XML 22 R12.htm IDEA: XBRL DOCUMENT v3.22.2.2
Note 6 - Mortgage and Other Indebtedness
6 Months Ended
Jun. 30, 2022
Debt Disclosure [Abstract]  
Mortgage and Other Indebtedness

Note 6 – Mortgage and Other Indebtedness

The table below details the Company’s debt balance at June 30, 2022 and December 31, 2021:

 

(dollars in thousands)

 

Maturity Date

 

Rate Type

 

Interest Rate (1)

 

June 30, 2022

 

 

December 31, 2021

 

Basis Term Loan (net of discount of $187 and $373, respectively)

 

January 1, 2023

 

Floating (2)

 

6.125%

 

$

66,997

 

 

$

66,811

 

Basis Preferred Interest (net of discount of $37 and $75, respectively) (3)

 

January 1, 2023 (4)

 

Fixed

 

14.00% (5)

 

 

8,111

 

 

 

8,560

 

MVB Term Loan

 

June 27, 2023 (6)

 

Fixed

 

6.75%

 

 

3,755

 

 

 

3,934

 

MVB Second Term Loan

 

June 27, 2023

 

Fixed

 

6.75%

 

 

1,750

 

 

 

 

MVB Revolver

 

June 27, 2023 (6)

 

Floating (7)

 

6.75%

 

 

1,076

 

 

 

1,404

 

Hollinswood Shopping Center Loan

 

December 1, 2024

 

LIBOR + 2.25% (8)

 

4.06%

 

 

12,918

 

 

 

13,070

 

Avondale Shops Loan

 

June 1, 2025

 

Fixed

 

4.00%

 

 

3,041

 

 

 

3,097

 

Vista Shops at Golden Mile Loan (net of discount of $25 and $39, respectively) (9)

 

June 24, 2023

 

Fixed

 

3.83%

 

 

11,606

 

 

 

11,661

 

Brookhill Azalea Shopping Center Loan

 

January 31, 2025

 

LIBOR + 2.75%

 

4.54%

 

 

8,840

 

 

 

9,034

 

Lamar Station Plaza East Loan (net of discount of $1 and $8, respectively)

 

October 17, 2022 (10)

 

WSJ Prime (11)

 

4.79%

 

 

3,515

 

 

 

3,507

 

Lamont Street Preferred Interest (net of discount of $48 and $67, respectively) (12)

 

September 30, 2023

 

Fixed

 

13.50%

 

 

4,256

 

 

 

4,498

 

Highlandtown Village Shopping Center Loan (net of discount of $29 and $46, respectively)

 

May 6, 2023

 

Fixed

 

4.13%

 

 

5,304

 

 

 

5,364

 

Cromwell Field Shopping Center Loan (net of discount of $62 and $144, respectively)

 

November 15, 2022

 

LIBOR + 5.40% (13)

 

7.19%

 

 

12,331

 

 

 

12,249

 

Cromwell Field Shopping Center Mezzanine Loan (net of discount of $8 and $18, respectively)

 

November 15, 2022

 

Fixed

 

10.00%

 

 

1,522

 

 

 

1,512

 

Spotswood Valley Square Shopping Center Loan (net of discount of $63 and $94, respectively)

 

July 6, 2023

 

Fixed

 

4.82%

 

 

11,975

 

 

 

12,100

 

The Shops at Greenwood Village (net of discount of $105 and $114, respectively)

 

October 10, 2028

 

Prime - 0.35% (14)

 

4.08%

 

 

23,035

 

 

 

23,296

 

 

 

 

 

 

 

 

 

$

180,032

 

 

$

180,097

 

Unamortized deferred financing costs, net

 

 

 

 

 

 

 

 

(770

)

 

 

(1,115

)

Total Mortgage and Other Indebtedness

 

 

 

 

 

 

 

$

179,262

 

 

$

178,982

 

 

(1)
At June 30, 2022, the floating rate loans tied to LIBOR were based on the one-month LIBOR rate of 1.79%.
(2)
The interest rate for the Basis Term Loan is the greater of (i) SOFR (as defined below) plus 3.97% per annum and (ii) 6.125% per annum. As of June 30, 2022, the Company had entered into an interest rate cap that capped the prior-LIBOR rate on this loan at 3.5%. On August 1, 2022, the interest rate cap was modified to cap the SOFR rate on this loan at 3.5%.
(3)
The outstanding balance includes approximately $0.3 million and $0.8 million of indebtedness as of June 30, 2022 and December 31, 2021, respectively, related to the Minimum Multiple Amount (as defined below) owed to the Preferred Investor as described below under the heading “—Basis Preferred Interest”.
(4)
If the Basis Term Loan is paid in full earlier than its maturity date, the Basis Preferred Interest in the Sub-OP will mature at that time.
(5)
In June 2020, the Preferred Investor made additional capital contributions of approximately $2.9 million as described below under the heading “—Basis Preferred Interest” of which approximately $0.9 million was outstanding at June 30, 2022. The Preferred Investor is entitled to a cumulative annual return of 13.0% on the additional contributions.
(6)
In March 2022, the Company entered into a six-month extension on the MVB Term Loan and the MVB Revolver as described under the heading “—MVB Loans.”
(7)
The interest rate on the MVB Revolver is the greater of (i) prime rate plus 1.5% and (ii) 6.75%.
(8)
The Company has entered into an interest rate swap which fixes the interest rate of the loan at 4.06%.
(9)
The Company completed the refinance of this loan in March 2021 as described below under the heading “—Mortgage Indebtedness”. The prior loan matured on January 25, 2021 and carried an interest rate of LIBOR plus 2.5% per annum.
(10)
As of June 30, 2022, the maturity date of the Lamar Station Plaza East loan was July 17, 2022. In August 2022, the Company entered into a modification to the Lamar Station Plaza East loan to extend the maturity date to October 17, 2022, effective July 17, 2022, as described below under the heading “—Mortgage Indebtedness”.
(11)
As of June 30, 2022, the interest rate on the Lamar Station Plaza East loan was LIBOR plus 3.00% per annum with a minimum LIBOR rate of 1.00%. As a result of the loan modification the Company entered into in August 2022, the interest rate on the Lamar Station Plaza East loan is the Wall Street Journal Prime Rate, effective July 17, 2022.
(12)
The outstanding balance includes approximately $0.4 million of indebtedness as of June 30, 2022 related to the Lamont Street Minimum Multiple Amount (as defined below) owed to Lamont Street (as defined below) as described below under the heading “—Lamont Street Preferred Interest”.
(13)
The interest rate on the Cromwell Field Shopping Center loan is LIBOR plus 5.40% per annum with a minimum LIBOR rate of 0.50%.
(14)
The Company entered into an interest rate swap which fixes the interest rate of this loan at 4.082%.

Basis Term Loan

In December 2019, six of the Company’s subsidiaries, as borrowers (collectively, the “Borrowers”), and Big Real Estate Finance I, LLC, a subsidiary of a real estate fund managed by Basis Management Group, LLC (“Basis”), as lender (the “Basis Lender”), entered into a loan agreement (the “Basis Loan Agreement”) pursuant to which the Basis Lender made a senior secured term loan of up to $66.9 million (the “Basis Term Loan”) to the Borrowers. Pursuant to the Basis Loan Agreement, the Basis Term Loan is secured by mortgages on the following properties: Coral Hills, Crestview, Dekalb, Midtown Colonial, Midtown Lamonticello and West Broad. The Basis Term Loan matures on January 1, 2023, subject to two one-year extension options, subject to certain conditions. On June 29, 2022, the Basis Loan Agreement was amended and restated, effective December 27, 2019, to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”). The Basis Term Loan bears interest at a rate equal to the greater of (i) SOFR plus 3.97% per annum and (ii) 6.125% per annum. As of June 30, 2022, the Borrowers had entered into an interest rate cap that effectively capped LIBOR at 3.50% per annum. On August 1, 2022, the interest rate cap was modified to cap the SOFR rate at 3.50%. As of June 30, 2022, the interest rate of the Basis Term Loan was 6.125% and the outstanding balance was $66.9 million.

Certain of the Borrowers’ obligations under the Basis Loan Agreement are guaranteed by the Company and by Michael Z. Jacoby, the Company’s chairman and chief executive officer, and Thomas M. Yockey, a director of the Company. The Company has agreed to indemnify Mr. Yockey for any losses he incurs as a result of his guarantee of the Basis Term Loan.

The Basis Loan Agreement contains certain customary representations and warranties and affirmative negative and restrictive covenants, including certain property related covenants for the properties owned by the Sub-OP, including a requirement that certain capital improvements be made. The Basis Lender has certain approval rights over amendments or renewals of material leases (as defined in the Basis Loan Agreement) and property management agreements for the properties securing the Basis Term Loan.

If (i) an event of default exists, (ii) Broad Street Realty, LLC (“BSR”) or any other subsidiary of the Company serving as property manager for one of the secured parties becomes bankrupt, insolvent or a debtor in an insolvency proceeding, or there is a change of control of BSR or such other subsidiary without approval by the Basis Lender, (iii) a default occurs under the applicable management agreement, or (iv) the property manager has engaged in fraud, willful misconduct, misappropriation of funds or is grossly negligent with regard to the applicable property, the Basis Lender may require a Borrower to replace BSR or such other subsidiary of the Company as the property manager and hire a third party manager approved by the Basis Lender to manage the applicable property.

The Borrowers are generally prohibited from selling the properties securing the Basis Term Loan and the Company is prohibited from transferring any interest in any of the Borrowers, in each case without consent from the Basis Lender. The Company is prohibited from engaging in transactions that would result in a Change in Control (as defined in the Basis Loan Agreement) of the Company. Under the Basis Loan Agreement, among other things, it is deemed a Change in Control if Michael Z. Jacoby ceases to be the chairman and chief executive officer of the Company and actively involved in the daily activities and operations of the Company and the Borrowers and a competent and experienced person is not approved by the Basis Lender to replace Mr. Jacoby within 90 days of him ceasing to serve in such roles.

The Basis Loan Agreement provides for standard events of default, including nonpayment of principal and other amounts when due, non-performance of covenants, breach of representations and warranties, certain bankruptcy or insolvency events and changes in control. If an event of default occurs and is continuing under the Basis Loan Agreement, the Basis Lender may, among other things, require the immediate payment of all amounts owed thereunder.

In addition, if there is a default by the Company under the MVB Loan Agreement, by Mr. Jacoby under his guarantee of the loans under the MVB Loan Agreement or by Mr. Jacoby under a certain personal loan as long as he has pledged OP units as collateral for such loan, and such default has not been waived or cured, then the Basis Lender will have the right to sweep the Borrowers’ cash account in which they collect and retain rental payments from the properties securing the Basis Term Loan on a daily basis in order for the Basis Lender to create a cash reserve that will serve as collateral for the Basis Term Loan.

The Basis Loan Agreement includes a debt service coverage calculation based on the trailing twelve month's results which includes an adjustment for tenants that are more than one-month delinquent in paying rent. A debt service coverage ratio below 1.10x is a Cash Trap Trigger Event (as defined in the Basis Loan Agreement), which gives the Basis Lender the right to institute a cash management period until the trigger is cured. A debt service coverage ratio below 1.05x for two consecutive calendar quarters gives the Basis Lender the right to remove the Company as manager of the properties. The Company was in compliance with the debt service coverage calculation for the twelve months ended June 30, 2022.

Basis Preferred Interest

In December 2019, the Operating Partnership and Big BSP Investments, LLC, a subsidiary of a real estate fund managed by Basis (the “Preferred Investor”), entered into an amended and restated operating agreement (the “Sub-OP Operating Agreement”) of Broad Street BIG First OP, LLC (the “Sub-OP”), a subsidiary of the Operating Partnership. Pursuant to the Sub-OP Operating Agreement, among other things, the Preferred Investor committed to make an investment of up to $10.7 million in the Sub-OP, of which $6.9 million had been funded as of June 30, 2022, in exchange for a 1.0% membership interest in the Sub-OP designated as Class A units.

Pursuant to the Sub-OP Operating Agreement, the Preferred Investor is entitled to a cumulative annual return of 14.0% on its initial capital contribution (the “Class A Return”), and the Preferred Investor will be entitled to a 20% return (the “Enhanced Class A Return”) on any capital contribution made to the Sub-OP in excess of the $10.7 million commitment. The Preferred Investor’s interests must be redeemed on or before the earlier of: (i) January 1, 2023 and (ii) the date on which the Basis Term Loan is paid in full (the “Redemption Date”). The Redemption Date may be extended to December 31, 2023 and December 31, 2024, in each case subject to certain conditions, including the payment of a fee equal to 0.25% of the Preferred Investor’s net invested capital for the first extension option and a fee of 0.50% of the Preferred Investor’s net invested capital for the second extension option. If the redemption price is paid on or before the Redemption Date, then the redemption price will be equal to (a) all unreturned capital contributions made by the Preferred Investor, (b) all accrued but unpaid Class A Return, (c) all accrued but unpaid Enhanced Class A Return and (d) all costs and other expenses incurred by the Preferred Investor in connection with the enforcement of its rights under the Sub-OP Operating Agreement. Additionally, at the Redemption Date, the Preferred Investor is entitled to an amount equal to (a) the product of (i) the aggregate amount of capital contributions made and (ii) 0.4, less (b) the aggregate amount of Class A return payments made to the Preferred Investor (the “Minimum Multiple Amount”). As of June 30, 2022 and December 31, 2021, the Minimum Multiple Amount was approximately $0.3 million and $0.8 million, respectively, which is included as indebtedness on the consolidated balance sheets.

The Operating Partnership serves as the managing member of the Sub-OP. However, the Preferred Investor has approval rights over certain major decisions (as defined in the Sub-OP Operating Agreement), including, but not limited to, (i) the incurrence of new indebtedness or modification of existing indebtedness by the Sub-OP or its direct or indirect subsidiaries, (ii) capital expenditures over $250,000, (iii) any proposed change to a property directly or indirectly owned by the Sub-OP, (iv) direct or indirect acquisitions of new properties, (v) the sale or other disposition of any property directly or indirectly owned by the Sub-OP, (v) the issuance of additional membership interests in the Sub-OP, (vi) the entry into any new material lease or any amendment to an existing material lease and (vii) decisions regarding the dissolution, winding up or liquidation of the Sub-OP or the filing of any bankruptcy petition by the Sub-OP.

Under certain circumstances, including in the event that the Preferred Investor’s interests are not redeemed on or prior to the Redemption Date (as it may be extended), the Preferred Investor may remove the Operating Partnership as the manager of the Sub-OP and as the manager for each of the property-owning entities held under the Sub-OP.

The obligations of the Operating Partnership under the Sub-OP Operating Agreement are guaranteed by the Company, Mr. Jacoby, the Company’s chairman and chief executive officer, and Mr. Yockey, a director of the Company. The Company has agreed to indemnify Mr. Yockey for any losses he incurs as a result of this guarantee.

The Preferred Investor’s interests in the Sub-OP under the Sub-OP Operating Agreement are mandatorily redeemable, and, as a result, are characterized as indebtedness in the accompanying consolidated financial statements.

On June 16, 2020, the Preferred Investor made two additional capital contributions available to the Sub-OP in the aggregate amount of approximately $2.9 million, which is classified as debt. The two capital contributions consisted of: (i) a $2.4 million capital contribution to the Sub-OP that the Sub-OP contributed to the Borrowers for purposes of making debt service payments under the Basis Loan Agreement and (ii) a $0.5 million capital contribution to the Sub-OP that the Sub-OP contributed to certain of its other property owning subsidiaries for purposes of making debt service payments on mortgage debt secured by the properties owned by such subsidiaries and making payments of the Class A Return due to the Preferred Investor pursuant to the Sub-OP Operating Agreement. The Preferred Investor is entitled to a cumulative annual return of 13.0% on the additional capital contributions. As described below under the heading “—Mortgage Indebtedness,” the Company repaid approximately $0.8 million of these funds with the proceeds from the Vista Shops mortgage refinance. Additionally, approximately $0.3 million of availability under the capital contributions was returned to the Preferred Investor and is no longer available to the Company. On October 1, 2021, approximately $1.0 million of availability under the capital contributions was returned to the Preferred Investor and is no longer available to the Company. As of the date of these consolidated financial statements, there is no remaining availability to the Company from these capital contributions.

MVB Loan

In December 2019, the Company, the Operating Partnership and BSR entered into a loan agreement (the “MVB Loan Agreement”) with MVB Bank, Inc. (“MVB”) with respect to a $6.5 million loan consisting of a $4.5 million term loan (the “MVB Term Loan”) and a $2.0 million revolving credit facility (the “MVB Revolver”). The MVB Term Loan had an original maturity date of December 27, 2022, which has been extended to June 27, 2023 under the terms described below, and the MVB Revolver had an original maturity date of December 27, 2020, which has been extended to June 27, 2023 under the terms described below. The MVB Term Loan has a fixed interest rate of 6.75% per annum. The MVB Revolver carries an interest rate of the greater of (i) prime rate plus 1.5% and (ii) 6.75%.

The Company has no additional availability under the MVB Term Loan and the MVB Revolver as of June 30, 2022.

The MVB Loan Agreement is secured by certain personal property of the Company, the Operating Partnership and BSR. In addition, Mr. Jacoby has pledged a portion of his shares of the Company's common stock and a portion of his OP units as collateral under the MVB Loan Agreement. The obligations of the Company and the Operating Partnership under the MVB Loan Agreement are guaranteed by Mr. Jacoby, in his individual capacity.

The MVB Loan Agreement contains certain customary representations and warranties and affirmative and negative covenants. The MVB Loan Agreement also requires the Company to maintain (as such terms are defined in the MVB Loan Agreement) (i) a debt service coverage ratio of at least 1.30 to 1.00, (ii) an EBITDA to consolidated funded debt ratio of at least 8.0%, (iii) an aggregate minimum unencumbered cash, including funds available under other lines of credit, of greater than $5.0 million (the “Minimum Liquidity Requirement”), and (iv) one or more deposit accounts with MVB with an aggregate minimum balance of $3.0 million (the “Deposit Requirement”). The failure to comply with the Deposit Requirement is not a default under the MVB Loan Agreement but will increase the interest rate under the MVB Term Loan and MVB Revolver by 1.0% until the Deposit Requirement has been satisfied. During 2020, the lender under the MVB Loan Agreement agreed to require interest-only payments for three months in 2021 (April, May, and June) and deferred covenant tests until June 30, 2021 and December 31, 2021 (as described below).

In December 2020, the Company entered into an amendment to the MVB Loan Agreement, which extended the maturity date of the MVB Revolver to December 27, 2021 and in March 2021, the Company entered into another amendment to the MVB Loan Agreement which further extended the maturity date of the MVB Revolver to December 27, 2022. The amendments also eliminated the revolving nature of the facility, require monthly principal payments as calculated over a 10-year amortization schedule, and require the repayment of $250,000 on each of the following dates (a) the earlier of March 31, 2021 or the closing of the Company’s then-pending acquisitions of the Highlandtown and Spotswood properties, (b) the earlier of September 30, 2021 or the closing of the Company’s then-pending acquisitions of the Greenwood property, (c) March 31, 2022, and (d) September 30, 2022. The $250,000 payments owed by March 31, 2021, September 30, 2021 and March 31, 2022 have been paid. Additionally, the amendments (i) deferred testing for covenants related to the Deposit Requirement, Minimum Liquidity Requirement and debt service coverage ratio until June 30, 2021, (ii) deferred testing for the covenant related to the Company’s EBITDA to consolidated funded debt ratio until December 31, 2021, (iii) modified the debt service coverage ratio to 1.00 to 1 and (iv) modified the Minimum Liquidity Requirement to $3.0 million. These amendments were treated as modifications under the accounting standards.

On March 22, 2022, the Company entered into agreements (the “MVB Amendments”) with respect to the MVB Term Loan and the MVB Revolver, which further extended the maturity date of each to June 27, 2023. The MVB Amendments require the repayment of $250,000 on each of the following dates (i) on or before March 31, 2022; (ii) on or before September 30, 2022 and (iii) on or before March 31, 2023. The $250,000 payment owed by March 31, 2022 has been paid. The MVB Amendments also provide for a $2.0 million term loan (the “Second MVB Term Loan”). The Second MVB Term Loan has a fixed interest rate of 6.75% per annum and matures on June 27, 2023. The Company is required to pay an exit fee to MVB in an amount equal to two percent multiplied by the aggregate principal balance of the MVB Term Loan, the MVB Revolver and the Second MVB Term Loan at the time of the maturity date or just prior to such repayments. Additionally, the MVB Amendments modified the EBITDA to consolidated funded debt ratio from a minimum of 8.0% to 7.0%. These amendments were treated as modifications under the accounting standards.

The Company was in compliance with the debt service calculation at June 30, 2022.

The MVB Loan Agreement provides for standard events of default, including nonpayment of principal and other amounts when due, non-performance of covenants, breach of representations and warranties, certain bankruptcy or insolvency events and changes in control. If an event of default occurs and is continuing under the MVB Loan Agreement, MVB may, among other things, require the immediate payment of all amounts owed thereunder.

Lamont Street Preferred Interest

In connection with the closing of the Highlandtown and Spotswood acquisitions on May 21, 2021 and June 4, 2021, respectively, Lamont Street Partners LLC (“Lamont Street”) contributed an aggregate of $3.9 million in exchange for a 1.0% preferred membership

interest in BSV Highlandtown Investors LLC (“BSV Highlandtown”) and BSV Spotswood Investors LLC (“BSV Spotswood”) designated as Class A units (the “Lamont Street Preferred Investment”).

Lamont Street is entitled to a cumulative annual return of 13.5% (the “Lamont Street Class A Return”), of which 10.0% is paid current and 3.5% is accrued. Lamont Street’s interests are to be redeemed on or before September 30, 2023 (the “Lamont Street Redemption Date”). The Lamont Street Redemption Date may be extended by the Company to September 30, 2024 and September 30, 2025, in each case subject to certain conditions, including the payment of a fee equal to 0.25% of Lamont Street’s net invested capital for the first extension option and a fee of 0.50% of Lamont Street’s net invested capital for the second extension option. If the redemption price is paid on or before the Lamont Street Redemption Date, then the redemption price will be equal to (a) all unreturned capital contributions made by Lamont Street, (b) all accrued but unpaid Lamont Street Class A Return, and (c) all costs and other expenses incurred by Lamont Street in connection with the enforcement of its rights under the agreements. Additionally, at the Lamont Street Redemption Date, Lamont Street is entitled to (i) a redemption fee of 0.50% of the capital contributions returned and (ii) an amount equal to (a) the product of (i) the aggregate amount of capital contributions made and (ii) 0.26 less (b) the aggregate amount of Lamont Street Class A Return payments made to Lamont Street (the “Lamont Street Minimum Multiple Amount”). The Lamont Street Minimum Multiple Amount of approximately $1.0 million was recorded as interest expense in the consolidated statement of operations during the second quarter of 2021. As of June 30, 2022, the remaining Lamont Street Minimum Multiple Amount was approximately $0.4 million, which is included in indebtedness on the consolidated balance sheet.

The Operating Partnership serves as the managing member of BSV Highlandtown and BSV Spotswood. However, Lamont Street has approval rights over certain major decisions, including, but not limited to (i) the incurrence of new indebtedness or modification of existing indebtedness by BSV Highlandtown or BSV Spotswood, or their direct or indirect subsidiaries, (ii) capital expenditures over $100,000, (iii) any proposed change to a property directly or indirectly owned by BSV Highlandtown or BSV Spotswood, (iv) direct or indirect acquisitions of new properties by BSV Highlandtown or BSV Spotswood, (v) the sale or other disposition of any property directly or indirectly owned by BSV Highlandtown or BSV Spotswood, (vi) the issuance of additional membership interests in BSV Highlandtown or BSV Spotswood, (vii) any amendment to an existing material lease related to the properties and (viii) decisions regarding the dissolution, winding up or liquidation of BSV Highlandtown or BSV Spotswood or the filing of any bankruptcy petition by BSV Highlandtown or BSV Spotswood or their subsidiaries.

Under certain circumstances, including an event whereby Lamont Street’s interests are not redeemed on or prior to the Lamont Street Redemption Date (as it may be extended), Lamont Street may remove the Operating Partnership as the manager of BSV Highlandtown and BSV Spotswood.

Mortgage Indebtedness

In addition to the indebtedness described above, as of June 30, 2022 and December 31, 2021, the Company had approximately $94.1 million and $94.9 million, respectively, of outstanding mortgage indebtedness secured by individual properties. The Hollinswood mortgage, Vista Shops mortgage, Brookhill mortgage, Lamar Station Plaza East mortgage, Highlandtown mortgage, Cromwell mortgage, Spotswood mortgage and Greenwood Village mortgage require the Company to maintain a minimum debt service coverage ratio (as such terms are defined in the respective loan agreements) as follows in the table below.

 

 

Minimum Debt Service Coverage

Hollinswood Shopping Center

 

1.40 to 1.00

Vista Shops at Golden Mile

 

1.50 to 1.00

Brookhill Azalea Shopping Center

 

1.30 to 1.00

Lamar Station Plaza East

 

1.25 to 1.00

Highlandtown Village Shopping Center

 

1.25 to 1.00

Cromwell Field Shopping Center

 

1.00 to 1.00

Spotswood Valley Square Shopping Center

 

1.15 to 1.00

The Shops at Greenwood Village

 

1.40 to 1.00

The debt service coverage ratio required for the Lamar Station Plaza East mortgage was eliminated pursuant to the latest loan modification described below.

In March 2021, the Company completed the refinance of the Vista Shops mortgage loan. The new loan has a principal balance of $11.7 million, matures in June 2023, and carries an interest rate of 3.83% per annum. The Company deposited approximately $1.9 million of the proceeds from the refinance with the Basis Lender, which was applied as follows during the second quarter of 2021: (i) repaid approximately $0.75 million of the outstanding principal balance on the capital contributions, which are treated as debt, provided to the Company in June 2020 under the Basis Preferred Interest as described above under the heading “—Basis Preferred Interest”, (ii) paid approximately $46,000 in accrued interest on these funds and (iii) contributed approximately $1.1 million into an escrow account

with the Basis Lender which will be used to pay down the outstanding principal balance of the capital contributions upon satisfaction of certain conditions.

In July 2021, the Company entered into a modification of the Lamar Station Plaza East mortgage loan, which extended the maturity date of the loan to July 2022. The amendment also waived the debt service coverage ratio test for the period ending June 30, 2021 and required a debt service coverage ratio of (i) 1.05 to 1.0 for the three months ended September 30, 2021; (ii) 1.15 to 1.0 for the six months ended December 31, 2021; and (ii) 1.25 to 1.0 for the twelve months ended March 31, 2022. In August 2022, the Company entered into an additional loan modification of the Lamar Station Plaza East mortgage loan, which further extends the maturity date of the loan to October 17, 2022 and changed the interest rate to the Wall Street Journal Prime Rate, effective July 17, 2022. The modification also eliminates the debt service coverage ratio test and prevents the Company from receiving any additional construction advances under the loan.

In connection with the closing of the Company's acquisition of The Shops at Greenwood Village on October 6, 2021, the Company entered into a $23.5 million mortgage loan secured by the property, which bears interest at prime rate less 0.35% per annum and matures on October 10, 2028. The Company has entered into an interest rate swap which fixes the interest rate of the loan at 4.082%.

As of June 30, 2022, the Company was not in compliance with the debt service coverage ratio covenant under the Lamar Station Plaza East mortgage loan agreement, which matures on October 17, 2022. However, pursuant to the latest modification of the Lamar Station Plaza East mortgage loan described above, the debt service coverage ratio test was eliminated, effective July 17, 2022. As of June 30, 2022, the Company was in compliance with all other covenants under its debt agreements.

Deferred Financing Costs and Debt Discounts

The total amount of deferred financing costs associated with the Company’s debt as of June 30, 2022 and December 31, 2021 was $2.1 million, gross ($0.8 million, net) and $2.1 million, gross ($1.1 million, net), respectively. Debt discounts associated with the Company’s debt as of June 30, 2022 and December 31, 2021 were $2.1 million, gross ($0.6 million, net) and $2.1 million, gross ($1.0 million, net), respectively. Deferred financing costs and debt discounts are netted against the debt balance outstanding on the Company’s consolidated balance sheets and will be amortized to interest expense through the maturity date of the related debt.

The Company recognized amortization expense of deferred financing costs and debt discounts, included in interest expense in the consolidated statements of operations, of approximately $0.4 million and $0.3 million for the three months ended June 30, 2022 and 2021, respectively, and approximately $0.8 million and $0.5 million for the six months ended June 30, 2022 and 2021, respectively.

Debt Maturities

The following table details the Company’s scheduled principal repayments and maturities during each of the next five years and thereafter as of June 30, 2022:

(dollars in thousands)

 

Amount Due

 

Remainder of 2022

 

$

18,825

 

2023

 

 

115,976

 

2024

 

 

13,597

 

2025

 

 

11,111

 

2026

 

 

644

 

2027

 

 

672

 

Thereafter

 

 

19,772

 

 

 

 

180,597

 

Unamortized debt discounts and issuance costs, net

 

 

(1,335

)

Total

 

$

179,262

 

 

Interest Rate Cap and Interest Rate Swap Agreements

To mitigate exposure to interest rate risk, the Company entered into an interest rate cap agreement, effective December 27, 2019, on the full $66.9 million Basis Term Loan to cap the previously variable LIBOR interest rate at 3.5%. On June 29, 2022, the Basis Loan Agreement was amended and restated, effective December 27, 2019, to replace LIBOR with SOFR. The Basis Term Loan bears interest at a rate equal to the greater of (i) SOFR plus 3.97% per annum and (ii) 6.125% per annum. On August 1, 2022, the interest rate cap for the Basis Term Loan was modified to cap the SOFR rate at 3.5%. As of June 30, 2022, the interest rate of the Basis Term Loan was 6.125%. The Company also entered into two interest rate swap agreements on the Hollinswood loan to fix the interest rate at 4.06%. The swap agreements are effective as of December 27, 2019 on the outstanding balance of $10.2 million and on July 1, 2021 for the additional availability of $3.0 million under the Hollinswood loan.

On October 6, 2021, the Company entered into an interest rate swap agreement on the Greenwood Village loan to fix the interest rate at 4.082%.

The Company recognizes all derivative instruments as assets or liabilities at their fair value in the consolidated balance sheets. Changes in the fair value of the Company’s derivatives that are not designated as hedges or do not meet the criteria of hedge accounting are recognized in earnings. For the three months ended June 30, 2022 and 2021, the Company recognized gains of approximately $0.8 million and less than $0.1 million, respectively, as a component of “Derivative fair value adjustment” on the consolidated statements of operations. For the six months ended June 30, 2022 and 2021, the Company recognized gains of approximately $2.6 million and $0.2 million, respectively, as a component of “Derivative fair value adjustment” on the consolidated statements of operations.

The fair value of the Company’s derivative financial instruments as of June 30, 2022 and December 31, 2021 was an interest rate cap asset of less than $0.1 million for each period, an interest rate swap asset of approximately $2.2 million at June 30, 2022 and an interest rate swap liability of approximately $0.4 million at December 31, 2021. The interest rate cap asset and interest rate swap asset are included in Other assets, net and the interest rate swap liability is included in Accounts payable and accrued expenses on the consolidated balance sheets.