XML 63 R13.htm IDEA: XBRL DOCUMENT v2.4.0.8
Indebtedness
 12 Months Ended
Dec. 31, 2013
Indebtedness  
Indebtedness

Note 7. Indebtedness

Our principal debt obligations at December 31, 2013 were: (1) outstanding borrowings under our $750,000 unsecured revolving credit facility; (2) four public issuances of unsecured senior notes, including: (a) $250,000 principal amount at an annual interest rate of 4.30% due 2016, (b) $200,000 principal amount at an annual interest rate of 6.75% due 2020, (c) $300,000 principal amount at an annual interest rate of 6.75% due 2021 and (d) $350,000 principal amount at an annual interest rate of 5.625% due 2042; and (3) $681,628 aggregate principal amount of mortgages secured by 51 of our properties with maturity dates from 2013 to 2043. The 51 mortgaged properties had a carrying value of $945,419 at December 31, 2013. We also have two properties subject to capital leases totaling $13,314 at December 31, 2013; these two properties had a carrying value of $18,627 at December 31, 2013.

In connection with the acquisitions discussed in Note 3 above, during the year ended December 31, 2013, we assumed $12,266 of mortgage debt, which was recorded at a fair value of $13,306. This mortgage has a contractual interest rate of 6.25% and matures in May 2015. We recorded the assumed mortgage at its fair value, which exceeded its outstanding principal balance by $1,040. We determined the fair value of the assumed mortgage using a market approach based upon Level 3 inputs (significant other unobservable inputs) in the fair value hierarchy.

In June 2013, we prepaid mortgage notes encumbering four of our properties that had an aggregate principal balance of $10,377, a weighted average interest rate of 6.1% and maturity dates later in 2013. In September 2013, we prepaid a mortgage note encumbering two of our properties that had an aggregate principal balance of $13,579, a weighted average interest rate of 6.9% and a maturity date later in 2013. As a result, we recognized losses on early extinguishment of debt of $259 for the year ended December 31, 2013.

Also in September 2013, we amended the agreement governing our unsecured revolving credit facility with Wells Fargo Bank, National Association, as administrative agent, and a syndicate of other lenders. As a result of the amendment the stated maturity date of the revolving credit facility was extended from June 24, 2015 to January 15, 2018. Subject to the payment of an extension fee and meeting certain other conditions, we have an option to further extend the stated maturity date by an additional one year. The revolving credit facility agreement provides that we can borrow, repay and reborrow funds available under the revolving credit facility agreement until maturity, and no principal repayment is due until maturity. The $750,000 maximum amount of our revolving credit facility remained unchanged by the amendment. The revolving credit facility agreement continues to include a feature under which maximum borrowings under the facility may be increased to up to $1,500,000 in certain circumstances. Under this amendment, the interest rate paid on borrowings under the revolving credit facility agreement was reduced from LIBOR plus a premium of 160 basis points to LIBOR plus a premium of 130 basis points, and the facility fee was reduced from 35 basis points to 30 basis points per annum on the total amount of lending commitments. Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings. As a result of the amendment, we recognized a loss on early extinguishment of debt of $538. As of December 31, 2013, the interest rate payable on borrowings under our revolving credit facility was 1.4% and the weighted average interest rate for borrowings under our revolving credit facility was 1.6% and 1.8% for the years ended December 31, 2013 and 2012, respectively. As of December 31, 2013 and February 28, 2014, we had $100,000 and $170,000, respectively outstanding under our revolving credit facility. We incurred interest expense and other associated costs related to our revolving credit facility of $3,781, $5,733 and $2,745 for the years ended December 31, 2013, 2012 and 2011, respectively.

Our revolving credit facility agreement provides for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as a change of control of us, which includes RMR ceasing to act as our business manager and property manager.

Our public debt indentures and related supplements and our credit facility agreement contain a number of financial and other covenants, including covenants that restrict our ability to incur indebtedness or to make distributions under certain circumstances and require us to maintain financial ratios and a minimum net worth.

In July 2012, we sold $350,000 of unsecured senior notes. The notes require interest at a fixed rate of 5.625% per annum and are due in 2042. The notes can also be prepaid at par at any time beginning in July 2017. Net proceeds from this sale of the notes, after underwriting discounts, fees and other expenses were approximately $338,561. Interest on the notes is payable quarterly in arrears. We used a part of the net proceeds of this offering to repay borrowings outstanding under our revolving credit facility and we used the remaining net proceeds from this offering to prepay a part of our FNMA secured term loan and for general business purposes, including funding a part of our recent acquisitions of properties discussed in Note 3 above.

In August 2012, we prepaid approximately $199,197 of the outstanding principal balance of our FNMA secured term loan that had an interest rate of 6.4% at August 31, 2012 and a maturity date in September 2019, using, among other funds, net proceeds from our July 2012 debt offering. As a result of this prepayment, 11 of the 28 properties securing this loan were released from the related mortgage. Also, as a result of this prepayment, we recorded a loss on early extinguishment of debt of approximately $6,349 consisting of a debt prepayment premium, legal fees and the write off of unamortized deferred financing fees.

At December 31, 2013 and 2012, our additional outstanding debt consisted of the following:

 
    
    
   December 31, 2013   December 31, 2012  
Unsecured Debt
  Coupon   Maturity   Face
Amount		   Unamortized
Discount		   Face
Amount		   Unamortized
Discount		  

Senior notes

     4.300 %   2016   $ 250,000   $ 1,085   $ 250,000   $ 1,620  

Senior notes

     6.750 %   2020     200,000     1,348     200,000     1,563  

Senior notes

     6.750 %   2021     300,000     4,230     300,000     4,764  

Senior notes

     5.625 %   2042     350,000     —     350,000     —  
                               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total unsecured debt

               $ 1,100,000   $ 6,663   $ 1,100,000   $ 7,947  
                               
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                               


 

 
   Principal Balance as of
December 31,		    
    
    
    
   Net Book Value of
Collateral		  
 
   Interest
Rate		    
   Number of
Properties as
Collateral		   Initial
Cost of
Collateral		  
Secured and Other Debt
  2013(1)   2012(1)   Maturity   2013   2012  

Mortgages(2)

   $ —   $ 10,565     6.11%     Dec 13     —   $ 17,034   $ —   $ 14,883  

Mortgages(2)

     —     13,759     6.91%     Dec 13     —     36,359     —     33,057  

Mortgages

     36,145     36,906     5.83%     Jun 14     2     79,000     77,799     78,594  

Mortgage

     30,177     30,944     6.02%     Mar 15     1     99,000     96,354     98,346  

Mortgage

     12,093     —     6.25%     May 15     1     22,350     22,033     —  

Mortgage

     5,020     5,121     5.65%     Jun 15     1     22,143     20,965     21,435  

Mortgage

     11,465     11,612     6.37%     Jul 15     1     14,849     14,197     14,432  

Mortgages

     12,773     13,051     5.66%     Jul 15     3     26,606     25,457     25,868  

Mortgage

     2,805     2,878     5.880%     Jul 15     1     15,397     14,384     14,774  

Mortgage

     6,579     6,792     5.81%     Oct 15     1     9,650     9,474     9,665  

Mortgage

     4,502     4,596     5.810%     Oct 15     1     8,600     8,168     8,391  

Mortgages

     52,000     52,000     5.64%     Jan 16     1     70,495     64,904     66,123  

Mortgage

     6,363     6,476     5.97%     Apr 16     1     10,272     9,811     10,051  

Mortgage

     87,928     90,607     5.92%     Nov 16     2     157,500     151,928     154,691  

Mortgage

     12,366     12,537     6.25%     Nov 16     1     22,102     21,672     21,968  

Mortgage

     5,720     5,810     5.86%     Mar 17     1     11,280     11,292     11,562  

Mortgages

     45,753     46,753     6.54%     May 17     8     62,500     54,702     56,341  

Mortgage

     11,245     11,419     6.150%     Aug 17     1     16,400     15,180     15,507  

Mortgage

     9,425     9,641     6.73%     Apr 18     1     15,100     11,299     11,526  

Mortgage

     292,611     296,437     6.71%     Sep 19     17     617,161     252,404     260,274  

Mortgage(3)

     3,007     3,270     7.31%     Jan 22     1     18,827     16,478     16,839  

Mortgage(3)

     1,482     1,608     7.85%     Jan 22     —     —     —     —  

Mortgage

     3,444     3,534     6.25%     Feb 33     1     5,200     4,588     4,695  

Mortgage

     9,353     9,492     5.95%     Sep 38     2     11,425     9,080     9,295  

Mortgage

     4,672     4,747     4.38%     Sep 43     1     8,059     7,632     7,768  

Bonds

     14,700     14,700     5.88%     Dec 27     1     34,307     25,619     26,559  

Capital Leases

     13,314     13,792     7.70%     Apr 26     2     28,601     18,626     15,603  
                                       
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total secured

   $ 694,942   $ 719,047                 53   $ 1,440,217   $ 964,046   $ 1,008,247  
                                       
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                                       
(1)
The principal balances are the amounts stated in the contracts. In accordance with GAAP, our carrying values and recorded interest expense may be different because of market conditions at the time we assumed certain of these debts. As of December 31, 2013 and 2012, the unamortized net premiums on certain of these mortgages were $4,485 and $5,430, respectively.

(2)
In 2013 we repaid this debt.

(3)
These two mortgages are collateralized by one MOB property acquired in July 2008.

We include amortization of capital lease assets in depreciation expense. Assets encumbered by capital leases had a net book value of $18,627 and $15,602 at December 31, 2013 and 2012, respectively.

Interest on our unsecured senior notes and our bonds is payable semi-annually in arrears; however, no principal repayments are due until maturity. Required monthly payments on our mortgages include principal and interest. Payments under our capital leases are due monthly.

Required principal payments on our outstanding debt as of December 31, 2013, are as follows:

2014

   $ 48,222  

2015

     94,249  

2016

     410,136  

2017

     65,382  

2018

     115,602  

Thereafter

     1,161,353