Indebtedness

12 Months Ended

Dec. 31, 2019

All debt is issued directly or indirectly by the Partnership. The General Partner does not have any indebtedness, but does guarantee some of the unsecured debt of the Partnership.

Indebtedness at December 31, 2019 and 2018 consists of the following (in thousands):



	Maturity Date	Weighted Average Interest Rate		Weighted Average Interest Rate
	Maturity Date	2019		2018		2019		2018
Fixed rate secured debt	2021 to 2027	5.92	%	6.91	%	$	32,287	$	77,601
Variable rate secured debt	2025	1.39	%	1.72	%	1,900		2,200
Unsecured debt	2022 to 2029	3.71	%	3.92	%	2,900,000		2,575,000
Unsecured line of credit	2022	—	%	3.39	%	—		30,000
						$	2,934,187	$	2,684,801
Less: Deferred financing costs						19,422		26,300
Total indebtedness as reported on consolidated balance sheets						$	2,914,765	$	2,658,501

Secured Debt

At December 31, 2019, our secured debt was collateralized by rental properties with a carrying value of $99.0 million and by a letter of credit in the amount of $1.9 million.

The fair value of our fixed rate secured debt at December 31, 2019 was $34.5 million. Because our fixed rate secured debt is not actively traded in any marketplace, we utilized a discounted cash flow methodology to determine its fair value. Accordingly, we calculated fair value by applying an estimate of the current market rate to discount the debt's remaining contractual cash flows. Our estimate of a current market rate, which is the most significant input in the discounted cash flow calculation, is intended to replicate debt of similar maturity and loan-to-value relationship. The estimated market rates for all of our current fixed rate secured debt is between 3.10% and 3.30%, based on the attributes of the specific loans. The current market rates we utilized were internally estimated; therefore, we have concluded that our determination of fair value for our fixed rate secured debt was primarily based upon Level 3 inputs.

During 2019, we repaid three fixed rate secured loans, totaling $41.7 million, which had a weighted average stated interest rate of 7.76%.

During 2018, we repaid three loans, totaling $227.1 million, which had a weighted average stated rate of 7.62%.

Unsecured Debt

At December 31, 2019, all of our unsecured debt bore interest at fixed rates and primarily consisted of unsecured notes that are publicly traded. We utilized broker estimates in estimating the fair value of our fixed rate unsecured debt. Our unsecured notes are thinly traded and, in certain cases, the broker estimates were not based upon comparable transactions. The broker estimates took into account any recent trades within the same series of our fixed rate unsecured debt, comparisons to recent trades of other series of our fixed rate unsecured debt, trades of fixed rate unsecured debt from companies with profiles similar to ours, as well as overall economic conditions. We reviewed these broker estimates for reasonableness and accuracy, considering whether the estimates were based upon market participant assumptions within the principal and most advantageous market and whether any other observable inputs would be more accurate indicators of fair value than the broker estimates. We concluded that the broker estimates were representative of fair value. We have determined that our estimation of the fair value of our fixed rate unsecured debt was primarily based upon Level 3 inputs. The estimated trading values of our fixed rate unsecured debt, depending on the maturity and coupon rates, ranged from 100.00% to 129.00% of face value.

The indentures (and related supplemental indentures) governing our outstanding series of notes also require us to comply with financial ratios and other covenants regarding our operations. We were in compliance with all such financial covenants at December 31, 2019.

We took the following actions during 2019 and 2018 as it pertains to our unsecured indebtedness:


•	In November 2019, we issued $400.0 million of senior unsecured notes that bear interest at a stated interest rate of 2.88%, have an effective interest rate of 3.96% when including the impact of interest rate swap amortization from AOCL, and mature on November 15, 2029.


•	In October 2019, we redeemed $250.0 million of senior unsecured notes that had a scheduled maturity date of February 2021 and bore a stated interest rate of 3.88% and an effective rate of 3.91%. We recognized a loss on debt extinguishment of $6.3 million, which included a prepayment premium and the write-off of unamortized deferred financing costs.

•

In August 2019, we issued $175.0 million of senior unsecured notes bearing interest at a stated interest rate of 3.38% and maturing on December 15, 2027, at 104.16% par value, resulting in an effective interest rate of 2.80%. Proceeds from the unsecured notes offering were primarily used to repay the borrowings under the unsecured line of credit. The notes were issued as additional notes under an indenture pursuant to which we previously issued $300.0 million senior unsecured notes due 2027 in December 2017. These notes have substantially identical terms.

•

In September 2018, we issued $450.0 million of senior unsecured notes that bear interest at a stated interest rate of 4.00%, have an effective interest rate of 4.13%, and mature on September 15, 2028. A portion of these proceeds were used to repay two of the secured loans noted above, totaling $223.9 million with a weighted average stated interest rate of 7.63% and a maturity date of March 10, 2019.

Unsecured Line of Credit

Our unsecured line of credit at December 31, 2019 is described as follows (in thousands):



				Outstanding Balance at
Description	Borrowing Capacity		Maturity Date	December 31, 2019
Unsecured Line of Credit – Partnership	$	1,200,000	January 30, 2022	$	—

The Partnership's unsecured line of credit has an interest rate on borrowings of LIBOR plus 0.875% and a maturity date of January 30, 2022, with options to extend until January 30, 2023. Subject to certain conditions, the terms also include an option to increase the facility by up to an additional $800.0 million, for a total of up to $2.00 billion. This line of credit provides us with an option to obtain borrowings from financial institutions that participate in the line at rates that may be lower than the stated interest rate, subject to certain restrictions.

This line of credit contains financial covenants that require us to meet certain financial ratios and defined levels of performance, including those related to fixed charge coverage, unsecured interest expense coverage and debt-to-asset value (with asset value being defined in the Partnership's unsecured line of credit agreement). At December 31, 2019, we were in compliance with all financial covenants under this line of credit.

To the extent there are outstanding borrowings, we utilize a discounted cash flow methodology in order to estimate the fair value of outstanding borrowings on our unsecured line of credit. To the extent that credit spreads have changed since the origination of the line of credit, the net present value of the difference between future contractual interest payments and future interest payments based on our estimate of a current market rate would represent the difference between the book value and the fair value. This estimate of a current market rate is based upon the rate, considering current market conditions and our specific credit profile, at which we estimate we could obtain similar borrowings. As our credit spreads have not changed appreciably, we believe that the contractual interest rate and the current market rate on any outstanding borrowings on the line of credit are the same. The current market rate is internally estimated and therefore is primarily based upon a Level 3 input.

Changes in Fair Value

As all of our fair value debt disclosures relied primarily on Level 3 inputs, the following table summarizes the book value and changes in the fair value of our debt for the year ended December 31, 2019 (in thousands):



	Book Value at 12/31/2018		Book Value at 12/31/2019		Fair Value at 12/31/2018		Issuances and Assumptions		Payments/Payoffs			Adjustments to Fair Value			Fair Value at 12/31/2019
Fixed rate secured debt	$	77,601	$	32,287	$	80,238	$	—	$	(45,215	)	$	(476	)	$	34,547
Variable rate secured debt	2,200		1,900		2,200		—		(300		)	—			1,900
Unsecured debt	2,575,000		2,900,000		2,549,963		575,000		(250,000		)	170,522			3,045,485
Unsecured line of credit	30,000		—		30,000		—		(30,000		)	—			—
Total	$	2,684,801	$	2,934,187	$	2,662,401	$	575,000	$	(325,515	)	$	170,046		$	3,081,932
Less: Deferred financing costs	26,300		19,422
Total indebtedness as reported on the consolidated balance sheets	$	2,658,501	$	2,914,765

Scheduled Maturities and Interest Paid

At December 31, 2019, the scheduled amortization and maturities of all indebtedness, excluding fair value adjustment, for the next five years and thereafter were as follows (in thousands):



Year	Amount
2020	$	3,883
2021	12,463
2022	603,611
2023	253,817
2024	304,036
Thereafter	1,756,325
	$	2,934,135

The amount of interest paid in 2019, 2018 and 2017 was $111.8 million, $108.2 million and $121.0 million, respectively. The amount of interest capitalized in 2019, 2018 and 2017 was $26.5 million, $27.2 million and $18.9 million, respectively.