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DEBT
 9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
DEBT
7. DEBT
The following table summarizes the debt balances as of September 30, 2022 and December 31, 2021, and the debt activity for the nine months ended September 30, 2022 (in thousands):
During the Nine Months Ended September 30, 2022
Balances as of December 31, 2021Debt Issuances & AssumptionsRepayments Accretion & (Amortization)Balances as of September 30, 2022
Mortgage Payable:
Outstanding Balance$97,100 $— $— $— $97,100 
Deferred debt origination costs — Mortgage Payable(120)— — 19 (101)
Total Mortgage Payable96,980 — — 19 96,999 
Secured Borrowings — Government Guaranteed Loans:
Outstanding Balance6,671 — (631)— 6,040 
Unamortized premiums305 — — (41)264 
Total Secured Borrowings — Government Guaranteed Loans6,976 — (631)(41)6,304 
Other Debt:
2018 revolving credit facility60,000 110,000 (85,000)— 85,000 
Junior subordinated notes27,070 — — — 27,070 
SBA 7(a) loan-backed notes7,670 — (4,922)— 2,748 
Borrowed funds from the Federal Reserve through the Paycheck Protection Program Liquidity Facility5,030 — (5,030)— — 
Deferred debt origination costs — other(989)— — 831 (158)
Discount on junior subordinated notes(1,592)— — 71 (1,521)
Total Other Debt97,189 110,000 (94,952)902 113,139 
Total Debt, Net$201,145 $110,000 $(95,583)$880 $216,442 
Mortgage Payable—The mortgage payable is secured by a deed of trust on a property and assignments of rents receivable. As of September 30, 2022, the Company’s mortgage payable had a fixed interest rate of 4.14% per annum, with monthly payments of interest only, due on July 1, 2026. The loan is nonrecourse.
Secured Borrowings—Government Guaranteed Loans—Secured borrowings—government guaranteed loans represent sold loans which are treated as secured borrowings because the loan sales did not meet the derecognition criteria provided for in ASC 860-30, Secured Borrowing and Collateral. These loans included cash premiums that are amortized as a reduction to interest expense over the life of the loan using the effective interest method and are fully amortized when the underlying loan is repaid in full. As of September 30, 2022, the Company’s secured borrowings-government guaranteed loans included $3.6 million of loans sold for a premium and excess spread, with a variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 5.38% at September 30, 2022, and $2.4 million of loans sold for an excess spread, with a variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 3.07% at September 30, 2022.
2018 Revolving Credit Facility—In October 2018, the Company entered into a secured revolving credit facility with a bank syndicate that, as amended, allows the Company to borrow up to $209.5 million, subject to a borrowing base calculation (the “2018 revolving credit facility”). The 2018 revolving credit facility is secured by properties in the Company’s real estate portfolio: eight office properties and one hotel property. In September 2020, the 2018 revolving credit facility was amended (the “2018 Credit Facility Modification”) to remedy the effect that COVID-19 had on the Company’s ability to borrow under the 2018 revolving credit facility during the period from September 2, 2020 through August 14, 2021 (the “Deferral Period”). The 2018 revolving credit facility bore interest during the Deferral Period at (A) the base rate plus 1.05% or (B) LIBOR plus 2.05% and (ii) bears interest after the Deferral Period, at (A) the base rate plus 0.55% or (B) LIBOR plus 1.55%. As of
September 30, 2022 and December 31, 2021, the variable interest rate was 4.33% and 2.15%, respectively. The 2018 revolving credit facility is also subject to an unused commitment fee of 0.15% or 0.25% depending on the amount of aggregate unused commitments. The 2018 revolving credit facility contains customary covenants and is not subject to any financial covenants (though the amount the Company may borrow under the 2018 revolving credit facility is determined by a borrowing base calculation). The Company is working with a bank to refinance the 2018 revolving credit facility which management believes is probable based on its projected performance and current capital market conditions. There can, however, be no assurance that such refinancing will occur. In the interim, the Company has executed a one-year extension of the 2018 Revolving Credit Facility to extend its maturity to October 2023. In connection with the extension, the Company paid 25% of the extension fee specified in the 2018 Revolving Credit Facility (i.e., 25% of 0.15% of each lender’s commitment being extended) on October 30, 2022, with the remaining 75% of the extension fee specified in the 2018 Revolving Credit Facility (i.e., 75% of 0.15% of each lender’s commitment being extended) being due and payable on the date that is 90 days after October 30, 2022. The Company believes cash on hand, proceeds from the sale of our Series A1 Preferred Stock, net cash provided by operations and the entry into new financing arrangements will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. As of September 30, 2022 and December 31, 2021, $85.0 million and $60.0 million, respectively, was outstanding under the 2018 revolving credit facility, and approximately $119.9 million and $117.6 million, respectively, was available for future borrowings.
Junior Subordinated Notes—The Company has junior subordinated notes with a variable interest rate which resets quarterly based on the three-month LIBOR plus 3.25%, with quarterly interest only payments. The junior subordinated balance is due at maturity on March 30, 2035. The junior subordinated notes may be redeemed at par at the Company’s option.
SBA 7(a) Loan-Backed Notes—On May 30, 2018, the Company completed a securitization of the unguaranteed portion of certain of its SBA 7(a) loans receivable with the issuance of $38.2 million of unguaranteed SBA 7(a) loan-backed notes. The SBA 7(a) loan-backed notes are secured by deeds of trust or mortgages and are collateralized solely by the right to receive payments and other recoveries attributable to the unguaranteed portions of certain of the Company’s SBA 7(a) loans receivable. The SBA 7(a) loan-backed notes mature on March 20, 2043, with monthly payments due as payments on the collateralized loans are received. Based on the anticipated repayments of the Company’s collateralized SBA 7(a) loans, at issuance, the Company estimated the weighted average remaining life of the SBA 7(a) loan-backed notes to be approximately two years. The SBA 7(a) loan-backed notes bear interest at the lower of the one-month LIBOR plus 1.40% or the prime rate less 1.08%. As of September 30, 2022 and December 31, 2021, the variable interest rate was 4.41% and 1.49%, respectively. The Company reflects the SBA 7(a) loans receivable as assets on its consolidated balance sheets and the SBA 7(a) loan-backed notes as debt on its consolidated balance sheets. The restricted cash on the Company’s consolidated balance sheets included funds related to the Company’s SBA 7(a) loan-backed notes of $1.5 million and $1.9 million as of September 30, 2022 and December 31, 2021, respectively.
Paycheck Protection Program Liquidity Facility—In June 2020, the Company commenced borrowing funds from the Federal Reserve through the PPP Liquidity Facility (the “PPPLF”) to finance all the loans the Company originated under the PPP. Advances under the PPPLF carried an interest rate of 0.35%, were made on a dollar-for-dollar basis based on the amount of loans originated under the PPP and were secured by loans made by the Company under the PPP. The maturity date of PPPLF borrowings was the same as the maturity date of the loans pledged to secure the extension of credit, generally two years. As of September 30, 2022 and December 31, 2021, $0 and $5.0 million, respectively, was outstanding under the PPPLF as the PPP has ended and as of September 30, 2022, all obligations to the Federal Reserve have been satisfied.
Deferred debt issuance costs, which represent legal and third-party fees incurred in connection with the Company’s borrowing activities, are capitalized and amortized to interest expense on a straight-line basis over the life of the related loan, approximating the effective interest method. Deferred debt issuance costs are presented net of accumulated amortization and are a reduction to total debt.
As of September 30, 2022 and December 31, 2021, accrued interest and unused commitment fees payable of $351,000 and $467,000, respectively, were included in accounts payable and accrued expenses.
Future principal payments on the Company’s debt (face value) as of September 30, 2022 are as follows (in thousands):
Years Ending December 31,Mortgage Payable
Secured Borrowings Principal (1)
2018 Revolving Credit Facility
Other (1) (2)
Total
2022 (Three months ending December 31, 2022)$— $81 $— $327 $408 
2023— 335 85,000 166 85,501 
2024— 349 — 171 520 
2025— 365 — 204 569 
202697,100 382 — 128 97,610 
Thereafter— 4,528 — 28,822 33,350 
$97,100 $6,040 $85,000 $29,818 $217,958 
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(1)Principal payments on secured borrowings and SBA 7(a) loan-backed notes, which are included in Other, are generally dependent upon cash flows received from the underlying loans. The Company’s estimate of their repayment is based on scheduled payments on the underlying loans. The Company’s estimate will differ from actual amounts to the extent the Company experiences prepayments and or loan liquidations or charge-offs. No payment is due unless payments are received from the borrowers on the underlying loans.
(2)Represents the junior subordinated notes and SBA 7(a) loan-backed notes.