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Debt

12 Months Ended

Dec. 31, 2019

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


	December 31, 2019		December 31, 2018		Interest Rate⁽¹⁾	Contractual Maturity Date
UNSECURED AND SECURED DEBT
Unsecured debt
Unsecured revolving credit facility⁽²⁾⁽³⁾	$	75,000	$	400,000	LIBOR + 1.05% to 1.50%	3/13/2022	⁽⁴⁾
Term loan A⁽²⁾⁽⁵⁾	—		300,000		LIBOR + 1.20% to 1.70%	4/1/2020	⁽⁹⁾
Term loan B⁽²⁾⁽⁶⁾	350,000		350,000		LIBOR + 1.20% to 1.70%	4/1/2022
Term loan C⁽²⁾	—		75,000		LIBOR + 1.30% to 2.20%	11/17/2020
Term loan D⁽²⁾⁽⁷⁾	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 B notes	259,000		259,000		4.69%	12/16/2025
Series C notes	56,000		56,000		4.79%	12/16/2027
Series D notes	150,000		150,000		3.98%	7/6/2026
Series E notes	50,000		50,000		3.66%	9/15/2023
3.95% Registered senior notes	400,000		400,000		3.95%	11/1/2027
4.65% Registered senior notes⁽⁸⁾	500,000		—		4.65%	4/1/2029
3.25% Registered senior notes⁽⁹⁾	400,000		—		3.25%	1/15/2030
Total unsecured debt	2,475,000		2,275,000

Secured debt
Met Park North⁽¹⁰⁾	64,500		64,500		LIBOR + 1.55%	8/1/2020
10950 Washington⁽¹¹⁾	26,312		26,880		5.32%	3/11/2022
One Westside and 10850 Pico⁽¹²⁾	5,646		—		LIBOR + 1.70%	12/18/2023	⁽⁴⁾
Revolving Sunset Bronson Studios/ICON/CUE facility⁽¹³⁾	5,001		—		LIBOR + 1.35%	3/1/2024
Element LA	168,000		168,000		4.59%	11/6/2025
Hill7⁽¹⁴⁾	101,000		101,000		3.38%	11/6/2028
Sunset Gower Studios/Sunset Bronson Studios	—		5,001		LIBOR + 2.25%	3/4/2019
Total secured debt	370,459		365,381
Total unsecured and secured debt	2,845,459		2,640,381
Unamortized deferred financing costs/loan discounts⁽¹⁵⁾	(27,549)		(16,546)
TOTAL UNSECURED AND SECURED DEBT, NET	$	2,817,910	$	2,623,835

IN-SUBSTANCE DEFEASED DEBT⁽¹⁶⁾	$	135,030	$	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 December 31, 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 December 31, 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 7 for details. Term loan A was paid off on October 3, 2019.

6.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 7 for details.

7.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 7 for details.

8.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.

9.On October 3, 2019, the operating partnership completed an underwritten public offering of $400.0 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 $80.0 million on the unsecured revolving credit facility.

10.Interest on the full loan amount has been effectively fixed at 3.71% per annum through use of an interest rate swap. See Note 7 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 the ability to draw up to $414.6 million under the construction loan secured by the One Westside and 10850 Pico properties.

13.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.

14.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.

15.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 2 for details.

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 due to 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 12 months ended December 31, 2019, the outstanding borrowings on the unsecured revolving credit facility decreased by $325.0 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 were issued at 98.663% of par value, with a coupon of 4.65%. 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. The notes were issued at 104.544% of par value, with a coupon of 4.65%. 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.

On October 3, 2019, the operating partnership completed an underwritten public offering of $400.0 million of senior notes due January 15, 2030. The notes were issued at 99.268% of par value, with a coupon of 3.25% and are fully and unconditionally guaranteed by the Company. The net proceeds from the offering, after deducting the underwriting discount, were approximately $393.7 million and were used to repay its $300.0 million five-year Term loan A due April 1, 2020, and to pay down $80.0 million on its unsecured revolving credit facility.

On December 18, 2019, the Company closed a four-year construction loan totaling $414.6 million with Wells Fargo Bank, N.A., secured by its One Westside and 10850 Pico properties. The loan bears interest at a rate equal to one-month LIBOR plus 1.70%. The proceeds from the loan will be used to fund the construction of the Company’s One Westside property and to renovate the 10850 Pico retail and entertainment property. The loan matures on December 18, 2023, with an option to extend the loan one additional year. As of December 31, 2019, the Company had a total borrowing capacity, subject to lender required submissions, of $414.6 million, $5.6 million of which had been drawn.

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 future minimum principal payments due on the Company’s debt (before the impact of extension options, if applicable) as of December 31, 2019:


For the Year Ended December 31,	Unsecured and Secured Debt		In-Substance Defeased Debt		Joint Venture Partner Debt
2020	$	65,095	$	3,323	$	—
2021	632		3,494		—
2022	575,085		128,213		—
2023	165,646		—		—
2024	5,001		—		—
Thereafter	2,034,000		—		66,136
TOTAL	$	2,845,459	$	135,030	$	66,136

Unsecured debt

Term Loan Agreement 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:


	December 31, 2019		December 31, 2018
Outstanding borrowings	$	75,000	$	400,000
Remaining borrowing capacity	525,000		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 December 31, 2019, no such election had been made.

2.The maturity date may be extended once for an additional one-year term.

Subject to the satisfaction of certain conditions and lender commitments, the operating partnership may increase the commitments held under the Amended and Restated Credit Agreement so long as the aggregate commitments do not exceed $2.0 billion.

The operating partnership continues to be the borrower under the Amended and Restated Credit Facility Agreement, and the Company and all subsidiaries that own unencumbered properties will continue to provide guarantees unless the Company obtains and maintains a credit rating of at least BBB- from S&P or Baa3 from Moody’s, in which case such guarantees are not required except under limited circumstances.

In October 2019, Moody’s Investors Service upgraded the Company’s long-term corporate credit rating from Baa3 to Baa2, with a stable outlook.

Note Purchase Agreements

On November 16, 2015, the operating partnership entered into a note purchase agreement with various purchasers, which provides for $425.0 million of guaranteed senior notes by the operating partnership, of which (i) $110.0 million are designated as 4.34% series A guaranteed senior notes due January 2, 2023 (the “Series A Notes”), (ii) $259.0 million are designated as 4.69% series B guaranteed senior notes due December 16, 2025 (the “Series B Notes”) and (iii) $56.0 million are designated as 4.79% series C guaranteed senior notes due December 16, 2027 (the “Series C Notes”).

On July 6, 2016, the Company entered into a note purchase agreement of debt for $150.0 million of 3.98% guaranteed senior notes due July 6, 2026 (the “Series D Notes”). Upon issuance, the notes pay interest semi-annually on the 6th day of January and July in each year until maturity. The Company also secured an additional $50.0 million of funds from a note purchase agreement of 3.66% guaranteed senior notes due September 15, 2023 (the “Series E Notes”), which were drawn on September 15, 2016.

The operating partnership may prepay at any time all or, from time to time, any part of the note purchase agreements in an amount not less than 5% of the aggregate principal amount of any series of note purchase agreements then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid plus a make-whole premium.

The operating partnership’s obligations under note purchase agreements will be fully and unconditionally guaranteed by the Company. Subsidiaries of the Company will also issue unconditional guarantees upon the occurrence of certain conditions, including such subsidiaries providing guarantees under the Amended and Restated Credit Facility Agreement, by and among the operating partnership, the financial institutions party thereto, and Wells Fargo Bank, National Association as administrative agent.

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 their 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 note purchase agreements, when considering the most restrictive terms:

Covenant Ratio

Covenant Level

Actual Performance

Total liabilities to total asset value

≤ 60%

35.4%

Unsecured indebtedness to unencumbered asset value

≤ 60%

41.4%

Adjusted EBITDA to fixed charges

≥ 1.5x

3.5x

Secured indebtedness to total asset value

≤ 45%

5.6%

Unencumbered NOI to unsecured interest expense

≥ 2.0x

3.4x

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

Covenant Ratio⁽¹⁾

Covenant Level

Actual Performance

Debt to total assets

≤ 60%

38.2%

Total unencumbered assets to unsecured debt

≥ 150%

246.9%

Consolidated income available for debt service to annual debt service charge

≥ 1.5x

3.8x

Secured debt to total assets

≤ 45%

6.0%

_________________

1.The covenant and actual performance metrics above represent terms and definitions reflected in the indentures governing the 3.95% Senior Notes and 4.65% Senior Notes based on the financial results as of December 31, 2019.

The operating partnership was in compliance with its financial covenants as of December 31, 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 the gross interest expense to the amount on the interest expense line item in the Consolidated Statements of Operations:


	Year Ended December 31,
	2019		2018		2017
Gross interest expense⁽¹⁾	$	115,845	$	92,017	$	94,660
Capitalized interest	(16,258)		(14,815)		(10,655)
Amortization of deferred financing costs and loan discount, net	6,258		5,965		6,032
INTEREST EXPENSE	$	105,845	$	83,167	$	90,037

_________________

1.Includes interest on the Company’s debt and hedging activities, extinguishment costs related to paydowns in the term loans, and loan extinguishment costs of $744.0 thousand, $421.0 thousand and $1.1 million during the years ended December 31, 2019, 2018 and 2017, respectively.