Drive Shack Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

DEBT OBLIGATIONS

DEBT OBLIGATIONS

12 Months Ended

Dec. 31, 2017

The following table presents certain information regarding the Company's debt obligations:



	December 31, 2017												December 31, 2016

Debt Obligation/Collateral	Month Issued	Outstanding Face Amount		Carrying Value		Final Stated Maturity	Weighted Average Coupon (A)	Weighted Average Funding Cost (B)		Weighted Average Life (Years)	Face Amount of Floating Rate Debt		Outstanding Face Amount		Carrying Value
Repurchase Agreements
FNMA/FHLMC securities	Dec 2016	$	—	$	—	—	—%	—	%	0.0	$	—	$	600,964	$	600,964
Credit Facilities and Capital Leases
Traditional Golf term loan (C)(D)	Jun 2016	102,000		99,931		Jul 2019	LIBOR + 4.70%	7.92	%	1.5	102,000		102,000		98,680
Vineyard II	Dec 1993	200		200		Dec 2043	2.20%	2.20	%	26.0	200		200		200
Capital Leases (Equipment)	June 2014 - Dec 2017	16,626		16,626		Sep 2018 - Jul 2023	3.00% to 16.16%	6.55	%	3.6	—		16,404		16,404
		118,826		116,757				7.72	%	1.8	102,200		118,604		115,284
Less current portion of obligations under capital leases		4,652		4,652									3,699		3,699
Credit facilities and obligations under capital leases - noncurrent		114,174		112,105									114,905		111,585

Corporate
Junior subordinated notes payable (E)	Mar 2006	51,004		51,208		Apr 2035	LIBOR + 2.25%	3.60	%	17.3	51,004		51,004		51,217
Total debt obligations		$	169,830	$	167,965			6.46	%	6.5	$	153,204	$	770,572	$	767,465

See notes on next page.


(A)	Weighted average, including floating and fixed rate classes.


(B)	Including the effect of deferred financing cost.


(C)	The Traditional Golf term loan is collateralized by 22 Traditional Golf properties. The carrying amount of the Traditional Golf term loan is reported net of deferred financing costs of $2.1 million and $3.3 million as of December 31, 2017 and 2016, respectively.


(D)	Interest rate based on 30-day LIBOR plus 4.70% with a LIBOR floor of 1.80%. At the time of closing, the Company purchased a co-terminus LIBOR interest rate cap of 1.80%.


(E)	Interest rate based on 3-month LIBOR plus 2.25%.

Repurchase Agreements

In August 2017, the Company sold the agency FNMA/FHLMC securities and repaid all remaining repurchase agreements associated with those securities.

Credit Facilities

In June 2016, the Company obtained third-party financing on 22 traditional golf properties for a total of $102.0 million at a floating rate of the greater of: (i) 30-day LIBOR + 4.70% or (ii) 6.50%. At the time of closing, the Company purchased a co-terminus LIBOR interest rate cap of 1.80%. The financing is for a term of three years with the option for two one-year extensions.

Traditional Golf is obligated under a $0.2 million loan with the City of Escondido, California (“Vineyard II”). The principal amount of the loan is payable in five equal installments upon reaching the "Achievement Date”, which is the date on which the previous 36-month period equals or exceeds 240,000 rounds of golf played on the property. As of December 31, 2017, 240,000 rounds of golf have not been achieved within an applicable 36-month period. The interest rate is adjusted annually and is equal to 1% plus a short-term investment return, as defined in the loan agreement. As of December 31, 2017, the interest rate is 2.20%.

Capital Leases - Equipment

The Company leases certain golf carts and other equipment under capital lease agreements. The agreements typically provide for minimum rentals plus executory costs. Lease terms range from 36-66 months. Certain leases include bargain purchase options at lease expiration.

The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of December 31, 2017 are as follows:



2018	$	5,600
2019	5,462
2020	4,182
2021	2,607
2022	825
Thereafter	56
Total minimum lease payments	18,732
Less: imputed interest	2,106
Present value of net minimum lease payments	$	16,626

Maturity Table

The Company’s debt obligations (gross of $1.9 million of discounts at December 31, 2017) have contractual maturities as follows:



	Nonrecourse		Recourse		Total
2018	$	4,652	$	—	$	4,652
2019	106,822		—		106,822
2020	3,829		—		3,829
2021	2,467		—		2,467
2022	801		—		801
Thereafter	255		51,004		51,259
Total	$	118,826	$	51,004	$	169,830

Debt Covenants

The Company’s credit facilities contain various customary loan covenants, including certain coverage ratios. The Company was in compliance with all of these covenants as of December 31, 2017.