Preferred Apartment Communities, Inc. (NYSE:APTS) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.
On February 28, 2017, Preferred Apartment Communities, Inc. (the
“Company”), as sponsor, and PCC Tempe, LLC, an indirect
subsidiary of the Company, as borrower (the “Borrower”), entered
into a Credit Agreement (the “Acquisition Credit Agreement”) with
KeyBank National Association (“Lender”) to obtain a $200 million
acquisition revolving credit facility (the “Acquisition
Facility”).
“Company”), as sponsor, and PCC Tempe, LLC, an indirect
subsidiary of the Company, as borrower (the “Borrower”), entered
into a Credit Agreement (the “Acquisition Credit Agreement”) with
KeyBank National Association (“Lender”) to obtain a $200 million
acquisition revolving credit facility (the “Acquisition
Facility”).
Under the Acquisition Facility, Lender will only make advances
(each an “Affiliate Borrower Loan”) to affiliates of the Company
(each an “Affiliate Borrower”) where each Affiliate Borrower: (a)
will be solely responsible for the portion of the debt under the
Acquisition Facility for which they are the borrower (the
“Affiliate Borrower Indebtedness”); and (b) will grant a security
interest in the real estate assets they own as security for the
repayment of their Affiliate Borrower Indebtedness. Each Affiliate
Borrower will enter into standard Federal Home Loan Mortgage
Corporation (“Freddie Mac”) documents for the Affiliate Borrower
Loan that include, but are not limited to, a loan agreement, a
security instrument and UCC-1 financing statements (the “Affiliate
Borrower Loan Documents”).
(each an “Affiliate Borrower Loan”) to affiliates of the Company
(each an “Affiliate Borrower”) where each Affiliate Borrower: (a)
will be solely responsible for the portion of the debt under the
Acquisition Facility for which they are the borrower (the
“Affiliate Borrower Indebtedness”); and (b) will grant a security
interest in the real estate assets they own as security for the
repayment of their Affiliate Borrower Indebtedness. Each Affiliate
Borrower will enter into standard Federal Home Loan Mortgage
Corporation (“Freddie Mac”) documents for the Affiliate Borrower
Loan that include, but are not limited to, a loan agreement, a
security instrument and UCC-1 financing statements (the “Affiliate
Borrower Loan Documents”).
In connection with each Affiliate Borrower Loan, we expect there
will be a standard commitment letter from Lender for the Affiliate
Borrower Loan once Lender has approved the Affiliate Borrower and
the related transaction and we expect the related Affiliate
Borrower will enter into a credit agreement substantially similar
to the Acquisition Credit Agreement. Lender intends to assign the
Acquisition Credit Agreement, any future credit agreement, and the
Affiliate Borrower Loan Documents to Freddie Mac.
will be a standard commitment letter from Lender for the Affiliate
Borrower Loan once Lender has approved the Affiliate Borrower and
the related transaction and we expect the related Affiliate
Borrower will enter into a credit agreement substantially similar
to the Acquisition Credit Agreement. Lender intends to assign the
Acquisition Credit Agreement, any future credit agreement, and the
Affiliate Borrower Loan Documents to Freddie Mac.
The Acquisition Facility has a maturity date of March 1, 2022 (as
it may be extended, the “Maturity Date”). Each Affiliate Borrower
Loan will mature on the Maturity Date. The Company has two one-year
extension options, each subject to Lender approval at Lender’s
sole discretion, by delivering notice to Lender at least 60 days,
but not more than 90 days, prior to the scheduled maturity date and
paying an extension fee of $50,000 for each extension.
it may be extended, the “Maturity Date”). Each Affiliate Borrower
Loan will mature on the Maturity Date. The Company has two one-year
extension options, each subject to Lender approval at Lender’s
sole discretion, by delivering notice to Lender at least 60 days,
but not more than 90 days, prior to the scheduled maturity date and
paying an extension fee of $50,000 for each extension.
The Company has the option to request Lender to expand the
Acquisition Facility to a maximum amount of $300 million at any
time prior to March 1, 2021, subject to Lender’s approval in its
sole discretion. Any request by the Company to expand the
Acquisition Facility must be in a minimum amount of $25 million and
the Company may not request more than two expansions within any
12-month period. If the Company requests an expansion that is not
approved by Lender, the Company will no longer have the right to
expand the Acquisition Facility. In connection with any expansion,
the Company will be required to pay: (I) an expansion fee of 0.0005
times the amount of the expansion to Freddie Mac; and (II) an
expansion fee of 0.0010 times the amount of the expansion to the
Lender.
Acquisition Facility to a maximum amount of $300 million at any
time prior to March 1, 2021, subject to Lender’s approval in its
sole discretion. Any request by the Company to expand the
Acquisition Facility must be in a minimum amount of $25 million and
the Company may not request more than two expansions within any
12-month period. If the Company requests an expansion that is not
approved by Lender, the Company will no longer have the right to
expand the Acquisition Facility. In connection with any expansion,
the Company will be required to pay: (I) an expansion fee of 0.0005
times the amount of the expansion to Freddie Mac; and (II) an
expansion fee of 0.0010 times the amount of the expansion to the
Lender.
At the Affiliate Borrower’s option for each Affiliate Borrower
Loan, loans will bear interest at a rate per annum equal to either:
(x) the Lender’s “prime rate” (the “Prime Rate”); or (y) the
one-month LIBOR rate plus an applicable margin (“LIBOR Rate”).
The margin for each LIBOR Rate Affiliate Borrower Loan is 5 basis
points plus a “net spread” based on the property type owned by
the Affiliate Borrower and the Lender’s calculated property debt
service coverage ratio as shown in the following tables:
Loan, loans will bear interest at a rate per annum equal to either:
(x) the Lender’s “prime rate” (the “Prime Rate”); or (y) the
one-month LIBOR rate plus an applicable margin (“LIBOR Rate”).
The margin for each LIBOR Rate Affiliate Borrower Loan is 5 basis
points plus a “net spread” based on the property type owned by
the Affiliate Borrower and the Lender’s calculated property debt
service coverage ratio as shown in the following tables:
Multifamily Property:
|
Property Debt Service Coverage Ratio (“DSCR”)
|
Net Spread
|
Margin
|
|
Greater than or equal to 1.55:1.00 but less than
1.75:1.00 |
|
|
|
Greater than or equal to 1.75:1.00 but less than
1.95:1.00 |
|
|
|
Greater than or equal to 1.95:1.00
|
|
|
Student Housing Property:
|
Property DSCR
|
Net Spread
|
Margin
|
|
Greater than or equal to 1.60:1.00 but less than
1.80:1.00 |
|
|
|
Greater than or equal to 1.80:1.00 but less than
2.00:1.00 |
|
|
|
Greater than or equal to 2.00:1.00
|
|
|
In connection with establishing the Acquisition Facility and
entering into the Acquisition Credit Agreement, the Company paid
the following fees: (1) a commitment fee of $100,000 payable to
Freddie Mac; and (2) a commitment fee to Lender of $200,000. Upon
the addition of an Affiliate Borrower and the creation of a new
Affiliate Borrower Loan, there will be the following fees due: (i)
an addition fee equal to .0010 times the amount of the Affiliated
Borrower Loan payable to Freddie Mac; and (ii) an addition fee
equal to .0030 times the amount of the Affiliated Borrower Loan
payable to Lender. On February 28, 2017, Borrower became the first
Affiliated Borrower under the Acquisition Credit Agreement and
received an advance of $37,485,000 (the “Acquisition Borrowing”)
and paid an addition fee of $37,485 to Freddie Mac and an addition
fee of $112,455 to Lender. In connection with the Acquisition
Borrowing, the Company’s manager, Preferred Apartment Advisors,
LLC, is entitled to a loan coordination fee of approximately
$599,760, or 1.6% of the Acquisition Borrowing.
entering into the Acquisition Credit Agreement, the Company paid
the following fees: (1) a commitment fee of $100,000 payable to
Freddie Mac; and (2) a commitment fee to Lender of $200,000. Upon
the addition of an Affiliate Borrower and the creation of a new
Affiliate Borrower Loan, there will be the following fees due: (i)
an addition fee equal to .0010 times the amount of the Affiliated
Borrower Loan payable to Freddie Mac; and (ii) an addition fee
equal to .0030 times the amount of the Affiliated Borrower Loan
payable to Lender. On February 28, 2017, Borrower became the first
Affiliated Borrower under the Acquisition Credit Agreement and
received an advance of $37,485,000 (the “Acquisition Borrowing”)
and paid an addition fee of $37,485 to Freddie Mac and an addition
fee of $112,455 to Lender. In connection with the Acquisition
Borrowing, the Company’s manager, Preferred Apartment Advisors,
LLC, is entitled to a loan coordination fee of approximately
$599,760, or 1.6% of the Acquisition Borrowing.
If an Affiliate Borrower Loan remains outstanding for more than two
years, the Affiliated Borrower will owe Lender an annual seasoning
fee (a “Seasoning Fee”) that is equal to the applicable seasoning
spread (the “Seasoning Spread”) multiplied by the outstanding
amount of the Affiliate Borrower Loan for the applicable seasoning
period (“Seasoning Period”). On each payment date for the
Affiliate Borrower Loan during the applicable Seasoning Period,
1/12th of the applicable Seasoning Fee shall be paid by the
Affiliate Borrower in arrears on each payment date beginning with
the payment date immediately after the applicable anniversary date.
Below is a table of the Seasoning Spreads and Seasoning Periods:
years, the Affiliated Borrower will owe Lender an annual seasoning
fee (a “Seasoning Fee”) that is equal to the applicable seasoning
spread (the “Seasoning Spread”) multiplied by the outstanding
amount of the Affiliate Borrower Loan for the applicable seasoning
period (“Seasoning Period”). On each payment date for the
Affiliate Borrower Loan during the applicable Seasoning Period,
1/12th of the applicable Seasoning Fee shall be paid by the
Affiliate Borrower in arrears on each payment date beginning with
the payment date immediately after the applicable anniversary date.
Below is a table of the Seasoning Spreads and Seasoning Periods:
|
Seasoning Spread (Basis Points)
|
Seasoning Period
|
|
0.0050
|
The second anniversary of the date the applicable
Affiliate Borrower Loan was initially advanced until, but not including, the fourth anniversary date. |
|
0.0075
|
The third anniversary of the date the applicable
Affiliate Borrower Loan was initially advanced until, but not including, the fifth anniversary date. |
|
0.0100
|
The fourth anniversary of the date the applicable
Affiliate Borrower Loan was initially advanced until, but not including, the sixth anniversary date. |
|
0.0125
|
The fifth anniversary of the date the applicable
Affiliate Borrower Loan was initially advanced until, but not including, the seventh anniversary date. |
The Acquisition Credit Agreement has limits on the amount any
Affiliate Borrower may borrow under the Acquisition Facility (the
“Sublimits”). The Sublimits include: (l) each Affiliate Borrower
Loan must have a loan to value ratio that does not exceed 70%
(“Property LTV”); (m) the debt service coverage ratio for each
Affiliate Borrower Loan shall not be less than 1.55:1.00 for a
multifamily property or 1.60:1.00 for a student housing property
(“DSCR”); (n) the aggregate number of all outstanding borrowing
advances at any time under the Acquisition Facility shall not
exceed ten; and (o) no more than $100 million of the Acquisition
Facility may be used for student housing properties.
Affiliate Borrower may borrow under the Acquisition Facility (the
“Sublimits”). The Sublimits include: (l) each Affiliate Borrower
Loan must have a loan to value ratio that does not exceed 70%
(“Property LTV”); (m) the debt service coverage ratio for each
Affiliate Borrower Loan shall not be less than 1.55:1.00 for a
multifamily property or 1.60:1.00 for a student housing property
(“DSCR”); (n) the aggregate number of all outstanding borrowing
advances at any time under the Acquisition Facility shall not
exceed ten; and (o) no more than $100 million of the Acquisition
Facility may be used for student housing properties.
Lender will perform annual market valuations for each property
underlying an Affiliate Borrower Loan (the “Annual Market
Value”). If an Annual Market Value is above the most recent market
value of the underlying property then, subject to the maximum
amount of the Acquisition Facility, the Affiliate Borrower may
borrower additional amounts so long as there is no Sublimit
violation. If a new Annual Market Value is less than the most
recent Annual Market Value and it causes a Sublimit violation, than
the Affiliate Borrower must: (1) pledge an additional operating
property as collateral to cure the Sublimit violations; (2) prepay
the portion of the Affiliate Borrower Loan in such amount as is
necessary to cure the Sublimits violation; or (3) if the Sublimit
violation is only related to Property LTV, the Affiliate Borrower
has the one-time right to supply a letter of credit in an amount of
not less than the difference between (a) the value all properties
in the
underlying an Affiliate Borrower Loan (the “Annual Market
Value”). If an Annual Market Value is above the most recent market
value of the underlying property then, subject to the maximum
amount of the Acquisition Facility, the Affiliate Borrower may
borrower additional amounts so long as there is no Sublimit
violation. If a new Annual Market Value is less than the most
recent Annual Market Value and it causes a Sublimit violation, than
the Affiliate Borrower must: (1) pledge an additional operating
property as collateral to cure the Sublimit violations; (2) prepay
the portion of the Affiliate Borrower Loan in such amount as is
necessary to cure the Sublimits violation; or (3) if the Sublimit
violation is only related to Property LTV, the Affiliate Borrower
has the one-time right to supply a letter of credit in an amount of
not less than the difference between (a) the value all properties
in the
Acquisition Facility utilizing the Property LTV’s determined at
the new Annual Market Value and (b) the value of all properties in
the Acquisition Facility utilizing a Property LTV Ratio of 70%
(“LOC Amount”). However, in no event may the aggregate of all LOC
Amounts under the Acquisition Facility exceed the lesser of 10% of
the maximum amount of the Acquisition Facility or $20 million.
the new Annual Market Value and (b) the value of all properties in
the Acquisition Facility utilizing a Property LTV Ratio of 70%
(“LOC Amount”). However, in no event may the aggregate of all LOC
Amounts under the Acquisition Facility exceed the lesser of 10% of
the maximum amount of the Acquisition Facility or $20 million.
The description above of the terms of the Acquisition Facility is
qualified in its entirety by the Acquisition Credit Agreement
attached as Exhibit 10.1 to this Current Report on Form 8-K.
qualified in its entirety by the Acquisition Credit Agreement
attached as Exhibit 10.1 to this Current Report on Form 8-K.
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Item 2.03
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Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant. |
The information in this report set forth under Item 1.01 regarding
the Acquisition Facility is incorporated herein by reference.
the Acquisition Facility is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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10.1
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Credit Agreement dated as of February 28, 2017 among
Preferred Apartment Communities, Inc., PCC Tempe, LLC and KeyBank National Association |
About Preferred Apartment Communities, Inc. (NYSE:APTS)
Preferred Apartment Communities, Inc. is a real estate investment trust (REIT). The Company is formed primarily to acquire and operate multifamily properties in select-targeted markets throughout the United States. It operates through three segments: multifamily communities, retail and real estate related financing. The multifamily communities segment consists of owned residential multifamily communities. It owns approximately 20 multifamily communities with a total of over 6,140 units in over eight states. The retail segment consists of owned grocery-anchored shopping centers. The Company owns over 31 grocery-anchored centers across over seven Sunbelt states. It owns Champions Village, a Randalls-anchored shopping center. The financing segment consists of a portfolio of real estate loans, bridge loans and other financial instruments, which partially finance the development, construction and prestabilization carrying costs of multifamily communities and other real estate assets. Preferred Apartment Communities, Inc. (NYSE:APTS) Recent Trading Information
Preferred Apartment Communities, Inc. (NYSE:APTS) closed its last trading session down -0.05 at 13.61 with 136,758 shares trading hands.
