Notes Payable

9 Months Ended

Sep. 30, 2020

Notes Payable

Debt Instrument [Line Items]

Unsecured Lines of Credit Payable and Notes Payable

NOTES PAYABLE

On May 5, 2020, we entered into a one-year, $150.0 million unsecured term loan facility (“2020 Term Loan”), maturing on May 5, 2021 with a one-year extension option. The 2020 Term Loan bears interest at LIBOR + 1.50%, which margin is subject to change based on our credit ratings, with a 0.50% floor for the LIBOR rate. We used the proceeds to repay borrowings under our Revolving Credit Facility.

On September 29, 2020, we entered into a note purchase agreement to issue $350.0 million aggregate principal amount of 3.44% senior unsecured 10-year notes payable (the “Green Bonds”). The effective interest rate under the Green Bonds, including amortization of the associated interest rate swaps (see note 8), is 4.09%. The closing and funding of the Green Bonds is expected to occur no later than December 29, 2020, with the ability for such closing and funding to occur earlier upon our election, in each case, subject to the satisfaction of standard closing conditions. We incurred $2.5 million of debt issuance costs associated with the Green Bonds which are recorded within Prepaid expenses and other assets on our consolidated balance sheets. Subsequent to the closing and funding of the Green Bonds, the debt issuance costs will be reported on our consolidated balance sheets as an offset to their related debt. The Green Bonds will be senior unsecured obligations of WashREIT and will rank equal in right to payment with all other senior unsecured indebtedness of WashREIT.

We intend to use the proceeds of the sale of the Green Bonds to finance or refinance recently completed and future green building and energy efficiency, sustainable water and wastewater management and renewable energy projects (“Eligible Green Projects”) and, pending allocation to such Eligible Green Projects, such net proceeds may be used to repay borrowings outstanding on the Revolving Credit Facility or term loans and may be held in Cash and cash equivalents on our consolidated balance sheets.

The note purchase agreement contains customary financial covenants, including a maximum total leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a minimum unencumbered interest coverage ratio, and a maximum unencumbered leverage ratio. The note purchase agreement also contains restrictive covenants that, among other things, restrict the ability of WashREIT and its subsidiaries to enter into transactions with affiliates, consolidate or merge or transfer or lease all or substantially all of its assets, create liens, make dividends and distributions if an event of default exists, or substantially change the general nature of our business. Such financial and restrictive covenants are substantially similar to the corresponding covenants contained in our amended and restated credit agreement and 2020 Term Loan.

The note purchase agreement also contains customary events of default, including payment defaults, cross defaults with certain other indebtedness, breaches of certain covenants and bankruptcy events. In the case of an event of default, we will generally be prohibited from paying any dividends, subject to certain exceptions including payment of dividends necessary to maintain REIT status, and the Purchasers may, among other remedies, accelerate the payment of all obligations. In the event of a change in control of WashREIT, we must offer to prepay the Green Bonds at par.