Debt Obligations

9 Months Ended

Sep. 30, 2023

Debt Obligations

Debt Obligations

6. Debt Obligations

Unsecured Credit Facility. We have an unsecured credit agreement (the “Credit Agreement”) that provides for an aggregate commitment of the lenders of up to $500,000,000 comprising of a $400,000,000 revolving credit facility (the “Revolving Line of Credit”) and two $50,000,000 term loans (the “Term Loans”). The Credit Agreement permits us to request increases to the Revolving Line of Credit and Term Loans commitments up to a total of $1,000,000,000. The Revolving Line of Credit matures November 19, 2025 and provides for a one-year extension option at our discretion, subject to customary conditions. The Term Loans mature on November 19, 2025 and November 19, 2026. During the fourth quarter of 2022, we entered into the First Amendment (the “Amended Credit Agreement”) to replace LIBOR with SOFR, plus a credit spread adjustment of 10 basis points (“Adjusted SOFR”), as the reference rate for purpose of calculating interest under the Amended Credit Agreement. Other material terms of the Credit Agreement remain unchanged. Based on our leverage at September 30, 2023, the facility provides for interest annually at Adjusted SOFR plus 120 basis points and a facility fee of 20 basis points and the Term Loans provide for interest annually at Adjusted SOFR plus 140 basis points.

Interest Rate Swap Agreements. In connection with entering into the Term Loans described above, we entered into two receive variable/pay fixed interest rate swap agreements (the “Interest Rate Swaps”) with maturities of November 19, 2025 and November 19, 2026, respectively, that will effectively lock-in the forecasted interest payments on the Term Loans’ borrowings over their four and five year terms of the loans. The Interest Rate Swaps are considered cash flow hedges and are recorded on our Consolidated Balance Sheets at fair value in Prepaid expenses and other assets, with cumulative changes

in the fair value of these instruments recognized in Accumulated other comprehensive income (loss) on our Consolidated Balance Sheets. In connection with entering into the Amended Credit Agreement discussed above, we entered into amendments to our Interest Rate Swaps to account for SOFR as the updated reference rate in the Amended Credit Agreement. During the three and nine months ended September 30, 2023, we recorded a $28,000 increase and $123,000 decrease in fair value of Interest Rate Swaps, respectively. During the three and nine months ended September 30, 2022, we recorded increase of $3,306,000 and $9,617,000 in fair value of Interest Rate Swaps, respectively.

As of September 30, 2023 and December 31, 2022, the terms of the Interest Rate Swaps are as follows (dollar amounts in thousands):

						Notional	Fair Value at
Date Entered	Maturity Date	Swap Rate		Rate Index		Amount		September 30, 2023		December 31, 2022
November 2021	November 19, 2025	2.62	%	1-month SOFR	$	50,000	$	3,776	$	4,003
November 2021	November 19, 2026	2.76	%	1-month SOFR		50,000		4,820		4,716
					$	100,000	$	8,596	$	8,719

Senior Unsecured Notes. We have senior unsecured notes held by institutional investors with interest rates ranging from 3.66% to 5.03%. The senior unsecured notes mature between 2024 and 2033.

The senior unsecured notes and the Credit Agreement, including the Revolving Line of Credit and the Term Loans, contain financial covenants, which are measured quarterly, that require us to maintain, among other things:

● a ratio of total indebtedness to total asset value not greater than 0.6 to 1.0;

● a ratio of secured debt to total asset value not greater than 0.35 to 1.0;

● a ratio of unsecured debt to the value of the unencumbered asset value not greater than 0.6 to 1.0; and

● a ratio of EBITDA, as calculated in the debt obligation, to fixed charges not less than 1.50 to 1.0.

At September 30, 2023, we were in compliance with all applicable financial covenants. These debt obligations also contain additional customary covenants and events of default that are subject to a number of important and significant limitations, qualifications and exceptions.

The following table sets forth information regarding debt obligations by component as of September 30, 2023 and December 31, 2022 (dollar amounts in thousands):

		At September 30, 2023				At December 31, 2022
	Applicable			Available				Available
	Interest	Outstanding		for		Outstanding		for
Debt Obligations	Rate (1)	Balance		Borrowing		Balance		Borrowing
Revolving line of credit	6.63%	$	362,250	$	37,750	$	130,000	$	270,000
Term loans, net of debt issue costs	2.74%		99,620		—		99,511		—
Senior unsecured notes, net of debt issue costs	4.20%		494,353		—		538,343		—
Total	4.97%	$	956,223	$	37,750	$	767,854	$	270,000

(1) Represents weighted average of interest rate as of September 30, 2023.

During the nine months ended September 30, 2023 and 2022, our debt borrowings and repayments were as follows (in thousands):

	Nine Months Ended September 30,
	2023				2022
Debt Obligations		Borrowings		Repayments	Borrowings		Repayments
Revolving line of credit	$	274,450	$	(42,200)	$	194,000	$	(153,900)
Senior unsecured notes		—		(44,160)		75,000		(43,160)
Total	$	274,450	$	(86,360)	$	269,000	$	(197,060)