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Debt | 9 Months Ended
--- | ---
Sep. 30, 2018
Debt Disclosure [Abstract] |
Debt | Debt The following table sets forth information with respect to our outstanding indebtedness:
| September 30, 2018 |  | December 31, 2017 |  | Interest Rate(1) |  | Contractual Maturity Date |
UNSECURED AND SECURED DEBT |  |  |  |  |  |  |  |
Unsecured debt |  |  |  |  |  |  |  |
Unsecured revolving credit facility(2)(3) | $ | 110,000 |  | $ | 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 | 400,000 |  | 400,000 |  | 3.95% |  |  | 11/1/2027 |
Series C notes | 56,000 |  | 56,000 |  | 4.79% |  |  | 12/16/2027 |
Total unsecured debt | 1,985,000 |  | 1,975,000 |  |  |  |  |
Secured debt |  |  |  |  |  |  |  |
Sunset Gower Studios/Sunset Bronson Studios(9) | 5,001 |  | 5,001 |  | LIBOR + 2.25% |  | 3/4/2019 | (4)
Met Park North(10) | 64,500 |  | 64,500 |  | LIBOR + 1.55% |  | 8/1/2020 |
10950 Washington(11) | 27,018 |  | 27,418 |  | 5.32% |  |  | 3/11/2022 |
Element LA | 168,000 |  | 168,000 |  | 4.59% |  |  | 11/6/2025 |
Hill7(12) | 101,000 |  | 101,000 |  | 3.38% |  |  | 11/6/2028 |
Rincon Center | — |  | 98,392 |  | 5.13% |  |  | N/A |
Total secured debt | 365,519 |  | 464,311 |  |  |  |  |
Total unsecured and secured debt | 2,350,519 |  | 2,439,311 |  |  |  |  |
Unamortized deferred financing costs and loan discounts(13) | (17,724) |  | (17,931) |  |  |  |  |
TOTAL UNSECURED AND SECURED DEBT, NET | $ | 2,332,795 |  | $ | 2,421,380 |  |  |  |  |
IN-SUBSTANCE DEFEASED DEBT(14) | $ | 139,003 |  | $ | — |  | 4.47% |  | 10/1/2022 |
_________________ 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 September 30, 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 September 30, 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 interest rate on 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 8 for details. 6. The maturity date may be extended twice, each time for an additional one-year term. 7. The interest rate on 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 8 for details. 8. The interest rate on 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 8 for details. 9. The Company has the ability to draw up to $257.0 million under its construction loan, subject to lender required submissions. This loan is also secured by the Company’s ICON and CUE properties. 10. This loan bears interest only. The interest rate on the full loan amount has been effectively fixed at 3.71% per annum through the use of an interest rate swap. See Note 8 for details. 11. Monthly debt service includes annual debt amortization payments based on a 30-year amortization schedule with a balloon payment at maturity. 12. 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. 13. Excludes deferred financing costs related to establishing the Company’s unsecured revolving credit facility. 14. On August 31, 2018, the Company assumed the debt held by a trust subsidiary of the consolidated joint venture that owns the One Westside and 10850 Pico properties. While the Company owns 75% of the ownership interest in the joint venture, the full amount of the loan is shown. The joint venture has, in-substance, defeased the debt by purchasing U.S. Government securities, which are intended to generate cash flows to fund loan obligations through the early prepayment date of the debt. Monthly debt service includes annual debt amortization payments based on a 10-year amortization schedule with a balloon payment at maturity. Current year activity During the nine months ended September 30, 2018, the outstanding borrowings on the unsecured revolving credit facility increased by $10.0 million, net of paydowns. 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. 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 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. On August 31, 2018, a trust subsidiary of the consolidated joint venture that owns One Westside and 10850 Pico purchased $149.2 million of government-backed securities and assumed $139.0 million of debt. The securities are intended to generate cash flows to fund loan obligations through the early prepayment date of the loan. This transaction does not qualify as an extinguishment of debt, since the Company will be responsible if there is a shortfall in the assets deposited into the trust. The securities are investments held to maturity and are carried at amortized cost on our Consolidated Balance Sheets. 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 loans 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 Company's debt as of September 30, 2018:
Year | In-substance Defeased Debt |  | Unsecured and Secured Debt
Remaining 2018 | $ | 780 |  | $ | 138
2019 | 3,193 |  | 5,569
2020 | 3,323 |  | 440,095
2021 | 3,494 |  | 632
2022 | 128,213 |  | 610,085
Thereafter | — |  | 1,294,000
TOTAL | $ | 139,003 |  | $ | 2,350,519
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 following table summarizes the balance and key terms of the unsecured revolving credit facility as of:
| September 30, 2018 |  | December 31, 2017
Outstanding borrowings | $ | 110,000 |  | $ | 100,000
Remaining borrowing capacity | 490,000 |  | 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%
Annual facility fee rate(1) | 0.15% or 0.30% |  | 0.20% or 0.35%
Contractual maturity date(3) | 3/13/2022 |  | 4/1/2019
_________________ 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 September 30, 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 September 30, 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, C, 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 September 30, 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 September 30, 2018, the outstanding balance of the construction loan 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 the 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 gross interest expense to the interest expense line item in the Consolidated Statements of Operations:
| Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
| 2018 |  | 2017 |  | 2018 |  | 2017
Gross interest expense(1) | $ | 22,136 |  | $ | 24,107 |  | $ | 66,081 |  | $ | 70,345
Capitalized interest | (3,439) |  | (2,831) |  | (10,643) |  | (7,817)
Amortization of deferred financing costs and loan discount | 1,434 |  | 1,185 |  | 4,527 |  | 3,558
INTEREST EXPENSE | $ | 20,131 |  | $ | 22,461 |  | $ | 59,965 |  | $ | 66,086
_________________ 1. Includes interest on the Company’s debt and hedging activities.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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