Debt Obligations, net

In September 2017, the Company completed a comprehensive set of capital markets transactions that addressed all parts of its capital structure, resulting in the Company having:


•	repaid or refinanced all of the Company's 2017 and 2018 corporate debt maturities, leaving no corporate debt maturities until July 2019;


•	extended its weighted average debt maturity by 1.5 years to 4.0 years;


•	reduced annual expenses;


•	lowered its cost of capital;


•	established new banking relationships; and


•	received upgrades to its corporate credit ratings from all three major ratings agencies.

The Company's debt obligations were as follows ($ in thousands):



	Carrying Value as of						Stated Interest Rates			Scheduled Maturity Date
	September 30, 2017			December 31, 2016			Stated Interest Rates			Scheduled Maturity Date
Secured credit facilities and mortgages:
2015 $325 Million Secured Revolving Credit Facility	$	—		$	—		LIBOR + 2.50%		⁽¹⁾	September 2020
2016 Senior Secured Credit Facility	400,000			498,648			LIBOR + 3.00%		⁽²⁾	October 2021
Mortgages collateralized by net lease assets	223,182			249,987			4.851% - 7.26%		⁽³⁾	Various through 2026
Total secured credit facilities and mortgages	623,182			748,635
Unsecured notes:
5.85% senior notes	—			99,722			5.85	%		March 2017
9.00% senior notes	—			275,000			9.00	%		June 2017
4.00% senior notes⁽⁴⁾	550,000			550,000			4.00	%		November 2017
7.125% senior notes⁽⁵⁾	300,000			300,000			7.125	%		February 2018
4.875% senior notes⁽⁶⁾	300,000			300,000			4.875	%		July 2018
5.00% senior notes⁽⁷⁾	770,000			770,000			5.00	%		July 2019
6.50% senior notes⁽⁸⁾	275,000			275,000			6.50	%		July 2021
6.00% senior notes⁽⁹⁾	375,000			—			6.00	%		April 2022
4.625% senior notes⁽¹⁰⁾	400,000			—			4.625	%		September 2020
5.25% senior notes⁽¹¹⁾	400,000			—			5.25	%		September 2022
3.125% senior convertible notes⁽¹²⁾	250,000			—			3.125	%		September 2022
Total unsecured notes	3,620,000			2,569,722
Other debt obligations:
Trust preferred securities	100,000			100,000			LIBOR + 1.50%			October 2035
Total debt obligations	4,343,182			3,418,357
Debt discounts and deferred financing costs, net	(64,228		)	(28,449		)
Total debt obligations, net⁽¹³⁾	$	4,278,954		$	3,389,908

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(1)

The loan bears interest at the Company's election of either (i) a base rate, which is the greater of (a) prime, (b) federal funds plus 0.5% or (c) LIBOR plus 1.0% and subject to a margin ranging from 1.25% to 1.75%, or (ii) LIBOR subject to a margin ranging from 2.25% to 2.75%. At maturity, the Company may convert outstanding borrowings to a one year term loan which matures in quarterly installments through October 2021.


(2)	The loan bears interest at the Company's election of either (i) a base rate, which is the greater of (a) prime, (b) federal funds plus 0.5% or (c) LIBOR plus 1.0% and subject to a margin of 2.00% or (ii) LIBOR subject to a margin of 3.00% with a minimum LIBOR rate of 0.75%.


(3)	As of September 30, 2017 and December 31, 2016, includes a loan with a floating rate of LIBOR plus 2.0%. As of September 30, 2017, the weighted average interest rate of these loans is 5.2%.


(4)	The Company prepaid these senior notes in October 2017 without penalty.


(5)	The Company prepaid these senior notes in October 2017 and incurred a make whole premium of $5.25 million.


(6)	The Company prepaid these senior notes in October 2017 and incurred a make whole premium of $3.66 million.


(7)	The Company can prepay these senior notes without penalty beginning July 1, 2018.


(8)	The Company can prepay these senior notes without penalty beginning July 1, 2020.


(9)	The Company can prepay these senior notes without penalty beginning April 1, 2021.


(10)	The Company can prepay these senior notes without penalty beginning June 15, 2020.


(11)	The Company can prepay these senior notes without penalty beginning September 15, 2021.

(12)

The Company's 3.125% senior convertible fixed rate notes due September 2022 ("3.125% Convertible Notes") are convertible at the option of the holders at a conversion rate of 64.36 shares per $1,000 principal amount of 3.125% Convertible Notes, which equals a conversion price of $15.54 per share, at any time prior to the close of business on the business day immediately preceding September 15, 2022. Upon conversion, the Company will pay or deliver, as the case may be, a combination of cash and shares of its common stock. As such, at issuance the Company valued the liability component at $221.8 million, net of fees, and the equity component of the conversion feature at $22.5 million, net of fees, and recorded the equity component in "Additional paid-in capital" on the Company's consolidated balance sheet.


(13)	The Company capitalized interest relating to development activities of $2.1 million and $6.1 million during the three and nine months ended September 30, 2017, respectively, and $1.4 million and $4.2 million during the three and nine months ended September 30, 2016, respectively.

Future Scheduled Maturities—As of September 30, 2017, future scheduled maturities of outstanding debt obligations are as follows ($ in thousands):



	Unsecured Debt				Secured Debt			Total
2017 (remaining three months)	$	550,000		⁽¹⁾	$	—		$	550,000
2018	600,000			⁽¹⁾	9,523			609,523
2019	770,000				27,924			797,924
2020	400,000				—			400,000
2021	275,000				517,506			792,506
Thereafter	1,125,000				68,229			1,193,229
Total principal maturities	3,720,000				623,182			4,343,182
Unamortized discounts and deferred financing costs, net	(56,331		)		(7,897		)	(64,228		)
Total debt obligations, net	$	3,663,669			$	615,285		$	4,278,954

_____________________________________________________________________________


(1)	Subsequent to September 30, 2017, the Company repaid the $550.0 million principal amount outstanding of the 4.0% senior unsecured notes due November 2017, the $300.0 million principal amount outstanding of the 7.125% senior unsecured notes due February 2018 and the $300.0 million principal amount outstanding of the 4.875% senior unsecured notes due July 2018.

2017 Secured Financing—In March 2017, the Company (through wholly-owned subsidiaries conducting the Company's GL business) entered into a $227.0 million secured financing transaction (the "2017 Secured Financing") that accrued interest at 3.795% and matures in April 2027. The 2017 Secured Financing was collateralized by the 12 properties comprising the Company's GL business, including seven GLs and one master lease (covering the accounts of five properties). In connection with the 2017 Secured Financing, the Company incurred $7.3 million of lender and third-party fees, substantially all of which was capitalized in "Debt obligations, net" on the Company's consolidated balance sheets. In April 2017, the Company derecognized the 2017 Secured Financing when third parties acquired a controlling interest in the Company's GL business (refer to Note 4).

The Company is providing a limited recourse guaranty and environmental indemnity under the 2017 Secured Financing that will remain in effect until SAFE has achieved either an equity market capitalization of at least $500.0 million (inclusive of the initial portfolio that the Company contributed to SAFE) or a net worth of at least $250.0 million (exclusive of the initial portfolio that the Company contributed to SAFE), and SAFE or another replacement guarantor provides similar guaranties and indemnities to the lenders. The management agreement with SAFE provides that SAFE may not terminate the management agreement unless a successor guarantor reasonably acceptable to the Company has agreed to replace the Company as guarantor and indemnitor or has provided the Company with a reasonably acceptable indemnity for any losses suffered by the Company as guarantor and indemnitor. SAFE has generally agreed to indemnify the Company for any amounts the Company is required to pay, or other losses the Company may suffer, under the limited recourse guaranty and environmental indemnity.

2016 Secured Term Loan—In December 2016, the Company arranged a $170.0 million delayed draw secured term loan (the "2016 Secured Term Loan"). In March 2017, the Company allowed the 2016 Secured Term Loan to expire and replaced the 2016 Secured Term Loan with the 2017 Secured Financing. The 2016 Secured Term Loan was collateralized by the 12 properties that served as collateral for the 2017 Secured Financing.

2016 Senior Secured Credit Facility—In June 2016, the Company entered into a senior secured credit facility of $450.0 million (the "2016 Senior Secured Credit Facility"). In August 2016, the Company upsized the facility to $500.0 million. The initial $450.0 million of the 2016 Senior Secured Credit Facility was issued at 99% of par and the upsize was issued at par. In January 2017, the Company repriced the 2016 Senior Secured Credit Facility to LIBOR plus 3.75% with a 1.00% LIBOR floor from LIBOR plus 4.50% with a 1.00% LIBOR floor. In September 2017, the Company reduced, repriced and extended the 2016 Senior Secured Credit Facility to $400.0 million priced at LIBOR plus 3.00% with a 0.75% LIBOR floor and maturing in October 2021. These transactions resulted in an aggregate 1.50% reduction in price.

The 2016 Senior Secured Credit Facility is collateralized 1.25x by a first lien on a fixed pool of assets. Proceeds from principal repayments and sales of collateral are applied to amortize the 2016 Senior Secured Credit Facility. Proceeds received for interest, rent, lease payments and fee income are retained by the Company. The Company may also make optional prepayments, subject to prepayment fees, and is required to repay 0.25% of the principal amount on the first business day of each quarter.

Proceeds from the 2016 Senior Secured Credit Facility, together with cash on hand, were primarily used to repay other secured debt. In connection with the 2016 Senior Secured Credit Facility, the Company incurred $4.5 million of lender fees, substantially all of which was capitalized in "Debt obligations, net" on the Company's consolidated balance sheets. The Company also incurred $6.2 million in third party fees, of which $4.3 million was capitalized in “Debt obligations, net” on the Company's consolidated balance sheets and $1.9 million was recognized in “Other expense” in the Company's consolidated statements of operations. In connection with the repricing of the 2016 Senior Secured Credit Facility in January 2017, the Company incurred an additional $0.8 million in fees, substantially all of which was recognized in "Other expense" in the Company's consolidated statements of operations. In connection with the repricing of the 2016 Senior Secured Credit Facility in September 2017, the Company incurred an additional $2.6 million in fees, of which $1.5 million was recognized in "Other expense" in the Company's consolidated statements of operations and $1.1 million was capitalized in "Debt obligations, net" on the Company's consolidated balance sheets.

During the three and nine months ended September 30, 2017, repayments of the 2016 Senior Secured Credit Facility resulted in losses on early extinguishment of debt of $0.6 million and $0.8 million, respectively.

2015 Secured Revolving Credit Facility—In March 2015, the Company entered into a secured revolving credit facility with a maximum capacity of $250.0 million (the "2015 Secured Revolving Credit Facility"). In September 2017, the Company upsized the 2015 Secured Revolving Credit Facility to $325.0 million, added additional lenders to the syndicate, extended the maturity date to September 2020 and made certain other changes. Borrowings under this credit facility bear interest at a floating rate indexed to one of several base rates plus a margin which adjusts upward or downward based upon the Company's corporate credit rating. An undrawn credit facility commitment fee ranges from 0.30% to 0.50%, based on corporate credit ratings each quarter. At maturity, the Company may convert outstanding borrowings to a one year term loan which matures in quarterly installments through September 2021. As of September 30, 2017, based on the Company's borrowing base of assets, the Company had $325.0 million of borrowing capacity available under the 2015 Secured Revolving Credit Facility.

Unsecured Notes—In September 2017, the Company issued $400.0 million principal amount of 4.625% senior unsecured notes due September 2020, $400.0 million principal amount of 5.25% senior unsecured notes due September 2022 and $250.0 million of 3.125% Convertible Notes due September 2022. The Company incurred approximately $17.4 million dollars in fees related to these offerings, all of which was capitalized in "Debt obligations, net" on the Company's consolidated balance sheets. Subsequent to September 30, 2017, proceeds from these offerings, together with cash on hand, were used to repay in full the $550.0 million principal amount outstanding of the 4.0% senior unsecured notes due November 2017, the $300.0 million principal amount outstanding of the 7.125% senior unsecured notes due February 2018 and the $300.0 million principal amount outstanding of the 4.875% senior unsecured notes due July 2018. In addition, subsequent to September 30, 2017, the initial purchasers of the 3.125% Convertible Notes exercised their option to purchase an additional $37.5 million aggregate principal amount of the 3.125% Convertible Notes.

In March 2017, the Company issued $375.0 million principal amount of 6.00% senior unsecured notes due April 2022. Proceeds from the offering were primarily used to repay in full the $99.7 million principal amount outstanding of the 5.85% senior unsecured notes due March 2017 and repay in full the $275.0 million principal amount outstanding of the 9.00% senior unsecured notes due June 2017 prior to maturity. In March 2016, the Company repaid its $261.4 million principal amount outstanding of the 5.875% senior unsecured notes at maturity using available cash. In addition, the Company issued $275.0 million principal amount of 6.50% senior unsecured notes due July 2021. Proceeds from the offering were primarily used to repay in full the $265.0 million principal amount outstanding of the senior unsecured notes due July 2016 and repay $5.0 million of the 2015 Secured Revolving Credit Facility.

During the nine months ended September 30, 2017, repayments of senior unsecured notes prior to maturity resulted in losses on early extinguishment of debt of $3.1 million. During the three and nine months ended September 30, 2016, repayments of unsecured notes prior to maturity resulted in losses on early extinguishment of debt of $0.1 million and $0.4 million, respectively. These amounts are included in "Loss on early extinguishment of debt, net" in the Company's consolidated statements of operations.

In November 2016, in connection with the retirement of the Company's $200.0 million principal amount of 3.0% senior unsecured convertible notes due November 2016, the Company converted $9.6 million principal amount into 0.8 million shares of our common stock.

Encumbered/Unencumbered Assets—The carrying value of the Company's encumbered and unencumbered assets by asset type are as follows ($ in thousands):



	As of
	September 30, 2017				December 31, 2016
	Encumbered Assets		Unencumbered Assets		Encumbered Assets		Unencumbered Assets
Real estate, net	$	841,570	$	482,292	$	881,212	$	506,062
Real estate available and held for sale	—		65,658		—		237,531
Land and development, net	25,100		836,407		35,165		910,400
Loans receivable and other lending investments, net⁽¹⁾⁽²⁾	188,973		813,447		172,581		1,142,050
Other investments	—		289,037		—		214,406
Cash and other assets	—		2,145,713		—		590,299
Total	$	1,055,643	$	4,632,554	$	1,088,958	$	3,600,748

_______________________________________________________________________________


(1)	As of September 30, 2017 and December 31, 2016, the amounts presented exclude general reserves for loan losses of $15.2 million and $23.3 million, respectively.


(2)	As of September 30, 2017 and December 31, 2016, the amounts presented exclude loan participations of $122.2 million and $159.1 million, respectively.

Debt Covenants

The Company's outstanding unsecured debt securities contain corporate level covenants that include a covenant to maintain a ratio of unencumbered assets to unsecured indebtedness of at least 1.2x and a covenant not to incur additional indebtedness (except for incurrences of permitted debt), if on a pro forma basis, the Company's consolidated fixed charge coverage ratio, determined in accordance with the indentures governing the Company's debt securities, is 1.5x or lower. If any of the Company's covenants are breached and not cured within applicable cure periods, the breach could result in acceleration of its debt securities unless a waiver or modification is agreed upon with the requisite percentage of the bondholders. If the Company's ability to incur additional indebtedness under the fixed charge coverage ratio is limited, the Company is permitted to incur indebtedness for the purpose of refinancing existing indebtedness and for other permitted purposes under the indentures.

The Company's 2016 Senior Secured Credit Facility and the 2015 Secured Revolving Credit Facility contain certain covenants, including covenants relating to collateral coverage, dividend payments, restrictions on fundamental changes, transactions with affiliates, matters relating to the liens granted to the lenders and the delivery of information to the lenders. In particular, the 2016 Senior Secured Credit Facility requires the Company to maintain collateral coverage of at least 1.25x outstanding borrowings on the facility. The 2015 Secured Revolving Credit Facility is secured by a borrowing base of assets and requires the Company to maintain both collateral coverage of at least 1.5x outstanding borrowings on the facility and a consolidated ratio of cash flow to fixed charges of at least 1.5x. The 2015 Secured Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided the collateral coverage remains at least 1.5x outstanding borrowings on the facility. To satisfy this covenant, the Company has the option to pay down outstanding borrowings or substitute assets in the borrowing base. In addition, for so long as the Company maintains its qualification as a REIT, the 2016 Senior Secured Credit Facility and the 2015 Secured Revolving Credit Facility permit the Company to distribute 100% of its REIT taxable income on an annual basis (prior to deducting certain cumulative net operating loss ("NOL") carryforwards). The Company may not pay common dividends if it ceases to qualify as a REIT.

The Company's 2016 Senior Secured Credit Facility and the 2015 Secured Revolving Credit Facility contain cross default provisions that would allow the lenders to declare an event of default and accelerate the Company's indebtedness to them if the Company fails to pay amounts due in respect of its other recourse indebtedness in excess of specified thresholds or if the lenders under such other indebtedness are otherwise permitted to accelerate such indebtedness for any reason. The indentures governing the Company's unsecured public debt securities permit the bondholders to declare an event of default and accelerate the Company's indebtedness to them if the Company's other recourse indebtedness in excess of specified thresholds is not paid at final maturity or if such indebtedness is accelerated.