Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Our future income, cash flows, and estimated fair values of our financial instruments depend in part upon prevailing market interest rates. Market risk is the exposure to loss resulting from changes in interest rates, foreign currency, exchange rates, commodity prices, and equity prices. Our potential for exposure to market risk includes interest rate fluctuations in connection with borrowings under our $500 Million Unsecured 2018 Line of Credit, our Amended and Restated $300 Million Unsecured 2011 Term Loan, and the $250 Million Unsecured 2018 Term Loan. As a result, we believe the primary market risk to which we are exposed is interest rate risk. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control contribute to interest rate risk, including changes in the method pursuant to which the LIBOR rates are determined and the phasing out of LIBOR after 2021 (see Item 1A. Risk Factors for further discussion of the risks associated with LIBOR). Piedmont has begun an initial evaluation of its contracts and agreements which reference LIBOR and determined that each of these agreements already contain "fallback" language allowing for the substitution of a comparable or successor rate as approved by the respective agent, as defined in the respective agreements. Piedmont will continue to evaluate its contracts as it approaches the December 31, 2021 potential end date for LIBOR.
Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flow primarily through a low-to-moderate level of overall borrowings, as well as managing the variability in rate fluctuations on our outstanding debt. As such, all of our debt as of December 31, 2020, other than the $500 Million Unsecured 2018 Line of Credit, the Amended and Restated $300 Million Unsecured 2011 Term Loan, and $150 million of our $250 Million Unsecured 2018 Term Loan, is currently based on fixed or effectively-fixed interest rates to hedge against volatility in the credit markets. We do not enter into derivative or interest rate transactions for speculative purposes, as such all of our debt and derivative instruments were entered into for other than trading purposes.
Our financial instruments consist of both fixed and variable-rate debt. As of December 31, 2020, our consolidated principal outstanding for aggregate debt maturities consisted of the following (in thousands):
2021 2022 2023 2024 2025 Thereafter Total
Maturing debt:
Variable rate repayments $ 300,000 $ 5,000 (2)
$ — $ —
$ 150,000 (3)
$ — $ 455,000
Variable rate average interest rate (1)
1.16 % 1.05 % — % — % 1.10 % — % 1.14 %
Fixed rate repayments $ 27,610 $ — $ 350,000 $ 400,000 $ 100,000 (3)
$ 300,000 $ 1,177,610
Fixed rate average interest rate (1)
5.55 % — % 3.40 % 4.45 % 3.56 % 3.15 % 3.76 %
(1) See Note 4 to our accompanying consolidated financial statements for further details on our debt structure.
(2) Includes the balance of our $500 Million Unsecured 2018 Line of Credit. However, we may extend the term for up to one additional year (through two available six month extensions to a final extended maturity date of September 29, 2023) provided we are not then in default and upon payment of extension fees.
(3) Includes the $250 Million Unsecured 2018 Term Loan. The facility has a stated variable rate; however, Piedmont has entered into interest rate swap agreements which effectively fix, exclusive of changes to Piedmont's credit rating, $100 million of the principal balance to 3.56% through the maturity date of the loan leaving the remaining $150 million principal at the variable rate.
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Index to Financial Statements
As of December 31, 2019, our consolidated principal outstanding for aggregate debt maturities consisted of the following (in thousands):
2020 2021 2022 2023 2024 Thereafter Total
Maturing debt:
Variable rate repayments $ —
$ —
$ — (3)
$ — $ — $ 100,000 (4)
$ 100,000
Variable rate average interest rate (1)
— % — % — % — % — % 3.40 % 3.40 %
Fixed rate repayments $ 985 $ 327,702 (2)
$ 160,000 $ 350,000 $ 400,000 $ 150,000 (4)
$ 1,388,687
Fixed rate average interest rate (1)
5.55 % 3.40 % 3.48 % 3.40 % 4.45 % 4.11 % 3.79 %
(1) See Note 4 to our accompanying consolidated financial statements for further details on our debt structure.
(2) Includes the Amended and Restated $300 Million Unsecured 2011 Term Loan which has a stated variable rate; however, we have entered into interest rate swap agreements which effectively fix, exclusive of changes to our credit rating, the rate on this facility to 3.20% through January 15, 2020.
(3) Piedmont had no balance outstanding on its variable-rate, $500 Million Unsecured 2018 Line of Credit as of December 31, 2019.
(4) Includes the balance of our $250 Million Unsecured 2018 Term Loan. The facility has a stated variable rate; however, Piedmont has entered into interest rate swap agreements which effectively fix, exclusive of changes to Piedmont's credit rating, $150 million of the principal balance to 4.11% through March 2020 leaving the remaining $100 million principal at the variable rate.
The estimated fair value of our debt above as of December 31, 2020 and 2019 was approximately $1.7 billion and $1.5 billion, respectively. Our interest rate swap agreements in place at December 31, 2020 and December 31, 2019 carried a notional amount totaling $100 million and $450 million, respectively, with a weighted-average fixed interest rate (not including the corporate credit spread) of 2.61% and 2.30%, respectively.
As of December 31, 2020, our total outstanding debt subject to fixed, or effectively fixed, interest rates totaling approximately $1.2 billion has an average effective interest rate of approximately 3.76% per annum with expirations ranging from 2021 to 2030. A change in the market interest rate impacts the net financial instrument position of our fixed-rate debt portfolio but has no impact on interest incurred or cash flows for that portfolio.
As of December 31, 2020, we had $5.0 million outstanding on our $500 Million Unsecured 2018 Line of Credit. Our $500 Million Unsecured 2018 Line of Credit currently has a stated rate of LIBOR plus 0.90% per annum (based on our current corporate credit rating), which, as of December 31, 2020, resulted in an interest rate of 1.05%. The current stated interest rate spread on $150 million of the $250 Million Unsecured 2018 Term Loan that is not effectively fixed through interest rate swaps is LIBOR plus 0.95% (based on our current corporate credit rating), which, as of December 31, 2020, resulted in a total interest rate on $150 million of the $250 Million Unsecured 2018 Term Loan of 1.10%. The current stated interest rate on the Amended and Restated $300 Million Unsecured 2011 Term Loan is LIBOR plus 1.00% (based on our current corporate credit rating), which, as of December 31, 2020, resulted in an interest rate of 1.16%. To the extent that we borrow funds in the future under the $500 Million Unsecured 2018 Line of Credit or potential future variable-rate lines of credit, we would have exposure to increases in interest rates, which would potentially increase our cost of debt. Additionally, a 1.0% increase in variable interest rates on our existing outstanding borrowings as of December 31, 2020 would increase interest expense approximately $4.6 million on a per annum basis.