5. DEBT

As of December 31, 2019, the Company’s consolidated indebtedness was comprised of borrowings under its line of credit, term loans and mortgage notes. Borrowings under the non-recourse mortgage notes are secured by mortgages or deeds of trust and related assignments and security interests in collateralized and certain cross-collateralized properties, which are generally owned by single purpose entities. All of the Company’s debt was repaid in connection with the closing of the Asset Sale in January 2020. A summary of the Company’s debt is as follows:



	Weighted-Average Effective Interest Rate as of					Balance as of
($ in thousands)	December 31, 2019		December 31, 2018		Maturity Date	December 31, 2019			December 31, 2018
Line of credit (1)	2.91	%	3.38	%	January 2020	$	378,000		$	324,000
Term loan (2)	2.50		2.65		January 2021	350,000			350,000
Term loan (3)	3.16		4.05		May 2022	150,000			150,000
Total principal amount / weighted-average	2.79	%	3.19	%		878,000			824,000
Less unamortized debt issuance costs						$	(1,431	)	$	(3,116	)
Total debt, net (excluding debt related to assets held for sale)						$	876,569		$	820,884

Fixed-rate mortgage notes related to assets held for sale, net of unamortized debt issuance costs (4)	3.36	%	3.36	%	July 2020 - December 2025	716,470			717,940
Total debt, net / weighted-average (including debt related to assets held for sale) (5)	3.04	%	3.27	%		$	1,593,039		$	1,538,824
Gross book value of properties encumbered by debt						$	1,154,412		$	1,147,963

(1)

The effective interest rate is calculated based on either: (i) the London Interbank Offered Rate (“LIBOR”) multiplied by a statutory reserve rate plus a margin ranging from 1.40% to 2.30%; or (ii) an alternative base rate plus a margin ranging from 0.40% to 1.30%, each depending on the Company’s consolidated leverage ratio. The weighted-average effective interest rate is the all-in interest rate, including the effects of interest rate swap agreements relating to $150.0 million in borrowings under this line of credit.

(2)

The effective interest rate is calculated based on either: (i) LIBOR multiplied by a statutory reserve rate, plus a margin ranging from 1.35% to 2.20%; or (ii) an alternative base rate plus a margin ranging from 0.35% to 1.20%, each depending on the Company’s consolidated leverage ratio. The weighted-average effective interest rate is the all-in interest rate, including the effects of interest rate swap agreements.


(3)	The effective interest rate is calculated based on either: (i) LIBOR multiplied by a statutory reserve rate, plus a margin ranging from 1.30% to 2.15%; or (ii) an alternative base rate plus a margin ranging from 0.30% to 1.15%, each depending on the Company’s consolidated leverage ratio. The weighted-average effective interest rate is the all-in interest rate.


(4)	Interest rates range from 2.94% to 3.65%, which includes the effects of an interest rate swap agreement relating to a variable-rate mortgage note with an outstanding amount of $93.7 million and $95.6 million as of December 31, 2019 and December 31, 2018, respectively.


(5)	The weighted-average remaining term of the Company’s consolidated debt was approximately 2.5 years as of December 31, 2019, excluding any extension options on the line of credit.

Debt Covenants

The Company’s line of credit, term loans and mortgage note agreements contain various property-level covenants, including customary affirmative and negative covenants. In addition, the line of credit and term loan agreements contain certain corporate level financial covenants, including leverage ratio, fixed charge coverage ratio, and tangible net worth thresholds. The Company was in compliance with its debt covenants as of December 31, 2019 and all of the Company’s debt was repaid in connection with the closing of the Asset Sale in January 2020.

Derivative Instruments

To manage interest rate risk for certain of its variable-rate debt, the Company uses interest rate swaps as part of its risk management strategy. These derivatives are designed to mitigate the risk of future interest rate increases by providing a fixed interest rate for a limited, pre-determined period of time. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the interest rate swap agreements without exchange of the underlying notional amount. As of December 31, 2019, the Company had 11 outstanding interest rate swap agreements, which were associated with $593.7 million of debt, that were designated as cash flow hedges of interest rate risk. Certain of the Company’s variable-rate borrowings are not hedged, and therefore, to an extent, the Company has on-going exposure to interest rate movements.

For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss is recorded as a component of accumulated other comprehensive income (loss) (“AOCI”) on the consolidated balance sheets and is reclassified into earnings as interest expense for the same period that the hedged transaction affects earnings, which is when the interest expense is recognized on the related debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. For the years ended December 31, 2019, 2018 and 2017, there was no hedge ineffectiveness. The Company expects no hedge ineffectiveness in the next 12 months.

All of the Company’s debt was repaid in connection with the closing of the Asset Sale in January 2020, and as a result, the derivative instruments were settled in January 2020 as well. Assuming the debt remained outstanding during the next 12 months, the Company estimates that approximately $2.6 million would have been reclassified as a decrease to interest expense related to active effective hedges of existing floating-rate debt. The BTC Partnerships, which are not consolidated by the Company under GAAP, continue to have debt outstanding.

The following table summarizes the location and fair value of the cash flow hedges on the Company’s consolidated balance sheets:



($ in thousands)	Number of Contracts	Notional Amount		Balance Sheet Location	Fair Value
As of December 31, 2019
Interest rate swaps	11	$	593,749	Other assets	$	2,514
As of December 31, 2018
Interest rate swaps	11	$	595,626	Other assets	$	16,438

The following table presents the effect of the Company’s cash flow hedges on the Company’s consolidated financial statements:



	For the Year Ended December 31,
(in thousands)	2019			2018			2017
Derivative Instruments Designated as Cash Flow Hedges
(Loss) gain recognized in AOCI	$	(6,645	)	$	5,165		$	3,452
Gain reclassified from AOCI into interest expense	(7,279		)	(5,599		)	(671		)
Total interest expense presented in the consolidated statements of operations in which the effects of the cash flow hedges are recorded (1)	52,133			50,401			41,750


(1)	Interest expense is included in discontinued operations on the consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017.