Quarterly report pursuant to Section 13 or 15(d)

Debt

v2.4.0.8
Debt
6 Months Ended
Jun. 30, 2014
Debt Disclosure [Abstract]  
Debt
Debt
 
Our debt consisted of the following (dollars in thousands):
 
Maximum
 
 
 
 
 
 
 
 
 
 Availability at
 
Carrying Value at
 
 
 
Scheduled Maturity
 
June 30,
2014
 
June 30,
2014
 
December 31,
2013
 
Stated Interest Rates as of
 
as of
 
 
 
 
June 30, 2014
 
June 30, 2014
Mortgage and Other Secured Loans:
 

 
 

 
 

 
 
 
 
Fixed rate mortgage loans (1)
(2)
 
$
599,448

 
$
675,060

 
3.96% - 7.87% (3)
 
2015-2024
Variable rate secured loan


 
37,288

 
37,691

 
LIBOR + 2.25% (4)
 
November 2015
Total mortgage and other secured loans
 

 
636,736

 
712,751

 
 
 
 
Revolving Credit Facility (5)
$
800,000

 

 

 
LIBOR + 0.975% to 1.75%
 
July 2017
Term Loan Facilities
(6)
 
570,000

 
620,000

 
LIBOR + 1.10% to 2.60% (7)
 
2015-2019
Unsecured Senior Notes
 
 
 
 
 
 
 
 
 
3.600% Senior Notes (8)


 
347,369

 
347,244

 
3.60%
 
May 2023
5.250% Senior Notes (9)


 
245,619

 
245,445

 
5.25%
 
February 2024
3.700% Senior Notes (10)
 
 
297,398

 

 
3.70%
 
June 2021
Unsecured notes payable


 
1,654

 
1,700

 
0% (11)
 
2026
4.25% Exchangeable Senior Notes (12)


 
567

 
563

 
4.25%
 
April 2030
Total debt, net
 

 
$
2,099,343

 
$
1,927,703

 
 
 
 

(1)  
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 $55,000 as of June 30, 2014 and $69,000 as of December 31, 2013.
(2)
Includes a $24.2 million balance on construction loans with maximum available borrowings of $26.2 million.
(3)
The weighted average interest rate on these loans was 5.95% as of June 30, 2014.
(4) 
The interest rate on the loan outstanding was 2.40% as of June 30, 2014.
(5)
No borrowings were outstanding on this facility as of the end of the respective periods.
(6)  
We have the ability to borrow an aggregate of an additional $180.0 million 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 1.78% as of June 30, 2014.
(8)
The carrying value of these notes included a principal amount of $350.0 million and an unamortized discount totaling $2.6 million as of June 30, 2014 and $2.8 million as of December 31, 2013.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.70%
(9)
The carrying value of these notes included a principal amount of $250.0 million and an unamortized discount totaling $4.4 million as of June 30, 2014 and $4.6 million as of December 31, 2013.  The effective interest rate under the notes, including amortization of the issuance costs, was 5.49%
(10)
Refer to the paragraph below for disclosure pertaining to these notes.
(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 $707,000 as of June 30, 2014 and $761,000 as of December 31, 2013.
(12) 
As described further in our 2013 Annual Report on Form 10-K, these notes have an exchange settlement feature that provides that the notes may, under certain circumstances, be exchangeable for cash and, at COPLP’s discretion, COPT common shares at an exchange rate (subject to adjustment) of 20.8513 shares per one thousand dollar principal amount of the notes (exchange rate is as of June 30, 2014 and is equivalent to an exchange price of $47.96 per common share).  The carrying value of these notes included a principal amount of $575,000 and an unamortized discount totaling $8,000 as of June 30, 2014 and $12,000 as of December 31, 2013.  The effective interest rate under the notes, including amortization of the issuance costs, was 6.05%.  Because the closing price of our common shares as of June 30, 2014 and December 31, 2013 was less than the exchange price per common share applicable to these notes, the if-converted value of the notes did not exceed the principal amount.  The table below sets forth interest expense recognized on these notes before deductions for amounts capitalized (in thousands):
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Interest expense at stated interest rate
$
6

 
$
1,891

 
$
12

 
$
4,195

Interest expense associated with amortization of discount
2

 
747

 
5

 
1,611

Total
$
8

 
$
2,638

 
$
17

 
$
5,806



All debt is owed by the Operating Partnership. While COPT is not directly obligated by any debt, it has guaranteed our Revolving Credit Facility, Term Loan Facilities, Unsecured Senior Notes and 4.25% Exchangeable Senior Notes.

In April 2014, a wholly owned subsidiary of ours defaulted on the payment terms of a $150.0 million nonrecourse mortgage loan secured by two operating properties in Northern Virginia with an aggregate estimated fair value that was less than the loan balance. This loan has a base interest rate of 5.65% (excluding the effect of default interest) and was originally scheduled to mature in 2017. In July 2014, the lender accelerated the loan’s maturity date to July 2014. Additional disclosure regarding this loan is provided in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Quarterly Report on Form 10-Q.

On May 14, 2014, we issued a $300.0 million aggregate principal amount of 3.700% Senior Notes at an initial offering price of 99.739% of their face value. The proceeds from the offering, after deducting underwriting discounts, but before other offering expenses, were approximately $297.3 million. The notes mature on June 15, 2021. We may redeem the 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 and (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 25 basis points, plus, in each case, accrued and unpaid interest thereon to the date of redemption. The notes are unconditionally guaranteed by COPT. The carrying value of these notes reflects an unamortized discount totaling $2.6 million at June 30, 2014. The effective interest rate under the notes, including amortization of the issuance costs, was 3.85%.

We capitalized interest costs of $1.4 million in the three months ended June 30, 2014, $2.1 million in the three months ended June 30, 2013, $3.0 million in the six months ended June 30, 2014 and $4.5 million in the six months ended June 30, 2013.

The following table sets forth information pertaining to the fair value of our debt (in thousands): 
 
June 30, 2014
 
December 31, 2013
 
Carrying
 
Estimated
 
Carrying
 
Estimated
 
Amount
 
Fair Value
 
Amount
 
Fair Value
Fixed-rate debt
 

 
 

 
 

 
 

Unsecured Senior Notes
$
890,386

 
$
897,188

 
$
592,689

 
$
575,374

4.25% Exchangeable Senior Notes
567

 
575

 
563

 
575

Other fixed-rate debt
601,102

 
589,702

 
676,760

 
650,997

Variable-rate debt
607,288

 
609,085

 
657,691

 
657,527

 
$
2,099,343

 
$
2,096,550

 
$
1,927,703

 
$
1,884,473