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DEBT
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
DEBT
7. DEBT
The following table summarizes the debt balances as of September 30, 2023 and December 31, 2022, and the debt activity for the nine months ended September 30, 2023 (in thousands):
During the Nine Months Ended September 30, 2023
Balances as of December 31, 2022Debt Issuances & AssumptionsRepayments Accretion & (Amortization)Balances as of September 30, 2023
Mortgages Payable:
Fixed rate mortgage payable$97,100 $— $— $— $97,100 
Variable rate mortgages payable— 182,600 (16,000)— 166,600 
97,100 182,600 (16,000)— 263,700 
Deferred debt origination costs — Mortgages Payable(94)(1,852)— 749 (1,197)
Total Mortgages Payable97,006 180,748 (16,000)749 262,503 
Secured Borrowings — Government Guaranteed Loans:
Outstanding Balance5,979 — (1,434)— 4,545 
Unamortized premiums258 — — (37)221 
Total Secured Borrowings — Government Guaranteed Loans6,237 — (1,434)(37)4,766 
Other Debt:
2022 credit facility revolver— 247,000 (170,000)— 77,000 
2022 credit facility term loan56,230 — — — 56,230 
Junior subordinated notes27,070 — — — 27,070 
SBA 7(a) loan-backed notes— 54,141 (8,239)— 45,902 
Deferred debt origination costs — other(779)(1,312)— 368 (1,723)
Discount on junior subordinated notes(1,497)— — 74 (1,423)
Total Other Debt81,024 299,829 (178,239)442 203,056 
Total Debt, Net$184,267 $480,577 $(195,673)$1,154 $470,325 
Fixed Rate Mortgage Payable—The Company’s fixed rate mortgage payable is secured by a deed of trust on a property and assignments of rents receivable. As of September 30, 2023, the Company’s fixed rate 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.
Variable Rate Mortgages Payable—The Company’s variable rate mortgages payable are secured by a deed of trust on the respective properties and assignments of rents receivable. As of September 30, 2023, the Company’s variable rate mortgages payable had a variable interest rates ranging from SOFR plus 3.25% - 3.35%, with monthly payments of interest only, due on various dates from June 7, 2024 to July 7, 2025 with extension options subject to certain conditions being met. In regards to the variable rate mortgage payable maturing on June 7, 2024, the Company expects to exercise its extension option or refinance such indebtedness prior to maturity. The loans are 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, 2023, the Company’s secured borrowings-government guaranteed loans included $3.0 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 8.79% at September 30, 2023, and $1.6 million of loans sold for an excess spread, with a variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 6.63% at September 30, 2023.
2022 Credit Facility—In December 2022, the Company refinanced its 2018 credit facility and replaced it with a new 2022 credit facility, entered into with a bank syndicate, that includes a $56.2 million term loan (the “2022 Credit Facility Term Loan”) as well as a revolver allowing the Company to borrow up to $150.0 million (the “2022 Credit Facility Revolver”), both of which are collectively subject to a borrowing base calculation. The 2022 credit facility is secured by certain properties in the Company’s real estate portfolio: six office properties and one hotel property (as well as the hotel’s adjacent parking garage and retail property). The 2022 credit facility bears interest at (A) the base rate plus 1.50% or (B) SOFR plus 2.60%. As of September 30, 2023, the variable interest rate was 7.92%. The 2022 Credit Facility Revolver is also subject to an unused commitment fee of 0.15% or 0.25% depending on the amount of aggregate unused commitments. The 2022 credit facility is guaranteed by the Company and the Company is subject to certain financial maintenance covenants. The 2022 credit facility matures in December 2025 and provides for two one-year extension options under certain conditions, including providing notice of the election and paying an extension fee of 0.15% of each lender’s commitment being extended on the effective date of such extension. As of September 30, 2023 and December 31, 2022, $73.0 million and $150.0 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 SOFR plus 3.51%, 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 March 9, 2023, the Company completed a securitization of the unguaranteed portion of certain of its SBA 7(a) loans receivable with the issuance of $54.1 million of unguaranteed SBA 7(a) loan-backed notes (with net proceeds of approximately $43.3 million, after payment of fees and expenses in connection with the securitization and the funding of a reserve account and an escrow account). The SBA 7(a) loan-backed notes are collateralized by the right to receive payments and other recoveries attributable to the unguaranteed portions of certain of our SBA 7(a) loans receivable. The SBA 7(a) loan-backed notes mature on March 20, 2048, with monthly payments due as payments on the collateralized loans are received. The SBA 7(a) loan-backed notes bear interest at a per annum rate equal to the lesser of (i) 30-day average compounded SOFR plus 2.90% and (ii) prime rate minus 0.35%. As of September 30, 2023, the variable interest rate was 8.14%. The Company reflects the SBA 7(a) loans receivable as assets on its consolidated balance sheet and the SBA 7(a) loan-backed notes as debt on its consolidated balance sheet. The restricted cash on the Company’s consolidated balance sheets included funds related to the Company’s SBA 7(a) loan-backed notes was $6.4 million as of September 30, 2023.
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, 2023 and December 31, 2022, accrued interest and unused commitment fees payable of $1.6 million and $562,000, respectively, were included in accounts payable and accrued expenses.
Future principal payments on the Company’s debt (face value) as of September 30, 2023 are as follows (in thousands):
Years Ending December 31,Mortgage Payable
Secured Borrowings Principal (1)
2022 Credit Facility
Other (1) (2)
Total
2023 (Three months ending December 31, 2023)$— $54 $— $798 $852 
202479,600 229 — 8,576 88,405 
202587,000 248 133,230 7,767 228,245 
202697,100 245 — 7,047 104,392 
2027— 289 — 6,436 6,725 
Thereafter— 3,480 — 42,348 45,828 
$263,700 $4,545 $133,230 $72,972 $474,447 
______________________
(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.
(2)Represents the junior subordinated notes and SBA 7(a) loan-backed notes.