Notes Payable, Interest Expense and Commitments And Contingencies

9 Months Ended

Sep. 30, 2011

Notes Payable, Interest Expense And Commitments And Contingencies [Abstract]

NOTES PAYABLE, INTEREST EXPENSE AND COMMITMENTS AND CONTINGENCIES

2. NOTES PAYABLE, INTEREST EXPENSE AND COMMITMENTS AND CONTINGENCIES

The following table summarizes the terms and amounts of the Company’s notes payable outstanding at September 30, 2011 and December 31, 2010 (in thousands):

		Term/
		Amortization				September 30,		December 31,
Description	Interest Rate	Period (Years)		Maturity		2011		2010
Terminus 100 mortgage note	5.25%		12/30		1/1/23	$	138,695	$	140,000
The American Cancer Society Center mortgage note (interest only until October 1, 2011)	6.45%		10/30		9/1/17		136,000		136,000
Credit Facility, unsecured (see note)	LIBOR + 1.75% to 2.25%		5/N/A		8/29/12		119,800		105,400
Meridian Mark Plaza mortgage note	6.00%		10/30		8/1/20		26,640		26,892
100/200 North Point Center East mortgage note	5.39%		5/30		6/1/12		24,568		24,830
The Points at Waterview mortgage note	5.66%		10/25		1/1/16		16,252		16,592
Callaway Gardens	4.13%		N/A		11/18/13		178		173
Mahan Village LLC (see note)	3.25%		3/N/A		9/12/14		1		—
Lakeshore Park Plaza mortgage note (see note)	5.89%		4/25		8/1/12		—		17,544
600 University Park Place mortgage note (see note)	7.38%		10/30		8/10/11		—		12,292
333/555 North Point Center East mortgage note (see note)	7.00%		10/25		11/1/11		—		26,412
Handy Road Associates, LLC (see note)	Prime + 1%, but not < 6%		5/N/A		3/30/2011		—		3,374
						$	462,134	$	509,509

The Company’s Credit Facility bears interest at the London Interbank Offered Rate (“LIBOR”) plus a spread, based on the Company’s leverage ratio, as defined in the Credit Facility. At September 30, 2011, the spread over LIBOR under the Credit Facility was 2.0%. The amount that the Company may draw under the Credit Facility is a defined calculation based on the Company’s unencumbered assets and other factors. Total borrowing capacity under the Credit Facility was $350 million at September 30, 2011. The Credit Facility had a maturity date of August 29, 2011. On that date, the Company exercised a one-year extension option which changed the maturity date to August 29, 2012, and paid a $438,000 extension fee.

On September 12, 2011, the Company, formed Mahan Village LLC (“Mahan”), a consolidated entity where a partner has a noncontrolling interest, to construct Mahan Village, a 147,000 square foot retail center in Tallahassee, Florida. Mahan entered into a construction loan agreement, secured by the project, to provide for up to approximately $15.0 million to fund construction. The debt contains two interest rate options, as defined in the loan agreement, which are based on floating-rate indices plus a spread. The loan matures September 12, 2014, and may be extended for two, one-year periods if certain conditions are met. The Company guarantees up to 25% of the construction loan, which may be eliminated after project completion, based on certain covenants.

On June 1, 2011, the Company prepaid, without penalty, the 333/555 North Point Center East mortgage note. On July 1, 2011, the Company prepaid, without penalty, the Lakeshore Park Plaza mortgage note, and expensed approximately $74,000 of unamortized loan closing costs, which are reflected as Loss on Extinguishment of Debt on the 2011 Statements of Operations. On August 10, 2011, the Company repaid the 600 University Park Place mortgage note in full upon its maturity.

In May 2011, the Company was released of its obligation under the Handy Road Associates, LLC mortgage note through foreclosure.

Fair Value

At September 30, 2011 and December 31, 2010, the estimated fair values of the Company’s notes payable were approximately $496.3 million and $521.8 million, respectively, calculated by discounting future cash flows at estimated rates at which similar loans could have been obtained at September 30, 2011 and December 31, 2010. 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.

Interest Rate Swap Agreements

In 2010, the Company had an interest rate swap agreement to manage its interest rate risk associated with its floating-rate, LIBOR-based borrowings. This swap expired in October 2010. Also during 2010, the Company had an interest rate swap agreement to manage interest rate risk under its former $100 million term facility, which swap was terminated in July 2010 when the term facility was paid in full. The changes in fair value of the interest rate swap agreements were recorded in Accumulated Other Comprehensive Loss on the Balance Sheets.

Other Information

For the three and nine months ended September 30, 2011 and 2010, interest expense was as follows (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011			2010		2011			2010
Total interest incurred	$	6,838		$	8,702	$	21,740		$	28,769
Interest capitalized		(237	)		—		(237	)		—
Total interest expense	$	6,601		$	8,702	$	21,503		$	28,769

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, 2011, the Company had outstanding letters of credit and performance bonds of $3.0 million. As a lessor, the Company has $15.6 million in future obligations under leases to fund tenant improvements and other funding commitments as of September 30, 2011. As a lessee, the Company has future obligations under ground and office leases of approximately $16.3 million at September 30, 2011.

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.