MORTGAGES, NOTES AND LOANS PAYABLE

6 Months Ended

Jun. 30, 2012

MORTGAGES, NOTES AND LOANS PAYABLE

MORTGAGES, NOTES AND LOANS PAYABLE

NOTE 6MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable are summarized as follows:

	June 30,		December 31,
	2012		2011
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	12,710,990	$	13,091,080
Corporate and other unsecured term loans	1,692,213		1,704,290
Total fixed-rate debt	14,403,203		14,795,370
Variable-rate debt:
Collateralized mortgages, notes and loans payable	1,876,117		2,347,644
Total Mortgages, notes and loans payable	$	16,279,320	$	17,143,014
Variable-rate debt:
Junior Subordinated Notes	$	206,200	$	206,200

The weighted-average interest rate excluding the effects of deferred finance costs on our collateralized mortgages, notes and loans payable was 5.00% at June 30, 2012 and 5.13% at December 31, 2011.  The weighted average interest rate on the remaining corporate unsecured fixed and variable rate debt and the revolving credit facility was 6.21% at June 30, 2012 and 6.18% at December 31, 2011.

We are not aware of any instances of non-compliance with our financial covenants related to our mortgages, notes and loans payable as of June 30, 2012.

Collateralized Mortgages, Notes and Loans Payable

As of June 30, 2012, $21.68 billion of land, buildings and equipment (before accumulated depreciation) and construction in progress have been pledged as collateral for our mortgages, notes and loans payable. Certain of these secured loans, representing $2.39 billion of debt, are cross-collateralized with other properties.  Although a majority of the $14.59 billion of fixed and variable rate collateralized mortgages, notes and loans payable are non-recourse, $1.60 billion of such mortgages, notes and loans payable are recourse to the Company due to guarantees or other security provisions for the benefit of the note holder.  In addition, certain mortgage loans contain other credit enhancement provisions (primarily master leases for all or a portion of the property) which have been provided by GGP.  Certain mortgages, notes and loans payable may be prepaid but are generally subject to a prepayment penalty equal to a yield-maintenance premium, defeasance or a percentage of the loan balance.

On June 6, 2012, we closed on a new loan for The Grand Canal Shoppes and The Shoppes at The Palazzo in the amount of $625.0 million, which bears interest at 4.24% and matures in 2019.  The new loan replaces the existing loans at The Grand Canal Shoppes which was $368.1 million, bore interest at 4.78% and was scheduled to mature in 2014 and The Shoppes at The Palazzo, which was $239.0 million, bore interest at LIBOR plus 300 basis points and was scheduled to mature in 2017. The new loan eliminates $238.7 million of recourse to the Company and resulted in $18.7 million in excess proceeds.

On April 2, 2012, we closed the $1.40 billion secured financing of Ala Moana Center.  The loan matures in April 2022 and bears interest at 4.23% per annum. The new loan replaces the previous loan at Ala Moana, which was $1.29 billion, bore interest at 5.59% and was scheduled to mature in 2018. The transaction resulted in $110.0 million in excess proceeds.

Corporate and Other Unsecured Loans

We have certain unsecured debt obligations, the terms of which are described below.

We have publicly-traded unsecured bonds of $1.65 billion outstanding as of June 30, 2012 and December 31, 2011.  Such bonds have maturity dates from September 2012 through November 2015 and interest rates ranging from 5.38% to 7.20%.  The bonds have covenants, including ratios of secured debt to gross assets and total debt to total gross assets. We are not aware of any instances of non-compliance with such covenants as of June 30, 2012. We expect to repay the $349.5 million of bonds that are due in September 2012 with available cash on hand.

In April 2012, we amended our revolving credit facility (the “Facility”) providing for revolving loans of up to $1.00 billion.  The Facility is scheduled to mature in April 2016 and is guaranteed by certain of our subsidiaries and secured by (i) first lien mortgages on certain properties, (ii) first-lien pledges of equity interests in certain of our subsidiaries and (iii) various additional collateral.  No amounts have been drawn on the Facility.  Borrowings under the Facility bear interest at a rate equal to LIBOR plus 2.25%.  The Facility contains certain restrictive covenants which limit material changes in the nature of our business conducted, including but not limited to, mergers, dissolutions or liquidations, dispositions of assets, liens, incurrence of additional indebtedness, dividends, transactions with affiliates, prepayment of subordinated debt, negative pledges and changes in fiscal periods. In addition, we are required to maintain a maximum net debt to value ratio, a maximum leverage ratio and a minimum net cash interest coverage ratio; we are not aware of any instances of non-compliance with such covenants as of June 30, 2012.

We also have a note payable in the amount of $22.3 million, which bears interest at 4.41% per annum and matures in 2015.

The corporate and other unsecured loans exclude market rate adjustments of $19.9 million.

Junior Subordinated Notes

GGP Capital Trust I, a Delaware statutory trust (the “Trust”) and a wholly-owned subsidiary of GGPLP, completed a private placement of $200.0 million of trust preferred securities (“TRUPS”) in 2006.  The Trust also issued $6.2 million of Common Securities to GGPLP.  The Trust used the proceeds from the sale of the TRUPS and Common Securities to purchase $206.2 million of floating rate Junior Subordinated Notes of GGPLP due 2041.  Distributions on the TRUPS are equal to LIBOR plus 1.45%.  Distributions are cumulative and accrue from the date of original issuance.  The TRUPS mature on April 30, 2041, but may be redeemed beginning on April 30, 2011 if the Trust exercises its right to redeem a like amount of the Junior Subordinated Notes.  The Junior Subordinated Notes bear interest at LIBOR plus 1.45%. Though the Trust is a wholly-owned subsidiary of GGPLP, we are not the primary beneficiary of the Trust and, accordingly, it is not consolidated for accounting purposes.  As a result, we have recorded the Junior Subordinated Notes as mortgages, notes and loans payable and our common equity interest in the Trust as prepaid expenses and other assets in our Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011.

Letters of Credit and Surety Bonds

We had outstanding letters of credit and surety bonds of $19.6 million as of June 30, 2012 and $19.1 million as of December 31, 2011. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.