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Notes Payable, Bank Credit Facility, Interest and Amortization of Deferred Debt Costs
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Notes Payable, Bank Credit Facility, Interest and Amortization of Deferred Debt Costs Notes Payable, Bank Credit Facility, Interest and Amortization of Deferred Debt Costs
At September 30, 2024, the Company had a $525.0 million senior unsecured credit facility (the “Credit Facility”) comprised of a $425.0 million revolving credit facility and a $100.0 million term loan. The revolving credit facility matures on August 29, 2025, and may be extended by the Company for one additional year, subject to satisfaction of certain conditions. The term loan matures on February 26, 2027. Interest accrues at the Secured Overnight Financing Rate (“SOFR”) plus 10 basis points plus an applicable spread, which is determined by certain leverage tests. As of September 30, 2024, the applicable spread for borrowings was 140 basis points related to the revolving credit facility and 135 basis points related to the term loan. Letters of credit may be issued under the Credit Facility. On September 30, 2024, based on the value of the Company’s unencumbered properties calculated in accordance with the terms of the Credit Facility, approximately $172.6 million was available and undrawn under the Credit Facility, $288.0 million was outstanding and approximately $185,000 was committed for letters of credit.
On August 23, 2022, the Company entered into two floating-to-fixed interest rate swap agreements to manage the interest rate risk associated with $100.0 million of its variable-rate debt. The effective date of each swap agreement is October 3, 2022 and each has a $50.0 million notional amount. One agreement terminates on October 1, 2027 and effectively fixes SOFR at 2.96%. The other agreement terminates on October 1, 2030 and effectively fixes SOFR at 2.91%. Because the interest-rate swaps effectively fix SOFR for $100.0 million of variable-rate debt, unless otherwise indicated, $100.0 million of variable-rate debt is treated as fixed-rate debt for disclosure purposes beginning September 30, 2022. The Company has designated the agreements as cash flow hedges for accounting purposes.
As of September 30, 2024, the fair value of the interest-rate swaps totaled approximately $1.3 million, which is included in Other assets in the Consolidated Balance Sheets. The change in value during the period is reflected in Other Comprehensive Income in the Consolidated Statements of Comprehensive Income.
On May 28, 2024, the Company closed on a 13.4-year, non-recourse, $100.0 million mortgage secured by Avenel Business Park, Leesburg Pike Plaza, and White Oak Shopping Center. The loan matures in 2037, bears interest at a fixed-rate of 6.38%, requires monthly principal and interest payments of $686,300 based on a 23.4-year amortization schedule and requires a final principal payment of $61.5 million at maturity. Proceeds were used to repay the remaining balance of approximately $51.2 million on the existing mortgages secured by the properties and reduce the outstanding balance of the Company’s Credit Facility. The loan is cross-collateralized and coterminous with the mortgage secured by Beacon Center and Seven Corners Center.
On September 24, 2024, the Company closed on a 15-year, $70.0 million mortgage secured by Thruway Shopping Center. The loan matures in 2039, bears interest at a fixed-rate of 6.41%, requires monthly principal and interest payments of $468,700 based on a 25-year amortization schedule and requires a final principal payment of $41.7 million at maturity. Proceeds were used to reduce the outstanding balance of the Company’s Credit Facility.
During the second quarter of 2023, the Company commenced drawing on its $145.0 million construction-to-permanent loan related to the residential and retail portions of Phase I of the Twinbrook Quarter development project. As of September 30, 2024, the balance of the loan was $122.7 million, net of unamortized deferred debt costs.
During the fourth quarter of 2023, the Company commenced drawing on its $133.0 million loan related to the Hampden House development project. As of September 30, 2024, the balance of the loan was $55.8 million, net of unamortized deferred debt costs.
Saul Centers and certain consolidated subsidiaries of the Operating Partnership have guaranteed the payment obligations of the Operating Partnership under the Credit Facility. The Operating Partnership is the guarantor of (a) the mortgage secured by Kentlands Place, Kentlands Square I and Kentlands pad (totaling $26.7 million at September 30, 2024), (b) a portion of The Waycroft mortgage (approximately $23.6 million of the $146.3 million outstanding balance at September 30, 2024), (c) the Ashbrook Marketplace mortgage (totaling $19.8 million at September 30, 2024), and (d) a portion of the Thruway mortgage (totaling $17.5 million of the $70.0 million outstanding balance at September 30, 2024) .
The Company provides a repayment guaranty of 100% of the loan secured by Twinbrook Quarter during construction and lease-up. Such guaranty is expected to be reduced in the future as the development achieves certain metrics. As of September 30, 2024, the loan balance and the amount guaranteed were $125.1 million. The Company also provides the lender with a 100% construction completion guaranty.
The Company provides a limited repayment guaranty of $26.6 million for the loan secured by Hampden House during construction and lease-up. Such guaranty is expected to be reduced in the future as the development achieves certain metrics. As of September 30, 2024, the loan balance was $58.5 million. The Company also provides the lender with a 100% construction completion guaranty.
All other notes payable are non-recourse.
The principal amount of the Company’s outstanding debt totaled approximately $1.51 billion at September 30, 2024, of which approximately $1.32 billion was fixed-rate debt and approximately $188.0 million was unhedged variable rate debt outstanding under the Credit Facility. The carrying amount of the properties collateralizing the notes payable totaled approximately $1.66 billion as of September 30, 2024.
At December 31, 2023, the principal amount of the Company’s outstanding debt totaled approximately $1.41 billion, of which $1.13 billion was fixed rate debt and $276.0 million was unhedged variable rate debt outstanding under the Credit Facility. The carrying amount of the properties collateralizing the notes payable totaled approximately $1.52 billion as of December 31, 2023.
At September 30, 2024, the future principal payments of debt, including scheduled maturities and amortization, for years ending December 31, were as follows:
(Dollars in thousands)Principal Payments
October 1 through December 31, 2024$8,692 
2025243,243 (1)
2026166,914 
2027131,878 (2)
202850,362 
202958,541 
Thereafter853,249 
Principal amount1,512,879 
Unamortized deferred debt costs19,997 
Net$1,492,882 
(1)Includes $188.0 million outstanding under the Credit Facility.
(2)Includes $100.0 million outstanding under the Credit Facility.
Deferred debt costs consist of fees and costs incurred to obtain long-term financing, construction financing and the Credit Facility. These fees and costs are being amortized on a straight-line basis over the terms of the respective loans or agreements, which approximates the effective interest method. Deferred debt costs totaling $20.0 million and $19.3 million, net of accumulated amortization of $11.2 million and $10.6 million, at September 30, 2024 and December 31, 2023, respectively, are reflected as a reduction of the related debt in the Consolidated Balance Sheets.
Interest expense, net and amortization of deferred debt costs for the three and nine months ended September 30, 2024 and 2023, were as follows:
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Dollars in thousands)2024202320242023
Interest incurred$18,870 $17,072 $55,355 $48,852 
Amortization of deferred debt costs577 564 1,722 1,687 
Capitalized interest(7,191)(5,154)(20,036)(13,768)
Interest expense12,256 12,482 37,041 36,771 
Less: Interest income(43)(63)(113)(253)
Interest expense, net and amortization of deferred debt costs$12,213 $12,419 $36,928 $36,518