Quarterly report pursuant to Section 13 or 15(d)

DEBT FINANCING

v3.19.3
DEBT FINANCING
9 Months Ended
Sep. 30, 2019
Debt Disclosure [Abstract]  
DEBT FINANCING DEBT FINANCING
The Company's outstanding debt as of September 30, 2019 and December 31, 2018 is summarized as follows (dollars in thousands):
 
Interest Rate(1)
 
September 30, 2019
 
December 31, 2018
Credit Facility:
 
 
 
 
 
Revolving line of credit
3.32%
 
$

 
$
139,500

Term loan A
3.74%
 
125,000

 
235,000

Term loan B
2.91%
 
250,000

 
155,000

Term loan C
2.80%
 
225,000

 
105,000

Term loan D
3.57%
 
175,000

 
125,000

2023 Term loan facility
2.83%
 
175,000

 
175,000

2028 Term loan facility
4.62%
 
75,000

 
75,000

2029 Term loan facility
4.27%
 
100,000

 

2029 Senior Unsecured Notes
3.98%
 
100,000

 

2031 Senior Unsecured Notes
4.08%
 
50,000

 

Fixed rate mortgages payable
4.18%
 
264,323

 
268,138

Total principal
 
 
1,539,323

 
1,277,638

Unamortized debt issuance costs and debt premium, net
 
 
(5,387
)
 
464

Total debt
 
 
$
1,533,936

 
$
1,278,102


(1) 
Represents the effective interest rate as of September 30, 2019. Effective interest rate incorporates the stated rate plus the impact of interest rate cash flow hedges and discount and premium amortization, if applicable. For the revolving line of credit, the effective interest rate excludes fees for unused borrowings. 
Credit Facility Amendment
 On July 29, 2019, the operating partnership, as borrower, the Company, and certain of the operating partnership's subsidiaries, as subsidiary guarantors, entered into a second amended and restated credit agreement with a syndicated group of lenders, which extended the maturities, enhanced the terms in line with the current market and increased the total borrowing capacity under the Company's unsecured credit facility by $255.0 million for a total of $1.275 billion (the "credit facility"). The credit facility consists of the following components: (i) a revolving line of credit (the "Revolver") which provides for a total borrowing commitment up to $500.0 million, under which the Company may borrow, repay and re-borrow amounts, (ii) a $125.0 million tranche A term loan facility (the "Term Loan A"), (iii) a $250.0 million tranche B term loan facility (the "Term Loan B"), (iv) a $225.0 million tranche C term loan facility (the "Term Loan C"), and (v) a $175.0 million tranche D term loan facility (the "Term Loan D"). The Company has an expansion option under the credit facility, which if exercised in full, would provide for a total borrowing capacity under the credit facility of $1.750 billion.
The Revolver matures in January 2024; provided that the Company may elect to extend the maturity to July 2024 by paying an extension fee of 0.075% of the total borrowing commitment thereunder at the time of extension and meeting other customary conditions with respect to compliance. The Term Loan A matures in January 2023, the Term Loan B matures in July 2024, the Term Loan C matures in January 2025 and the Term Loan D matures in July 2026. The credit facility is not subject to any scheduled reduction or amortization payments prior to maturity.
Interest rates applicable to loans under the credit facility are determined based on a 1, 2, 3 or 6 month LIBOR period (as elected by the Company at the beginning of any applicable interest period) plus an applicable margin or a base rate, determined by the greatest of the Key Bank prime rate, the federal funds rate plus 0.50% or one month LIBOR plus 1.00%, plus an applicable margin. The applicable margins for the credit facility are leverage based and range from 1.15% to 2.20% for LIBOR loans and 0.15% to 1.20% for base rate loans; provided that after such time as the Company achieves an investment grade rating as defined in the credit facility, the Company may elect (but is not required to elect) (a "credit rating pricing election") that the credit facility be subject to applicable margins ranging from 0.78% to 2.25% for LIBOR loans and 0.00% to 1.25% for base rate loans. The Company is also required to pay usage based fees ranging
from 0.15% to 0.20% with respect to the unused portion of the Revolver; provided that if the Company makes a credit rating pricing election under the credit facility, the Company will be required to pay rating based fees ranging from 0.125% to 0.300% with respect to the entire Revolver in lieu of any usage based fees.
On July 29, 2019, the Company entered into interest rate swap agreements which together with the Company's existing interest rate swap agreements, fix the interest rates through maturity for the Term Loan A, Term Loan B, Term Loan C and Term Loan D. As of September 30, 2019, the Term Loan A, Term Loan B, Term Loan C and Term Loan D had effective interest rates of 3.74%, 2.91%, 2.80% and 3.57%, respectively.
As of September 30, 2019, the Company had outstanding letters of credit totaling $5.7 million and would have had the capacity to borrow remaining Revolver commitments of $494.3 million while remaining in compliance with the credit facility's financial covenants described in the following paragraph.
The Company is required to comply with the following financial covenants under the credit facility:
Maximum total leverage ratio not to exceed 60%, provided, however, the Company is permitted to maintain a ratio of up to 65% up to two (2) consecutive fiscal quarters immediately following the quarter in which a material acquisition (as defined in the credit facility) occurs
Minimum fixed charge coverage ratio of at least 1.5x
Maximum unsecured debt to unencumbered asset value ratio not to exceed 60%, provided, however, the Company shall be permitted to maintain a ratio of up to 65% up to two (2) consecutive fiscal quarters immediately following the quarter in which a material acquisition (as defined in the credit facility) occurs
Unencumbered adjusted net operating income to unsecured interest expense of at least 2.0x
On July 29, 2019, the financial covenants and certain other terms of the Company's credit agreement for a term loan facility that matures in June 2023 (the "2023 Term Loan Facility"), the Company's credit agreement for a term loan facility that matures in December 2028 (the "2028 Term Loan Facility"), and the 2029 Term Loan Facility (as defined below) were amended to make such terms substantially similar to those in the credit facility.
In addition, the terms of the credit facility contain customary affirmative and negative covenants that, among other things, limit the Company's ability to make distributions or certain investments, incur debt, incur liens and enter into certain transactions.
2029 Term Loan Facility
On April 24, 2019, the Company entered into a credit agreement with BMO Harris Bank N.A. to make available an unsecured term loan facility that matures in April 2029 (the "2029 Term Loan Facility") in an aggregate amount of $100.0 million. The entire outstanding principal amount of, and all accrued but unpaid interest, is due on the maturity date.
Interest rates applicable to loans under the 2029 Term Loan Facility are payable during such periods as such loans are LIBOR loans, at the applicable LIBOR based on a 1, 2, 3 or 6 month LIBOR period (as elected by the Company at the beginning of any applicable interest period) plus an applicable margin, and during the period that such loans are base rate loans, at the base rate under the 2029 Term Loan Facility in effect from time to time plus an applicable margin. The base rate under the 2029 Term Loan Facility is equal to the greatest of the BMO Harris Bank prime rate, the federal funds rate plus 0.50% or one month LIBOR plus 1.00%. The applicable margin for the 2029 Term Loan Facility is leverage-based and ranges from 1.85% to 2.30% for LIBOR loans and 0.85% to 1.30% for base rate loans; provided that after such time as the Company achieves an investment grade rating from at least two rating agencies, the Company may elect (but is not required to elect) that the 2029 Term Loan Facility be subject to rating-based margins ranging from 1.40% to 2.25% for LIBOR Loans and 0.40% to 1.25% for base rate loans.
On April 24, 2019, the Company also entered into an interest rate swap agreement with a notional amount of $100.0 million that matures in April 2029 fixing the interest rate of the 2029 Term Loan Facility at an effective interest rate of 4.27%.
The Company is required to comply with the same financial covenants under the 2029 Term Loan Facility as it is with the credit facility, 2023 Term Loan Facility and the 2028 Term Loan Facility. In addition, the terms of the 2029 Term Loan Facility contain customary affirmative and negative covenants that are consistent with those contained in the 2023 Term Loan Facility and 2028 Term Loan Facility, and, among other things, limit the Company's ability to make distributions, make certain investments, incur debt, incur liens and enter into certain transactions.
2029 And 2031 Senior Unsecured Notes
On August 30, 2019, the operating partnership issued $100.0 million of 3.98% senior unsecured notes due August 30, 2029 (the "2029 Senior Unsecured Notes") and $50.0 million of 4.08% senior unsecured notes due August 30, 2031 (the "2031 Senior Unsecured Notes" and together with the 2029 Senior Unsecured Notes, the "Senior Unsecured Notes") in a private placement to certain institutional accredited investors. The Senior Unsecured Notes are governed by a Note Purchase Agreement, dated July 30, 2019 (the "Note Purchase Agreement"), by and among the operating partnership as issuer, the Company, and the purchasers of Senior Unsecured Notes.
Interest is payable semiannually, on August 30th and February 28th of each year, commencing on February 28, 2020. The Senior Unsecured Notes are senior unsecured obligations of the Company and will be jointly and severally guaranteed by certain of the Company's subsidiaries, as subsidiary guarantors, upon issuance. The Senior Unsecured Notes rank pari passu with the credit facility, the 2023 Term Loan Facility, 2028 Term Loan Facility, and the 2029 Term Loan Facility. The Note Purchase Agreement contains financial covenants that are substantially similar to those described under the heading "Credit Facility Amendment" above. In addition, the terms of the Note Purchase Agreement contain customary affirmative and negative covenants that, among other things, limit the Company's ability to make distributions or certain investments, incur debt, incur liens and enter into certain transactions.
Future Debt Obligations
Based on existing debt agreements in effect as of September 30, 2019, the scheduled principal and maturity payments for the Company's outstanding borrowings are presented in the table below (in thousands):
Year Ending December 31,
 
Scheduled Principal and Maturity Payments
 
Amortization of Premium and Unamortized Debt Issuance Costs
 
Total
Remainder of 2019
 
$
1,312

 
$
(201
)
 
$
1,111

2020
 
39,397

 
(1,154
)
 
38,243

2021
 
7,603

 
(1,502
)
 
6,101

2022
 
4,205

 
(1,504
)
 
2,701

2023
 
377,049

 
(1,155
)
 
375,894

2024
 
271,964

 
(788
)
 
271,176

Thereafter
 
837,793

 
917

 
838,710

 
 
$
1,539,323

 
$
(5,387
)
 
$
1,533,936