Item 1.01 Entry into a Material Definitive Agreement.
On August 26, 2021, Washington Real Estate Investment Trust (“Washington REIT”) entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent (the “Agent”), and the financial institutions party thereto as lenders (the “Lenders”) and agents, which provides for aggregate revolving loan commitments of $700 million (the “Revolving Credit Facility”) and the continuation of the existing unsecured term loan facility of $250 million (the “Term Loan Facility”). The Credit Agreement amends and restates that certain Amended and Restated Credit Agreement (the “Existing Credit Agreement”), dated as of March 29, 2018, among Washington REIT, Wells Fargo Bank, National Association, as administrative agent, and the financial institutions party thereto as lenders and agents, which provided for aggregate revolving loan commitments of $700 million, the Term Loan Facility and an unsecured term loan facility of $150 million, which was previously repaid in full.
The Credit Agreement includes the option to increase the revolving loan commitments or add term loans under the Credit Agreement to up to $1.5 billion in the aggregate to the extent the lenders (from the syndicate or otherwise) agree to provide additional revolving loan commitments or term loans. The Revolving Credit Facility will mature on August 26, 2025, unless extended pursuant to one or both of the two six-month extension options provided therein. The exercise of an extension option requires the payment of a fee of 0.0625% on the extended revolving loan commitments for each extension and is subject to certain other customary conditions. The Term Loan Facility will mature on July 21, 2023. The Credit Agreement also provides Washington REIT with the ability to obtain letters of credit of up to $60 million in the aggregate and swingline loans of up to $75 million in the aggregate. As of August 26, 2021, $250 million of the Term Loan Facility and no revolving loans were outstanding under the Credit Agreement.
No subsidiaries of Washington REIT are currently required to guarantee Washington REIT’s obligations under the Credit Agreement. Subsidiaries of Washington REIT may in the future be required to guarantee Washington REIT’s obligations under the Credit Agreement if any such subsidiary (a) guarantees the indebtedness of Washington REIT or another subsidiary of Washington REIT (excluding, among other things, guarantees of certain indebtedness in an aggregate principal amount not in excess of $200 million) or (b) owns a property included in the determination of Washington REIT’s unencumbered pool value and incurs any recourse indebtedness.
Borrowings under the Revolving Credit Facility will bear interest, at Washington REIT’s option, at a rate of either LIBOR plus a margin ranging from 0.70% to 1.40% (depending on Washington REIT’s credit rating) or the base rate plus a margin ranging from 0.00% to 0.40% (based upon Washington REIT’s credit rating). Loans under the Term Loan Facility bear interest, at Washington REIT’s option, at a rate of either LIBOR plus a margin ranging from 0.85% to 1.75% (depending on Washington REIT’s credit rating) or the base rate plus a margin ranging from 0.00% to 0.75% (based upon Washington REIT’s credit rating). The base rate is the highest of the Agent’s prime rate, the federal funds rate plus 0.50% and the LIBOR market index rate plus 1.0%. The Credit Agreement contains provisions specifying alternative interest rate calculations to be employed at such time as LIBOR ceases to be available as a benchmark for establishing the interest rate on floating interest rate borrowings. In addition, the Credit Agreement requires the payment of a facility fee equal to 0.10% to 0.30% (depending on Washington REIT’s credit rating) on the $700 million committed capacity in respect of the Revolving Credit Facility, without regard to usage. The Credit Agreement also includes a sustainability component whereby the Revolving Credit Facility pricing can improve upon Washington REIT’s achievement of certain sustainability ratings, determined via an independent third-party evaluation.
The Credit Agreement contains representations, financial and other affirmative and negative covenants that are similar to the Existing Credit Agreement and generally customary for credit facilities of this type. The Credit Agreement requires that Washington REIT comply with various covenants, including covenants restricting liens on properties included in the determination of Washington REIT’s unencumbered pool value, mergers, affiliate transactions, asset sales and the payment of dividends following an event of default. In addition, the Credit Agreement requires that Washington REIT satisfy certain financial maintenance covenants, including:
•ratio of total debt to total asset value of not more than 0.60 to 1.00 (subject to a higher level following acquisitions);
•ratio of adjusted EBITDA to fixed charges of not less than 1.50 to 1.00;
•ratio of secured indebtedness to total asset value of not more than 0.40 to 1.00; and
•ratio of unsecured indebtedness to the unencumbered pool value of properties satisfying certain criteria specified in, and valued per the terms of, the Credit Agreement of not more than 0.60 to 1.00 (subject to a higher level following acquisitions).
The Credit Agreement also includes customary events of default, the occurrence of which, following any applicable grace period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations of Washington REIT under the Credit Agreement to be immediately due and payable.
From time to time, the Company has had customary commercial and/or investment banking relationships with Wells Fargo Bank, National Association, PNC Bank, National Association, Truist Bank, KeyBank National Association, TD Bank, N.A.,
Capital One, National Association, US Bank National Association, each of whom is a lender under the Credit Agreement, and/or certain of their respective affiliates, for which such banks receive customary fees and commissions.
In connection with Washington REIT’s entry into the Credit Agreement, under the terms of Washington REIT’s 3.44% Senior Notes due December 29, 2030 issued pursuant the Note Purchase Agreement, dated September 29, 2020 by and among Washington REIT and the various purchasers party thereto (the “Note Purchase Agreement”), the Note Purchase Agreement is deemed amended to conform to certain reciprocal covenants and defined terms in the Credit Agreement, as provided in the Note Purchase Agreement.