Mortgages and Notes Payable

The following table summarizes the Company's mortgages and notes payable at September 30, 2012 and December 31, 2011:



	September 30, 2012			December 31, 2011
Fixed rate mortgages payable:
Mortgage loans (a)	$	2,262,572		$	2,691,323
Premium, net of accumulated amortization	—			10,858
Discount, net of accumulated amortization	(1,619		)	(2,003		)
	2,260,953			2,700,178
Variable rate mortgages payable:
Construction loans	10,946			79,599

Mortgages payable	2,271,899			2,779,777
Notes payable	125,000			138,900
Margin payable	—			7,541
Mortgages and notes payable	$	2,396,899		$	2,926,218


(a)	Includes $76,109 and $76,269 of variable rate mortgage debt that was swapped to a fixed rate as of September 30, 2012 and December 31, 2011, respectively.

Mortgages Payable

Mortgages payable outstanding as of September 30, 2012 were $2,271,899 and had a weighted average interest rate of 6.11%. Of this amount, $2,260,953 had fixed rates ranging from 3.50% to 8.00% (9.78% for matured mortgages payable) and a weighted average fixed rate of 6.13% at September 30, 2012. The weighted average interest rate for the fixed rate mortgages payable excludes the impact of the discount amortization. The remaining $10,946 of mortgages payable represented a variable rate construction loan with an interest rate of 2.50% based on LIBOR at September 30, 2012. Properties with a net carrying value of $3,559,925 at September 30, 2012 and related tenant leases are pledged as collateral for the mortgage loans and a consolidated joint venture property with a net carrying value of $27,083 at September 30, 2012 and related tenant leases are pledged as collateral for the construction loan. As of September 30, 2012, the Company's outstanding mortgage indebtedness had a weighted average years to maturity of 6.0 years.

During the nine months ended September 30, 2012, the Company obtained mortgages payable proceeds of $281,874 (of which $280,586 represents mortgages payable originated on 10 properties and $1,288 relates to draws on construction loans), made mortgages payable repayments of $725,118 (excluding principal amortization of $26,711) and received forgiveness of debt of $27,449. The mortgages payable originated during the nine months ended September 30, 2012 have fixed interest rates ranging from 3.50% to 5.25%, a weighted average interest rate of 4.53% and a weighted average years to maturity of 9.4 years. The fixed and variable interest rates of the loans repaid during the nine months ended September 30, 2012 ranged from 3.25% to 7.50% and had a weighted average interest rate of 5.64%.

Mortgages payable outstanding as of December 31, 2011 were $2,779,777 and had a weighted average interest rate of 6.13%. Of this amount, $2,700,178 had fixed rates ranging from 4.61% to 8.00% (9.78% for matured mortgages payable) and a weighted average fixed rate of 6.20% at December 31, 2011. The weighted average interest rate for the fixed rate mortgages payable excludes the impact of premium and discount amortization. The remaining $79,599 of mortgages payable represented variable rate construction loans with a weighted average interest rate of 3.77% at December 31, 2011. Properties with a net carrying value of $4,086,595 at December 31, 2011 and related tenant leases are pledged as collateral for the mortgage loans. Properties with a net carrying value of $126,585 at December 31, 2011 and related tenant leases are pledged as collateral for the construction loans. As of December 31, 2011, the Company's outstanding mortgage indebtedness had a weighted average years to maturity of 6.1 years.

The majority of the Company's mortgages payable require monthly payments of principal and interest, as well as reserves for real estate taxes and certain other costs. Although the mortgage loans obtained by the Company are generally non-recourse, occasionally, when it is deemed necessary, the Company may guarantee all or a portion of the debt on a full-recourse basis. As of September 30, 2012, the Company had guaranteed $17,030 of the outstanding mortgage and construction loans with maturity dates ranging from February 11, 2013 through September 30, 2016 (see Note 16). At times, the Company has borrowed funds financed as part of a cross-collateralized package, with cross-default provisions, in order to enhance the financial benefits. In those circumstances, one or more of the properties may secure the debt of another of the Company's properties. Individual decisions regarding interest rates, loan-to-value, debt yield, fixed versus variable-rate financing, term and related matters are often based on the condition of the financial markets at the time the debt is issued, which may vary from time to time.

As of September 30, 2012, the Company had a $26,865 mortgage payable (University Square) that had matured and had not been repaid or refinanced. In the second quarter of 2010, the Company ceased making the monthly debt service payment on this matured mortgage payable, the non-payment of which amounts to $2,627 annually and does not result in noncompliance under any of the Company's other mortgages payable or unsecured credit agreements. The Company has attempted to negotiate and has made offers to the lender to determine an appropriate course of action under the non-recourse loan agreement; however, no assurance can be provided that negotiations will result in a favorable outcome. As of September 30, 2012, the Company had accrued $6,732 of interest related to this mortgage payable.

Some of the mortgage payable agreements include periodic reporting requirements and/or debt service coverage ratios which allow the lender to control property cash flow if the Company fails to meet such requirements. Management believes the Company was in compliance with such provisions as of September 30, 2012.

Notes Payable

The following table summarizes the Company's notes payable:



	September 30, 2012		December 31, 2011
IW JV Senior Mezzanine Note	$	85,000	$	85,000
IW JV Junior Mezzanine Note	40,000		40,000
Mezzanine Note	—		13,900
Notes payable	$	125,000	$	138,900

Notes payable outstanding as of September 30, 2012 and December 31, 2011 were $125,000 and $138,900, respectively, and had a weighted average interest rate of 12.80% and 12.62%, respectively. The September 30, 2012 balance represents notes payable proceeds from a third party lender related to the debt refinancing transaction for IW JV 2009, LLC (IW JV), which is a wholly-owned entity as of September 30, 2012. The notes have fixed interest rates of 12.24% and 14.00%, mature on December 1, 2019 and are secured by 100% of the Company's equity interest in the IW JV investment properties. The IW JV notes can be prepaid beginning in February 2013 for a fee ranging from 1% to 5% of the outstanding principal balance depending on the date the prepayment is made.

During the year ended December 31, 2010, the Company borrowed $13,900 from a third party in the form of a mezzanine note and used the proceeds as a partial paydown of a mortgage payable, as required by the lender. The mezzanine note bore interest at 11.00% and was scheduled to mature on December 16, 2013. On July 2, 2012, the Company repaid the entire balance of this mezzanine note.

Margin Payable

The Company purchased a portion of its securities through a margin account. As of September 30, 2012 and December 31, 2011, the Company had recorded a payable of none and $7,541, respectively, for securities purchased on margin. Interest expense on this debt in the amount of $3 and $11 was recognized within "Interest expense" in the accompanying condensed consolidated statements of operations and other comprehensive loss for the three months ended September 30, 2012 and 2011, respectively. Interest expense on this debt in the amount of $29 and $39 was recognized within "Interest expense" in the accompanying condensed consolidated statements of operations and other comprehensive loss for the nine months ended September 30, 2012 and 2011, respectively. During the nine months ended September 30, 2012, the Company did not borrow on its margin account, but paid down $7,541.

Debt Maturities

The following table shows the scheduled maturities of the Company's mortgages payable, notes payable, margin payable and unsecured credit facility (as described in Note 11) as of September 30, 2012 for the remainder of 2012, each of the next four years and thereafter and does not reflect the impact of any debt activity that occurred after September 30, 2012:



	2012			2013			2014			2015			2016			Thereafter			Total
Maturing debt (a):
Fixed rate debt:
Mortgages payable (b)	$	62,230		$	276,324		$	195,777		$	471,439		$	48,214		$	1,208,588		$	2,262,572
Notes payable	—			—			—			—			—			125,000			125,000
Unsecured credit facility - term loan (c)	—			—			—			—			300,000			—			300,000
Total fixed rate debt	62,230			276,324			195,777			471,439			348,214			1,333,588			2,687,572

Variable rate debt:
Mortgages payable	—			—			10,946			—			—			—			10,946
Unsecured credit facility - line of credit	—			—			—			235,000			—			—			235,000
Total variable rate debt	—			—			10,946			235,000			—			—			245,946
Total maturing debt (d)	$	62,230		$	276,324		$	206,723		$	706,439		$	348,214		$	1,333,588		$	2,933,518

Weighted average interest rate on debt:
Fixed rate debt	7.60		%	5.21		%	7.09		%	5.76		%	3.23		%	6.87		%	6.06		%
Variable rate debt	—		%	—		%	2.50		%	2.50		%	—		%	—		%	2.50		%
Total	7.60		%	5.21		%	6.84		%	4.68		%	3.23		%	6.87		%	5.77		%


(a)	The debt maturity table does not include mortgage discount of $1,619, net of accumulated amortization, which was outstanding as of September 30, 2012.


(b)	Includes $76,109 of variable rate mortgage debt that was swapped to a fixed rate.


(c)	In July 2012, the Company entered into an interest rate swap transaction to convert the variable rate portion of $300,000 of London Interbank Offered Rate (LIBOR) based debt to a fixed rate through February 24, 2016, the maturity date of the Company's unsecured term loan. The swap effectively converts one-month floating rate LIBOR to a fixed rate of 0.53875% over the term of the swap.


(d)	As of September 30, 2012, the weighted average years to maturity of consolidated indebtedness was 5.5 years.

The maturity table excludes accelerated principal payments that may be required as a result of covenants or conditions included in certain loan agreements due to the uncertainty in the timing and amount of these payments. In these cases, the total outstanding indebtedness is included in the year corresponding to the loan maturity date or, if the mortgage payable is amortizing, the payments are presented in accordance with the loan's original amortization schedule. As of September 30, 2012, the Company was making accelerated principal payments on two mortgages payable with a combined outstanding principal balance of $71,365, which are reflected in the years corresponding to the loan maturity dates. During the nine months ended September 30, 2012, the Company made accelerated principal payments of $5,937 with respect to these mortgages payable. If the Company is not able to cure these arrangements, these mortgages payable would have a weighted average years to maturity of 6.5 years. A $26,865 mortgage payable that had matured in 2010, and which remains outstanding as of September 30, 2012, is included in the 2012 column. The Company plans on addressing its mortgages payable maturities by using proceeds from its unsecured credit facility, by obtaining secured loans collateralized by individual properties, through asset sales and through other capital markets transactions.