Mortgage and Other Indebtedness

Mortgage and other indebtedness consisted of the following:



	March 31, 2012				December 31, 2011
	Amount		Weighted Average Interest Rate ⁽¹⁾		Amount		Weighted Average Interest Rate ⁽¹⁾
Fixed-rate debt:
Non-recourse loans on operating properties⁽²⁾	$	3,342,787	5.42	%	$	3,656,243	5.55	%
Recourse term loans on operating properties	50,454		5.83	%	77,112		5.89	%
Total fixed-rate debt	3,393,241		5.43	%	3,733,355		5.54	%
Variable-rate debt:
Non-recourse term loans on operating properties	163,750		3.50	%	168,750		3.03	%
Recourse term loans on operating properties	119,407		2.47	%	124,439		2.29	%
Construction loans	28,223		3.28	%	25,921		3.25	%
Secured lines of credit	359,418		3.00	%	27,300		3.03	%
Unsecured term loans	395,209		1.64	%	409,590		1.67	%
Total variable-rate debt	1,066,007		2.52	%	756,000		2.18	%
Total	$	4,459,248	4.73	%	$	4,489,355	4.99	%


(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 $116,748 as of March 31, 2012 and $117,700 as of December 31, 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 at March 31, 2012 and December 31, 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. Borrowings under the 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 and had a weighted average interest rate of 3.00% at March 31, 2012. 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 March 31, 2012:



Total Capacity		Total Outstanding			Maturity Date	Extended Maturity Date
$	105,000	$	5,000		June 2013	N/A
525,000		204,223		₍₁₎	February 2014	February 2015
520,000		150,195			April 2014	N/A
$	1,150,000	$	359,418


(1)	There was an additional $2,169 outstanding on this secured line of credit as of March 31, 2012 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 March 31, 2012, the outstanding borrowings of $167,209 under this loan had a weighted average interest rate of 1.35%. 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 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 March 31, 2012, the outstanding borrowings of $228,000 under the unsecured term loan had a weighted average interest rate of 1.85%. Subsequent to March 31, 2012, the Company exercised a one-year extension option on this loan to extend the maturity date to April 2013.

Letters of Credit

At March 31, 2012, the Company had additional secured and unsecured lines of credit with a total commitment of $15,906 that can only be used for issuing letters of credit. The letters of credit outstanding under these lines of credit totaled $2,650 at March 31, 2012.

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 believes it was in compliance with all covenants and restrictions at March 31, 2012.

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 first quarter of 2012, the Company retired 15 operating property loans with an aggregate principal balance of $394,386 that were secured by Arbor Place, The Landing at Arbor Place, CBL Center, Fashion Square, Hickory Hollow Mall, The Courtyard at Hickory Hollow Mall, Jefferson Mall, Massard Crossing, Northwoods Mall, Old Hickory Mall, Pemberton Plaza, Randolph Mall, Regency Mall, WestGate Mall and Willowbrook Plaza with borrowings from its secured credit facilities. At March 31, 2012, the Company was in the process of obtaining mortgage financing for many of these properties.

Also during the first quarter of 2012, the Company closed on a $73,000 ten-year non-recourse commercial mortgage-backed securities ("CMBS") loan secured by Northwoods Mall in Charleston, SC, which bears a fixed interest rate of 5.075%. Proceeds were used to reduce outstanding balances on the Company's secured credit facilities. Additionally, the maturity date for a $20,911 recourse loan with an outstanding balance of $13,579 as of March 31, 2012, secured by Statesboro Crossing in Statesboro, GA, was extended from February 15, 2012 to April 15, 2012.

In February 2012, the lender of the non-recourse mortgage loan secured by Columbia Place in Columbia, SC notified the Company that the loan had been placed in default. Columbia Place generates insufficient income levels to cover the debt service on the mortgage, which had a balance of $27,349 at March 31, 2012, and a contractual maturity date of September 2013. The lender on the loan receives the net operating cash flows of the property each month in lieu of scheduled monthly mortgage payments.

See Note 15 regarding subsequent events related to mortgage loans on operating properties.

Scheduled Principal Payments

As of March 31, 2012, 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:



2012	$	601,819
2013	402,088
2014	564,376
2015	472,840
2016	677,150
Thereafter	1,741,201
	4,459,474
Net unamortized premiums	(226		)
	$	4,459,248

The remaining scheduled principal payments in 2012 of $601,819 include the maturing principal balances of five operating property loans totaling $168,902 , two unsecured term loans totaling $395,209, and principal amortization of $37,708. Three maturing property loans with principal balances totaling $93,102 and one of the unsecured term loans with an outstanding balance of $228,000 have extensions available at the Company's option, leaving approximately $243,009 of loan maturities in 2012 which the Company intends to retire or refinance. Subsequent to March 31, 2012, the Company exercised an extension option on the unsecured term loan with total capacity of $228,000 and one of the maturing operating property loans with a principal balance of $13,579, which were both scheduled to mature in April 2012. Subsequent to March 31, 2012, the Company also closed on a CMBS loan for an operating property with an existing loan that was scheduled to mature in May 2012. See Note 15 for additional information.

The Company’s mortgage and other indebtedness had a weighted average maturity of 4.68 years as of March 31, 2012 and 4.69 years as of December 31, 2011.

Interest Rate Hedge Instruments

The Company records its derivative instruments in its condensed 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.

In January 2012, the Company entered into an interest rate cap agreement with an initial notional amount of $125,000, amortizing to $122,375, to hedge the risk of changes in cash flows on the borrowings of one of its properties equal to the cap notional. The interest rate cap protects the Company from increases in the hedged cash flows attributable to overall changes in the 3-month LIBOR above the strike rate of the cap on the debt. The strike rate associated with the interest rate cap is 5.0%. The cap matures in January 2014.

As of March 31, 2012, 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 3/31/12			Fair Value at 12/31/11			Maturity Date
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$56,444 (amortizing to $48,337)	1-month LIBOR	2.149%	$	(2,532	)	$	(2,674	)	Apr 2016
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$35,333 (amortizing to $30,276)	1-month LIBOR	2.187%	(1,632		)	(1,725		)	Apr 2016
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$13,212 (amortizing to $11,313)	1-month LIBOR	2.142%	(589		)	(622		)	Apr 2016
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$11,759 (amortizing to $10,083)	1-month LIBOR	2.236%	(563		)	(596		)	Apr 2016
Cap	Intangible lease assets and other assets	$125,000 (amortizing to $122,375)	3-month LIBOR	5.000%	3			—			Jan 2014



	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 March 31,					Three Months Ended March 31,							Three Months Ended March 31,
Hedging Instrument	2012		2011			2012			2011				2012		2011
Interest rate contracts	$	284	$	562	Interest Expense	$	(562	)	$	(22	)	Interest Expense	$	—	$	—

As of March 31, 2012, the Company expects to reclassify approximately $1,905 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 March 31, 2012 and the respective dates of termination will vary the projected reclassification amoun

Interest Rate
Derivative

Number of
Instruments

Notional
Amount
Outstanding

Interest Rate Cap

Interest Rate Swaps