Secured and Unsecured Debt of the Operating Partnership

Secured Debt

The following table sets forth the composition of our secured debt as of December 31, 2016 and 2015:



	Annual Stated Interest Rate ⁽¹⁾	GAAP Effective Rate ⁽¹⁾⁽²⁾	Maturity Date	December 31,
Type of Debt	Annual Stated Interest Rate ⁽¹⁾	GAAP Effective Rate ⁽¹⁾⁽²⁾	Maturity Date	2016			2015
				(in thousands)
Mortgage note payable ⁽³⁾	3.57%	3.57%	December 2026	$	170,000		$	—
Mortgage note payable ⁽⁴⁾	4.27%	4.27%	February 2018	125,756			128,315
Mortgage note payable ⁽⁴⁾	4.48%	4.48%	July 2027	94,754			96,354
Mortgage note payable ⁽⁴⁾⁽⁵⁾	6.05%	3.50%	June 2019	82,443			85,890
Mortgage note payable⁽⁶⁾	7.15%	7.15%	May 2017	1,215			3,987
Mortgage note payable ⁽⁷⁾	6.51%	6.51%	February 2017	—			65,563
Other ⁽⁸⁾	Various	Various	Various	—			1,809
Total secured debt				$	474,168		$	381,918
Unamortized Deferred Financing Costs				(1,396		)	(1,083		)
Total secured debt, net				$	472,772		$	380,835

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(1)	All interest rates presented are fixed-rate interest rates.


(2)	Represents the effective interest rate including the amortization of initial issuance discounts/premiums excluding the amortization of deferred financing costs.


(3)	This mortgage note payable was entered into in November 2016.


(4)	The secured debt and the related properties that secure the debt are held in a special purpose entity and the properties are not available to satisfy the debts and other obligations of the Company or the Operating Partnership.


(5)	As of December 31, 2016 and 2015, the mortgage loan had unamortized debt premiums of $4.4 million and $6.2 million, respectively.


(6)	This mortgage note payable was repaid in February 2017 at par.


(7)	This mortgage note payable was repaid in December 2016 at par.


(8)	Balance of $1.8 million as of December 31, 2015 included public facility bonds that were assumed by the buyers in connection with sales of land during the year ended December 31, 2016.

The Operating Partnership’s secured debt was collateralized by operating properties with a combined net book value of approximately $570.6 million as of December 31, 2016.

Although our mortgage loans are secured and non-recourse to the Company and the Operating Partnership, the Company provides limited customary secured debt guarantees for items such as voluntary bankruptcy, fraud, misapplication of payments and environmental liabilities.

As of December 31, 2016, all of the Operating Partnership’s secured loans contained restrictions that would require the payment of prepayment penalties for the acceleration of outstanding debt. The mortgage notes payable are secured by deeds of trust on certain of our properties and the assignment of certain rents and leases associated with those properties.

Unsecured Senior Notes

In September 2015, the Operating Partnership issued $400.0 million of aggregate principal amount of unsecured senior notes in a registered public offering. The outstanding balance of the unsecured senior notes is included in unsecured debt, net of the unamortized balance of the initial issuance discount of $2.2 million, on our consolidated balance sheets. The unsecured senior notes, which are scheduled to mature on October 1, 2025, require semi-annual interest payments each April and October based on a stated annual interest rate of 4.375%. The Company used the net proceeds to repay the $325.0 million 5.000% Unsecured Senior Notes upon maturity in November 2015 and for other general corporate purposes, including the repayment of debt and funding development expenditures.

The following table summarizes the balance and significant terms of the registered unsecured senior notes issued by the Operating Partnership as of December 31, 2016 and 2015:



					Net Carrying Amount as of December 31,
	Issuance date	Maturity date	Stated coupon rate	Effective interest rate⁽¹⁾	2016			2015
					(in thousands)
4.375% Unsecured Senior Notes ⁽²⁾	September 2015	October 2025	4.375%	4.440%	$	400,000		$	400,000
Unamortized discount and deferred financing costs					(4,846		)	(5,400		)
Net carrying amount					$	395,154		$	394,600

4.250% Unsecured Senior Notes ⁽³⁾	July 2014	August 2029	4.250%	4.350%	$	400,000		$	400,000
Unamortized discount and deferred financing costs					(6,696		)	(7,228		)
Net carrying amount					$	393,304		$	392,772

3.800% Unsecured Senior Notes ⁽⁴⁾	January 2013	January 2023	3.800%	3.804%	$	300,000		$	300,000
Unamortized discount and deferred financing costs					(1,656		)	(1,931		)
Net carrying amount					$	298,344		$	298,069

4.800% Unsecured Senior Notes ⁽⁴⁾⁽⁵⁾	July 2011	July 2018	4.800%	4.827%	$	325,000		$	325,000
Unamortized discount and deferred financing costs					(767		)	(1,251		)
Net carrying amount					$	324,233		$	323,749

6.625% Unsecured Senior Notes ⁽⁶⁾	May 2010	June 2020	6.625%	6.743%	$	250,000		$	250,000
Unamortized discount and deferred financing costs					(1,868		)	(2,414		)
Net carrying amount					$	248,132		$	247,586

Total Unsecured Senior Notes, Net					$	1,659,167		$	1,656,776

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(1)	Represents the effective interest rate including the amortization of initial issuance discounts, excluding the amortization of deferred financing costs.


(2)	Interest on these notes is payable semi-annually in arrears on April 1st and October 1st of each year.


(3)	Interest on these notes is payable semi-annually in arrears on February 15th and August 15th of each year.


(4)	Interest on these notes is payable semi-annually in arrears on January 15th and July 15th of each year.

(5)

In October 2015, certain common limited partners in the Operating Partnership that previously contributed their interests in the property at 6255 W. Sunset Blvd., Los Angeles, California to the Operating Partnership entered into an agreement with the Company. Pursuant to this agreement, such common limited partners will reimburse the Company for a portion of any amounts the Company may be required to pay pursuant to its guarantee of the Operating Partnership's 4.800% Senior Notes due 2018 or that the Company may otherwise become required to pay under applicable law with respect to such notes.


(6)	Interest on these notes is payable semi-annually in arrears on June 1st and December 1st of each year.

Unsecured Senior Notes - Private Placement

On September 14, 2016, the Operating Partnership entered into a Note Purchase Agreement in a private placement (the “Note Purchase Agreement”), in connection with the issuance and sale of $175.0 million principal amount of the Operating Partnership’s 3.35% Senior Notes, Series A, due February 17, 2027 (the “Series A Notes”), and $75.0 million principal amount of the Operating Partnership’s 3.45% Senior Notes, Series B, due February 17, 2029 (the “Series B Notes” and, together with the Series A Notes, the “Series A and B Notes”). Under the delayed draw option of the Series A and B Notes, the Operating Partnership is required to issue $175.0 million principal amount of its Series A Notes and $75.0 million principal amount of its Series B Notes by February 17, 2017. As of December 31, 2016, there were no amounts issued or outstanding under the Series A and B Notes. The Series A Notes mature on February 17, 2027, and the Series B notes mature on February 17, 2029, unless earlier redeemed or prepaid pursuant to the terms of the Note Purchase Agreement. Interest on the Notes is payable semi-annually in arrears on February 17 and August 17 of each year beginning February 17, 2017.

The Operating Partnership may, at its option and upon notice to the purchasers of the Series A and B Notes, prepay at any time all, or from time to time any part of the Series A and B Notes then outstanding (in an amount not less than 5% of the aggregate principal amount of the Series A and B Notes then outstanding in the case of a partial prepayment), at 100% of the principal amount so prepaid, plus the make-whole amount determined for the prepayment date with respect to such principal amount as set forth in the Note Purchase Agreement.

In connection with the issuance of the Series A and B Notes, the Company will enter into an agreement whereby it will guarantee the payment by the Operating Partnership of all amounts due with respect to the Series A and B Notes and the performance by the Operating Partnership of its obligations under the Note Purchase Agreement.

Unsecured Revolving Credit Facility and Unsecured Term Loan Facility

The following table summarizes the balance and terms of our unsecured revolving credit facility as of December 31, 2016 and 2015:



	December 31, 2016			December 31, 2015
	(in thousands)
Outstanding borrowings	$	—		$	—
Remaining borrowing capacity	600,000			600,000
Total borrowing capacity ⁽¹⁾	$	600,000		$	600,000
Interest rate ⁽²⁾	1.82		%	1.48		%
Facility fee-annual rate ⁽³⁾	0.200%
Maturity date	July 2019

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(1)	We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $311.0 million under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility.


(2)	The interest rate on our unsecured revolving credit facility is based on an annual rate of LIBOR plus1.050%.

(3)

Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of December 31, 2016 and 2015, $3.3 million and $4.6 million of deferred financing costs remained to be amortized through the maturity date of our unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.

The Company intends to borrow amounts under the unsecured revolving credit facility from time to time for general corporate purposes, to fund potential acquisitions, to finance development and redevelopment expenditures and to potentially repay long-term debt.

The following table summarizes the balance and terms of our term loan facility, which is included in our unsecured debt, as of December 31, 2016 and 2015:



	December 31, 2016			December 31, 2015
	(in thousands)
Outstanding borrowings ⁽¹⁾	$	150,000		$	150,000
Interest rate ⁽²⁾	1.85		%	1.40		%
Maturity date	July 2019

_______________


(1)	As of December 31, 2016 and December 31, 2015, $0.7 million and $0.9 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.


(2)	Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus 1.150%.

Additionally, the Company has a $39.0 million unsecured term loan outstanding with an annual interest rate of LIBOR plus 1.150% as of December 31, 2016 and 2015, that matures in July 2019. As of December 31, 2016 and 2015, $0.2 million of unamortized deferred financing costs remained to be amortized through the maturity date of our unsecured term loan.

Debt Covenants and Restrictions

The unsecured revolving credit facility, the unsecured term loan facility, the unsecured term loan, the unsecured senior notes, the Series A and B Notes and certain other secured debt arrangements contain covenants and restrictions requiring us to meet certain financial ratios and reporting requirements. Some of the more restrictive financial covenants include a maximum ratio of total debt to total asset value, a minimum fixed-charge coverage ratio, a minimum unsecured debt ratio and a minimum unencumbered asset pool debt service coverage ratio. Noncompliance with one or more of the covenants and restrictions could result in the full principal balance of the associated debt becoming immediately due and payable. We believe we were in compliance with all of our debt covenants as of December 31, 2016 and 2015.

Debt Maturities

The following table summarizes the stated debt maturities and scheduled amortization payments as of December 31, 2016:



Year	(in thousands)
2017	$	7,286
2018	451,669
2019	265,309
2020	255,137
2021	5,342
Thereafter	1,349,023
Total aggregate principal value ⁽¹⁾⁽²⁾	$	2,333,766

________________________


(1)	Includes gross principal balance of outstanding debt before the effect of the following at December 31, 2016: $11.5 million of unamortized deferred financing costs, $6.6 million of unamortized discounts for the unsecured senior notes and $4.4 million of unamortized premiums for the secured debt.


(2)	Excludes the Series A and B Notes issuable pursuant to the Note Purchase Agreement entered into in September 2016 as no Series A or B Notes were issued and outstanding under these notes as of December 31, 2016.

4.25% Exchangeable Senior Notes due 2014

The Company repaid its $172.5 million 4.25% Exchangeable Notes due November 2014 (the “4.25% Exchangeable Notes”) upon maturity in November 2014. The unamortized discount on the 4.25% Exchangeable Notes was accreted as additional interest expense from the date of issuance through the maturity date. The following table summarizes the total interest expense attributable to the 4.25% Exchangeable Notes prior to maturity in November 2014, based on the effective interest rates, before the effect of capitalized interest, for the year ended December 31, 2014:



	Year Ended December 31, 2014

Contractual interest payments	$	5,608
Amortization of discount	3,769
Interest expense attributable to the 4.25% Exchangeable Notes	$	9,377

For the respective reporting periods noted below, which preceding maturity of the 4.25% Exchangeable Notes on November 15, 2014, the per share average trading price of the Company's common stock on the NYSE was higher than the $35.93 exchange price for the 4.25% Exchangeable Notes, as presented in the table below. See Note 22 “Net Income Available to Common Stockholders Per Share of the Company” and Note 23 “Net Income Available to Common Unitholders Per Unit of the Operating Partnership” for a discussion of the impact of the 4.25% Exchangeable Notes on our diluted earnings per share and unit calculations for the year ended December 31, 2014.



	Period Ended November 15, 2014 ⁽¹⁾
Per share average trading price of the Company's common stock	$	60.04

_______________

(1) Represents the maturity date of the 4.25% Exchangeable Notes.

Capitalized Interest and Loan Fees

The following table sets forth gross interest expense reported in continuing operations, including debt discount/premium and deferred financing cost amortization, net of capitalized interest, for the years ended December 31, 2016, 2015 and 2014. The interest expense capitalized was recorded as a cost of development and redevelopment, and increased the carrying value of undeveloped land and construction in progress.



	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Gross interest expense	$	105,263		$	109,647		$	114,661
Capitalized interest	(49,460		)	(51,965		)	(47,090		)
Interest expense	$	55,803		$	57,682		$	67,571