Notes Payable, net

The following table sets forth information with respect to our outstanding indebtedness:



	March 31, 2018			December 31, 2017			Interest Rate⁽¹⁾	Contractual Maturity Date
UNSECURED NOTES PAYABLE
Unsecured Revolving Credit Facility⁽²⁾⁽³⁾	$	20,000		$	100,000		LIBOR + 1.05% to 1.50%	3/13/2022	⁽⁴⁾
Term Loan A⁽²⁾⁽⁵⁾	300,000			300,000			LIBOR + 1.20% to 1.70%	4/1/2020	⁽⁶⁾
Term Loan C⁽²⁾	75,000			75,000			LIBOR + 1.30% to 2.20%	11/17/2020
Term Loan B⁽²⁾⁽⁷⁾	350,000			350,000			LIBOR + 1.20% to 1.70%	4/1/2022
Term Loan D⁽²⁾⁽⁸⁾	125,000			125,000			LIBOR + 1.20% to 1.70%	11/17/2022
Series A Notes	110,000			110,000			4.34%	1/2/2023
Series E Notes	50,000			50,000			3.66%	9/15/2023
Series B Notes	259,000			259,000			4.69%	12/16/2025
Series D Notes	150,000			150,000			3.98%	7/6/2026
Registered Senior Notes⁽⁹⁾	400,000			400,000			3.95%	11/1/2027
Series C Notes	56,000			56,000			4.79%	12/16/2027
TOTAL UNSECURED NOTES PAYABLE	1,895,000			1,975,000

SECURED NOTES PAYABLE
Sunset Gower Studios/Sunset Bronson Studios⁽¹⁰⁾	5,001			5,001			LIBOR + 2.25%	3/4/2019	⁽⁴⁾
Met Park North⁽¹¹⁾	64,500			64,500			LIBOR + 1.55%	8/1/2020
10950 Washington⁽¹²⁾	27,281			27,418			5.32%	3/11/2022
Element LA	168,000			168,000			4.59%	11/6/2025
Hill7⁽¹³⁾	101,000			101,000			3.38%	11/6/2028
Rincon Center	—			98,392			5.13%	N/A
TOTAL SECURED NOTES PAYABLE	365,782			464,311
TOTAL NOTES PAYABLE	2,260,782			2,439,311
Unamortized deferred financing costs and loan discounts⁽¹⁴⁾	(20,094		)	(17,931		)
TOTAL NOTES PAYABLE, NET	$	2,240,688		$	2,421,380

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(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, 2018, which may be different than the interest rates as of December 31, 2017 for corresponding indebtedness.


(2)	The Company has an option to make an irrevocable election to change the interest rate depending on the Company’s credit rating or a specified base rate plus an applicable margin. As of March 31, 2018, no such election had been made.


(3)	The Company has a total capacity of $600.0 million under its unsecured revolving credit facility.


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


(5)	The outstanding balance of the term loan was effectively fixed at 2.56% to 3.06% per annum through the use of two interest rate swaps. See Note 9 for details.


(6)	The maturity date may be extended twice, each time for an additional one-year term.


(7)	The outstanding balance of the term loan was effectively fixed at 2.96% to 3.46% per annum through the use of two interest rate swaps. See Note 9 for details.


(8)	The outstanding balance of the term loan was effectively fixed at 2.63% to 3.13% per annum through the use of an interest rate swap. See Note 9 for details.


(9)	On October 2, 2017, the Company completed an underwritten public offering of $400.0 million of senior notes, which were issued at 99.815% of par.


(10)	The Company has the ability to draw up to $257.0 million under its construction loan, subject to lender required submissions.


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


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


(13)	The Company owns 55% of the ownership interest in the consolidated joint venture that owns the Hill7 property. The full amount of the loan is shown. This loan bears interest only at 3.38% until November 6, 2026, at which time the interest rate will increase and monthly debt service will include principal payments with a balloon payment at maturity.


(14)	Excludes deferred financing costs related to establishing the Company’s unsecured revolving credit facility.

Current year activity

On February 1, 2018, the Company paid in full the debt secured by its Rincon Center property, which was due to mature in May 2018.

On March 13, 2018, the operating partnership entered into the Amended and Restated Credit Agreement (as defined below) with various financial institutions. The Amended and Restated Credit Agreement modifies the operating partnership’s unsecured revolving credit facility and its term loans as discussed under the Term Loan and Credit Facility section below.

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 Sunset Gower Studios and Sunset Bronson Studios, the Company’s separate property-owning subsidiaries are not obligors of 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 have been no events of default associated with the Company’s loans.

The following table summarizes the minimum future principal payments due (before the impact of extension options, if applicable) on the operating partnership’s secured and unsecured notes payable as of March 31, 2018:



Year	Annual Principal Payments
Remaining 2018	$	400
2019	5,569
2020	440,095
2021	632
2022	520,086
Thereafter	1,294,000
Total	$	2,260,782

Term Loan and Credit Facility

On March 13, 2018, the operating partnership entered into a Third Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) with various financial institutions. The Amended and Restated Credit Agreement amends and restates and replaces (i) the operating partnership’s existing Second Amended and Restated Credit Agreement, entered into on March 31, 2015 (the “Prior Credit Agreement”), which governed its $400.0 million unsecured revolving credit facility, $300.0 million unsecured 5-year term loan facility and $350.0 million unsecured 7-year term loan facility, and (ii) the operating partnership’s Term Loan Credit Agreement, entered into on November 17, 2015 (together with the Prior Credit Agreement, the “Existing Credit Agreements”), which governed its $75.0 million unsecured 5-year term loan facility and $125.0 million unsecured 7-year term loan facility.

The Amended and Restated Credit Agreement provides for (i) the increase of the operating partnership’s unsecured revolving credit facility to $600.0 million and the extension of the term to March 13, 2022 and (ii) term loans in amount and tenor equal to the term loans outstanding under the Existing Credit Agreements ($300.0 million term loan A maturing April 1, 2020, $350.0 million term loan B maturing April 1, 2022, $75.0 million term loan C maturing November 17, 2020 and $125.0 million term loan D maturing November 17, 2022).

The Company uses the unsecured revolving credit facility to finance the acquisition of other properties, to provide funds for tenant improvements and capital expenditures and to provide for working capital and other corporate purposes.

The following table summarizes the balance and key terms of the unsecured revolving credit facility as of:



	March 31, 2018		December 31, 2017
Outstanding borrowings	$	20,000	$	100,000
Remaining borrowing capacity	580,000		300,000
Total borrowing capacity	$	600,000	$	400,000
Interest rate⁽¹⁾⁽²⁾	LIBOR + 1.05% to 1.50%		LIBOR + 1.15% to 1.85%
Facility fee-annual rate⁽¹⁾	0.15% or 0.30%		0.20% or 0.35%
Contractual maturity date⁽³⁾	3/13/2022		4/1/2019

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(1)	The rate is based on the operating partnership’s leverage ratio. 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, 2018, no such election had been made.


(2)	The Company has the option to make an irrevocable election to change the interest rate depending on the Company’s specified base rate plus an applicable margin. As of March 31, 2018, no such election had been made.


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

Debt Covenants

The operating partnership’s ability to borrow under its unsecured loan arrangements remains subject to ongoing compliance with financial and other covenants as defined in the respective agreements. 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 following table summarizes existing covenants and their covenant levels related to our unsecured revolving credit facility, term loans, and series A, B, D, and E notes, when considering the most restrictive terms:



Covenant Ratio		Covenant Level
Total Liabilities to Total Asset Value		≤ 60%
Unsecured Indebtedness to Unencumbered Asset Value		≤ 60%
Adjusted EBITDA to Fixed Charges		≥ 1.5x
Secured Indebtedness to Total Asset Value		≤ 45%
Unencumbered NOI to Unsecured Interest Expense		≥ 2.0x

The following table summarizes existing covenants and their covenant levels related to our registered senior notes:



Covenant Ratio		Covenant Level
Debt to Total Assets		≤ 60%
Total Unencumbered Assets to Unsecured Debt		≥ 150%
Consolidated Income Available for Debt Service to Annual Debt Service Charge		≥ 1.5x
Secured Debt to Total Assets		≤ 45%

The operating partnership was in compliance with its financial covenants as of March 31, 2018.

Repayment Guarantees

Registered Senior Notes

The Company has fully and unconditionally guaranteed the operating partnership’s $400.0 million registered senior notes due November 1, 2027.

Sunset Gower Studios and Sunset Bronson Studios Loan

In connection with the loan secured by the Sunset Gower Studios and Sunset Bronson Studios 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. As of March 31, 2018, the outstanding balance was $5.0 million, which results in a maximum guarantee amount for the principal under this loan of $1.0 million. The Company has the ability to draw up to $257.0 million under its construction loan, subject to lender required submissions. 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.

Other Loans

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

Interest Expense

The following table represents a reconciliation from the gross interest expense to the amount on the interest expense line item in the Consolidated Statements of Operations:



	Three Months Ended March 31,
	2018			2017
Gross interest expense⁽¹⁾	$	22,431		$	23,190
Capitalized interest	(3,586		)	(2,446		)
Amortization of deferred financing costs and loan discount, net	1,658			1,186
Interest expense	$	20,503		$	21,930

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(1)	Includes interest on the Company’s notes payable and hedging activities.