| Debt |
Debt
Our debt consisted of the following (dollars in thousands):
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Maximum |
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Availability at |
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Carrying Value at |
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Scheduled Maturity |
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September 30,
2014 |
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September 30,
2014 |
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December 31,
2013 |
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Stated Interest Rates as of |
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as of |
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September 30, 2014 |
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September 30, 2014 |
Mortgage and Other Secured Loans: |
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Fixed rate mortgage loans (1) |
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$ |
600,082 |
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$ |
675,060 |
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3.96% - 10.65% (2) |
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2014-2024 |
Variable rate secured loan |
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37,087 |
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37,691 |
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LIBOR + 2.25% (3) |
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November 2015 |
Total mortgage and other secured loans |
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637,169 |
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712,751 |
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Revolving Credit Facility (4) |
$ |
800,000 |
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— |
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— |
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LIBOR + 0.975% to 1.75% |
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July 2017 |
Term Loan Facilities |
(5) |
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520,000 |
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620,000 |
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LIBOR + 1.10% to 2.60% (6) |
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2015-2019 |
Unsecured Senior Notes |
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3.600% Senior Notes (7) |
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347,432 |
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347,244 |
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3.60% |
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May 2023 |
5.250% Senior Notes (8) |
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245,707 |
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245,445 |
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5.25% |
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February 2024 |
3.700% Senior Notes (9) |
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297,483 |
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— |
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3.70% |
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June 2021 |
Unsecured notes payable |
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1,631 |
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1,700 |
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0% (10) |
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2026 |
4.25% Exchangeable Senior Notes (11) |
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570 |
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563 |
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4.25% |
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April 2030 |
Total debt, net |
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$ |
2,049,992 |
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$ |
1,927,703 |
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(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 $49,000 as of September 30, 2014 and $69,000 as of December 31, 2013.
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(2) |
The weighted average interest rate on these loans was 7.20% as of September 30, 2014.
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(3) |
The interest rate on the loan outstanding was 2.41% as of September 30, 2014.
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(4) |
No borrowings were outstanding on this facility as of the end of the respective periods. |
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(5) |
We have the ability to borrow an additional $180.0 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.
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(6) |
The weighted average interest rate on these loans was 1.80% as of September 30, 2014.
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(7) |
The carrying value of these notes included a principal amount of $350.0 million and an unamortized discount totaling $2.6 million as of September 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%.
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(8) |
The carrying value of these notes included a principal amount of $250.0 million and an unamortized discount totaling $4.3 million as of September 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%.
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(9) |
Refer to the paragraph below for disclosure pertaining to these notes. |
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(10) |
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 $680,000 as of September 30, 2014 and $761,000 as of December 31, 2013.
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(11) |
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 September 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 $5,000 as of September 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 September 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):
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2014 |
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2013 |
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2014 |
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2013 |
Interest expense at stated interest rate |
$ |
6 |
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$ |
6 |
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$ |
18 |
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$ |
4,201 |
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Interest expense associated with amortization of discount |
2 |
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2 |
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7 |
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1,613 |
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Total |
$ |
8 |
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$ |
8 |
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$ |
25 |
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$ |
5,814 |
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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 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 an interest rate of 10.65% (including 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 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 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 $2.5 million at September 30, 2014. The effective interest rate under the notes, including amortization of the issuance costs, was 3.85%.
We capitalized interest costs of $1.3 million in the three months ended September 30, 2014, $2.2 million in the three months ended September 30, 2013, $4.3 million in the nine months ended September 30, 2014 and $6.7 million in the nine months ended September 30, 2013.
The following table sets forth information pertaining to the fair value of our debt (in thousands):
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September 30, 2014 |
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December 31, 2013 |
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Carrying |
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Estimated |
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Carrying |
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Estimated |
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Amount |
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Fair Value |
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Amount |
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Fair Value |
Fixed-rate debt |
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Unsecured Senior Notes |
$ |
890,622 |
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$ |
901,022 |
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$ |
592,689 |
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$ |
575,374 |
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4.25% Exchangeable Senior Notes |
570 |
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575 |
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563 |
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575 |
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Other fixed-rate debt |
601,713 |
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578,116 |
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676,760 |
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650,997 |
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Variable-rate debt |
557,087 |
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558,665 |
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657,691 |
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657,527 |
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$ |
2,049,992 |
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$ |
2,038,378 |
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$ |
1,927,703 |
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$ |
1,884,473 |
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