Indebtedness

9 Months Ended

Sep. 30, 2017

All debt is held directly or indirectly by the Partnership. The General Partner does not have any indebtedness, but does guarantee some of the unsecured debt of the Partnership. The following table summarizes the book value and changes in the fair value of our debt (in thousands):



	Book Value at 12/31/2016		Book Value at 9/30/2017		Fair Value at 12/31/2016		Payments/Payoffs			Adjustments to Fair Value			Fair Value at 9/30/2017
Fixed rate secured debt	$	381,894	$	310,975	$	415,231	$	(70,854	)	$	(12,352	)	$	332,025
Variable rate secured debt	2,800		2,500		2,800		(300		)	—			2,500
Unsecured debt	2,498,835		1,832,687		2,568,034		(666,148		)	7,339			1,909,225
Unsecured line of credit	48,000		5,000		48,000		(43,000		)	—			5,000
Total	$	2,931,529	$	2,151,162	$	3,034,065	$	(780,302	)	$	(5,013	)	$	2,248,750
Less: Deferred financing costs	23,052		19,282
Total indebtedness as reported on the consolidated balance sheets	$	2,908,477	$	2,131,880

Secured Debt

Because our fixed rate secured debt is not actively traded in any marketplace, we utilized a discounted cash flow methodology to determine its fair value. Accordingly, we calculated fair value by applying an estimate of the current market rate to discount the debt's remaining contractual cash flows. Our estimate of a current market rate, which is the most significant input in the discounted cash flow calculation, is intended to replicate debt of similar maturity and loan-to-value relationship. The estimated rates ranged from 3.20% to 3.70%, depending on the attributes of the specific loans. The current market rates we utilized were internally estimated; therefore, we have concluded that our determination of fair value for our fixed rate secured debt was primarily based upon level 3 inputs.

During the nine months ended September 30, 2017, we repaid seven fixed rate secured loans, totaling $66.3 million, which had a weighted average stated interest rate of 5.85%.

Unsecured Debt

At September 30, 2017, all of our unsecured debt bore interest at fixed rates and primarily consisted of unsecured notes that are publicly traded. We utilized broker estimates in estimating the fair value of our fixed rate unsecured debt. Our unsecured notes are thinly traded and, in certain cases, the broker estimates were not based upon comparable transactions. The broker estimates took into account any recent trades within the same series of our fixed rate unsecured debt, comparisons to recent trades of other series of our fixed rate unsecured debt, trades of fixed rate unsecured debt from companies with profiles similar to ours, as well as overall economic conditions. We reviewed these broker estimates for reasonableness and accuracy, considering whether the estimates were based upon market participant assumptions within the principal and most advantageous market and whether any other observable inputs would be more accurate indicators of fair value than the broker estimates. We concluded that the broker estimates were representative of fair value. We have determined that our estimation of the fair value of our fixed rate unsecured debt was primarily based upon level 3 inputs. The estimated trading values of our fixed rate unsecured debt, depending on the maturity and coupon rates, ranged from 99.00% to 130.00% of face value.

The indentures (and related supplemental indentures) governing our outstanding series of unsecured notes also require us to comply with financial ratios and other covenants regarding our operations. We were in compliance with all such financial covenants at September 30, 2017.

During the nine months ended September 30, 2017, we repaid the following unsecured loans:


•	In June 2017, we repaid our $250.0 million variable rate term loan, which had a scheduled maturity date of January 2019 and bore interest at LIBOR plus 1.00%, and recognized a loss of $523,000 from the write-off of unamortized deferred financing costs.


•	In June 2017, we also repaid $285.6 million of senior unsecured notes that had a stated interest rate of 6.50% and an effective interest rate of 6.08%, with a scheduled maturity date of January 2018. We recognized a loss of $9.0 million including a repayment premium and the write-off of unamortized deferred financing costs.


•	In July 2017, we repaid $128.7 million of senior unsecured notes that had both a stated and an effective interest rate of 6.75% with a scheduled maturity date of March 2020. We recognized a loss of $16.6 million including a repayment premium and the write-off of unamortized deferred financing costs.

Unsecured Line of Credit

Our unsecured line of credit at September 30, 2017 is described as follows (in thousands):



Description	Borrowing Capacity		Maturity Date	Outstanding Balance at September 30, 2017
Unsecured Line of Credit - Partnership	$	1,200,000	January 1, 2019	$	5,000

The Partnership's unsecured line of credit had an interest rate on borrowings of LIBOR plus 0.93% (equal to 2.17% for outstanding borrowings at September 30, 2017), and had a maturity date of January 1, 2019, which in October 2017 was restated and amended (see Note 11). This line of credit provides us with an option to obtain borrowings from financial institutions that participate in the line at rates that may be lower than the stated interest rate, subject to certain restrictions.

This line of credit contains financial covenants that require us to meet certain financial ratios and defined levels of performance, including those related to fixed charge coverage, unsecured interest expense coverage and debt-to-asset value (with asset value being defined in the Partnership's unsecured line of credit agreement). At September 30, 2017, we were in compliance with all financial covenants under this line of credit.

To the extent that there are outstanding borrowings, we utilize a discounted cash flow methodology in order to estimate the fair value of our unsecured line of credit. To the extent that credit spreads have changed since the origination of the line of credit, the net present value of the difference between future contractual interest payments and future interest payments based on our estimate of a current market rate would represent the difference between the book value and the fair value. Our estimate of a current market rate is based upon the rate, considering current market conditions and our specific credit profile, at which we estimate we could obtain similar borrowings. As our credit spreads have not changed appreciably, we believe that the contractual interest rate and the current market rate on the line of credit are the same. To the extent there are outstanding borrowings, this current market rate is internally estimated and therefore would be primarily based upon a level 3 input.