Debt

As of March 31, 2016, the Company had $7.8 billion of debt outstanding, including net premiums and net deferred financing costs, with a weighted-average years to maturity of 3.6 years and a weighted-average interest rate of 3.79%. The following table summarizes the carrying value of debt as of March 31, 2016 and December 31, 2015, and the debt activity for the three months ended March 31, 2016 (in thousands):



					Three Months Ended March 31, 2016
		Balance as of December 31, 2015			Debt Issuances		Repayments, Extinguishment and Assumptions			Accretion and (Amortization)			Balance as of March 31, 2016
Mortgage notes payable:
	Outstanding balance	$	3,039,882		$	206	$	(72,785	)	$	—		$	2,967,303
	Net premiums ⁽¹⁾	59,402			—		(1,096		)	(5,777		)	52,529
	Deferred costs	(21,020		)	—		329			1,017			(19,674		)
Other debt:
	Outstanding balance	33,463			—		(4,163		)	—			29,300
	Premium ⁽¹⁾	258			—		—			(50		)	208
Mortgages and other debt, net		3,111,985			206		(77,715		)	(4,810		)	3,029,666
Corporate bonds:
	Outstanding balance	2,550,000			—		—			—			2,550,000
	Discount ⁽²⁾	(2,745		)	—		—			197			(2,548		)
	Deferred costs	(10,922		)	—		—			1,169			(9,753		)
Corporate bonds, net		2,536,333			—		—			1,366			2,537,699
Convertible debt:
	Outstanding balance	1,000,000			—		—			—			1,000,000
	Discount ⁽²⁾	(17,779		)	—		—			1,201			(16,578		)
	Deferred costs	(19,327		)	—		—			1,374			(17,953		)
Convertible debt, net		962,894			—		—			2,575			965,469
Credit facility:
	Outstanding balance	1,460,000			203,000		(383,000		)	—			1,280,000
	Deferred costs ⁽³⁾	(11,410		)	—		—			1,141			(10,269		)
Credit facility, net		1,448,590			203,000		(383,000		)	1,141			1,269,731

Total debt		$	8,059,802		$	203,206	$	(460,715	)	$	272		$	7,802,565

____________________________________


(1)	Net premiums on mortgage notes payable and other debt were recorded upon the assumption of the respective debt instruments in relation to the various mergers and acquisitions. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective debt instruments using the effective-interest method.


(2)	Discounts on the corporate bonds and convertible debt were recorded based upon the fair value of the respective debt instruments as of the respective issuance dates. Amortization of these discounts is recorded as an increase to interest expense over the remaining term of the respective debt instruments using the effective-interest method.


(3)	Deferred costs relate to the term portion of the credit facility.

Mortgage Notes Payable

The Company’s mortgage notes payable consisted of the following as of March 31, 2016 (dollar amounts in thousands):



	Encumbered Properties	Gross Carrying Value of Collateralized Properties ⁽¹⁾		Outstanding Balance		Weighted-Average Interest Rate ⁽²⁾		Weighted-Average Years to Maturity
Fixed-rate debt ⁽³⁾	651	$	5,533,845	$	2,958,859	5.10	%	4.9
Variable-rate debt	1	24,797		8,444		3.39	%	0.4
Total ⁽⁴⁾	652	$	5,558,642	$	2,967,303	5.09	%	4.9

____________________________________


(1)	Gross carrying value is gross real estate assets, including investment in direct financing leases, net of gross real estate liabilities.


(2)	Weighted-average interest rate for variable-rate debt represents the interest rate in effect as of March 31, 2016.


(3)	Includes $247.9 million of variable-rate debt fixed by way of interest rate swap arrangements.

(4)

The table above does not include loan amounts associated with the Unconsolidated Joint Ventures of $46.3 million, none of which is recourse to the Company. These loans represent secured fixed and variable rates ranging from 2.84% to 5.20% and maturities ranging from October 2016 to July 2021, with a weighted-average interest rate of 3.88% and a weighted-average years to maturity of 2.6 years as of March 31, 2016.

The Company’s mortgage loan agreements generally restrict corporate guarantees and require the maintenance of financial covenants, including maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios). The mortgage loan agreements contain no dividend restrictions except in the event of default or when a distribution would drive liquidity below the applicable thresholds. At March 31, 2016, the Company believes it was in compliance with the debt covenants under the mortgage loan agreements, except for a loan in default that is described below, and had no restrictions on the payment of dividends. The default on the loan did not result in a cross default on our other indebtedness.

During the three months ended March 31, 2016 and 2015, an aggregate of $55.0 million and $72.3 million, respectively, of mortgage notes payable were repaid prior to maturity or assumed by the buyer in a property disposition. During the three months ended March 31, 2015, $0.4 million was recorded in relation to the write-off of deferred financing costs and net premiums related to mortgage notes payable. During the three months ended March 31, 2016, no such write-off was recorded relating to the early repayment of debt. These costs are included in gain on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations. The mortgage notes payable repaid during the three months ended March 31, 2016 had a weighted-average interest rate of 4.41% and a weighted-average remaining term of 2.9 years at the time of prepayment.

On January 13, 2015, a substantially vacant office building in Bethesda, Maryland was foreclosed upon after the Company elected to stop making debt service payments on the related non-recourse loan with an outstanding balance of $53.8 million as of December 31, 2014. As a result of the foreclosure, the Company forfeited its right to the property and was relieved of all obligations on the non-recourse loan. During the three months ended March 31, 2015, the Company recorded a gain on the forgiveness of debt of $4.9 million, which is included in gain on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.

On March 6, 2015, the Company received a notice of default from the lender of a non-recourse loan, which had an outstanding balance of $38.1 million as of March 31, 2016, due to the Company’s election not to make a reserve payment required per the loan agreement. Due to the default, the Company is currently accruing interest at the default rate of interest of 10.68% per annum. The Company is engaged with the servicer to complete foreclosure proceedings.

The following table summarizes the scheduled aggregate principal repayments due on mortgage notes subsequent to March 31, 2016 (in thousands):



	Total
April 1, 2016 - December 31, 2016 ⁽¹⁾	$	198,991
2017	412,546
2018	211,026
2019	231,461
2020	284,197
Thereafter	1,629,082
Total	$	2,967,303

____________________________________


(1)	Includes $38.1 million of mortgage notes in connection with the default of a non-recourse loan discussed above.

Other Debt

As of March 31, 2016, the Company had a secured term loan from KBC Bank, N.V. with an outstanding principal balance of $29.3 million and remaining unamortized premium of $0.2 million (the “KBC Loan”). The interest coupon on the KBC Loan is fixed at 5.81% annually until its maturity in January 2018. The KBC Loan is non-recourse to the Company, subject to limited non-recourse exceptions. The KBC Loan provides for monthly payments of both principal and interest. The scheduled principal repayments subsequent to March 31, 2016 are $8.3 million, $7.7 million and $13.3 million for the years ended December 31, 2016, 2017 and 2018, respectively.

The KBC Loan is secured by various investment assets held by the Company. The following table is a summary of the outstanding balance and carrying value of the collateral by asset type as of March 31, 2016 (in thousands):



	Outstanding Balance		Collateral Carrying Value
Mortgage notes receivable	$	8,095	$	19,950
Intercompany mortgage loans	2,264		5,462
CMBS	18,941		35,921
	$	29,300	$	61,333

Corporate Bonds

As of March 31, 2016, the OP had $2.55 billion aggregate principal amount of senior unsecured notes outstanding comprised of 2.00% senior notes due 2017 (the “2017 Senior Notes”), 3.00% senior notes due 2019 (the “2019 Senior Notes”) and 4.60% senior notes due 2024 (the “2024 Senior Notes” and, together with the 2017 Senior Notes and the 2019 Senior Notes, (the “Senior Notes”). The following table presents the three senior notes with their respective terms (dollar amounts in thousands):



	Outstanding Balance		Interest Rate		Maturity Date
2017 Senior Notes	$	1,300,000	2.0	%	February 6, 2017
2019 Senior Notes	750,000		3.0	%	February 6, 2019
2024 Senior Notes	500,000		4.6	%	February 6, 2024
Total balance and weighted-average interest rate	$	2,550,000	2.8	%

The Senior Notes are guaranteed by the General Partner. The OP may redeem all or a part of any series of the Senior Notes at any time, at its option, for the redemption prices set forth in the indenture governing the Senior Notes. With respect to the 2019 Senior Notes and the 2024 Senior Notes, if such Senior Notes are redeemed on or after January 6, 2019 with respect to the 2019 Senior Notes, or November 6, 2023 with respect to the 2024 Senior Notes, the redemption price will equal 100% of the principal amount of the Senior 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. The Senior Notes are registered under the Securities Act of 1933, as amended, and are freely transferable. The Company believes it was in compliance with the covenants pursuant to the indenture governing the Senior Notes as of March 31, 2016.

Convertible Debt

As of March 31, 2016, the OP had two tranches of Convertible Notes with an outstanding aggregate balance of $1.0 billion, comprised of the 2018 Convertible Notes and 2020 Convertible Notes. The Convertible Notes are identical to the General Partner’s registered issuance of the same amount of notes to various purchasers in a public offering. The following table presents each of the 2018 Convertible Notes and the 2020 Convertible Notes listed below with their respective terms (dollar amounts in thousands):



	Outstanding Balance ⁽¹⁾		Interest Rate		Conversion Rate ⁽²⁾	Maturity Date
2018 Convertible Notes	$	597,500	3.00	%	60.5997	August 1, 2018
2020 Convertible Notes	402,500		3.75	%	66.7249	December 15, 2020
Total balance and weighted-average interest rate	$	1,000,000	3.30	%

____________________________________


(1)	Excludes the carrying value of the conversion options recorded within additional paid-in capital of $28.6 million and the unamortized discount of $16.6 million as of March 31, 2016. The discount will be amortized over the remaining term of 3.3 years.


(2)	Conversion rate represents the amount of the General Partner OP Units per $1,000 principal amount of Convertible Notes converted as of March 31, 2016, as adjusted in accordance with the applicable indentures as a result of cash dividend payments.

In connection with any permissible conversion election made by the holders of the identical convertible notes issued by the General Partner, the General Partner may elect to convert the 2018 Convertible Notes into cash, General Partner OP Units or a combination thereof, in limited circumstances prior to February 1, 2018 and may convert the 2018 Convertible Notes at any time into such consideration on or after February 1, 2018. Additionally, the General Partner may elect to convert the 2020 Convertible Notes into cash, General Partner OP Units or a combination thereof, in limited circumstances prior to June 15, 2020, and may convert the 2020 Convertible Notes at any time into such consideration on or after June 15, 2020. The Company believes it was in compliance with the covenants pursuant to the indenture governing the Convertible Notes as of March 31, 2016.

Credit Facility

The General Partner, as guarantor, and the OP, as borrower, are parties to an unsecured credit facility (the “Credit Facility”) pursuant to a credit agreement, dated as of June 30, 2014, as amended, with Wells Fargo, National Association (“Wells Fargo”), as administrative agent and other lenders party thereto (the “Credit Agreement”).

On July 31, 2015, the General Partner and the OP entered into the Second Amendment to the Credit Agreement (the “Second Amendment”) with Wells Fargo and other lenders party to the Credit Agreement. Pursuant to the Second Amendment, the maximum capacity under the Credit Facility was reduced from $3.6 billion to $3.3 billion, which included a reduction in the size of the $2.45 billion revolving credit facility to $2.3 billion and the elimination of the $150.0 million multicurrency revolving credit facility. The maximum aggregate dollar amount of letters of credit that may be outstanding at any one time under the Credit Facility was reduced from $50.0 million to $25.0 million.

In respect of financial covenants, the Second Amendment reduced the Company’s minimum Unencumbered Asset Value (as defined in the Credit Agreement) from $10.5 billion to $8.0 billion. For the purposes of determining Unencumbered Asset Value, the Company is permitted to include restaurant properties representing more than 30% of its Unencumbered Asset Value in such calculation such that: (i) from July 1, 2015 to June 29, 2016, up to 40% of the Unencumbered Asset Value may be comprised of restaurant properties; and (ii) from June 30, 2016 to December 30, 2016, up to 35% of the Unencumbered Asset Value may be comprised of restaurant properties. From December 31, 2016, the maximum percentage of Unencumbered Asset Value attributable to restaurant properties will be reduced back down to 30%. In connection with the Second Amendment, the Company agreed to pay certain customary fees to the consenting lenders and agreed to reimburse customary expenses of the arrangers, which are recorded as deferred financing costs and included in rent and tenant receivables and other assets, net in the accompanying consolidated balance sheets.

As of March 31, 2016, the Credit Facility allowed for maximum borrowings of $3.3 billion, consisting of a $1.0 billion term loan facility and a $2.3 billion revolving credit facility. The outstanding balance on the Credit Facility was $1.3 billion, of which $0.3 billion bore a floating interest rate of 2.24%, at March 31, 2016. The remaining outstanding balance on the Credit Facility of $1.0 billion is, in effect, fixed through the use of derivative instruments used to hedge interest rate volatility. Including the spread, which can vary based on the General Partner’s credit rating, the interest rate on this portion was 3.29% at March 31, 2016. As of March 31, 2016, a maximum of $2.0 billion was available to the OP for future borrowings, subject to borrowing availability.

The revolving credit facility generally bears interest at an annual rate of LIBOR plus 1.00% to 1.80% or Base Rate plus 0.00% to 0.80% (based upon the General Partner’s then current credit rating). “Base Rate” is defined as the highest of the prime rate, the federal funds rate plus 0.50% or a floating rate based on one month LIBOR, determined on a daily basis. The term loan facility generally bears interest at an annual rate of LIBOR plus 1.15% to 2.05%, or Base Rate plus 0.15% to 1.05% (based upon the General Partner’s then current credit rating). In addition, the Credit Agreement provides the flexibility for interest rate auctions, pursuant to which, at the Company’s election, the Company may request that lenders make competitive bids to provide revolving loans, which competitive bids may be at pricing levels that differ from the foregoing interest rates.

The Credit Agreement provides for monthly interest payments under the Credit Facility. In the event of default, at the election of a majority of the lenders (or automatically upon a bankruptcy event of default with respect to the OP or the General Partner), the commitments of the lenders under the Credit Facility will mature, and payment of any unpaid amounts in respect of the Credit Facility will be accelerated. The revolving credit facility and the term loan facility both terminate on June 30, 2018, in each case, unless extended in accordance with the terms of the Credit Agreement. The Credit Agreement provides for a one-year extension option with respect to each of the revolving credit facility and the term loan facility, exercisable at the Company’s election and subject to certain customary conditions, as well as certain customary “amend and extend” provisions. At any time, upon timely notice by the OP and subject to any breakage fees, the OP may prepay borrowings under the Credit Facility (subject to certain limitations applicable to the prepayment of any loans obtained through an interest rate auction, as described above). The OP incurs a fee equal to 0.15% to 0.25% per annum (based upon the General Partner’s then current credit rating) multiplied by the commitments (whether or not utilized) in respect of the revolving credit facility. In addition, the OP incurs customary administrative agent, letter of credit issuance, letter of credit fronting, extension and other fees.

The Credit Facility requires restrictions on corporate guarantees, as well as the maintenance of financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) and the maintenance of a minimum net worth. The key financial covenants in the Credit Facility, as defined and calculated per the terms of the Credit Agreement, include maintaining (i) a maximum leverage ratio less than or equal to 60%, (ii) a minimum fixed charge coverage ratio of at least 1.5x, (iii) a secured leverage ratio less than or equal to 45%, (iv) a total unencumbered asset value ratio less than or equal to 60%, (v) a minimum tangible net worth covenant of at least $5.5 billion, (vi) a minimum unencumbered interest coverage ratio of at least 1.75x and (vii) a minimum unencumbered asset value of at least $8.0 billion. The Company believes it was in compliance with the Credit Agreement and is not restricted from accessing any borrowings under the Credit Facility as of March 31, 2016.