Note 7. Indebtedness

Our principal debt obligations at December 31, 2014 were: (1) outstanding borrowings under our $750,000 unsecured revolving credit facility; (2) six public issuances of unsecured senior notes, including: (a) $250,000 principal amount at an annual interest rate of 4.30% due 2016, (b) $400,000 principal amount at an annual interest rate of 3.25% due 2019, (c) $200,000 principal amount at an annual interest rate of 6.75% due 2020, (d) $300,000 principal amount at an annual interest rate of 6.75% due 2021, (e) $250,000 principal amount at an annual interest rate of 4.75% due 2024 and (f) $350,000 principal amount at an annual interest rate of 5.625% due 2042; (3) our $350,000 principal amount term loan; and (4) $611,369 aggregate principal amount of mortgages secured by 45 of our properties (47 buildings) with maturity dates from 2015 to 2043. The 45 mortgaged properties had a carrying value of $816,065 at December 31, 2014. We also have two properties subject to capital leases totaling $12,770 at December 31, 2014; these two properties had a carrying value of $18,237 at December 31, 2014.

As of December 31, 2014, we have a $750,000 unsecured revolving credit facility that is available for general business purposes, including acquisitions. In September 2013, we amended the agreement governing our unsecured revolving credit facility with Wells Fargo Bank, National Association, as administrative agent, and a syndicate of other lenders. As a result of the amendment the stated maturity date of the revolving credit facility was extended from June 24, 2015 to January 15, 2018. Subject to the payment of an extension fee and meeting certain other conditions, we have an option to further extend the stated maturity date by an additional one year. The revolving credit facility agreement provides that we can borrow, repay and reborrow funds available under the revolving credit facility agreement until maturity, and no principal repayment is due until maturity. The $750,000 maximum amount of our revolving credit facility remained unchanged by the amendment. The revolving credit facility agreement continues to include a feature under which maximum borrowings under the facility may be increased to up to $1,500,000 in certain circumstances. Under this amendment, the interest rate payable on borrowings under the revolving credit facility agreement was reduced from LIBOR plus a premium of 160 basis points to LIBOR plus a premium of 130 basis points, and the facility fee was reduced from 35 basis points to 30 basis points per annum on the total amount of lending commitments. Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings. As a result of the amendment, we recognized a loss on early extinguishment of debt of $538 for the year ended December 31, 2013. As of December 31, 2014, the interest rate payable on borrowings under our revolving credit facility was 1.4% and the weighted average interest rate for borrowings under our revolving credit facility was 1.4% and 1.6%, and 1.8% for the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014 and February 26, 2015, we had $80,000 and no amounts, respectively, outstanding under our revolving credit facility. We incurred interest expense and other associated costs related to our revolving credit facility of $3,094, $3,781 and $5,733 for the years ended December 31, 2014, 2013 and 2012, respectively.

Our revolving credit facility agreement provides for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as a change of control of us, which includes RMR ceasing to act as our business manager and property manager.

In April 2014, we sold $400,000 of 3.25% senior unsecured notes due 2019 and $250,000 of 4.75% senior unsecured notes due 2024, raising net proceeds of approximately $644,889, after underwriting discounts but before expenses. Interest on the notes is payable semi-annually in arrears. We used the net proceeds of this offering for general business purposes, including funding the acquisitions described in Note 3.

On May 30, 2014, we entered into a term loan agreement with Wells Fargo Bank, National Association and a syndicate of other lenders, pursuant to which we obtained a $350,000 unsecured term loan. Our term loan matures on January 15, 2020, and is prepayable without penalty at any time. In addition, our term loan includes a feature under which maximum borrowings may be increased to up to $700,000 in certain circumstances. Our term loan bears interest at a rate of LIBOR plus a premium of 140 basis points that is subject to adjustment based upon changes to our credit ratings. We used the net proceeds of our term loan to repay amounts outstanding under our revolving credit facility, to repay mortgage notes and for general business purposes. As of December 31, 2014, the interest rate payable for amounts outstanding under our term loan was 1.6%. The weighted average annual interest rate for amounts outstanding on our term loan was 1.6% for the year ended December 31, 2014. We incurred interest expense and other associated costs related to our term loan of $3,263 for the year ended December 31, 2014.

Our public debt indenture and its supplements, our credit facility agreement and our term loan agreement contain a number of financial and other covenants, including covenants that restrict our ability to incur indebtedness or to make distributions under certain circumstances and require us to maintain financial ratios and a minimum net worth. We believe we were in compliance with the terms and conditions of our public debt indenture and its supplements, our credit facility agreement and our term loan agreement at December 31, 2014.

In connection with the acquisitions discussed in Note 3 above, during the year ended December 31, 2014, we assumed $15,630 of mortgage debt, which was recorded at a fair value of $16,643. This mortgage has a contractual interest rate of 6.28% and matures in July 2022. We recorded the assumed mortgage at its fair value, which exceeded its outstanding principal balance by $1,013. We determined the fair value of the assumed mortgage using a market approach based upon Level 3 inputs (significant other unobservable inputs) in the fair value hierarchy.

In June 2014, we repaid at maturity mortgage notes that encumbered two of our properties that had an aggregate principal balance of $35,807 and a weighted average interest rate of 5.8%. In October 2014, we prepaid at par our $14,700 loan incurred in connection with certain revenue bonds scheduled to mature on December 1, 2027. That loan had an interest rate of 5.875%. Also in October 2014, we prepaid a mortgage note scheduled to mature in May 2015 that encumbered one of our properties that had a principal balance of $11,900 and an interest rate of 6.25%. In December 2014, we prepaid a mortgage note scheduled to mature in July 2015 that encumbered one of our properties that had a principal balance of $11,308 and an interest rate of 6.37%. As a result, we recognized losses on early extinguishment of debt of $12 for the year ended December 31, 2014. Also, in February 2015, we repaid a mortgage note for approximately $29,227 that had a maturity date in March 2015 with an interest rate of 6.02% encumbering one of our properties.

In June 2013, we prepaid mortgage notes encumbering four of our properties that had an aggregate principal balance of $10,377, a weighted average interest rate of 6.1% and maturity dates later in 2013. In September 2013, we prepaid a mortgage note encumbering two of our properties that had an aggregate principal balance of $13,579, a weighted average interest rate of 6.9% and a maturity date later in 2013. As a result, we recognized losses on early extinguishment of debt of $259 for the year ended December 31, 2013.

At December 31, 2014 and 2013, our additional outstanding debt consisted of the following:


				December 31, 2014				December 31, 2013
				Face		Unamortized		Face		Unamortized
Unsecured Debt	Coupon		Maturity	Amount		Discount		Amount		Discount
Senior notes	4.300	%	2016	$	250,000	$	551	$	250,000	$	1,085
Senior notes	3.250	%	2019		400,000		256		—		—
Senior notes	6.750	%	2020		200,000		1,133		200,000		1,348
Senior notes	6.750	%	2021		300,000		3,696		300,000		4,230
Senior notes	4.750	%	2024		250,000		737		—		—
Senior notes	5.625	%	2042		350,000		—		350,000		—
Total unsecured debt				$	1,750,000	$	6,373	$	1,100,000	$	6,663


	Principal Balance as of							Number of	Initial		Net Book Value of
	December 31,				Interest			Properties as	Cost of		Collateral
Secured and Other Debt	2014(1)		2013(1)		Rate		Maturity	Collateral	Collateral		2014		2013
Mortgages(2)	$	—	$	36,145	5.83	%	Jun 14	—	$	79,000	$	—	$	77,799
Mortgage (3)		29,362		30,177	6.015	%	Mar 15	1		99,000		94,245		96,354
Mortgage(2)		—		12,093	6.25	%	May 15	—		22,350		—		22,033
Mortgage		4,914		5,020	5.65	%	Jun 15	1		22,143		20,511		20,965
Mortgage(2)		—		11,465	6.37	%	Jul 15	—		14,849		—		14,197
Mortgage		12,479		12,773	5.66	%	Jul 15	3		26,606		24,948		25,457
Mortgages		2,728		2,805	5.88	%	Jul 15	1		15,397		13,991		14,384
Mortgage		6,353		6,579	5.81	%	Oct 15	1		9,650		9,927		9,474
Mortgage		4,403		4,502	5.81	%	Oct 15	1		8,600		8,211		8,168
Mortgage		52,000		52,000	5.64	%	Jan 16	1		70,495		64,175		64,904
Mortgages		6,243		6,363	5.97	%	Apr 16	1		10,272		9,552		9,811
Mortgage		85,085		87,928	5.92	%	Nov 16	2		157,500		150,036		151,928
Mortgage		12,184		12,366	6.25	%	Nov 16	1		22,102		21,255		21,672
Mortgage		5,625		5,720	5.86	%	Mar 17	1		11,280		11,004		11,292
Mortgage		44,687		45,753	6.54	%	May 17	8		62,500		53,878		54,702
Mortgages		11,059		11,245	6.15	%	Aug 17	1		16,400		14,846		15,180
Mortgage		9,195		9,425	6.73	%	Apr 18	1		15,100		11,103		11,299
Mortgage		288,519		292,611	6.71	%	Sep 19	17		617,161		245,593		252,404
Mortgage(4)		2,723		3,007	7.31	%	Jan 22	1		18,827		16,136		16,478
Mortgage(4)		1,345		1,482	7.85	%	Jan 22	—		—		—		—
Mortgage		15,318		—	6.28	%	Jul 22	1		32,658		25,848		—
Mortgage		3,348		3,444	6.25	%	Feb 33	—		5,200		4,483		4,588
Mortgage		9,205		9,353	5.95	%	Aug 37	1		11,425		8,865		9,080
Mortgage		4,594		4,672	4.375	%	Sep 43	1		8,059		7,459		7,632
Bonds(2)		—		14,700	5.875	%	Dec 27	—		34,307		—		25,619
Capital Leases		12,770		13,314	7.70	%	Apr 26	2		28,601		18,237		18,627
Total secured	$	624,139	$	694,942				47	$	1,419,482	$	834,302	$	964,047

(1)

The principal balances are the amounts stated in the contracts. In accordance with U.S. generally accepted accounting principles, our carrying values and recorded interest expense may be different because of market conditions at the time we assumed certain of these debts. As of December 31, 2014 and 2013, the unamortized net premiums on certain of these mortgages were $2,937 and $4,485, respectively.

(2)

In 2014 we repaid this debt.

(3)

In 2015 we repaid this debt.

(4)

These two mortgages are collateralized by one MOB property acquired in July 2008.

We include amortization of capital lease assets in depreciation expense. Assets encumbered by capital leases had a net book value of $18,237 and $18,627 at December 31, 2014 and 2013, respectively.

Interest on our unsecured senior notes and our bonds is payable semi‑annually in arrears; however, no principal repayments are due until maturity. Required monthly payments on our mortgages include principal and interest. Payments under our capital leases are due monthly.

Required principal payments on our outstanding debt as of December 31, 2014, are as follows:


2015	$	71,541
2016		410,660
2017		65,941
2018		96,197
2019		671,757
Thereafter		1,488,043