(3) “Tangible net worth” is defined as the gross book value of our real estate assets and other corporate assets
less our total debt and all other corporate liabilities.
Our Facility requires that we maintain a specific pool of unencumbered borrowing base properties. The
unencumbered borrowing base assets are subject to the following limitations and covenants:
Actual at
December 31,
2008
Covenant
Minimum implied debt service ratio . . . . . . . . . . . . . . . . . . . . . . . .
1.5x
Maximum unencumbered leverage ratio . . . . . . . . . . . . . . . . . . . . .
65%
Minimum number of unencumbered borrowing base properties . . . .
4
Minimum unencumbered borrowing base value . . . . . . . . . . . . . . . . $150 million
Percentage of total asset value owned by borrowers or
guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90%
12.67x
8.1%
8
$703.0 million
100%
If we were to default under any of the above covenants, we would be obligated to repay all amounts
outstanding under our Facility and our Facility would terminate. Our ability to comply with two most
restrictive financial covenants, the maximum leverage ratio and the fixed charge coverage ratio, depend
primarily on our EBITDA. The following table shows the impact of various hypothetical scenarios on those
two covenants.
Covenant
Maximum leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum fixed charge coverage ratio . . . . . . . . . . . . . . .
65%
1.6x
EBITDA Change from 2008
-10%
-20%
-30%
-40%
45%
2.6x
51%
2.3x
58%
2.0x
67%
1.7x
In addition to the interest payable on amounts outstanding under the Facility, we are required to pay an
amount equal to 0.20% of the unused portion of the Facility if the unused portion of the Facility is greater
than 50% and 0.125% if the unused portion of the Facility is less than 50%. We incurred interest and unused
credit facility fees of $2.6 million, $2.7 million and $0.8 million for the years ended 2008, 2007 and 2006,
respectively, on the credit facility. As of December 31, 2008, we had $57 million outstanding under the
Facility. On February 5, 2009, we repaid $5.0 million of the outstanding amount under the Facility.
Sources and Uses of Cash
Our principal sources of cash are cash from operations, borrowings under mortgage financings, draws on
our credit facility and the proceeds from offerings of our common stock. Our principal uses of cash are debt
service, asset acquisitions, capital expenditures, operating costs, corporate expenses and dividends.
Cash From Operations. Our cash provided by operating activities was $129.5 million for the year ended
December 31, 2008, which is the result of our $52.9 million net income adjusted for the impact of several
non-cash charges, including $78.2 million of depreciation, $7.8 million of non-cash ground rent, $0.8 million
of amortization of deferred financing costs, $0.8 million of yield support received , $0.7 million of loss on
asset impairment and $4.0 million of stock compensation, offset by $1.7 million of amortization of unfavorable
agreements, $0.6 million of amortization of deferred income and unfavorable working capital changes of
$13.5 million.
Our cash provided by operations was $148.7 million for the year ended December 31, 2007, which is the
result of our net income, adjusted for the impact of several non-cash charges, including $75.5 million of real
estate and corporate depreciation, $7.8 million of non-cash straight line ground rent, $0.8 million of
amortization of deferred financing costs and loan repayment losses, $1.8 million of yield support received,
$3.0 million non-cash deferred income tax expense and $3.6 million of restricted stock compensation expense,
offset by negative working capital changes of $5.0 million, gain on sale of assets of $3.8 million, $0.4 million
of key money amortization, $1.8 million amortization of debt premium and unfavorable contract liabilities.
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