Annual report pursuant to Section 13 and 15(d)

Note Payable and Revolving Line of Credit

v3.19.1
Note Payable and Revolving Line of Credit
12 Months Ended
Dec. 31, 2018
Notes Payable [Abstract]  
Note Payable and Revolving Line of Credit

7. NOTE PAYABLE AND REVOLVING LINE OF CREDIT

 

Note Payable

 

On June 24, 2016, certain wholly owned subsidiaries (the “Secured Subsidiaries”) of the Company entered into a loan agreement (the “Loan Agreement”) borrowing the principal amount of $20 million pursuant to a promissory note (the “Promissory Note”). The Promissory Note bears an interest rate equal to 4.192% per annum (effective interest rate 4.40%) and is due to mature on July 1, 2036. Pursuant to a security agreement (the “Security Agreement”), the obligations under the Loan Agreement are secured by certain real estate assets owned by the Secured Subsidiaries.

The Company entered into a non-recourse guaranty on June 24, 2016 (the “Guaranty,” and together with the Loan Agreement, the Promissory Note and the Security Agreement, the “Loan Documents”) to guarantee the payment to Lender of certain obligations of the Secured Subsidiaries under the Loan Agreement.

The Loan Documents require the Secured Subsidiaries and the Company to comply with certain covenants, including, among others, a minimum net worth test and other customary covenants. The Lender may accelerate amounts outstanding under the Loan Documents upon the occurrence of an Event of Default (as defined in the Loan Agreement) including, but not limited to, the failure to pay amounts due or commencement of bankruptcy proceedings. As of December 31, 2018 and 2017, the Company was in compliance with these covenants.

The Company incurred loan procurement costs of $646,246 and such costs have been recorded net of the note payable on the consolidated balance sheet and are amortized as an adjustment to interest expense over the term of the loan.

As of December 31, 2018 and 2017 the carrying value of the Company’s note payable is summarized as follows:

 

Note Payable

 

December 31,

2018

 

 

December 31, 2017

 

Principal balance outstanding

 

$

19,809,511

 

 

$

20,000,000

 

Less: Loan procurement costs, net

 

 

(540,261

)

 

 

(282,595

)

Total note payable, net

 

$

19,269,250

 

 

$

19,717,405

 

 

As of December 31, 2018, the note payable was secured by certain of its self storage properties with an aggregate net book value of approximately $34.6 million. The note payable paid interest only from August 1, 2016 through June 30, 2018. The following table represents the future principal payment requirements on the note payable as of December 31, 2018:

 

2019

 

$

511,098

 

2020

 

 

492,797

 

2021

 

 

513,857

 

2022

 

 

535,816

 

2023

 

 

558,714

 

2024 and thereafter

 

 

17,197,229

 

Total principal payments

 

 

19,809,511

 

Less: Loan procurement costs, net

 

 

(540,261

)

Total note payable

 

$

19,269,250

 

 

Revolving Line of Credit

 

On December 20, 2018, certain wholly owned subsidiaries (the “Subsidiaries”) of the Company entered into a revolving credit loan agreement (the “Agreement”) between the Subsidiaries and TCF National Bank (the “Lender”). Under the Agreement, the Subsidiaries are borrowing from the Lender in the principal amount of up to $10 million pursuant to a promissory note (the “Note”). The Note bears an interest rate equal to 3.00% over the One Month U.S. Dollar London Inter-Bank Offered Rate and is due to mature on December 20, 2021. The obligations under the Agreement are secured by certain real estate assets owned by the Subsidiaries.

 

The Company entered into a guaranty of payment on December 20, 2018 (the “Guaranty,” and together with the Agreement, the Note and related instruments, the “Revolver”) to guarantee the payment to Lender of certain obligations of the Subsidiaries under the Agreement.

 

The Revolver requires the Subsidiaries and the Company to comply with certain covenants, including, among others, customary financial covenants. The Lender may accelerate amounts outstanding under the Loan Documents upon the occurrence of an Event of Default (as defined in the Agreement) including, but not limited to, the failure to pay amounts due to the Lender or commencement of bankruptcy proceedings.

The Company incurred issuance costs of $477,981 and such costs are amortized as an adjustment to interest expense over the term of the loan. As of December 31, 2018, there were no outstanding borrowings under the Revolver.