NOTES PAYABLE, INTEREST EXPENSE AND COMMITMENTS AND CONTINGENCIES

The following table summarizes the terms and amounts of the Company’s notes payable at September 30, 2012 and December 31, 2011 ($ in thousands):



Description	Interest Rate		Term/Amortization Period (Years)	Maturity	September 30, 2012		December 31, 2011
Terminus 100 mortgage note	5.25	%	12/30	1/1/2023	$	136,651	$	138,194
The American Cancer Society Center mortgage note	6.45	%	10/30	9/1/2017	134,615		135,650
191 Peachtree Tower mortgage note (interest only until May 1, 2016) (see discussion below)	3.35	%	6.5/30	10/1/2018	100,000		—
Credit Facility, unsecured (see discussion below)	1.71	%	4/N/A	2/28/2016	93,500		198,250
Meridian Mark Plaza mortgage note	6.00	%	10/30	8/1/2020	26,286		26,554
100/200 North Point Center East mortgage note (see discussion below)	5.39	%	5/30	6/1/2012	—		24,478
The Points at Waterview mortgage note	5.66	%	10/25	1/1/2016	15,775		16,135
Mahan Village construction facility	1.86	%	3/N/A	9/12/2014	11,633		1
Callaway Gardens	4.13	%	N/A	11/18/2013	170		180
					$	518,630	$	539,442

Credit Facility

On February 28, 2012, the Company amended its $350 million senior unsecured line of credit by entering into the Second Amended and Restated Credit Agreement (the “Credit Facility”), which replaced the Amended and Restated Credit Agreement dated August 29, 2007 (the “Old Facility"). The Credit Facility amended the Old Facility by, among other things, extending the maturity date from August 29, 2012 to February 28, 2016, with an additional one-year extension option upon certain conditions and with the payment of a fee. It also added an accordion feature, which authorized the maximum amount available to be borrowed to increase to $500 million under certain conditions and in specified increments.

The Credit Facility contains financial covenants that require, among other things, the maintenance of an unencumbered interest coverage ratio of at least 2.00; a fixed charge coverage ratio of at least 1.40, increasing to 1.50 during any extension period; and maximum leverage of no more than 60%.

The Credit Facility also reduced the Company's interest rate spreads on borrowings. The Company may borrow funds at an interest rate, at its option, calculated as either (1) the current London Interbank Offered Rate (LIBOR) plus the applicable spread as detailed below or (2) the greater of Bank of America's prime rate, the federal funds rate plus 0.50% or the one-month LIBOR plus 1.0% (the “Base Rate”), plus the applicable spread as detailed below. The Company also pays an annual facility fee on the total commitment under the Credit Facility. The pricing spreads and the Facility Fee under the Credit Facility are as follows:



Leverage Ratio	Applicable % Spread for LIBOR	Applicable % Spread for Base Rate	Annual Facility Fee %

≤ 40%	1.50%	0.50%	0.20%
>40% but ≤ 50%	1.60%	0.60%	0.25%
>50% but ≤ 55%	1.90%	0.90%	0.35%
>55% but ≤ 60%	2.10%	1.10%	0.40%

The Company selected the LIBOR for interest calculation purposes in September 2012, and the applicable spread at September 30, 2012 was 1.50%.

Other Debt Activity

On March 28, 2012, the Company entered into a $100 million mortgage note payable secured by 191 Peachtree Tower, a 1.2 million square foot office building in Atlanta, Georgia. The interest rate is 3.35% and interest-only payments are due monthly through May 1, 2016, followed by monthly principal and interest payments through October 1, 2018, the maturity date.

In April 2012, the Company prepaid the 100/200 North Point Center East mortgage note in full, without penalty.

Fair Value

At September 30, 2012 and December 31, 2011, the aggregate estimated fair values of the Company's notes payable were $539.9 million and $568.5 million, respectively, calculated by discounting future cash flows using estimated rates at which similar loans could have been obtained at those respective dates. This fair value calculation is considered to be a Level 2 calculation under the guidelines as set forth in ASC 820, “Fair Value Measurements and Disclosures,” as the Company utilizes estimates of market rates for similar type loans from third party brokers in its discounted cash flow calculations.

Other Information

For the three and nine months ended September 30, 2012 and 2011, interest expense was as follows (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Total interest incurred	$	6,337		$	6,838		$	19,395		$	21,740
Interest capitalized	(544		)	(237		)	(1,459		)	(237		)
Total interest expense	$	5,793		$	6,601		$	17,936		$	21,503

The real estate and other assets of The American Cancer Society Center (the “ACS Center”) are restricted under the ACS Center loan agreement in that they are not available to settle debts of the Company. However, provided that the ACS Center loan has not incurred any uncured event of default, as defined in the loan agreement, the cash flows from the ACS Center, after payments of debt service, operating expenses and reserves, are available for distribution to the Company.

At September 30, 2012, the Company had outstanding letters of credit and performance bonds totaling $2.7 million. As a lessor, the Company has $14.8 million in future obligations under leases to fund tenant improvements as of September 30, 2012. As a lessee, the Company has future obligations under ground and office leases of approximately $15.9 million at September 30, 2012.

Litigation

The Company is subject to various legal proceedings, claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Company records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Company accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Company discloses the nature and estimate of the possible loss of the litigation. The Company does not disclose information with respect to litigation where an unfavorable outcome is considered to be remote. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Company.