NOTE 5. BORROWINGS

Our borrowings as of September 30, 2014, and December 31, 2013, are summarized below:

 

														As of September 30, 2014												As of December 31, 2013
Issuer		Type of Issuance		Date of Issuance		Initial Commitment				Maturity Date				Principal Outstanding				Stated Interest Rate				Undrawn Commitment				Principal Outstanding				Stated Interest Rate				Undrawn Commitment
MetLife		Mortgage Note Payable		12/30/2010		$	45,200,000				1/5/2026			$	—				N/A			$	—			$	43,054,165				3.50	%		$	—	(1)
MetLife		Line of Credit		5/23/2012			4,785,000				4/5/2017				—				N/A				—				100,000				3.25	%			4,685,000	(1)
MetLife		Mortgage Note Payable		5/9/2014			100,000,000				1/5/2029				41,331,998				3.50	%			58,668,002				—				N/A				—	(2)
MetLife		Line of Credit		5/9/2014			25,000,000				4/5/2024				3,500,000				2.75	%			21,500,000				—				N/A				—	(2)
Farm Credit		Mortgage Note Payable		9/19/2014			2,655,000				8/1/2034				2,655,000				3.52	%			—				—				N/A				—
Farm Credit		Mortgage Note Payable		9/19/2014			1,599,600				8/1/2034				1,599,600				3.52	%			—				—				N/A				—
Farm Credit		Mortgage Note Payable		9/29/2014			8,259,000				8/1/2034				8,259,000				3.54	%			—				—				N/A				—
											Totals:			$	57,345,598							$	80,168,002			$	43,154,165							$	4,685,000

 

(1)	Indebtedness was fully repaid with the proceeds from the New MetLife Credit Facility and was terminated on May 9, 2014.

(2)	Based on the properties that were pledged as collateral as of September 30, 2014, approximately $24.8 million of the remaining availability was available for us to draw.

The weighted-average effective interest rate charged on all of our borrowings, excluding the impact of deferred financing costs, was 3.6% for both the three and nine months ended September 30, 2014, as well as for both the three and nine months ended September 30, 2013.

MetLife Credit Facility

On May 9, 2014, we closed on a new mortgage loan facility and a new revolving line of credit with Metropolitan Life Insurance Company (“MetLife”) for an aggregate amount of up to $125.0 million (the “New MetLife Credit Facility”). The New MetLife Credit Facility consists of a $100.0 million long-term note payable (the “New MetLife Note Payable”) and a $25.0 million revolving equity line of credit (the “New MetLife Line of Credit”). Under the New MetLife Credit Facility, we may borrow up to 58% of the aggregate of the lower of cost or the appraised value of the real property pledged as collateral.

 

The New MetLife Note Payable is scheduled to mature on January 5, 2029, and we may not repay the note prior to maturity, except on one of the interest rate adjustment dates. Advances will initially bear interest at a fixed rate of 3.50% per annum, plus an unused fee of 0.20% on undrawn amounts. The interest rate for subsequent disbursements will be based on prevailing market rates at the time of such disbursements. The interest rates on the initial advance and any subsequent disbursements will be subject to adjustment every three years. If we have not drawn the full commitment amount of $100.0 million by December 31, 2016, MetLife has the option to be relieved of its obligation to disburse the additional funds under this loan. As of September 30, 2014, there was $41.3 million outstanding under the New MetLife Note Payable.

The New MetLife Line of Credit is scheduled to mature on April 5, 2024, and advances will initially bear interest at a variable rate equal to the three-month LIBOR plus a spread of 2.50%, with a minimum annualized rate of 2.75%, plus an unused fee of 0.20% on undrawn amounts. The interest rate spread on borrowings under the New MetLife Line of Credit will be subject to adjustment in April 2017.

The New MetLife Credit Facility replaces two prior loan agreements with MetLife, dated December 30, 2010, as amended, and May 23, 2012, for a mortgage promissory note (the “Prior MetLife Note Payable”) and a revolving line of credit (the “Prior MetLife Line of Credit,” and together with the Prior MetLife Note Payable, the “Prior MetLife Credit Facility”), respectively. The Prior MetLife Note Payable provided mortgage financing in an amount not to exceed $45.2 million and was scheduled to mature on January 5, 2026. The Prior MetLife Line of Credit provided a revolving line of credit in an amount up to $4.8 million and was scheduled to mature on April 5, 2017.

Similar to the Prior MetLife Credit Facility, the continuing ability to borrow under the New MetLife Credit Facility will be subject to our ongoing compliance with various affirmative and negative covenants, including with respect to liens, indebtedness, mergers and asset sales. The New MetLife Credit Facility also requires that we satisfy financial covenants on a consolidated basis at the end of each calendar quarter, including:

 

•

a debt-to-asset-value ratio of equal to or less than sixty-five percent (65%);

 

•

a net worth value in excess of $50,000,000;

 

•

a debt-to-two-times-net-worth ratio of equal to or less than 0.65; and

 

•

a rental-revenue-to-debt ratio of equal to or greater than 5.0%.

As of September 30, 2014, we were in compliance with all covenants.

Amounts owed under the New MetLife Credit Facility are guaranteed by us and each subsidiary of ours that owns a property pledged as collateral pursuant to the loan documents.

A portion of the proceeds from the New MetLife Credit Facility was used to repay amounts owed under the Prior MetLife Credit Facility. No early termination penalties or fees were incurred in connection with the repayment of the Prior MetLife Credit Facility. In connection with obtaining the New MetLife Credit Facility and the subsequent pledging of properties under the facility, as of September 30, 2014, we have incurred loan fees of $220,500 and aggregate financing costs, which includes legal fees, origination fees and administrative fees, of $601,085. In addition, $298,614 of unamortized deferred financing costs associated with our Prior MetLife facility were further deferred and are being amortized over the term of our New MetLife Credit Facility.

As of September 30, 2014, the following properties were pledged as collateral under the New MetLife Credit Facility: San Andreas, West Gonzales, West Beach, Dalton Lane, 38^th Avenue, Sequoia Street, Natividad Road, 20^th Avenue, Broadway Road, Oregon Trail, East Shelton, Spring Valley, Naumann Road and Sycamore Road. With these properties pledged as collateral under the New MetLife Credit Facility, as of September 30, 2014, we had the ability to draw an additional $24.8 million under the New MetLife Credit Facility.

Farm Credit Notes Payable

On September 19, 2014, we, through certain subsidiaries of our Operating Partnership, closed two loans from Farm Credit of Central Florida, FLCA (“Farm Credit”), in the aggregate amount of approximately $4.2 million. In addition, on September 29, 2014, we obtained an additional loan for approximately $8.3 million, bringing our total borrowings from Farm Credit to approximately $12.5 million (collectively, the “Farm Credit Notes Payable”).

The Farm Credit Notes Payable are scheduled to mature on August 1, 2034, and will bear interest (before interest repatriation) at a blended fixed rate of 3.53% per annum through July 31, 2017; thereafter, the interest rate will be equal to the one-month LIBOR, plus 2.875%. The original principal amounts borrowed from Farm Credit equaled approximately 60% of the aggregate appraised value of the real properties pledged as collateral under the Farm Credit Notes Payable.

 

Our agreement with Farm Credit contains various affirmative and negative covenants, including with respect to liens, indebtedness, mergers and asset sales. The Farm Credit Notes Payable also require us to satisfy financial covenants on a consolidated basis at the end of each calendar year, including having:

 

•

a net worth value in excess of $50,000,000; and

 

•

a maximum leverage ratio of equal to or less than sixty-five percent (65%).

As of September 30, 2014, we were in compliance with all covenants.

Certain amounts owed under the Farm Credit Notes Payable, limited to 12 months of principal and interest due under the loans, are guaranteed by us pursuant to the loan documents.

The proceeds from the Farm Credit Notes Payable were invested into the acquisition of three new farms during the three months ended September 30, 2014. In connection with the Farm Credit Notes Payable, we incurred loan fees of $78,211 and aggregate financing costs, which includes legal fees, origination fees and administrative fees, of $120,852.

As of September 30, 2014, the following properties were pledged as collateral under the Farm Credit Notes Payable: Trapnell Road, McIntosh Road and Wauchula Road.

Mortgage Notes Payable

Scheduled principal payments of the mortgage notes payable under the New MetLife Note Payable and the Farm Credit Notes Payable for the remainder of 2014 and each of the five succeeding fiscal years and thereafter are as follows:

 

Period				Scheduled Principal Payments
For the remaining three months ending December 31:		2014		$	103,237
For the fiscal years ending December 31:		2015			2,072,300
		2016			2,021,668
		2017			1,972,809
		2018			1,925,659
		2019			1,880,160
		Thereafter			43,869,765
				$	53,845,598

The aggregate fair value of our mortgage notes payable outstanding as of September 30, 2014, was approximately $53.7 million, as compared to a carrying value of $53.8 million. We determined the fair value of the New MetLife Note Payable using Level 3 inputs under the hierarchy established by ASC 820, “Fair Value Measurements and Disclosures,” and is calculated based on a discounted cash flow analysis, using discount rates based on management’s estimates of market interest rates on long-term debt with comparable terms. As the Farm Credit Notes Payable closed during the three months ended September 30, 2014, the terms, including the interest rate, were deemed to be in-line with those of the current market; thus, the aggregate carrying value of the loans as of September 30, 2014, is deemed to approximate its fair value.