Debt

As of December 31, 2018, the Company had $6.1 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 December 31, 2018 and 2017, and the debt activity for the year ended December 31, 2018 (in thousands):



					Year Ended December 31, 2018
		Balance as of December 31, 2017			Debt Issuances			Repayments, Extinguishment and Assumptions			Accretion and Amortization			Balance as of December 31, 2018
Mortgage notes payable:
	Outstanding balance	$	2,071,038		$	187		$	(154,093	)	$	—		$	1,917,132
	Net premiums ⁽¹⁾	24,652			—			(191		)	(8,384		)	16,077
	Deferred costs	(12,998		)	(43		)	30			2,459			(10,552		)
Mortgages notes payable, net		2,082,692			144			(154,254		)	(5,925		)	1,922,657
Corporate bonds:
	Outstanding balance	2,850,000			550,000			—			—			3,400,000
	Discount ⁽²⁾	(1,232		)	(3,696		)	—			813			(4,115		)
	Deferred costs	(27,274		)	(4,825		)	—			4,823			(27,276		)
Corporate bonds, net		2,821,494			541,479			—			5,636			3,368,609
Convertible debt:
	Outstanding balance	1,000,000			—			(597,500		)	—			402,500
	Discount ⁽²⁾	(7,782		)	—			—			3,873			(3,909		)
	Deferred costs	(7,960		)	—			—			4,252			(3,708		)
Convertible debt, net		984,258			—			(597,500		)	8,125			394,883

Credit facility:
	Outstanding balance	185,000			1,934,000			(1,716,000		)	—			403,000
	Deferred costs ⁽³⁾	—			(1,236		)	—			9			(1,227		)
Credit facility, net		185,000			1,932,764			(1,716,000		)	9			401,773

Total debt		$	6,073,444		$	2,474,387		$	(2,467,754	)	$	7,845		$	6,087,922

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(1)	Net premiums on mortgage notes payable were recorded upon the assumption of the respective mortgage notes 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 mortgage notes 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 Credit Facility Term Loan.

Mortgage Notes Payable

The Company’s mortgage notes payable consisted of the following as of December 31, 2018 (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 ⁽³⁾
Fixed-rate debt ⁽⁴⁾	458	$	3,760,194	$	1,903,095	4.92	%		3.5
Variable-rate debt	1	33,384		14,037		5.72	%	⁽⁵⁾	0.6
Total	459	$	3,793,578	$	1,917,132	4.93	%		3.4

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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 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 will increase as specified in the respective loan agreement until the extended maturity date.


(3)	Weighted average years remaining to maturity is computed using the anticipated repayment date as specified in each loan agreement, where applicable.


(4)	Includes $50.7 million of variable-rate debt fixed by way of interest rate swap arrangements.


(5)	Weighted-average interest rate for variable-rate debt represents the interest rate in effect as of December 31, 2018.

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 debt service coverage ratios and minimum net operating income). 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, 2018, the Company believes that it was in compliance with the financial covenants under the mortgage loan agreements and had no restrictions on the payment of dividends.

On April 12, 2018, 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 $16.2 million at the time of default and conveyed all 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 $5.2 million, which is included in gain (loss) on extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.

During the year ended December 31, 2017, the Company entered into deed-in-lieu of foreclosure agreements or completed the foreclosure with the lenders of three mortgage loans, secured by six properties, which resulted in a gain on forgiveness of debt of $20.5 million.

The following table summarizes the scheduled aggregate principal repayments due on mortgage notes subsequent to December 31, 2018 (in thousands):



	Total
2019	$	167,279
2020	265,189
2021	352,768
2022	314,898
2023	144,843
Thereafter	672,155
Total	$	1,917,132

Corporate Bonds

As of December 31, 2018, the OP had $3.40 billion aggregate principal amount of senior unsecured notes (the “Senior Notes”) outstanding comprised of the following (dollar amounts in thousands):



	Outstanding Balance December 31, 2018		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
2025 Senior Notes	550,000		4.625	%	November 1, 2025
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	$	3,400,000	4.129	%

On October 16, 2018, the Company closed a senior note offering, consisting of $550.0 million aggregate principal amount of the Operating Partnership’s 4.625% Senior Notes due 2025 (the “2025 Senior Notes”).

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, is 60 or fewer days prior to the maturity date with respect to the 2025 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 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). As of December 31, 2018, the Company believes that it was in compliance with the financial covenants of our Senior Notes based on the covenant limits and calculations in place at that time.

Convertible Debt

During the year ended December 31, 2018, the Company’s convertible senior notes due August 1, 2018 (the “2018 Convertible Notes”) matured and the principal outstanding of $597.5 million, plus accrued and unpaid interest thereon, was repaid. The interest rate on the 2018 Convertible Notes was 3.00% annually.

As of December 31, 2018, the Company had convertible senior notes due December 15, 2020 (the “2020 Convertible Notes”) with a balance of $402.5 million outstanding, which excludes the carrying value of the conversion options recorded within additional paid-in capital of $12.8 million and the unamortized discount of $3.9 million. The discount will be amortized over the remaining term of 2.0 years. The 2020 Convertible Notes bear interest at an annual rate of 3.75%.

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. As of December 31, 2018, the conversion rate was 66.7249 shares of the Company’s Common Stock per $1,000 principal amount of 2020 Convertible Notes, which reflects adjustments to the initial conversion rate pursuant to the terms of the applicable indenture as a result of cash dividend payments. There were no changes to the terms of the 2020 Convertible Notes during the year ended December 31, 2018 and the Company believes that it was in compliance with the financial covenants pursuant to the indenture governing the 2020 Convertible Notes as of December 31, 2018.

Credit Facility

On May 23, 2018, the General Partner, as guarantor, and the OP, as borrower, entered into a credit agreement with Wells Fargo Bank, National Association as administrative agent and other lenders party thereto (the “Credit Agreement”). The Credit Agreement provides for a $2.0 billion unsecured revolving credit facility (the “Revolving Credit Facility”) and a $900.0 million unsecured term loan facility (the “Credit Facility Term Loan,” together with the Revolving Credit Facility, the “Credit Facility”), which is available through February 23, 2019, for up to four borrowings of delayed-draw term loans. In connection with entering into the Credit Agreement, the OP repaid all of the outstanding obligations under the amended and restated credit agreement dated as of June 30, 2014 (as amended, the “2014 Credit Agreement”) and the 2014 Credit Agreement was terminated. The 2014 Credit Agreement provided for a $2.3 billion revolving credit facility and was scheduled to terminate on June 30, 2018.

As of December 31, 2018, the outstanding balance under the Revolving Credit Facility was $253.0 million. As of December 31, 2018, $150.0 million had been drawn on the Credit Facility Term Loan. The maximum aggregate dollar amount of letters of credit that may be outstanding at any one time under the Credit Facility is $50.0 million.

The Revolving Credit Facility generally bears interest at an annual rate of London Inter-Bank Offer Rate (“LIBOR”) plus 0.775% to 1.55% or Base Rate plus 0.00% to 0.55% (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 plus 1.0%, determined on a daily basis. The Credit Facility Term Loan generally bears interest at an annual rate of LIBOR plus 0.85% to 1.75%, or Base Rate plus 0.00% to 0.75% (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.

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 terminate, and payment of any unpaid amounts in respect of the Credit Facility will be accelerated. The Revolving Credit Facility terminates on May 23, 2022, unless extended in accordance with the terms of the Credit Agreement. The Credit Agreement provides for two six-month extension options with respect to the Revolving Credit Facility, exercisable at the OP’s election and subject to certain customary conditions, as well as certain customary “amend and extend” provisions. Any term loans outstanding under the Credit Facility Term Loan mature on May 23, 2023. 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 facility fee equal to 0.10% to 0.30% 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 a ticking fee equal to 0.25% multiplied by unused commitments in respect of the Credit Facility Term Loan. The OP also 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). 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% and (v) a minimum unencumbered interest coverage ratio of at least 1.75x. The Company believes that 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, 2018.

In connection with entering into the Credit Agreement, the Company capitalized an aggregate $20.7 million in lender fees and third-party costs in respect of the Revolving Credit Facility and the Credit Facility Term Loan, which will be amortized over the respective terms. Deferred financing costs, net of accumulated amortization, related to the Revolving Credit Facility are included in rent and other tenant receivables and other assets, net in the accompanying consolidated balance sheets. Deferred financing costs, net of accumulated amortization, related to the Credit Facility Term Loan outstanding balance are included in credit facility, net in the accompanying consolidated balance sheets.