Mortgage Notes Payable, Net

Mortgage notes payable, net as of September 30, 2018 and December 31, 2017 consisted of the following:



		Encumbered Properties	Outstanding Loan Amount ⁽¹⁾				Effective Interest Rate		Interest Rate
Country	Portfolio	Encumbered Properties	September 30, 2018		December 31, 2017		Effective Interest Rate		Interest Rate	Maturity
			(In thousands)		(In thousands)
Finland:	Finnair	4	$	32,957	$	34,022	2.2%	⁽²⁾	Fixed	Sep. 2020
	Tokmanni	1	33,625		34,711		2.4%	⁽²⁾	Fixed	Oct. 2020

France:	Auchan	1	9,632		9,943		1.7%	⁽²⁾	Fixed	Dec. 2019
	Pole Emploi	1	6,731		6,948		1.7%	⁽²⁾	Fixed	Dec. 2019
	Sagemcom	1	41,661		43,006		1.7%	⁽²⁾	Fixed	Dec. 2019
	Worldline	1	5,802		5,990		1.9%	⁽²⁾	Fixed	Jul. 2020
	DCNS	1	11,024		11,381		1.5%	⁽²⁾	Fixed	Dec. 2020
	ID Logistics II	2	12,185		12,578		1.3%		Fixed	Jun. 2021

Germany	Rheinmetall	1	12,301		12,698		2.6%	⁽²⁾	Fixed	Jan. 2019
	OBI DIY	1	5,222		5,391		2.4%		Fixed	Jan. 2019
	RWE AG	3	72,529		74,872		1.6%	⁽²⁾	Fixed	Oct. 2019
	Rexam	1	5,959		6,301		1.8%	⁽²⁾	Fixed	Aug. 2019
	Metro Tonic	1	30,752		31,746		1.7%	⁽²⁾	Fixed	Dec. 2019
	ID Logistics I	1	4,642		4,792		1.0%		Fixed	Oct. 2021

Luxembourg:	DB Luxembourg	1	41,777		43,126		1.4%	⁽²⁾	Fixed	May 2020
The Netherlands:	ING Amsterdam	1	51,061		52,710		1.7%	⁽²⁾	Fixed	Jun. 2020
	Total EUR denominated	22	377,860		390,215

United Kingdom:	McDonald's	—	—		1,025		—%		—	—
	Wickes Building Supplies I	—	—		2,226		—%		—	—
	Everything Everywhere	—	—		5,397		—%		—	—
	Thames Water	—	—		8,096		—%		—	—
	Wickes Building Supplies II	—	—		2,626		—%		—	—
	Northern Rock	—	—		7,084		—%		—	—
	Wickes Building Supplies III	—	—		2,564		—%		—	—
	Provident Financial	—	—		17,203		—%		—	—
	Crown Crest	—	—		25,973		—%		—	—
	Aviva	—	—		21,183		—%		—	—
	Bradford & Bingley	—	—		10,200		—%		—	—
	Intier Automotive Interiors	—	—		6,375		—%		—	—



		Encumbered Properties	Outstanding Loan Amount ⁽¹⁾						Effective Interest Rate		Interest Rate
Country	Portfolio	Encumbered Properties	September 30, 2018			December 31, 2017			Effective Interest Rate		Interest Rate	Maturity
	Capgemini	—	—			6,381			—%		—	—
	Fujitsu	—	—			33,435			—%		—	—
	Amcor Packaging	—	—			4,218			—%		—	—
	Fife Council	—	—			2,474			—%		—	—
	Malthrust	—	—			4,318			—%		—	—
	Talk Talk	—	—			5,161			—%		—	—
	HBOS	—	—			7,272			—%		—	—
	DFS Trading	—	—			13,680			—%		—	—
	DFS Trading	—	—			3,203			—%		—	—
	HP Enterprise Services	—	—			12,531			—%		—	—
	Foster Wheeler	—	—			53,026			—%		—	—
	Harper Collins	—	—			37,880			—%		—	—
	NCR Dundee	—	—			7,610			—%		—	—
	UK Multi-Property Cross Collateralized Loan	43	299,674			—			3.2%	⁽³⁾	Fixed	Aug. 2023
	Total GBP denominated	43	299,674			301,141

United States:	Quest Diagnostics	1	52,800			52,800			4.2%	⁽⁴⁾	Variable	Sep. 2019
	Western Digital	—	—			17,363			—%	⁽⁵⁾	—	—
	AT&T Services	1	33,550			33,550			2.0%	⁽⁶⁾	Variable	Dec. 2020
	FedEx Freight	—	—			6,165			—%		—	—
	Veolia Water	—	—			4,110			—%		—	—
	Multi-Tenant Mortgage Loan I	12	187,000			187,000			4.4%		Fixed	Nov. 2027
	Multi-Tenant Mortgage Loan II	8	32,750			—			4.4%		Fixed	Feb. 2028
	Total USD denominated	22	306,100			300,988
	Gross mortgage notes payable	87	983,634			992,344			2.9%
	Mortgage discount		(696		)	(1,927		)	—
	Deferred financing costs, net of accumulated amortization		(8,423		)	(5,541		)	—
	Mortgage notes payable, net	87	$	974,515		$	984,876		2.9%

_______________________________


⁽¹⁾	Amounts borrowed in local currency and translated at the spot rate in effect at the applicable reporting date.


⁽²⁾	Fixed as a result of an interest rate swap agreement.


⁽³⁾	80% fixed as a result of an interest rate swap agreement and 20% variable. Variable portion is at LIBOR rate in effect at September 30, 2018.


⁽⁴⁾	The interest rate is 2.0% plus 1-month LIBOR. LIBOR rate in effect is as of September 30, 2018.


⁽⁵⁾	The debt prepayment costs associated with the sale of Western Digital were $1.3 million.


⁽⁶⁾	The interest rate is 2.0% plus 1-month Adjusted LIBOR as defined in the mortgage agreement. LIBOR rate in effect is as of September 30, 2018.

The following table presents future scheduled aggregate principal payments on the Company's gross mortgage notes payable over the next five calendar years and thereafter as of September 30, 2018:



(In thousands)	Future Principal Payments ⁽¹⁾
2018 (remainder)	$	—
2019	237,587
2020	209,796
2021	16,827
2022	—
2023	299,674
Thereafter	219,750
Total	$	983,634

_________________________


⁽¹⁾	Assumes exchange rates of £1.00 to $1.30 for GBP and €1.00 to $1.16 for EUR as of September 30, 2018 for illustrative purposes, as applicable.

The Company's mortgage notes payable agreements require compliance with certain property-level financial covenants including debt service coverage ratios. As of September 30, 2018, the Company was in compliance with all financial covenants under its mortgage notes payable agreements.

As of September 30, 2018, the unencumbered balance of the portfolio was $1.4 billion, of which approximately $1.3 billion of this amount was included in the unencumbered asset pool comprising the borrowing base under the Revolving Credit Facility and therefore is not available to serve as collateral for future borrowings.

As of December 31, 2017, the Company was in breach of a loan-to-vacant possession financial covenant on one mortgage note payable agreement, which had an outstanding principal balance of $37.9 million (£28.1 million) as of December 31, 2017. During the fourth quarter of 2017, the Company repaid £0.8 million and in January 2018 the Company repaid €0.1 million of principal on two separate mortgage note payable agreements in order to cure these loan-to-value financial covenant breaches which did not result in events of default. The Company was in compliance with the remaining covenants under its mortgage notes payable agreements as of December 31, 2017.

Multi-Tenant Mortgage Loan I

On October 27, 2017, 12 wholly owned subsidiaries (the “Borrowers”) of the OP closed on a loan agreement (the “Loan Agreement”) with Column Financial, Inc. and Citi Real Estate Funding Inc. (collectively, the “Lenders”). The Multi-Tenant Mortgage Loan requires monthly interest-only payments, with the principal balance due on the maturity date and is secured by, among other things, the Borrowers’ interests in 12 single tenant net leased office and industrial properties. The Borrowers’ financial statements are included within the Company’s consolidated financial statements, however, the Borrowers’ assets and credit are only available to pay the debts of the Borrowers and their liabilities constitute obligations of the Borrowers.

Multi-Tenant Mortgage Loan II

On January 26, 2018, the Company entered into a multi-tenant mortgage loan, yielding gross proceeds of $32.8 million with a fixed interest rate of 4.32% and a 10-year maturity in February 2028. The multi-tenant mortgage loan is secured by eight properties in six states, totaling approximately 627,500 square feet. Proceeds were used to pay down approximately $30.0 million of outstanding indebtedness under the Revolving Credit Facility (as defined in Note 5 — Credit Facilities) and for general corporate purposes and future acquisitions.

United Kingdom Multi-Property Loan

On August 13, 2018, the Company entered into a multi-tenant mortgage loan, yielding gross proceeds of £230.0 million and bearing interest at a rate of 1.975% + 3-month GBP LIBOR, maturing in August 2023 (the "UK Loan"). With respect to the interest, 80% of the principal amount is fixed by a swap agreement, while the remaining 20% of the principal remains variable. The UK Loan is secured by all 43 of the Company's properties located in the United Kingdom. At closing, £209.0 million of the net proceeds were used to repay all outstanding mortgage indebtedness encumbering 38 of the 43 properties. The other five properties were unencumbered prior to the loan.