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Note Payable and Revolving Line of Credit
 6 Months Ended
Jun. 30, 2024
Notes Payable [Abstract]  
Note Payable and Revolving Line of Credit

7. NOTE PAYABLE AND REVOLVING LINE OF CREDIT

 

Note Payable

On June 24, 2016, certain wholly owned subsidiaries (“Term Loan Secured Subsidiaries”) of the Company entered into a loan agreement and certain other related agreements (collectively, the “Term Loan Agreement”) between the Term Loan Secured Subsidiaries and Insurance Strategy Funding IV, LLC (the “Lender”). Under the Term Loan Agreement, the Term Loan Secured Subsidiaries borrowed from the Lender in the principal amount of $20 million pursuant to a promissory note (the “Term Loan Promissory Note”). The Term Loan Promissory Note bears an interest rate equal to 4.192% per annum and is due to mature on July 1, 2036. Pursuant to a security agreement (the “Term Loan Security Agreement”), the obligations under the Term Loan Agreement are secured by certain real estate assets owned by the Term Loan Secured Subsidiaries.

The Company entered into a non-recourse guaranty on June 24, 2016 (the “Term Loan Guaranty,” and together with the Term Loan Agreement, the Term Loan Promissory Note and the Term Loan Security Agreement, the “Term Loan Documents”) to guarantee the payment to the Lender of certain obligations of the Term Loan Secured Subsidiaries under the Term Loan Agreement.

The Term Loan Documents require the Term Loan Secured Subsidiaries and the Company to comply with certain covenants, including, among others, a minimum net worth test and other customary covenants. The Lender may accelerate amounts outstanding under the Term Loan Documents upon the occurrence of an event of default (as defined in the Term Loan Agreement) including, but not limited to, the failure to pay amounts due or commencement of bankruptcy proceedings. As of June 30, 2024, the Company was in compliance with these covenants.

The Company incurred loan procurement costs of $646,246 and such costs have been recorded as a reduction of the note payable on the consolidated balance sheet and are amortized as an adjustment to interest expense over the term of the loan. The Company recorded amortization expense of $9,020 and $9,321 for the three months ended June 30, 2024 and 2023, respectively and $18,117 and $18,715 for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024 and December 31, 2023 ,the carrying value of the Company’s note payable is summarized as follows:

Note Payable

 

June 30, 2024

 

 

December 31, 2023

 

Principal balance outstanding

 

$

16,957,442

 

 

$

17,244,687

 

Less: Loan procurement costs, net

 

 

(325,351

)

 

 

(343,468

)

Total note payable, net

 

$

16,632,091

 

 

$

16,901,219

 

 

As of June 30, 2024, the note payable was secured by certain of the Company’s self storage properties with an aggregate net book value of approximately $23.6 million. The following table represents the future principal payment requirements on the note payable as of June 30, 2024:

 

2024 (6 months)

 

$

294,343

 

2025

 

 

607,488

 

2026

 

 

633,449

 

2027

 

 

660,519

 

2028

 

 

688,746

 

2029 and thereafter

 

 

14,072,897

 

Total principal payments

 

$

16,957,442

 

 

 

Revolving Line of Credit

On July 6, 2021, certain wholly owned subsidiaries (“Amended Credit Facility Secured Subsidiaries”) of the Company entered into a first amendment to the Credit Facility Loan Agreement (collectively, the “Amended Credit Facility Loan Agreement”) between the Amended Credit Facility Secured Subsidiaries and The Huntington National Bank ("Huntington"), successor by merger to TCF

National Bank (“Amended Credit Facility Lender”). Under the Amended Credit Facility Loan Agreement, the Amended Credit Facility Secured Subsidiaries may borrow from the Amended Credit Facility Lender in the principal amount of up to $15 million, reduced to $14.75 million and $14.5 million in years 2 and 3, respectively, pursuant to a promissory note (the “Amended Credit Facility Promissory Note”). The Amended Credit Facility Promissory Note bears an interest rate equal to 3% plus the greater of the Secured Overnight Financing Rate (“SOFR”) plus 0.11448% or one-quarter of one percent (0.25%) and is due to mature on July 6, 2024. As of June 30, 2024, the effective interest rate was approximately 8.44%. The obligations under the Amended Credit Facility Loan Agreement are secured by certain real estate assets owned by the Amended Credit Facility Secured Subsidiaries. The Company entered into an amended and restated guaranty of payment on July 6, 2021 (“Amended Credit Facility Guaranty,” and together with the Amended Credit Facility Loan Agreement, the Amended Credit Facility Promissory Note and related instruments, the “Amended Credit Facility Loan Documents” or the “Revolving Line of Credit”) to guarantee the payment to the Amended Credit Facility Lender of certain obligations of the Amended Credit Facility Secured Subsidiaries under the Amended Credit Facility Loan Agreement. The Company and the Amended Credit Facility Secured Subsidiaries paid customary fees and expenses in connection with their entry into the Amended Credit Facility Loan Documents.

 

The Revolving Line of Credit requires the Secured Subsidiaries and the Company to comply with certain covenants, including, among others, customary financial covenants. The Lender may accelerate amounts outstanding under the Loan Documents upon the occurrence of an Event of Default (as defined in the Agreement) including, but not limited to, the failure to pay amounts due to the Lender or commencement of bankruptcy proceedings.

 

The Company incurred issuance costs of $231,926 and $477,981 for the July 6, 2021 Revolving Line of Credit extension and entry into the Revolving Line of Credit in December 18, 2018, respectively, and such costs are amortized as an adjustment to interest expense using the straight-line method, which approximates the effective interest method, over the term of the loan. The Company recorded amortization expense of $24,500 and $25,400 for the three months ended June 30, 2024 and 2023, respectively $50,801 and $50,801 for the six months ended June 30, 2024 and 2023, respectively. The was no outstanding loan balance under the Revolving Line of Credit as of June 30, 2024 or December 31, 2023.