Annual report pursuant to Section 13 and 15(d)

Debt, Net

v3.22.4
Debt, Net
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
Debt, Net Debt, Net
 
Debt Summary

Our debt consisted of the following (dollars in thousands):
 
Carrying Value (1) as of December 31,
 December 31, 2022
  2022 2021 Stated Interest Rates Scheduled Maturity
Mortgage and Other Secured Debt:        
Fixed rate mortgage debt $ 84,433  $ 86,960 
3.82% - 4.62% (2)
 2023-2026
Variable rate secured debt 33,318  33,667 
SOFR + 0.10%
+ 1.45% to 1.55% (3)
 2025-2026
Total mortgage and other secured debt 117,751  120,627     
Revolving Credit Facility (4) 211,000  76,000 
SOFR + 0.10%
+ 0.725% to 1.400% (5)
 October 2026
Term Loan Facilities (4) 123,948  299,420 
SOFR + 0.10%
+ 0.850% to 1.700% (6)
 January 2026
Unsecured Senior Notes (4)
2.25%, $400,000 aggregate principal
 396,539  395,491 
2.25% (7)
 March 2026
2.00%, $400,000 aggregate principal
 396,988  396,512 
2.00% (8)
 January 2029
2.75%, $600,000 aggregate principal
 590,123  589,060 
2.75% (9)
 April 2031
2.90%, $400,000 aggregate principal
 394,848  394,441 
2.90% (10)
 December 2033
Unsecured note payable 597  753 
0% (11)
 May 2026
Total debt, net $ 2,231,794  $ 2,272,304     
(1)The carrying values of our debt other than the Revolving Credit Facility reflect net deferred financing costs of $5.4 million as of December 31, 2022 and $5.8 million as of December 31, 2021.
(2)The weighted average interest rate on our fixed rate mortgage debt was 4.07% as of December 31, 2022.
(3)The weighted average interest rate on our variable rate secured debt as of December 31, 2022 was 5.58%, or 2.45% including the effect of interest rate swaps that hedge the risk of interest rate changes on this debt.
(4)Refer to the paragraphs below for further disclosure.
(5)The weighted average interest rate on the Revolving Credit Facility was 5.47% as of December 31, 2022.
(6)The interest rate on this loan was 5.72% as of December 31, 2022.
(7)The carrying value of these notes reflects an unamortized discount totaling $2.8 million as of December 31, 2022 and $3.6 million as of December 31, 2021 The effective interest rate under the notes, including amortization of the issuance costs, was 2.48%.
(8)The carrying value of these notes reflects an unamortized discount totaling $2.1 million as of December 31, 2022 and $2.5 million as of December 31, 2021. The effective interest rate under the notes, including amortization of the issuance costs, was 2.09%.
(9)The carrying value of these notes reflects an unamortized discount totaling $8.5 million as of December 31, 2022 and $9.5 million as of December 31, 2021. The effective interest rate under the notes, including amortization of the issuance costs, was 2.94%.
(10)The carrying value of these notes reflects an unamortized discount totaling $4.2 million as of December 31, 2022 and $4.5 million as of December 31, 2021. The effective interest rate under the notes, including amortization of the issuance costs, was 3.01%.
(11)This note carries an interest rate that, upon assumption, was below market rates and it therefore was recorded at its fair value based on applicable effective interest rates.  The carrying value of this note reflects an unamortized discount totaling $65,000 as of December 31, 2022 and $108,000 as of December 31, 2021.
All debt is owed by the Operating Partnership. While COPT is not directly obligated by any debt, it has guaranteed COPLP’s Revolving Credit Facility, Term Loan Facility 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 fixed charge coverage ratio, 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, unless such distributions are required to maintain COPT’s qualification as a REIT.  As of December 31, 2022, we were compliant with these financial covenants.
Our debt matures on the following schedule (in thousands):
Year Ending December 31, December 31, 2022
2023 $ 18,954 
2024 29,983 
2025 23,717 
2026 782,300 
2027 — 
Thereafter 1,400,000 
Total $ 2,254,954  (1)
(1)Represents scheduled principal amortization and maturities only and therefore excludes net discounts and deferred financing costs of $23.2 million.

We capitalized interest costs of $6.7 million in 2022, $6.5 million in 2021 and $12.1 million in 2020.

The following table sets forth information pertaining to the fair value of our debt (in thousands):
  December 31, 2022 December 31, 2021
  Carrying
Amount		 Estimated
Fair Value		 Carrying
Amount		 Estimated
Fair Value
Fixed-rate debt        
Unsecured Senior Notes $ 1,778,498  $ 1,433,561  $ 1,775,504  $ 1,809,950 
Other fixed-rate debt 85,030  80,330  87,713  87,339 
Variable-rate debt 368,266  367,896  409,087  409,639 
  $ 2,231,794  $ 1,881,787  $ 2,272,304  $ 2,306,928 

Revolving Credit Facility

On October 26, 2022, we entered into a credit agreement with a group of lenders for an unsecured revolving credit facility with a lender commitment of $600.0 million that replaced our existing unsecured revolving credit facility (the prior facility and new facility are referred to collectively herein as our “Revolving Credit Facility”). The facility matures on October 26, 2026, with the ability for us to 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 0.0625% of the total availability under the facility for each extension period. The interest rate on the facility is based on the Secured Overnight Financing Rate (“SOFR”) plus a SOFR index adjustment of 0.10% plus 0.725% to 1.400%, as determined by the credit ratings assigned to COPLP by Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc. or Fitch Ratings Ltd. (collectively, the “Ratings Agencies”). The facility also carries a quarterly fee that is based on the lenders’ 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, 2022, the maximum borrowing capacity under this facility totaled $600.0 million, of which $389.0 million was available.

Weighted average borrowings under our Revolving Credit Facility totaled $202.8 million in 2022 and $135.8 million in 2021. The weighted average interest rate on our Revolving Credit Facility was 3.31% in 2022 and 1.18% in 2021.

Term Loan Facilities

The credit agreement with a group of lenders entered into on October 26, 2022 discussed above provided for a $125.0 million unsecured term loan with an interest rate based on SOFR plus a SOFR index adjustment of 0.10% plus 0.850% to 1.700%, as determined by the credit ratings assigned to COPLP by the Ratings Agencies. This term loan facility matures on January 30, 2026, with the ability for us to extend such maturity by two 12-month periods at our option, provided that there is no default under the facility and we pay an extension fee of 0.125% of the outstanding loan balance for each extension period.

In addition to the term loan discussed above, we also had a term loan that we amended in 2020 to increase the loan amount by $150.0 million for a balance outstanding of $400.0 million. We repaid $100.0 million of this loan in 2021 and the remaining $300.0 million in 2022.
Unsecured Senior Notes

During 2020 and 2021, we issued the following unsecured senior notes:

•$400.0 million of 2.25% Senior Notes due 2026 (the “2.25% Notes”) at an initial offering price of 99.42% of their face value on September 17, 2020, resulting in proceeds, after deducting underwriting discounts, but before other offering expenses, of $395.3 million. The notes mature on March 15, 2026;
•$600.0 million of 2.75% Senior Notes due 2031 (the “2.75% Notes”) at an initial offering price of 98.95% of their face value on March 11, 2021, resulting in proceeds, after deducting underwriting discounts, but before other offering expenses, of $589.8 million. The notes mature on April 15, 2031;
•$400.0 million of 2.00% Senior Notes due 2029 (the “2.00% Notes”) at an initial offering price of 99.97% of their face value on August 11, 2021, resulting in proceeds, after deducting underwriting discounts, but before other offering expenses, of $397.4 million. The notes mature on January 15, 2029; and
•$400.0 million of 2.90% Senior Notes due 2033 (the “2.90% Notes”) at an initial offering price of 99.53% of their face value on November 17, 2021, resulting in proceeds, after deducting underwriting discounts, but before other offering expenses, of $395.4 million. The notes mature on December 1, 2033.

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 (35 basis points for the 2.25% Notes, 25 basis points for the 2.75% Notes, 20 basis points for the 2.00% Notes and 25 basis points for the 2.90% 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 a defined date (February 15, 2026 for the 2.25% Notes, January 15, 2031 for the 2.75% Notes, November 15, 2028 for the 2.00% Notes and September 1, 2033 for the 2.90% Notes), 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.

During 2020 and 2021, we purchased or redeemed the following unsecured senior notes:

•purchased pursuant to a tender offer $122.9 million of our 3.70% Senior Notes due 2021 (the “3.70% Notes”) on September 17, 2020 for $126.0 million, plus accrued interest; and redeemed the remaining $177.1 million of the 3.70% Notes on October 19, 2020 for $180.9 million plus accrued interest. In connection with this purchase and redemption, we recognized a loss on early extinguishment of debt of $7.3 million in 2020;
•purchased pursuant to tender offers $184.4 million of 3.60% Senior Notes due 2023 (the “3.60% Notes”) for $196.7 million and $145.6 million of 5.25% Senior Notes due 2024 (the “5.25% Notes”) for $164.7 million, plus accrued interest effective March 11, 2021; and on April 12, 2021, redeemed the remaining $165.6 million of 3.60% Notes for $176.3 million and $104.4 million of 5.25% Notes for $117.7 million, plus accrued interest. In connection with these purchases and redemptions, we recognized a loss on early extinguishment of debt of $58.4 million in 2021; and
•redeemed $300.0 million of 5.00% Senior Notes due 2025 on November 18, 2021 for $336.4 million plus accrued interest. We recognized a loss on early extinguishment of debt of $38.2 million for this redemption in 2021.