v3.22.2.2
Notes Payable
 9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
Notes Payable Disclosures NOTES PAYABLE
Revolving Credit Agreement
On April 29, 2022, we entered into that certain Lender Addition and Acknowledgement Agreement and Second Amendment to Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Second Amendment” and, as so amended, “the Credit Agreement”), which amended that certain Fifth Amended and Restated Credit Agreement, dated as of April 28, 2021, with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “2021 Credit Agreement”). The Second Amendment, among other things, (a) increased the commitments under the 2021 Credit Agreement by an additional $250.0 million, bringing the total commitments under the Credit Agreement to $1.1 billion, and (b) replaced LIBOR as the benchmark interest rate with SOFR.
Borrowings under the Credit Agreement bear interest, payable monthly in arrears, at the Company’s option, at either (1) term SOFR (based on 1, 3 or 6 month interest periods, as selected by the Company) plus a 10, 15 or 25 basis point adjustment, respectively, which rate is subject to a 50 basis point floor, plus an applicable margin (ranging from 145 basis points to 210 basis points (the “Applicable Margin”)) based on the Company’s leverage ratio as determined in accordance with a pricing grid, and (2) term SOFR based on a 1 month interest period plus a 10 basis point adjustment, subject to a 50 basis point floor, plus the Applicable Margin.
The Credit Agreement matures on April 28, 2025. Before each anniversary of the Credit Agreement, we may request a one-year extension of its maturity date. The Credit Agreement is guaranteed by, among others, each of our subsidiaries that have gross assets of at least $0.5 million.
The borrowings and letters of credit outstanding under the Credit Agreement, together with the outstanding principal balance of our 4.000% Senior Notes due 2029 (the “2029 Senior Notes”), may not exceed the borrowing base under the Credit Agreement. The borrowing base primarily consists of a percentage of commercial land, land held for development, lots under development and finished lots held by the Company and its subsidiaries that guarantee the obligations under the Credit Agreement. As of September 30, 2022, the borrowing base under the Credit Agreement was $1.4 billion, of which borrowings, including the 2029 Senior Notes, of $1.2 billion were outstanding, $29.8 million of letters of credit were outstanding and $127.3 million was available to borrow under the Credit Agreement.
Interest is paid monthly on borrowings under the Credit Agreement at SOFR plus 1.85%. The Credit Agreement applicable margin for SOFR loans ranges from 1.45% to 2.10% based on our leverage ratio. At September 30, 2022, SOFR was 3.03%, subject to the 0.50% SOFR floor as included in the Credit Agreement.
The Credit Agreement contains various financial covenants, including a minimum tangible net worth, a leverage ratio, a minimum liquidity amount and an EBITDA to interest expense ratio. The Credit Agreement contains various covenants that, among other restrictions, limit the amount of our additional debt and our ability to make certain investments. At September 30, 2022, we were in compliance with all of the covenants contained in the Credit Agreement.
Senior Notes Offering
On June 28, 2021, we issued $300.0 million aggregate principal amount of the 2029 Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S. persons in transactions outside the United States pursuant to Regulation S under the Securities Act. Interest on the 2029 Senior Notes accrues at a rate of 4.000% per annum, payable semi-annually in arrears on January 15 and July 15 of each year. The 2029 Senior Notes mature on July 15, 2029. The terms of the 2029 Senior Notes are governed by an Indenture, dated as of July 6, 2018, and Third Supplemental Indenture thereto, dated as of June 28, 2021, as may be supplemented from time to time, among us, our subsidiaries that guarantee our obligations under the Credit Agreement and Wilmington Trust, National Association, as trustee.
Notes payable consist of the following (in thousands):
September 30, 2022December 31, 2021
Notes payable under the Credit Agreement ($1.1 billion revolving credit facility at September 30, 2022) maturing on April 28, 2025; interest paid monthly at SOFR plus 1.85%.
$942,316 $517,439 
4.000% Senior Notes due July 15, 2029; interest paid semi-annually at 4.000%.
300,000 300,000 
Net debt issuance costs(12,215)(12,203)
Total notes payable$1,230,101 $805,236 
Capitalized Interest
Interest activity, including other financing costs, for notes payable for the periods presented is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Interest incurred$14,583 $6,091 $31,048 $21,863 
Less: Amounts capitalized(14,583)(6,091)(31,048)(21,863)
Interest expense$— $— $— $— 
Cash paid for interest$14,874 $11,772 $29,080 $26,264 
Included in interest incurred was amortization of deferred financing costs and discounts for notes payable of $0.9 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $2.5 million and $2.2 million for the nine months ended September 30, 2022 and 2021, respectively.