Mortgage Notes Payable, Net

6 Months Ended

Jun. 30, 2019

Mortgage notes payable, net as of June 30, 2019 and December 31, 2018 consisted of the following:



		Encumbered Properties	Outstanding Loan Amount ⁽¹⁾						Effective Interest Rate		Interest Rate
Country	Portfolio	Encumbered Properties	June 30, 2019			December 31, 2018			Effective Interest Rate		Interest Rate	Maturity
			(In thousands)			(In thousands)
Finland:	Finnair ⁽⁹⁾	—	$	—		$	32,501		—%		—	—
	Tokmanni ⁽⁹⁾	—	—			33,159			—%		—	—
	Finland	5	84,145			—			1.7%	⁽²⁾	Fixed/Variable	Feb. 2024

France:	Auchan	1	9,438			9,498			1.7%	⁽³⁾	Fixed	Dec. 2019
	Pole Emploi	1	6,595			6,637			1.7%	⁽³⁾	Fixed	Dec. 2019
	Sagemcom	1	40,822			41,083			1.7%	⁽³⁾	Fixed	Dec. 2019
	Worldline	1	5,685			5,722			1.9%	⁽³⁾	Fixed	Jul. 2020
	DCNS	1	10,802			10,872			1.5%	⁽³⁾	Fixed	Dec. 2020
	ID Logistics II	2	11,939			12,016			1.3%		Fixed	Jun. 2021

Germany	Rheinmetall^(10)(11)	—	—			12,130			—%		—	—
	OBI DIY ^(10)(11)	—	—			5,150			—%		—	—
	RWE AG	3	71,068			71,524			1.6%	⁽³⁾	Fixed	Oct. 2019
	Rexam ⁽¹²⁾	—	—			5,876			—%		—	—
	Metro Tonic ⁽¹²⁾	—	—			30,326			—%		—	—
	ID Logistics I⁽¹²⁾	—	—			4,578			—%		—	—
	Germany	5	58,561			—			2.0%	⁽¹⁴⁾	Fixed/Variable	Jun. 2023

Luxembourg:	DB Luxembourg ⁽¹³⁾	—	—			41,198			—%		—	—
The Netherlands:	ING Amsterdam ⁽¹³⁾	—	—			50,353			—%		—	—
Luxembourg/ The Netherlands	Benelux	3	136,451			—			1.4%		Fixed	Jun. 2024
	Total EUR denominated	23	435,506			372,623

United Kingdom:	UK Multi-Property Cross Collateralized Loan	43	292,039			292,890			3.2%	⁽⁴⁾	Fixed/Variable	Aug. 2023
	Total GBP denominated	43	292,039			292,890

United States:	Quest Diagnostics	1	52,800			52,800			4.5%	⁽⁵⁾	Variable	Sep. 2019
	AT&T Services	1	33,550			33,550			2.0%	⁽⁶⁾	Variable	Dec. 2020
	Penske Logistics ⁽⁷⁾	1	70,000			70,000			4.7%		Fixed	Nov. 2028
	Multi-Tenant Mortgage Loan I ⁽⁷⁾	12	187,000			187,000			4.4%		Fixed	Nov. 2027
	Multi-Tenant Mortgage Loan II	8	32,750			32,750			4.4%		Fixed	Feb. 2028
	Multi-Tenant Mortgage Loan III	7	98,500			98,500			4.9%		Fixed	Dec. 2028
	Multi-Tenant Mortgage Loan IV	16	97,500			—			4.6%		Fixed	May 2029
	Total USD denominated	46	572,100			474,600
	Gross mortgage notes payable	112	1,299,645			1,140,113			3.2%
	Mortgage discount		(86		)	(569		)
	Deferred financing costs, net of accumulated amortization ⁽⁸⁾		(13,526		)	(9,737		)
	Mortgage notes payable, net	112	$	1,286,033		$	1,129,807		3.2%

_______________________________


⁽¹⁾	Amounts borrowed in local currency and translated at the spot rate in effect at the applicable reporting date.


⁽²⁾	80% fixed as a result of a “pay-fixed” interest rate swap agreement and 20% variable. Variable portion is approximately 1.4% plus 3-month Euribor. Euribor rate in effect as of June 30, 2019.


⁽³⁾	Fixed as a result of a “pay-fixed” interest rate swap agreement.


⁽⁴⁾	80% fixed as a result of a “pay-fixed” interest rate swap agreement and 20% variable. Variable portion is approximately 2.0% plus 3-month GBP LIBOR. LIBOR rate in effect as of June 30, 2019.


⁽⁵⁾	The interest rate is 2.0% plus 1-month LIBOR. LIBOR rate in effect is as of June 30, 2019.


⁽⁶⁾	The interest rate is 2.0% plus 1-month Adjusted LIBOR as defined in the mortgage agreement. LIBOR rate in effect is as of June 30, 2019.


⁽⁷⁾	The borrower’s (wholly owned subsidiaries of the Company) financial statements are included within the Company’s consolidated financial statements, however, the borrowers’ assets and credit are only available to pay the debts of the borrowers and their liabilities constitute obligations of the borrowers.

⁽⁸⁾

Deferred financing costs represent commitment fees, legal fees, and other costs associated with obtaining commitments for financing. These costs are amortized over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or paid down before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.


⁽⁹⁾	These loans were refinanced in February 2019 as part of the Finland Refinancing (see below for further details).


⁽¹⁰⁾	These loans were repaid in full upon maturity in January 2019.


⁽¹¹⁾	These loans were encumbered in May 2019 as part of the German Refinancing (see below for further details).


⁽¹²⁾	These loans were refinanced in May 2019 as part of the German Refinancing (see below for further details).


⁽¹³⁾	These loans were refinanced in June 2019 as part of the Benelux Refinancing (see below for further details).


⁽¹⁴⁾	The loan initially bore interest at a rate of 3-month Euribor plus 1.80% per annum, but, following the replacement of an easement on one property, the loan will bear interest going forward at a rate of Euribor plus 1.55% per annum beginning on October 1, 2019. 80% fixed as a result of a “pay-fixed” interest rate swap agreement and 20% variable.

The following table presents future scheduled aggregate principal payments on the Company’s gross mortgage notes payable over the next five calendar years and thereafter as of June 30, 2019:



(In thousands)	Future Principal Payments ⁽¹⁾
2019 (remainder)	$	180,723
2020	52,550
2021	24,238
2022	19,046
2023	316,743
2024	220,596
Thereafter	485,749
Total	$	1,299,645

_________________________


⁽¹⁾	Assumes exchange rates of £1.00 to $1.27 for GBP and €1.00 to $1.14 for EUR as of June 30, 2019 for illustrative purposes, as applicable.

The Company’s mortgage notes payable agreements require compliance with certain property-level financial covenants including debt service coverage ratios. As of June 30, 2019, the Company was in compliance with all financial covenants under its mortgage notes payable agreements.

The total gross carrying value of unencumbered assets as of June 30, 2019 was $1.3 billion, of which approximately $1.0 billion of this amount was included in the unencumbered asset pool comprising the borrowing base under the Revolving Credit Facility (as defined in Note 5 — Credit Facilities) and therefore is not available to serve as collateral for future borrowings.

Benelux Refinancing

On June 12, 2019, the Company, through certain wholly owned subsidiaries borrowed €120.0 million from Landesbank Hessen-Thüringen Girozentrale, secured by three of the Company’s properties located in the Netherlands and Luxembourg. The loan bears interest at a fixed rate of 1.383% and matures on June 11, 2024. The loan is interest-only, with the principal due at maturity. At the closing of the loan, approximately €80.3 million of the net proceeds was used to repay all outstanding indebtedness encumbering two of the properties.

German Refinancing

On May 10, 2019, the Company, through certain wholly owned subsidiaries borrowed €51.5 million from Landesbank Hessen-Thüringen Girozentrale, secured by five of the Company’s properties located in Germany. The loan is interest-only with the principal due at maturity, which is June 30, 2023. The maturity date may be extended at the Company’s option to February 29, 2024 subject to conditions. The loan initially bore interest at a rate of 3-month Euribor plus 1.80% per annum, but, following the replacement of an easement on one property, the loan will bear interest going forward at a rate of Euribor plus 1.55% per annum beginning on October 1, 2019. The Company also entered into a swap to fix the interest rate for 80% of the principal amount. The net proceeds from the loan were used to repay all €35.6 million outstanding in mortgage indebtedness that previously encumbered three of the properties that secure the loan.

Multi-Tenant Mortgage Loan IV

On April 12, 2019, the Company, through certain wholly owned subsidiaries, borrowed $97.5 million from Column Financial, Inc. and Société Générale Financial Corporation, secured by 16 of the Company’s single tenant net leased office and industrial properties located in 12 states that were simultaneously removed from the borrowing base under the Revolving Credit Facility. At closing, approximately $90.0 million was used to repay outstanding indebtedness under the Revolving Credit Facility, with the remaining proceeds, after costs and fees related to the loan, available for working capital and general corporate purposes. The loan bears interest at a fixed rate of 4.489% and has a maturity date of May 6, 2029. The loan is interest-only, with the principal balance due on the maturity date. The Company may prepay the loan in whole or in part at any time, subject to certain fees and any unpaid interest depending on the timing and other circumstances of the prepayment.

Finland Refinancing

On February 6, 2019, the Company, through certain wholly owned subsidiaries borrowed an aggregate of €74.0 million ($84.2 million based on the prevailing exchange rate on that date) secured by mortgages on the Company’s five properties located in Finland. The maturity date of this loan is February 1, 2024, and it bears interest at a rate of 3-month Euribor plus 1.4% per year, with the interest rate for approximately €59.2 million ($67.4 million based on the prevailing exchange rate on that date) fixed by an interest rate swap agreement. The amount fixed by swap agreement represents 80% of the principal amount of the loan and is fixed at 1.8% per year. The loan is interest-only with the principal due at maturity. At the closing of the loan, €57.4 million ($65.3 million based on the prevailing exchange rate on that date) was used to repay all outstanding indebtedness encumbering the five properties, with the remaining proceeds, after costs and fees related to the loan, available for working capital and general corporate purposes.

Multi-Tenant Mortgage Loan II

On January 26, 2018, the Company, through certain wholly owned subsidiaries, borrowed $32.8 million. The loan bears interest at a fixed interest rate of 4.32% per annum and matures in February 2028. The loan is interest only with the principal due at maturity and is secured by eight properties in six states, totaling approximately 627,500 square feet. Proceeds were primarily used to repay approximately $30.0 million of outstanding indebtedness under the Revolving Credit Facility.