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Debt | 3 Months Ended
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Mar. 31, 2021
Debt Disclosure [Abstract] |
Debt | 4. Debt Mortgage Loans, Net. As of March 31, 2021 and December 31, 2020, we had approximately $356.5 million and approximately $357.5 million of outstanding mortgage debt, respectively. The following table sets forth our mortgage debt obligations on our hotels.
| Balance Outstanding as of |  |  |  |  |  |  |  |  |  |  |  |
| March 31, |  |  | December 31, |  |  | Prepayment |  | Maturity |  | Amortization |  | Interest |  |
Property | 2021 |  |  | 2020 |  |  | Penalties |  | Date |  | Provisions |  | Rate |  |
The DeSoto (1) | $ | 32,820,733 |  |  | $ | 32,820,733 |  |  | Yes |  | 7/1/2026 |  | 25 years |  | 4.25% |  |
DoubleTree by Hilton Jacksonville Riverfront (2) |  | 33,501,600 |  |  |  | 33,655,483 |  |  | Yes |  | 7/11/2024 |  | 30 years |  | 4.88% |  |
DoubleTree by Hilton Laurel (3) |  | 8,654,754 |  |  |  | 8,654,754 |  |  | Yes |  | 8/5/2021 |  | 25 years |  | 5.25% |  |
DoubleTree by Hilton Philadelphia Airport (4) |  | 41,069,612 |  |  |  | 41,804,700 |  |  | None |  | 10/31/2023 |  | 30 years |  | LIBOR plus 2.27% |  |
DoubleTree by Hilton Raleigh- Brownstone University (5) |  | 18,300,000 |  |  |  | 18,300,000 |  |  | Yes |  | 7/27/2022 |  | (5) |  | LIBOR plus 4.00% |  |
DoubleTree Resort by Hilton Hollywood Beach (6) |  | 55,878,089 |  |  |  | 55,878,089 |  |  | (6) |  | 10/1/2025 |  | 30 years |  | 4.913% |  |
Georgian Terrace (7) |  | 42,268,756 |  |  |  | 42,507,512 |  |  | (7) |  | 6/1/2025 |  | 30 years |  | 4.42% |  |
Hotel Alba Tampa, Tapestry Collection by Hilton (8) |  | 17,946,480 |  |  |  | 17,946,480 |  |  | None |  | 6/30/2022 |  | (8) |  | LIBOR plus 3.75% |  |
Hotel Ballast Wilmington, Tapestry Collection by Hilton (9) |  | 33,259,067 |  |  |  | 33,259,067 |  |  | Yes |  | 1/1/2027 |  | 25 years |  | 4.25% |  |
Hyatt Centric Arlington (10) |  | 48,990,136 |  |  |  | 48,990,136 |  |  | Yes |  | 9/18/2028 |  | 30 years |  | 5.25% |  |
Sheraton Louisville Riverside (11) |  | 11,037,086 |  |  |  | 11,037,086 |  |  | Yes |  | 12/1/2026 |  | 25 years |  | 4.27% |  |
The Whitehall (12) |  | 14,697,831 |  |  |  | 14,697,830 |  |  | Yes |  | 2/26/2023 |  | 25 years |  | PRIME plus 1.25% |  |
Total Mortgage Principal Balance | $ | 358,424,144 |  |  | $ | 359,551,870 |  |  |  |  |  |  |  |  |  |  |  |
Deferred financing costs, net |  | (1,998,280 | ) |  |  | (2,122,822 | ) |  |  |  |  |  |  |  |  |  |  |
Unamortized premium on loan |  | 110,759 |  |  |  | 116,929 |  |  |  |  |  |  |  |  |  |  |  |
Total Mortgage Loans, Net | $ | 356,536,623 |  |  | $ | 357,545,977 |  |  |  |  |  |  |  |  |  |  |  |
(1) | The note amortizes on a 25-year schedule after an initial 1 year interest only period (which expired in August 2017) and is subject to a pre-payment penalty except for any pre-payments made within 120 days of the maturity date.
(2) | The note is subject to a pre-payment penalty until March 2024. Prepayment can be made without penalty thereafter.
(3) | Prepayment can be made on this note without penalty.
(4) | The note bears a floating interest rate of 1-month LIBOR plus 2.27%, but we entered into a swap agreement to fix the rate at 5.237%. Under the swap agreement, notional amounts approximate the declining balance of the loan and we are responsible for any potential termination fees associated with early termination of the swap agreement.
(5) | The note provides initial proceeds of $18.3 million, with an additional $5.2 million available upon the satisfaction of certain conditions; has an initial term of 4 years with a 1-year extension; bears a floating interest rate of 1-month LIBOR plus 4.00%; requires interest only monthly payments; and following a 12-month lockout, can be prepaid with penalty in year 2 and without penalty thereafter. We entered into an interest-rate cap agreement to limit our exposure through August 1, 2022 to increases in LIBOR exceeding 3.25% on a notional amount of $23,500,000.
(6) | With limited exception, the note may not be prepaid prior to June 2025.
(7) | With limited exception, the note may not be prepaid prior to February 2025.
(8) | The note bears a floating interest rate of 1-month LIBOR plus 3.75% subject to a floor rate of 3.75%; with monthly principal payments of $26,812; the note provides that the mortgage can be extended for two additional periods of one year each, subject to certain conditions.
(9) | The note amortizes on a 25-year schedule after an initial 1 year interest only period and is subject to a pre-payment penalty except for any pre-payments made within 120 days of the maturity date.
(10) | Following a 5-year lockout, the note can be prepaid with penalty in years 6-10 and without penalty during the final 4 months of the term.
(11) | The note bears a fixed interest rate of 4.27% for the first 5 years of the loan, with an option for the lender to reset the interest rate after 5 years.
(12) | The note bears a floating interest rate of New York Prime Rate plus 1.25% and is subject to prepayment penalty of 2.0% if prepaid after April 12, 2021 and 1.0% if prepaid after April 12, 2022 but on or before November 26, 2022.
Mortgage Forbearance Agreements Since the onset of the COVID-19 pandemic, we have completed mortgage forbearance agreements and/or loan modification agreements for eleven of our twelve mortgage loans secured by our hotels. The terms of the amendments varied by lender, and included items such as the deferral of monthly interest and/or principal payments for three to twelve months, temporary elimination of requirements to make contributions to the furniture, fixtures and equipment replacement reserve, the ability to temporarily utilize furniture, fixtures and equipment replacement reserve funds for operating expenses or to fund principal and interest and required deposits to real estate tax escrows, subject to certain restrictions and conditions, including requirements to replenish such funds used; waivers for existing quarterly financial covenants for one to six quarters; and adjustments to some covenant calculations following the waiver period. Below is a summary of those agreements for each hotel. The DeSoto The lender has agreed to the following: (a) deferral of scheduled principal payments due from April 1, 2020 to February 1, 2021; (b) a payment of interest only on March 1, 2021; (c) waiver of FF&E requirement until March 1, 2021; (d) deferred principal and interest are due and payable at maturity; and (e) payment of up to 5.0% of the indebtedness under the loan is guaranteed by the Operating Partnership. The maturity date under the loan modification remains unchanged. DoubleTree by Hilton Laurel The lender has agreed to the following: (a) deferral of scheduled payments of principal and interest due from April 5, 2020 to September 5, 2020; (b) subsequent payments are required to be applied first toward current and deferred interest and then toward principal; (c) any deferred principal is due and payable at maturity; and (d) deferral of principal payments through March 5, 2021. The maturity date under the loan modification remains unchanged. DoubleTree by Hilton Philadelphia Airport The lender has agreed to the following: (a) deferral of scheduled principal through June 1, 2021; (b) payment of regular principal and interest on June 2, 2021; (c) remaining deferred interest is to be paid in 12 equal installments beginning June 2, 2021; and (d) deferred principal is due and payable at maturity. The maturity date was extended by 3 months, or until October 31, 2023. DoubleTree by Hilton Raleigh-Brownstone University The lender has agreed to the following: (a) deferral of scheduled interest payments due from April 1, 2020 to July 31, 2021; (b) a one-time fee of $236,375 to be applied to deferred interest; and (c) remainder of deferred interest, along with additional accrued interest on interest, is due and payable by August 1, 2021. DoubleTree Resort by Hilton Hollywood Beach Subsequent to the quarter end, on April 30, 2021, we entered into a loan modification and reinstatement agreement with the mortgage lender for the DoubleTree Resort by Hilton Hollywood Beach pursuant to which we agreed with the lender to amend and reinstate the promissory note and loan agreement on revised terms. Under the amended loan agreement and promissory note the Company (i) paid to the lender contemporaneously with the closing of the amendment and reinstatement an aggregate amount of approximately $4 million made up of (i) tax and insurance reserves required to be funded in certain reserve accounts in the aggregate amount of approximately $2.5 million; (ii) a lump sum payment of approximately $1.3 million in respect of amounts owed by us relating to payments for the period from January through March 2021; (iii) certain FF&E reserve amounts required to be deposited with the lender; and (iv) certain other fees and expenses. In addition, we agreed to (a) begin regular monthly payments on May 1, 2021; (b) pay the aggregate amount owed by the Company relating to deferred monthly payments for the period from April through December 2020 in 24 equal monthly installments of $119,591.36 beginning on January 1, 2021 and continuing through December 2022; and (c) certain other amended terms, including to restrict the borrower under the promissory note from making any distributions until all such deferred payments have been made. In consideration for the payments made at closing and the other amended terms the loan agreement, promissory note and other loan documents thereunder were amended and reinstated in accordance with their respective terms and conditions and the lender agreed to certain accommodations, including the waiver of the cash sweep period trigger for a period of time and to forbear in collection of default interest and late payment charges accrued and unpaid under the loan agreement and promissory note, provided that in the event of a future default those amounts will become due immediately and the waivers will no longer be effective. Georgian Terrace On October 8, 2020, the lender agreed to the release of approximately $1.1 million from the FF&E reserve to fund up to 50% of shortfall between gross revenues and scheduled payments of debt service, deposits to the real estate tax escrow and operating expenses for the period April through August 2020. The FF&E reserve must be replenished no later than December 31, 2021. Hotel Alba Tampa The lender agreed to the deferral of scheduled payments of principal due from April 1, 2020 to June 1, 2021. Hotel Ballast Wilmington The lender has agreed to the following: (a) deferral of scheduled principal payments due from April 1, 2020 to March 1, 2021; (b) deferral of scheduled payments of interest from April 1, 2020 to September 1, 2020; (c) waiver of FF&E requirement until March 1, 2021; (d) deferred principal and interest will be due and payable at maturity; and (e) payment of up to 5.0% of the indebtedness under the loan is guaranteed by the Operating Partnership. The maturity date under the loan modification remains unchanged. Hyatt Centric Arlington The lender has agreed to the following: (a) deferral of scheduled payments of principal and interest due from April 1, 2020 to March 31, 2021; (b) deferral of scheduled payments of principal due from April 1, 2021 to December 31, 2021; (c) a one-time fee of $100,000; (d) loan balance to be re-amortized as of January 1, 2022; and (e) deferred principal and interest, along with additional accrued interest on interest, is due and payable by July 1, 2022. Sheraton Louisville Riverside The lender has agreed to the following: (a) deferral of scheduled payments of interest due from May 1, 2020 to July 1, 2020; (b) deferral of scheduled payments of principal due from May 1, 2020 to April 1, 2021; (c) subsequent payments are required to be applied first toward current and deferred interest and then toward principal; and (d) any deferred principal is due and payable at maturity. The maturity date under the loan modification remains unchanged. The Whitehall The lender has agreed to the following: (a) deferral of scheduled payments of principal due from April 1, 2020 to July 13, 2021; (b) deferral of scheduled payments of interest from April 1, 2020 to October 12, 2020; (c) deferred payments will be added to the principal balance of the loan and subsequent payments will be calculated based on the remainder of the amortization period; (d) on July 14, 2021 principal and interest payments will resume based upon the original amortization; (e) the interest rate is changed from LIBOR plus 3.50% to New York Prime Rate plus 1.25%; (f) a loan modification fee of $25,000; and (g) the prepayment penalty is changed to: (i) 2.0% if prepaid after April 12, 2021 but on or before April 12, 2022; (ii) 1.0% if prepaid after April 12, 2022 but on or before November 26, 2022; and (iii) no prepayment fee if prepaid after November 26, 2022. The maturity date under the loan modification remains unchanged. As of March 31, 2021, we had failed to make twelve consecutive monthly payments of principal and interest under the mortgage secured by our DoubleTree Resort by Hilton Hollywood Beach hotel, which constituted an Event of Default. On April 30, 2021, we entered into a loan modification agreement curing the above mentioned Event of Default. See the disclosure above related to the forbearance agreement for the DoubleTree Resort by Hilton Hollywood Beach and “Note 13 – Subsequent Events” for additional information. As of March 31, 2021, we failed to meet the financial covenants under the mortgages secured by the DoubleTree by Hilton Philadelphia Airport and The Whitehall. We have received waivers of the financial covenants from the lender on the DoubleTree by Hilton Philadelphia Airport through September 30, 2021 and from the lender on The Whitehall mortgage through June 30, 2022. As of March 31, 2021, we were in compliance with the modified financial covenant under the mortgage secured by the Hotel Alba, provided that we maintain the cash collateral on deposit with the lender. Cash collateral on deposit with the Hotel Alba lender, is included in restricted cash on our consolidated balance sheets and was approximately $1.9 million as of March 31, 2021, subject to certain withdrawal privileges. As of March 31, 2021, we failed to meet the financial covenants under the mortgage secured by the DoubleTree by Hilton Jacksonville Riverfront, the DoubleTree Resort by Hilton Hollywood Beach and the Georgian Terrace, which triggered a “cash trap” under the loan documents relating to each of these properties requiring substantially all the revenue generated by those hotels to be deposited directly into lockbox accounts and swept into cash management accounts for the benefit of the respective lenders until each property meets the criteria in the relevant loan agreement for exiting the “cash trap”. Provided we continue to meet certain terms and conditions, the lender has waived the “cash trap” with respect to the DoubleTree Resort by Hilton Hollywood Beach and we are in negotiations with the lender on the DoubleTree by Hilton Jacksonville Riverfront for a waiver of the “cash trap” as well. Additionally, in order to receive forbearance from the lenders on the DoubleTree by Hilton Raleigh Brownstone – University and the Hyatt Centric Arlington, we agreed to “cash traps” which will continue until the properties meet the criteria in the forbearance agreements for exiting the “cash traps”. Total future mortgage debt maturities for the remaining nine and twelve-month periods, without respect to any extension of loan maturity or loan modification after March 31, 2021, were as follows:
For the nine months ending December 31, 2021 |  | 13,511,647 |
December 31, 2022 |  | 42,087,366 |
December 31, 2023 |  | 60,575,964 |
December 31, 2024 |  | 37,218,158 |
December 31, 2025 |  | 93,250,734 |
December 31, 2026 and thereafter |  | 111,780,275 |
Total future maturities | $ | 358,424,144 |
PPP Loans. The Operating Partnership and certain of its subsidiaries have received PPP Loans administered by the U.S. Small Business Administration pursuant to the CARES Act. Each PPP Loan has a term of five years and carries an interest rate of 1.00%. Equal payments of principal and interest begin no later than 10 months following origination of the loan and are amortized over the remaining term of the loan. Pursuant to the terms of the CARES Act, the proceeds of each PPP Loan may be used for payroll costs, mortgage interest, rent or utility costs. The promissory note for each PPP Loan contains customary events of default relating to, among other things, payment defaults and breach of representations and warranties or of provisions of the relevant promissory note. Under the terms of the CARES Act, each borrower can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds in accordance with the terms of the CARES Act. No assurance is provided that any borrower will obtain forgiveness under any relevant PPP Loan in whole or in part. On April 16, 2020, our Operating Partnership entered into a promissory note with Village Bank in connection with a PPP Loan and received proceeds of $333,500. On April 28, 2020, we entered into a promissory note and received proceeds of $9,432,900 under a PPP Loan from Fifth Third Bank, National Association. On May 6, 2020, we entered into a second promissory note with Fifth Third Bank, National Association and received proceeds of $952,700 under a PPP Loan. Secured Notes Financing. On December 31, 2020, we entered into the following agreements with KW, as collateral agent and an investor, and MIG, as an investor: (i) a Note Purchase Agreement with KW and MIG; (ii) a Secured Note with KW in the amount of $10.0 million and a Secured Note with MIG in the amount of $10.0 million; (iii) a Pledge and Security Agreement with KW; (iv) a Board Observer Agreement with KW; and (v) other ancillary agreements. These agreements constitute a transaction whereby the Investors purchased $20.0 million in Secured Notes from the Operating Partnership with an option to require the Investors to purchase an additional $10.0 million in Secured Notes on the terms and subject to the conditions described below. Note Purchase Agreement On December 31, 2020, the Operating Partnership and the Company entered into the Note Purchase Agreement with KW and MIG, pursuant to which: (i) we agreed to issue and sell, and the Investors agreed to purchase, the Secured Notes with an aggregate face amount of US $20 million and on the terms described below; (ii) KW and MIG granted us an option, subject to certain conditions and exercisable by us on or before the first anniversary of the first closing date, pursuant to which we may issue and sell a second note to each of the Investors with an aggregate face amount of $10.0 million on substantially the same terms as the initial Secured Notes; (iii) the Company agreed to fully and unconditionally guaranty the obligations of the Operating Partnership; (iv) we entered into the Pledge Agreement and Board Observer Agreement; (v) we agreed to provide certain representations and warranties to the Investors; and (vi) we agreed to use the net proceeds to support the continued operation of the business conducted by the Operating Partnership. We were required to pay a 1% origination fee on the amount of the initial Secured Notes in connection with the first closing and a 1% commitment fee on the committed amount of the Second Secured Notes. Secured Notes On December 31, 2020, the Operating Partnership issued and sold initial Secured Notes to the Investors in the amount of $20.0 million. The Secured Notes: (i) have a maturity date of December 30, 2023, with a one-year extension option, subject to a fee in the amount of 1% of the outstanding principal amount under the Secured Notes as of such maturity date; (ii) accrue interest at a rate of 6.00% during the initial term and then at a rate of 10% following any extension; (ii) require quarterly interest payments, which shall initially be in the amount of $0.30 million; (iii) require principal repayment equal to 1.47 times the face amount of the Secured Notes if repaid on or prior to December 30, 2023 and 1.65 times the face amount of the Secured Notes if repaid after December 30, 2023; (iv) may be prepaid without penalty, but subject to make-whole amounts for interest and the repayment multiplier; and (v) rank pari passu with other notes issued under the Note Purchase Agreement and senior to all other indebtedness of the Operating Partnership. The Secured Notes requires us to maintain certain cash management standards and include a broad range of covenants restricting our ability to incur additional debt, make dividend payments, transfer or acquire assets, or exceed our 2019 employee compensation levels. They also require us to maintain certain financial thresholds, including limitations on our accounts payable and capital expenditures. Upon an event of default or liquidity event described in the Secured Notes, the holders of the Secured Notes have the right to require and approve our selection of one or more of our hotel properties for disposition or refinancing in order to cure an event of default or liquidity event based on a process set forth in the Secured Notes. In addition, the Secured Notes are redeemable by the holder in full upon an event of default or a change of control transaction. Pledge Agreement On December 31, 2020, certain subsidiaries of the Operating Partnership entered into the Pledge Agreement with KW, pursuant to which we agreed to pledge and grant to KW a first priority security interest in the equity interests, including certain voting rights, of our affiliates that own The DeSoto hotel, Hotel Ballast Wilmington, and the DoubleTree by Hilton Philadelphia Airport hotel. Upon an uncured monetary event of default under the Secured Notes, KW, as collateral agent, has a right to sell, lease or otherwise dispose of or realize upon the Pledged Collateral in order to satisfy any amounts outstanding under the Secured Notes.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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