Debt

As of March 31, 2017, the Company had $6.3 billion of debt outstanding, including net premiums and net deferred financing costs, with a weighted-average years to maturity of 4.2 years and a weighted-average interest rate of 4.3%. The following table summarizes the carrying value of debt as of March 31, 2017 and December 31, 2016, and the debt activity for the three months ended March 31, 2017 (in thousands):



					Three Months Ended March 31, 2017
		Balance as of December 31, 2016			Debt Issuances		Repayments, Extinguishment and Assumptions			Accretion and Amortization			Balance as of March 31, 2017
Mortgage notes payable:
	Outstanding balance	$	2,629,949		$	2,403	$	(78,966	)	$	—		$	2,553,386		⁽¹⁾
	Net premiums ⁽²⁾	36,751			—		—			(3,290		)	33,461
	Deferred costs	(16,633		)	—		—			817			(15,816		)
Other debt:
	Outstanding balance	20,947			—		(5,125		)	—			15,822
	Premium ⁽²⁾	92			—		—			(28		)	64
Mortgages and other debt, net		2,671,106			2,403		(84,091		)	(2,501		)	2,586,917
Corporate bonds:
	Outstanding balance	2,250,000			—		—			—			2,250,000
	Discount ⁽³⁾	(1,937		)	—		—			176			(1,761		)
	Deferred costs	(21,839		)	—		—			907			(20,932		)
Corporate bonds, net		2,226,224			—		—			1,083			2,227,307
Convertible debt:
	Outstanding balance	1,000,000			—		—			—			1,000,000
	Discount ⁽³⁾	(12,894		)	—		—			1,261			(11,633		)
	Deferred costs	(13,766		)	—		—			1,430			(12,336		)
Convertible debt, net		973,340			—		—			2,691			976,031
Credit facility:
	Outstanding balance	500,000			—		—			—			500,000
	Deferred costs ⁽⁴⁾	(3,422		)	—		—			570			(2,852		)
Credit facility, net		496,578			—		—			570			497,148

Total debt		$	6,367,248		$	2,403	$	(84,091	)	$	1,843		$	6,287,403

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(1)	Includes $41.8 million related to two mortgage notes payable in default.


(2)	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.


(3)	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.


(4)	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, 2017 (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⁾	596	$	4,949,078	$	2,539,726	4.99	%	4.6
Variable-rate debt	1	30,846		13,660		3.79	%	0.4
Total ⁽⁴⁾	597	$	4,979,924	$	2,553,386	4.99	%	4.6

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(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, 2017.


(3)	Includes $188.7 million of variable-rate debt fixed by way of interest rate swap arrangements.


(4)	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. The loan represents a secured fixed rate of 5.20% and a maturity of July 2021.

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, 2017, except for the loans in default described below, the Company believes it was in compliance with the financial covenants under the mortgage loan agreements and had no restrictions on the payment of dividends.

During the three months ended March 31, 2017, the Company received two notices of default from the lenders of two non-recourse loans each secured by one property, which had an aggregate outstanding balance of $41.8 million on the notice date, due to the Company’s intentional non-repayment of the respective loan balances at maturity.

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 loan balance at maturity. During the three months ended March 31, 2017, the Company cured the default by fully repaying the outstanding loan balance.

The following table summarizes the scheduled aggregate principal repayments due on mortgage notes subsequent to March 31, 2017 (in thousands):



	Total
April 1, 2017 - December 31, 2017 ⁽¹⁾	$	340,411
2018	108,694
2019	228,107
2020	280,668
2021	356,849
Thereafter	1,238,657
Total	$	2,553,386

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(1)	Includes $41.8 million of outstanding balances on mortgage notes payable, excluding accrued interest, related to two mortgage notes payable in default.

Other Debt

As of March 31, 2017, the Company had a secured term loan from KBC Bank, N.V. with an outstanding principal balance of $15.8 million and remaining unamortized premium of less than $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 March 31, 2017 are $2.5 million and $13.3 million for the years ended December 31, 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, 2017 (in thousands):



	Outstanding Balance		Collateral Carrying Value
Mortgage notes receivable	$	5,598	$	18,936
Intercompany mortgage loans	404		1,240
CMBS	9,820		30,688
Total	$	15,822	$	50,864

Corporate Bonds

As of March 31, 2017, 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 March 31, 2017		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	%

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 our 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 March 31, 2017.

Convertible Debt

The following table presents each of the Company’s $597.5 million aggregate principal amount of convertible senior notes due 2018 (the “2018 Convertible Notes”) and $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”) with their respective terms (dollar amounts in thousands). The OP has issued corresponding identical convertible notes to the General Partner.



	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 $11.6 million as of March 31, 2017. The discount will be amortized over the remaining weighted average term of 2.3 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, 2017, 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 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 March 31, 2017.

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”).

As of March 31, 2017, 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 and has no outstanding balance as of March 31, 2017. The interest rate on 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 the outstanding balance was 3.25% at March 31, 2017. As of March 31, 2017, 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 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 March 31, 2017.