NOTE 9. DEBT

The following is a summary of our total debt outstanding as of December 31, 2011 and December 31, 2010 (in thousands):


Description of Debt	Principal Balance as of					Stated Interest Rate as of December 31, 2011			Stated Maturity Date
Description of Debt	December 31, 2011			December 31, 2010		Stated Interest Rate as of December 31, 2011			Stated Maturity Date
Secured Notes Payable
160 King Street ^(1)(2)(3)(4)	$	—		$	8,564		N/A			November 1, 2012
Carmel Country Plaza ⁽¹⁾⁽⁵⁾		—			10,145		N/A			January 2, 2013
Santa Fe Park RV Resort ⁽¹⁾⁽⁵⁾		—			1,856		N/A			January 2, 2013
Lomas Santa Fe Plaza⁽¹⁾⁽⁵⁾		—			19,599		N/A			May 1, 2013
Torrey Reserve—South Court ⁽¹⁾⁽⁵⁾		—			12,892		N/A			May 1, 2013
Carmel Mountain Plaza⁽¹⁾⁽⁵⁾		—			62,907		N/A			June 1, 2013
Alamo Quarry Market ⁽⁵⁾⁽⁶⁾		96,027			98,011		5.67	%		January 8, 2014
160 King Street⁽⁷⁾		31,412			32,931		5.68	%		May 1, 2014
Waikele Center⁽³⁾		140,700			140,700		5.15	%		November 1, 2014
The Shops at Kalakaua ⁽³⁾		19,000			19,000		5.45	%		May 1, 2015
The Landmark at One Market⁽³⁾⁽⁶⁾		133,000			133,000		5.61	%		July 5, 2015
Del Monte Center ⁽³⁾		82,300			82,300		4.93	%		July 8, 2015
Rancho Carmel Plaza⁽¹⁾⁽⁵⁾		—			8,049		N/A			January 1, 2016
First & Main⁽³⁾		84,500			—		3.97	%		July 1, 2016
Imperial Beach Gardens⁽³⁾		20,000			20,000		6.16	%		September 1, 2016
Mariner's Point⁽³⁾		7,700			7,700		6.09	%		September 1, 2016
Torrey Reserve—ICW Plaza⁽¹⁾⁽³⁾		—			43,000		N/A			February 1, 2017
South Bay Marketplace ⁽³⁾		23,000			23,000		5.48	%		February 10, 2017
Waikiki Beach Walk—Retail ⁽³⁾		130,310			—		5.39	%		July 1, 2017
Solana Beach Corporate Centre III-IV ⁽⁸⁾		37,330			—		6.39	%		August 1, 2017
Loma Palisades⁽³⁾		73,744			73,744		6.09	%		July 1, 2018
Torrey Reserve—North Court ⁽⁵⁾		21,921			22,165		7.22	%		June 1, 2019
Torrey Reserve—Torrey Daycare ⁽¹⁾⁽⁹⁾		—			1,660		N/A			June 1, 2019
Torrey Reserve—VCI, VCII, VCIII ⁽⁵⁾		7,380			7,462		6.36	%		June 1, 2020
Solana Beach Corporate Centre I-II ⁽⁵⁾		11,788			—		5.91	%		June 1, 2020
Solana Beach Towne Centre⁽⁵⁾		39,293			—		5.91	%		June 1, 2020

		959,405			828,685

Unamortized fair value adjustment		(15,926	)		—

		943,479			828,685

Unsecured Notes Payable
Waikele Center Notes ^(1)(2)(3)		—			5,813		N/A			February 15, 2011
Landmark Note ^(1)(2)(3)		—			19,000		N/A			July 1, 2013
Carmel Mountain Note ^(1)(2)(3)		—			13,200		N/A			August 1, 2013

		—			38,013

Notes Payable to Affiliates
Del Monte Center Affiliates ^(1)(10)		—			5,266		N/A			March 1, 2013
Debt of Discontinued Operations
Secured Notes Payable
Valencia Corporate Center ^(1)(2)(11)		—			7,223		N/A			February 1, 2011
Valencia Corporate Center ⁽¹⁾⁽⁵⁾		—			15,639		N/A			October 1, 2012

		—			22,862

Total Debt Outstanding	$	943,479		$	894,826

(1)	Note was voluntarily repaid in full as part of the Formation Transactions.

(2)	Loan was fully or partially guaranteed by owners or affiliates.

(3)	Interest only.

(4)	Secured by the owners' equity interests in the entity.

(5)	Principal payments based on a 30-year amortization schedule.

(6)	Maturity Date is the earlier of the loan maturity date under the loan agreement, or the "Anticipated Repayment Date" as specifically defined in the loan agreement, which is the date after which substantial economic penalties apply if the loan has not been paid off.

(7)	Principal payments based on a 20-year amortization schedule.

(8)	Loan is interest only through August 2012. Beginning in September 2012, principal payments are based on a 30-year amortization schedule.

(9)	Principal payments based on a 25-year amortization schedule. The interest rate will be reset to the greater of 6.50% or LIBOR plus 4.00% on June 1, 2014.

(10)	Principal payments based on a 5-year amortization schedule.

(11)	Interest rate has floor of 4.50%

We used a portion of net proceeds received from the Offering to repay in full certain outstanding indebtedness, including applicable prepayment costs, exit fees and defeasance costs. The defeasance costs of $24.3 million are included in early extinguishment of debt, along with $0.6 million of unamortized deferred loan fees and $0.9 million of unamortized debt fair value adjustments that were written off related to loans repaid at the time of the Offering. Additionally, we paid $9.0 million in loan transfer and consent fees to lenders, which were expensed as incurred, in order for the lenders to consent to the transfer of the existing loans at certain properties to the Operating Partnership as part of the Formation Transactions.

On June 1, 2011, we entered into a five-year non-recourse mortgage loan with PNC Bank, National Association with an original principal amount of $84.5 million. The loan is secured by a first-priority deed of trust on First & Main and an assignment of all leases, rents and security deposits relating to First & Main. The loan has a maturity date of July 1, 2016, bears interest at a fixed rate per annum of 3.97% and is interest only.

On November 10, 2010, our Predecessor obtained a $13.2 million unsecured loan related to the acquisition of the vacated Mervyn's building at Carmel Mountain Plaza. The loan bears interest at LIBOR plus 2.0% through November 1, 2011 with increases of 0.50% on November 2, 2011 and November 2, 2012. The loan would have matured on August 1, 2013 and required interest only payments through maturity, but the loan was repaid in full as part of the Formation Transactions.

On June 30, 2010, our Predecessor obtained a $23.0 million unsecured loan related to the acquisition of the third party's interests in Landmark. The loan bears interest at LIBOR plus 2.0% through July 1, 2011 with increases of 0.50% on July 2, 2011 and July 2, 2012. The loan would have matured on July 1, 2013, and required interest only payments through maturity, except for a one time repayment of $4.0 million paid on December 31, 2010, but the loan was repaid in full as part of the Formation Transactions.

On June 1, 2010, our Predecessor closed on a $7.5 million ten year loan secured by a deed of trust on the property owned by Torrey Reserve-VC I, Torrey Reserve-VC II, and Torrey Reserve-VC III in San Diego, California. The loan bears interest at 6.36% and matures on June 1, 2020. The proceeds from the loan were used to repay the outstanding loans on Torrey Reserve-VC I, Torrey Reserve-VC II, and Torrey Reserve-VC III, which had outstanding balances of $5.8 million at the time of repayment.

On March 18, 2010, the Waikele Center unsecured loans were modified to extend their maturity to February 15, 2011. The previous maturity date was February 15, 2010, which had been extended during 2009 from the original maturity date of January 1, 2009. These unsecured loans were repaid in full as part of the Formation Transactions.

On May 31, 2009, our Predecessor refinanced the then-existing loan on the Torrey Reserve-North Court property of $16.2 million with a new $22.5 million loan that bears interest at 7.22% and matures on June 1, 2019.

On May 31, 2009, our Predecessor refinanced the then existing loan on the Torrey Reserve-Daycare property of $0.9 million with a new $1.7 million loan which bore interest at 6.50%. The loan would have matured on June 1, 2019, but it was repaid in full as part of the Formation Transactions.

On January 20, 2009, the Valencia Corporate Center construction loan was modified, and the loan commitment of $11.7 million was reduced to $10.0 million. On November 5, 2009, the loan was further modified to reduce the loan commitment to $9.2 million and extend the maturity through November 1, 2010. At modification, a principal payment of $0.8 million was made to reduce the outstanding principal balance to $7.8 million. On November 8, 2010, the loan was again modified to extend the maturity through February 1, 2011, and a principal payment of $0.6 million was made to reduce the outstanding principal balance to $7.2 million. This loan is included in liabilities of discontinued operations on the balance sheet at December 31, 2010 and was repaid in full as part of the Formation Transactions.

Certain loans require us to comply with various financial covenants, including the maintenance of minimum debt coverage ratios. As of December 31, 2011, we were in compliance with all loan covenants.

Scheduled principal payments on notes payable as of December 31, 2011 are as follows (in thousands):


2012	$	4,822
2013		5,405
2014		262,095
2015		235,980
2016		113,974
Thereafter		337,129

	$	959,405

Credit Facility

On January 19, 2011, in connection with the Offering, we entered into a credit facility pursuant to which a group of lenders provided commitments for a revolving credit facility allowing borrowings of up to $250.0 million. At December 31, 2011, our maximum allowable borrowing amount was $191.8 million. The credit facility has an accordion feature that may allow us to increase the availability thereunder up to a maximum of $400.0 million, subject to meeting specified requirements and obtaining additional commitments from lenders. No amounts have been borrowed on the credit facility to date. The credit facility bears interest at the rate of either LIBOR or a base rate, in each case plus a margin that will vary depending on our leverage ratio. The amount available for us to borrow under the credit facility is subject to the net operating income of our properties that form the borrowing base of the facility and a minimum implied debt yield of such properties.

On March 7, 2011, the credit facility was amended to allow us or our Operating Partnership to purchase GNMA securities with maturities of up to 30 years. On January 10, 2012, the credit facility was amended a second time to (1) extend the maturity date to January 10, 2016 (with a one-year extension option), (2) decrease the applicable interest rates and (3) modify certain financial covenants contained therein (Note 19).

The amended credit facility includes a number of customary financial covenants, including:

•

a maximum leverage ratio (defined as total indebtedness net of certain unrestricted cash and cash equivalents to total asset value) of 60%,

•

a minimum fixed charge coverage ratio (defined as consolidated earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 1.50x,

•

a maximum secured leverage ratio (defined as total secured indebtedness to secured total asset value) of 50%,

•

a minimum tangible net worth equal to at least 75% of our tangible net worth at January 19, 2011, plus 85% of the net proceeds of any additional equity issuances (other than additional equity issuances in connection with any dividend reinvestment program), and

•

a $35.0 million limit on the maximum principal amount of recourse indebtedness we may have outstanding at any time, other than under the credit facility.

The credit facility provides that our annual distributions may not exceed the greater of (1) 95.0% of our funds from operations ("FFO") or (2) the amount required for us to (a) qualify and maintain our REIT status and (b) avoid the payment of federal or state income or excise tax. If certain events of default exist or would result from a distribution, we may be precluded from making distributions other than those necessary to qualify and maintain our status as a REIT.

We and certain of our subsidiaries guarantee the obligations under the credit facility, and certain of our subsidiaries pledged specified equity interests in our subsidiaries as collateral for our obligations under the credit facility.