Debt

9 Months Ended

Sep. 30, 2019

The following table sets forth information with respect to the Company’s outstanding indebtedness:


	September 30, 2019		December 31, 2018		Interest Rate⁽¹⁾	Contractual Maturity Date
UNSECURED AND SECURED DEBT
Unsecured debt
Unsecured revolving credit facility⁽²⁾⁽³⁾	$	80,000	$	400,000	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 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
3.95% Registered senior notes	400,000		400,000		3.95%	11/1/2027
Series C notes	56,000		56,000		4.79%	12/16/2027
4.65% Registered senior notes⁽⁹⁾	500,000		—		4.65%	4/1/2029
Term loan C	—		75,000		LIBOR + 1.30% to 2.20%	N/A
Total unsecured debt	2,380,000		2,275,000

Secured debt
Met Park North⁽¹⁰⁾	64,500		64,500		LIBOR + 1.55%	8/1/2020
10950 Washington⁽¹¹⁾	26,459		26,880		5.32%	3/11/2022
Revolving Sunset Bronson Studios/ICON/CUE facility⁽¹²⁾	5,001		—		LIBOR + 1.35%	3/1/2024
Element LA	168,000		168,000		4.59%	11/6/2025
Hill7⁽¹³⁾	101,000		101,000		3.38%	11/6/2028
Sunset Gower Studios/Sunset Bronson Studios	—		5,001		LIBOR + 2.25%	N/A
Total secured debt	364,960		365,381
Total unsecured and secured debt	2,744,960		2,640,381
Unamortized deferred financing costs and loan discounts/premiums⁽¹⁴⁾	(16,573)		(16,546)
TOTAL UNSECURED AND SECURED DEBT, NET⁽¹⁵⁾	$	2,728,387	$	2,623,835

IN-SUBSTANCE DEFEASED DEBT⁽¹⁶⁾	$	135,846	$	138,223	4.47%	10/1/2022

JOINT VENTURE PARTNER DEBT⁽¹⁷⁾	$	66,136	$	66,136	4.50%	10/9/2028

_________________

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, 2019, which may be different than the interest rates as of December 31, 2018 for corresponding indebtedness.

2.The rate is based on the operating partnership’s leverage ratio. 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, 2019, 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 2.65% 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 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 9 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 9 for details.

9.On February 27, 2019, the operating partnership completed an underwritten public offering of $350.0 million of senior notes, which were issued at a discount at 98.663% of par. On June 14, 2019, the operating partnership completed an additional underwritten public offering of $150.0 million of senior notes, which were issued at a premium at 104.544% of par. These notes are treated as a single series of securities with an aggregate principal amount of $500.0 million.

10.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.

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 has a total capacity of $235.0 million under the Sunset Bronson Studios/ICON/CUE revolving credit facility. This loan is secured by the Company’s Sunset Bronson Studios, ICON and CUE properties.

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 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 and Sunset Bronson Studios/ICON/CUE revolving credit facility, which are reflected in prepaid and other assets, net line item in the Consolidated Balance Sheets. See Note 7 for details.

15.On October 3, 2019, the operating partnership completed an underwritten public offering of $400 million in senior notes due January 15, 2030. The notes were issued at 99.268% of par value, with a coupon of 3.25%. The net proceeds from the offering were used to repay the $300.0 million five-year term loan due April 1, 2020 and to pay down the remaining $80.0 million balance on the unsecured revolving credit facility.

16.The Company owns 75% of the ownership interest in the joint venture that owns the One Westside and 10850 Pico properties. The full amount of the loan is separately presented on the balance sheet. Monthly debt service includes annual debt amortization payments based on a 10-year amortization schedule with a balloon payment at maturity.

17.This amount relates to debt attributable to Allianz U.S. Private REIT LP (“Allianz”), the Company’s partner in the joint venture that owns the Ferry Building property. The maturity date may be extended twice for an additional two-year term each.

Current Year Activity

During the nine months ended September 30, 2019, the outstanding borrowings on the unsecured revolving credit facility decreased by $320.0 million, net of draws. 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 27, 2019, the operating partnership completed an underwritten public offering of $350.0 million in senior notes due April 1, 2029. The notes are fully and unconditionally guaranteed by the Company. The net proceeds from the offering, after deducting the underwriting discount, were approximately $343.0 million and were used to repay outstanding borrowings under its unsecured revolving credit facility and $75.0 million of its five-year term loan due November 17, 2020.

On March 1, 2019, the Company entered into a loan agreement to borrow up to $235.0 million on a revolving basis, maturing on March 1, 2024. The Company drew $5.0 million to pay down the Sunset Gower Studios/Sunset Bronson Studios construction loan that matured on March 4, 2019. The unused fee rate is 0.20%.

On June 14, 2019, the operating partnership completed an underwritten public offering of $150.0 million in senior notes due April 1, 2029. These notes were issued as additional notes under the indenture, pursuant to which the operating partnership previously issued $350.0 million of 4.65% senior notes due 2029. The notes are fully and unconditionally guaranteed by the Company. The net proceeds from the offering, after deducting the underwriting discount and commissions, were approximately $155.3 million, $150.0 million of which were used by the operating partnership to repay outstanding borrowings under its unsecured revolving credit facility.

Indebtedness

The Company presents its financial statements on a consolidated basis. Notwithstanding such presentation, except to the extent expressly indicated, 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 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 provides information regarding the Company’s minimum future principal payments due on the Company’s debt (before the impact of extension options, if applicable) as of September 30, 2019:


Year	Unsecured and Secured Debt		In-substance Defeased Debt		Joint Venture Partner Debt
Remaining 2019	$	146	$	816	$	—
2020	365,095		3,323		—
2021	632		3,494		—
2022	580,085		128,213		—
2023	160,000		—		—
Thereafter	1,639,002		—		66,136
TOTAL	$	2,744,960	$	135,846	$	66,136

Unsecured Debt

Registered Senior Notes

The following table provides further information on the operating partnership’s Registered senior notes as of September 30, 2019:


	Issuance Date	Maturity Date	Par Value		Issuance at Par		Coupon at Offer		Effective Interest Rate
4.65% Registered senior notes	6/14/2019	4/1/2029	$	150,000	104.544	%	4.65	%	4.12	%
4.65% Registered senior notes	2/27/2019	4/1/2029	$	350,000	98.663	%	4.65	%	4.82	%
3.95% Registered senior notes	10/2/2017	11/1/2027	$	400,000	99.815	%	3.95	%	3.97	%

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, 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, 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 previous 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 $75.0 million term loan was repaid with proceeds from the Company’s 4.65% registered senior notes. The $300.0 million term loan was repaid with proceeds from the Company’s 3.25% registered senior notes on October 3, 2019.

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


	September 30, 2019		December 31, 2018
Outstanding borrowings	$	80,000	$	400,000
Remaining borrowing capacity	520,000		200,000
TOTAL BORROWING CAPACITY	$	600,000	$	600,000
Interest rate⁽¹⁾	LIBOR + 1.05% to 1.50%
Annual facility fee rate⁽¹⁾	0.15% or 0.30%
Contractual maturity date⁽²⁾	3/13/2022

_________________

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, 2019, no such election had been made.

2.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 the unsecured revolving credit facility, term loans, and note purchase agreements, when considering the most restrictive terms:

Covenant Ratio

Covenant Level

Actual Performance

Total liabilities to total asset value

≤ 60%

35.3%

Unsecured indebtedness to unencumbered asset value

≤ 60%

42.5%

Adjusted EBITDA to fixed charges

≥ 1.5x

3.5x

Secured indebtedness to total asset value

≤ 45%

5.7%

Unencumbered NOI to unsecured interest expense

≥ 2.0x

3.4x

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

Covenant Ratio

Covenant Level

Actual Performance

Debt to total assets

≤ 60%

37.4%

Total unencumbered assets to unsecured debt

≥ 150%

252.7%

Consolidated income available for debt service to annual debt service charge

≥ 1.5x

3.8x

Secured debt to total assets

≤ 40%

6.0%

The operating partnership was in compliance with its financial covenants as of September 30, 2019.

Repayment Guarantees

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.

The Company guaranteed the operating partnership’s unsecured debt.

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,
	2019		2018		2019		2018
Gross interest expense⁽¹⁾	$	29,536	$	22,136	$	85,981	$	66,081
Capitalized interest	(4,334)		(3,439)		(12,911)		(10,643)
Amortization of deferred financing costs and loan discounts/premiums	1,388		1,434		4,422		4,527
INTEREST EXPENSE	$	26,590	$	20,131	$	77,492	$	59,965

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1.Includes interest on the Company’s debt and hedging activities and extinguishment costs related to paydowns in the term loans.