DEBT

The following is a summary of our total secured notes payable outstanding as of December 31, 2013 and December 31, 2012 (in thousands):



Description of Debt	Principal Balance as of						Stated Interest Rate		Stated Maturity Date
Description of Debt	December 31, 2013			December 31, 2012			as of December 31, 2013		Stated Maturity Date
Alamo Quarry Market ⁽¹⁾	$	—		$	93,942
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 ⁽²⁾⁽³⁾	133,000			133,000			5.61	%	July 5, 2015
Del Monte Center ⁽³⁾	82,300			82,300			4.93	%	July 8, 2015
First & Main ⁽³⁾	84,500			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
South Bay Marketplace ⁽³⁾	23,000			23,000			5.48	%	February 10, 2017
Waikiki Beach Walk—Retail ⁽³⁾	130,310			130,310			5.39	%	July 1, 2017
Solana Beach Corporate Centre III-IV	36,804			37,204			6.39	%	August 1, 2017
Loma Palisades ⁽³⁾	73,744			73,744			6.09	%	July 1, 2018
One Beach Street ⁽³⁾	21,900			21,900			3.94	%	April 1, 2019
Torrey Reserve—North Court ⁽¹⁾	21,377			21,659			7.22	%	June 1, 2019
Torrey Reserve—VCI, VCII, VCIII ⁽¹⁾	7,200			7,294			6.36	%	June 1, 2020
Solana Beach Corporate Centre I-II ⁽¹⁾	11,475			11,637			5.91	%	June 1, 2020
Solana Beach Towne Centre ⁽¹⁾	38,249			38,790			5.91	%	June 1, 2020
City Center Bellevue ⁽³⁾	111,000			111,000			3.98	%	November 1, 2022
Total	962,259			1,057,680
Unamortized fair value adjustment	(10,085		)	(12,998		)
Total Secured Notes Payable Balance	$	952,174		$	1,044,682


(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)	Interest only.

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.

Certain loans require us to comply with various financial covenants, including the maintenance of minimum debt coverage ratios. As of December 31, 2013, we were in compliance with all loan covenants.

Scheduled principal payments on notes payable as of December 31, 2013 are as follows (in thousands):



2014	$	142,276
2015	235,980
2016	113,974
2017	190,139
2018	75,224
Thereafter	204,666
	$	962,259

Credit Facility

On January 19, 2011, upon completion of our Offering, we entered into a revolving credit facility, or the credit facility. A group of lenders for which an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as administrative agent and joint arranger, and an affiliate of Wells Fargo Securities, LLC acts as syndication agent and joint arranger, provided commitments for a revolving credit facility allowing borrowings of up to $250.0 million. At December 31, 2013, our maximum allowable borrowing amount was $222.3 million, of which $93.0 million was outstanding. The credit facility also had an accordion feature that allowed 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. The credit facility bore interest at the rate of either LIBOR or a base rate, in each case plus a margin that varied depending on our leverage ratio. At December 31, 2013, the interest rate on our outstanding credit facility was 1.8%. For the year ended December 31, 2013, we incurred approximately $0.4 million of interest expense on amounts drawn on our credit facility. The amount available for us to borrow under the credit facility was 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) was consummated through and including the last day of the third fiscal quarter that followed such date.

The amended credit facility included 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 provided that our annual distributions may not exceed the greater of (1) 95.0% of our funds from operations 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 existed or resulted from a distribution, we would have been precluded from making distributions other than those necessary to qualify and maintain our status as a REIT.

We and certain of our subsidiaries guaranteed 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, 2013, we were in compliance with all then in-place credit facility covenants.

On January 9, 2014, we entered into an amended and restated credit agreement, or the amended and restated credit facility, which amended and restated the then in-place credit facility. The amended and restated credit facility provides for aggregate, unsecured borrowing of $350 million, consisting of a revolving line of credit of $250 million, or the revolver loan, and a term loan of $100 million, or the term loan. The amended and restated credit facility has an accordion feature that may allow us to increase the availability thereunder up to an additional $250 million, subject to meeting specified requirements and obtaining additional commitments from lenders.

Borrowings under the amended and restated credit facility initially bear interest at floating rates equal to, at our option, either (1) LIBOR, plus a spread which ranges from (a) 1.35%-1.95% (with respect to the revolver loan) and (b) 1.30% to 1.90% (with respect to the term loan), in each case based on our consolidated leverage ratio, or (2) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 50 bps or (c) the Eurodollar rate plus 100 bps, plus a spread which ranges from (i) 0.35%-0.95% (with respect to the revolver loan) and (ii) 0.30% to 0.90% (with respect to the term loan), in each case based on our consolidated leverage ratio. The foregoing rates are more favorable than previously contained in the credit agreement in place as of December 31, 2013. If we obtain an investment-grade debt rating, under the terms set forth in the amended and restated credit facility, the spreads will further improve.

The revolver loan initially matures on January 9, 2018, subject to our option to extend the revolver loan up to two times, with each such extension for a six-month period. The term loan initially matures on January 9, 2016, subject to our option to extend the term loan up to three times, with each such extension for a 12-month period. The foregoing extension options are exercisable by us subject to the satisfaction of certain conditions.

Concurrent with the closing of the amended and restated credit facility, we drew down on the entirety of the $100 million term loan and entered into an interest rate swap agreement that is intended to fix the interest rate associated with the term loan at approximately 3.08% through its maturity date and extension options, subject to adjustments based on our consolidated leverage ratio.

Additionally, the amended and restated credit facility includes a number of customary financial covenants, including:


•	A maximum leverage ratio (defined as total indebtedness net of certain cash and cash equivalents to total asset value) of 60%, and during any material acquisition period the maximum leverage ratio allowable is 65%,


•	A maximum secured leverage ratio (defined as total secured debt to secured total asset value) of 45% at any time prior to December 31, 2015, and 40% thereafter, during a material acquisition period the maximum secured leverage ratio is increased to 50% at any time prior to December 31, 2015 and 45% thereafter,


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


•	A minimum unsecured interest coverage ratio of 1.75x,


•	A maximum unsecured leverage ratio of 60%, and during any material acquisition period the maximum unsecured leverage ratio allowable is 65%,


•	A minimum tangible net worth of $721.16 million, and 75% of the net proceeds of any additional equity issuances (other than additional equity issuances in connection with any dividend reinvestment program), and


•	Recourse indebtedness at any time cannot exceed 15% of total asset value.

The amended and restated credit facility provides that our annual distributions may not exceed the greater of (1) 95% 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.