Notes Payable

The following table summarizes the balances of the Company’s indebtedness as of:



	March 31, 2016			December 31, 2015
Notes payable	$	2,097,539		$	2,278,445
Less: unamortized loan premium and deferred financing costs, net⁽¹⁾	(17,534		)	(17,729		)
Notes payable, net	$	2,080,005		$	2,260,716

________________


(1)	Deferred financing costs exclude debt issuance costs, net related to establishing the Company’s unsecured revolving credit facility and undrawn term loans. These costs are presented within prepaid expenses and other assets, net in the Consolidated Balance Sheets.

The following table sets forth information as of March 31, 2016 and December 31, 2015 with respect to the Company’s outstanding indebtedness, excluding net deferred financing costs related to unsecured revolving credit facility and undrawn term loans.



	March 31, 2016						December 31, 2015
	Principal Amount		Unamortized Loan Premium and Deferred Financing Costs, net				Principal Amount		Unamortized Loan Premium and Deferred Financing Costs, net				Interest Rate⁽¹⁾	Contractual Maturity Date
Unsecured Loans
Unsecured Revolving Credit Facility⁽²⁾	$	50,000	$	—			$	230,000	$	—			LIBOR+ 1.15% to 1.85%	4/1/2019	⁽¹¹⁾
5-Year Term Loan due April 2020⁽²⁾⁽³⁾	550,000		(5,243		)		550,000		(5,571		)		LIBOR+ 1.30% to 2.20%	4/1/2020
5-Year Term Loan due November 2020⁽²⁾	—		—				—		—				LIBOR +1.30% to 2.20%	11/17/2020
7-Year Term Loan due April 2022⁽²⁾⁽⁴⁾	350,000		(2,549		)		350,000		(2,656		)		LIBOR+ 1.60% to 2.55%	4/1/2022
7-Year Term Loan due November 2022⁽²⁾	—		—				—		—				LIBOR + 1.60% to 2.55%	11/17/2022
Series A Notes	110,000		(1,049		)		110,000		(1,011		)		4.34%	1/2/2023
Series B Notes	259,000		(2,462		)		259,000		(2,378		)		4.69%	12/16/2025
Series C Notes	56,000		(576		)		56,000		(509		)		4.79%	12/16/2027
Total Unsecured Loans	$	1,375,000	$	(11,879	)		$	1,555,000	$	(12,125	)

Mortgage Loans
Mortgage loan secured by Pinnacle II⁽⁵⁾	$	85,914	$	873		⁽⁶⁾	$	86,228	$	1,310		⁽⁶⁾	6.31%	9/6/2016
Mortgage loan secured by 901 Market	30,000		(83		)		30,000		(119		)		LIBOR+2.25%	10/31/2016
Mortgage loan secured by Rincon Center⁽⁷⁾	101,836		(315		)		102,309		(355		)		5.13%	5/1/2018
Mortgage loan secured by Sunset Gower/Sunset Bronson⁽⁸⁾	115,001		(2,055		)		115,001		(2,232		)		LIBOR+2.25%	3/4/2019	⁽¹¹⁾
Mortgage loan secured by Met Park North⁽⁹⁾	64,500		(481		)		64,500		(509		)		LIBOR+1.55%	8/1/2020
Mortgage loan secured by 10950 Washington⁽⁷⁾	28,288		(404		)		28,407		(421		)		5.32%	3/11/2022
Mortgage loan secured by Pinnacle I⁽¹⁰⁾	129,000		(669		)		129,000		(694		)		3.95%	11/7/2022
Mortgage loan secured by Element L.A.	168,000		(2,521		)		168,000		(2,584		)		4.59%	11/6/2025
Total mortgage loans	$	722,539	$	(5,655	)		$	723,445	$	(5,604	)
Total	$	2,097,539	$	(17,534	)		$	2,278,445	$	(17,729	)

_________________


(1)	Interest rate with respect to indebtedness is calculated on the basis of a 360-day year for the actual days elapsed. Interest rates are as of March 31, 2016, which may be different than the interest rates as of December 31, 2015 for corresponding indebtedness.


(2)	The Company has the option to make an irrevocable election to change the interest rate depending on the Company’s credit rating. As of March 31, 2016, no such election has been made.


(3)	Effective May 1, 2015, $300.0 million of the $550.0 million term loan has been effectively fixed at 2.66% to 3.56% per annum through the use of an interest rate swap. See Note 6 for details.


(4)	Effective May 1, 2015, the outstanding balance of the term loan has been effectively fixed at 3.21% to 4.16% per annum through the use of an interest rate swap. See Note 6 for details.


(5)	This loan bore interest only for the first five years. Beginning with the payment due October 6, 2011, monthly debt service includes annual debt amortization payments based on a 30-year amortization schedule with a balloon payment at maturity.


(6)	Represents unamortized premium amount of the non-cash mark-to-market adjustment.


(7)	Monthly debt service includes annual debt amortization payments based on a 30-year amortization schedule with a balloon payment at maturity.


(8)	Through February 11, 2016, interest on $92.0 million of the outstanding loan balance was effectively capped at 5.97% and 4.25% on $50.0 million and $42.0 million, respectively, of the loan through the use of two interest rate caps. These interest rate caps were not renewed after maturity.


(9)	This loan bears interest only. Interest on the full loan amount has been effectively fixed at 3.71% per annum through use of an interest rate swap. See Note 6 for details.


(10)	This loan bears interest only for the first five years. Beginning with the payment due December 6, 2017, monthly debt service will include annual debt amortization payments based on a 30-year amortization schedule with a balloon payment at maturity.


(11)	The maturity date may be extended once for an additional one-year term.

Indebtedness

The Company presents its financial statements on a consolidated basis. Notwithstanding such presentation, except to the extent expressly indicated, such as in the case of the project financing for the Sunset Gower and Sunset Bronson properties, the Company’s separate property-owning subsidiaries are not obligors of or under the debt of their respective affiliates and each property-owning subsidiary’s separate liabilities do not constitute obligations of its respective affiliates.

Loan agreements include events of default that the Company believes are usual for loan and transactions of this type. As of the date of this filing, there has been no events of default associated with the Company’s loans.

The minimum future principal payments due on the Company’s secured and unsecured notes payable at March 31, 2016 were as follows (before the impact of extension options, if applicable):



Year ended	Annual Principal Payments
2016 (nine months ending December 31, 2016)	$	117,701
2017	2,714
2018	101,157
2019	167,886
2020	617,493
Thereafter	1,090,588
Total	$	2,097,539

Senior Unsecured Revolving Credit Facility and Term Loan Facilities

New Term Loan Agreement

On November 17, 2015, the operating partnership entered into a new term loan credit agreement (the “New Term Loan Agreement”) with a group of lenders for an unsecured $175.0 million five-year delayed draw term loan with a maturity date of November 2020 (“5-Year Term Loan due November 2020”) and an unsecured $125.0 million seven-year delayed draw term loan with a maturity date of November 2022 (“7-Year Term Loan due November 2022”). These term loans were undrawn as of March 31, 2016. On May 3, 2016, these loans were fully drawn. See Note 14 for details.

A&R Credit

On April 1, 2015, the operating partnership entered into the Second Amended and Restated Credit Agreement dated as of March 31, 2015 (the “Credit Facility”), which extended the maturity dates and increased the availability of the credit facilities governed by the prior agreement. On November 17, 2015, the operating partnership amended and restated the Credit Facility (“Amended and Restated Credit Facility”) to align certain terms therein with the less restrictive terms of the New Term Loan Agreement. Borrowings under the Credit Facility were used towards the EOP Acquisition in 2015 and the Amended and Restated Credit Facility is available for other purposes, including for payment of pre-development and development costs incurred in connection with properties owned by the Company, to finance capital expenditures and the repayment of indebtedness of the Company, to provide for general working capital needs and for general corporate purposes of the Company, and to pay fees and expenses incurred in connection with the Amended and Restated Credit Facility. On May 3, 2016, the unsecured revolving loan has been fully paid off and the five-year term loan due April 2020 has been partially paid off. See Note 14 for details.

Guaranteed Senior Notes

On November 16, 2015, the operating partnership entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with various purchasers, which provides for the private placement of $425.0 million of senior guaranteed notes by the operating partnership, designated as three notes with various interest rates and maturity dates (“Notes”). The Notes were issued on December 16, 2015 and upon issuance, the Notes pay interest semi-annually on the 16th day of June and December in each year until their respective maturities.

Debt Covenants

The operating partnership’s ability to borrow under the New Term Loan Agreement, the Amended and Restated Credit Facility, and the Note Purchase Agreement remains subject to ongoing compliance with financial and other covenants as defined in the respective agreements, including maintaining a leverage ratio (maximum of 0.60:1.00), unencumbered leverage ratio (maximum of 0.60:1.00), fixed charge coverage ratio (minimum of 1.50:1.00), secured indebtedness leverage ratio (maximum of 0.55:1.00), and unsecured interest coverage ratio (minimum 2.00:1.00). Certain financial covenant ratios are subject to change in the occurrence of material acquisitions as defined in the respective agreements. Other covenants include certain limitations on dividend payouts and distributions, limits on certain types of investments outside of the operating partnership’s primary business, and other customary affirmative and negative covenants.

The operating partnership was in compliance with its financial covenants at March 31, 2016.

Repayment Guaranties

Sunset Gower and Sunset Bronson Loan

In connection with the loan secured by the Sunset Gower and Sunset Bronson properties, the Company has guaranteed in favor of and promised to pay to the lender 19.5% of the principal payable under the loan in the event the borrower, a wholly-owned entity of the operating partnership, does not do so. At March 31, 2016, the outstanding balance was $115.0 million, which results in a maximum guarantee amount for the principal under this loan of $22.4 million. Furthermore, the Company agreed to guarantee the completion of the construction improvements, including tenant improvements, as defined in the agreement, in the event of any default of the borrower. If the borrower fails to complete the remaining required work, the guarantor agrees to perform timely all of the completion obligations, as defined in the agreement. As of the date of this filing, there has been no event of default associated with this loan. On May 3, 2016, this loan has been partially paid off. See Note 14 for details.

901 Market Loan

In connection with its 901 Market Street loan, the Company has guaranteed in favor of and promised to pay to the lender 35.0% of the principal under the loan in the event the borrower, a wholly-owned entity of the operating partnership, does not do so. At March 31, 2016, the outstanding balance was $30.0 million, which results in a maximum guarantee amount for the principal under this loan of $10.5 million. Furthermore, the Company agreed to guarantee the completion of the construction improvements, including tenant improvements, as defined in the agreement, in the event of any default of the borrower. The borrower has completed various of the improvements subject to this completion guaranty. If the borrower fails to complete the remaining required work, the guarantor agrees to perform timely all of the completion obligations, as defined in the agreement. As of the date of this filing, there has been no event of default associated with this loan. On May 3, 2016, this loan has been fully paid off. See Note 14 for details.

Other Loans

Although the rest of the operating partnership’s loans are secured and non-recourse to the operating partnership, the operating partnership provides limited customary secured debt guarantees for items such as voluntary bankruptcy, fraud, misapplication of payments and environmental liabilities.