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Mortgage Loans Payable and Credit Facility
9 Months Ended
Sep. 30, 2019
Debt Disclosure [Abstract]  
Mortgage Loans Payable and Credit Facility

Note 5. Mortgage Loans Payable and Credit Facility

Debt and capital lease obligations are composed of the following at September 30, 2019:

 

 

 

 

 

September 30, 2019

 

 

 

 

 

 

 

 

 

Contractual

 

 

 

Maturity

 

Balance

 

 

interest rates

 

Description

 

dates

 

outstanding

 

 

weighted-average

 

Fixed-rate mortgage

 

Jun 2026

 

$

46,931,000

 

 

3.9%

 

Capital lease obligation

 

Sep 2050

 

 

5,673,000

 

 

5.3%

 

Unsecured credit facilities (a):

 

 

 

 

 

 

 

 

 

 

Variable-rate:

 

 

 

 

 

 

 

 

 

 

Revolving credit facility

 

Sep 2021

(b)

 

107,000,000

 

 

3.6%

 

Term loan

 

Sep 2022

 

 

50,000,000

 

 

3.5%

 

Fixed-rate (c):

 

 

 

 

 

 

 

 

 

 

Term loan

 

Feb 2021

 

 

75,000,000

 

 

3.7%

 

Term loan

 

Feb 2022

 

 

50,000,000

 

 

3.1%

 

Term loan

 

Sep 2022

(d)

 

50,000,000

 

 

2.9%

 

Term loan

 

Apr 2023

 

 

100,000,000

 

 

3.3%

 

Term loan

 

Sep 2024

 

 

75,000,000

 

 

3.8%

 

Term loan

 

Jul 2025

 

 

75,000,000

 

 

4.7%

 

 

 

 

 

 

634,604,000

 

 

3.7%

 

Unamortized issuance costs

 

 

 

 

(2,962,000

)

 

 

 

 

 

 

 

 

$

631,642,000

 

 

 

 

 

 

 

(a)

During the quarter ended June 30, 2019, the weighted average interest rate for the Company’s unsecured credit facilities increased 14 basis points (“bps”) (ranging from an increase of 10 bps to 15 bps for each individual borrowing) as a result of a slight increase in the Company’s leverage ratio.

 

(b)

The revolving credit facility is subject to a one-year extension at the Company’s option.

 

(c)

The interest rates on these term loans consist of the London Interbank Offered Rate (“LIBOR”) plus a credit spread based on the Company’s leverage ratio, for which the Company has interest rate swap agreements which convert the LIBOR rates to fixed rates. Accordingly, these term loans are presented as fixed-rate debt. 

 

(d)

The current interest rate swap agreement expires in February 2020 at which time a new interest rate swap agreement will begin resulting in an effective interest ratio of 3.3%, based on the Company’s leverage ratio at September 30, 2019.  

Unsecured Revolving Credit Facility and Term Loans

As of September 30, 2019, the Company had $116.0 million available for additional borrowings under its revolving credit facility. The Company has a $300 million unsecured credit facility which, as amended and restated on September 8, 2017, consists of (1) a $250 million revolving credit facility, expiring on September 8, 2021, and (2) a $50 million term loan, expiring on September 8, 2022. The revolving credit facility may be extended, at the Company’s option, for an additional one-year period, subject to customary conditions. Under an accordion feature, the facility can be increased to $750 million, subject to customary conditions and lending commitments. Interest on borrowings under the revolving credit facility component can range from LIBOR plus 135 bps to 195 bps (150 bps at September 30, 2019) and interest on borrowings under the term loan component can range from LIBOR plus 130 to 190 bps (145 bps at September 30, 2019), each based on the Company’s leverage ratio. During the quarter ended June 30, 2019, the weighted average interest rate for the Company’s unsecured credit facilities increased 14 bps (ranging from an increase of 10 bps to 15 bps for each individual borrowing) as a result of a slight increase in the Company’s leverage ratio.

The Company’s unsecured credit facility and term loans contain financial covenants including, but not limited to, maximum debt leverage, maximum secured debt, minimum fixed charge coverage, and minimum net worth. In addition, the facility contains restrictions including, but not limited to, limits on indebtedness, certain investments and distributions. Although the credit facility is unsecured, borrowing availability is based on unencumbered property adjusted net operating income, as defined in the agreements. The Company’s failure to comply with the covenants or the occurrence of an event of default under the facilities could result in the acceleration of the related debt and exercise of other lender remedies. As of September 30, 2019, the Company is in compliance with all financial covenants. Interest on borrowings under the unsecured credit facility and term loans are based on the Company’s leverage ratio.

Derivative Financial Instruments

The fair values of the interest rate swaps applicable to the unsecured term loans discussed above are included in other assets and deferred charges, net, and accounts payable and accrued liabilities on the consolidated balance sheet at September 30, 2019. Charges and/or credits relating to the changes in the fair value of the interest rate swaps are made to accumulated other comprehensive income (loss), limited partners’ interest, or operations (included in interest expense), as applicable. Over time, the unrealized gains and losses recorded in accumulated other comprehensive loss will be reclassified into earnings as an increase or reduction to interest expense in the same periods in which the hedged interest payments affect earnings. The Company estimates that approximately $1.4 million of accumulated other comprehensive income will be reclassified as an increase to earnings within the next twelve months.

The following is a summary of the derivative financial instruments held by the Company at September 30, 2019 and December 31, 2018:

 

September 30, 2019

Designation/

 

 

 

 

 

 

 

Fair

 

 

Maturity

 

Balance sheet

Cash flow

 

Derivative

 

Count

 

 

value

 

 

dates

 

location

Qualifying

 

Interest rate swaps

 

 

1

 

 

$

74,000

 

 

2020

 

Other assets and deferred charges, net

Qualifying

 

Interest rate swaps

 

 

7

 

 

$

9,961,000

 

 

2021-2025

 

Accounts payable and accrued liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

Designation/

 

 

 

 

 

 

 

Fair

 

 

Maturity

 

Balance sheet

Cash flow

 

Derivative

 

Count

 

 

value

 

 

dates

 

location

Qualifying

 

Interest rate swaps

 

 

7

 

 

$

8,871,000

 

 

2019-2024

 

Other assets and deferred charges, net

Qualifying

 

Interest rate swaps

 

 

2

 

 

$

1,576,000

 

 

2025

 

Accounts payable and accrued liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The notional values of the interest rate swaps held by the Company at September 30, 2019 and December 31, 2018 were $425.0 million and $425.0 million, respectively.

 

The following presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations and the consolidated statements of equity for the three and nine months ended September 30, 2019 and 2018, respectively:

 

 

 

 

 

(Loss) gain recognized in other

 

 

 

 

 

comprehensive (loss) income

 

 

 

 

 

(effective portion)

 

Designation/

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

Cash flow

 

Derivative

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Qualifying

 

Interest rate swaps

 

$

(2,883,000

)

 

$

2,375,000

 

 

$

(15,837,000

)

 

$

10,221,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) recognized in other

 

 

 

 

 

comprehensive (loss) income

 

 

 

 

 

reclassified into earnings (effective portion)

 

 

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

Classification

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

Continuing Operations

 

$

216,000

 

 

$

246,000

 

 

$

1,300,000

 

 

$

265,000

 

 

As of September 30, 2019 the Company believes it has no significant risk associated with non-performance of the financial institutions which are the counterparties to its derivative contracts.