Notes Payable Related to Acquisitions and Revolving Credit Facility |
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Text Block] |
Note 4 Notes Payable Related to Acquisitions and Revolving Credit Facility Summary of Notes Payable Related to Acquisitions, Net of Debt Discount The Company’s notes payable related to acquisitions, net, includes two loans: (1) the Cantor Loan and (2) the West Mifflin Note, described in detail below. The following table sets forth the aggregate balances of these loans as of September 30, 2017 and December 31, 2016.
Costs incurred related to securing the Company’s fixed-rate debt instruments have been capitalized as a debt discount, net of accumulated amortization, and are netted against the Company’s Notes Payable balance in the accompanying Consolidated Balance Sheets. Amortization expense incurred related to the debt discount was $32,806 and $98,418 for the three and nine months ended September 30, 2017, respectively, and $62,604 and $215,449 for the three and nine months ended September 30, 2016, respectively, and is included in the “Interest Expense” line item in the accompanying Consolidated Statements of Operations. Cantor Loan On March 31, 2016, the Company, through certain of its subsidiaries, entered into a $32,097,400 portfolio commercial mortgage-backed securities loan (the “Cantor Loan”) with Cantor Commercial Real Estate Lending, LP (“CCRE”). The subsidiaries are GMR Melbourne, LLC, GMR Westland, LLC, GMR Memphis, LLC, and GMR Plano, LLC (“GMR Loan Subsidiaries”). The Cantor Loan has cross-default and cross-collateral terms. The Company used the proceeds of the Cantor Loan to acquire the Marina Towers (Melbourne, FL) and the Surgical Institute of Michigan (Westland, MI) properties and to refinance the Star Medical (Plano, TX) assets by paying off the existing principal amount of the loan with East West bank in the amount of $9,223,500.
The Cantor Loan has a maturity date of April 6, 2026 and accrues annual interest at 5.22%. The first five years of the term require interest only payments and after that payments will include interest and principal, amortized over a 30-year schedule. Prepayment can only occur within four months prior to the maturity date, except that after the earlier of (a) two years after the loan is placed in a securitized mortgage pool, or (ii) May 6, 2020, the Cantor Loan can be fully and partially defeased upon payment of amounts due under the Cantor Loan and payment of a defeasance amount that is sufficient to purchase U.S. government securities equal to the scheduled payments of principal, interest, fees, and any other amounts due related to a full or partial defeasance under the Cantor Loan.
The Company is securing the payment of the Cantor Loan with the assets, including property, facilities, and rents, held by the GMR Loan Subsidiaries and has agreed to guarantee certain customary recourse obligations, including findings of fraud, gross negligence, or breach of environmental covenants by GMR Loan Subsidiaries. The GMR Loan Subsidiaries will be required to maintain a monthly debt service coverage ratio of 1.35:1.00 for all of the collateral properties in the aggregate. No principal payments were made on the Cantor Loan during the three and nine months ended September 30, 2017. The note balance as of September 30, 2017 and December 31, 2016 was $32,097,400. Interest expense was $428,180 and $1,270,578 for the three and nine months ended September 30, 2017, respectively. Interest expense incurred on this note was $428,179 and $851,704 for the three and nine months ended September 30, 2016, respectively.
As of September 30, 2017, scheduled principal payments due for each fiscal year ended December 31 are listed below as follows:
West Mifflin Note In order to finance a portion of the purchase price for the West Mifflin facility, on September 25, 2015 the Company (through its wholly owned subsidiary GMR Pittsburgh LLC, as borrower) entered into a Term Loan and Security Agreement with Capital One (the “West Mifflin Note”) to borrow $7,377,500. The West Mifflin Note bears interest at 3.72% per annum and all unpaid interest and principal is due on September 25, 2020. Interest is paid in arrears and interest payments began on November 1, 2015, and on the first day of each calendar month thereafter. Principal payments begin on November 1, 2018 and on the first day of each calendar month thereafter based on an amortization schedule with the principal balance due on the maturity date. The Company, at its option, may prepay the West Mifflin Note at any time, in whole (but not in part) on at least thirty calendar days but not more than sixty calendar days advance written notice. The West Mifflin Note has an early termination fee of two percent if prepaid prior to September 25, 2018. The West Mifflin Note requires a quarterly fixed charge coverage ratio of at least 1:1, a quarterly minimum debt yield of 0.09:1.00, and annualized Operator EBITDAR (as defined in the note) measured on a quarterly basis of not less than $6,000,000. The Operator is Associates in Ophthalmology, Ltd. and Associates Surgery Centers, LLC. No principal payments were made during the three and nine months ended September 30, 2017. The West Mifflin Note balance as of September 30, 2017 and December 31, 2016 was $7,377,500. Interest expense incurred on the West Mifflin Note was $70,136 and $208,882 for the three and nine months ended September 30, 2017, respectively, and $70,136 and $209,645 for the three and nine months ended September 30, 2016, respectively.
As of September 30, 2017, scheduled principal payments due for each fiscal year ended December 31 are listed below as follows:
Revolving Credit Facility As of September 30, 2017 and December 31, 2016, the Company had $126,100,000 and $27,700,000 of outstanding borrowings under its revolving credit facility, respectively. As described below, the maximum amount that the Company can borrow under the facility is $250,000,000. On December 2, 2016, the Company, the Operating Partnership, as borrower, and certain subsidiaries (GMR Asheville LLC, GMR Watertown LLC, GMR Sandusky LLC, GMR East Orange LLC, GMR Omaha LLC, and GMR Reading LLC) (such subsidiaries, the “Subsidiary Guarantors”) of the Operating Partnership entered into a senior revolving credit facility (the “Credit Facility”) with BMO Harris Bank N.A., as Administrative Agent (“BMO”), which initially provided up to $75,000,000 in revolving credit commitments for the Operating Partnership. The initial Credit Facility included an accordion feature that provided the Operating Partnership with additional capacity, subject to the satisfaction of customary terms and conditions, of up to $125,000,000, for a total initial facility size of up to $200,000,000. On March 3, 2017, the Company, the Operating Partnership, as borrower, and the Subsidiary Guarantors of the Operating Partnership entered into an amendment to the Credit Facility with BMO, which increased the commitment amount to $200,000,000 plus an accordion feature that allows for up to an additional $50,000,000 of principal amount subject to certain conditions, for a total facility size of $250,000,000 (the “Revolving Credit Facility”). On September 28, 2017, the Company obtained commitments from certain of its lenders on the Revolving Credit Facility for the entire $50,000,000 accordion. The Subsidiary Guarantors and the Company are guarantors of the obligations under the Revolving Credit Facility. The amount available to borrow from time to time under the Revolving Credit Facility is limited according to a quarterly borrowing base valuation of certain properties owned by the Subsidiary Guarantors. The initial termination date of the Revolving Credit Facility is December 2, 2019, which could be extended for one year in the case that no event of default occurs.
Amounts outstanding under the Revolving Credit Facility bear annual interest at a floating rate that is based, at the Operating Partnership’s option, on (i) adjusted LIBOR plus 2.00% to 3.00% or (ii) a base rate plus 1.00% to 2.00%, in each case, depending upon the Company’s consolidated leverage ratio. In addition, the Operating Partnership is obligated to pay a quarterly fee equal to a rate per annum equal to (x) 0.20% if the average daily unused commitments are less than 50% of the commitments then in effect and (y) 0.30% if the average daily unused commitments are greater than or equal to 50% of the commitments then in effect and determined based on the average daily unused commitments during such previous quarter.
The Operating Partnership is subject to ongoing compliance with a number of customary affirmative and negative covenants, including limitations with respect to liens, indebtedness, distributions, mergers, consolidations, investments, restricted payments and asset sales. The Operating Partnership must also maintain (i) a maximum consolidated leverage ratio, commencing with the fiscal quarter ending December 31, 2016 and as of the end of each fiscal quarter thereafter, of less than (y) 0.65:1.00 for each fiscal quarter ending prior to October 1, 2019 and (z) thereafter, 0.60:1.00, (ii) a minimum fixed charge coverage ratio of 1.50:1.00, (iii) a minimum net worth of $119,781,219 plus 75% of all net proceeds raised through subsequent equity offerings and (iv) a ratio of total secured recourse debt to total asset value of not greater than 0.10:1.00. During the nine months ended September 30, 2017, the Company borrowed $205,400,000 under the Revolving Credit Facility and repaid $107,000,000 using funds primarily from the follow-on common stock offering and the preferred offering for a net amount borrowed of $98,400,000. For the three and nine months ended September 30, 2017, interest incurred on the Revolving Credit Facility was $1,335,730 and $2,945,588, respectively. No interest expense was incurred for the three and nine months ended September 30, 2016 as the Revolving Credit Facility was not in place. Deferred Financing Costs, Net Costs incurred related to securing the Company’s Revolving Credit Facility have been capitalized as a deferred financing asset, net of accumulated amortization, in the accompanying Consolidated Balance Sheets. A rollforward of the deferred financing cost balance as of September 30, 2017, is as follows:
1 This amount includes $1,223,359 of costs incurred in connection with the Company’s Revolving Credit Facility that were erroneously expensed and included in the “General and Administrative Expense” line item within the Company’s Consolidated Statement of Operations for the three months ended March 31, 2017. During the six-month period ended June 30, 2017, the Company corrected this error by removing the $1,223,359 from expense and capitalizing it as “Deferred Financing Costs, Net” on the Company’s Consolidated Balance Sheet as of June 30, 2017. See Note 2 “Summary of Significant Accounting Policies.”
Amortization expense incurred related to the Revolving Credit Facility deferred financing costs were $307,831 and $741,796 for the three and nine months ended September 30, 2017, respectively, and is included in the “Interest Expense” line item in the accompanying Consolidated Statements of Operations. There was no amortization expense incurred on the Revolving Credit Facility during the three and nine months ended September 30, 2016, as the Revolving Credit Facility was not in place. Weighted-Average Interest Rate and Term The Company’s weighted average interest rate and term of its debt was 3.84% and 3.43 years, respectively, at September 30, 2017, compared to 4.29% and 6.04 years, respectively, at December 31, 2016. |
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