NOTES PAYABLE

12 Months Ended

Dec. 31, 2014

5.	NOTES PAYABLE

Our outstanding debt due to unrelated, third parties as of December 31, 2014 and 2013, was as follows (in thousands):

Notes payable	2014		2013
Lantern Lane	$	-	$	15,000
Westside Plaza		8,980		9,587
Total	$	8,980	$	24,587

During June 2014, the Lantern Lane note payable was repaid in connection with the sale of the property. See Note 3.

The Westside Plaza mortgage loan is secured by our real estate property. As of December 31, 2014, its interest rate was 5.62%, and matures in July 2015. On June 6, 2014, we modified the Westside Plaza debt. We made a payment of approximately $1.2 million, which included a $424,000 principal reduction on the Note A balance, a $357,000 payment of principal and interest that was two months in arrears, a $100,000 loan modification fee, $166,000 of escrows related to property taxes, insurance, and anticipated future leasing costs escrow accounts, and $166,000 in other closing and legal fees.

Under the modified agreement, Note A payments are interest-only at 5.62% and Note B payments are deferred with no interest due until the debt is refinanced or the property is sold (a “capital event”). Upon the occurrence of a capital event, we and the lender will share evenly in any excess proceeds until Note B principal is repaid, after which, we would receive all remaining proceeds. If the proceeds received after a capital event are not sufficient to repay any or all of Note B, the unpaid amount will be forgiven.

We also serve as joint and several guarantors of up to 25% of the $8.2 million mortgage loan held by our 5433 Westheimer joint venture, of which we own 57.5%. The debt matures in 2017. See Note 4. While we serve as guarantor on this debt, we do not believe that we would be required to perform under the guarantee as we believe the fair value of the property exceeds the amount of the loan, and therefore we believe that our potential exposure is limited to our investment balance.

As of December 31, 2014, scheduled principal repayments on notes payable were as follows (in thousands):

Scheduled payments by year	Principal		Loan maturities		Total payments
2015	$	-	$	8,980	$	8,980
Total	$	-	$	8,980	$	8,980

Notes Payable – Related Party – As of December 31, 2014 and 2013, our notes payable – related party were $0 and $267,000, respectively.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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