HIGHLANDS REIT, INC. References to "Highlands," the "Company," "we" or "us" are toHighlands REIT, Inc. , as well as all of Highlands' wholly-owned and consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying notes, which appear elsewhere in this Quarterly Report on Form 10-Q, and the historical consolidated financial statements, and related notes included elsewhere in our Annual Report on Form 10-K. The following discussion and analysis contains forward-looking statements based upon our current expectations, estimates and assumptions that involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to, factors discussed in "Part I - Item 1A. Risk Factors" and "Disclosure Regarding Forward-Looking Statements" in our Annual Report on Form 10-K. Certain statements in this Quarterly Report on Form 10-Q, other than purely historical information, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include statements about Highlands' plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "guidance," "predict," "potential," "continue," "likely," "will," "would," "illustrative" and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by Highlands and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements. There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors include, among others: the uncertainty and economic impact of pandemics, epidemics or other public health emergencies or fear of such events, such as the novel coronavirus disease 2019 ("COVID-19") pandemic; the risks, uncertainties and factors set forth in our filings with theU.S. Securities and Exchange Commission , including our Annual Report on Form 10-K; business, financial and operating risks inherent to real estate investments and the industry; our ability to renew leases, lease vacant space, or re-lease space as leases expire; our ability to repay or refinance our debt as it comes due; difficulty selling or re-leasing our properties due to their specific characteristics as described elsewhere in this report; contraction in the global economy or low levels of economic growth; our ability to sell our assets at a price and on a timeline consistent with our investment objectives, or at all; our ability to service our debt; changes in interest rates and operating costs; compliance with regulatory regimes and local laws; uninsured or underinsured losses, including those relating to natural disasters or terrorism; domestic or international instability or political or civil unrest; our status as an emerging growth company; the amount of debt that we currently have or may incur in the future; provisions in our debt agreements that may restrict the operation of our business; our separation from InvenTrust and our ability to operate as a stand-alone public reporting company; our organizational and governance structure; our status as a REIT; the cost of compliance with and liabilities under environmental, health and safety laws; adverse litigation judgments or settlements; changes in real estate and zoning laws and increase in real property tax rates; changes in federal, state or local tax law, including legislative, administrative, regulatory or other actions affecting REITs; changes in governmental regulations or interpretations thereof; and estimates relating to our ability to make distributions to our stockholders in the future. The ongoing impact of the COVID-19 pandemic on theU.S. , regional and global economies and the broader financial markets is currently one of the most significant factors impacting our Company. The COVID-19 pandemic has also impacted, and is likely to continue to impact, many of the other important factors described above. It is difficult to fully assess the impact of the COVID-19 pandemic at this time due to, among other factors, uncertainty regarding the severity, duration and any resurgences of the pandemic domestically and internationally, including the rise and prevalence of any variants to the virus, the effectiveness and duration of federal, state and local governments' efforts to contain the spread of COVID-19, and the effect of the COVID-19 pandemic in the markets where we own and operate properties, including the effect on our tenants' operations and ability to pay rent. These factors are not necessarily all of the important factors that could cause our actual financial results, performance, achievements or prospects to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. All forward-looking statements attributable to 24
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us or persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements set forth above. Forward-looking statements speak only
as of the date they are made, and we do not undertake or assume any obligation
to update publicly any of these forward-looking statements to reflect actual
results, new information or future events, changes in assumptions or changes in
other factors affecting forward-looking statements, except to the extent
required by applicable laws. If we update one or more forward-looking
statements, no inference should be drawn that we will make additional updates
with respect to those or other forward-looking statements.
Overview
We are a self-advised and self-administered real estate investment trust
("REIT") created to own and manage substantially all of the "non-core" assets
previously owned and managed by our former parent, InvenTrust Properties Corp.,
a Maryland corporation ("InvenTrust"). On April 28, 2016 , we were spun-off from
InvenTrust through a pro rata distribution (the "Distribution") by InvenTrust of
100% of the outstanding shares of our common stock to holders of InvenTrust's
common stock. Prior to or concurrent with the separation, we and InvenTrust
engaged in certain reorganization transactions that were designed to consolidate
substantially all of InvenTrust's remaining "non-core" assets in Highlands.
This portfolio of "non-core" assets, which were acquired by InvenTrust between
2005 and 2008, included assets that are special use, single tenant or build to
suit; face unresolved legal issues; are in undesirable locations or in weak
markets or submarkets; are aging or functionally obsolete; and/or have
sub-optimal leasing metrics. A number of our assets are retail properties
located in tertiary markets, which are particularly susceptible to the negative
trends affecting retail real estate, including the severe effects of the
COVID-19 pandemic. As a result of these characteristics, such assets are
difficult to lease, finance and refinance and are relatively illiquid compared
to other types of real estate assets. These factors also significantly limit our
asset disposition options, impact the timing of such dispositions and restrict
the viable options available to the Company for a future potential liquidity
option.
Our strategy is focused on preserving, protecting and maximizing the total value
of our portfolio with the long-term objective of providing stockholders with a
return of their investment. We engage in rigorous asset management, and seek to
sustain and enhance our portfolio, and improve the quality and income-producing
ability of our portfolio, by engaging in selective dispositions, acquisitions,
capital expenditures, financing, refinancing and enhanced leasing. We are also
focused on cost containment efforts across our portfolio, improving our overall
capital structure and making select investments in our existing "non-core"
assets to maximize their value. To the extent we are able to generate cash flows
from operations or dispositions of assets, in addition to the cash uses outlined
above, our board of directors has determined that it is in the best interests of
the Company to seek to reinvest in assets that are more likely to generate more
reliable and stable cash flows, such as multi-family assets, as part of the
Company's overall strategy to optimize the value of the portfolio, enhance our
options for a future potential liquidity option and maximize shareholder value.
Given the nature and quality of the "non-core" assets in our portfolio as well
as current market conditions, a definitive timeline for execution of our
strategy cannot be made. The impact of the COVID-19 pandemic on our business has
disrupted our efforts to implement a liquidity option and, although we cannot
predict when circumstances will improve, we will continue to evaluate options to
implement a liquidity option during 2022. However, we may be unable to execute
on such a transaction on terms we would find attractive for our stockholders and
our ability to do so will be influenced by external and macroeconomic factors,
including, among others, the effects and duration of the COVID-19 pandemic and
future resurgences, the timing and nature of recovery of the COVID-19 pandemic,
interest rate movements, local, regional, national and global economic
performance, government policy changes and competitive factors.
As of September 30, 2021 , our portfolio of assets consisted of one office
asset, two industrial assets, four retail assets, twelve multi-family
assets, one correctional facility and one parcel of unimproved land. We
currently have four business segments, consisting of (i) net lease, (ii) retail,
(iii) multi-tenant office and (iv) multi-family. Our unimproved land asset is
presented in "other." We may have additional or fewer segments in the future to
the extent we enter into additional real property sectors, dispose of
properties, or change the character of our assets. For the complete presentation
of our reportable segments, see Note 10 to our Condensed Consolidated Financial
Statements for the three and nine months ended September 30, 2021 , and 2020.
Basis of Presentation
The accompanying condensed consolidated financial statements reflect the
accounts of the Company. Highlands consolidates its wholly-owned subsidiaries
and any other entities which it controls (i) through voting rights or similar
rights or (ii) by means other than voting rights if Highlands is the primary
beneficiary of a variable interest entity ("VIE"). The portions of the equity
and net income of consolidated subsidiaries that are not attributable to the
Company are presented separately as amounts attributable to non-controlling
interests in our condensed consolidated financial statements. Entities which
Highlands does not control and entities which are VIEs in which Highlands is not
a primary beneficiary, if any, are accounted for under
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appropriate GAAP. Highlands' subsidiaries generally consist of limited liability
companies ("LLCs"). The effects of all significant intercompany transactions
have been eliminated.
Critical accounting policies are described in "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations" and in the "Notes
to Consolidated Financial Statements" for the year ended December 31, 2020
contained in the Company's latest Annual Report on Form 10-K. Any new accounting
policies or updates to existing accounting policies as a result of new
accounting pronouncements have been discussed in the "Notes to Condensed
Consolidated Financial Statements" in this Quarterly Report on Form 10-Q. The
application of critical accounting policies may require management to make
assumptions, judgments and estimates about the amounts reflected in the
Consolidated Financial Statements. Management uses historical experience and all
available information to make these estimates and judgments, and different
amounts could be reported using different assumptions and estimates.
Our Revenues and Expenses
Revenues
Our revenues are primarily derived from rental income and expense recoveries we
receive from our tenants under leases with us, including monthly rent and other
property income pursuant to tenant leases. Tenant recovery income primarily
consists of reimbursements for real estate taxes, common area maintenance costs,
management fees and insurance costs.
Expenses
Our expenses consist of property operating expenses, real estate taxes,
depreciation and amortization expense and general and administrative expenses.
Property operating expenses primarily consist of repair and maintenance,
management fees, utilities and insurance (in each case, some of which are
recoverable from the tenant).
Key Indicators of Operating Performance
In evaluating our financial condition and operating performance, management
focuses on the following financial and non-financial indicators, discussed in
further detail herein:
•Cash flows from operations as determined in accordance with GAAP;
•Economic and physical occupancy and rental rates;
•Leasing activity and lease rollover;
•Management of operating expenses;
•Management of general and administrative expenses;
•Debt maturities and leverage ratios;
•Liquidity levels;
•Funds From Operations ("FFO"), a supplemental non-GAAP measure; and
•Adjusted Funds From Operations ("AFFO"), a supplemental non-GAAP measure.
See "Selected Financial Data" for further discussion of the Company's use,
definitions and limitations of FFO and AFFO.
Impact of COVID-19
The impact of the COVID-19 pandemic has not materially changed from the
information included in our Annual Report and other periodic or current reports
on file with the SEC . The primary impact of the pandemic was and continues to be
related to our tenants' ability to make their future rental payments in a timely
fashion or at all. We have been working with our tenants to collect rental
payments that are commensurate to our contractual rights under our lease
agreements.
At this time, given the uncertainty related to variants of the virus, we are
unable to predict whether cases of COVID-19 in our markets will decrease,
increase, or remain the same, whether the approved COVID-19 vaccines will be
effective against the virus and new variants of the virus, efficiently
distributed in our markets and widely accepted by the public, and whether local
governments will mandate closures of our tenants' businesses or implement other
restrictive measures on their and our operations in the future in response to a
resurgence of the pandemic. We have taken and will continue to consider a number
of measures to mitigate the impact of the pandemic on our business and financial
condition.
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Table of Contents State Street Cash Trap The loan documents governing the mortgage encumbering theState Street property include a "cash trap" provision that is triggered if DICK'S Sporting Goods, which was an anchor tenant at theState Street property, failed to renew its lease agreement. DuringSeptember 2020 , we were informed that DICK'S Sporting Goods will not renew its lease at theState Street property. As a result, we received notice that the lender under theState Street mortgage exercised its right to trigger this "cash trap" provision, and, beginning in the fourth quarter of 2020, all of the revenue from theState Street property which would otherwise have been available for our use was trapped into a blocked account controlled by the lender until a substitute lease is approved. If, during that period, the terms of the loan agreement are not satisfied, those funds will be swept by the lender in mandatory prepayment of the mortgage. As of the date of this filing, a replacement tenant has not been identified. Termination of Credit Agreement OnNovember 6, 2020 , the Company entered into the Third Amendment to the Credit Agreement, pursuant to which the Company "right-sized" the Credit Agreement by eliminating the Term Loan (as defined in the Third Amendment) previously available under the Credit Agreement. In connection with the execution of the Third Amendment, the Company borrowed sufficient funds under the Revolving Credit Loan (as defined in the Third Amendment) to repay all of its obligations under the Term Loan. Additionally, pursuant to the Third Amendment, the lender under the Credit Agreement waived the Company's obligation to comply with certain financial covenants for the period fromJuly 1, 2020 toDecember 31, 2020 (the "Waiver Period") and restricted the Company from drawing on the Revolving Credit Loan in amounts in excess of$20.0 million until the Company is in compliance with all such covenants. OnJanuary 21, 2021 , the Company repaid$5.0 million of the outstanding principal balance of the Revolving Credit Loan and onMarch 29, 2021 , repaid in full all of the remaining outstanding indebtedness consisting of approximately$15.0 million of principal plus accrued and unpaid interest thereon. The Credit Agreement and related security interests, and all commitments thereunder, were terminated in conjunction with such payment in full. Acquisition and Disposition Activity There were no asset acquisitions during the nine months endedSeptember 30, 2021 . During the nine months endedSeptember 30, 2020 , the Company acquired one multi-family asset for a gross acquisition price of$7.4 million . Acquisition Price Property Location Acquisition Date (in thousands) The Sterling San Diego, California April 22, 2020 $ 7,372 There were no asset dispositions during the nine months endedSeptember 30, 2021 . During the nine months endedSeptember 30, 2020 , consistent with our strategy of disposing of legacy "non-core" assets, we sold the following property: (in thousands) Gross Disposition Sale Proceeds, Property Location Disposition Date Price Net Gain on Sale CitizensProvidence, Rhode Island March 31, 2020$ 1,425 $ 1,287 $ 82
Results of Operations
Comparison of the three and nine months ended
As of September 30,
2021 2020
Economic occupancy (a) 72.9 % 72.5 %
Rent per square foot (b) $ 15.80 $ 14.52
(a)Economic occupancy is defined as the percentage of total gross leasable area
for which a tenant is obligated to pay rent under the terms of its lease
agreement, regardless of the actual use or occupation by the tenant of the area
being leased. Actual use may be less than economic square footage.
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(b)Rent per square foot is computed as annualized rent divided by the total
occupied square footage at the end of the period. Annualized rent is computed as
revenue for the last month of the period multiplied by twelve months. Annualized
rent includes the effect of rent abatements, lease inducements and straight-line
rent GAAP adjustments.
Condensed Consolidated Results of Operations
(dollar amounts in thousands) (dollar amounts in thousands)
For the three months ended September 30, For the nine months ended September 30,
2021 2020 Increase (Decrease) 2021 2020 Increase (Decrease)
Net loss $ (1,756) $ (5,197) $ (3,441) (66.2) % $ (8,473) $ (12,586) $ (4,113) (32.7) %
Net loss decreased $3.4 million for the three months ended September 30, 2021 ,
compared to the three months ended September 30, 2020 , due to an increase in
total revenues and lower total compensation expenses, reduced property operating
expenses, depreciation and amortization expenses and interest expense. Details
of these changes are provided below.
Net loss decreased by $4.1 million , to $8.5 million , for the nine months ended
September 30, 2021 , compared to $12.6 million for the nine months ended
September 30, 2020 , primarily as a result of reduced general and administrative,
property operating and depreciation and amortization expenses. Partially
offsetting this decrease in expenses is a decrease in revenues resulting from
the termination of the lease with The GEO Group, Inc. ("GEO") on the Hudson
correctional facility asset and termination of the lease with Alta Devices, Inc.
("Alta") at the Trimble office asset in the first fiscal quarter of 2020.
Further details of the changes are provided below.
Operating Income and Expenses
(dollar amounts in thousands) (dollar amounts in thousands)
For the three months ended September 30, For the nine months ended September 30,
2021 2020 Increase (Decrease) 2021 2020 Increase (Decrease)
Income:
Rental income $ 6,842 $ 6,256 $ 586 9.4 % $ 20,498 $ 20,309 $ 189 0.9 %
Other property income 280 360
(80) (22.2) % 738 1,466 (728) (49.7) %
Total revenues $ 7,122 $ 6,616 $ 506 7.6 % $ 21,236 $ 21,775 $ (539) (2.5) %
Expenses:
Property operating expenses $ 2,017 $ 2,434 $ (417) (17.1) % $ 6,112 $ 6,426 $ (314) (4.9) %
Real estate taxes 1,513 1,548 (35) (2.3) % 4,639 4,265 374 8.8 %
Depreciation and amortization 2,640 3,118 (478) (15.3) % 7,967 9,672 (1,705) (17.6) %
General and administrative
expenses 1,996 3,633 (1,637) (45.1) % 8,481 11,084 (2,603) (23.5) %
Total expenses $ 8,166 $ 10,733 $ (2,567) (23.9) % $ 27,199 $ 31,447 $ (4,248) (13.5) %
Total Revenues
Total revenues increased $0.5 million during the three months ended September
30, 2021 , compared to the three months ended September 30, 2020 , due to
commencement of rental income on the Northwestern Medical lease at Sherman Plaza
upon its 2021 lease commencement date and increased occupancy at our
multi-family assets.
Total revenues decreased by $0.5 million in the nine months ended September 30,
2021 , compared to the same period in 2020, due to the termination of the leases
with GEO at the correctional facility and Alta at our Trimble office asset,
which both occurred in early 2020. Partially offsetting the decrease in revenue
are fewer pandemic-related concessions and the items noted above for the three
month periods.
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Property Operating Expenses Property operating expenses decreased$0.4 million during the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 , due to lower bad debt expense caused by partial recovery from the impacts of the COVID-19 pandemic. Property operating expenses decreased$0.3 million for the nine months endedSeptember 30, 2021 , compared to the same period in 2020, due to the factors described above, partially offset by increased repair and maintenance projects postponed from 2020. Real Estate Taxes Real estate taxes remained consistent for the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 . Real estate taxes increased$0.4 million during the nine months endedSeptember 30, 2021 , compared to the same period in 2020, primarily due to an adjustment made in 2020 to adjust down our estimate of taxes upon receiving the actual tax bill for our Cook Country,Illinois properties, partially offset by the sale of the bank branch asset in the first quarter of 2020. No such adjustment was required during the nine months endedSeptember 30, 2021 . Depreciation and Amortization Depreciation and amortization decreased$0.5 million for the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2020 , due to the reduction in carrying value of theHudson correctional facility asset driven by a full asset impairment recognized during the fourth quarter of 2020 and reduced amortization on in-place leases for certain multi-family assets being fully amortized during 2020. Depreciation and amortization decreased by$1.7 million for the nine months endedSeptember 30, 2021 , compared to the same period in 2020, due to the same factors as described above. General Administrative Expenses General and administrative expense decreased$1.6 million for the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 , primarily due to reduced compensation expense. The three months endedSeptember 30, 2020 included severance related expenses in accordance with an executive's employment contract, upon their departure from the Company. General and administrative expense decreased by$2.6 million for the nine months endedSeptember 30, 2021 , compared to the same period in 2020, primarily as a result of a reduction in total compensation expenses and lower consulting and legal expenses. Non-Operating Income and Expenses (dollar amounts in thousands) (dollar amounts in thousands) For the three months ended September 30, For the nine months ended September 30, 2021 2020 Increase (Decrease) 2021 2020 Increase (Decrease) Non-operating income and expenses: Interest income$ 3 $ 19 $ (16) (84.2) %$ 27 $ 231 $ (204) (88.3) % Gain on sale of investment properties, net - - - - % - 82 (82) (100.0) % Interest expense (715) (1,099) (384) (34.9) % (2,537) (3,227) (690) (21.4) % 29
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Table of Contents Interest Income Interest income decreased by$0.02 million and$0.2 million during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the same period in 2020, as a result of a reduction in the average cash balances during the periods. Gain on Sale of Investment Properties During the nine months endedSeptember 30, 2020 , the gain on sale of investment properties of$0.1 million was attributed to the sale of the bank branch asset. There were no sales of investment properties during the three and nine months endedSeptember 30, 2021 or during the three months endedSeptember 30, 2020 . Interest Expense Interest expense decreased$0.4 million during the three months endedSeptember 30, 2021 and$0.7 million during the nine months endedSeptember 30, 2021 , compared to the same periods in 2020, due to the termination of the Credit Agreement duringMarch 2021 and to interest charged on lower balances for our mortgage debt on those loans with monthly amortization requirements. 30
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Leasing Activity
Our primary source of funding for our property-level operating activities and debt payments is rent collected pursuant to our tenant leases. The following table represents lease expirations, excluding multi-family leases, as ofSeptember 30, 2021 : Annualized Gross Leasable Area (GLA) of Rent of
Percent of Total Expiring
Number of Expiring Leases Expiring Leases Percent of Total Annualized Rent/Square
Lease Expiration Year Expiring Leases (Sq. Ft.) (in thousands) GLA Rent Foot
2021 - - $ - - % - % $ -
2022 7 162,087 2,303 15.3 % 19.0 % 14.21
2023 4 29,298 293 2.8 % 2.4 % 10.01
2024 5 48,148 772 4.6 % 6.4 % 16.04
2025 14 79,961 1,167 7.6 % 9.6 % 14.60
2026 4 20,191 294 1.9 % 2.4 % 14.55
2027 6 508,032 2,539 48.1 % 21.0 % 5.00
2028 6 49,315 869 4.7 % 7.2 % 17.62
2029 2 26,542 308 2.5 % 2.5 % 11.60
2030 1 2,790 75 0.3 % 0.6 % 27.00
MTM 1 2,875 42 0.3 % 0.3 % 14.61
Thereafter 2 126,113 3,456 11.9 % 28.6 % 27.41
Grand Total 52 1,055,352 $ 12,118 100.0 % 100.0 % $ 11.48 The following table represents new and renewed leases that commenced during
the nine months ended
Weighted
Gross Leasable Rent Average
# of Leases Area (square feet) per square foot Lease Term (years)
New 1 29,333 $ 33.50 15.0
Renewals 3 22,699 $ 10.16 2.5
Total 4 52,032 $ 23.32 9.6
Liquidity and Capital Resources
As of September 30, 2021 , we had $20.1 million of cash and cash equivalents, and
$3.5 million of restricted cash and escrows.
Our principal demands for funds have been or may be:
•to pay the operating expenses of our assets;
•to pay our general and administrative expenses;
•to pay for acquisitions;
•to pay for capital commitments;
•to pay for short-term obligations;
•to service or pay-down our debt; and
•to fund capital expenditures and leasing related costs.
Generally, our cash needs have been and will be funded from:
•cash flows from our investment assets;
•proceeds from sales of assets; and
•proceeds from debt.
In April 2020 , the Company executed a lease with Northwestern Medical Group for
approximately 29,000 square feet at our Sherman Plaza asset, replacing Barnes
and Noble, Inc. , whose lease was terminated after the signing of this new lease.
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The new lease requires a significant amount of landlord work, a tenant allowance and a broker commission. The total commitment is estimated to be approximately$3.9 million . As ofSeptember 30, 2021 , we estimate that remaining costs under this commitment are approximately$1.7 million . InFebruary 2021 , the Company executed a lease with Veeco Instruments, Inc. for approximately 97,000 square feet at ourTrimble office asset, replacing Alta, whose lease was terminated in early 2020. The lease requires a significant tenant allowance and broker commission. The total cost commitment is estimated to be approximately$9.2 million . As ofSeptember 30, 2021 , we estimate that remaining costs under this commitment are approximately$1.7 million . An anchor tenant at theState Street property, DICK'S Sporting Goods, did not renew its lease agreement. Pursuant to the mortgage agreement, the lender under theState Street mortgage exercised its right under a "cash trap" provision, and, as such, beginning in the fourth fiscal quarter of 2020, all of our cash flow from theState Street property which would otherwise have been available for our use was trapped into a blocked account controlled by the lender until an approved lease is executed. See also Note 7 (Debt) in the accompanying condensed consolidated financial statements for additional discussion. We may, from time to time, repurchase our outstanding equity and/or debt securities, if any, through cash purchases or other transactions. Such repurchases or transactions, if any, will depend on our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. Borrowings The table below presents, on a condensed consolidated basis, the principal amount, weighted average interest rates and maturity date (by year) on our mortgage debt, as ofSeptember 30, 2021 (dollar amounts are stated in thousands). Debt maturing during the year Weighted average ended December 31, As of September 30, 2021 interest rate 2021 (remaining) $ - - % 2022 8,793 5.24 % 2023 17,992 3.28 % (1) 2024 - - % 2025 - - % Thereafter 36,311 4.38 % Total $ 63,096 4.19 % (1) See below for discussion of the swap agreement entered into with the mortgage loan obtained in connection with the acquisition of The Locale asset. The weighted average interest rate reflected is the strike rate. As ofSeptember 30, 2021 andDecember 31, 2020 , none of our mortgage debt was recourse to the Company, although we have provided certain customary, non-recourse carve-out guarantees in connection with obtaining mortgage loans on certain of our properties. Our ability to pay off our mortgages when they become due is, in part, dependent upon our ability either to refinance the related mortgage debt or to sell the related asset. With respect to each mortgage loan, if the applicable property-owning subsidiary is unable to refinance or sell the related asset, or in the event that the estimated asset value is less than the mortgage balance, the applicable property-owning subsidiary may, if appropriate, satisfy a mortgage obligation by transferring title of the asset to the lender or permitting a lender to foreclose. Volatility in the capital markets could expose us to the risk of not being able to borrow on terms and conditions acceptable to us for refinancing. The Company assumed a mortgage loan in the principal amount of$11.1 million , net of a debt discount of$0.3 million in connection with the acquisition of TheDetroit and Detroit Terraces onJanuary 8, 2019 . The contractual rate and terms of the assumed debt was marked to market as of the acquisition date. According to the terms of the note agreement, the contractual fixed interest rate is 3.99% and payments are interest-only throughSeptember 30, 2022 . The maturity date of the mortgage loan is onAugust 31, 2027 . OnNovember 6, 2020 , the Company entered into the Third Amendment to the Credit Agreement, pursuant to which the Company "right-sized" the Credit Agreement by eliminating the Term Loan (as defined in the Third Amendment) 32
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previously available under the Credit Agreement. In connection with the execution of the Third Amendment, the Company borrowed sufficient funds under the Revolving Credit Loan (as defined in the Third Amendment) to repay all of its obligations under the Term Loan. Additionally, pursuant to the Third Amendment, the lender under the Credit Agreement waived the Company's obligation to comply with certain financial covenants for the period fromJuly 1, 2020 toDecember 31, 2020 (the "Waiver Period") and restricted the Company from drawing on the Revolving Credit Loan in amounts in excess of$20.0 million until the Company is in compliance with all such covenants. OnJanuary 21, 2021 , the Company repaid$5.0 million of the outstanding principal balance of the Revolving Credit Loan and onMarch 29, 2021 , repaid in full all of the remaining outstanding indebtedness consisting of approximately$15.0 million of principal plus accrued and unpaid interest thereon. The Credit Agreement and related security interests, and all commitments thereunder, were terminated in conjunction with such payment in full. The Company obtained a mortgage loan in the principal amount of$18.8 million in connection with the acquisition of The Locale onAugust 16, 2019 . We entered into a swap agreement with respect to the loan, effective throughAugust 31, 2023 , to swap the variable interest rate to a fixed rate of approximately 3.27% per annum. The interest rate is based on the London Interbank Offered Rate ("LIBOR") plus the applicable spread. The effective interest rate as ofSeptember 30, 2021 , is approximately 1.84%. Total debt outstanding as ofSeptember 30, 2021 andDecember 31, 2020 was$63.1 million and$83.9 million , respectively, and had a weighted average interest rate of 4.19% and 3.78%, respectively, per annum.
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