Mortgage and Other Indebtedness
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Dec. 31, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage and Other Indebtedness | MORTGAGE AND OTHER INDEBTEDNESS Debt of the Company All of the Company's debt is held directly or indirectly by the Operating Partnership. CBL is a limited guarantor of the 5.250% senior notes, issued by the Operating Partnership in November 2013, for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates. The Company also provides a limited guarantee of the Operating Partnership's obligations with respect to its unsecured credit facilities and two unsecured term loans as of December 31, 2013. CBL also has guaranteed 100% of the debt secured by The Promenade in D'Ilberville, MS, which had a balance of $51,300 at December 31, 2013. Debt of the Operating Partnership Mortgage and other indebtedness consisted of the following:
Non-recourse and recourse term loans include loans that are secured by Properties owned by the Company that have a net carrying value of $4,126,555 at December 31, 2013. Senior Unsecured Notes In November 2013, the Operating Partnership issued $450,000 of senior unsecured notes that bear interest at 5.250% payable semiannually beginning June 1, 2014 and mature on December 1, 2023 ("the Notes"). The interest rate will be subject to an increase ranging from 0.25% to 1.00% from time to time if, on or after January 1, 2016 and prior to January 1, 2020, the ratio of secured debt to total assets of the Company, as defined, is greater than 40% but less than 45%. The Notes are redeemable at the Operating Partnership's election, in whole or in part from time to time, on not less than 30 days notice to the holders of the Notes to be redeemed. The Notes may be redeemed prior to September 1, 2023 for cash, at a redemption price equal to the greater of (1) 100% of the aggregate principal amount of the Notes to be redeemed or (2) an amount equal to the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed, discounted to the redemption date on a semi-annual basis at the treasury rate, as defined, plus 0.40%, plus accrued and unpaid interest. On or after September 1, 2023, the Notes are redeemable for cash at a redemption price equal to 100% of the aggregate principal amount of the Notes to be redeemed plus accrued and unpaid interest. After deducting underwriting and other offering expenses of $4,152 and a discount of $4,626, the net proceeds from the sale of the Notes was $441,222, which the Operating Partnership used to reduce the outstanding balances on its credit facilities. Unsecured Lines of Credit The Company has three unsecured credit facilities that are used for retirement of secured loans, repayment of term loans, working capital, construction and acquisition purposes, as well as issuances of letters of credit. Wells Fargo Bank NA serves as the administrative agent for a syndicate of financial institutions for our two unsecured $600.0 million credit facilities ("Facility A" and "Facility B") for an aggregate amount of $1.2 billion. Facility A matures in November 2015 and has a one-year extension option for an outside maturity date of November 2016. Facility B matures in November 2016 and has a one-year extension option for an outside maturity date of November 2017. The extension options on both facilities are at the Company's election, subject to continued compliance with the terms of the facilities, and have a one-time extension fee of 0.20% of the commitment amount of each credit facility. In the first quarter of 2013, the Company amended and restated its $105,000 secured credit facility with First Tennessee Bank, NA. The facility was converted from secured to unsecured with a capacity of $100,000 and a maturity date of February 2016. Prior to May 14, 2013, borrowings under the three unsecured lines of credit bore interest at LIBOR plus a spread ranging from 155 to 210 basis points based on the Company’s leverage ratio. The Company also paid annual unused facility fees, on a quarterly basis, at rates of either 0.25% or 0.30% based on any unused commitment of each facility. In May 2013, the Company obtained an investment grade rating from Moody's and, effective May 14, 2013, made a one-time irrevocable election to use its credit rating to determine the interest rate on each facility. Under the credit rating election, each facility now bears interest at LIBOR plus a spread of 100 to 175 basis points. In July 2013, the Company received an IDR of BBB- with a stable outlook and a senior unsecured notes rating of BBB- from Fitch. As of December 31, 2013, the Company's interest rate based on its credit ratings from Moody's and Fitch is LIBOR plus 140 basis points. Additionally, the Company pays an annual facility fee that ranges from 0.15% to 0.35% of the total capacity of each facility rather than the unused commitment fees as described above. As of December 31, 2013, the annual facility fee is 0.30%. The three unsecured lines of credit had a weighted-average interest rate of 1.57% at December 31, 2013. The following summarizes certain information about the Company's unsecured lines of credit as of December 31, 2013:
Secured Line of Credit In the first quarter of 2013, the Company amended and restated its $105,000 secured credit facility to convert it to an unsecured credit facility as described above. Unsecured Term Loans In the third quarter of 2013, the Company closed on a five-year $400,000 unsecured term loan. Net proceeds from the term loan were used to reduce outstanding balances on the Company's credit facilities. The loan bears interest at a variable-rate of LIBOR plus 150 basis points based on the Company's current credit ratings and has a maturity date of July 2018. At December 31, 2013, the outstanding borrowings of $400,000 had an interest rate of 1.67%. In the first quarter of 2013, under the terms of the Company's amended and restated agreement with First Tennessee Bank, NA, the Company obtained a $50,000 unsecured term loan that bears interest at a variable-rate of LIBOR plus 190 basis points and matures in February 2018. At December 31, 2013, the outstanding borrowings of $50,000 had a weighted-average interest rate of 2.07%. The Company had an unsecured term loan of $228,000 that bore interest at LIBOR plus a margin of 1.50% to 1.80% based on the Company’s leverage ratio, as defined in the loan agreement. The Company retired the unsecured term loan at its April 2013 maturity date with borrowings from the Company's credit facilities. Fixed-Rate Debt As of December 31, 2013, fixed-rate loans on operating Properties bear interest at stated rates ranging from 4.54% to 8.50%. Outstanding borrowings under fixed-rate loans include net unamortized debt premiums of $10,315 that were recorded when the Company assumed debt to acquire real estate assets that was at a net above-market interest rate compared to similar debt instruments at the date of acquisition. Fixed-rate loans on operating Properties generally provide for monthly payments of principal and/or interest and mature at various dates through November 2023, with a weighted average maturity of 4.8 years. The following table presents the fixed-rate loans that are secured by the related Properties, that have been entered into since January 1, 2012:
The Company has repaid the following fixed-rate loans, secured by the related Properties, since January 1, 2012:
In the third quarter of 2013, the lender of the non-recourse mortgage loan secured by Citadel Mall in Charleston, SC sent a formal notice of default and initiated foreclosure proceedings. Citadel Mall generates insufficient income levels to cover the debt service on the mortgage, which had a balance of $68,169 at December 31, 2013 and a contractual maturity date of April 2017. In the second quarter of 2013, the lender on the loan began receiving the net operating cash flows of the property each month in lieu of scheduled monthly mortgage payments. A foreclosure sale occurred in January 2014. See Note 19 for additional information. During the third quarter of 2012, the Company retired a $44,480 loan, which was secured by a regional mall, with borrowings from the Company's credit facilities. The loan was 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 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 December 31, 2013, 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. The Property is currently in the foreclosure process. See Note 19 for information related to an operating Property loan that was placed in default subsequent to December 31, 2013. Variable-Rate Debt Recourse term loans for the Company’s operating Properties bear interest at variable interest rates indexed to the LIBOR rate. At December 31, 2013, interest rates on such recourse loans varied from 1.87% to 3.25%. These loans mature at various dates from December 2014 to December 2016, with a weighted average maturity of 2.42 years, and several have extension options of up to two years. The following table presents the variable-rate loans that are secured by the related Properties that have been entered into since January 1, 2012:
The Company has repaid the following variable-rate loans that were secured by the related Properties, since January 1, 2012:
See Note 19 for information on an operating Property loan that was retired subsequent to December 31, 2013. Construction Loans 2013 Activity In the fourth quarter of 2013, the Company retired a $53,080 variable-rate recourse construction loan, secured by The Outlet Shoppes at Atlanta, with proceeds from a $80,000 non-recourse mortgage loan. In August 2013, Louisville Outlet Shoppes, LLC obtained a construction loan for the development of The Outlet Shoppes at Louisville in Louisville, KY that allows for borrowings up to $60,200 and bears interest at LIBOR plus 200 basis points. The loan matures in August 2016 and has two one-year extension options, which are at the consolidated joint venture's election, for an outside maturity date of August 2018. The Company has guaranteed 100% of the loan. The construction loan had an outstanding balance of $2,983 at December 31, 2013. 2012 Activity In the third quarter of 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. In the second quarter of 2012, the Company entered into a 75%/25% joint venture, Atlanta Outlet Shoppes, LLC, with a third party to develop, own and operate The Outlet Shoppes at Atlanta, an outlet center development located in Woodstock, GA. In August 2012, the joint venture closed on a construction loan with a maximum capacity of $69,823 that bears interest at LIBOR plus a margin of 275 basis points. The loan matures in August 2015 and has two one-year extensions available, which are at the joint venture's option. The loan was retired in the fourth quarter of 2013. The Company had guaranteed 100% of this loan. Covenants and Restrictions The agreements for the unsecured lines of credit, the Notes and unsecured term loans contain, among other restrictions, certain financial covenants including the maintenance of certain financial coverage ratios, minimum net worth requirements, minimum unencumbered asset and interest ratios, maximum secured indebtedness ratios, maximum total indebtedness ratios and limitations on cash flow distributions. The Company believes that it was in compliance with all covenants and restrictions at December 31, 2013. Unsecured Lines of Credit and Unsecured Term Loans The following presents the Company's compliance with key covenant ratios, as defined, of the credit facilities and term loans as of December 31, 2013:
The agreements for the unsecured credit facilities and unsecured term loans described above contain default provisions customary for transactions of this nature (with applicable customary grace periods). Additionally, any default in the payment of any recourse indebtedness greater than or equal to $50,000 or any non-recourse indebtedness greater than $150,000 (for the Company's ownership share) of CBL, the Operating Partnership or any Subsidiary, as defined, will constitute an event of default under the agreements for the credit facilities. The credit facilities also restrict the Company's ability to enter into any transaction that could result in certain changes in its ownership or structure as described under the heading “Change of Control/Change in Management” in the agreements for the credit facilities. Prior to the Company obtaining an investment grade rating in May 2013, the obligations of the Company under the agreements were unconditionally guaranteed, jointly and severally, by any subsidiary of the Company to the extent such subsidiary was a material subsidiary and was not otherwise an excluded subsidiary, as defined in the agreements. Once the Company obtained an investment grade rating, guarantees by material subsidiaries were no longer required by the agreements. Senior Unsecured Notes The following presents the Company's compliance with key covenant ratios, as defined, of the Notes as of December 31, 2013:
The agreements for the Notes described above contain default provisions customary for transactions of this nature (with applicable customary grace periods). Additionally, any default in the payment of any recourse indebtedness greater than or equal to $50,000 of the Operating Partnership will constitute an event of default under the Notes. Other 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. Scheduled Principal Payments As of December 31, 2013, 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:
Of the $284,205 of scheduled principal payments in 2014, $164,700 relates to the maturing principal balances of two operating Property loans, $17,570 relates to the financing method obligation associated with Pearland Town Center, $74,670 represents scheduled principal amortization and $27,265 relates to the principal balance of one operating Property loan secured by Columbia Place with a maturity date of September 2013. One maturing operating Property loan with a principal balance of $51,300 outstanding as of December 31, 2013 has an extension available at the Company’s option, leaving one loan maturity in 2014 of $113,400 that the Company intends to retire or refinance. The servicer for the loan secured by Columbia Place is proceeding with foreclosure which the Company anticipates will occur during the second quarter of 2014. Subsequent to December 31, 2013, the Company retired one operating Property loan secured by St. Clair Square, with a balance of $122,375 as of December 31, 2013, which was scheduled to mature in 2016. The Company has extension options available at its election, subject to continued compliance with the terms of the facilities, related to the maturities of its unsecured credit facilities. The credit facilities may be used to retire loans maturing in 2014 as well as to provide additional flexibility for liquidity purposes. Interest Rate Hedging Instruments The Company records its derivative instruments in its 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 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 a $125,000 interest rate cap agreement (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 protected the Company from increases in the hedged cash flows attributable to overall changes in 3-month LIBOR above the strike rate of the cap on the debt. The strike rate associated with the interest rate cap was 5.0%. The cap matured in January 2014. As of December 31, 2013, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
The following tables provide further information relating to the Company’s interest rate derivatives that were designated as cash flow hedges of interest rate risk as of December 31, 2013 and 2012:
As of December 31, 2013, the Company expects to reclassify approximately $2,118 of losses currently reported in AOCI to interest expense within the next twelve months due to the amortization of its outstanding interest rate contracts. Fluctuations in fair values of these derivatives between December 31, 2013 and the respective dates of termination will vary the projected reclassification amount. |