Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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. As of December 31, 2023, our potential for exposure to market risk includes interest rate fluctuations in connection with borrowings under our $600 Million Unsecured 2022 Line of Credit, the remaining $100 million outstanding on the $200 Million 2022 Unsecured Term Loan Facility, and the $215 Million Unsecured 2023 Term Loan. As a result, the primary market risk to which we believe 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 SOFR rates are determined.
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, 2023, other than those variable rate facilities mentioned above, 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 purposes other than trading purposes.
Our financial instruments consist of both fixed and variable-rate debt. As of December 31, 2023, our consolidated principal outstanding for aggregate debt maturities consisted of the following (in thousands):
2024 2025 2026 2027 2028 Thereafter Total
Maturing debt:
Variable rate repayments $ 315,000 (2)
$ — $ 59,000 (4)
$ — $ — $ — $ 374,000
Variable rate average interest rate (1)
6.71 % — % 6.45 % — % — % — % 6.67 %
Fixed rate repayments $ 53,317 $ 253,588 (3)
$ 3,738 $ 3,895 $ 781,495 $ 600,000 $ 1,696,033
Fixed rate average interest rate (1)
4.43 % 4.78 % 4.10 % 4.10 % 8.05 % 2.95 % 5.63 %
(1) See Note 3 to our accompanying consolidated financial statements for further details on our debt structure.
(2) Includes a balance of $100 million on the $200 Million Unsecured Term Loan Facility which was repaid on January 30, 2024. Also includes the $215 Million Unsecured 2023 Term Loan, $190 million of which was repaid on January 30, 2024, with the remaining $25 million extended to January 31, 2025. See Note 3 to our accompanying consolidated financial statements for more details.
(3) Includes the $250 Million Unsecured 2018 Term Loan. The facility has a stated variable rate; however, Piedmont's interest rate swap agreements as of December 31, 2023 effectively fix, exclusive of changes to Piedmont's credit rating, the full principal balance to 4.79% through the maturity date of the loan.
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(4) Piedmont may extend the term for up to one additional year (through two available six month extensions to a final extended maturity date of June 30, 2027) provided Piedmont is not in default and upon payment of extension fees.
The estimated fair value of our debt above as of December 31, 2023 and 2022 was approximately $2.0 billion and $1.8 billion, respectively. Our interest rate swap agreements in place as of December 31, 2023 and December 31, 2022, respectively, carried a notional amount of $250 million and a weighted-average fixed interest rate of 3.49%, exclusive of our corporate credit rating spread.
As of December 31, 2023, our total outstanding debt subject to fixed, or effectively fixed, interest rates totaling approximately $1.7 billion has an average effective interest rate of approximately 5.63% per annum with expirations ranging from 2024 to 2032. 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, 2023, we had a $59.0 million outstanding balance on our $600 Million Unsecured 2022 Line of Credit. Our $600 Million Unsecured 2022 Line of Credit currently has a stated rate of Adjusted SOFR plus 1.04% per annum (based on our current corporate credit rating), resulting in a total interest rate of 6.45%. Our $200 Million Unsecured Term Loan Facility had a stated rate of Adjusted SOFR plus 1.25% per annum (based on our current corporate credit rating), resulting in a total interest rate of 6.70%. Our $215 Million Unsecured 2023 Term Loan had a stated rate of Adjusted SOFR plus 1.30% per annum (based on our current corporate credit rating), resulting in a total interest rate of 6.71%.To the extent that we borrow funds in the future under the $600 Million Unsecured 2022 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 outstanding borrowings as of December 31, 2023 would increase interest expense approximately $3.7 million on a per annum basis.