Mortgage Notes Payable

The Company’s mortgage notes payable consist of the following as of December 31, 2014 and December 31, 2013 (dollar amounts in thousands):



	Encumbered Properties	Outstanding Loan Amount		Weighted Average Effective Interest Rate ⁽¹⁾		Weighted Average Maturity ⁽²⁾
December 31, 2014	776	$	3,689,795	4.88	%	6.18
December 31, 2013	177	$	1,258,661	3.42	%	3.41

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(1)	Mortgage notes payable primarily have fixed rates or are fixed by way of interest rate swap arrangements. Effective interest rates range from 2.75% to 7.20% at December 31, 2014 and 1.83% to 6.28% at December 31, 2013.


(2)	Weighted-average remaining years until maturity as of December 31, 2014 and December 31, 2013, respectively.

In conjunction with the various mergers and portfolio acquisitions, as described in Note 2 – Mergers and Significant Acquisitions and Sales, aggregate net premiums totaling $137.4 million were recorded upon the assumption of the mortgages for above-market interest rates. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective mortgages using the effective-interest method. As of December 31, 2014, there was $70.1 million in unamortized net premiums included in mortgage notes payable, net on the consolidated balance sheet.

The following table summarizes the scheduled aggregate principal repayments subsequent to December 31, 2014 (in thousands):



Year	Total
2015	163,821
2016	250,658
2017	457,903
2018	221,105
2019	297,146
Thereafter	2,299,162
Total	$	3,689,795

The Company’s mortgage loan agreements generally require restrictions on corporate guarantees and the maintenance of financial covenants including maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios). As of December 31, 2014, the Company believes it was in compliance with the debt covenants under the mortgage loan agreements.

During the year ended December 31, 2014, the Company repaid or sold $1.6 billion of mortgage notes payable, including notes that were subject to interest rate swap agreements. In connection with the debt repayments, the Company paid prepayment fees totaling $35.9 million for the year ended December 31, 2014, which are included in extinguishment of debt, net in the accompanying consolidated statements of operations. In addition, the Company paid $11.4 million during the year ended December 31, 2014 for the settlement of interest rate swaps that were associated with certain mortgage notes, which approximated the fair value of the interest rate swaps. The Company wrote off the deferred financing costs and net premiums associated with these mortgages, which resulted in a gain of $18.3 million during the year ended December 31, 2014, which is included in extinguishment of debt, net in the accompanying consolidated statements of operations. The mortgages repaid during the year ended December 31, 2014 had a weighted average remaining interest rate of 4.72% and a weighted average remaining term of 4.06 years.

National Institute of Health

The Company acquired an office building in Bethesda, Maryland occupied by the National Institute of Health (“NIH”) with a fair value approximating $40.0 million on November 5, 2013 as part of the Caplease Merger. The office building secures a mortgage loan that had an outstanding balance of $53.8 million as of December 31, 2014 (the “NIH Loan”). On November 1, 2013, NIH substantially vacated the building resulting in a shortfall between the rental cash inflows and the debt service payments. Due to this shortfall, the Company elected to stop making the debt service payments on the NIH Loan which resulted in the lender placing the loan in default on June 12, 2014.

Subsequent to December 31, 2014, the property went to a foreclosure auction. On January 13, 2015, a Substitute Trustees’ Deed was filed with the Clerk’s Office of Montgomery County, Maryland and the foreclosure sale was ratified by the court. As a result of the ratification, the Company forfeited its rights to the property and was relieved of its obligation on the NIH Loan. A gain is expected to be recorded in 2015.