Mortgage and Other Indebtedness

Mortgage and other indebtedness consisted of the following:



	September 30, 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⁾	$	3,772,111	5.43	%	$	3,656,243	5.55	%
Recourse term loans on operating properties	50,160		5.83	%	77,112		5.89	%
Total fixed-rate debt	3,822,271		5.43	%	3,733,355		5.54	%
Variable-rate debt:
Non-recourse term loans on operating properties	124,250		3.33	%	168,750		3.03	%
Recourse term loans on operating properties	71,513		2.07	%	124,439		2.29	%
Construction loans	31,246		3.28	%	25,921		3.25	%
Secured lines of credit	256,901		2.70	%	27,300		3.03	%
Unsecured term loans	395,209		1.63	%	409,590		1.67	%
Total variable-rate debt	879,119		2.25	%	756,000		2.18	%
Total	$	4,701,390	4.84	%	$	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 $114,884 as of September 30, 2012 and $117,700 as of December 31, 2011 related to four 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 September 30, 2012 and December 31, 2011.

See Note 4 for a description of debt assumed in connection with acquisitions completed during the nine months ended September 30, 2012.

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 1.75% to 3.00%, based on the Company’s leverage ratio, and had a weighted average interest rate of 2.70% at September 30, 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 September 30, 2012:



Total Capacity		Total Outstanding			Maturity Date	Extended Maturity Date
$	525,000	$	77,500	₍₁₎	February 2014	February 2015
520,000		150,196			April 2014	N/A
105,000		29,205			June 2015	June 2016
$	1,150,000	$	256,901

(1) There was an additional $351 outstanding on this secured line of credit as of September 30, 2012 for

letters of credit. Up to $50,000 of the capacity on this line can be used for letters of credit.

During the second quarter of 2012, the Company closed on the extension and modification of its secured credit facility with total capacity of $105,000. The facility's maturity date was extended to June 2015 with a one-year extension option, which is at the Company's election, for an outside maturity date of June 2016. The loan bears interest at LIBOR plus a margin ranging from 1.75% to 2.75%, based on the Company's leverage ratio.

See Note 15 for subsequent events related to the Company's 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, 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 expects to use its lines of credit and excess proceeds realized from its October 2012 preferred stock issuance, discussed in Note 15 below, to retire this loan in November 2012.

The Company has an unsecured term loan with a 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, 2012, the outstanding borrowings of $228,000 under the unsecured term loan had a weighted average interest rate of 1.84%. The Company exercised an option to extend the maturity date from April 2012 to April 2013. The Company intends to retire this loan at the maturity date.

Letters of Credit

At September 30, 2012, the Company had additional secured and unsecured lines of credit with a total commitment of $14,000 that can only be used for issuing letters of credit. The letters of credit outstanding under these lines of credit totaled $1,475 at September 30, 2012.

Covenants and Restrictions

The agreements to each of the 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 September 30, 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 condensed 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

In September 2012, the Company retired two loans totaling $121,980, each of which was secured by a regional mall, with borrowings from the Company's secured credit facilities. The loans were scheduled to mature in 2012. The Company recorded a gain on extinguishment of debt of $178 related to the early retirement of this debt.

In August 2012, the Company retired a $2,023 land loan, secured by The Forum at Grandview in Madison, MS, with borrowings from the Company's secured credit facilities. The loan was scheduled to mature in September 2012.

During the second quarter of 2012, the Company closed on five ten-year non-recourse commercial mortgage-backed securities ("CMBS") loans totaling $342,190. The loans bear interest at fixed rates ranging from 4.75% to 5.099% with a total weighted average interest rate of 4.946%. These loans are secured by WestGate Mall in Spartanburg, SC, Southpark Mall in Colonial Heights, VA, Jefferson Mall in Louisville, KY, Fashion Square Mall in Saginaw, MI and Arbor Place in Douglasville, GA. Proceeds were used to pay down the Company's secured credit facilities and to retire an existing loan with a balance of $30,763 secured by Southpark Mall.

Additionally, during the second quarter of 2012, the Company closed on a $22,000 ten-year non-recourse loan with an insurance company at a fixed interest rate of 5.00% secured by CBL Centers I and II in Chattanooga, TN. The new loan was used to pay down the Company's secured credit facilities, which had been used in April 2012 and February 2012 to retire the loan balances on the maturing loans on CBL Centers II and I which had principal outstanding balances of $9,078 and $12,818, respectively.

Also during the second quarter of 2012, the Company closed on the extension and modification of a recourse mortgage loan secured by Statesboro Crossing in Statesboro, GA to extend the maturity date to February 2013 and reduce the amount available under the loan from $20,911 to equal the outstanding balance of $13,568. The interest rate remained at one-month LIBOR plus a spread of 1.00%. During the first quarter of 2012, this loan had previously been extended to April 2012.

During the first quarter of 2012, the Company closed on a $73,000 ten-year non-recourse 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.

Also during the first quarter of 2012, the Company retired 14 operating property loans with an aggregate principal balance of $381,568 that were secured by Arbor Place, The Landing at Arbor Place, Fashion Square, Hickory Hollow Mall, The Courtyard at Hickory Hollow, 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. See Note 4 related to the sale of Massard Crossing in July 2012. See Notes 4 and 15 related to the sale of Hickory Hollow Mall in October 2012.

In the first quarter of 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 $27,265 at September 30, 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 related to the retirement of an operating property loan subsequent to September 30, 2012.

Scheduled Principal Payments

As of September 30, 2012, the scheduled principal amortization and balloon 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	$	187,072
2013	625,011
2014	446,768
2015	516,711
2016	778,870
Thereafter	2,138,298
	4,692,730
Net unamortized premiums (discounts)	8,660
	$	4,701,390

The remaining scheduled principal payments in 2012 of $187,072 include principal amortization of $19,863 and the maturing principal balance of one unsecured term loan of $167,209, which the Company intends to retire during the fourth quarter of 2012 with borrowings from the Company's secured credit facilities.

The Company’s mortgage and other indebtedness had a weighted average maturity of 4.88 years as of September 30, 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 the first quarter of 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 September 30, 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 9/30/2012			Fair Value at 12/31/11			Maturity Date
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$55,541 (amortizing to $48,337)	1-month LIBOR	2.149%	$	(3,018	)	$	(2,674	)	Apr 2016
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$34,770 (amortizing to $30,276)	1-month LIBOR	2.187%	(1,930		)	(1,725		)	Apr 2016
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$13,001 (amortizing to $11,313)	1-month LIBOR	2.142%	(704		)	(622		)	Apr 2016
Pay fixed/ Receive variable Swap	Accounts payable and accrued liabilities	$11,572 (amortizing to $10,083)	1-month LIBOR	2.236%	(660		)	(596		)	Apr 2016
Cap	Intangible lease assets and other assets	$124,250 (amortizing to $122,375)	3-month LIBOR	5.000%	—			—			Jan 2014



	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	2012			2011				2012			2011				2012		2011
Interest rate contracts	$	(234	)	$	(3,393	)	Interest Expense	$	(567	)	$	(668	)	Interest Expense	$	—	$	—



	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	2012			2011				2012			2011				2012		2011
Interest rate contracts	$	(714	)	$	(5,466	)	Interest Expense	$	(1,696	)	$	(1,326	)	Interest Expense	$	—	$	—

As of September 30, 2012, the Company expects to reclassify approximately $2,239 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, 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