Item 1.01. Entry into a Material Definitive Agreement.
On November 22, 2022 Centerspace, LP (the “Partnership”) entered into a Term Loan Agreement (the “Agreement”). The Partner and Centerspace (the “Company”), Centerspace, Inc. (the “Corporation”) and certain wholly-owned subsidiaries of the Partnership (each, a “Subsidiary Guarantor,” and together with the Company and the Corporation, the “Loan Parties”) guaranteed the obligations of the Partnership under the Agreement. The Partnership and the Loan Parties with the lenders party thereto, for which PNC Bank, National Association, acted as administrative agent. The Agreement is effective November 22, 2022 and provides the Partnership with a $100,000,000 senior unsecured term loan (the “Credit Facility”). The Credit Facility terminates 364 days following the effective date of the Agreement, but may be extended, subject to certain conditions, for one additional 364-day term. The Company will use the Credit Facility for debt refinancing, company or property acquisitions, development, financing ongoing working capital and other general corporate purposes.
The interest rate applicable to the loan is currently determined with respect to leverage ratio of the Company with certain adjustments based on the Secured Overnight Financing Rate (“SOFR”). Subject to certain conditions, if the Company and/or the Partnership is rated at a certain investment grade level by S&P or Moody’s, the rate of interest that accrues on the revolving loans may thereafter be determined with reference to the Company’s investment grade level. Unless and until the Company elects to change the determination of the applicable margin to the margin rate based on investment grade level, the applicable margins for borrowings under the Agreement will be based on the Company’s leverage ratio and range from 1.200% to 1.750% with respect to borrowings made for SOFR loans, and 0.200% to 0.750% with respect to borrowings made for non-SOFR-based loans. If the Company elects to change the determination of the applicable margin to the rate based on investment grade level, the applicable margins for borrowings under the Agreement will be based on the Company’s investment grade level and range from 0.800% to 1.600% with respect to borrowings made for SOFR-based loans, and 0.000% to 0.600% with respect to borrowings made for non-SOFR-based loans. The Company also agreed to pay a structuring fee and a closing fee upon the closing of the transactions contemplated by the Agreement, and a fixed annual administration fee to the extent the loan facilities provided for under the Agreement are syndicated.
Among other covenants, the Agreement requires the Loan Parties to maintain a specified consolidated leverage ratio, consolidated secured leverage ratio, total unsecured indebtedness to aggregate unencumbered asset pool value ratio, recourse debt to total asset value ratio, fixed charge coverage ratio, and net operating income of unencumbered asset pool properties to unsecured interest expense ratio, and requires the Company to maintain a tangible net worth ratio. The Agreement also contains customary representations and warranties, affirmative and negative covenants, and events of default, and provides for customary acceleration and remedy rights for the Lenders upon the occurrence of an event of default.
The foregoing description of the Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the full and complete terms of the Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.