Debt

12 Months Ended

Dec. 31, 2018

During the year ended December 31, 2018, Piedmont fully repaid the balances of the $300 Million Unsecured 2013 Term Loan and the $170 Million Unsecured 2015 Term Loan.

Additionally, during the year ended December 31, 2018, Piedmont replaced its $500 Million Unsecured 2015 Line of Credit with a new $500 Million Unsecured Line of Credit (the "$500 Million Unsecured 2018 Line of Credit"). The term of the new $500 Million Unsecured 2018 Line of Credit is four years with a maturity date of September 30, 2022, and Piedmont may extend the term for up to one additional year (through two available six-month extensions) provided Piedmont is not then in default and all representations and warranties are true and correct in all material respects and upon payment of applicable extension fees. Under certain terms of the agreement, Piedmont may increase the new facility by up to an additional $500 million, to an aggregate size of $1.0 billion, provided that no existing bank has any obligation to participate in such increase. Piedmont paid customary arrangement and upfront fees to the lenders in connection with the closing of the new facility.

The $500 Million Unsecured 2018 Line of Credit has the option to bear interest at varying levels (determined with reference to the greater of the credit rating for Piedmont or Piedmont OP) based on the London Interbank Offered Rate (“LIBOR”) or the Base Rate, defined as the greater of the prime rate, the federal funds rate plus 0.5%, or LIBOR for a one-month period plus 0.9%. LIBOR loans are available with interest periods selected by Piedmont of one, two (if available), three, or six months, or to the extent available from all lenders in each case, one year or periods of less than one month. The stated interest rate spread over LIBOR can vary from 0.775% to 1.45% based upon the greater of the then current credit rating of Piedmont.

Further, during the year ended December 31, 2018, Piedmont amended and restated its $300 Million Unsecured 2011 Term Loan (the "Amended and Restated $300 Million Unsecured 2011 Term Loan") to extend its maturity date 22 months, from January 15, 2020 to November 30, 2021. The amendment also decreases the stated interest rate spread over LIBOR from a range of 0.9% to 1.90% to a range of 0.85% to 1.65%. The specific spread in effect from time to time is based upon the greater of the credit rating for Piedmont or Piedmont OP; however, as of December 31, 2018, the spread over LIBOR is 1.0%. All other material terms of the facility remain unchanged.

Finally, during the year ended December 31, 2018, Piedmont entered into a $250 million unsecured term loan facility (the “$250 Million Unsecured 2018 Term Loan”) with a consortium of lenders. The term of the $250 Million Unsecured 2018 Term Loan is seven years with a maturity date of March 31, 2025; however, Piedmont may prepay the $250 Million Unsecured 2018 Term Loan, in whole or in part, at any time after March 29, 2020 without premium or penalty. The $250 Million Unsecured 2018 Term Loan has the option to bear interest at varying levels based on either (i) LIBOR for an interest period selected by Piedmont of one, two, three, or six months, or to the extent available from all lenders in each case, one year or periods of less than one month, or (ii) Base Rate, defined as the greater of the prime rate, the federal funds rate plus 0.5%, or LIBOR for a one-month period plus 1%; plus a stated interest rate spread based on the higher credit rating level issued for either Piedmont or Piedmont OP. The stated interest rate spread over LIBOR can vary from 1.45% to 2.40% based upon the then current credit rating of Piedmont or Piedmont OP, whichever is higher. In conjunction with this new facility, Piedmont also entered into three interest rate swap agreements for a total notional amount of $150 million which effectively fixed $150 million of the $250 Million Unsecured 2018 Term Loan at an interest rate of approximately 4.11%.

The $500 Million Unsecured 2018 Line of Credit, the Amended and Restated $300 Million Unsecured 2011 Term Loan, and the $250 Million Unsecured 2018 Term Loan all have certain financial covenants that require, among other things, the maintenance of an unencumbered interest coverage ratio of at least 1.75, an unencumbered leverage ratio of at least 1.60, a fixed charge coverage ratio of at least 1.50, a leverage ratio of no more than 0.60, and a secured debt ratio of no more than 0.40.

As of December 31, 2018, Piedmont believes it was in compliance with all financial covenants associated with its debt instruments. See Note 6 for a description of Piedmont’s estimated fair value of debt as of December 31, 2018.

The following table summarizes the terms of Piedmont’s indebtedness outstanding as of December 31, 2018 and 2017, including net discounts/premiums and unamortized debt issuance costs (in thousands):



Facility ⁽¹⁾	Stated Rate		Effective Rate ⁽²⁾				Maturity			Amount Outstanding as of
										2018		2017
Secured (Fixed)
$35 Million Fixed-Rate Loan ⁽³⁾	5.55	%	3.75	%			9/1/2021			$	29,706	$	30,670
$160 Million Fixed-Rate Loan ⁽⁴⁾	3.48	%	3.58	%			7/5/2022			160,000		160,000
Net premium and unamortized debt issuance costs										645		946
Subtotal/Weighted Average ⁽⁵⁾	3.80	%								190,351		191,616
Unsecured (Variable and Fixed)
$170 Million Unsecured 2015 Term Loan	LIBOR + 1.125%		2.54	%			5/15/2018			—		170,000
$300 Million Unsecured 2013 Term Loan	LIBOR + 1.20%		2.78	%	⁽⁷⁾		1/31/2019			—		300,000
$500 Million Unsecured 2015 Line of Credit ⁽⁶⁾	LIBOR + 1.00%		3.17	%			6/18/2019			—		23,000
$500 Million Unsecured 2018 Line of Credit ⁽⁶⁾	LIBOR + 0.90%		3.35	%			9/30/2022	⁽⁸	⁾	205,000		—
Amended and Restated $300 Million Unsecured 2011 Term Loan	LIBOR + 1.00%		3.20	%	⁽⁷⁾		11/30/2021			300,000		300,000
$350 Million Unsecured Senior Notes	3.40	%	3.43	%			6/01/2023			350,000		350,000
$400 Million Unsecured Senior Notes	4.45	%	4.10	%			3/15/2024			400,000		400,000
$250 Million Unsecured 2018 Term Loan	LIBOR + 1.60%		4.12	%	⁽⁹	⁾	3/31/2025			250,000		—
Discounts and unamortized debt issuance costs										(9,879)		(7,689)
Subtotal/Weighted Average ⁽⁵⁾	3.75	%								1,495,121		1,535,311
Total/Weighted Average ⁽⁵⁾	3.76	%								$	1,685,472	$	1,726,927


⁽¹⁾	Other than the $35 Million Fixed-Rate Loan, all of Piedmont’s outstanding debt as of December 31, 2018 and 2017 is interest-only.


⁽²⁾	Effective rate after consideration of settled or in-place interest rate swap agreements, issuance premiums/discounts, and/or fair market value adjustments upon assumption of debt.


⁽³⁾	Collateralized by the 5 Wall Street building in Burlington, Massachusetts.


⁽⁴⁾	Collateralized by the 1901 Market Street building in Philadelphia, Pennsylvania.


⁽⁵⁾	Weighted average is based on contractual balance of outstanding debt and the stated or effectively fixed interest rates as of December 31, 2018.


⁽⁶⁾	On a periodic basis, Piedmont may select from multiple interest rate options, including the prime rate and various-length LIBOR locks on all or a portion of the principal. All LIBOR selections are subject to an additional spread over the selected rate based on Piedmont’s current credit rating.


⁽⁷⁾	The facility has a stated variable rate; however, Piedmont has entered into interest rate swap agreements which effectively fix, exclusive of changes in Piedmont's credit rating, the rate to that shown as the effective rate through the maturity date of the interest rate swap agreements (see Note 5 for more detail).


⁽⁸⁾	Piedmont may extend the term for up to one additional year (through two available six month extensions to a final extended maturity date of September 29, 2023) provided Piedmont is not then in default and upon payment of extension fees.

⁽⁹⁾

The facility has a stated variable rate; however, Piedmont has entered into interest rate swap agreements which effectively fix, exclusive of changes to Piedmont's credit rating, $150 million of the principal balance to 4.11% through March 29, 2020, and $100 million of the principal balance to 4.21% from March 30, 2020 through the maturity date of the loan. For the remaining variable portion of the loan, Piedmont may periodically select from multiple interest rate options, including the prime rate and various-length LIBOR locks on all or a portion of the principal. All LIBOR selections are subject to an additional spread over the selected rate based on Piedmont’s current credit rating. The rate presented is the weighted-average rate for the effectively fixed and variable portions of the debt outstanding as of December 31, 2018.

A summary of Piedmont's consolidated principal outstanding for aggregate debt maturities of its indebtedness as of December 31, 2018, is provided below (in thousands):



2019	$	932
2020	1,072
2021	327,702
2022	365,000		⁽¹⁾
2023	350,000
Thereafter	650,000
Total	$	1,694,706


⁽¹⁾	Includes the balance outstanding as of December 31, 2018 on the $500 Million Unsecured 2018 Line of Credit of $205 million. However, Piedmont may extend the term for up to one additional year (through two available six month extensions to a final extended maturity date of September 29, 2023) provided Piedmont is not then in default and upon payment of extension fees.

Piedmont’s weighted-average interest rate as of December 31, 2018 and 2017, for the aforementioned borrowings was approximately 3.76% and 3.48%, respectively. Piedmont made interest payments on all indebtedness, including interest rate swap cash settlements, of approximately $63.1 million, $67.6 million, and $69.0 million during the years ended December 31, 2018, 2017, and 2016, respectively.