Secured and unsecured senior debt (Tables)

9 Months Ended

Sep. 30, 2012

Secured and unsecured senior debt

Summary of secured and unsecured debt

The following table summarizes our secured and unsecured senior debt and their respective principal maturities, as of September 30, 2012 (in thousands):

	Fixed Rate/Hedged Variable Rate		Unhedged Variable Rate		Total Consolidated		Percentage of Total		Weighted Average Interest Rate at End of Period (1)		Weighted Average Remaining Term (Years)
Secured notes payable (2)	$	640,815	$	78,535	$	719,350	23.7	%	5.76	%	3.2
Unsecured senior notes payable (2)	549,794		–		549,794		18.1		4.61		9.5
Unsecured senior line of credit (3)	50,000		363,000		413,000		13.6		1.46		4.6
2016 Unsecured Senior Bank Term Loan (4)	750,000		–		750,000		24.8		3.12		3.8
2017 Unsecured Senior Bank Term Loan (5)	600,000		–		600,000		19.8		3.84		4.3
Total debt	$	2,590,609	$	441,535	$	3,032,144	100.0	%	3.93	%	4.9
Percentage of total debt	85%		15%		100%

(1)Represents the contractual interest rate as of the end of the period plus the impact of debt premiums/discounts and our interest rate hedge agreements.  The weighted average interest rate excludes bank fees and amortization of loan fees.

(2)Represents amounts net of unamortized premiums/discounts.

(3)Total commitments available for borrowing aggregate $1.5 billion under our unsecured senior line of credit.  As of September 30, 2012, we had approximately $1.1 billion available for borrowings under our unsecured senior line of credit.  Weighted average remaining term assumes we exercise our sole option to extend the stated maturity date of April 30, 2016, by six months, twice, to April 30, 2017.

(4)Assumes we exercise our sole option to extend the stated maturity date of June 30, 2015, by one year, to June 30, 2016.

(5)Assumes we exercise our sole option to extend the stated maturity date of January 31, 2016, by one year, to January 31, 2017.

Summary of fixed rate/hedged and unhedged floating rate debt and their respective principal maturities

The following table summarizes fixed rate/hedged variable and unhedged variable rate debt and their respective principal maturities, as of September 30, 2012 (in thousands):

Debt		Stated Rate		Effective Interest Rate (1)		Maturity Date		2012			2013			2014			2015			2016			Thereafter			Total
Secured notes payable
San Diego		6.21	%	6.21	%	3/1/13		$	78		$	7,934		$	–		$	–		$	–		$	–		$	8,012
Suburban Washington, D.C.		6.36		6.36		9/1/13		135			26,093			–			–			–			–			26,228
San Francisco Bay		6.14		6.14		11/16/13		–			7,527			–			–			–			–			7,527
Greater Boston		5.26		5.59		4/1/14		929			3,839			208,683			–			–			–			213,451
Suburban Washington, D.C.		2.33		2.33		4/20/14		–			–			76,000			–			–			–			76,000
San Diego		6.05		4.88		7/1/14		22			142			6,458			–			–			–			6,622
San Diego		5.39		4.00		11/1/14		29			177			7,495			–			–			–			7,701
Seattle		6.00	(2)	6.00		11/18/14		60			240			240			–			–			–			540
Suburban Washington, D.C.		5.64		4.50		6/1/15		21			130			138			5,788			–			–			6,077
San Francisco Bay		LIBOR+1.50		1.74		7/1/15	(3)	–			–			–			1,995			–			–			1,995
Greater Boston, San Francisco Bay, and San Diego		5.73		5.73		1/1/16		393			1,616			1,713			1,816			75,501			–			81,039
Greater Boston, San Diego, and Greater NYC		5.82		5.82		4/1/16		208			878			931			988			29,389			–			32,394
San Francisco Bay		6.35		6.35		8/1/16		542			2,332			2,487			2,652			126,715			–			134,728
San Diego, Suburban Washington, D.C., and Seattle		7.75		7.75		4/1/20		320			1,345			1,453			1,570			1,696			110,301			116,685
San Francisco Bay		6.50		6.50		6/1/37		4			16			17			17			19			801			874
Average/Total		5.70	%	5.76				2,741			52,269			305,615			14,826			233,320			111,102			719,873
$1.5 billion unsecured senior line of credit		LIBOR+1.20%(4)		1.46		4/30/17	(5)	–			–			–			–			–			413,000			413,000
2016 Unsecured Senior Bank Term Loan		LIBOR+1.75%		3.12		6/30/16	(6)	–			–			–			–			750,000			–			750,000
2017 Unsecured Senior Bank Term Loan		LIBOR+1.50%		3.84		1/31/17	(7)	–			–			–			–			–			600,000			600,000
Unsecured senior notes payable (8)		4.60	%	4.61		4/1/22		–			–			250			–			–			550,000			550,250
Average/Subtotal				3.93				2,741			52,269			305,865			14,826			983,320			1,674,102			3,033,123
Unamortized discounts				–				(112		)	(464		)	(78		)	(12		)	(44		)	(269		)	(979		)
Average/Total				3.93	%			$	2,629		$	51,805		$	305,787		$	14,814		$	983,276		$	1,673,833		$	3,032,144
Balloon payments								$	–		$	41,165		$	297,330		$	7,723		$	980,029		$	1,666,791		$	2,993,038
Principal amortization								2,629			10,640			8,457			7,091			3,247			7,042			39,106
Total consolidated debt								$	2,629		$	51,805		$	305,787		$	14,814		$	983,276		$	1,673,833		$	3,032,144
Fixed rate/hedged variable rate debt								$	2,569		$	51,565		$	229,547		$	12,819		$	983,276		$	1,310,833		$	2,590,609
Unhedged variable rate debt								60			240			76,240			1,995			–			363,000			441,535
Total consolidated debt								$	2,629		$	51,805		$	305,787		$	14,814		$	983,276		$	1,673,833		$	3,032,144
(1)	Represents the contractual interest rate as of the end of the period plus the impact of debt premiums/discounts and our interest rate hedge agreements. The weighted average interest rate excludes bank fees and amortization of loan fees.
(2)	Represents a loan assumed with the acquisition of a property. The interest rate is based upon 10 year U.S. treasury bills plus 3%, with a floor of 6% and a ceiling of 8.5%.
(3)	We have an option to extend the stated maturity date of July 1, 2015, by one year, twice, to July 1, 2017.
(4)	In addition to the stated rate, we are subject to an annual facility fee of 0.25%.
(5)	Assumes we exercise our sole option to extend the stated maturity date of April 30, 2016, by six months, twice, to April 30, 2017.
(6)	Assumes we exercise our sole option to extend the stated maturity date of June 30, 2015, by one year, to June 30, 2016.
(7)	Assumes we exercise our sole option to extend the stated maturity date of January 31, 2016, by one year, to January 31, 2017.
(8)	Includes $550 million of our 4.60% unsecured senior notes payable due in April 2022, and $250,000 of our 8.00% unsecured senior convertible notes payable with a maturity date of April 15, 2014.

Summary of financial covenants under unsecured senior notes payable

The requirements of the key financial covenants under our unsecured senior notes payable as of September 30, 2012, are as follows:

Covenant Ratios (1)	Requirement
Total Debt to Total Assets	Less than or equal to 60%
Consolidated EBITDA to Interest Expense	Greater than or equal to 1.5x
Unencumbered Total Asset Value to Unsecured Debt	Greater than or equal to 150%
Secured Debt to Total Assets	Less than or equal to 40%

(1) For a definition of the ratios used in the table above, refer to the Indenture dated February 29, 2012, which governs the unsecured senior notes payable, which was filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 29, 2012.

Summary of financial covenants under unsecured senior line of credit and unsecured senior bank term loans

The requirements of the key financial covenants under our unsecured senior line of credit and unsecured senior bank term loans as of September 30, 2012, are as follows:

Covenant Ratios (1)	Requirement
Leverage Ratio	Less than or equal to 60.0%
Fixed Charge Coverage Ratio	Greater than or equal to 1.50x
Secured Debt Ratio	Less than or equal to 40.0%
Unsecured Leverage Ratio	Less than or equal to 60.0%
Unsecured Interest Coverage Ratio	Greater than or equal to 1.75x

(1) For a definition of the ratios used in the table above, refer to the amended unsecured senior line of credit and unsecured senior bank term loan agreements, dated as of April 30, 2012, which are filed as exhibits to our Quarterly Report on Form 10-Q filed with the SEC on August 8, 2012.

Summary of balances and terms of unsecured convertible notes

The following tables summarize the balances, significant terms, and components of interest cost recognized (excluding amortization of loan fees and before the impact of capitalized interest) on our unsecured senior convertible notes (dollars in thousands):

	8.00% Unsecured Senior Convertible Notes						3.70% Unsecured Senior Convertible Notes
	September 30,			December 31,			September 30,		December 31,
	2012			2011			2012		2011
Principal amount	$	250		$	250		$	–	$	84,801
Unamortized discount	(10		)	(15		)	–		(77		)
Net carrying amount of liability component	$	240		$	235		$	–	$	84,724
Carrying amount of equity component	$	27		$	27		$	–	$	8,080
Number of shares on which the aggregate consideration to be delivered on conversion is determined	6,087			6,087			N/A		N/A		(1)
Issuance date	April 2009						N/A
Stated interest rate	8.00%						N/A
Effective interest rate at September 30, 2012	11.00%						N/A
Conversion rate per $1,000 principal value of unsecured senior convertible notes, as adjusted, as of September 30, 2012	24.3480						N/A

(1)Our 3.70% unsecured senior convertible notes (“3.70% Unsecured Senior Convertible Notes”) require that upon conversion, the entire principal amount is to be settled in cash, and any excess value above the principal amount, if applicable, is to be settled in shares of our common stock.  Based on the December 31, 2011, closing price of our common stock of $68.97, and the conversion price of our 3.70% Unsecured Senior Convertible Notes of $117.36 as of December 31, 2011, the if-converted value of the notes did not exceed the principal amount as of December 31, 2011, and accordingly, no shares of our common stock would have been issued if the notes had been settled on December 31, 2011.

Summary of components of interest cost recognized on unsecured convertible notes

	8.00% Unsecured Senior Convertible Notes				3.70% Unsecured Senior Convertible Notes
	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Contractual interest	$	5	$	5	$	–	$	1,132
Amortization of discount on liability component	1		2		–		673
Total interest cost	$	6	$	7	$	–	$	1,805

	Nine Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Contractual interest	$	15	$	15	$	142	$	5,228
Amortization of discount on liability component	4		4		78		3,056
Total interest cost	$	19	$	19	$	220	$	8,284

Schedule of interest expense incurred

The following table outlines our interest expense for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Gross interest	$	33,857		$	30,939		$	99,097		$	93,591
Capitalized interest	(16,763		)	(16,666		)	(47,854		)	(44,905		)
Interest expense (1)	$	17,094		$	14,273		$	51,243		$	48,686

(1)Includes interest expense related to and classified in (loss) income from discontinued operations in the accompanying condensed consolidated statements of income.