Mortgages and Notes Payable

Our mortgages and notes payable consist of the following:



	December 31,
	2016			2015
Secured indebtedness: (1)
7.50% mortgage loan due 2016 (2)	$	—		$	43,852
5.10% (4.22% effective rate) mortgage loan due 2017 (3)	109,138			112,230
6.11% (5.36% effective rate) mortgage loan due 2017 (4)	19,066			19,199
	128,204			175,281
Unsecured indebtedness:
5.85% (5.88% effective rate) notes due 2017 (5)	379,661			379,544
7.50% notes due 2018	200,000			200,000
3.20% (3.363% effective rate) notes due 2021 (6)	298,072			297,639
3.625% (3.752% effective rate) notes due 2023 (7)	248,412			248,150
Variable rate term loan due 2019 (8)	200,000			200,000
Variable rate term loan due 2020 (9)	350,000			350,000
Variable rate term loan due 2022 (10)	150,000			—
Bridge credit facility due 2016 (2)	—			350,000
Revolving credit facility due 2018 (11)	—			299,000
	1,826,145			2,324,333
Less-unamortized debt issuance costs	(6,302		)	(7,801		)
Total mortgages and notes payable, net	$	1,948,047		$	2,491,813

__________


(1)	Our secured mortgage loans were collateralized by real estate assets with an aggregate undepreciated book value of $251.9 million at December 31, 2016. Our fixed rate mortgage loans generally are either locked out to prepayment for all or a portion of their term or are prepayable subject to certain conditions including prepayment penalties.


(2)	This debt was repaid in 2016.


(3)	Net of unamortized fair market value premium of $0.8 million and $1.7 million as of December 31, 2016 and 2015, respectively.


(4)	Net of unamortized fair market value premium of $0.1 million and $0.2 million as of December 31, 2016 and 2015, respectively.


(5)	Net of unamortized original issuance discount of less than $0.1 million and $0.1 million as of December 31, 2016 and 2015, respectively.


(6)	Net of unamortized original issuance discount of $1.9 million and $2.4 million as of December 31, 2016 and 2015, respectively.

6. Mortgages and Notes Payable - Continued


(7)	Net of unamortized original issuance discount of $1.6 million and $1.9 million as of December 31, 2016 and 2015, respectively.


(8)	The interest rate was 1.82% at December 31, 2016.


(9)	As more fully described in Note 7, we entered into floating-to-fixed interest rate swaps that effectively fix LIBOR for the original $225.0 million portion of this loan. Accordingly, the equivalent fixed rate of this amount is 2.78%. The interest rate on the remaining $125.0 million was 1.77% at December 31, 2016.


(10)	The interest rate was 1.72% at December 31, 2016.


(11)	There were no amounts outstanding on the revolving credit facility at December 31, 2016.

The following table sets forth scheduled future principal payments, including amortization, due on our mortgages and notes payable at December 31, 2016:



Years Ending December 31,	Principal Amount
2017	$	507,170
2018	199,305
2019	199,305
2020	349,305
2021	299,538
Thereafter	399,726
Less-unamortized debt issuance costs	(6,302		)
	$	1,948,047

Our $475.0 million unsecured revolving credit facility is scheduled to mature in January 2018 and includes an accordion feature that allows for an additional $75.0 million of borrowing capacity subject to additional lender commitments. Assuming no defaults have occurred, we have an option to extend the maturity for two additional six-month periods. The interest rate at our current credit ratings is LIBOR plus 110 basis points and the annual facility fee is 20 basis points. There were no amounts outstanding under our revolving credit facility at December 31, 2016 and $48.8 million outstanding at January 27, 2017. At both December 31, 2016 and January 27, 2017, we had $0.2 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility at December 31, 2016 and January 27, 2017 was $474.8 million and $426.0 million, respectively.

During 2016, we prepaid without penalty the remaining $43.6 million balance on a secured mortgage loan with an effective interest rate of 7.5% that was originally scheduled to mature in August 2016. Real estate assets having a gross book value of approximately $73 million became unencumbered in connection with the payoff of this secured loan. We also paid down $2.4 million of secured loan balances through principal amortization during 2016.

During 2016, we borrowed an aggregate of $150.0 million under an unsecured bank term loan that is originally scheduled to mature in January 2022. The interest rate on the term loan at our current credit ratings is LIBOR plus 110 basis points.

During 2015, we prepaid without penalty a secured mortgage loan with a fair market value of $5.9 million with an effective interest rate of 7.65% that was originally scheduled to mature in February 2016, the remaining $106.0 million balance on a secured mortgage loan with an effective interest rate of 6.88% that was originally scheduled to mature in January 2016 and the remaining $39.4 million balance on a secured mortgage loan with an effective interest rate of 6.43% that was originally scheduled to mature in November 2015. We recorded aggregate losses on debt extinguishment of $0.2 million related to these prepayments.

During 2015, we obtained a $350.0 million, six-month unsecured bridge facility. The interest rate on the bridge facility at our current credit ratings was LIBOR plus 110 basis points. There was $350.0 million outstanding under our bridge facility at December 31, 2015. During 2016, we prepaid without penalty the full balance on this unsecured bridge facility.

6. Mortgages and Notes Payable - Continued

During 2015, we amended our $225.0 million, seven-year unsecured bank term loan, which was scheduled to mature in January 2019. We increased the borrowed amount to $350.0 million. The amended term loan is now scheduled to mature in June 2020 and the interest rate, based on our current credit ratings, was reduced from LIBOR plus 175 basis points to LIBOR plus 110 basis points. We incurred $1.3 million of debt issuance costs in connection with this amendment, which will be amortized along with existing unamortized debt issuance costs over the remaining term of the new loan.

During 2015, we acquired our joint venture partner’s 77.2% interest in a building in Orlando. Simultaneously with this acquisition, the joint venture's previously existing mortgage note was restructured into a new $18.0 million first mortgage note and a $10.2 million subordinated note, both of which are scheduled to mature in July 2017. Assuming no defaults have occurred, we have an option to extend the maturity for an additional year. The first mortgage note is interest only with an effective interest rate of 5.36%, payable monthly. The subordinated note has an effective interest rate of 8.6%. Additionally, we deposited $3.0 million into escrow to fund tenant improvements, leasing commissions and building improvements. The first mortgage note and subordinated note can now be prepaid at any time upon a sale or refinancing of the property. In such event, the subordinated note and any and all accrued interest thereon would be deemed fully satisfied upon payment of a "waterfall payment," if any. Such "waterfall payment" would be a cash payment equal to 50.0% of the amount, if any, by which the net sale proceeds or appraised value in the event of a refinancing exceeds (1) the outstanding principal of the first mortgage note, (2) the funds deposited by us into escrow to fund tenant improvements, leasing commissions and building improvements and (3) a 10.0% return on such funds deposited by us into escrow. As of the date of such restructuring, the fair value of the first mortgage note was $18.3 million and the fair value of the subordinated note equaled the projected waterfall payment of $1.0 million.

During 2014, the Operating Partnership issued $300 million aggregate principal amount of 3.20% Notes due June 15, 2021, less original issue discount of $3.1 million. These notes were priced at 98.983% for an effective yield of 3.363%. Underwriting fees and other expenses were incurred that aggregated $2.4 million; these costs were deferred and will be amortized over the term of the notes.

During 2014, we prepaid the remaining $36.9 million balance on a secured mortgage loan with an effective interest rate of 3.34% that was originally scheduled to mature in April 2015. We recorded $0.3 million of loss on debt extinguishment related to this prepayment. We also prepaid without penalty the remaining $123.7 million balance on a secured mortgage loan with an effective interest rate of 3.11% that was originally scheduled to mature in July 2014 and the remaining $7.2 million balance on a secured mortgage loan with an effective interest rate of 3.32% that was originally scheduled to mature in August 2014. We recorded less than $0.1 million of gain on debt extinguishment related to this last prepayment.

We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt.

Our revolving credit facility and bank term loans require us to comply with customary operating covenants and various financial requirements. Upon an event of default on the revolving credit facility, the lenders having at least 51.0% of the total commitments under the revolving credit facility can accelerate all borrowings then outstanding, and we could be prohibited from borrowing any further amounts under our revolving credit facility, which would adversely affect our ability to fund our operations. In addition, certain of our unsecured debt agreements contain cross-default provisions giving the unsecured lenders the right to declare a default if we are in default under more than $25.0 million with respect to other loans in some circumstances.

The Operating Partnership has $379.7 million carrying amount of 2017 notes outstanding, $200.0 million carrying amount of 2018 notes outstanding, $298.1 million carrying amount of 2021 notes outstanding and $248.4 million carrying amount of 2023 notes outstanding. The indenture that governs these outstanding notes requires us to comply with customary operating covenants and various financial ratios. The trustee or the holders of at least 25.0% in principal amount of any series of notes can accelerate the principal amount of such series upon written notice of a default that remains uncured after 60 days.

6. Mortgages and Notes Payable - Continued

We have considered our short-term (one year or less) liquidity needs and the adequacy of our estimated cash flows from operating activities and other expected financing sources to meet these needs. In particular, we have considered our scheduled debt maturities in 2017, including $379.7 million principal amount of unsecured notes due March 15, 2017 and the $109.1 million secured loan due November 1, 2017. We expect to meet these short-term liquidity requirements, including the repayment of such unsecured notes and secured loan, through a combination of the following:


•	available cash and cash equivalents;


•	cash flows from operating activities;


•	issuance of debt securities by the Operating Partnership (some of which debt securities may be hedged to a fixed interest rate pursuant to the forward-starting swaps discussed below);


•	issuance of secured debt (including the anticipated $100.0 million fixed-rate loan discussed below);


•	bank term loans (including the anticipated $50.0 million expansion of an existing term loan);


•	borrowings under our revolving credit facility;


•	issuance of other secured debt;


•	issuance of equity securities by the Company or the Operating Partnership; and


•	the disposition of non-core assets.

To limit the risks associated with interest rate changes, during 2016, we obtained $150.0 million notional amount of forward-starting swaps that expire on March 15, 2017 and effectively lock the underlying 10-year treasury rate at 1.90% with respect to a planned issuance of debt securities by the Operating Partnership.

We expect to obtain an approximate $100.0 million fixed-rate secured loan with a term of at least 10 years. This planned secured loan is expected to close no later than May 1, 2017, which is the date on which we can prepay without penalty the $109.1 million secured loan that is scheduled to mature on November 1, 2017. The new secured loan is subject to formal lender commitment, definitive documentation and customary conditions.

We expect to borrow an additional $50.0 million under the unsecured bank term loan we obtained in 2016 that is scheduled to mature in January 2022. This planned expansion of the term loan, which will bear interest at LIBOR plus 110 basis points based on our current credit ratings, is expected to close no later than March 31, 2017. The term loan expansion is subject to definitive documentation and customary conditions.

Capitalized Interest

Total interest capitalized to development and significant building and tenant improvement projects was $8.2 million, $6.9 million and $5.3 million for the years ended December 31, 2016, 2015 and 2014, respectively.