1 and 5.2 years at December 31, 2022 and 2021, respectively.

 

 

The following is a summary of mortgages payable at December 31, 2022 and 2021 (in thousands):

 

   At December 31, 2022  Balance at December 31, 
Property  Due Date  Interest Rate   2022    2021 
                 
Allentown  10/01/25   4.06%  $11,992    $12,295 
Brookview Village  04/01/25   3.92%   2,473     2,539 
Candlewick Court  09/01/25   4.10%   4,002     4,104 
Catalina  08/19/25   3.00%   4,311     4,586 
Cedarcrest Village  04/01/25   3.71%   10,662     10,956 
Clinton Mobile Home Resort  10/01/25   4.06%   3,147     3,227 
Cranberry Village  04/01/25   3.92%   6,783     6,965 
D & R Village  03/01/25   3.85%   6,828     7,013 
Fairview Manor  11/01/26   3.85%   14,388     14,739 
Fohl Village  11/22/32   5.93%   9,490     0 
Forest Park Village  09/01/25   4.10%   7,463     7,652 
Friendly Village  06/06/23   4.618%   6,382     6,650 
Hayden Heights  04/01/25   3.92%   1,864     1,914 
Highland Estates  06/01/27   4.12%   15,080     15,419 
Holiday Village  09/01/25   4.10%   7,102     7,282 
Holiday Village- IN  11/01/25   3.96%   7,616     7,811 
Holly Acres Estates  09/01/31   3.21%   5,910     6,031 
Kinnebrook Village  04/01/25   3.92%   3,603     3,700 
Lake Erie Estates  07/06/25   5.16%   2,549     2,604 
Lake Sherman Village  09/01/25   4.10%   4,935     5,060 
Meadows of Perrysburg  10/06/23   5.413%   0     2,825 
Northtowne Meadows  09/06/26   4.45%   11,322     11,576 
Oak Tree  12/15/32   5.60%   12,000     0 
Olmsted Falls  04/01/25   3.98%   1,865     1,915 
Oxford Village  07/01/29   3.41%   14,659     14,985 
Perrysburg Estates  09/06/25   4.98%   1,493     1,526 
Pikewood Manor  11/29/28   5.00%   13,414     13,766 
Shady Hills  04/01/25   3.92%   4,444     4,563 
Springfield Meadows  10/06/25   4.83%   0     2,914 
Suburban Estates  10/01/25   4.06%   5,000     5,126 
Sunny Acres  10/01/25   4.06%   5,566     5,706 
Trailmont  04/01/25   3.92%   2,963     3,042 
Twin Oaks  10/01/29   3.37%   5,683     5,809 
Valley Hills  06/01/26   4.32%   3,080     3,152 
Waterfalls  06/01/26   4.38%   4,197     4,293 
Weatherly Estates  04/01/25   3.92%   7,229     7,422 
Wellington Estates  02/01/23   6.35%   2,144     2,205 
Woods Edge  01/07/26   3.25%   5,306     5,627 
Worthington Arms  09/01/25   4.10%   8,369     8,580 
Various (2 properties)  02/01/27   4.56%   12,799     13,073 
Various (2 properties)  08/01/28   4.27%   12,408     12,661 
Various (2 properties)  07/01/29   3.41%   21,430     21,907 
Various (4 properties)   07/01/23   4.975%   7,230     7,418 
Various (4 properties)  10/1/32   5.24%   34,027     0 
Various (5 properties)  12/06/22   4.75%   0     6,523 
Various (6 properties)  08/01/27   4.18%   12,048     12,320 
Various (13 properties)  03/01/23   4.065%   43,037     44,339 
Various (28 properties)*  09/01/30   4.25%   24,935     0 
Various (28 properties)  09/01/30   2.62%   100,481     102,882 
Total Mortgages Payable           513,709     456,702 
Unamortized Debt Issuance Costs           (4,771)    (4,135)
Total Mortgages Payable, net of Unamortized Debt Issuance Costs          $508,938    $452,567 

 

*Rental home addition to the Fannie Mae credit facility consisting of 28 properties.

 

 

At December 31, 2022 and 2021, mortgages were collateralized by real property with a carrying value of $1.1 billion and $950.9 million, respectively, before accumulated depreciation and amortization. Interest costs amounting to $2.7 million, $1.5 million and $1.3 million were capitalized during 2022, 2021 and 2020, respectively, in connection with the Company’s expansion program. At December 31, 2022, the Company owned 134 communities of which 36 are unencumbered.

 

Recent Financing Transactions

 

During the year ended December 31, 2022

 

In August 2020, the Company financed 28 of its previously unencumbered communities, containing approximately 4,100 sites, under a Federal National Mortgage Association (“Fannie Mae”) credit facility through Wells Fargo Bank, N.A. for total proceeds of approximately $106 million. On March 15, 2022, the Company completed the addition of approximately 1,100 homes to this credit facility for total proceeds of approximately $25.6 million. This addition is coterminous with the remaining term of the existing facility, which matures in 2030. Interest is at a fixed rate of 4.25%.

 

On September 26, 2022, the Company completed the addition of two tranches to its Fannie Mae credit facility through Wells Fargo Bank, N.A., for total proceeds of approximately $34.0 million. One tranche consists of four communities (the “Community Tranche”) and the other tranche consists of approximately 250 homes located in those communities (the “Home Tranche”). Both tranches have a loan term of 10 years with the Community Tranche amortizing over 30 years and the Home Tranche amortizing over 17 years. Interest is at a fixed rate of 5.24%.

 

On November 22, 2022, in conjunction with the acquisition of Fohl Village (See Note 3), the Company obtained a mortgage totaling $9.5 million with OceanFirst Bank. The initial interest rate on this mortgage is fixed at 5.93% until November 22, 2027 and then adjusted by adding 200 basis points to the weekly average yield on the U.S. Treasury Securities, adjusted to a constant maturity of 5 years, with a floor of 4.5%, through maturity date. This mortgage matures on November 22, 2032, with principal repayments based on a 30-year amortization schedule.

 

On December 15, 2022, in conjunction with the acquisition of Oak Tree (see Note 3), the Company obtained a mortgage totaling $12.0 million with OceanFirst Bank. The initial interest rate on this mortgage is fixed at 5.6% until December 15, 2027 and then adjusted by adding 200 basis points to the weekly average yield on the U.S. Treasury Securities, adjusted to a constant maturity of 5 years, with a floor of 4.5%, through maturity date. This mortgage matures on December 15, 2032, with principal repayments based on a 30-year amortization schedule.

 

During the year ended December 31, 2021

 

On August 17, 2021, the Company obtained a Federal Home Loan Mortgage Corporation (“Freddie Mac”) mortgage totaling $6.1 million through Wells Fargo Bank, N.A. (“Wells Fargo”) on Holly Acres. The interest rate on this mortgage is fixed at 3.21%. This mortgage matures on September 1, 2031, with principal repayments based on a 30-year amortization schedule.

 

The aggregate principal payments of all mortgages payable are scheduled as follows (in thousands):

  

      
Year Ended December 31,    
2023  $70,323 
2024   11,983 
2025   138,373 
2026   37,967 
2027   42,674 
Thereafter   212,389 
      
Total  $513,709