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Debt Obligations | 12 Months Ended
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Dec. 31, 2018
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, 2018 and 2017 (in thousands):
| December 31, 2018 |  |  | December 31, 2017 |  |  | Effective Interest Rate |  |  | Maturity Date
MORTGAGE DEBT: |  |  |  |  |  |  |  |  |  |  |  |  |
Two Logan Square | $ | 82,805 |  |  | $ | 84,440 |  |  | 3.98% |  |  | May 2020
Four Tower Bridge |  | 9,526 |  |  |  | - |  |  | 4.50% |  | (a) | Feb 2021
One Commerce Square |  | 120,183 |  |  |  | 123,667 |  |  | 3.64% |  |  | Apr 2023
Two Commerce Square |  | 110,518 |  |  |  | 112,000 |  |  | 4.51% |  |  | Apr 2023
Principal balance outstanding |  | 323,032 |  |  |  | 320,107 |  |  |  |  |  |  |
Plus: fair market value premium (discount), net |  | (1,759 | ) |  |  | (2,325 | ) |  |  |  |  |  |
Less: deferred financing costs |  | (404 | ) |  |  | (566 | ) |  |  |  |  |  |
Mortgage indebtedness | $ | 320,869 |  |  | $ | 317,216 |  |  |  |  |  |  |
UNSECURED DEBT |  |  |  |  |  |  |  |  |  |  |  |  |
$600 million Unsecured Credit Facility | $ | 92,500 |  |  | $ | - |  |  | LIBOR + 1.10% |  |  | Jul 2022
Seven-Year Term Loan - Swapped to fixed |  | 250,000 |  |  |  | 250,000 |  |  | 2.87% |  | (b) | Oct 2022
$350.0M 3.95% Guaranteed Notes due 2023 |  | 350,000 |  |  |  | 350,000 |  |  | 3.87% |  |  | Feb 2023
$250.0M 4.10% Guaranteed Notes due 2024 |  | 250,000 |  |  |  | 250,000 |  |  | 4.33% |  |  | Oct 2024
$450.0M 3.95% Guaranteed Notes due 2027 |  | 450,000 |  |  |  | 450,000 |  |  | 4.03% |  |  | Nov 2027
$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 |  |  | LIBOR + 1.25% |  |  | Mar 2035
Indenture IB (Preferred Trust I) - Swapped to fixed |  | 25,774 |  |  |  | 25,774 |  |  | 3.30% |  |  | Apr 2035
Indenture II (Preferred Trust II) - Swapped to fixed |  | 25,774 |  |  |  | 25,774 |  |  | 3.09% |  |  | Jul 2035
Principal balance outstanding |  | 1,721,110 |  |  |  | 1,628,610 |  |  |  |  |  |  |
Plus: original issue premium (discount), net |  | (4,096 | ) |  |  | (4,423 | ) |  |  |  |  |  |
Less: deferred financing costs |  | (9,837 | ) |  |  | (10,575 | ) |  |  |  |  |  |
Total unsecured indebtedness | $ | 1,707,177 |  |  | $ | 1,613,612 |  |  |  |  |  |  |
Total Debt Obligations | $ | 2,028,046 |  |  | $ | 1,930,828 |  |  |  |  |  |  |
(a) | This loan was assumed upon acquisition of the related property on January 5, 2018. The interest rate reflects the market rate at the time of acquisition.
(b) | On December 13, 2018, the Company amended and restated its $250.0 million seven-year term loan maturing October 8, 2022. In connection with the terms of the amendment, the credit spread on the term loan decreased from LIBOR plus 1.80% to LIBOR plus 1.25%, reducing the Company’s effective interest rate by 0.55%. Through a series of interest rate swaps, the $250.0 million outstanding balance of the term loan has a fixed interest rate of 2.87%.
During 2018, 2017, and 2016, the Company’s weighted-average effective interest rate on its mortgage notes payable was 4.05%, 4.04%, and 4.03%, 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 July 17, 2018, the Company amended and restated its revolving credit agreement (as amended and restated, the “2018 Credit Facility”). The amendment and restatement, among other things: (i) maintained the total commitment of the revolving line of credit of $600.0 million; (ii) extended the maturity date from May 15, 2019 to July 15, 2022, with two six-month extensions at the Company’s election subject to specified conditions and subject to payment of an extension fee; (iii) reduced the interest rate margins applicable to Eurodollar loans; (iv) provided for an additional interest rate option based on a floating LIBOR rate; and (v) removed the covenant requiring the Company to maintain a minimum net worth. In connection with the amendments, the Company capitalized $2.7 million in financing costs, which will be amortized through the July 15, 2022 maturity date. At the Company's option, loans outstanding under the 2018 Credit Facility will bear interest at a rate per annum equal to (1) LIBOR plus between 0.775% and 1.45%, 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 0.45% based on the Company's credit rating. The 2018 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 1.10% and the facility fee is 0.25%. The terms of the 2018 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 leverage ratio less than or equal to 0.60 to 1.00, subject to specified exceptions; (iii) a ratio of unsecured indebtedness to unencumbered asset value less than or equal to 0.60 to 1.00, subject to specified exceptions; (iv) a ratio of secured indebtedness to total asset value less than or equal to 0.40 to 1.00; and (v) a ratio of unencumbered cash flow to interest expense on unsecured debt greater than 1.75 to 1.00. In addition, the 2018 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. The Company had $92.5 million of borrowings under the 2018 Credit Facility as of the twelve-month period ended December 31, 2018. During the twelve months ended December 31, 2018, the weighted-average interest rate on 2018 Credit Facility borrowings was 3.24% resulting in $1.0 million of interest expense. As of December 31, 2018, the effective interest rate on 2018 Credit Facility borrowings was 3.61%. As of December 31, 2017, the Company had no borrowings under the Credit Facility. During the twelve months ended December 31, 2017, the weighted-average interest rate on Credit Facility borrowings was 2.28% resulting in $2.6 million of interest expense. On November 17, 2017, the Company completed an underwriting offering of its $450.0 million 3.95% Guaranteed Notes due 2027 (the “2027 Notes”) and reopened the 3.95% Guaranteed Notes due 2023 (the “2023 Notes”) for an additional $100.0 million. The 2027 Notes were priced at 99.25% of their face amount with a yield to maturity of 4.04%, representing a spread at the time of pricing of 1.70% over the ten-year treasury rate. The 2023 Notes were priced at 102.497% of their face amount with a yield to maturity of 3.40%, representing a spread at the time of pricing of 1.40% over the five-year treasury rate. The 2027 Notes and 2023 Notes have been reflected net of a discount of $3.4 million and a premium of $2.5 million, respectively, in the consolidated balance sheet as of December 31, 2017. The Company received $546.6 million after the deduction for underwriting discounts and offering expenses. On November 17, 2017, the Company used a portion of the net proceeds from the offering of the 2027 Notes and 2023 Notes to repurchase $115.1 million aggregate principal amount of 2018 Notes, through a tender offer, which consists of a $113.4 million principal repayment of the 2018 Notes, $1.2 million of prepayment penalties and $0.5 million of accrued interest. The Company recognized a $1.4 million loss on early extinguishment of debt related to the total repurchase. On December 18, 2017, the Company redeemed in full the $211.6 million aggregate principal amount of 2018 Notes that remained outstanding following completion of the tender offer, at a cash redemption price of $215.7 million (inclusive of prepayment penalties of $2.3 million and accrued interest of $1.8 million). The Company recognized a $2.5 million loss on early extinguishment of debt related to the total repurchase. The following table provides additional information on the Company’s repurchase of $325.0 million in the aggregate principal amount of its outstanding unsecured notes (consisting of the 2018 Notes, as indicated above) during the twelve months ended December 31, 2017 (in thousands). There were no repurchases of unsecured debt during the twelve months ended December 31, 2018 or 2016.
Notes | Principal |  |  | Repurchase Amount (a) |  |  | Loss on Early Extinguishment of Debt (b) |
2018 4.95% Notes | $ | 325,000 |  |  | $ | 330,792 |  |  | $ | (3,933 | )
(a) | Includes prepayment penalties with respect to the redemption of debt.
(b) | Includes unamortized balance of the original issue discount and deferred financing costs.
The Company was in compliance with all financial covenants as of December 31, 2018. 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, 2018, the Company’s aggregate scheduled principal payments of debt obligations, excluding amortization of discounts and premiums, are as follows (in thousands):
2019 | $ | 7,595 |
2020 |  | 87,226 |
2021 |  | 15,143 |
2022 |  | 348,832 |
2023 |  | 556,736 |
Thereafter |  | 1,028,610 |
Total principal payments |  | 2,044,142 |
Net unamortized premiums/(discounts) |  | (5,855 | )
Net deferred financing costs |  | (10,241 | )
Outstanding indebtedness | $ | 2,028,046 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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