Debt

As of December 31, 2016, the Company had $6.4 billion of debt outstanding, including net premiums and net deferred financing costs, with a weighted-average years to maturity of 4.4 years and a weighted-average interest rate of 4.2%. The following table summarizes the carrying value of debt as of December 31, 2016 and December 31, 2015, and the debt activity for the year ended December 31, 2016 (in thousands):



					Year Ended December 31, 2016
		Balance as of December 31, 2015			Debt Issuances			Repayments, Extinguishment and Assumptions			Accretion and Amortization			Balance as of December 31, 2016
Mortgage notes payable:
	Outstanding balance	$	3,039,882		$	3,112		$	(413,045	)	$	—		$	2,629,949
	Net premiums ⁽¹⁾	59,402			—			(2,313		)	(20,338		)	36,751
	Deferred costs	(21,020		)	(27		)	522			3,892			(16,633		)
Other debt:
	Outstanding balance	33,463			—			(12,516		)	—			20,947
	Premium ⁽¹⁾	258			—			—			(166		)	92
Mortgages and other debt, net		3,111,985			3,085			(427,352		)	(16,612		)	2,671,106
Corporate bonds:
	Outstanding balance	2,550,000			1,000,000			(1,300,000		)	—			2,250,000
	Discount ⁽²⁾	(2,745		)	—			73			735			(1,937		)
	Deferred costs	(10,922		)	(17,137		)	1,898			4,322			(21,839		)
Corporate bonds, net		2,536,333			982,863			(1,298,029		)	5,057			2,226,224
Convertible debt:
	Outstanding balance	1,000,000			—			—			—			1,000,000
	Discount ⁽²⁾	(17,779		)	—			—			4,885			(12,894		)
	Deferred costs	(19,327		)	—			—			5,561			(13,766		)
Convertible debt, net		962,894			—			—			10,446			973,340
Credit facility:
	Outstanding balance	1,460,000			1,033,000			(1,993,000		)	—			500,000
	Deferred costs ⁽³⁾	(11,410		)	—			4,313			3,675			(3,422		)
Credit facility, net		1,448,590			1,033,000			(1,988,687		)	3,675			496,578
2016 Term Loan:
	Outstanding balance	—			300,000			(300,000		)	—			—
	Deferred costs	—			(2,764		)	2,588			176			—
2016 Term Loan, net		—			297,236			(297,412		)	176			—

Total debt		$	8,059,802		$	2,316,184		$	(4,011,480	)	$	2,742		$	6,367,248

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(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 December 31, 2016 (dollar amounts in thousands):



	Encumbered Properties	Gross Carrying Value of Collateralized Properties ⁽²⁾		Outstanding Balance		Weighted-Average Interest Rate ^{(3) (4)}		Weighted-Average Years to Maturity ⁽⁴⁾
Fixed-rate debt ⁽¹⁾	618	$	5,083,978	$	2,618,652	4.95	%	4.6
Variable-rate debt	1	30,273		11,297		3.79	%	0.6
Total ⁽⁵⁾	619	$	5,114,251	$	2,629,949	4.95	%	4.6

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(1)	Includes $242.2 million of variable-rate debt fixed by way of interest rate swap arrangements.


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


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

(4)

Weighted average years remaining to maturity is computed using the anticipated repayment date as specified in each loan agreement, where applicable. Weighted average interest rate is computed using the interest rate in effect until the anticipated repayment date. Should the loan not be repaid at the anticipated repayment date, the applicable interest rate shall increase as specified in the respective loan agreement until the extended maturity date.


(5)	The table above does not include the loan amount associated with an unconsolidated joint venture of $20.4 million, none of which is recourse to the Company. This loan has a secured fixed rate of 5.20% and a maturity date of July 2021, with weighted-average years to maturity of 4.5 years as of December 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 December 31, 2016, the Company believes it was in compliance with the financial covenants under the mortgage loan agreements, except for the loans in default described below, and had no restrictions on the payment of dividends.

During the years ended December 31, 2016 and 2015, the Company repaid mortgage notes payable resulting in a gain on extinguishment of debt of $0.3 million and loss on extinguishment of debt of $0.1 million, respectively, due to the write-off of unamortized premiums, net of deferred financing costs and prepayment penalties, which are included in (loss) gain on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.

On December 30, 2016, the Company received a notice of default from the lender of a non-recourse loan secured by 16 properties, which had an outstanding balance of $11.6 million on the notice date, due to the Company’s non-repayment of the respective loan balance at maturity. The Company and the lender are assessing options in relation to the default.

On March 6, 2015, the Company received a notice of default from the lender of a non-recourse loan secured by two properties, which had an outstanding balance of $38.1 million on the notice date, due to the Company’s election not to make a reserve payment required per the loan agreement. The foreclosure sale of the first property securing the loan occurred during the three months ended June 30, 2016. As the loan was outstanding upon the foreclosure of the first property, the Company recorded a loss of $3.4 million in gain (loss) on disposition of real estate and held for sale assets, net in the accompanying consolidated statements of operations for the year ended December 31, 2016. The foreclosure proceedings on the second property that secured the loan were completed during the three months ended September 30, 2016. As a result of the foreclosure sale and deed transfer of both properties securing the loan, the Company recognized a gain on forgiveness of debt of $19.1 million, which is included in (loss) gain on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.

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 year ended December 31, 2015, the Company recorded a gain on the forgiveness of debt of $4.9 million, which is included in (loss) gain on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.

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



	Total
2017	$	287,094
2018	209,259
2019	229,547
2020	282,223
2021	383,110
Thereafter	1,238,716
Total	$	2,629,949

Other Debt

As of December 31, 2016, the Company had a secured term loan from KBC Bank, N.V. with an outstanding principal balance of $20.9 million and remaining unamortized premium of $0.1 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 December 31, 2016 are $7.7 million and $13.2 million for the years ended 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 December 31, 2016 (in thousands):



	Outstanding Balance		Collateral Carrying Value
Mortgage notes receivable	$	6,791	$	19,204
Intercompany mortgage loans	1,046		2,648
CMBS	13,110		34,114
Total	$	20,947	$	55,966

Corporate Bonds

As of December 31, 2016, the OP had $2.25 billion aggregate principal amount of senior unsecured notes (the “Senior Notes”) outstanding comprised of the following (dollar amounts in thousands):



	Outstanding Balance December 31, 2016		Interest Rate		Maturity Date
2019 Senior Notes	750,000		3.000	%	February 6, 2019
2021 Senior Notes	400,000		4.125	%	June 1, 2021
2024 Senior Notes	500,000		4.600	%	February 6, 2024
2026 Senior Notes	600,000		4.875	%	June 1, 2026
Total balance and weighted-average interest rate	$	2,250,000	4.056	%

On February 6, 2014, the Operating Partnership issued, in a private offering, $2.55 billion aggregate principal amount of senior unsecured notes consisting of $1.3 billion aggregate principal amount of 2.000% senior notes due 2017 (the “2017 Senior Notes”), $750.0 million aggregate principal amount of 3.00% senior notes due 2019 (the “2019 Senior Notes”) and $500.0 million aggregate principal amount of 4.60% senior notes due 2024 (the “2024 Senior Notes”).

On June 2, 2016, the Company closed its senior note offering, consisting of (i) $0.4 billion aggregate principal amount of 4.125% Senior Notes due June 1, 2021 (the “2021 Senior Notes”) and (ii) $0.6 billion aggregate principal amount of 4.875% Senior Notes due June 1, 2026 (the “2026 Senior Notes”) (the offering of the 2021 Senior Notes, collectively with the 2026 Senior Notes, the “2016 Bond Offering”).

On July 5, 2016, the Company redeemed the 2017 Senior Notes, plus accrued and unpaid interest thereon and the required make-whole premium. Upon consummation of these transactions, the Company had no 2017 Senior Notes outstanding. The Company recorded a loss related to the early extinguishment of $13.2 million which is included in (loss) gain on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.

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. If the redemption date is 30 or fewer days prior to the maturity date with respect to the 2019 Senior Notes and the 2021 Senior Notes or is 90 or fewer days prior to the maturity date with respect to the 2024 Senior Notes and the 2026 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, (the “Securities Act”) and are freely transferable.

The indenture governing both our existing and new Senior Notes requires us to maintain financial ratios which include maintaining (i) a maximum limitation on incurrence of total debt less than or equal to 65% of Total Assets (as defined in the indenture), (ii) maximum limitation on incurrence of secured debt less than or equal to 40% of Total Assets (as defined in the indenture), (iii) a minimum debt service coverage ratio of at least 1.5x and (iv) a minimum unencumbered asset value of at least 150% of the aggregate principal amount of all of the outstanding Unsecured Debt (as defined in the indenture). The Company believes it was in compliance with the financial covenants pursuant to the indenture governing the Senior Notes as of December 31, 2016.

On January 22, 2015, the Company entered into an agreement in principle with an ad hoc group of holders (the “Senior Noteholder Group”) of the Senior Notes, by which the Senior Noteholder Group agreed not to issue a notice of default due to the Company’s failure to timely deliver certain financial statements in 2014. The Company and the OP filed the required financial statements with the SEC on March 2, 2015.

Convertible Debt

On July 29, 2013, the Company issued $300.0 million aggregate principal amount of convertible senior notes due 2018 (the “2018 Convertible Notes”) and, pursuant to an over-allotment exercise by the underwriters of such 2018 Convertible Notes offering, issued an additional $10.0 million aggregate principal amount of its 2018 Convertible Notes on August 1, 2013. On December 10, 2013, the Company issued an additional $287.5 million of the 2018 Convertible Notes by reopening the indenture governing the 2018 Convertible Notes. Also on December 10, 2013, the Company issued $402.5 million aggregate principal amount of convertible senior notes due 2020 (the “2020 Convertible Notes” and, together with the 2018 Convertible Notes, the “Convertible Notes”). As of December 31, 2016, the outstanding aggregate balance of the Convertible Notes was $1.0 billion. The OP has issued corresponding identical convertible notes to the General Partner. 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	%

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(1)	Excludes the carrying value of the conversion options recorded within additional paid-in capital of $28.6 million and the unamortized discount of $12.9 million as of December 31, 2016. The discount will be amortized over the remaining term of 2.5 years.


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

The 2018 Convertible Notes may be converted into cash, shares of the Company’s common stock or a combination thereof at the Company’s option, in limited circumstances prior to February 1, 2018 and may be converted into such consideration at any time on or after February 1, 2018. The 2020 Convertible Notes may be converted into cash, shares of the Company’s common stock or a combination thereof, in limited circumstances prior to June 15, 2020, and may be converted into such consideration at any time on or after June 15, 2020. There were no changes to the terms of the Convertible Notes and the Company believes it was in compliance with the financial covenants pursuant to the indenture governing the Convertible Notes as of December 31, 2016.

On January 22, 2015, the Company received a notice from the trustee of the indentures (the “Convertible Indentures”) governing each of the Convertible Notes of the Company’s failure to timely deliver certain financial statements in 2014. Pursuant to the terms of the Convertible Indentures, the Company had 60 days following its receipt of a notice of default to deliver the required financial statements, after which such failure would become an event of default under each of the Convertible Indentures. The Company and the OP filed the required financial statements with the SEC on March 2, 2015.

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 Bank, National Association (“Wells Fargo”), as administrative agent and other lenders party thereto (the “Credit Agreement”).

In 2014, the General Partner, as guarantor, and the OP, as borrower entered into certain agreements with respect to the Credit Agreement which provided for, among other things, an extension of the delivery date of certain financial statements and other deliverables, the suspension of the payment of dividends until such financial statements and other deliverables were provided and a reduction to the maximum amount of indebtedness under the Credit Agreement to $3.6 billion. In connection with the agreements, the Company agreed to pay certain customary fees to the consenting lenders and agreed to reimburse certain customary expenses of the arrangers. The Company and the OP filed the required financial statements with the SEC on March 2, 2015.

On July 31, 2015, the General Partner and the OP entered into the Second Amendment to 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 was allowed 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.

As of December 31, 2016, the Credit Facility allowed for maximum borrowings of $2.8 billion, consisting of a $0.5 billion term loan facility (the “Credit Facility Term Loan”) and a $2.3 billion revolving credit facility. The maximum aggregate dollar amount of letters of credit that may be outstanding at any one time under the Credit Facility is $25.0 million. During the year ended December 31, 2016, the Company repaid all of the outstanding borrowings under its revolving credit facility. Additionally, the Company repaid $0.5 billion of the Credit Facility Term Loan, resulting in the write-off of unamortized deferred financing costs of $4.3 million, which is included in (loss) gain on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations. As discussed in Note 12 – Derivatives and Hedging Activities, in connection with the early repayment of a portion of the Credit Facility Term Loan, the Company terminated two of its interest rate swaps, resulting in the reclassification of $3.3 million from accumulated other comprehensive loss to earnings, which is included in loss on derivative instruments, net in the accompanying consolidated statements of operations. The remaining outstanding balance on the Credit Facility Term Loan of $0.5 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 3.25% at December 31, 2016. As of December 31, 2016, a maximum of $2.3 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 Credit Facility Term Loan 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 Credit Facility Term Loan 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 Credit Facility Term Loan, 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 (up to 35% of which may be comprised of restaurant properties from June 30, 2016 to December 30, 2016 and up to 30% of which may be comprised of restaurant properties from December 31, 2016 on). The Company believes it was in compliance with the financial covenants pursuant to the Credit Agreement and is not restricted from accessing any borrowing availability under the Credit Facility as of December 31, 2016.

2016 Term Loan

On June 2, 2016, the General Partner as guarantor, and the OP, as borrower, entered into a $300.0 million senior secured term loan facility (the “2016 Term Loan”), pursuant to a credit agreement (the “2016 Term Loan Agreement”) with JPMorgan Chase Bank, N.A., as the administrative agent, and certain other lenders party thereto. During the year ended December 31, 2016, the Company borrowed $300.0 million on the 2016 Term Loan and subsequently repaid the balance prior to December 31, 2016. In connection with the prepayment, the Company wrote-off the remaining unamortized deferred financing costs resulting in a loss of $2.6 million which is included in (loss) gain on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.