Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The principal material financial market risk to which we are exposed is interest rate risk. Our exposure to interest rate risk relates primarily to refinancing long-term fixed rate obligations, the opportunity cost of fixed rate obligations in a falling interest rate environment and our variable rate line of credit. We primarily enter into debt obligations to support general corporate purposes, including acquisition of real estate properties, capital improvements and working capital needs. We use interest rate swap arrangements to reduce our exposure to the variability in future cash flows attributable to changes in interest rates.
The table below presents principal, interest and related weighted average fair value interest rates by year of maturity, with respect to debt outstanding on December 31, 2020.
2021 2022 2023 2024 2025 Thereafter Total Fair Value
(dollars in thousands)
Unsecured fixed rate debt (1)
Principal $ — $ 300,000 $ 250,000 $ — $ — $ 400,000 $ 950,000 $ 978,678
Interest payments $ 37,218 $ 37,218 $ 22,177 $ 17,995 $ 17,995 $ 80,775 $ 213,378
Interest rate on debt maturities — % 4.0 % 2.6 % — % — % 4.5 % 3.8 %
Unsecured variable rate debt
Principal $ — $ — $ 42,000 $ — $ — $ — $ 42,000 $ 42,000
Variable interest rate on debt maturities 1.1 % 1.1 %
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(1) Includes $250.0 million term loan with a floating interest rate. The interest rate on the $250.0 million term loan is effectively fixed by interest rate swap arrangements at 2.9%.
We entered into the interest rate swap arrangements designated and qualifying as cash flow hedges to reduce our exposure to the variability in future cash flows attributable to changes in interest rates. Derivative instruments expose us to credit risk in the event of non-performance by the counterparty under the terms of the interest rate hedge agreement. We believe that we minimize our credit risk on these transactions by dealing with major, creditworthy financial institutions. As part of our ongoing control procedures, we monitor the credit ratings of counterparties and our exposure to any single entity, thus minimizing our credit risk concentration.
The following table sets forth information pertaining to interest rate swap contracts in place as of December 31, 2020 and 2019 and their respective fair values (dollars in thousands):
Notional Amount Floating Index Rate Fair Value as of:
Fixed Rate Effective Date Expiration Date December 31, 2020 December 31, 2019
$ 75,000 1.619% One-Month USD-LIBOR 10/15/2015 3/15/2021 $ — $ (28)
75,000 1.626% One-Month USD-LIBOR 10/15/2015 3/15/2021 — (34)
100,000 1.205% One-Month USD-LIBOR 3/31/2017 7/21/2023 (2,671) 1,218
50,000 1.208% One-Month USD-LIBOR 3/31/2017 7/21/2023 (1,338) 607
25,000 2.610% One-Month USD-LIBOR 6/29/2018 7/21/2023 (1,562) (917)
25,000 2.610% One-Month USD-LIBOR 6/29/2018 7/21/2023 (1,562) (915)
25,000 2.610% One-Month USD-LIBOR 6/29/2018 7/21/2023 (1,561) (917)
25,000 2.610% One-Month USD-LIBOR 6/29/2018 7/21/2023 (1,561) (915)
50,000 1.680% One-Month USD-LIBOR 4/1/2020 4/1/2030 — 844
50,000 1.680% One-Month USD-LIBOR 4/1/2020 4/1/2030 — 844
50,000 1.718% One-Month USD-LIBOR 4/1/2020 4/1/2030 — 1,018
50,000 1.718% One-Month USD-LIBOR 4/1/2020 4/1/2030 — 1,018
$ 600,000 $ (10,255) $ 1,823
In September 2020, in conjunction with the entry into the note purchase agreement to issue the Green Bonds, we terminated $200.0 million of four forward interest rate swap arrangements that we had entered into in November 2019 and which were effective as of
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April 1, 2020, designated as cash flow hedges of the interest rate variability on the issuance of unsecured notes. On October 2, 2020, we paid the $20.4 million liability associated with the termination of the forward swaps.
In December 2020, in connection with the prepayment of our 2015 Term Loan, we terminated two interest rate swap agreements with notional amounts in the aggregate of $150.0 million resulting in a loss on interest rate derivatives of approximately $0.6 million.
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ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data appearing on pages 86 to 125 are incorporated herein by reference.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.