Mortgage Notes Payable, Net

3 Months Ended

Mar. 31, 2023

Mortgage notes payable, net as of March 31, 2023 and December 31, 2022 consisted of the following:


		Encumbered Properties	Outstanding Loan Amount (1)				Effective Interest Rate		Interest Rate
Country	Portfolio		March 31, 2023		December 31, 2022					Maturity
			(In thousands)		(In thousands)
Finland:	Finland Properties	5	$	80,496	$	79,232	3.8%	(2)	Fixed/Variable	Feb. 2024

Germany:	Germany Properties	5	56,021		55,140		3.6%	(3)	Fixed/Variable	Jun. 2023

Luxembourg/ The Netherlands:	Benelux Properties	3	130,534		128,485		1.4%		Fixed	Jun. 2024
	Total EUR denominated	13	267,051		262,857

United Kingdom:	McLaren	3	124,917		122,182		6.0%		Fixed	Apr. 2024
	United Kingdom Properties - Bulk Loan	41	194,032		194,320		3.2%	(4)	Fixed/Variable	Aug. 2023
	Total GBP denominated	44	318,949		316,502

United States:	Penske Logistics	1	70,000		70,000		4.7%	(5)	Fixed	Nov. 2028
	Multi-Tenant Mortgage Loan I	10	162,580		162,580		4.4%	(5)	Fixed	Nov. 2027
	Multi-Tenant Mortgage Loan II	8	32,750		32,750		4.4%	(5)	Fixed	Feb. 2028
	Multi-Tenant Mortgage Loan III	7	98,500		98,500		4.9%	(5)	Fixed	Dec. 2028
	Multi-Tenant Mortgage Loan IV	16	97,500		97,500		4.6%	(5)	Fixed	May 2029
	Multi-Tenant Mortgage Loan V	12	204,000		204,000		3.7%	(5)	Fixed	Oct. 2029
	Total USD denominated	54	665,330		665,330
	Gross mortgage notes payable	111	1,251,330		1,244,689		3.9%
	Mortgage discount		(1,003)		(1,207)
	Deferred financing costs, net of accumulated amortization (6)		(9,532)		(10,401)
	Mortgage notes payable, net	111	$	1,240,795	$	1,233,081	3.9%

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(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 March 31, 2023.

(3)80% fixed as a result of a “pay-fixed” interest rate swap agreement and 20% variable. Variable portion is approximately 1.55% plus 3-month Euribor. Euribor rate in effect as of March 31, 2023.

(4)80% fixed as a result of a “pay-fixed” interest rate swap agreement and 20% variable. Variable portion is approximately 2.0% plus daily SONIA as of January 25, 2022 rate in effect as of March 31, 2023. This loan requires principal repayments which began in October 2020 based on amounts specified under the loan.

(5)The borrowers’ (wholly owned subsidiaries of the OP) 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.

(6)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.

The following table presents future scheduled aggregate principal payments on the Company’s gross mortgage notes payable over the next four calendar years and thereafter as of March 31, 2023:


(In thousands)	Future Principal Payments (1)
2023 (remainder) (2)	$	250,053
2024	335,947
2025	—
2026	—
2027	162,580
2028	201,250
Thereafter	301,500
Total	$	1,251,330

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(1)Assumes exchange rates of £1.00 to $1.24 for British Pounds Sterling (“GBP”) and €1.00 to $1.09 for Euros (“EUR”) as of March 31, 2023 for illustrative purposes, as applicable.

(2)This amount is comprised of the mortgage loan that encumbers the Company’s properties in Germany ($56.0 million as of March 31, 2023) and the United Kingdom Properties - Bulk Loan ($194.0 million as of March 31, 2023).

The loan in Germany was paid in full on May 5, 2023 (see Note 15 — Subsequent Events).

In April 2023, the Company made its scheduled principal repayment of £3.8 million ($4.7 million using the exchange rate on the date of repayment) on its United Kingdom Properties - Bulk Loan, which reduced the balance to approximately £153.1 million (approximately $191.4 million as of the end of April 2023) after the payment. The Company intends to repay the entire remaining principal amount of the United Kingdom Properties - Bulk Loan in May 2023, after the filing of this Quarterly Report on Form 10-Q, with additional borrowings in GBP under the Revolving Credit Facility. The 41 properties in the U.K. are expected to be added to the borrowing base of the Revolving Credit Facility.

The total gross carrying value of unencumbered assets as of March 31, 2023 was $2.2 billion, of which approximately $1.3 billion was included in the unencumbered asset pool comprising the borrowing base under the Revolving Credit Facility (as defined in Note 5 — Revolving Credit Facility and Term Loan, Net) and therefore is not currently available to serve as collateral for future borrowings.

Mortgage Covenants

The Company’s mortgage notes payable agreements require compliance with certain property-level financial covenants including debt service coverage ratios. As of March 31, 2023, the Company was in compliance with all of its financial covenants under its mortgage notes payable agreements.

Multi-Tenant Mortgage Loan III

During the three months ended December 31, 2020, a tenant failed to renew its lease triggering a cash sweep event under one of the Company’s mortgage loans secured by seven of the Company’s properties with a balance of $98.5 million as of March 31, 2023. The event triggering the cash sweep was not, however, an event of default. During the first quarter of 2021, the Company cured the cash sweep event through one of the available options under the loan by putting a $3.2 million letter of credit in place (subject to future increase under the terms of the loan agreement, to a maximum amount of $7.4 million). During the third quarter of 2021, the amount of the letter of credit was increased by an additional $4.2 million, resulting in the lender holding the $7.4 million maximum amount in respect to this obligation as of September 30, 2021. This $7.4 million letter of credit is being held by the lender until such time the Company is able to find a suitable replacement tenant and it reduces the availability for future borrowings under the Revolving Credit Facility.

The borrower entities under the same mortgage loan, based upon a review conducted during the three months ended June 30, 2022, identified that during the three months ended March 31, 2022, the borrowers failed to maintain the debt service coverage ratio required by the loan agreement for such period (a “DSCR Sweep Trigger”). Such failure, upon delivery of notice of the same by the lender, triggered a separate cash sweep event under the loan. A DSCR Sweep Trigger is not an event of default and instead triggers a cash sweep. The lender notified the borrower entities of the occurrence of the DSCR Sweep Trigger under the loan for the three-months ended March 31, 2022 and the continuance of such DSCR Sweep Trigger for the three months ended June 30, 2022. Per the loan agreement the Company can cure the cash sweep resulting from a DSCR Sweep Trigger by delivering a letter of credit in the face amount of the excess cash flow for the trailing three months immediately preceding the date of the DSCR Sweep Trigger. Such letter of credit is recalculated and increased (but never decreased) every three-month period thereafter until such time as the borrowers demonstrate compliance with the debt service coverage ratio required by the loan for a period of two consecutive calendar quarters. The Company cured the cash sweep resulting from the

DSCR Sweep Trigger referenced above for the relevant periods by delivering a letter of credit to the lender in the face amount of approximately $0.9 million. The face value of such letter of credit was thereafter increased by $1.3 million to reflect the continuance of the DSCR Sweep Trigger for the three months ended September 30, 2022. The DSCR Sweep Trigger remained in place for the quarters ended December 31, 2022, and March 31, 2023 and the Company intends to cure the cash sweep that would otherwise result from such continuance by further increasing the letter of credit by an additional $1.2 million as required by the terms of the loan agreement. Such letter of credit is held by the lender, and the Company expects to maintain the effectiveness of the cash sweep cure by future increases to the face value of such letter of credit on a quarterly basis, in each case in accordance with the terms of the loan agreement, until such time as the Company restores compliance with the debt service coverage ratio required by the loan agreement for the requisite two-calendar-quarter time period. For so long as it remains outstanding, the face value of such letter of credit will represent a dollar-for-dollar reduction to availability under the Revolving Credit Facility for future borrowings.

Multi-Tenant Mortgage Loan IV

During the three months ended September 30, 2021, a tenant exercised its right to terminate its lease effective December 31, 2022. Notice of the termination triggered a lease sweep event, which began in the fourth quarter of 2021, under one of the Company’s mortgage loans secured by this property. This was not, however, an event of default. The mortgage loan had a balance of $97.5 million as of March 31, 2023 and it encumbers 16 properties, including this property. Pursuant to the terms of the loan agreement, the lender has swept all cash flow attributable to the lease that triggered the lease sweep event into a rollover reserve account not to exceed an aggregate cap of $0.8 million, which has been met. The reserve is being held by the lender who is required to make the reserve funds available to the Company to fund re-tenanting expenses for the property. The lease sweep event will be cured under the loan agreement if and when the Company leases the space to a new tenant approved by the lender and, at such time, any amounts remaining in the rollover reserve account in respect of the lease sweep event will be released to the Company.