Annual report pursuant to Section 13 and 15(d)

Debt

v3.6.0.2
Debt
 12 Months Ended
Dec. 31, 2016
Debt Disclosure [Abstract]  
Debt
Debt
 
Debt Summary

Our debt consisted of the following (dollars in thousands):
 
 
Carrying Value (1) as of
 
 
 
 
 
 
December 31,
2016
 
December 31,
2015
 
Stated Interest Rates as of
 
Scheduled Maturity as of
 
 
 
 
December 31, 2016
 
December 31, 2016
Mortgage and Other Secured Debt:
 
 

 
 

 
 
 
 
Fixed rate mortgage debt (2)
 
$
154,143

 
$
281,208

 
3.82% - 7.87% (3)
 
2019-2026
Variable rate secured loans
 
13,448

 
49,792

 
LIBOR + 1.85% (4)
 
October 2020
Total mortgage and other secured debt
 
167,591

 
331,000

 
 
 
 
Revolving Credit Facility (5)
 
—

 
43,500

 
LIBOR + 0.875% to 1.60%
 
May 2019
Term Loan Facilities (6)
 
547,494

 
515,902

 
LIBOR + 0.90% to 2.40% (7)
 
2020-2022
Unsecured Senior Notes (5)
 
 
 
 
 
 
 
 
3.600%, $350,000 aggregate principal
 
347,128

 
346,714

 
3.60% (8)
 
May 2023
5.250%, $250,000 aggregate principal
 
246,176

 
245,731

 
5.25% (9)
 
February 2024
3.700%, $300,000 aggregate principal
 
297,843

 
297,378

 
3.70% (10)
 
June 2021
5.000%, $300,000 aggregate principal
 
296,368

 
296,019

 
5.00% (10)
 
July 2025
Unsecured notes payable
 
1,401

 
1,508

 
0% (11)
 
2026
Total debt, net
 
$
1,904,001

 
$
2,077,752

 
 
 
 

(1)
The carrying values of our debt other than the Revolving Credit Facility reflect net deferred financing costs of $6.1 million as of December 31, 2016 and $8.0 million as of December 31, 2015.
(2)  
Several of the fixed rate mortgages carry interest rates that were above or below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying values of these loans reflect net unamortized premiums totaling $422,000 as of December 31, 2016 and $514,000 as of December 31, 2015.
(3)
The weighted average interest rate on our fixed rate mortgage loans was 4.19% as of December 31, 2016.
(4) 
The interest rate on our variable rate secured loan was 2.47% as of December 31, 2016.
(5)
Refer to the paragraphs below for further disclosure.
(6)
As discussed below, we have the ability to borrow an additional $350.0 million in the aggregate under these term loan facilities, provided that there is no default under the facilities and subject to the approval of the lenders.
(7) 
The weighted average interest rate on these loans was 2.23% as of December 31, 2016.
(8)  
The carrying value of these notes reflects an unamortized discount totaling $2.0 million as of December 31, 2016 and $2.2 million as of December 31, 2015. The effective interest rate under the notes, including amortization of the issuance costs, was 3.70%.
(9)  
The carrying value of these notes reflects an unamortized discount totaling $3.4 million as of December 31, 2016 and $3.8 million as of December 31, 2015. The effective interest rate under the notes, including amortization of the issuance costs, was 5.49%.
(10)
Refer to the paragraphs below for further disclosure.
(11) 
These notes carry interest rates that were below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying value of these notes reflects an unamortized discount totaling $460,000 as of December 31, 2016 and $554,000 as of December 31, 2015.
All debt is owed by the Operating Partnership. While COPT is not directly obligated by any debt, it has guaranteed the Operating Partnership’s Revolving Credit Facility, Term Loan Facilities and Unsecured Senior Notes.

Certain of our debt instruments require that we comply with a number of restrictive financial covenants, including maximum leverage ratio, unencumbered leverage ratio, minimum net worth, minimum fixed charge coverage, minimum unencumbered interest coverage ratio, minimum debt service and maximum secured indebtedness ratio. In addition, the terms of some of COPLP’s debt may limit its ability to make certain types of payments and other distributions to COPT in the event of default or when such payments or distributions may prompt failure of debt covenants.  As of December 31, 2016, we were within the compliance requirements of these financial covenants.

Our debt matures on the following schedule (in thousands):
2017
$
4,061

 
2018
4,241

 
2019
4,387

 
2020
316,156

 
2021
303,875

 
Thereafter
1,287,509

 
Total
$
1,920,229

(1)

(1)
Represents scheduled principal amortization and maturities only and therefore excludes net discounts and deferred financing costs of $16.2 million.

We capitalized interest costs of $5.7 million in 2016, $7.2 million in 2015 and $6.1 million in 2014.

The following table sets forth information pertaining to the fair value of our debt (in thousands):
 
December 31, 2016
 
December 31, 2015
 
Carrying
 
Estimated
 
Carrying
 
Estimated
 
Amount
 
Fair Value
 
Amount
 
Fair Value
Fixed-rate debt
 

 
 

 
 

 
 

Unsecured Senior Notes
$
1,187,515

 
$
1,220,282

 
$
1,185,842

 
$
1,211,658

Other fixed-rate debt
155,544

 
156,887

 
282,716

 
291,991

Variable-rate debt
560,942

 
558,437

 
609,194

 
610,987

 
$
1,904,001

 
$
1,935,606

 
$
2,077,752

 
$
2,114,636



Revolving Credit Facility

On May 6, 2015, we entered into a credit agreement with a group of lenders for which KeyBanc Capital Markets and J.P. Morgan Securities LLC acted as joint lead arrangers and joint book runners, KeyBank National Association acted as administrative agent and JPMorgan Chase Bank, N.A. acted as syndication agent (the “Consolidated Credit Agreement”) to amend, restate and consolidate the terms of our existing unsecured revolving credit facility (the “Revolving Credit Facility”) and one of our term loan facilities discussed below. The lenders’ aggregate commitment under the Revolving Credit Facility is $800.0 million, with the ability for us to increase the lenders’ aggregate commitment to $1.3 billion, provided that there is no default under the facility and subject to the approval of the lenders. Amounts available under the facility are computed based on 60% of our unencumbered asset value, as defined in the agreement.  The facility matures on May 6, 2019, with the ability for us to further extend such maturity by two six-month periods at our option, provided that there is no default under the facility and we pay an extension fee of 0.075% of the total availability under the facility for each extension period. The interest rate on the facility is based on LIBOR (customarily the 30-day rate) plus 0.875% to 1.600%, as determined by the credit ratings assigned to COPLP by Standard & Poor’s Rating Services, Moody’s Investor Services, Inc. or Fitch Ratings Ltd. (collectively, the “Ratings Agencies”). The facility also carries a quarterly fee that is based on the lenders’ aggregate commitment under the facility multiplied by a per annum rate of 0.125% to 0.300%, as determined by the credit ratings assigned to COPLP by the Ratings Agencies. As of December 31, 2016, the maximum borrowing capacity under this facility totaled $800.0 million, all of which was available.

Weighted average borrowings under our Revolving Credit Facility totaled $90.3 million in 2016 and $125.0 million in 2015. The weighted average interest rate on our Revolving Credit Facility was 1.64% in 2016 and 1.40% in 2015.

Term Loan Facilities

Effective February 14, 2012, we entered into an unsecured term loan agreement under which we borrowed $250.0 million. In connection with our entry into the Consolidated Credit Agreement on May 6, 2015 discussed above, we increased the loan amount to $300.0 million, with a right for us to borrow up to an additional $200.0 million during the term for an aggregate maximum loan of $500.0 million, subject to certain conditions. The term loan matures on May 6, 2020.  The variable interest rate on the loan is based on the LIBOR rate (customarily the 30-day rate) plus 0.90% to 1.85%, as determined by the credit ratings assigned to COPLP by the Ratings Agencies.

Effective December 17, 2015, we entered into an unsecured term loan agreement with an initial commitment of $250.0 million; we borrowed $100.0 million under this loan on December 17, 2015 and $150.0 million on December 28, 2016. We also have the ability to borrow $150.0 million above the initial commitment, provided that there is no default under the loan and subject to the approval of the lenders.  The term loan matures on December 17, 2022.  The variable interest rate on the loan is based on the LIBOR rate (customarily the 30-day rate) plus 1.40% to 2.35%, as determined by the credit ratings assigned to COPLP by the Ratings Agencies.

In addition to the term loans discussed above, we also had the following term loans that were repaid prior to December 31, 2016:

•
for a term loan originating in 2012, we repaid the remaining balance of $120.0 million in 2016; and
•
for a term loan originating in 2011, we repaid $100.0 million of the loan in 2014 and repaid the remaining balance of $150.0 million in 2015.

Unsecured Senior Notes

We issued the following senior notes in 2015 and 2014:

•
$300.0 million of 5.000% Senior Notes at an initial offering price of 99.510% of their face value on June 29, 2015, resulting in proceeds, after deducting underwriting discounts, but before other offering expenses of $296.6 million. The carrying value of these notes reflects an unamortized discount totaling $3.0 million at December 31, 2016 and $3.3 million as of December 31, 2015. The effective interest rate under the notes, including amortization of the issuance costs, was 5.15%; and
•
$300.0 million of 3.700% Senior Notes at an initial offering price of 99.739% of their face value on May 14, 2014, resulting in proceeds, after deducting underwriting discounts, but before other offering expenses, of $297.3 million. The carrying value of these notes reflects an unamortized discount totaling $1.7 million as of December 31, 2016 and $2.1 million as of December 31, 2015. The effective interest rate under the notes, including amortization of the issuance costs, was 3.85%.
 
We may redeem our unsecured senior notes, in whole at any time or in part from time to time, at our option, at a redemption price equal to the greater of (1) the aggregate principal amount of the notes being redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued as of the date of redemption) discounted to its present value, on a semi-annual basis at an adjusted treasury rate plus a spread (30 basis points for the 3.600% Senior Notes, 40 basis points for the 5.250% Senior Notes, 25 basis points for the 3.700% Senior Notes and 45 basis points for the 5.000% Senior Notes), plus, in each case, accrued and unpaid interest thereon to the date of redemption. However, in each case, if this redemption occurs on or after three months prior to the maturity date, the redemption price will be equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the applicable redemption date. These notes are unconditionally guaranteed by COPT.

(Losses) Gains on Early Extinguishment of Debt

Our (losses) gains on early extinguishment of debt included:

•
a gain of $84.8 million on August 28, 2015 pertaining to the removal of a $150.0 million nonrecourse mortgage loan from our balance sheet as discussed further in Note 5; and
•
a loss of $9.1 million in December 2014, when we completed the defeasance of, and full satisfaction of our obligations with respect to, (1) $103.0 million principal amount of secured nonrecourse mortgage debt due to mature in November 2015 and bearing an interest rate of 5.53% and (2) $108.5 million principal amount of secured nonrecourse mortgage debt due to mature in January 2016 and bearing an interest rate of 5.56%, as well as costs related to the defeasance and satisfaction.