Notes Payable and Revolving Lines of Credit

12 Months Ended

Dec. 31, 2018

Notes Payable and Revolving Lines of Credit

NOTES PAYABLE AND REVOLVING LINES OF CREDIT

The components of notes payable are summarized as follows:



Notes Payable	December 31, 2018			December 31, 2017			Fixed Rate	Variable Rate	Basis Rate ⁽²⁾	Maturity Dates
Secured fixed rate notes payable ⁽¹⁾	$	2,032,414		$	2,095,495		2.5% - 6.0%			February 2019 - February 2030
Secured variable rate notes payable ⁽¹⁾	834,735			717,979				3.9% - 4.1%	Libor plus 1.4% - 1.6%	May 2019 - August 2028
Unsecured fixed rate notes payable	990,000			600,000			3.4% - 4.4%			January 2024 - July 2028
Unsecured variable rate notes payable	310,000			350,000				3.8%	Libor plus 1.3%	October 2023 - January 2024
Total	4,167,149			3,763,474
Less: unamortized debt issuance costs	(29,936		)	(24,977		)
Total	$	4,137,213		$	3,738,497

⁽¹⁾ The loans are collateralized by mortgages on real estate assets and the assignment of rents.
⁽²⁾ 30-day USD LIBOR

On December 7, 2018, the Company amended the credit agreement originally entered into on October 14, 2016 (the "Credit Agreement"). The amended Credit Agreement provides for aggregate borrowings of up to $1.35 billion consisting of a senior unsecured four-year revolving credit facility of $650 million maturing January 2023 (the “Revolving Credit Facility”), a senior unsecured loan of $480 million maturing January 2024 (the Tranche 1 Term Loan Facility”) and a senior unsecured loan of $220 million maturing October 2023 (the “Tranche 2 Term Loan Facility” and, together with the Revolving Credit Facility and the Tranche 1 Term Loan Facility, the “Credit Facility”). The Company may request an increase in the amount of the commitments under the Credit Facility up to an aggregate of $2.0 billion, and extend the term of the Revolving Credit Facility for up to two additional periods of six months each, after satisfying certain conditions.

Amounts outstanding under the Credit Facility bear interest at floating rates, at the Company’s option, equal to either (i) LIBOR plus the applicable Eurodollar rate margin or (ii) the applicable base rate which is the applicable margin plus the highest of (a) 0.0%, (b) the federal funds rate plus 0.50%, (c) U.S. Bank’s prime rate or (d) the Eurodollar rate plus 1.00%. The applicable Eurodollar rate margin will range from 1.05% to 1.7% per annum and the applicable base rate margin will range from 0.05% to 0.7% per annum, in each case depending on the Company’s Consolidated Leverage Ratio, as defined in the Credit Agreement, and the type of loan. If the Operating Partnership obtains a specified investment grade rating from two or more specified credit rating agencies, and elects to use the alternative rates based on the Company’s debt rating, the applicable Eurodollar rate margin will range from 0.75% to 1.65% per annum and the applicable base rate margin will range from 0.0% to 0.7% per annum, in each case depending on the rating achieved and the type of loan.

The Credit Agreement is guaranteed by the Company and is not secured by any assets of the Company. We are subject to certain restrictive covenants relating to our outstanding debt. As of December 31, 2018, the Company was in compliance with all of its financial covenants.

The following table summarizes the scheduled maturities of notes payable, excluding available extensions, at December 31, 2018:




2019	$	208,742
2020	699,522
2021	228,015
2022	294,948
2023	915,646
Thereafter	1,820,276
	$	4,167,149

Real estate assets are pledged as collateral for the secured loans. Of the Company’s $4,167,149 principal amount of notes payable outstanding at December 31, 2018, $2,601,960 was recourse due to guarantees or other security provisions.

All of the Company’s lines of credit are guaranteed by the Company. The following table presents information on the Company’s lines of credit, the proceeds of which are used to repay debt and for general corporate purposes, for the periods indicated:

As of December 31, 2018

Revolving Lines of Credit

Amount Drawn

Capacity

Interest Rate

Origination Date

Maturity

Basis Rate ⁽¹⁾

Credit Line 1 ⁽²⁾

81,000

140,000

4.0%

6/4/2010

7/1/2021

LIBOR plus 1.5%

Credit Line 2 ⁽³⁾⁽⁴⁾

—

650,000

3.6%

12/7/2018

1/29/2023

LIBOR plus 1.1%

81,000

790,000

(1) 30-day USD LIBOR

(2) Secured by mortgages on certain real estate assets. One two-year extension available.

(3) Unsecured. Two six-month extensions available.

(4) Basis Rate as of December 31, 2018. Rate is subject to change based on our consolidated leverage ratio.

EXCHANGEABLE SENIOR NOTES

In September 2015, the Operating Partnership issued $575,000 of its 3.125% Exchangeable Senior Notes due 2035. Costs incurred to issue the 2015 Notes were approximately $11,992, consisting primarily of a 2.0% underwriting fee. These costs are being amortized as an adjustment to interest expense over five years, which represents the estimated term based on the first available redemption date, and are included in exchangeable senior notes, net, in the consolidated balance sheets. The 2015 Notes are general unsecured senior obligations of the Operating Partnership and are fully guaranteed by the Company. Interest is payable on April 1 and October 1 of each year beginning April 1, 2016, until the maturity date of October 1, 2035. The Notes bear interest at 3.125% per annum and contain an exchange settlement feature, which provides that the 2015 Notes may, under certain circumstances, be exchangeable for cash (for the principal amount of the 2015 Notes) and, with respect to any excess exchange value, for cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s option. The exchange rate of the 2015 Notes as of December 31, 2018 was approximately 10.78 shares of the Company’s common stock per $1,000 principal amount of the 2015 Notes.

The Operating Partnership may redeem the 2015 Notes at any time to preserve the Company’s status as a REIT. In addition, on or after October 5, 2020, the Operating Partnership may redeem the 2015 Notes for cash, in whole or in part, at 100% of the principal amount plus accrued and unpaid interest, upon at least 30 days but not more than 60 days prior written notice to the holders of the 2015 Notes. The holders of the 2015 Notes have the right to require the Operating Partnership to repurchase the 2015 Notes for cash, in whole or in part, on October 1 of the years 2020, 2025 and 2030, (unless the Operating Partnership has called the 2015 Notes for redemption), and upon the occurrence of certain designated events, in each case for a repurchase price equal to 100% of the principal amount of the 2015 Notes plus accrued and unpaid interest. Certain events are considered “Events of Default,” as defined in the indenture governing the 2015 Notes, which may result in the accelerated maturity of the 2015 Notes.

Additionally, the 2015 Notes can be exchanged during any calendar quarter, if the last reported sale price of the common stock of the Company is greater than or equal to 130% of the exchange price for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter. The price of the Company’s common stock did not exceed 130% of the exchange price for the required time period for the 2015 Notes during the quarter ended December 31, 2018.

On June 21, 2013, the Operating Partnership issued $250,000 of its 2013 Notes at a 1.5% discount, or $3,750. Costs incurred to issue the 2013 Notes were approximately $1,672. These costs were amortized as an adjustment to interest expense over five years, which represented the estimated term based on the first available redemption date. The 2013 Notes bore interest at 2.375% per annum and contained an exchange settlement feature. The Operating Partnership redeemed all remaining outstanding 2013 Notes on July 5, 2018.

GAAP requires entities with convertible debt instruments that may be settled entirely or partially in cash upon conversion to separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s economic interest cost. The Company therefore accounts for the liability and equity component of the 2015 Notes separately. The equity components are included in paid-in capital in stockholders’ equity in the consolidated balance sheets, and the value of the equity components are treated as original issue discount for purposes of accounting for the debt components. The discount is being amortized as interest expense over the remaining period of the debt through its first redemption date, October 1, 2020 for the 2015 Notes. The effective interest rate on the liability components of the 2015 Notes is 4.0%, which approximates the market rate of interest of similar debt without exchange features (i.e. nonconvertible debt) at the time of issuance.

Information about the 2013 Notes and 2015 Notes (collectively, the "Notes"), including the total carrying amounts of the equity components, the principal amounts of the liability components, their unamortized discounts and net carrying amount were as follows for the periods indicated:



	December 31, 2018			December 31, 2017
Carrying amount of equity component - 2015 Notes	$	22,597		$	22,597
Carrying amount of equity component - 2013 Notes	—			—
Carrying amount of equity components	$	22,597		$	22,597
Principal amount of liability component - 2015 Notes	$	575,000		$	575,000
Principal amount of liability component - 2013 Notes	—			49,259
Unamortized discount - equity component - 2015 Notes	(8,417		)	(12,974		)
Unamortized discount - equity component - 2013 Notes	—			(315		)
Unamortized cash discount - 2013 Notes	—			(74		)
Unamortized debt issuance costs	(4,209		)	(6,620		)
Net carrying amount of liability components	$	562,374		$	604,276

The amount of interest cost recognized relating to the contractual interest rate and the amortization of the discount on the liability component for the Notes were as follows for the periods indicated:



	For the Year Ended December 31,
	2018		2017		2016
Contractual interest	$	18,106	$	19,303	$	19,483
Amortization of discount	4,687		5,103		4,980
Total interest expense recognized	$	22,793	$	24,406	$	24,463

Repurchase of 2013 Notes

During the year ended December 31, 2018, the Company repurchased a total principal amount of $49,259 of the 2013

Notes, which represented all of the remaining principal amount outstanding. The Company paid cash of $80,270 for the total of

the principal amount and the exchange value in excess of the principal amount.

During the year ended December 31, 2017, the Company repurchased a total principal amount of $13,911 of the 2013 Notes. The Company paid cash of $20,042 for the total of the principal amount and the exchange value in excess of the principal amount.

During the year ended December 31, 2016, the Company repurchased a total principal amount of $22,194 of the 2013 Notes. The Company paid cash for the principal amount, and issued a total of 148,940 shares of common stock valued at $13,066 for the exchange value in excess of the principal amount.

The Company allocated the value of the consideration paid to repurchase the 2013 Notes (1) to the extinguishment of the liability component and (2) to the reacquisition of the equity component. The amount allocated to the extinguishment of the liability component is equal to the fair value of that component immediately prior to extinguishment. The difference between the consideration attributed to the extinguishment of the liability component and the sum of (a) the net carrying amount of the repurchased liability component, and (b) the related unamortized debt issuance costs, is recognized as a gain on debt extinguishment. The remaining settlement consideration is allocated to the reacquisition of the equity component of the repurchased 2013 Notes and recognized as a reduction of stockholders’ equity.

Information about the repurchases is as follows:



	For the Year Ended December 31,
	2018			2017			2016
Principal amount repurchased	$	49,259		$	13,911		$	22,194

Amount allocated to:
Extinguishment of liability component	$	49,019		$	13,692		$	21,363
Reacquisition of equity component	31,251			6,350			13,898
Total consideration paid for repurchase	$	80,270		$	20,042		$	35,261
Exchangeable senior notes repurchased	$	49,259		$	13,911		$	22,194
Extinguishment of liability component	(49,019		)	(13,692		)	(21,363		)
Discount on exchangeable senior notes	(230		)	(184		)	(788		)
Related debt issuance costs	(10		)	(35		)	(43		)
Gain/(loss) on repurchase	$	—		$	—		$	—