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Debt Obligations | 12 Months Ended
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Dec. 31, 2016
Debt Disclosure [Abstract] |
DEBT OBLIGATIONS | 7. DEBT OBLIGATIONS The following table sets forth information regarding the Company’s consolidated debt obligations outstanding at December 31, 2016 and 2015 (in thousands):
| December 31, 2016 |  |  | December 31, 2015 |  |  | Effective Interest Rate |  |  | Maturity Date |
MORTGAGE DEBT: |  |  |  |  |  |  |  |  |  |  |  |  |  |
3141 Fairview Park Drive (a) | $ | - |  |  | $ | 20,838 |  |  |  | 4.25 | % |  | Jan 2017 |
Two Logan Square |  | 86,012 |  |  |  | 86,886 |  |  |  | 3.98 | % | (b) | May 2020 |
One Commerce Square |  | 127,026 |  |  |  | 130,000 |  |  |  | 3.64 | % | (c) | Apr 2023 |
Two Commerce Square |  | 112,000 |  |  |  | 112,000 |  |  |  | 4.51 | % | (d) | Apr 2023 |
IRS Philadelphia Campus (e) |  | - |  |  |  | 177,425 |  |  |  | 7.00 | % |  | Sep 2030 |
Cira South Garage (e) |  | - |  |  |  | 35,546 |  |  |  | 7.12 | % |  | Sep 2030 |
Principal balance outstanding |  | 325,038 |  |  |  | 562,695 |  |  |  |  |  |  |  |
Plus: fair market value premium (discount), net |  | (2,761 | ) |  |  | (3,198 | ) |  |  |  |  |  |  |
Less: deferred financing costs |  | (728 | ) |  |  | (13,744 | ) |  |  |  |  |  |  |
Mortgage indebtedness | $ | 321,549 |  |  | $ | 545,753 |  |  |  |  |  |  |  |
UNSECURED DEBT |  |  |  |  |  |  |  |  |  |  |  |  |  |
Seven-Year Term Loan - Swapped to fixed | $ | 250,000 |  |  | $ | 250,000 |  |  |  | 3.72 | % |  | Oct 2022 |
$250.0M 6.00% Guaranteed Notes due 2016 (f) |  | - |  |  |  | 149,919 |  |  |  | 5.95 | % |  | Apr 2016 |
$300.0M 5.70% Guaranteed Notes due 2017 |  | 300,000 |  |  |  | 300,000 |  |  |  | 5.68 | % |  | May 2017 |
$325.0M 4.95% Guaranteed Notes due 2018 |  | 325,000 |  |  |  | 325,000 |  |  |  | 5.13 | % |  | Apr 2018 |
$250.0M 3.95% Guaranteed Notes due 2023 |  | 250,000 |  |  |  | 250,000 |  |  |  | 4.02 | % |  | Feb 2023 |
$250.0M 4.10% Guaranteed Notes due 2024 |  | 250,000 |  |  |  | 250,000 |  |  |  | 4.33 | % |  | Oct 2024 |
$250.0M 4.55% Guaranteed Notes due 2029 |  | 250,000 |  |  |  | 250,000 |  |  |  | 4.60 | % |  | Oct 2029 |
Indenture IA (Preferred Trust I) |  | 27,062 |  |  |  | 27,062 |  |  |  | 2.75 | % |  | Mar 2035 |
Indenture IB (Preferred Trust I) |  | 25,774 |  |  |  | 25,774 |  |  |  | 3.30 | % |  | Apr 2035 |
Indenture II (Preferred Trust II) |  | 25,774 |  |  |  | 25,774 |  |  |  | 3.09 | % |  | Jul 2035 |
Principal balance outstanding |  | 1,703,610 |  |  |  | 1,853,529 |  |  |  |  |  |  |  |
Plus: original issue premium (discount), net |  | (4,678 | ) |  |  | (5,714 | ) |  |  |  |  |  |  |
Less: deferred financing costs |  | (7,369 | ) |  |  | (8,851 | ) |  |  |  |  |  |  |
Total unsecured indebtedness | $ | 1,691,563 |  |  | $ | 1,838,964 |  |  |  |  |  |  |  |
Total Debt Obligations | $ | 2,013,112 |  |  | $ | 2,384,717 |  |  |  |  |  |  |  |
(a) | On August 31, 2016, the Company deconsolidated 3141 Fairview Park Drive and began accounting for it under the equity method of accounting as part of Brandywine - AI Venture LLC, an unconsolidated real estate venture in which the Company holds a 50% interest. At December 31, 2015, this balance represented the full debt amount of the property, as it was consolidated at that time. See Note 4, “Investment in Unconsolidated Real Estate Ventures,” for further details.
(b) | On April 7, 2016, the Company closed on an $86.9 million first mortgage financing on Two Logan Square, a 708,844-square foot office property located in Philadelphia, Pennsylvania. Proceeds of the loan were used to repay, without penalty, the $86.6 million principal balance of the former Two Logan Square first mortgage loan, which had a 7.57% effective interest rate.
(c) | This loan was assumed upon acquisition of the related properties on December 19, 2013. On December 29, 2015, the Company refinanced the debt increasing the principal balance to $130.0 million and extended the term from the scheduled maturity from January 6, 2016 to April 5, 2023. The effective interest rate as of December 31, 2015 was 3.64%. A default under this loan will also constitute a default under the loan outstanding on Two Commerce Square. This loan is also secured by a lien on Two Commerce Square.
(d) | This loan was assumed upon acquisition of the related property on December 19, 2013. The interest rate reflects the market rate at the time of acquisition. A default under this loan will also constitute a default under the loan outstanding on One Commerce Square. This loan is also secured by a lien on One Commerce Square.
(e) | On January 14, 2016, the Company funded $265.8 million to prepay two mortgage loans, consisting of $176.9 million of principal repayment, $44.5 million in prepayment charges and a nominal amount of accrued interest, in repayment of the mortgage indebtedness on the office property located at 2970 Market Street in Philadelphia, Pennsylvania commonly known as 30 th Street Main Post Office (“Cira Square”), ahead of its scheduled maturity date of September 10, 2030. Also on January 14, 2016, the Company funded $44.4 million, consisting of $35.5 million of principal repayment, $8.9 million in prepayment charges and a nominal amount of accrued interest, in repayment of the mortgage indebtedness of a 1,662 parking space facility located in Philadelphia, Pennsylvania commonly known as (“Cira South Garage”), ahead of its scheduled maturity date of September 10, 2030. These repayments were financed with $195.0 million of funds available under the Credit Facility with the remaining balance funded through available cash balances. The Company recognized a $66.6 million loss on extinguishment of debt, consisting of the prepayment charges along with $10.8 million and $2.4 million related to non-cash charges for deferred financing costs for Cira Square and Cira South Garage, respectively.
(f) | On April 1, 2016, the entire principal balance of the unsecured 6.00% Guaranteed Notes was repaid upon maturity. Available cash balances were used to fund the repayment of the unsecured notes.
During 2016, 2015, and 2014, the Company’s weighted-average effective interest rate on its mortgage notes payable was 4.03%, 5.72%, and 5.73%, respectively. As of December 31, 2016 and 2015, the carrying value of the mortgage indebtedness encumbering the Company’s Properties was $325.0 million and $562.7 million, respectively. The Parent Company unconditionally guarantees the unsecured debt obligations of the Operating Partnership (or is a co-borrower with the Operating Partnership) but does not by itself incur unsecured indebtedness. The Parent Company has no material assets other than its investment in the Operating Partnership. On September 16, 2014, the Company closed on an underwritten offering of its 4.10% Guaranteed Notes 2024 Notes due October 1, 2024 (the “2014 Notes”) and its 4.55% Guaranteed Notes due October 1, 2029 Notes (the “2029 Notes”). The 2024 Notes were priced at 99.388% of their face amount with a yield to maturity of 4.175%, representing a spread at the time of pricing of 1.70%. The 2029 Notes were priced at 99.191% of their face amount with a yield to maturity of 4.625%, representing a spread at the time of pricing of 2.15%. The 2024 Notes and 2029 Notes have been reflected net of discounts of $1.2 million and $1.7 million, respectively, in the consolidated balance sheets as of December 31, 2016 and $1.3 million and $1.8 million, respectively, in the consolidated balance sheets as of December 31, 2015. The Company used a portion of the net proceeds from the sale of the 2024 Notes and 2029 Notes, aggregating $492.9 million after the deduction for underwriting discounts and offering expenses, to fund its repurchase, through a tender offer, of a portion of the 5.40% Guaranteed Notes due November 1, 2014 (the “2014 Notes”) and 7.50% Guaranteed Notes due May 15, 2015 (the “2015 Notes”). Specifically, on September 16, 2014, the Company funded, under the tender offer, $75.1 million in respect of the 2014 Notes and $42.7 million in respect of the 2015 Notes. The Company recognized a $2.6 million loss on early extinguishment of debt related to the total repurchase during the year ended December 31, 2014. On September 16, 2014, the Company repaid the entire $150.0 million three-year term loan and $100.0 million four-year term loan prior to their scheduled February 2015 and 2016 maturities, respectively. In connection with these repayments, the Company accelerated $0.3 million of deferred financing amortization expense and also incurred a $0.8 million charge on the termination of associated interest rate swap contracts, as reflected in the Company’s consolidated statements of operations. See Note 9, “Risk Management and Use of Financial Instruments,” for further information related to the termination of the interest rate swap contracts. On September 16, 2014, the Company gave notice of redemption, in full, of the $143.5 million in principal amount of 2014 Notes that remained outstanding following completion of the tender offer. The Company completed the redemption of the 2014 Notes on October 16, 2014 at a cash redemption price of $1,026.88 per $1,000 principal amount of the 2014 Notes (inclusive of accrued interest to the redemption date). Also on September 16, 2014, the Company gave notice of redemption, in full, of the $114.9 million in principal amount of 2015 Notes that remained outstanding following completion of the tender offer. The Company completed the redemption of the 2015 Notes on October 16, 2014 at a cash redemption price of $1,070.24 per $1,000 principal amount of the 2015 Notes (inclusive of accrued interest to the redemption date). The Company recognized a $5.0 million loss on early extinguishment of debt related to total repurchase during the year ended December 31, 2014. There were no repurchases of unsecured debt during the twelve months ended December 31, 2016 and 2015. The following table provides additional information on the Company’s repurchase of $376.2 million in aggregate principal amount of its outstanding unsecured notes (consisting of the 2014 Notes and 2015 Notes, as indicated above) during the twelve months ended December 31, 2014 (in thousands):
Notes | Principal |  |  | Repurchase Amount (a) |  |  | Loss on Early Extinguishment of Debt (b) |  |  | Acceleration of Deferred Financing |
2014 5.40% Notes | $ | 218,549 |  |  | $ | 219,404 |  |  | $ | (855 | ) |  | $ | 9 |
2015 7.50% Notes |  | 157,625 |  |  |  | 164,364 |  |  |  | (6,739 | ) |  |  | 143 |
| $ | 376,174 |  |  | $ | 383,768 |  |  | $ | (7,594 | ) |  | $ | 152 |
(a) | Includes cash losses with respect to redemption of debt.
(b) | Includes unamortized balance of the original issue discount.
On October 8, 2015, the Company amended and restated its $200.0 million seven-year term loan maturing February 1, 2019. Pursuant to the terms of the amendment, the Company increased the term loan by an additional $50.0 million, lengthened the maturity date to October 8, 2022, and exercised the option to increase the aggregate amount by up to $150.0 million. The loan bears interest at LIBOR plus 1.80%. Through a series of interest rate swaps, the $250.0 million outstanding balance of the term loan has a fixed interest rate of 3.72%. On May 15, 2015, the Company closed on a four-year unsecured revolving credit facility (the "Credit Facility") that provides for borrowings of up to $600.0 million. The Company expects to use advances under the Credit Facility for general business purposes, including to fund costs of acquisitions, developments and redevelopments of properties, fund share repurchases and to repay from time to time other debt. On terms and conditions specified in the credit agreement, the Company may enter into unsecured term loans and/or increase the initial amount of the credit facility by up to, in the aggregate for all such term loans and increases, an additional $400.0 million. The Credit Facility includes a $65.0 million sub-limit for the issuance of letters of credit and a $60.0 million sub-limit for swing-loans. The Credit Facility has a scheduled maturity date of May 15, 2019, and is subject to two six-month extensions on terms and conditions specified in the credit agreement. At the Company's option, loans outstanding under the Credit Facility will bear interest at a rate per annum equal to (1) LIBOR plus between 0.875% and 1.55% based on the Company's credit rating or (2) a base rate equal to the greatest of (a) the Administrative Agent's prime rate, (b) the Federal Funds rate plus 0.5% or (c) LIBOR for a one month period plus 1.00%, in each case, plus a margin ranging from 0.0% to 0.55% based on the Company's credit rating. The Credit Facility also contains a competitive bid option that allows banks that are part of the lender consortium to bid to make loan advances to the Company at a reduced interest rate. In addition, the Company is also obligated to pay (1) in quarterly installments a facility fee on the total commitment at a rate per annum ranging from 0.125% to 0.30% based on the Company's credit rating and (2) an annual fee on the undrawn amount of each letter or credit equal to the LIBOR Margin. Based on the Company's current credit rating, the LIBOR margin is 1.20% and the facility fee is 0.25%. The Company had no borrowings under the Credit Facility as of December 31, 2016. The Credit Facility contains financial and operating covenants and restrictions, including covenants that relate to the Company’s incurrence of additional debt; granting liens; consummation of mergers and consolidations; the disposition of assets and interests in subsidiaries; the making of loans and investments and the payment of dividends. The terms of the Credit Facility require that the Company maintain customary financial and other covenants, including: (i) a fixed charge coverage ratio greater than or equal to 1.5 to 1.00; (ii) a minimum net worth; (iii) a leverage ratio less than or equal to 0.60 to 1.00, subject to specified exceptions; (iv) a ratio of unsecured indebtedness to unencumbered asset value less than or equal to 0.60 to 1.00, subject to specified exceptions; (v) a ratio of secured indebtedness to total asset value less than or equal to 0.40 to 1.00; and (vi) a ratio of unencumbered cash flow to interest expense on unsecured debt greater than 1.75 to 1.00. In addition, the Credit Facility restricts payments of dividends and distributions on shares in excess of 95% of the Company's funds from operations (FFO) except to the extent necessary to enable the Company to continue to qualify as a REIT for Federal income tax purposes. At December 31, 2016, the Company was in compliance with all covenants in the Credit Facility. Concurrently with its entry into the Credit Facility, the Company terminated its then existing unsecured revolving credit facility, which had a scheduled maturity date of February 1, 2016. The Term Loan contains the same financial and operating covenants and restrictions, including covenants that relate to the Company’s incurrence of additional debt; granting liens; consummation of mergers and consolidations; the disposition of assets and interests in subsidiaries; the making of loans and investments; negative pledges, transactions with affiliates and the payment of dividends, as the Credit Facility. The Company was in compliance with all financial covenants as of December 31, 2016. Management continuously monitors the Company’s compliance with and anticipated compliance with the covenants. Certain of the covenants restrict the Company’s ability to obtain alternative sources of capital. While the Company currently believes it will remain in compliance with its covenants, in the event that the economy deteriorates in the future, the Company may not be able to remain in compliance with such covenants, in which case a default would result absent a lender waiver. As of December 31, 2016, the Company’s aggregate scheduled principal payments of debt obligations, excluding amortization of discounts and premiums, are as follows (in thousands):
2017 | $ | 304,931 |
2018 |  | 331,601 |
2019 |  | 7,360 |
2020 |  | 86,978 |
2021 |  | 6,099 |
Thereafter |  | 1,291,679 |
Total principal payments |  | 2,028,648 |
Net unamortized premiums/(discounts) |  | (7,439 | )
Net deferred financing costs |  | (8,097 | )
Outstanding indebtedness | $ | 2,013,112 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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