Note 13 — Other Debt

Corporate Bond Offering

On February 6, 2014, the OP issued, in a private offering, $2.55 billion aggregate principal amount of senior unsecured notes consisting of $1.3 billion aggregate principal amount of 2.00% senior notes due February 6, 2017 (the “2017 Notes”), $750.0 million aggregate principal amount of 3.00% senior notes due February 6, 2019 (the “2019 Notes”) and $500.0 million aggregate principal amount of 4.60% senior notes due February 6, 2024 (the “2024 Notes,” and, together with the 2017 Notes and 2019 Notes, the “Notes”). The Notes are guaranteed by the Company. The OP may redeem all or a part of any series of the Notes at any time at its option at the redemption prices set forth in the indenture governing the Notes, plus accrued and unpaid interest on the principal amount of the Notes of such series being redeemed to, but excluding, the applicable redemption date. With respect to the 2019 Notes and the 2024 Notes, if such Notes are redeemed on or after January 6, 2019 with respect to the 2019 Notes, or November 6, 2023 with respect to the 2024 Notes, the redemption price will equal 100% of the principal amount of the Notes of the applicable series to be redeemed, plus accrued and unpaid interest on the amount being redeemed to, but excluding, the applicable redemption date. In conjunction with this corporate bond offering, aggregate discounts totaling $4.2 million were recorded. As of September 30, 2014, the unamortized net discount totaled $3.7 million.

On September 12, 2014, the OP commenced an offer to exchange the 2017 Notes, 2019 Notes and 2024 Notes for new $1.3 billion aggregate principal amount of 2.00% senior notes due 2017 (the “Exchange 2017 Notes”), new $750.0 million aggregate principal amount of 3.00% senior notes due 2019 (the “Exchange 2019 Notes”) and new $500.0 million aggregate principal amount of 4.60% senior notes due 2024 (the “Exchange 2024 Notes,” and, together with the Exchange 2017 Notes and Exchange 2019 Notes, the “Exchange Notes”). The terms of the Exchange Notes are substantially similar to the terms of the Notes except that the Exchange Notes are registered under the Securities Act of 1933 and are freely transferable. The exchange offer closed on October 16, 2014, with 100% of the Notes exchanged for Exchanged Notes.

Convertible Senior Note Offering

Effective July 29, 2013, the Operating Partnership issued to the General Partner $300.0 million of the 3.0% Convertible Senior Notes due 2018 and issued an additional $10.0 million of such notes on August 1, 2013 (collectively, the “Original 2018 Notes”). Effective December 10, 2013, the Company issued an additional $287.5 million through a reopening of the Original 2018 Notes indenture agreement (the “Reopened 2018 Notes,” together with the Original 2018 Notes, the “2018 Notes”). The 2018 Notes mature on August 1, 2018. Such issuances were identical to ARCP’s registered issuances of the same amount of notes to various purchasers in a public offering. The fair value of the Original 2018 Notes and Reopened 2018 Notes was determined at issuance to be $299.6 million and $282.1 million, respectively, resulting in a debt discount of $10.4 million and $5.4 million, respectively, with an offset recorded for the General Partner to additional paid-in capital and for the Operating Partnership to partners’ equity, both representing the equity component of the notes for the conversion options. The discount is being amortized to interest expense over the expected lives of the 2018 Notes. As of September 30, 2014, the carrying value of the Original 2018 Notes and Reopened 2018 Notes was $302.1 million and $283.0 million, respectively. In connection with any permissible conversion election made by the holders of the identical convertible notes issued by ARCP, the General Partner may elect to convert the 2018 Notes into cash, General Partner OP Units or a combination thereof, in limited circumstances prior to February 1, 2018 and may convert the 2018 Notes at any time into such consideration on or after February 1, 2018. The initial conversion rate is 59.805 General Partner OP Units per $1,000 principal amount of 2018 Notes.

Effective December 10, 2013, the Operating Partnership issued to the General Partner $402.5 million of 3.75% Convertible Senior Notes due 2020 (the “2020 Notes”). The 2020 Notes mature on December 15, 2020. Such issuance was identical to ARCP’s registered issuance of the same amount of notes to various purchasers in a public offering. The fair value of the 2020 Notes was determined at issuance to be $389.7 million, resulting in a debt discount of $12.8 million with an offset recorded recorded for the General Partner to additional paid-in capital and for the Operating Partnership to partners’ equity, both representing the equity component of the notes for the conversion options. The discount is being amortized to interest expense over the expected life of the 2020 Notes. As of September 30, 2014, the carrying value of the 2020 Notes was $391.2 million. In connection with any permissible conversion election made by the holders of the identical convertible notes issued by ARCP, the General Partner may elect to convert the 2020 Notes into cash, General OP Units or a combination thereof, in limited circumstances prior to June 15, 2020 and may convert the 2020 Notes at any time into such consideration on or after June 15, 2020. The initial conversion rate is 66.0262 General Partner OP Units per $1,000 principal amount of 2020 Notes.

The remaining unamortized discount for the 2018 Notes and 2020 Notes totaled $23.7 million as of September 30, 2014.

Secured Term Loan

As part of the CapLease Merger, the Company assumed a secured term loan with KBC Bank, N.V. with a principal balance of $59.8 million and a fair value of $60.7 million at the CapLease Acquisition Date. The Company recorded a premium of $0.8 million upon the assumption of the term loan in Other debt, net on the consolidated balance sheet. The interest coupon on the loan is fixed at 5.81% annually until the loan matures in January 2018. The loan is non-recourse to the Company, subject to limited non-recourse exceptions. The secured term loan provides for monthly payments of both principal and interest. During the nine months ended September 30, 2014, the Company made principal payments of $10.2 million. The scheduled principal repayments subsequent to September 30, 2014 are $2.7 million for the period October 1, 2014 through December 31, 2014 and $11.9 million, $12.5 million, $7.7 million and $13.3 million for the years ended December 31, 2015, 2016, 2017 and 2018, respectively. The premium is being amortized to interest expense on the consolidated statements of operations over the life of the secured term loan. As of September 30, 2014, the unamortized premium is $0.6 million. As of September 30, 2014, the carrying value of the secured term loan was $48.6 million, which is included in other debt, net in the accompanying consolidated balance sheets.

Amounts related to the secured term loan as of September 30, 2014 were as follows (in thousands):


	Borrowings		Collateral Carrying Value
Loans held for investment	$	30,689	$	43,900
Intercompany mortgage loans on CapLease properties		4,201		15,091
CMBS		13,126		21,600

	$	48,016	$	80,591

Repayments and Termination of Other Debt

Trust Preferred Notes

As part of the CapLease Merger, the Company assumed $30.9 million in aggregate principal amount of fixed/floating rate preferred notes with a fair value of $26.5 million at the CapLease Acquisition Date. The Company recorded a discount of $4.4 million upon the assumption of the notes in Other debt, net on the consolidated balance sheet. On July 30, 2014, the Company redeemed the notes at par. Upon redemption, the Company wrote off $4.4 million of the remaining unamortized discount to Extinguishment of debt, net in the consolidated statement of operations.

Senior Notes

As part of the CapLease Merger, the Company assumed $19.2 million of senior notes (the “Senior Notes”) that bore interest at an annual interest rate of 7.50%, payable semi-annually on April 1 and October 1, with a fair value of $19.3 million at the CapLease Acquisition Date. The Company recorded a premium of $0.1 million upon the assumption of the Senior Notes in Other debt, net on the consolidated balance sheet. On July 14, 2014, the Company redeemed the $19.2 million outstanding on the Senior Notes at par. Upon redemption, the Company wrote off $0.1 million of the remaining unamortized premium to Extinguishment of debt, net in the consolidated statement of operations.

Repurchase Agreements

As part of the Cole Merger, the Company assumed $49.0 million of repurchase agreements secured by a portion of the Company’s CMBS portfolio. On September 29, 2014, in connection with the sale of CMBS securities, as discussed in Note 8 — Investment Securities, at Fair Value, the company settled all outstanding Repurchase Agreements at par with proceeds from the sale.

Barclay’s Facility

As of December 31, 2013, the Company had available commitments from Barclays Bank PLC, and other committed parties, for up to $2.1 billion in senior secured term loans (the “Barclays Facility”) which, if funded, would have been available to fund cash amounts payable in connection with the Cole Merger. The Barclays Facility was terminated upon the issuance of the senior unsecured notes in February 2014. In connection with the termination, the Company recorded $32.6 million as amortization of deferred financing costs associated with the Barclays Facility, which is included in interest expense, net in the accompanying consolidated statements of operations.