NOTE 5. BORROWINGS

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

The weighted-average effective interest rate charged on all of our borrowings, excluding the impact of deferred financing costs, was 3.7% and 3.6% for the three and six months ended June 30, 2014, respectively, as compared to 3.6% for both the three and six months ended June 30, 2013.

Mortgage Note Payable and Line of Credit

On May 9, 2014, we closed on a new mortgage loan facility and a new revolving line of credit with MetLife for an aggregate amount of up to $125.0 million (the “New Credit Facility”). The New Credit Facility consists of a $100.0 million long-term note payable (the “New Note Payable”) and a $25.0 million revolving equity line of credit (the “New Line of Credit”). Under the New 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 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 June 30, 2014, there was $41.3 million outstanding under the New Note Payable.

The New 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 Line of Credit will be subject to adjustment in April 2017.

The New 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 Note Payable”) and a revolving line of credit (the “Prior Line of Credit,” and together with the Prior Note Payable, the “Prior Credit Facility”), respectively. The Prior 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 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 Credit Facility, the continuing ability to borrow under the New 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 Credit Facility also requires that we satisfy financial covenants on a consolidated basis at the end of each calendar quarter, including: (i) a debt-to-asset-value ratio of equal to or less than sixty-five percent (65%); (ii) a net worth value in excess of $50,000,000; (iii) a debt-to-two-times-net-worth ratio of equal to or less than 0.65; and (iv) a rental-revenue-to-debt ratio of equal to or greater than 5.0%. As of June 30, 2014, we were in compliance with all covenants.

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

A portion of the proceeds from the New Credit Facility was used to repay amounts owed under the Prior Credit Facility. No early termination penalties or fees were incurred in connection with the repayment of the Prior Credit Facility. As part of the New Credit Facility, we incurred loan fees in the aggregate of $220,500.

Scheduled principal payments of the mortgage note payable for the remainder of 2014 and each of the five succeeding fiscal years and thereafter are as follows:

As the New Credit Facility closed during the three months ended June 30, 2014, the terms, including the interest rate, were deemed to be in-line with those of the current market; thus, the carrying values as of June 30, 2013, of both the New Note Payable and the New Line of Credit of $41.3 million and $3.0 million, respectively, are deemed to approximate their fair values. As of June 30, 2014, the following properties were pledged as collateral under the New Credit Facility: San Andreas, West Gonzales, West Beach, Dalton Lane, 38^th Avenue, Sequoia Street, Natividad Road, 20^th Avenue, Broadway Road, Oregon Trail and East Shelton. With these properties pledged as collateral under the New Credit Facility, as of June 30, 2014, we had the ability to draw an additional $14.5 million under the New Credit Facility.