NOTE 9. DEBT

The following is a summary of our total debt outstanding as of December 31, 2012 and December 31, 2011 (in thousands):


Description of Debt	Principal Balance as of						Stated Interest Rate as of December 31, 2012			Stated Maturity Date
Description of Debt	December 31, 2012			December 31, 2011			Stated Interest Rate as of December 31, 2012			Stated Maturity Date
Alamo Quarry Market ⁽¹⁾⁽²⁾	$	93,942		$	96,027			5.67	%		January 8, 2014
Waikele Center ⁽⁴⁾		140,700			140,700			5.15	%		November 1, 2014
The Shops at Kalakaua ⁽⁴⁾		19,000			19,000			5.45	%		May 1, 2015
The Landmark at One Market ⁽²⁾⁽⁴⁾		133,000			133,000			5.61	%		July 5, 2015
Del Monte Center ⁽⁴⁾		82,300			82,300			4.93	%		July 8, 2015
First & Main ⁽⁴⁾		84,500			84,500			3.97	%		July 1, 2016
Imperial Beach Gardens ⁽⁴⁾		20,000			20,000			6.16	%		September 1, 2016
Mariner’s Point ⁽⁴⁾		7,700			7,700			6.09	%		September 1, 2016
South Bay Marketplace ⁽⁴⁾		23,000			23,000			5.48	%		February 10, 2017
Waikiki Beach Walk—Retail ⁽⁴⁾		130,310			130,310			5.39	%		July 1, 2017
Solana Beach Corporate Centre III-IV ⁽⁵⁾		37,204			37,330			6.39	%		August 1, 2017
Loma Palisades ⁽⁴⁾		73,744			73,744			6.09	%		July 1, 2018
One Beach Street ⁽⁴⁾		21,900			—			3.94	%		April 1, 2019
Torrey Reserve—North Court ⁽¹⁾		21,659			21,921			7.22	%		June 1, 2019
Torrey Reserve—VCI, VCII, VCIII ⁽¹⁾		7,294			7,380			6.36	%		June 1, 2020
Solana Beach Corporate Centre I-II ⁽¹⁾		11,637			11,788			5.91	%		June 1, 2020
Solana Beach Towne Centre ⁽¹⁾		38,790			39,293			5.91	%		June 1, 2020
City Center Bellevue ⁽⁴⁾		111,000			—			3.98	%		November 1, 2022

Total		1,057,680			927,993

Unamortized fair value adjustment		(12,998	)		(15,926	)

Total Secured Notes Payable Balance		1,044,682			912,067
Debt of Discontinued Operations Secured Notes Payable
160 King Street ⁽³⁾		—			31,412			N/A			May 1, 2014

Total Debt Outstanding	$	1,044,682		$	943,479

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

(2)	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.

(3)	Principal payments based on a 20-year amortization schedule. Note payable included in liabilities of discontinued operations as of December 31, 2011.

(4)	Interest only.

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

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 October 10, 2012, we entered into a ten-year non-recourse mortgage loan with PNC Bank, National Association with an original principal amount of $111.0 million. The loan is secured by a first-priority deed of trust on City Center Bellevue and an assignment of all leases, rents and security deposits relating to City Center Bellevue. The loan has a maturity date of November 1, 2022, bears interest at a fixed rate per annum of 3.98% and is interest only.

On March 29, 2012, we entered into a seven-year non-recourse mortgage loan with PNC Bank, National Association with an original principal amount of $21.9 million. The loan is secured by a first-priority deed of trust on One Beach Street and an assignment of all leases, rents and security deposits relating to One Beach Street. The loan has a maturity date of April 1, 2019, bears interest at a fixed rate per annum of 3.94% and is interest only.

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.

Certain loans require us to comply with various financial covenants, including the maintenance of minimum debt coverage ratios. As of December 31, 2012, we were in compliance with all loan covenants.

Scheduled principal payments on notes payable as of December 31, 2012 are as follows (in thousands):


2013	$	3,704
2014		233,993
2015		235,980
2016		113,974
2017		190,139
Thereafter		279,890

	$	1,057,680

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. During the third quarter of 2012, we drew approximately $164.0 million on our credit facility in connection with our acquisition of City Center Bellevue. Additionally, during the fourth quarter of 2012, we repaid all outstanding principal and interest amounts related to our borrowings with the proceeds from the sale of 160 King Street. At December 31, 2012, our maximum allowable borrowing amount was $226.3 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. On September 7, 2012, the credit facility was amended a third time to allow our consolidated total secured indebtedness to be up to 55% of our secured total asset value for the period commencing upon the date that a material acquisition (generally, greater than $100 million) is consummated through and including the last day of the third fiscal quarter that follows such date.

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 up to 55% in circumstances,

•

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.

As of December 31, 2012, we were in compliance with all credit facility covenants.