Debt

Consolidated debt consisted of the following (dollars in thousands):



	Encumbered		Interest		Maturity	September 30,		December 31,
	Hotels		Rate (%)		Date	2012		2011
Line of credit	10		L + 4.50		August 2014^(a)	$	117,000	$	—
Hotel mortgage debt
Mortgage debt	5	^(b)	6.66		June - August 2014	65,935		67,375
Mortgage debt	7		L + 5.10	^(c)	April 2015	186,529		202,982
Mortgage debt	1		5.81		July 2016	10,521		10,876
Mortgage debt	4	^(b)	4.95		October 2022	128,500		—
Mortgage debt	1		4.94		October 2022	32,250		—
Senior notes
Senior secured notes	6		6.75		June 2019	525,000		525,000
Senior secured notes^(d)	11		10.00		October 2014	467,499		459,931
Other^(e)	—		L + 1.50		December 2012	64,860		64,860
Retired debt	—		—		—	—		265,442
Total	45					$	1,598,094	$	1,596,466


(a)	Our $225 million line of credit can be extended for one year (to 2015), subject to satisfying certain conditions.


(b)	The hotels securing this debt are subject to separate loan agreements and are not cross-collateralized.


(c)	LIBOR (for this loan) is subject to a 3% floor. We purchased an interest rate cap ($202 million notional amount) that caps LIBOR at 5.4% and expires May 2013.


(d)	These notes have $492 million in aggregate principal outstanding ($144 million and $96,000 in aggregate principal amount was redeemed in June 2011 and January 2012, respectively) and were initially sold at a discount that provided an effective yield of 12.875% before transaction costs.

(e)

This loan is related to our Knickerbocker redevelopment project and is fully secured by restricted cash and a mortgage. Because we were able to assume an existing loan when we purchased this hotel, we were not required to pay any local mortgage recording tax. When that loan is transferred to a new lender and made part of our construction loan, we expect to only pay such tax to the extent of the incremental principal amount of the construction loan.

In May 2012, we repaid $69.2 million in secured loans when we sold the mortgaged hotels.

In August 2012, we repaid $24.9 million in secured loans when we sold a mortgaged hotel.


3.	Debt – (continued)

In September 2012, we obtained $160.8 million in gross proceeds from five mortgage loans. The 10‑year loans mature in 2022, bear an average fixed interest rate of 4.95% and are neither cross-collateralized nor cross-defaulting. A portion of the proceeds from the new loans was used to repay a 9.02% mortgage loan, of which $107 million was outstanding, that would otherwise mature in 2014. The repaid loan was secured by a pool of seven hotels, including four of the five hotels mortgaged to support the new loans. The remaining three hotels (two of which are non-strategic) that secured the repaid loan are now unencumbered. Also in September 2012, we repaid the remaining $60 million balance of a mortgage loan using excess proceeds from the new loans as well as asset sale proceeds. This repaid loan, which would have otherwise matured in 2013, was secured by five properties, of which four are now unencumbered (two of which are non-strategic) and one was mortgaged to secure one of the new loans. The repayments resulted in $11.6 million in debt extinguishment costs, primarily prepayment penalties.

We reported $31.4 million and $32.9 million of interest expense for the three months ended September 30, 2012 and 2011, respectively, which is net of: (i) interest income of $34,000 and $59,000 and (ii) capitalized interest of $3.1 million and $403,000, respectively. We reported $93.5 million and $98.2 million of interest expense for the nine months ended September 30, 2012 and 2011, respectively, which is net of: (i) interest income of $117,000 and $151,000 and (ii) capitalized interest of $9.7 million and $913,000, respectively.