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Notes Payable, Bank Credit Facility, Interest and Amortization of Deferred Debt Costs
 6 Months Ended
Jun. 30, 2023
Debt Disclosure [Abstract]  
Notes Payable, Bank Credit Facility, Interest and Amortization of Deferred Debt Costs Notes Payable, Bank Credit Facility, Interest and Amortization of Deferred Debt Costs
At June 30, 2023, the Company had a $525.0 million senior unsecured credit facility (the “Credit Facility”) comprised of a $425.0 million revolving credit facility and a $100.0 million term loan. The revolving credit facility matures on August 29, 2025, and may be extended by the Company for one additional year, subject to satisfaction of certain conditions. The term loan matures on February 26, 2027. Interest accrues at the Secured Overnight Financing Rate (“SOFR”) plus 10 basis points plus an applicable spread, which is determined by certain leverage tests. As of June 30, 2023, the applicable spread for borrowings was 140 basis points related to the revolving credit facility and 135 basis points related to the term loan. Letters of credit may be issued under the Credit Facility. On June 30, 2023, based on the value of the Company’s unencumbered properties calculated in accordance with the terms of the Credit Facility, approximately $165.3 million was available and undrawn under the Credit Facility, $319.0 million was outstanding and approximately $185,000 was committed for letters of credit.
On August 23, 2022, the Company entered into two floating-to-fixed interest rate swap agreements to manage the interest rate risk associated with $100.0 million of its variable-rate debt. The effective date of each swap agreement is October 3, 2022 and each has a $50.0 million notional amount. One agreement terminates on October 1, 2027 and effectively fixes SOFR at 2.96%. The other agreement terminates on October 1, 2030 and effectively fixes SOFR at 2.91%. Because the interest-rate swaps effectively fix SOFR for $100.0 million of variable-rate debt, unless otherwise indicated, $100.0 million of variable-rate debt is being treated as fixed-rate debt for disclosure purposes beginning September 30, 2022. The Company has designated the agreements as cash flow hedges for accounting purposes.
As of June 30, 2023, the fair value of the interest-rate swaps totaled approximately $4.3 million, which is included in Other assets in the Consolidated Balance Sheets. The increase in value from inception of the swaps is reflected in Other Comprehensive Income in the Consolidated Statements of Comprehensive Income.
On March 8, 2023, the Company closed on a 10-year, non-recourse, $15.3 million mortgage secured by BJ’s Wholesale Club in Alexandria, Virginia. The loan matures in 2033, bears interest at a fixed-rate of 6.07%, requires monthly principal and interest payments of $99,200 based on a 25-year amortization schedule and requires a final principal payment of $11.7 million at maturity. Proceeds were used to repay the remaining balance of approximately $9.3 million on the existing mortgage and reduce the outstanding balance of the Credit Facility.
During the second quarter of 2023, the Company commenced drawing on its $145.0 million construction-to-permanent loan related to the residential and retail portions of Phase I of the Twinbrook Quarter development project. As of June 30, 2023, the outstanding balance on the loan was $25.8 million, net of unamortized deferred debt costs.
Saul Centers and certain consolidated subsidiaries of the Operating Partnership have guaranteed the payment obligations of the Operating Partnership under the Credit Facility. The Operating Partnership is the guarantor of (a) the construction-to-permanent loan secured by Twinbrook Quarter Phase I (approximately $28.4 million at June 30, 2023), (b) the mortgage secured by Kentlands Place, Kentlands Square I and Kentlands Pad (totaling $27.7 million at June 30, 2023), (c) a portion of the mortgage secured by The Waycroft (approximately $23.6 million of the $150.9 million outstanding balance at June 30, 2023), (d) the mortgage secured by Ashbrook Marketplace (approximately $20.5 million at June 30, 2023) and (e) a portion of
the mortgage secured by Avenel Business Park (approximately $6.3 million of the $22.3 million outstanding balance at June 30, 2023). All other notes payable are non-recourse.
The principal amount of the Company’s outstanding debt totaled approximately $1.31 billion at June 30, 2023, of which approximately $1.09 billion was fixed-rate debt and approximately $219.0 million was unhedged variable rate debt outstanding under the Credit Facility. The carrying amount of the properties collateralizing the notes payable totaled approximately $1.33 billion as of June 30, 2023.
At December 31, 2022, the principal amount of the Company’s outstanding debt totaled approximately $1.24 billion, of which $1.07 billion was fixed rate debt and $164.0 million was unhedged variable rate debt outstanding under the Credit Facility. The carrying amount of the properties collateralizing the notes payable totaled approximately $1.04 billion as of December 31, 2022.
At June 30, 2023, the future principal payments of debt, including scheduled maturities and amortization, for years ending December 31, were as follows:
(In thousands)Principal Payments
July 1 through December 31, 2023$16,728 
202483,973 
2025271,086 (a)
2026162,468 
2027123,792 (b)
202841,863 
Thereafter611,879 
Principal amount1,311,789 
Unamortized deferred debt costs17,659 
Net$1,294,130 

(a) Includes $219.0 million outstanding under the Credit Facility.
(b) Includes $100.0 million outstanding under the Credit Facility.
Deferred debt costs consist of fees and costs incurred to obtain long-term financing, construction financing and the Credit Facility. These fees and costs are being amortized on a straight-line basis over the terms of the respective loans or agreements, which approximates the effective interest method. Deferred debt costs totaling $17.7 million and $15.8 million, net of accumulated amortization of $9.1 million and $7.9 million, at June 30, 2023 and December 31, 2022, respectively, and are reflected as a reduction of the related debt in the Consolidated Balance Sheets. At June 30, 2023, deferred debt costs totaling $2.9 million related to the Hampden House construction-to-permanent loan, which has no outstanding balance, are included in Other Assets in the Consolidated Balance Sheets. At December 31, 2022, deferred debt costs totaling $2.7 million and $3.0 million, related to the Twinbrook Quarter and Hampden House construction-to-permanent loans, respectively, which had no outstanding balance, were included in Other Assets in the Consolidated Balance Sheets.
Interest expense, net and amortization of deferred debt costs for the three and six months ended June 30, 2023 and 2022, were as follows:
 Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2023202220232022
Interest incurred$16,267 $12,468 $31,780 $24,781 
Amortization of deferred debt costs564 465 1,122 941 
Capitalized interest(4,472)(2,474)(8,614)(4,661)
Interest expense12,359 10,459 24,288 21,061 
Less: Interest income81 2 189 2 
Interest expense, net and amortization of deferred debt costs$12,278 $10,457 $24,099 $21,059