Mortgage and Other Indebtedness

Mortgage and other indebtedness consisted of the following:



	September 30, 2011				December 31, 2010
	Amount		Weighted Average Interest Rate (1)		Amount		Weighted Average Interest Rate (1)
Fixed-rate debt:
Non-recourse loans on operating properties (2)	$	4,047,205	5.63	%	$	3,664,293	5.85	%
Recourse term loans on operating properties	78,075		5.89	%	30,449		6.00	%
Total fixed-rate debt	4,125,280		5.64	%	3,694,742		5.85	%
Variable-rate debt:
Non-recourse term loans on operating properties	113,500		3.60	%	114,625		3.61	%
Recourse term loans on operating properties	285,067		2.36	%	350,106		2.28	%
Construction loans	57,061		3.25	%	14,536		3.32	%
Secured lines of credit	215,026		2.99	%	598,244		3.38	%
Unsecured term loans	437,214		1.60	%	437,494		1.66	%
Total variable-rate debt	1,107,868		2.35	%	1,515,005		2.65	%
Total	$	5,233,148	4.94	%	$	5,209,747	4.92	%


(1)	Weighted-average interest rate includes the effect of debt premiums (discounts), but excludes amortization of deferred financing costs.


(2)	The Company has four interest rate swaps on notional amounts totaling $118,641 as of September 30, 2011 related to its variable-rate loans on operating properties to effectively fix the interest rate on the respective loans. Therefore, these amounts are reflected in fixed-rate debt in 2011.

Secured Lines of Credit

The Company has three secured lines of credit that are used for mortgage retirement, working capital, construction and acquisition purposes, as well as issuances of letters of credit. Each of these lines is secured by mortgages on certain of the Company’s operating properties. In August 2011, the Company sold one of the operating properties that was pledged as collateral on its $105,000 facility. As a result, total capacity on that facility was reduced from $105,000 to $100,084. In October 2011, the Company pledged another operating property as collateral to the facility, which increased the total capacity back to $105,000.

During the second and third quarters of 2011, the three secured facilities were modified to remove a 1.50% floor on LIBOR. Pursuant to the terms of the modifications, borrowings under these secured lines of credit bear interest at LIBOR plus an applicable spread, ranging from 2.00% to 3.00%, based on the Company’s leverage ratio. Without giving effect to actual LIBOR, the removal of the 1.50% floors and the reduction in the spreads resulted in a decrease in the interest rates on the $525,000 and $520,000 facilities of approximately 2.75% and on the $105,000 facility of approximately 2.50%, respectively. The Company also executed extensions on the maturity of each of the facilities. The three secured lines of credit had a weighted average interest rate of 2.99% at September 30, 2011. The Company also pays fees based on the amount of unused availability under its secured lines of credit at rates ranging from 0.15% to 0.35% of unused availability. The following summarizes certain information about the secured lines of credit as of September 30, 2011:



Total Capacity		Total Outstanding			Maturity Date	Extended Maturity Date
$	100,084	$	17,700		June 2013	N/A
525,000		47,130		(1)	February 2014	February 2015
520,000		150,196			April 2014	N/A
$	1,145,084	$	215,026


(1)	There was an additional $4,870 outstanding on this secured line of credit as of September 30, 2011 for letters of credit. Up to $50,000 of the capacity on this line can be used for letters of credit.

See Note 15 regarding subsequent events that affected the outstanding borrowings on the secured credit facilities.

Unsecured Term Facilities

The Company has an unsecured term loan that bears interest at LIBOR plus a margin ranging from 0.95% to 1.40%, based on the Company’s leverage ratio. At September 30, 2011, the outstanding borrowings of $209,214 under this loan had a weighted average interest rate of 1.34%. The loan was obtained for the exclusive purpose of acquiring certain properties from the Starmount Company or its affiliates. The Company completed its acquisition of the properties in February 2008 and, as a result, no further draws can be made against the loan. The loan matures in November 2011 and has a one-year extension option that the Company intends to exercise, for an outside maturity date of November 2012. Net proceeds from a sale, or the Company’s share of excess proceeds from any refinancings, of any of the properties originally purchased with borrowings from this unsecured term loan must be used to pay down any remaining outstanding balance.

The Company has an unsecured term loan with total capacity of $228,000 that bears interest at LIBOR plus a margin ranging from 1.50% to 1.80%, based on the Company’s leverage ratio. At September 30, 2011, the outstanding borrowings of $228,000 under the unsecured term loan had a weighted average interest rate of 1.83%. The loan matures in April 2012 and has a one--year extension option remaining, which is at the Company’s election, for an outside maturity date of April 2013.

Letters of Credit

At September 30, 2011, the Company had additional secured and unsecured lines of credit with a total commitment of $16,021 that can only be used for issuing letters of credit. The letters of credit outstanding under these lines of credit totaled $12,045 at September 30, 2011.

Covenants and Restrictions

The agreements to the $525,000 and $520,000 secured lines of credit contain, among other restrictions, certain financial covenants including the maintenance of certain financial coverage ratios, minimum net worth requirements, and limitations on cash flow distributions. The Company was in compliance with all covenants and restrictions at September 30, 2011.

The agreements to the $525,000 and $520,000 secured credit facilities and the two unsecured term facilities described above, each with the same lead lender, contain default and cross-default provisions customary for transactions of this nature (with applicable customary grace periods) in the event (i) there is a default in the payment of any indebtedness owed by the Company to any institution which is a part of the lender groups for the credit facilities, or (ii) there is any other type of default with respect to any indebtedness owed by the Company to any institution which is a part of the lender groups for the credit facilities and such lender accelerates the payment of the indebtedness owed to it as a result of such default. The credit facility agreements provide that, upon the occurrence and continuation of an event of default, payment of all amounts outstanding under these credit facilities and those facilities with which these agreements reference cross-default provisions may be accelerated and the lenders’ commitments may be terminated. Additionally, any default in the payment of any recourse indebtedness greater than $50,000, or any non-recourse indebtedness greater than $100,000, of the Company, the Operating Partnership and/or significant subsidiaries, as defined in the credit facilities, regardless of whether the lending institution is a part of the lender groups for the credit facilities, will constitute an event of default under the agreements to the credit facilities.

Several of the Company’s malls/open-air centers, associated centers and community centers, in addition to the corporate office building are owned by special purpose entities that are included in the Company’s consolidated financial statements. The sole business purpose of the special purpose entities is to own and operate these properties. The real estate and other assets owned by these special purpose entities are restricted under the loan agreements in that they are not available to settle other debts of the Company. However, so long as the loans are not under an event of default, as defined in the loan agreements, the cash flows from these properties, after payments of debt service, operating expenses and reserves, are available for distribution to the Company.

Mortgages on Operating Properties

During the third quarter of 2011, the Company closed on two ten-year, non-recourse mortgage loans totaling $128,800, including a $50,800 loan secured by Alamance Crossing in Burlington, NC and a $78,000 loan secured by Asheville Mall in Asheville, NC. The loans bear interest at fixed rates of 5.83% and 5.80%, respectively. Proceeds were used to repay existing loans with principal balances of $51,847 and $61,346, respectively, and to pay down the Company's $525,000 secured credit facility.

During the second quarter of 2011, the Company closed on two separate ten-year, non-recourse mortgage loans totaling $277,000, including a $185,000 loan secured by Fayette Mall in Lexington, KY and a $92,000 loan secured by Mid Rivers Mall in St. Charles, MO. The loans bear interest at fixed rates of 5.42% and 5.88%, respectively. Proceeds were used to repay existing loans with principal balances of $84,733 and $74,748, respectively, and to pay down the Company’s $105,000 secured credit facility. In addition, the Company retired a loan with a principal balance of $36,317 that was secured by Panama City Mall in Panama City, FL with borrowings from its $105,000 facility.

During the first quarter of 2011, the Company closed on five separate non-recourse mortgage loans totaling $268,905. These loans have ten-year terms and include a $95,000 loan secured by Parkdale Mall and Parkdale Crossing in Beaumont, TX; a $99,400 loan secured by Park Plaza in Little Rock, AR; a $44,100 loan secured by EastGate Mall in Cincinnati, OH; a $19,800 loan secured by Wausau Center in Wausau, WI; and a $10,605 loan secured by Hamilton Crossing in Chattanooga, TN. The loans bear interest at a weighted average fixed rate of 5.64% and are not cross-collateralized.

Also during the first quarter of 2011, the Company closed on four separate loans totaling $120,165. These loans have five-year terms and include a $36,365 loan secured by Stroud Mall in Stroud, PA; a $58,100 loan secured by York Galleria in York, PA; a $12,100 loan secured by Gunbarrel Pointe in Chattanooga, TN; and a $13,600 loan secured by CoolSprings Crossing in Nashville, TN. These four loans have partial-recourse features totaling $13,998, which will be reduced by $5,650 upon the opening of a certain tenant in late 2011 and will further decrease as the aggregate principal amount outstanding on the loans is amortized. The loans bear interest at LIBOR plus a margin of 2.40% and are not cross-collateralized. The Company has interest rate swaps in place for the full term of each five-year loan to effectively fix the interest rates. As a result, these loans bear interest at a weighted average fixed rate of 4.57%. See Interest Rate Hedge Instruments below for additional information.

Proceeds from the nine loans that closed during the first quarter of 2011 were used predominantly to pay down the outstanding balance of the Company’s $520,000 secured credit facility. Eight of the new loans were secured with properties previously used as collateral to secure the $520,000 credit facility.

Scheduled Principal Payments

As of September 30, 2011, the scheduled principal payments of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other indebtedness, including construction loans and lines of credit, are as follows:



2011	$	364,708
2012	991,651
2013	554,866
2014	409,744
2015	813,499
Thereafter	2,098,321
	5,232,789
Net unamortized premiums	359
	$	5,233,148

The remaining scheduled principal payments in 2011 of $364,708 include the maturing principal balance of an operating property loan totaling $133,884, which was retired subsequent to September 30, 2011, and the unsecured term facility with an outstanding balance of $209,214 related to the Starmount acquisition, which has a one-year extension that the Company intends to exercise. Subsequent to September 30, 2011, the Company also retired an operating property loan with a principal balance as of September 30, 2011 of $20,786 that was scheduled to mature in March 2012.

The Company’s mortgage and other indebtedness had a weighted average maturity of 4.1 years as of September 30, 2011 and 3.5 years as of December 31, 2010.

Interest Rate Hedge Instruments

The Company records its derivative instruments in its consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the derivative has been designated as a hedge and, if so, whether the hedge has met the criteria necessary to apply hedge accounting.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. 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 agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in accumulated other comprehensive income (loss) (“AOCI/L”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Such derivatives were used to hedge the variable cash flows associated with variable-rate debt.

During the first quarter of 2011, the Company entered into four pay fixed/receive variable interest rate swaps with an initial aggregate notional amount of $120,165, amortizing to $100,009, to hedge the interest rate risk exposure on the borrowings on four of its operating properties equal to the aggregate swap notional amount. These interest rate swaps hedge the risk of changes in cash flows on the Company’s designated forecasted interest payments attributable to changes in 1-month LIBOR, the designated benchmark interest rate being hedged, thereby reducing exposure to variability in cash flows relating to interest payments on the variable-rate debt. The interest rate swaps effectively fix the interest payments on the portion of debt principal corresponding to the swap notional amount at a weighted average rate of 4.57%.

Also during the first quarter of 2011, the Company entered into an interest rate cap agreement with an initial notional amount of $64,265, amortizing to $63,555, to hedge the risk of changes in cash flows on the letter of credit supporting certain bonds related to one of its operating properties equal to the then-outstanding cap notional. The interest rate cap protects the Company from increases in the hedged cash flows attributable to overall changes in the USD-SIFMA Municipal Swap Index above the strike rate of the cap on the debt. The strike rate associated with the interest rate cap is 1.00%.

As of September 30, 2011, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:



Instrument Type	Location in Consolidated Balance Sheet	Outstanding Notional Amount	Designated Benchmark Interest Rate	Strike Rate		Fair Value at 9/30/11			Fair Value at 12/31/10		Maturity Date
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$57,361 (amortizing to $48,337)	1-month LIBOR	2.149	%	$	(2,644	)	$	—	Apr 2016
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$35,905 (amortizing to $30,276)	1-month LIBOR	2.187	%	(1,709		)	—		Apr 2016
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$13,427 (amortizing to $11,313)	1-month LIBOR	2.142	%	(615		)	—		Apr 2016
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$11,948 (amortizing to $10,083)	1-month LIBOR	2.236	%	(592		)	—		Apr 2016
Cap	Intangible lease assets and other assets	$63,555	USD - SIFMA municipal swap index	1.00	%	1			—		Mar 2012
Cap	Intangible lease assets and other assets	$69,750 (amortizing to $69,375)	3-month LIBOR	3.00	%	—			3		Jan 2012



	Gain (Loss) Recognized in OCI/L (Effective Portion)					Location of Losses Reclassified from AOCI/L into Earnings(Effective Portion)	Loss Recognized in Earnings (Effective Portion)						Location of Gain Recognized in Earnings (Ineffective Portion)	Gain Recognized in Earnings (Ineffective Portion)
Hedging Instrument	Three Months Ended September 30,						Three Months Ended September 30,							Three Months Ended September 30,
Hedging Instrument	2011			2010			2011			2010				2011		2010
Interest rate contracts	$	(3,393	)	$	1,054	Interest Expense	$	(668	)	$	(889	)	Interest Expense	$	—	$	7



	Gain (Loss) Recognized in OCI/L (Effective Portion)					Location of Losses Reclassified from AOCI/L into Earnings(Effective Portion)	Loss Recognized in Earnings (Effective Portion)						Location of Gain Recognized in Earnings (Ineffective Portion)	Gain Recognized in Earnings (Ineffective Portion)
Hedging Instrument	Nine Months Ended September 30,						Nine Months Ended September 30,							Nine Months Ended September 30,
Hedging Instrument	2011			2010			2011			2010				2011		2010
Interest rate contracts	$	(5,466	)	$	2,569	Interest Expense	$	(1,326	)	$	(2,773	)	Interest Expense	$	—	$	23

As of September 30, 2011, the Company expects to reclassify approximately $5,456 of losses currently reported in accumulated other comprehensive income to interest expense within the next twelve months due to amortization of its outstanding interest rate contracts. Fluctuations in fair values of these derivatives between September 30, 2011 and the respective dates of termination will vary the projected reclassification amount.

Interest Rate
Derivative

Number of
Instruments

Notional
Amount
Outstanding

Interest Rate Caps

Interest Rate Swaps