7. Notes Payable

Notes payable consisted of the following at December 31 (in thousands):


	2015		2014
Notes payable requiring payments of interest and principal, with fixed rates ranging from 4.12% to 5.95%; maturing at dates ranging from July 2016 through January 2025. The notes are collateralized by first deeds of trust on eight hotel properties at December 31, 2015, and 14 hotel properties at December 31, 2014.	$	791,073	$	1,023,780
Note payable requiring payments of interest and principal, bearing a blended rate of one-month LIBOR plus 225 basis points; maturing in August 2019. The note is collateralized by a first deed of trust on one hotel property.		225,407		228,296
Note payable requiring payments of interest only through October 2013, and interest and principal thereafter, with a blended interest rate of one-month LIBOR plus 325 basis points; maturing in October 2018. The note is collateralized by a first deed of trust on one hotel property at December 31, 2014.		—		177,216
Unsecured term loan requiring payments of interest only, with a blended interest rate based on a pricing grid with a range of 180 to 255 basis points over LIBOR, depending on the Company's leverage ratios. LIBOR has been swapped to a fixed rate of 1.591%, reflecting an interest rate of 3.391% based on the Company's current leverage. Matures in September 2022.		85,000		—
Total notes payable	$	1,101,480	$	1,429,292

Current portion of notes payable	$	86,840	$	121,328
Less: current portion of deferred financing fees		(1,064)		(1,721)
Current portion of notes payable, net	$	85,776	$	119,607

Notes payable, less current portion	$	1,014,640	$	1,307,964
Less: long-term portion of deferred financing fees		(3,821)		(5,827)
Notes payable, less current portion, net	$	1,010,819	$	1,302,137

Aggregate future principal maturities and amortization of notes payable at December 31, 2015, are as follows (in thousands):


2016	$	86,840
2017		254,733
2018		121,002
2019		223,880
2020		84,137
Thereafter		330,888
Total	$	1,101,480

Notes Payable Transactions – 2015

In April 2015, the Company entered into a $400.0 million senior unsecured credit facility, which replaced its prior $150.0 million senior unsecured credit facility. The credit facility’s interest rate is based on a pricing grid with a range of 155 to 230 basis points over LIBOR, depending on the Company’s leverage ratios, and represents a decline in pricing from the prior credit facility of approximately 30 to 60 basis points. The initial term of the credit facility is four years, expiring in April 2019, with an option to extend for an additional one year subject to the satisfaction of certain customary conditions. The credit facility also includes an accordion option, which allows the Company to request additional lender commitments for up to a total capacity of $800.0 million. As of December 31, 2015, the Company has no outstanding amounts due under its credit facility.

In May 2015, the Company repaid $99.1 million of debt secured by four of its hotels, the Marriott Houston, the Marriott Park City, the Marriott Philadelphia and the Marriott Tysons Corner.

In October 2015, the Company drew down $85.0 million in funds available from a term loan supplement agreement under its credit facility and used the proceeds, combined with cash on hand, to repay the $85.9 million loan secured by the Renaissance Harborplace, which loan was scheduled to mature in January 2016. The $85.0 million unsecured term loan matures in September 2022, and bears interest based on a pricing grid with a range of 180 to 255 basis points over LIBOR, depending on the Company’s leverage ratios. Additionally, the Company entered into a swap agreement effective October 29, 2015, fixing the LIBOR rate at 1.591% for the duration of the $85.0 million term loan (see Note 5). Based on the Company’s current leverage, the loan reflects a fixed rate of 3.391%.

In December 2015, the Company repaid the $30.7 million loan secured by the Hilton North Hilton, which loan was scheduled to mature in March 2016. The Company funded the repayment of the loan using cash on hand.

Additionally, in December 2015, the Company entered into a term loan agreement, which provided the Company with a six month period within which the Company had the option to borrow up to $100.0 million. The Company drew the available $100.0 million in January 2016, and used the proceeds, combined with cash on hand, to repay the loan secured by the Boston Park Plaza, which had a balance of $114.2 million as of December 31, 2015 (see Note 15). The Boston Park Plaza loan was scheduled to mature in February 2018, but could be repaid without penalty in February 2016. The $100.0 million unsecured term loan matures in January 2023, and bears interest based on a pricing grid with a range of 180 to 255 basis points over LIBOR, depending on the Company’s leverage ratios. Additionally, the Company entered into a forward swap agreement that will fix the LIBOR rate at 1.853% for the duration of the $100.0 million term loan. Based on the Company’s current leverage, the loan reflects a fixed rate of 3.653%.

Also in December 2015, the Company repaid the remaining $175.0 million balance of the loan secured by the Doubletree Guest Suites Times Square concurrent with the sale of the hotel (see Note 4). In conjunction with the repayment, the Company incurred a $1.2 million prepayment penalty upon the loan’s repayment, and wrote off $1.7 million in deferred financing fees, both of which are included in loss on extinguishment of debt on the Company’s consolidated statements of operations.

Notes Payable Transactions – 2014

In August 2014, the Company amended the mortgage secured by the Hilton San Diego Bayfront, which mortgage originally included the syndication of four lenders. In conjunction with the amendment and in accordance with the Debt Topic of the FASB ASC, the Company analyzed each of the four lenders to determine if their participation in the refinancing should be accounted for as a modification or as an extinguishment of their portion of the original loan. As a result of the Company’s assessments, three of the lenders’ participations were deemed to be modifications of the original loan, and the applicable amounts of unamortized deferred financing fees continue to be capitalized and amortized over the term of the refinanced debt. During 2014, the Company paid $0.1 million in loan fees to third parties related to the modifications, which were recorded in the Company’s results of operations as a component of interest expense. The amended loan extends the loan’s maturity from April 2016 to August 2019, and reduces the loan’s interest rate from three-month LIBOR plus 325 basis points to one-month LIBOR plus 225 basis points.

In December 2014, the Company repaid the $38.9 million mortgage secured by the JW Marriott New Orleans, using proceeds received from a new $90.0 million mortgage secured by the JW Marriott New Orleans. The new loan extends the maturity date from September 2015 to December 2024. The new loan is subject to a 30-year amortization schedule, and reduces the interest rate from 5.45% under a related interest rate swap agreement to a fixed rate of 4.15%.

Also in December 2014, the Company extinguished the $67.1 million mortgage secured by the Embassy Suites La Jolla for a total cost of $71.1 million. The extinguishment was funded using proceeds received from a new $65.0 million mortgage secured by the Embassy Suites La Jolla, along with cash on hand. The new loan is subject to a 30-year amortization schedule, reduces the interest rate from a fixed rate of 6.6% to a fixed rate of 4.12%, and extends the maturity date from June 2019 to January 2025.

Deferred Financing Fees and Losses on Extinguishment of Debt

Deferred financing fees and losses on extinguishment of debt for the years ended December 31, 2015, 2014 and 2013 were as follows (in thousands):


	2015 (1)		2014 (2)		2013 (3)
Payments of deferred financing fees	$	5,861	$	2,346	$	243
Write-off of deferred financing fees	$	455	$	—	$	—
Loss on extinguishment of debt	$	2,964	$	4,638	$	3,159

(1)

During the year ended December 31, 2015, the Company paid $5.9 million in deferred financing fees related to its new credit facility and two new term loan agreements, as well as its new loans entered into in December 2014 secured by the Embassy Suites La Jolla and the JW Marriott New Orleans. In addition, during 2015, the Company wrote off $0.5 million in deferred financing fees related to its prior credit facility, and incurred a total of $3.0 million in losses on extinguishment of debt related to its 2015 debt repayments.

(2)

During the year ended December 31, 2014, the Company paid additional deferred financing fees of $2.3 million related to its amendment of the mortgage secured by the Hilton San Diego Bayfront, as well as the refinancing of the mortgages secured by the JW Marriott New Orleans and the Embassy Suites La Jolla. In addition, the Company incurred a total of $4.6 million in losses on the extinguishment of debt related to the portion of the Hilton San Diego Bayfront loan associated with the prior lender who chose not to participate in the loan’s refinancing, along with the repayment and extinguishment of the prior mortgages secured by the JW Marriott New Orleans and the Embassy Suites La Jolla.

(3)

During the year ended December 31, 2013, the Company paid additional deferred financing fees of $0.2 million related to the assumption of a mortgage in connection with the acquisition of the Boston Park Plaza and the purchase of an interest rate cap derivative agreement on the Hilton San Diego Bayfront mortgage. In addition, the Company incurred a $3.2 million loss on extinguishment of debt associated with its extinguishment and prepayment of debt associated with the Rochester Portfolio, which it sold in January 2013 (see Note 4).

Interest Expense

Total interest incurred and expensed on the notes payable for the years ended December 31, 2015, 2014 and 2013 was as follows (in thousands):


	2015		2014		2013
Interest expense on debt and capital lease obligations	$	63,677	$	70,067	$	69,806
Gain on derivatives, net		(309)		(529)		(525)
Amortization and write-off of deferred financing fees		3,148		2,777		2,955
Accretion of Senior Notes		—		—		3
Total interest expense	$	66,516	$	72,315	$	72,239