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Debt, Net
 6 Months Ended
Jun. 30, 2024
Debt Disclosure [Abstract]  
Debt, Net

Note 7 – Debt, Net

 

2024 Debt Transactions

 

On June 28, 2024, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement for up to $104.0 million in principal amount (the “1000 First Construction Loan”) with various lenders.

 

On June 26, 2024, our indirect majority-owned subsidiary entered into a fixed-rate loan agreement for $10.0 million in principal amount (the “900 8th Land Loan”) with KHRE SMA Funding, LLC.

 

On January 31, 2024, our indirect majority-owned subsidiary entered into a fixed-rate mezzanine loan agreement for up to $56.4 million in principal amount (the “1991 Main Mezzanine Loan”) with Southern Realty Trust Holdings, LLC.

 

2023 Debt Transactions

 

On May 12, 2023, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement for up to $130.0 million in principal amount (the “1991 Main Construction Loan”) with Bank OZK.

 

The following table details our Debt, net (dollars in thousands):

 

Indebtedness  Interest Rate   Maturity Date  Total Commitment   June 30, 2024   December 31, 2023 
              Carrying Value as of 
Indebtedness  Interest Rate   Maturity Date  Total Commitment   June 30, 2024   December 31, 2023 
              (unaudited)     
Fixed rate loans:                       
1991 Main Mezzanine Loan (1) (3)   13.00%  May 2027  $56,378   $43,260   $— 
900 8th Land Loan (2)   9.50%  June 2025   N/A    10,000    — 
Variable rate loans:                       
1991 Main Construction Loan (1) (4)   SOFR + 3.45%  May 2027  $130,000    71,716    23,076 
1000 First Construction Loan (5)   SOFR + 3.80%  June 2027  $104,000    —    — 
Total debt                124,976    23,076 
Unamortized debt issuance costs (6)                (3,350)   (2,239)
Unamortized debt discount (6)                (1,721)   (1,159)
Debt, net               $119,905   $19,678 

 

 

(1)Loan contains a one-year extension option, subject to certain restrictions.

 

 

(2)Loan contains two six-month extension options, subject to certain restrictions.
  
(3)We are required to maintain an interest reserve and carry reserve for purposes of paying accrued but unpaid interest on the 1991 Main Mezzanine Loan and interest, principal and other obligations under the 1991 Main Construction Loan. Undrawn amounts were held back at closing and are being maintained by an administrative agent appointed by the lender (the “Reserves”). As interest and other obligations accrue, the Reserves balance will be reduced and be added to the principal outstanding on the 1991 Main Mezzanine Loan. As of June 30, 2024 , the Reserves balance was $13.1 million.
  
(4)Advances under the 1991 Main Construction Loan bear interest at a per annum rate equal to the one-month term Secured Overnight Financing Rate (“SOFR”) plus 3.45%, subject to a minimum all-in per annum rate of 8.51%. To mitigate our exposure to increases to the one-month SOFR, we have obtained an interest rate cap (see Note 9 – Derivative Instruments).
  
(5)Loan contains two one-year extension options, subject to certain restrictions. Advances under the 1000 First Construction Loan bear interest at a per annum rate equal to the one-month term SOFR plus 3.80%, subject to a minimum all-in per annum rate of 7.55%. To mitigate our exposure to increases to the one-month SOFR, we have obtained an interest rate cap (see Note 9 – Derivative Instruments).
  
(6)Amounts as of June 30, 2024 exclude unamortized debt issuance costs and unamortized debt discounts of $1.5 million and $1.1 million, respectively, in relation to the 1000 First Construction Loan. Such amounts are included in Other assets in the consolidated balance sheets and will be reclassified as a component of Debt, net when amounts drawn on the construction loan exceed the costs incurred.

 

The following table summarizes the scheduled future principal payments under our debt arrangements as of June 30, 2024 (amounts in thousands):

 

      
Year ended December 31,  (unaudited) 
2024 (remainder)  $— 
2025   10,000 
2026   — 
2027   114,976 
2028   — 
Thereafter   — 
Total  $124,976 

 

Interest paid, net of capitalized interest for the six months ended June 30, 2024 and 2023, was $1.8 million and zero, respectively.

 

Amortization of deferred financing costs for the three months ended June 30, 2024 and 2023, was $0.4 million and $0.1 million, respectively, of which $0.2 million and $0.1 million was capitalized, respectively. Amortization of deferred financing costs for the six months ended June 30, 2024 and 2023 was $0.8 million and $0.1 million, respectively, of which $0.5 million and $0.1 million was capitalized, respectively.

 

Guarantees and Covenants

 

Each of our indebtedness agreements are secured by the individual underlying real estate investments serving as collateral. In connection with certain agreements, we provided completion guarantees, which, among other things, guarantee completion of the work at each individual construction project, as well as carveout guarantees pursuant to which we guarantee the borrowers obligations with respect to certain non-recourse carveout events, such as “bad acts,” environmental conditions, and violations of certain provisions of the loan documents. We also provided a customary environmental indemnity agreement to the certain lenders pursuant to which we agreed to protect, defend, indemnify, release and hold harmless such lenders from and against certain environmental liabilities related to the real estate investments for which they apply.

 

We are subject to various financial and operational covenants which includes, but is not limited to, maintaining liquid assets of no less than $20.0 million and a net worth of no less than $130.0 million. As of June 30, 2024, we were in compliance with all of our loan covenants.