Item
1.01 Entry into a Material Definitive Agreement.
On
March 22, 2018, Monmouth Real Estate Investment Corporation (the “Company”) entered into a Second Amendment (the “Second
Amendment”) to its Credit Agreement (the “Facility”) with Bank of Montreal, as L/C Issuer, Administrative Agent
and Lender (“BMO”), JP Morgan Chase Bank, N.A., as Lender (“JPMorgan”), and Royal Bank of Canada, as Lender
(“RBC”), whereby the Second Amendment decreases the Capitalization Rate defined in the Facility from 7.0% to 6.5%.
Availability
under the Facility is limited to 60% of the value of the borrowing base properties. The value of the borrowing base properties
is determined by applying a capitalization rate to the Net Operating Income (“NOI”) generated by our unencumbered,
wholly-owned industrial properties. The value of the borrowing base properties is determined by applying a 6.5% capitalization
rate to the NOI generated by the Company’s unencumbered, wholly owned industrial properties Borrowings under the Facility,
will, at the Company’s election, either i) bear interest at LIBOR plus 140 basis points to 220 basis points, depending on
our leverage ratio, or ii) bear interest at BMO’s prime lending rate plus 40 basis points to 120 basis points, depending
on our leverage ratio. The Company’s current borrowings are less than 60% of the value of the borrowing base properties
and based on the Company’s current leverage ratio, borrowings under the Facility bear interest at LIBOR plus 170 basis points.
If the Company receives a credit rating from two rating agencies of at least BBB- by S&P, Baa3 by Moody’s or BBB- by
Fitch, and satisfies certain conditions, the Company may elect that borrowings under the Facility will bear interest either at
BMO’s prime lending rate plus 0 basis points to 55 basis points, depending on the Company’s credit ratings, or LIBOR
plus 87.5 basis points to 155 basis points, depending on the Company’s credit ratings (the “investment grade credit
rating interest election”).
In
addition, the Company incurs a commitment fee on the average daily unadvanced portion of the total amount committed under the
Facility at a rate of 0.25% per annum if average daily borrowings under the Facility are equal to or greater than 50% of the commitment
then in effect, or 0.35% per annum if average daily borrowings under the Facility are less than 50% of the commitment then in
effect, which fee will be payable quarterly based on outstanding borrowings and the unadvanced portion of the total amount committed
under the Facility during the applicable quarter. If the Company has made the investment grade credit rating interest election
described above, the Company will incur a facility fee on the average daily amount committed under the Facility, whether or not
in use, at a rate of 0.125% per annum to 0.30% per annum, depending on the Company’s credit ratings, payable quarterly.
Affiliates
of RBC, BMO, and JPMorgan have, from time to time, performed, and may in the future perform, various financial advisor, investment
banking and general financing services for the Company, for which they have received, and will receive, customary fees and expenses.
The
description of the amended Facility is qualified by reference to the complete Second Amendment to Credit Agreement that is attached
hereto as Exhibit 10.1 and is incorporated herein by reference.