Debt

As of September 30, 2017, the Company had $5.9 billion of debt outstanding, including net premiums and net deferred financing costs, with a weighted-average years to maturity of 4.7 years and a weighted-average interest rate of 4.2%. The following table summarizes the carrying value of debt as of September 30, 2017 and December 31, 2016, and the debt activity for the nine months ended September 30, 2017 (in thousands):



					Nine Months Ended September 30, 2017
		Balance as of December 31, 2016			Debt Issuances			Repayments, Extinguishment and Assumptions			Accretion and Amortization			Balance as of September 30, 2017
Mortgage notes payable:
	Outstanding balance	$	2,629,949		$	4,283		$	(545,307	)	$	—		$	2,088,925		⁽¹⁾
	Net premiums ⁽²⁾	36,751			—			(528		)	(9,422		)	26,801
	Deferred costs	(16,633		)	—			576			2,229			(13,828		)
Other debt:
	Outstanding balance	20,947			—			(7,233		)	—			13,714
	Premium ⁽²⁾	92			—			—			(71		)	21
Mortgages and other debt, net		2,671,106			4,283			(552,492		)	(7,264		)	2,115,633
Corporate bonds:
	Outstanding balance	2,250,000			600,000			—			—			2,850,000
	Discount ⁽³⁾	(1,937		)	—			—			528			(1,409		)
	Deferred costs	(21,839		)	(9,497		)	—			2,909			(28,427		)
Corporate bonds, net		2,226,224			590,503			—			3,437			2,820,164
Convertible debt:
	Outstanding balance	1,000,000			—			—			—			1,000,000
	Discount ⁽³⁾	(12,894		)	—			—			3,816			(9,078		)
	Deferred costs	(13,766		)	—			—			4,334			(9,432		)
Convertible debt, net		973,340			—			—			8,150			981,490
Credit facility:
	Outstanding balance	500,000			—			(500,000		)	—			—
	Deferred costs ⁽⁴⁾	(3,422		)	—			2,030			1,392			—
Credit facility, net		496,578			—			(497,970		)	1,392			—

Total debt		$	6,367,248		$	594,786		$	(1,050,462	)	$	5,715		$	5,917,287

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(1)	Includes $16.2 million related to one mortgage note 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 September 30, 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⁾	501	$	4,146,793	$	2,073,481	4.91	%	4.5
Variable-rate debt	1	32,938		15,444		4.49	%	0.1
Total ⁽⁴⁾	502	$	4,179,731	$	2,088,925	4.91	%	4.4

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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 September 30, 2017.


(3)	Includes $79.2 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 September 30, 2017, except for the loan 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.

As of September 30, 2017, the Company had $16.2 million related to one outstanding mortgage note payable in default. The Company is engaged with the servicer to determine a method of settlement.

On August 31, 2017, the Company entered into a deed-in-lieu of foreclosure agreement with the lender of a mortgage loan secured by one property, with an outstanding balance of $41.6 million on the date of agreement and conveyed its interest in the property to satisfy the mortgage loan. As a result of the deed-in-lieu of foreclosure transaction, the Company recognized a gain on forgiveness of debt of $6.7 million, which is included in gain (loss) on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.

On August 29, 2017, the Company completed the foreclosure sale of one property secured by a mortgage loan and was relieved of all obligations on the non-recourse loan. On the date of the foreclosure sale, the mortgage loan had an outstanding balance of $20.5 million. The Company recognized a gain on forgiveness of debt of $4.8 million, which is included in gain (loss) on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations as a result of the transaction.

On June 27, 2017, the Company entered into a deed-in-lieu of foreclosure agreement with the lender of a mortgage loan, secured by four properties, with an outstanding balance of $38.3 million and conveyed all interests in the properties to satisfy the mortgage loan. As a result of the deed-in-lieu of foreclosure transaction, the Company recognized a gain on forgiveness of debt of $9.0 million, which is included in gain (loss) 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 intentional non-repayment of the loan balance at maturity. During the nine months ended September 30, 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 September 30, 2017 (in thousands):



	Total
October 1, 2017 - December 31, 2017 ⁽¹⁾	$	33,981
2018	67,603
2019	223,171
2020	265,582
2021	353,274
Thereafter	1,145,314
Total	$	2,088,925

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(1)	Includes $16.2 million, excluding accrued interest, related to one mortgage note payable in default.

Other Debt

As of September 30, 2017, the Company had a secured term loan from KBC Bank, N.V. with an outstanding principal balance of $13.7 million and remaining unamortized premium of $21,000 (the “KBC Loan”). At September 30, 2017, the interest coupon on the KBC Loan was fixed at 5.81%. Subsequent to September 30, 2017, the Company repaid the remaining outstanding principal balance of the KBC Loan. The KBC Loan provided for monthly payments of both principal and interest.

The KBC Loan was 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 September 30, 2017 (in thousands):



	Outstanding Balance		Collateral Carrying Value
Mortgage notes receivable	$	4,945	$	18,400
CMBS	8,769		30,204
Total	$	13,714	$	48,604

Corporate Bonds

On August 11, 2017, the Company closed a senior note offering, consisting of $600.0 million aggregate principal amount of the Operating Partnership’s 3.950% Senior Notes due 2027 (the “2027 Senior Notes”) (the offering of the 2027 Senior Notes, the “2017 Bond Offering”).

As of September 30, 2017, the OP had $2.85 billion aggregate principal amount of senior unsecured notes (the “Senior Notes”) outstanding comprised of the following (dollar amounts in thousands):



	Outstanding Balance September 30, 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
2027 Senior Notes	600,000		—	3.950	%	—	August 15, 2027
Total balance and weighted-average interest rate	$	2,850,000		4.033	%

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, the 2026 Senior Notes and the 2027 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 September 30, 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 $9.1 million as of September 30, 2017. The discount will be amortized over the remaining weighted average term of 1.8 years.


(2)	Conversion rate represents the amount of the General Partner OP Units per $1,000 principal amount of Convertible Notes converted as of September 30, 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 September 30, 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 September 30, 2017, the Credit Facility had no outstanding balance and allowed for maximum borrowings of $2.3 billion under its revolving credit facility, subject to borrowing availability. 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. The Operating Partnership used a portion of the proceeds from the 2017 Bond Offering discussed above to repay all of the outstanding borrowings, swap termination costs and accrued and unpaid interest, under the Credit Facility’s $0.5 billion term loan facility (the "Credit Facility Term Loan”) on August 11, 2017, resulting in the write-off of unamortized deferred financing costs of $2.0 million, which is included in gain (loss) on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.

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 Credit Facility terminates on June 30, 2018, unless extended in accordance with the terms of the Credit Agreement. The Credit Agreement provides for a one-year extension option, 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 September 30, 2017.