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6. Debt
Credit Facility
On June 20, 2011, the Company, through the Operating Partnership, entered into an unsecured revolving credit facility that provides for maximum borrowings of up to $300.0 million. The credit facility requires that a group of no less than fifteen of the Company’s hotel properties remain unencumbered by outstanding indebtedness. The credit facility contains certain financial covenants relating to maximum leverage ratio, minimum fixed charge coverage ratio, minimum tangible net worth and maximum secured indebtedness. If an event of default exists, under the terms of the credit facility, the Company is not permitted to make distributions to shareholders, other than those required to qualify for and maintain REIT status. As of June 30, 2011, the Company was in compliance with all financial covenants.
The credit facility matures on June 20, 2014 and may be extended for an additional year, at the Company’s option. In addition, the Company has the option to increase the revolving loan commitment to $450.0 million, subject to certain conditions. The Company incurred $3.0 million in deferred financing fees related to the credit facility.
Borrowings under the credit facility bear interest at variable rates equal to the London InterBank Offered Rate (“LIBOR”) plus an applicable margin. The margin ranges from 2.25% to 3.25%, depending on the Company’s leverage ratio, as calculated under the terms of the credit facility. The Company incurs an unused facility fee of between 0.30% and 0.40%, based on the amount by which the maximum borrowing amount exceeds the total principal balance of outstanding borrowings.
Under the terms of the credit facility, one or more standby letters of credit, up to a maximum aggregate outstanding balance of $30.0 million, may be issued on behalf of the Company by the lenders holding the credit facility. The Company will incur a fee of 0.125% of the value of each standby letter of credit that is issued on its behalf. Any outstanding standby letters of credit would reduce the available borrowings on the credit facility by a corresponding amount. No standby letters of credit were outstanding at June 30, 2011. The Company also may borrow up to a maximum aggregate outstanding balance of $40.0 million of swingline loans. Any outstanding swingline loans would reduce the available borrowings on the credit facility by a corresponding amount. No swingline loans were outstanding at June 30, 2011.
The Company did not incur any interest expense on the credit facility for the three or six months ended June 30, 2011. For both the three and six months ended June 30, 2011, the Company incurred an unused commitment fee of approximately $37,000. There were no borrowings outstanding at June 30, 2011.
Predecessor Credit Facility
RLJ Fund III, through wholly-owned subsidiaries, maintained a credit facility that provided for maximum borrowings of up to $200.0 million. The credit facility was collateralized by RLJ Fund III’s partners’ committed and uncalled capital and was guaranteed by RLJ Fund III. Borrowings under the credit facility bore interest at variable rates equal to the London InterBank Offered Rate (“LIBOR”) plus a margin of 0.75%. For both the three and six months ended June 30, 2010, the weighted average interest rate for borrowings under the credit facility was approximately 1.00%. There were no borrowings at June 30, 2011 since the credit facility matured on January 31, 2011.
RLJ Fund III incurred interest expense related to the credit facility of approximately $0.3 million and $0.6 million for the three and six months ended June 30, 2010. No interest expense related to the credit facility was incurred for either the three or six months ended June 30, 2011. Additionally, there was an unused commitment fee of 0.15% of the unused portion of the credit facility. For both the three and six months ended June 30, 2011, RLJ Fund III incurred an unused commitment fee of approximately $12,000. For the three and six months ended June 30, 2010, RLJ Fund III incurred an unused commitment fee of approximately $34,000 and $68,000, respectively.
RLJ Fund III was subject to a letter of credit (now held by the Company) with a value of approximately $1.9 million related to securing a swap agreement on certain variable rate mortgages. No balances were drawn on this letter of credit as of June 30, 2011 or December 31, 2010.
At December 31, 2010, RLJ Fund III had approximately $198.1 million available for borrowing.
Mortgage Loans
As of June 30, 2011 and December 31, 2010, the Company was subject to the following mortgage loans (in thousands):
|
|
|
Number |
|
Interest rate at |
|
|
|
|
|
|
|
|
|
|
of Assets |
|
June 30, |
|
Maturity |
|
Principal balance at, |
|
|
Lender |
|
Encumbered |
|
2011 (1) |
|
Date |
|
June 30, 2011 |
|
December 31, 2010 |
|
|
Capmark Financial Group |
|
1 |
|
1.36 |
%(3) |
July 2010 |
|
$ |
58,000 |
|
$ |
58,000 |
|
|
Keybank (2) |
|
6 |
|
4.57 |
%(3) |
April 2012 |
|
48,000 |
|
48,000 |
|
|
State Street Bank (2) |
|
|
|
6.08 |
%(3) |
April 2012 |
|
37,000 |
|
37,000 |
|
|
Wells Fargo |
|
1 |
|
4.26 |
%(4) |
June 2013 |
(5) |
60,000 |
|
60,000 |
|
|
Wells Fargo |
|
1 |
|
5.50 |
%(4) |
Oct 2013 |
(5) |
40,000 |
|
40,000 |
|
|
Wells Fargo |
|
1 |
|
5.50 |
%(4) |
Oct 2013 |
(5) |
31,000 |
|
31,000 |
|
|
Wells Fargo |
|
1 |
|
4.90 |
%(6) |
Dec 2013 |
(5) |
150,000 |
|
150,000 |
|
|
Blackstone |
|
|
|
10.75 |
%(6) |
Dec 2013 |
(5) |
50,000 |
|
50,000 |
|
|
Capmark Financial Group |
|
1 |
|
6.12 |
% |
April 2015 |
|
4,386 |
|
4,446 |
|
|
Capmark Financial Group |
|
1 |
|
5.50 |
% |
May 2015 |
|
5,050 |
|
5,123 |
|
|
Capmark Financial Group |
|
1 |
|
5.55 |
% |
May 2015 |
|
11,826 |
|
11,997 |
|
|
Capmark Financial Group |
|
1 |
|
5.55 |
% |
June 2015 |
|
5,130 |
|
5,205 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
2,680 |
|
2,718 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
4,399 |
|
4,462 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
10,253 |
|
10,400 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
9,151 |
|
9,282 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
8,200 |
|
8,317 |
|
|
Barclay’s Bank |
|
1 |
|
5.60 |
% |
June 2015 |
|
5,671 |
|
5,751 |
|
|
Barclay’s Bank |
|
1 |
|
5.60 |
% |
June 2015 |
|
8,833 |
|
8,956 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
5,373 |
|
5,450 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
35,624 |
|
36,135 |
|
|
Barclay’s Bank |
|
1 |
|
5.60 |
% |
June 2015 |
|
6,765 |
|
6,861 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
6,029 |
|
6,116 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
6,929 |
|
7,028 |
|
|
Barclay’s Bank |
|
1 |
|
5.60 |
% |
June 2015 |
|
8,826 |
|
8,952 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
6,919 |
|
7,018 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
7,616 |
|
7,724 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
6,929 |
|
7,028 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
7,909 |
|
8,023 |
|
|
Barclay’s Bank |
|
1 |
|
5.55 |
% |
June 2015 |
|
9,925 |
|
10,068 |
|
|
Capmark Financial Group |
|
1 |
|
5.50 |
% |
July 2015 |
|
6,983 |
|
7,083 |
|
|
Barclay’s Bank |
|
1 |
|
5.44 |
% |
Sept 2015 |
|
11,385 |
|
11,547 |
|
|
Merrill Lynch |
|
1 |
|
6.29 |
% |
July 2016 |
|
9,347 |
|
9,403 |
|
|
Merrill Lynch |
|
1 |
|
6.29 |
% |
July 2016 |
|
5,573 |
|
5,605 |
|
|
Merrill Lynch |
|
1 |
|
6.29 |
% |
July 2016 |
|
7,824 |
|
7,871 |
|
|
Merrill Lynch |
|
1 |
|
6.29 |
% |
July 2016 |
|
9,362 |
|
9,416 |
|
|
Wachovia Securities |
|
43 |
|
6.29 |
% |
July 2016 |
|
496,159 |
|
499,132 |
|
|
Wachovia Securities |
|
1 |
|
6.29 |
% |
July 2016 |
|
6,702 |
|
6,742 |
|
|
Wells Fargo / Morgan Stanley |
|
2 |
|
6.29 |
% |
July 2016 |
|
35,456 |
|
35,669 |
|
|
Wells Fargo / Morgan Stanley |
|
1 |
|
6.29 |
% |
July 2016 |
|
6,876 |
|
6,916 |
|
|
Wells Fargo / Morgan Stanley |
|
1 |
|
6.29 |
% |
July 2016 |
|
9,790 |
|
9,845 |
|
|
Capmark Financial Group |
|
1 |
|
— |
|
— |
|
— |
(7) |
72,246 |
|
|
Merrill Lynch |
|
10 |
|
— |
|
— |
|
— |
(7) |
92,000 |
|
|
Wells Fargo |
|
1 |
|
— |
|
— |
|
— |
(7) |
23,967 |
|
|
Wells Fargo / GE |
|
13 |
|
— |
|
— |
|
— |
(7) |
186,392 |
|
|
Capmark Financial Group |
|
1 |
|
— |
|
— |
|
— |
(7) |
10,818 |
|
|
Capmark Financial Group |
|
1 |
|
— |
|
— |
|
— |
(7) |
9,975 |
|
|
Capmark Financial Group |
|
1 |
|
— |
|
— |
|
— |
(7) |
12,350 |
|
|
Capmark Financial Group |
|
1 |
|
— |
|
— |
|
— |
(7) |
10,334 |
|
|
Capmark Financial Group |
|
1 |
|
— |
|
— |
|
— |
(7) |
22,934 |
|
|
Capmark Financial Group |
|
1 |
|
— |
|
— |
|
— |
(7) |
11,078 |
|
|
Capmark Financial Group |
|
1 |
|
— |
|
— |
|
— |
(7) |
11,355 |
|
|
Capmark Financial Group |
|
1 |
|
— |
|
— |
|
— |
(7) |
13,339 |
|
|
|
|
120 |
|
|
|
|
|
$ |
1,263,880 |
|
$ |
1,747,077 |
|
(1) Interest rate at June 30, 2011 gives effect to interest rate swaps and LIBOR floors, where applicable.
(2) The Keybank/State Street Bank loans are a senior and a mezzanine loan, which, as of June 30, 2011 had outstanding balances of $48 million and $37 million, respectively.
(3) Requires payments of interest only.
(4) Requires payments of interest only until the commencement of the extension periods.
(5) Maturity date may be extended for up to two additional one-year terms at the Company’s option (subject to the Company’s prior satisfaction of certain conditions and advance notice of the exercise of the Company’s option).
(6) Requires payments of interest only until the commencement of the second extension period.
(7) Loan(s) was/(were) paid off in conjunction with the IPO on May 16, 2011.
Some mortgage agreements are subject to customary financial covenants. The Company was in compliance with these covenants at June 30, 2011 and December 31, 2010.
In February 2010, RLJ Fund II received a notice of event of default for failure to make the required monthly payment on its mortgage loan secured by the New York LaGuardia Airport Marriott located in New York, NY. The mortgage loan matured in July 2010. In April 2011, RLJ Fund II escrowed an executed deed in lieu of foreclosure agreement for the benefit of the lenders. On August 5, 2011, the Company transferred title to the hotel to the lenders pursuant to the deed in lieu of foreclosure arrangement. At June 30, 2011 the book value of the New York LaGuardia Airport Marriott equals the fair market value, which is less than the mortgage loan balance.
Term Loan
On January 14, 2011, RLJ Fund III entered into a $140.0 million unsecured term loan. RLJ Fund III agreed to maintain an unencumbered asset pool of ten hotel properties during the term of the term loan. The term loan contains certain financial covenants related to maximum leverage ratio, minimum fixed charge coverage ratio and minimum net worth. As of June 30, 2011, the Company is in compliance with all financial covenants.
The term loan has an original maturity date of September 30, 2011, with two six month extension options, and bears interest at LIBOR plus 4.25%, with a LIBOR floor of 1.00% (5.25% and zero at June 30, 2011 and December 31, 2010, respectively). For the three and six months ended June 30, 2011, the Company incurred $1.7 million and $3.2 million of interest expense, respectively, related to the term loan. |