Sun Communities Inc., a real estate investment trust (REIT) that owns RV parks and manufactured home communities, has successfully resolved a dispute with some of its lenders.
According to a Jan. 6 filing with the Securities and Exchange Commission (SEC), Sun Communities had the dispute with PNC Bank, National Association and Fannie Mae. With the resolution Sun now has a $152.4 million variable rate credit facility and a separate $10 million variable rate credit facility.
Highlights of the 8-K filing follow:
On July 27, 2011, six indirect operating subsidiaries of Sun Communities Inc. entered into a Second Amended and Restated Master Credit Facility Agreement with PNC Bank, National Association, and Fannie Mae, as amended on Oct. 3, 2011. The agreement was entered into in connection with the settlement of litigation the company commenced over certain fees charged when the variable rate loan facility was extended in April 2009. On Jan. 3, 2012, the agreement became effective and the litigation was dismissed.
Pursuant to the agreement, the company has a $152.4 million variable rate facility and a $10 million variable rate facility, each of which matures on May 1, 2023, and provides for interest-only payments until May 1, 2014, after which principal and interest payments will be due based on a 30-year amortization. The interest rate for the $152.4 million variable rate facility is equal to the 90-day LIBOR index, plus an investor spread equal to 97 basis points, plus a variable facility fee equal to 90 basis points through maturity. The interest rate for the $10 million variable rate facility is equal to the 90-day LIBOR index, plus an investor spread equal to 95 basis points, plus a variable facility fee equal to 172 basis points through maturity. The 90-basis point variable facility fee applicable to the $152.4 million variable rate facility was retroactively applied to the variable rate facility as of Jan. 1, 2011, which resulted in a reduction in the facility fee charged on the company’s variable rate facility, the effect of which reduced interest expense by $1.7 million through Dec. 31, 2011.
The company has the option to convert the variable rate facility into a fixed-rate facility after the one-year anniversary of the effective date of the agreement pursuant to the terms of the agreement. Pursuant to the agreement, PNC Bank will complete a full underwriting of the three existing fixed-rate facility notes which mature in 2013 and 2014, and pursuant to which the company has borrowed an aggregate of $211.5 million as of Jan. 3, 2012, and the company at its election, subject to the satisfaction of certain conditions, may extend the maturity dates of the three existing fixed-rate facility notes to May 1, 2023.
The company has the option to convert the fixed-rate facility notes, in whole or in part, into variable or fixed rate components, pursuant to the terms of the agreement. The credit facility is secured by mortgages encumbering 34 manufactured housing communities comprised of real and personal property owned by the borrowers. Additionally, the company has provided a guaranty of the recourse carve-out obligations of the borrowers under the credit facility. As of Jan 3, 2012, there were $152.4 million of borrowings under the $152.4 million variable rate facility and $10 million of borrowings under the $10 million variable rate facility.
The foregoing description is qualified in its entirety by reference to the credit agreement and the promissory notes for the variable rate facilities, copies of which are attached hereto as Exhibits.