Mortgages, Notes and Loans Payable

12 Months Ended

Dec. 31, 2011

Mortgages, Notes and Loans Payable [Abstract]

MORTGAGES, NOTES AND LOANS PAYABLE

NOTE 7 MORTGAGES, NOTES AND LOANS PAYABLE

The following table presents our mortgages, notes, and loans payable by property:

Property	Maturity		Interest Rate			Maximum Facility Amount		Carrying Value
								December  31, 2011		2010
								(In thousands)
110 N. Wacker (a)		October 2019		5.21	%			$	29,000	$	28,276
Bridgeland
Note #1		May 2026		6.50	%				15,138		15,757
Note #2		December 2017		6.50	%				3,180		3,600
Note #3		June 2033		6.50	%				2,053		2,086
Note #4		December 2021		6.50	%				233		311
Bridgeland Acquisition									—		6,870
Bridgeland Total									20,604		28,624
Special Improvement District
Summerlin South - S108		December 2016		5.95	%				1,302		1,519
Summerlin South - S124		December 2019		5.95	%				378		414
Summerlin South - S128		December 2020		7.30	%				862		934
Summerlin South - S128C		December 2030		6.05	%				5,956		6,164
Summerlin South - S132		December 2020		7.88	%				5,378		5,366
Summerlin South - S151		June 2025		6.00	%				12,293		15,699
Summerlin West - S808		April 2021		7.75	%				682		1,580
Summerlin West - S809		April 2023		6.65	%				1,000		2,253
Summerlin West - S810		April 2031		7.13	%				22,770		23,316
The Shops at Summerlin Centre - S128		December 2030		6.05	%				3,829		4,066
The Shops at Summerlin Centre - S108		December 2016		5.95	%				713		793
SID Payable to Nevada Cancer Institute		December 2019		5.95	%				50		59
Total Special Improvement District bonds									55,213		62,163
The Woodlands (b)
Master credit facility (c)		March 2015		5.00	%	$	270,000		183,000		—
Resort and Conference Center (d)		October 2012		5.50	%				36,100		—
2201 Lake Woodlands Drive		November 2016		5.25	%				4,803		—
Weiner Tract		January 2013		6.25	%				1,479		—
Land in Montgomery Co.		December 2012		6.00	%				649		—
Land in Harris Co.		January 2013		6.00	%				381		—
Capital lease obligation		-		—					147		—
CVS		upon sale		3.25	%				101		—
4 Waterway		December 2023		4.88	%				41,000		—
9303 New Trails		December 2023		4.88	%				14,000		—
The Woodlands Total									281,660		—
Ward Centers
Victoria Ward									—		394
Ward Gateway Center									—		80,284
Ward Warehouse									—		65,518
Ward Entertainment Center									—		29,370
VWL-Ward Centers									—		24,031
Victoria Ward (e)		September 2016		3.45	%	$	250,000		220,000		—
Ward Centers Total									220,000		199,597
								$	606,477	$	318,660

(a) Loan has a stated interest rate of one-month LIBOR + 2.25%. The $29.0 million outstanding principal balance is swapped to a 5.21% fixed rate through maturity.

(b) The Woodlands was a non-consolidated equity investment as of December 31, 2010. Refer to Note 3- Acquisition.

(c) Loan bears interest at one-month LIBOR + 4.00% and has a 1.00% LIBOR floor.

(d) Loan bears interest at one-month LIBOR + 4.00% and has a 1.00% LIBOR floor. The rate increased by 0.5% on September 23, 2011 and increases by 0.5% every six months thereafter until maturity.

(e) Loan has a stated interest rate of one-month LIBOR + 2.50%. $143.0 million of the outstanding principal balance is swapped to a 3.81% fixed rate through maturity.

The weighted average interest rate on our mortgages, notes and loans payable, inclusive of interest rate hedges but excluding the acquisition note and capital lease obligation, was 4.65% and 5.14% as of December 31, 2011 and December 31, 2010, respectively. The weighted average interest rate on our mortgages, notes and loans payable excluding interest rate hedges was 4.68% and 5.14% as of December 31, 2011 and 2010, respectively.

Mortgages, notes and loans payable are summarized as follows:

	December 31,
	2011		2010
	(In thousands)
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	83,164	$	191,037
Special Improvement District bonds		55,213		62,105
Variable-rate debt:
Collateralized mortgages, notes and loans payable		468,100		65,518
Total mortgages, notes and loans payable	$	606,477	$	318,660

The following table summarizes the contractual obligations relating to our long-term debt as of December 31, 2011:

	Long-term debt principal payments
	(In thousands)
2012	$	52,166
2013		31,896
2014		35,553
2015		126,670
2016		232,639
Subsequent/Other		127,553
Total	$	606,477

Collateralized Mortgages, Notes and Loans Payable

As of December 31, 2011, we had $606.5 million of collateralized mortgages, notes and loans payable. Approximately $281.7 million of the debt included in the table above is related to The Woodlands, which was consolidated on July 1, 2011. All of the debt is non-recourse and is secured by the individual properties as listed in the table above, except for The Woodlands Master Credit Facility and Resort and Conference Center Loan which is recourse to the partnerships that directly own The Woodlands operations, and a $7.0 million corporate recourse guarantee associated with the 110 N. Wacker mortgage, which is more fully discussed below. The Bridgeland MPC loan is secured by approximately 7,182 acres of land within the Bridgeland MPC and a security interest in its Municipal Utility District receivables. In addition, certain of our loans contain provisions which grant the lender a security interest in the operating cash flow of the property that represents the collateral for the loan. Such provisions are not expected to impact our operations in 2012. Certain mortgage notes may be prepaid, but may be subject to a prepayment penalty equal to a yield-maintenance premium, defeasance or a percentage of the loan balance.

The Woodlands Master Credit Facility is a $270.0 million facility consisting of a $170.0 million term loan and a $100.0 million revolving credit line (together, the “TWL Facility”). As of December 31, 2011, the TWL Facility had an outstanding balance of $183.0 million. The TWL Facility bears interest at one-month LIBOR plus 4.0% with a 1.0% LIBOR floor, has a March 29, 2014 initial maturity date and a one-year extension at borrower’s option. The TWL Facility also contains certain restrictions or covenants that, among other things, require the maintenance of specified financial ratios, restrict the incurrence of additional indebtedness at The Woodlands, and limit distributions from The Woodlands to us. Until The Woodlands leverage, as defined by the credit agreement, is less than a 40.0% loan to value ratio, we must amortize the debt on a dollar for dollar basis for any distributions that we make from The Woodlands. As of December 31, 2011, leverage was approximately 45.5%. There was $34.2 million of undrawn and available borrowing capacity under the TWL Facility based on the collateral underlying the facility and covenants as of December 31, 2011. The TWL Facility also requires mandatory principal amortization payments during its initial term and during the extension period, if exercised. Repayments of $10.0 million, $25.0 million and $30.0 million are required on March 29 of 2012, 2013 and, if extended, 2014, respectively. Furthermore, $10.0 million is due on each of June 29, September 29 and December 29, 2014 during the extension period.

The Woodlands Resort and Conference Center loan has a $36.1 million outstanding balance as of December 31, 2011, matures on October 30, 2012 and may be extended for one year at our option. The loan bears interest at one-month LIBOR plus 4.5% as of December 31, 2011 and has a 1.0% LIBOR floor. The interest rate increased by 0.5% on September 23, 2011 and increases by 0.5% every six months thereafter until maturity. The loan is secured by a 440 rooms and 40 acre conference center and resort located within The Woodlands, and requires the maintenance of specified financial ratios.

On December 5, 2011, we secured a $55.0 million loan for 4 Waterway Square and 9303 New Trails. Proceeds from the loan were partially used to refinance a $13.1 million mortgage secured by 9303 New Trails. The excess proceeds were used to partially repay the credit facility and to increase unrestricted cash. The loan matures in December 2023 and has a fixed interest rate of 4.88%.

On September 30, 2011, we closed on a $250.0 million non-recourse first mortgage financing secured by the Ward Centers in Honolulu, Hawaii, that bears interest at LIBOR plus 2.50%. The loan matures on September 29, 2016, and $143.0 million of the principal balance was swapped to a 3.81% fixed rate for the term of the loan. The initial loan proceeds of $212.5 million were used to repay approximately $208.7 million of mortgage debt and to fund closing costs. The loan may be drawn to a maximum $250.0 million to fund capital expenditures at the property, provided that the outstanding principal balance cannot exceed 65% of the property’s appraised value and the borrowers are required to have a minimum 10.0% debt yield in order to draw additional loan proceeds under the facility. The loan also permits partial repayment during its term in connection with property releases for development. The repayment of three mortgages previously secured by Ward Centers resulted in an $11.3 million pre-tax loss on early repayment of debt. The mortgages had been recorded at discounts to their outstanding principal balances because they were recorded at their fair values as part of the reorganization transactions in 2010. The loan had a $220.0 million outstanding balance as of December 31, 2011.

On May 10, 2011, we closed a $29.0 million first mortgage financing secured by our office building located at 110 N. Wacker Drive in Chicago, Illinois and bearing interest at LIBOR plus 2.25%. At closing, the interest rate on the loan was swapped to a 5.21% fixed rate for the term of the loan. The loan matures on October 31, 2019 and its term is coterminous with the expiration of the first term of the existing tenant's lease (Note 11). The loan has an interest-only period through April 2015 and, thereafter, amortizes ratably to $12.0 million through maturity. The proceeds from the financing were used to repay the existing $28.2 million mortgage and to pay closing costs and other expenses. We provided a $7.0 million repayment guarantee for the loan, which is reduced on a dollar for dollar basis during the amortization period.

As of December 31, 2011, $1.1 billion of land, buildings and equipment and developments in progress (before accumulated depreciation) have been pledged as collateral for our mortgages, notes and loans payable of which $7.0 million is recourse.

As of December 31, 2011, we were in compliance with all of the financial covenants related to our debt agreements.

Special Improvement Districts Bonds

The Summerlin master planned community uses Special Improvement District bonds to finance certain common infrastructure. These bonds are issued by the municipalities and, although unrated, are secured by the assessments on the land. They are tax exempt for federal income tax purposes. The majority of proceeds from each bond issued is held in a construction escrow and dispersed to us as infrastructure projects are completed, inspected by the municipalities and approved for reimbursement and, accordingly, the Special Improvement District bonds have been classified as a receivable. The Summerlin master planned community pays the debt service on the bonds semi-annually, but receives reimbursement of all principal paid from most of the purchasers of its land; generally, resulting in no gain or loss relating to the Special Improvement District bonds. In addition, as Summerlin sells land, the purchasers assume a proportionate share of the bond obligation.

Letters of Credit and Surety Bonds

We had outstanding letters of credit and surety bonds of $41.6 million as of December 31, 2011 and $38.7 million as of December 31, 2010. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.