Debt

The Company's debt consisted of the following as of December 31, 2018 and 2017 (dollars in thousands):



			Balance Outstanding as of
	Interest Rate	Maturity Date	December 31, 2018			December 31, 2017
Revolving credit facilities
Senior unsecured credit facility	Floating ⁽¹⁾	January 2022	$	170,000		$	45,000
PHL unsecured credit facility	Floating ⁽²⁾	January 2022	—			—
Total revolving credit facilities			$	170,000		$	45,000

Unsecured term loans
First Term Loan	Floating ⁽³⁾	January 2023	300,000			300,000
Second Term Loan	Floating ⁽³⁾	April 2022	65,000			65,000
Third Term Loan	Floating ⁽³⁾	January 2021	200,000			200,000
Fourth Term Loan	Floating ⁽³⁾	October 2024	110,000			110,000
Fifth Term Loan	Floating ⁽³⁾	March 2019	—			—
Sixth Term Loan
Tranche 2020	Floating ⁽³⁾	December 2020	250,000			—
Tranche 2021	Floating ⁽³⁾	November 2021	300,000			—
Tranche 2022	Floating ⁽³⁾	November 2022	400,000			—
Tranche 2023	Floating ⁽³⁾	November 2023	400,000			—
Tranche 2024	Floating ⁽³⁾	January 2024	400,000			—
Total Sixth Term Loan			1,750,000			—
Total term loans at stated value			2,425,000			675,000
Deferred financing costs, net			(15,716		)	(4,594		)
Total term loans			$	2,409,284		$	670,406

Senior unsecured notes
Series A Notes	4.70%	December 2023	60,000			60,000
Series B Notes	4.93%	December 2025	40,000			40,000
Total senior unsecured notes at stated value			100,000			100,000
Deferred financing costs, net			(531		)	(626		)
Total senior unsecured notes			$	99,469		$	99,374

Mortgage loans
The Westin San Diego Gaslamp Quarter	3.69%	January 2020	68,207			70,573
Deferred financing costs, net			(62		)	(116		)
Total mortgage loans			$	68,145		$	70,457
Total debt			$	2,746,898		$	885,237

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⁽¹⁾Borrowings bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an Adjusted Base Rate (as defined in the applicable credit agreement) plus an applicable margin.

⁽²⁾Borrowings bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an Eurocurrency Rate (as defined in the applicable credit agreement) plus an applicable margin.

⁽³⁾Borrowings under the term loan facilities bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) a Base Rate plus an applicable margin.

Unsecured Revolving Credit Facilities

The Company has a $650.0 million senior unsecured credit facility maturing in January 2022, with options to extend the maturity date to January 2023, pursuant to certain terms and conditions and payment of an extension fee. As of December 31, 2018, the Company had $170.0 million outstanding borrowings and $480.0 million borrowing capacity remaining on its senior unsecured credit facility. Interest is paid on the periodic advances under the senior unsecured revolving credit facility at varying rates, based upon either LIBOR or the alternate base rate, plus an additional margin amount. The Company has the ability to further increase the aggregate borrowing capacity under the credit agreement to up to $1.3 billion, subject to lender approval. Borrowings on the revolving credit facility bear interest at LIBOR plus 1.45% to 2.25%, depending on the Company’s leverage ratio. Additionally, the Company is required to pay an unused commitment fee at an annual rate of 0.20% or 0.30% of the unused portion of the revolving credit facility, depending on the amount of borrowings outstanding. The credit agreement contains certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio, and a maximum percentage of secured debt to total asset value.

The Company also has a $10.0 million unsecured revolving credit facility (the "PHL Credit Facility") to be used for PHL's working capital and general corporate purposes. This credit facility has substantially similar terms as our senior unsecured revolving credit facility, as amended and restated and matures in January 2022 . Borrowings on the PHL Credit Facility bear interest at LIBOR plus 1.45% to 2.25%, depending on the Company's leverage ratio. The PHL Credit Facility is subject to debt covenants substantially similar to the covenants under the Company's amended and restated credit agreement. As of December 31, 2018, the Company had no borrowings under the PHL Credit Facility and had $10.0 million borrowing capacity remaining under the PHL Credit Facility.

Under the terms of the credit agreement for the unsecured revolving credit facility, one or more standby letters of credit, up to a maximum aggregate outstanding balance of $30.0 million, may be issued on behalf of the Company by the lenders under the unsecured revolving credit facility. The Company will incur a fee that shall be agreed upon with the issuing bank. Any outstanding standby letters of credit reduce the available borrowings on the senior unsecured revolving credit facility by a corresponding amount. No standby letters of credit were outstanding at December 31, 2018.

As of December 31, 2018, the Company was in compliance with the credit agreement debt covenants.

Unsecured Term Loan Facilities

The Company has senior unsecured term loans with different maturities. The unsecured term loans bear interest at a variable rate of a benchmark interest rate plus an applicable margin, depending on its leverage ratio. Each of the term loan facilities is subject to debt covenants substantially similar to the covenants under the credit agreement that governs the revolving credit facility. As of December 31, 2018, the Company was in compliance with all debt covenants of its term loan facilities. The Company entered into interest rate swap agreements to fix the LIBOR rate on a portion of these unsecured term loan facilities, see Derivative and Hedging Activities below.

Senior Unsecured Notes

The Company has unsecured notes outstanding, $60.0 million of senior unsecured notes bearing a fixed interest rate of 4.70% per annum and maturing in December 2023 (the "Series A Notes") and $40.0 million of senior unsecured notes bearing a fixed interest rate of 4.93% per annum and maturing in December 2025 (the "Series B Notes"). The terms of the Series A Notes and the Series B Notes are substantially similar to those of its senior unsecured revolving credit facility, as amended and restated. As of December 31, 2018, the Company was in compliance with all such debt covenants.

Mortgage Debt

The Company’s sole mortgage loan is secured by a first mortgage lien on the underlying property. The mortgage is non-recourse to the Company except for customary carve-outs such as fraud or misapplication of funds.

Interest Expense

The components of the Company's interest expense consisted of the following (in thousands):



	For the year ended December 31,
	2018		2017		2016
Unsecured revolving credit facilities	$	11,274	$	3,914	$	3,694
Unsecured term loan facilities	30,479		21,396		21,208
Senior unsecured notes	4,686		4,805		4,872
Mortgage debt	2,592		3,600		11,377
Amortization of deferred financing fees	2,565		2,397		2,737
Other	2,327		1,187		(273		)
Total interest expense	$	53,923	$	37,299	$	43,615

Future Minimum Principal Payments

As of December 31, 2018, the future minimum principal payments for the Company's debt are as follows (in thousands):



2019	$	2,455
2020	315,752
2021	500,000
2022	635,000
2023	760,000
Thereafter	550,000
Total debt principal payments	2,763,207
Mortgage loan premiums and deferred financing costs	(16,309		)
Total debt	$	2,746,898

The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates, taking into consideration general market conditions and maturity of the debt with similar credit terms and is classified within level 2 of the fair value hierarchy. The estimated fair value of the Company’s fixed rate debt (unsecured senior notes and mortgage loans) as of December 31, 2018 and 2017 was $164.3 million and $167.1 million, respectively.

Derivative and Hedging Activities

The Company enters into interest rate swap agreements to hedge against interest rate fluctuations. All of the Company's interest rate swaps are cash flow hedges. On January 1, 2018, the Company adopted ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. All unrealized gains and losses on these hedging instruments are reported in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The Company's interest rate swaps consisted of the following (in thousands):



				Notional Value as of
Hedge Type	Interest Rate		Maturity	December 31, 2018		December 31, 2017
Swap - cash flow	1.57%	⁽¹⁾	May 2019	$	100,000	$	—
Swap - cash flow	1.57%	⁽¹⁾	May 2019	62,500		—
Swap - cash flow	1.57%	⁽¹⁾	May 2019	15,000		—
Swap - cash flow	1.63%		January 2020	50,000		50,000
Swap - cash flow	1.63%		January 2020	50,000		50,000
Swap - cash flow	2.46%		January 2020	50,000		50,000
Swap - cash flow	2.46%		January 2020	50,000		50,000
Swap - cash flow	1.66%		January 2020	50,000		50,000
Swap - cash flow	1.66%		January 2020	50,000		50,000
Swap - cash flow	1.74%		January 2021	75,000		75,000
Swap - cash flow	1.75%		January 2021	50,000		50,000
Swap - cash flow	1.53%		January 2021	37,500		37,500
Swap - cash flow	1.53%		January 2021	37,500		37,500
Swap - cash flow	1.46%	⁽¹⁾	January 2021	100,000		—
Swap - cash flow	1.47%	⁽¹⁾	January 2021	47,500		—
Swap - cash flow	1.47%	⁽¹⁾	January 2021	47,500		—
Swap - cash flow	1.47%	⁽¹⁾	January 2021	47,500		—
Swap - cash flow	1.47%	⁽¹⁾	January 2021	47,500		—
Swap - cash flow	2.60%	⁽²⁾	October 2021	55,000		—
Swap - cash flow	2.60%	⁽²⁾	October 2021	55,000		—
Swap - cash flow	1.78%	⁽¹⁾	January 2022	100,000		—
Swap - cash flow	1.78%	⁽¹⁾	January 2022	50,000		—
Swap - cash flow	1.79%	⁽¹⁾	January 2022	30,000		—
Swap - cash flow	1.68%		April 2022	25,000		25,000
Swap - cash flow	1.68%		April 2022	25,000		25,000
Swap - cash flow	1.64%		April 2022	25,000		25,000
Swap - cash flow	1.64%		April 2022	25,000		25,000
Swap - cash flow	2.60%	⁽³⁾	January 2024	75,000		—
Swap - cash flow	2.60%	⁽³⁾	January 2024	50,000		—
Swap - cash flow	2.60%	⁽³⁾	January 2024	25,000		—
Swap - cash flow	2.60%	⁽³⁾	January 2024	75,000		—
Swap - cash flow	2.60%	⁽³⁾	January 2024	75,000		—

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⁽¹⁾ Swaps assumed from the LaSalle merger on November 30, 2018.

⁽²⁾ Swaps will be effective January 2019.

⁽³⁾ Swaps will be effective January 2020.

The Company records all derivative instruments at fair value in the consolidated balance sheets. Fair values of interest rate swaps are determined using the standard market methodology of netting the discounted future fixed cash receipts/payments and the discounted expected variable cash payments/receipts. Variable interest rates used in the calculation of projected receipts and payments on the swaps are based on an expectation of future interest rates derived from observable market interest rate curves (Overnight Index Swap curves) and volatilities (Level 2 inputs). Derivatives expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company incorporates these counterparty credit risks in its fair value measurements. The Company believes it minimizes the credit risk by transacting with major creditworthy financial institutions.

As of December 31, 2018, the Company's derivative instruments were in an asset position, with aggregate net asset fair values of $15.1 million, in the accompanying consolidated balance sheets. For the year ended December 31, 2018 and 2017, there was $(2.9) million and $6.0 million in unrealized gain (loss), respectively, recorded in accumulated other comprehensive income (loss). For the years ended December 31, 2018, 2017 and 2016, the Company recorded a gain (loss) of zero, $0.3 million and $0.3 million, respectively, for the ineffective portion of the change in fair values of the interest rate swaps. For the years ended December 31, 2018, 2017 and 2016, the Company reclassified $0.7 million, $3.4 million and $6.2 million, respectively, from accumulated other comprehensive income (loss) to interest expense. The Company expects approximately $3.4 million will be reclassified from accumulated other comprehensive income (loss) to interest expense in the next 12 months.