Debt

9 Months Ended

Sep. 30, 2020

7. Debt

A summary of the Company’s consolidated indebtedness is as follows (dollars in thousands):

	Interest Rate at				Carrying Value at
	September 30,	December 31,		Maturity Date at	September 30,			December 31,
	2020	2019		September 30, 2020	2020			2019
Mortgages Payable
Core Fixed Rate	3.88%-6.00%	3.88%-6.00%		Feb 2024 - Apr 2035	$	174,628		$	176,176
Core Variable Rate - Swapped ^(a)	3.41%-4.54%	3.41%-4.54%		Jan 2023 - Nov 2028		80,770			81,559
Total Core Mortgages Payable						255,398			257,735
Fund II Fixed Rate ^(b)	4.75%	4.75%		May 2022		200,000			200,000
Fund II Variable Rate	LIBOR+3.00%	LIBOR+3.00%		March 2022		26,670			24,225
Fund II Variable Rate - Swapped ^(a)	2.88%	2.88%		Nov 2021		18,872			19,073
Total Fund II Mortgages Payable						245,542			243,298
Fund III Variable Rate	LIBOR+2.75%-LIBOR+3.10%	LIBOR+2.75%-LIBOR+3.10%		Jan 2021 - Jun 2021		75,722			74,554
Fund IV Fixed Rate	3.40%-4.50%	3.40%-4.50%		Oct 2025 - Jun 2026		8,189			8,189
Fund IV Variable Rate	LIBOR+1.60%-LIBOR+3.40%	LIBOR+1.60%-LIBOR+3.40%		Dec 2020 - Aug 2021		178,380			157,015
Fund IV Variable Rate - Swapped ^(a)	3.48%-4.61%	3.48%-4.61%		Mar 2021 - Dec 2022		66,921			102,699
Total Fund IV Mortgages Payable						253,490			267,903
Fund V Variable Rate	LIBOR+1.50%-LIBOR+2.20%	LIBOR+1.50%-LIBOR+2.20%		Feb 2021 - Dec 2024		1,478			1,387
Fund V Variable Rate - Swapped ^(a)	2.95%-4.78%	2.95%-4.78%		Feb 2021 - Dec 2024		334,416			334,626
Total Fund V Mortgage Payable						335,894			336,013
Net unamortized debt issuance costs						(6,932	)		(10,078	)
Unamortized premium						574			651
Total Mortgages Payable					$	1,159,688		$	1,170,076
Unsecured Notes Payable
Core Variable Rate Unsecured Term Loans	LIBOR+2.55%		—	Jun 2021	$	30,000		$	—
Core Variable Rate Unsecured Term Loans - Swapped ^(a)	2.49%-5.02%	2.49%-5.02%		Mar 2023		350,000			350,000
Total Core Unsecured Notes Payable						380,000			350,000
Fund II Unsecured Notes Payable	LIBOR+1.65%	LIBOR+1.65%		Sep 2021		40,000			40,000
Fund IV Term Loan/Subscription Facility	LIBOR+1.65%-LIBOR+2.00%	LIBOR+1.65%-LIBOR+2.00%		Dec 2020 - June 2021		82,829			87,625
Fund V Subscription Facility	LIBOR+1.60%		—	May 2021		—			—

Net unamortized debt issuance costs						(329	)		(305	)
Total Unsecured Notes Payable					$	502,500		$	477,320
Unsecured Line of Credit
Core Unsecured Line of Credit -Swapped ^(a)	2.49%-5.02%	2.49%-5.02%		Mar 2022	$	127,400		$	60,800

Total Debt - Fixed Rate ^{(b, c )}					$	1,361,199		$	1,403,324
Total Debt - Variable Rate ^(d)						435,076			314,604
Total Debt						1,796,275			1,717,928
Net unamortized debt issuance costs						(7,261	)		(10,383	)
Unamortized premium						574			651
Total Indebtedness					$	1,789,588		$	1,708,196

(a)

At September 30, 2020, the stated rates ranged from LIBOR + 1.50% to LIBOR +1.90% for Core variable-rate debt; LIBOR + 1.39% for Fund II variable-rate debt; LIBOR + 2.75% to LIBOR + 3.10% for Fund III variable-rate debt; LIBOR + 1.75% to LIBOR +2.25% for Fund IV variable-rate debt; LIBOR + 1.50% to LIBOR + 2.20% for Fund V variable-rate debt; LIBOR + 1.25% for Core variable-rate unsecured term loans; and LIBOR + 1.35% for Core variable-rate unsecured lines of credit.

(b)

Includes $978.4 million and $948.8 million, respectively, of variable-rate debt that has been fixed with interest rate swap agreements as of the periods presented.

(c)

Fixed-rate debt at September 30, 2020 and December 31, 2019 includes $14.3 million and $70.2 million, respectively of Core swaps that may be used to hedge debt instruments of the Funds.

(d)

Includes $144.5 million and $143.3 million, respectively, of variable-rate debt that is subject to interest cap agreements.

Credit Facility

On February 20, 2018, the Company entered into a $500.0 million senior unsecured credit facility (the “Credit Facility”), comprised of a $150.0 million senior unsecured revolving credit facility (the “Revolver”) which bears interest at LIBOR + 1.40%, and a $350.0 million senior unsecured term loan (the “Term Loan”) which bears interest at LIBOR + 1.30%.

On October 8, 2019, the Company modified the Credit Facility, which provided for a $100.0 million increase in the Revolver. This amendment resulted in borrowing capacity of up to $600.0 million in principal amount, which includes a $250.0 million revolving credit facility maturing on March 31, 2022, subject to an extension option, and a $350.0 million Term Loan expiring on March 31, 2023. In addition, the amendment provides for revisions to the accordion feature, which allows for one or more increases in the revolving credit facility or term loan facility, for a maximum aggregate principal amount not to exceed $750.0 million.

Mortgages Payable

During the nine months ended September 30, 2020, the Company:

•

extended the maturity dates of a $200.0 million Fund II loan from May 2020 to May 2022 and the $150.0 million Fund V Subscription line from May 2020 to May 2021. In addition, the Company extended five Fund mortgages, three of which were extended for one year during the second quarter with aggregate outstanding balances of $75.4 million at September 30, 2020 and two of which were extended for one year during the third quarter with aggregate outstanding balances of $55.4 million at September 30, 2020;

•

modified the terms of one Fund IV $23.8 million mortgage, which had $18.9 million outstanding, in June 2020 to adjust the allowable timing of draws. At closing, an additional $1.0 million was drawn and in July 2020 an additional $0.9 million was drawn;

•

negotiated mortgage interest payment deferrals during the second quarter in relation to the COVID-19 Pandemic for three months on two Core loans and seven Fund loans aggregating $1.8 million. Of this total deferral, $0.7 million has since been repaid as of September 30, 2020;

•

entered into two swap agreements in February 2020 each with notional values of $50.0 million, which are not effective until April 2022 and April 2023. In July 2020, two previously-executed forward swap agreements took effect with current notional values as of September 30, 2020 of $30.4 million each (Note 8);

•

At September 30, 2020 five Fund mortgages aggregating $177.7 million, or $36.2 million at the Company’s share, had not met their debt yield and/or debt service coverage ratio requirements. Some of these lenders may require cash sweeps of property rents until the condition is remedied.

•

repaid one Fund IV mortgage of $11.6 million in connection with the sale of Colonie Plaza in April 2020 (Note 2); and

•

made scheduled principal payments of $4.2 million.

During the year ended December 31, 2019 the Company:

•

obtained one new Fund II construction loan, three new Fund IV mortgages and five new Fund V mortgages totaling $258.9 million with a weighted-average interest rate of LIBOR + 1.70% collateralized by nine properties and maturing in 2022 through 2024;

•

refinanced three mortgages with existing balances totaling $69.0 million at a weighted-average rate of LIBOR + 2.08% and maturities ranging from May 2019 to January 2021 with new mortgages totaling $71.8 million with a weighted-average rate of LIBOR + 1.86% and maturities ranging from April 2022 through December 2024;

•

transferred a Fund III mortgage with a balance of $4.7 million and an interest rate of Prime + 0.5% which was assumed by the purchasing venture in a property sale (Note 2). The Company repaid one Fund III loan in the amount of $9.8 million and two Fund IV loans in the aggregate amount of $18.4 million in connection with the sale of the properties. The Company also repaid a Fund IV loan in full, which had a balance of $38.2 million and an interest rate of LIBOR + 2.35%. The Company also made scheduled principal payments of $5.9 million;

•

modified three loans with prior borrowing capacity totaling $135.9 million at a weighted-average rate of LIBOR + 3.65% and maturities ranging from November 2019 through January 2020 by obtaining new commitments totaling $125.3 million with a weighted-average rate of LIBOR + 2.96% and maturities ranging from December 2020 through May 2021; and

•

entered into interest rate swap contracts to effectively fix the variable portion of the interest rates of all nine new obligations and two of the refinanced obligations with a notional value of $283.6 million at a weighted-average interest rate of 1.78%.

At September 30, 2020 and December 31, 2019, the Company’s mortgages were collateralized by 43 and 44 properties, respectively, and the related tenant leases. Certain loans are cross-collateralized and contain cross-default provisions. The loan agreements contain customary

representations, covenants and events of default. Certain loan agreements require the Company to comply with affirmative and negative covenants, including the maintenance of debt service coverage and leverage ratios. The Company is not in default of its loan agreements, except as noted below. A portion of the Company’s variable-rate mortgage debt has been effectively fixed through certain cash flow hedge transactions (Note 8).

The mortgage loan collateralized by the property held by Brandywine Holdings in the Core Portfolio, was in default and subject to litigation at September 30, 2020 and December 31, 2019. The loan was originated in June 2006 and had an original principal amount of $26.3 million and a scheduled maturity of July 1, 2016. By maturity, the loan was in default. The loan bore interest at a stated rate of approximately 6% and was subject to additional default interest of 5%. In April 2017, the successor to the original lender, Wilmington – 5190 Brandywine Parkway, LLC (the “Successor Lender”), initiated lawsuits against Brandywine Holdings in Delaware Superior Court and Delaware Court of Chancery, for among other things, judgment on the note (the “Note Complaint”) and foreclosure on the property. In a contemporaneously filed action in Delaware Superior Court (the “Guaranty Complaint”), the Successor Lender also initiated a lawsuit against the Operating Partnership as guarantor of certain guaranteed obligations of Brandywine Holdings set forth in a non-recourse carve-out guaranty executed by the Operating Partnership. The Guaranty Complaint alleged that the Operating Partnership was liable for the original principal, accrued interest, default interest, late charges as well as fees, costs and protective advances, under the Brandywine Loan, which the Successor Lender alleged totaled approximately $33.0 million as of November 9, 2017 (exclusive of accruing interest, default interest, late charges, and fees and costs). In August 2019, the Delaware Superior Court heard arguments on the parties’ cross-motions for summary judgment regarding both the Guaranty Complaint and the Note Complaint. On February 7, 2020, the Delaware Superior Court granted in part the Successor Lender’s motion, and denied Brandywine Holdings’ and the Operating Partnership’s cross-motion, for summary judgment, finding that each of Brandywine Holdings and the Operating Partnership have recourse liability under the Brandywine Loan and requesting the parties to contact the Court regarding a hearing of any additional outstanding issues. On June 24, 2020, the Successor Lender filed a motion to (i) amend the Note Complaint and Guaranty Complaint in order to increase the alleged balance under the Brandywine Loan to $46.8 million as of March 31, 2020, plus default interest of $0.3 million and additional attorneys’ fees of $0.2 million from April 1, 2020 to April 23, 2020, minus suspense funds of $1.5 million, and (ii) for entry of judgment in the foregoing amounts. Brandywine Holdings and the Operating Partnership opposed the motion. By Final Order and Judgment, entered July 27, 2020, the Delaware Superior Court denied the Successor Lender’s motion, and entered judgment against Brandywine Holdings and the Operating Partnership, jointly and severally, in the amount of $33.2 million, plus accruing interest and default interest in the total amount of $8,017 per diem from and after November 10, 2017 through the date of entry of judgment, less $1.3 million in “suspense funds” (consisting of unapplied property collections minus unapplied fees (including attorneys’ fees), costs, and protective advances made on Successor Lender’s behalf), together with post judgment interest, accruing after the entry of judgment, at the contract rate of interest agreed to by the parties. In connection with the Final Order and Judgment, during the three months ended June 30, 2020, the Company recorded an additional $6.8 million related primarily to legal and other costs of which the Company’s proportionate share was $1.5 million. Brandywine Holdings and the Operating Partnership filed a notice of appeal of the ruling by the Delaware Superior Court and the lender filed a notice of cross-appeal. On October 2, 2020, on request of all parties to the litigation, the appeal and cross-appeal were stayed by the Supreme Court of Delaware for a period of 90 days so that the parties could pursue settlement of the litigation. On October 30, 2020, this matter was settled (Note 15).

During the third quarter of 2019, the Company recognized income of $5.0 million related to Fund II’s New Market Tax Credit transaction (“NMTC”) involving its City Point project. NMTCs were created to encourage economic development in low income communities and provided for a 39% tax credit on certain qualifying invested equity/loans. In 2012, the NMTCs were transferred to a group of investors (“Investors”) in exchange for $5.2 million. The NMTCs were subject to recapture under various circumstances, including redemption of the loan/investment prior to a requisite seven-year hold period, and recognition of income was deferred. Upon the expiration of the seven-year period and no further obligations, the Company recognized income of $5.0 million during the three and nine months ended September 30, 2019, of which the Company’s proportionate share was $1.4 million, which is included in Interest and other income in the consolidated statements of operations.

Unsecured Notes Payable

Unsecured notes payable for which total availability was $157.3 million and $152.5 million at September 30, 2020 and December 31, 2019, respectively, are comprised of the following:

•

The outstanding balance of the Core term loan was $350.0 million at September 30, 2020 and December 31, 2019. The Company previously entered into swap agreements fixing the rates of the remaining Core term loan balance.

•

On July 1, 2020, the Company obtained an additional $30.0 million Core term loan, with an accordion option to increase up to $90.0 million. This term loan matures on June 30, 2021 and bears interest at LIBOR plus 2.55% with a LIBOR floor of 0.75%. The outstanding balance and total availability at September 30, 2020 was $30.0 million and $0.0 million, respectively.

•

Fund II has a $40.0 million term loan secured by the real estate assets of City Point Phase II and guaranteed by the Operating Partnership. The outstanding balance of the Fund II term loan was $40.0 million at each of September 30, 2020 and December 31, 2019. There was no availability at each of September 30, 2020 and December 31, 2019.

•

Fund IV has a $79.2 million bridge facility and a $15.0 million subscription line. The bridge facility is guaranteed by the Operating partnership up to $50.8 million. The outstanding balance and total available credit of the Fund IV bridge facility was $79.2 million and $0.0 million, respectively at each of September 30, 2020 and at December 31, 2019. The outstanding balance and total available credit of the Fund IV subscription line was $3.6 million and $7.3 million, respectively at September 30, 2020, reflecting letters of credit of $4.1 million. The outstanding balance and total availability at December 31, 2019 was $8.4 million and $2.5 million, respectively, reflecting letters of credit of $4.1 million.

•

Fund V has a $150.0 million subscription line collateralized by Fund V’s unfunded capital commitments, and, to the extent of Acadia’s capital commitments, is guaranteed by the Operating Partnership. The outstanding balance and total available credit of the Fund V subscription line was $0.0 million and $150.0 million, respectively at September 30, 2020 and December 31, 2019.

Unsecured Revolving Line of Credit

The Company had a total of $112.1 million and $173.6 million available under its $250.0 million Core Revolver, reflecting borrowings of $127.4 million and $60.8 million and letters of credit of $10.5 million and $15.6 million at September 30, 2020 and December 31, 2019, respectively. At each of September 30, 2020 and December 31, 2019, all of the Core unsecured revolving line of credit was swapped to a fixed rate.

Scheduled Debt Principal Payments

The scheduled principal repayments, without regard to available extension options (described further below), of the Company’s consolidated indebtedness, as of September 30, 2020 are as follows (in thousands):

Year Ending December 31,
2020 (Remainder)	$	88,360
2021		455,086
2022		427,401
2023		415,507
2024		212,015
Thereafter		197,906
		1,796,275
Unamortized premium		574
Net unamortized debt issuance costs		(7,261	)
Total indebtedness	$	1,789,588

The table above does not reflect available extension options (subject to customary conditions) on consolidated debt of $56.7 million contractually due in 2020, $271.2 million contractually due in 2021, $365.7 million contractually due in 2022 and $41.5 million contractually due in 2023; all for which the Company has available options to extend by up to 12 months and for some an additional 12 months thereafter. However, there can be no assurance that the Company will be able to successfully execute any or all of its available extension options.

See Note 4 for information about liabilities of the Company’s unconsolidated affiliates.