5. Debt

Below is a listing of the Company’s outstanding debt, including capital leases and lease financing obligations, as of September 30, 2018 and December 31, 2017 (in thousands):


	Weighted Average
	Coupon Interest Rate at		September 30,		December 31,
	September 30, 2018 (1)	Maturities	2018		2017
	(unaudited)		(unaudited)
Unsecured Credit Facility
Revolving Credit Facility	3.70%	December 17, 2021	$	81,000	$	131,000
Term Loan I	3.54%	December 17, 2022		350,000		350,000
Term Loan II	3.56%	April 27, 2023		350,000		350,000
Senior Notes	4.75%	November 15, 2025		400,000		400,000
Lenexa Mortgage	4.10%	May 1, 2022		1,823		1,866
Capital Lease and Lease Financing Obligations	3.53%	2018 - 2038		4,357		8,699
	3.97%			1,187,180		1,241,565
Less net debt issuance costs				(10,353)		(11,636)
Total outstanding debt, net			$	1,176,827	$	1,229,929

(1)

The coupon interest rates associated with Term Loan I and Term Loan II incorporate the effects of the Company’s interest rate swaps.

Credit Facilities, Senior Notes and Mortgage Notes Payable

(a) Unsecured Credit Facility – In December 2017, the Company executed an amendment to its amended and restated unsecured credit facility (the “unsecured credit facility”), increasing the total capacity to $1.52 billion and extending the term. The unsecured credit facility includes a $350 million term loan which matures on December 17, 2022, a $350 million term loan which matures on April 27, 2023, and an $820 million revolving credit facility which matures on December 17, 2021, with a one year extension option. Amounts outstanding under the amended unsecured credit facility bear interest at a variable rate equal to, at the Company’s election, LIBOR or a base rate, plus a spread that will vary depending upon the Company’s leverage ratio. For revolving credit loans, the spread ranges from 1.55% to 2.15% for LIBOR loans and 0.55% to 1.15% for base rate loans. For term loans, the spread ranges from 1.50% to 2.10% for LIBOR loans and 0.50% to 1.10% for base rate loans. The unsecured credit facility also includes a $400 million accordion feature.

Under the unsecured credit facility, the capacity may be increased from the current capacity of $1.52 billion to $1.92 billion subject to certain conditions set forth in the credit agreement, including the consent of the administrative agent and obtaining necessary commitments. The Company is also required to pay a commitment fee to the lenders assessed on the unused portion of the unsecured revolving credit facility. At the Company’s election, it can prepay amounts outstanding under the unsecured credit facility, in whole or in part, without penalty or premium.

The Company’s ability to borrow under the amended unsecured credit facility is subject to ongoing compliance with a number of customary affirmative and negative covenants. As of September 30, 2018, the Company was in compliance with all of its covenants.

As of September 30, 2018, the Company had outstanding $781 million of indebtedness under the unsecured credit facility, consisting of $81 million of outstanding borrowings under the unsecured revolving credit facility and $700 million outstanding under the term loans, exclusive of net debt issuance costs of $4.9 million. In connection with the unsecured credit facility, as of September 30, 2018, the Company had letters of credit outstanding aggregating to $4.1 million. As of September 30, 2018, the weighted average interest rate for amounts outstanding under the unsecured credit facility, including the effects of interest rate swaps, was 3.57%.

The Company has entered into interest rate swap agreements with an aggregate notional amount of $400 million. See Note 6 – ‘Interest Rate Swaps’ for additional details.

(b) Senior Notes – On November 8, 2017, the Operating Partnership and QTS Finance Corporation, a subsidiary of the Operating Partnership formed solely for the purpose of facilitating the offering of the 5.875% Senior Notes due 2022 (collectively, the “Issuers”), the Company and certain of its other subsidiaries entered into a purchase agreement pursuant to which the Issuers issued $400 million aggregate principal amount of 4.75% Senior Notes due November 15, 2025 (the “Senior Notes”) in a private offering. The Senior Notes have an interest rate of 4.750% per annum and were issued at a price equal to 100% of their face value. The net proceeds from the offering were used to fund the redemption of, and satisfy and discharge the indenture pursuant to which the Issuers issued, all of their outstanding 5.875% Senior Notes due 2022 and to repay a portion of the amount outstanding under the Company’s unsecured revolving credit facility. As of September 30, 2018, the outstanding net debt issuance costs associated with the Senior Notes were $5.4 million.

The Senior Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Operating Partnership’s existing subsidiaries (other than foreign subsidiaries and receivables entities) and future subsidiaries that guarantee any indebtedness of QTS Realty Trust, Inc., the Issuers or any other subsidiary guarantor, other than QTS Finance Corporation, the co-issuer of the Senior Notes. QTS does not guarantee the Senior Notes and will not be required to guarantee the Senior Notes except under certain circumstances. The offering was conducted pursuant to Rule 144A of the Securities Act of 1933, as amended, and the Senior Notes were issued pursuant to an indenture, dated as of November 8, 2017, among QTS, the Issuers, the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee.

The annual remaining principal payment requirements as of September 30, 2018 per the contractual maturities and excluding extension options, capital leases and lease financing obligations, are as follows (unaudited and in thousands):


2018	$	17
2019		68
2020		71
2021		81,074
2022		350,077
Thereafter		751,516
Total	$	1,182,823

As of September 30, 2018, the Company was in compliance with all of its covenants.

Capital Leases

The Company has historically entered into capital leases for certain data center equipment as well as fiber optic transmission cabling. In addition, through its acquisition of Carpathia on June 16, 2015, the Company acquired capital leases of both equipment and certain properties. Total outstanding liabilities for capital leases were $4.0 million as of September 30, 2018, of which $1.4 million were assumed through the Carpathia acquisition, all of which was related to the lease of real property. Carpathia had entered into capital lease arrangements for data center space under two lease agreements expiring in 2018 and 2019 at its Harrisonburg, Virginia and Ashburn, Virginia locations. Total recurring monthly payments range from approximately $0.2 million to $0.5 million during the terms of the leases, in addition to payments made for utilities. Depreciation related to the associated assets for the capital leases is included in depreciation and amortization expense in the Statements of Operations.

Lease Financing Obligations

The Company, through its acquisition of Carpathia has a lease financing agreement in connection with a $4.8 million tenant improvement allowance on one of its data center lease agreements. The financing requires monthly payments of principal and interest of less than $0.1 million through February 2019. The outstanding balance on the financing agreement was $0.3 million as of September 30, 2018. Depreciation expense on the related leasehold improvements is included in depreciation and amortization expense in the Statements of Operations.

The following table summarizes the Company’s combined future payment obligations, excluding interest, as of September 30, 2018, on the capital leases and lease financing obligations above (unaudited and in thousands):


2018	$	1,493
2019		985
2020		151
2021		48
2022		44
Thereafter		1,636
Total	$	4,357