Debt

6 Months Ended

Jun. 30, 2021

The following table summarizes the Company’s outstanding indebtedness, including borrowings under the Company’s unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes as of June 30, 2021 and December 31, 2020.


Loan	Principal Outstanding as of June 30, 2021 (in thousands)		Principal Outstanding as of December 31, 2020 (in thousands)		Interest Rate(1)(2)		Maturity Date	Prepayment Terms(3)
Unsecured credit facility:
Unsecured Credit Facility(4)	$	284,000	$	107,000	L + 0.90%		January 12, 2024	i
Total unsecured credit facility	284,000		107,000

Unsecured term loans:
Unsecured Term Loan A	150,000		150,000		3.38	%	March 31, 2022	i
Unsecured Term Loan D	150,000		150,000		2.85	%	January 4, 2023	i
Unsecured Term Loan E	175,000		175,000		3.92	%	January 15, 2024	i
Unsecured Term Loan F	200,000		200,000		3.11	%	January 12, 2025	i
Unsecured Term Loan G	300,000		300,000		1.28	%	February 5, 2026	i
Total unsecured term loans	975,000		975,000
Total unamortized deferred financing fees and debt issuance costs	(4,070)		(3,889)
Total carrying value unsecured term loans, net	970,930		971,111

Unsecured notes:
Series F Unsecured Notes	100,000		100,000		3.98	%	January 5, 2023	ii
Series A Unsecured Notes	50,000		50,000		4.98	%	October 1, 2024	ii
Series D Unsecured Notes	100,000		100,000		4.32	%	February 20, 2025	ii
Series G Unsecured Notes	75,000		75,000		4.10	%	June 13, 2025	ii
Series B Unsecured Notes	50,000		50,000		4.98	%	July 1, 2026	ii
Series C Unsecured Notes	80,000		80,000		4.42	%	December 30, 2026	ii
Series E Unsecured Notes	20,000		20,000		4.42	%	February 20, 2027	ii
Series H Unsecured Notes	100,000		100,000		4.27	%	June 13, 2028	ii
Total unsecured notes	575,000		575,000
Total unamortized deferred financing fees and debt issuance costs	(1,610)		(1,719)
Total carrying value unsecured notes, net	573,390		573,281

Mortgage notes (secured debt):
Wells Fargo Bank, National Association CMBS Loan	47,580		48,546		4.31	%	December 1, 2022	iii
Thrivent Financial for Lutherans	3,494		3,556		4.78	%	December 15, 2023	iv
United of Omaha Life Insurance Company	5,040		—		3.71	%	October 1, 2039	ii
Total mortgage notes	56,114		52,102
Net unamortized fair market value premium (discount)	(134)		29
Total unamortized deferred financing fees and debt issuance costs	(169)		(233)
Total carrying value mortgage notes, net	55,811		51,898
Total / weighted average interest rate(5)	$	1,884,131	$	1,703,290	2.99	%

(1)Interest rate as of June 30, 2021. At June 30, 2021, the one-month LIBOR (“L”) was 0.10050%. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for the Company’s unsecured credit facility and unsecured term loans is based on the Company’s debt rating, as defined in the respective loan agreements.

(2)The unsecured term loans have a stated interest rate of one-month LIBOR plus a spread of 1.0%. As of June 30, 2021, one-month LIBOR for the Unsecured Term Loans A, D, E, F, and G was swapped to a fixed rate of 2.38%, 1.85%, 2.92%, 2.11%, and 0.28%, respectively. One-month LIBOR for the Unsecured Term Loan G will be swapped to a fixed rate of 0.94% effective April 18, 2023.

(3)Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.

(4)The capacity of the unsecured credit facility is $750.0 million. Deferred financing fees and debt issuance costs, net of accumulated amortization related to the unsecured credit facility of approximately $2.2 million and $1.6 million is included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively. The initial maturity date is January 15, 2023, which may be extended pursuant to two six-month extension options exercisable by the Company in its discretion upon advance written notice. Exercise of each six-month option is subject to the following conditions: (i) absence of a default immediately before the extension and immediately after giving effect to the extension, (ii) accuracy of representations and warranties as of the extension date (both immediately before and after the extension), as if made on the extension date, and (iii) payment of a fee. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions.

(5)The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $975.0 million of debt, and is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums or discounts.

The aggregate undrawn nominal commitment on the unsecured credit facility as of June 30, 2021 was approximately $463.1 million, including issued letters of credit. The Company’s actual borrowing capacity at any given point in time may be less and is restricted to a maximum amount based on the Company’s debt covenant compliance. Total accrued interest for the Company’s indebtedness was approximately $6.3 million and $6.3 million as of June 30, 2021 and December 31, 2020, respectively, and is included in accounts payable, accrued expenses and other liabilities on the accompanying Consolidated Balance Sheets.

The following table summarizes the costs included in interest expense related to the Company’s debt arrangements on the accompanying Consolidated Statement of Operations for the three and six months ended June 30, 2021 and 2020.


	Three months ended June 30,				Six months ended June 30,
Costs Included in Interest Expense (in thousands)	2021		2020		2021		2020
Amortization of deferred financing fees and debt issuance costs and fair market value premiums/discounts	$	789	$	746	$	1,276	$	1,422
Facility, unused, and other fees	$	440	$	316	$	826	$	680

Subsequent to June 30, 2021, on July 8, 2021, the Company entered into a note purchase agreement for the future private placement by the Operating Partnership of $275.0 million senior unsecured notes, maturing September 29, 2031, with a fixed annual interest rate of 2.80%, and $50.0 million senior unsecured notes, maturing September 28, 2033, with a fixed annual interest rate of 2.95%. The notes are expected to be issued on or around September 28, 2021, subject to conditions.

On February 25, 2021, the Company assumed a mortgage note with United of Omaha Life Insurance Company of approximately $5.1 million in connection with the acquisition of the property located in Long Island, NY, which serves as collateral for the debt. The debt matures on October 1, 2039 and bears interest at 3.71% per annum. The assumed debt was recorded at fair value and a fair value discount of approximately $0.2 million was recorded during three months ended March 31, 2021. The fair value of debt was determined by discounting the future cash flows using the current rate of approximately 4.10% at which loans would be made to borrowers with similar credit ratings for loans with similar maturities, terms, and loan-to-value ratios. The fair value of the debt is based on Level 3 inputs and is a nonrecurring fair value measurement.

On February 5, 2021, the Company entered into an amendment to the unsecured credit facility (the “Credit Facility Amendment”). The Credit Facility Amendment provides for an increase in the aggregate commitments available for borrowing under the unsecured credit facility from $500 million to up to $750 million. As of June 30, 2021, the unsecured credit facility bore an interest rate of LIBOR plus a spread of 0.90% based on the Company’s debt rating, as defined in the loan agreement. In connection with the Credit Facility Amendment, the Company incurred approximately $1.2 million in costs which are being deferred and amortized through the maturity date of the unsecured credit facility. Other than the increase in the borrowing commitments, the material terms of the unsecured credit facility remain unchanged.

On February 5, 2021, the Company entered into an amendment to the Unsecured Term Loan G (the “Amendment to Unsecured Term Loan G”). The Amendment to Unsecured Term Loan G provides for an extension of the maturity date to February 5, 2026 and a reduced stated interest rate of one-month LIBOR plus a spread that ranges from 0.85% to 1.65% for LIBOR borrowings based on the Company’s debt ratings. The Amendment to Unsecured Term Loan G also amended the provision for a minimum interest rate, or floor, for LIBOR borrowings to 0.00% and for Base Rate borrowings to 1.00%. As of June 30, 2021, borrowings under the Unsecured Term Loan G bore interest at LIBOR plus 1.00%. In connection with the Amendment to Unsecured Term Loan G, the Company incurred approximately $1.6 million in costs which are being deferred and amortized through the new maturity date of February 5, 2026. The Company also incurred approximately $0.7 million of modification expenses which were recognized in debt extinguishment and modification expenses in the accompanying Consolidated Statements of Operations. Additionally, the Company reversed the previously accrued extension fees of approximately $1.1 million from the amendment to the Unsecured Term Loan G that was entered into on April 17, 2020, which resulted in a decrease to interest expense of approximately $0.3 million. Other than the maturity and interest rate provisions described above, the material terms of the Unsecured Term Loan G remain unchanged.

Financial Covenant Considerations

The Company was in compliance with all financial and other covenants as of June 30, 2021 and December 31, 2020 related to its unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes. The real estate net book value of the properties that are collateral for the Company’s debt arrangements was approximately $89.3 million and $81.4 million at June 30, 2021 and December 31, 2020, respectively, and is limited to senior, property-level secured debt financing arrangements.

Fair Value of Debt

The following table summarizes the aggregate principal outstanding under the Company’s debt arrangements and the corresponding estimate of fair value as of June 30, 2021 and December 31, 2020.


	June 30, 2021				December 31, 2020
Indebtedness (in thousands)	Principal Outstanding		Fair Value		Principal Outstanding		Fair Value
Unsecured credit facility	$	284,000	$	284,558	$	107,000	$	107,000
Unsecured term loans	975,000		979,222		975,000		978,448
Unsecured notes	575,000		627,036		575,000		628,575
Mortgage notes	56,114		58,435		52,102		54,485
Total principal amount	1,890,114		$	1,949,251	1,709,102		$	1,768,508
Net unamortized fair market value premium (discount)	(134)				29
Total unamortized deferred financing fees and debt issuance costs	(5,849)				(5,841)
Total carrying value	$	1,884,131			$	1,703,290

The applicable fair value guidance establishes a three tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The fair value of the Company’s debt is based on Level 3 inputs.