NOTE 9. DEBT

All debt is incurred by the OP. The Parent does not have any indebtedness, but guarantees the unsecured debt of the OP.

The following table summarizes our debt at December 31 (dollars in thousands):

	2017					2016
	Weighted Average Interest Rate (1)			Amount Outstanding (2)		Weighted Average Interest Rate (1)			Amount Outstanding
Credit facilities		1.8	%	$	317,392		1.0	%	$	35,023
Senior notes (3)		3.0	%		6,067,277		3.3	%		6,417,492
Term loans		1.7	%		2,046,945		1.4	%		1,484,523
Unsecured other		6.1	%		13,546		6.1	%		14,478
Secured mortgages (4)		5.7	%		808,096		4.9	%		979,585
Secured mortgages of consolidated entities (5)		2.9	%		159,375		3.0	%		1,677,193
Total		2.9	%	$	9,412,631		3.2	%	$	10,608,294

(1)	The interest rates presented represent the effective interest rates (including amortization of debt issuance costs and the noncash premiums or discounts) at the end of the year for the debt outstanding.

(2)	Included in the outstanding balances were borrowings denominated in non-U.S. dollars, principally: euro ($3.8 billion), Japanese yen ($1.3 billion), British pound sterling ($0.7 billion) and Canadian dollars ($0.5 billion).

(3)	Notes are due October 2020 to June 2029 with effective interest rates ranging from 1.5% to 4.4% at December 31, 2017.

(4)	Debt is due May 2018 to December 2025 with effective interest rates ranging from 2.7% to 7.8% at December 31, 2017. The debt is secured by 144 real estate properties with an aggregate undepreciated cost of $2.2 billion at December 31, 2017.

(5)	Debt is due April 2019 to December 2027 with effective interest rates ranging from 2.9% to 3.4% at December 31, 2017. The debt is secured by 18 real estate properties with an aggregate undepreciated cost of $0.3 billion at December 31, 2017.

Credit Facilities

We have a global senior credit facility (the “Global Facility”), under which we may draw in British pounds sterling, Canadian dollars, euro, Japanese yen and U.S. dollars on a revolving basis up to $3.0 billion (subject to currency fluctuations). We have the ability to increase the Global Facility to $3.8 billion, subject to currency fluctuations and obtaining additional lender commitments. Pricing under the Global Facility, including the spread over LIBOR, facility fees and letter of credit fees, varies based on the public debt ratings of the OP. The Global Facility is scheduled to mature in April 2020; however, we may extend the maturity date for six months on two occasions, subject to the satisfaction of certain conditions and payment of extension fees.

We also have a Japanese yen revolver (the “Revolver”). In February 2017, we renewed and amended the Revolver to increase our availability from ¥45.0 billion to ¥50.0 billion ($444.2 million at December 31, 2017). We have the ability to increase the Revolver to ¥65.0 billion ($577.4 million at December 31, 2017), subject to obtaining additional lender commitments. Pricing under the Revolver, including the spread over LIBOR, facility fees and letter of credit fees, varies based on the public debt ratings of the OP. The Revolver is scheduled to mature in February 2021; however, we may extend the maturity date for one year, subject to the satisfaction of certain conditions and payment of extension fees.

We refer to the Global Facility and the Revolver, collectively, as our “Credit Facilities.”

The following table summarizes information about our Credit Facilities (dollars in millions):

	2017			2016			2015
For the years ended December 31:
Weighted average daily interest rate		1.3	%		1.4	%		1.1	%
Weighted average daily borrowings	$	111		$	128		$	261
Maximum borrowings outstanding at any month-end	$	317		$	307		$	942
At December 31:
Aggregate lender commitments	$	3,490		$	3,306		$	2,662
Less:
Borrowings outstanding		317			35			-
Outstanding letters of credit		33			36			32
Current availability	$	3,140		$	3,235		$	2,630

Senior Notes

The senior notes are unsecured and our obligations are effectively subordinated in certain respects to any of our debt that is secured by a lien on real property, to the extent of the value of such real property. The senior notes require interest payments be made quarterly, semi-annually or annually. All of the senior notes are redeemable at any time at our option, subject to certain prepayment penalties. Such repurchase and other terms are governed by the provisions of indenture agreements, various note purchase agreements or trust deeds.

In June 2017, we issued £500.0 million ($645.3 million) senior notes bearing a coupon rate of 2.25%, maturing in June 2029, at 99.9% par value for an effective rate of 2.30%. The exchange rate used to calculate into U.S. dollar was the spot rate at the date of the transaction. We did not issue senior notes during 2016.

In January 2018, we issued €400.0 million ($495.3 million) senior notes bearing a floating rate of Euribor plus 0.25%, maturing in January 2020. The exchange rate used to calculate into U.S. dollar was the spot rate at the date of the transaction.

Term Loans

The following table summarizes our outstanding term loans at December 31 (dollars and borrowing currency in thousands):

Term Loan	Borrowing Currency	Initial Borrowing Date	Lender Commitment at 2017				Amount Outstanding at 2017			Amount Outstanding at 2016			Interest Rate	Maturity Date
			Borrowing Currency		USD		USD			USD
2017 Term Loan (1) (2)	USD, EUR, JPY and GBP	June 2014	$	500,000	$	500,000	$	500,000		$	193,293		LIBOR plus 0.90%	May 2020
2015 Canadian Term Loan	CAD	December 2015	$	371,925	$	296,595		296,595			276,322		CDOR rate plus 1.50%	February 2023
2016 Yen Term Loan	JPY	August 2016	¥	120,000,000	$	1,065,965		1,065,965			1,025,057		Yen LIBOR plus 0.65%	August 2022 and 2023
March 2017 Yen Term Loan	JPY	March 2017	¥	12,000,000	$	106,597		106,597			-		0.92% and 1.01%	March 2027 and 2028
October 2017 Yen Term Loan	JPY	October 2017	¥	10,000,000	$	88,830		88,830			-		0.85%	October 2032
Subtotal								2,057,987			1,494,672
Debt issuance costs, net								(11,042	)		(10,149	)
Total							$	2,046,945		$	1,484,523

(1)

In May 2017, we renewed and amended our existing senior term loan agreement (the “2017 Term Loan”). We may increase the borrowings up to $1.0 billion, subject to obtaining additional lender commitments. We may pay down and reborrow on this term loan. We may extend the maturity date twice, by one year each, subject to the satisfaction of certain conditions and the payment of an extension fee.

(2)	We paid down $1.2 billion and $1.2 billion and reborrowed $1.5 billion and $0.8 billion in 2017 and 2016, respectively.

Secured Mortgage Debt

In July 2017, USLF assumed $956.0 million of secured mortgage debt in conjunction with our contribution of the associated real estate properties, as discussed in Note 4.

TMK bonds are a financing vehicle in Japan for special purpose companies known as TMKs. In June 2017, we issued ¥4.5 billion ($40.2 million) of new TMK bonds. We subsequently paid off or transferred all of our outstanding TMK bonds and there were no TMK bonds outstanding at December 31, 2017. During 2016, we issued new TMK bonds totaling ¥25.7 billion ($244.6 million).

Long-Term Debt Maturities

Principal payments due on our debt, for each year through the period ended December 31, 2022, and thereafter were as follows at December 31, 2017 (in thousands):

	Unsecured
		Credit		Senior			Term Loans			Secured
Maturity		Facilities		Notes			and Other			Mortgage Debt			Total
2018 (1)		$	-	$	-		$	934		$	167,960		$	168,894
2019			-		-			1,013			446,324			447,337
2020 (2) (3)			264,982		719,580			501,077			12,401			1,498,040
2021 (3)			52,410		839,510			910			14,780			907,610
2022			-		839,510			444,890			10,791			1,295,191
Thereafter			-		3,715,027			1,122,709			314,298			5,152,034
Subtotal			317,392		6,113,627			2,071,533			966,554			9,469,106
Premiums (discounts), net			-		(21,333	)		-			4,660			(16,673	)
Debt issuance costs, net			-		(25,017	)		(11,042	)		(3,743	)		(39,802	)
Total		$	317,392	$	6,067,277		$	2,060,491		$	967,471		$	9,412,631

(1)	We expect to repay the amounts maturing in 2018 with cash generated from operations, proceeds from dispositions of real estate properties, or as necessary, with borrowings on our Credit Facilities.

(2)	Included in the 2020 maturities was the 2017 Term Loan that can be extended until 2022, as discussed above.

(3)	Included in the 2020 and 2021 maturities were the Credit Facilities that can be extended until 2021 and 2022, respectively, as discussed above.

Interest Expense

The following table summarizes the components of interest expense for the years ended December 31 (in thousands):

	2017			2016			2015
Gross interest expense	$	328,228		$	383,098		$	394,012
Amortization of premium, net		(13,728	)		(30,596	)		(45,253	)
Amortization of debt issuance costs		14,479			15,459			13,412
Interest expense before capitalization	$	328,979		$	367,961		$	362,171
Capitalized amounts		(54,493	)		(64,815	)		(60,808	)
Net interest expense	$	274,486		$	303,146		$	301,363
Total cash paid for interest, net of amounts capitalized	$	278,313		$	322,442		$	345,916

Early Extinguishment of Debt

In 2017 and 2015, we repurchased or repaid certain debt before the maturity date in an effort to reduce our borrowing costs and extend our debt maturities. As a result, we recognized gains or losses represented by the difference between the recorded debt (including premiums and discounts and related debt issuance costs) and the consideration we paid to retire the debt, including fees. Fees associated with the restructuring of debt that meets the modification criteria, along with existing unamortized premium or discount and debt issuance costs, are amortized over the term of the new debt.

The following table summarizes the activity related to the repurchase of debt and net loss on early extinguishment of debt for the years ended December 31 (in millions):

	2017		2015
Senior notes:
Original principal amount	$	1,495.3	$	709.7
Cash purchase price	$	1,566.5	$	789.0
Term loans:
Original principal amount	$	-	$	600.0
Cash repayment price	$	-	$	600.0
Secured mortgage debt:
Original principal amount	$	538.3	$	571.5
Cash repayment price	$	538.3	$	595.5
Total:
Original principal amount	$	2,033.6	$	1,881.2
Cash purchase / repayment price	$	2,104.8	$	1,984.5
Losses on early extinguishment of debt	$	68.4	$	86.3

During 2016, we repaid certain debt at the earliest available payment date with no prepayment costs. We recorded a gain of $2.5 million that related to unamortized premiums associated with the extinguished debt and were net of unamortized debt issuance costs.

Financial Debt Covenants

We have $6.1 billion of senior notes and $2.0 billion of term loans outstanding at December 31, 2017 under two separate indentures, as supplemented, and were subject to certain financial covenants. We are also subject to financial covenants under our Credit Facilities and certain secured mortgage debt. At December 31, 2017, we were in compliance with all of our financial debt covenants.