Note 10. Mortgage Loans Payable and Credit Facility

Debt relating to continuing operations is comprised of the following at December 31, 2013 and 2012:


	December 31, 2013			December 31, 2012
		Interest rates			Interest rates
	Balance	Weighted		Balance	Weighted
Description	outstanding	average	Range	outstanding	average	Range
Fixed-rate mortgages (a)	$ 458,207,000	5.5%	3.1% - 7.5%	$ 528,751,000	5.6%	3.1% - 7.5%
Variable-rate mortgage	58,085,000	2.9%		60,417,000	3.0%
Total property-specific mortgages	516,292,000	5.2%		589,168,000	5.3%
Unsecured credit facility:
Revolving facility	153,500,000	2.3%		-	n/a
Term loan	50,000,000	2.3%		-	n/a
	203,500,000	2.3%		-	n/a
Secured credit facility:
Revolving facility	-	n/a		81,000,000	2.8%
Term loan	-	n/a		75,000,000	2.8%
	-	n/a		156,000,000	2.8%

	$ 719,792,000	4.3%		$ 745,168,000	4.8%

(a) At December 31, 2012, the Company had two mortgage loans payable aggregating approximately $19.3 million subject to interest rate swaps which converted the LIBOR-based variable rates to fixed annual rates of 5.4% and 6.5% per annum. These loans were repaid during 2013.

Mortgage Loans Payable

Mortgage loan activity for 2013 and 2012 is summarized as follows:


	Years ended December 31,
	2013	2012
Balance, beginning of year (a)	$ 589,168,000	$ 570,372,000
New mortgage borrowings and assumptions (b)	-	74,605,000
Repayments	(72,876,000)	(55,809,000)
Balance, end of the year	$ 516,292,000	$ 589,168,000

(a) Restated to reflect the reclassifications of properties subsequently treated as "held for sale/conveyance".
(b) Includes $1.5 million increase relating to Franklin Village Plaza purchase accounting allocations in 2012.

During 2013 and 2012, the Company paid off $64.0 million and $63.3 million (including $19.0 million classified as held for sale/conveyance in 2012) of mortgage loans payable, respectively, of which $44.9 million and $63.3 million, respectively, represented prepayments. In this connection, during 2013 and 2012, the Company incurred charges relating to early extinguishment of mortgage loans payable (prepayment penalties and accelerated amortization of deferred financing costs) of $543,000 (including $437,000 classified as discontinued operations in 2013) and $66,000 respectively.

Mortgage Loans Payable – Real Estate Held for Sale/Conveyance

Debt included in discontinuing operations is comprised of the following at December 31, 2013 and 2012:

December 31, 2013

December 31, 2012

Interest rates

Balance

Weighted

Balance

Weighted

Description

outstanding

average

Range

outstanding

average

Range

Fixed-rate mortgages (a)

$ 22,848,000

5.4%

5.2% - 6.1%

$ 39,306,000

5.7%

5.2% - 6.5%

(a) At December 31, 2013 and 2012, the Company had a mortgage loan payable of approximately $11.9 million and $12.2 million, respectively, subject to an interest rate swap which converted the LIBOR-based variable rate to a fixed annual rate of 5.2% per annum.

Unsecured Credit Facility

On August 1, 2013, the Company amended and extended, on an unsecured basis, its credit facility. As amended, the $310 million credit facility is comprised of a three-year $260 million revolving credit facility, expiring on August 1, 2016, and a five-year $50 million term loan, expiring on August 1, 2018. Subject to customary conditions, the revolving credit facility may be extended, at the Company’s option, for two additional one-year periods. Under an accordion feature, the new facility can be increased to $500 million, subject to customary conditions, and lending commitments from participating banks. The new facility contains financial covenants including, but not limited to, maximum debt leverage, maximum secured debt, minimum interest coverage, minimum fixed charge coverage, and minimum net worth. In addition, the new facility contains restrictions including, but not limited to, limits on indebtedness, certain investments and distributions. Although the new facility is unsecured, borrowing availability is based on unencumbered property adjusted net operating income, as defined in the agreement. The Company’s failure to comply with the covenants or the occurrence of an event of default under the new facility could result in the acceleration of the related debt. In connection with the transaction, the Company paid fees and legal expenses of approximately $1.7 million.

Borrowings under the credit facility are priced at LIBOR plus 195 basis points (“bps”) (a weighted average rate of 2.3% per annum at December 31, 2013), and can range from LIBOR plus 165 to 225 bps based on the Company’s leverage ratio. As of December 31, 2013, the Company had $153.5 million outstanding under the revolving credit facility and $50.0 million outstanding under the term loan, and had $91.3 million available for additional borrowings. On February 11, 2014, the loan agreement was amended to modify the interest rate on the $50.0 term loan to match that of the new five-year $75.0 million unsecured term loan (see below).

Unsecured Term Loans

On February 11, 2014, the Company closed $150 million of unsecured term loans consisting of a five-year $75 million term loan, maturing on February 11, 2019, and a seven-year $75 million term loan, maturing on February 11, 2021. Under an accordion feature, the term loans can be increased to an aggregate of $300 million, subject to customary conditions and lending commitments from participating banks. The financial covenants and other terms contained in the loan agreement are substantially the same as those contained in the Company’s unsecured credit facility. In connection with the transaction, the Company paid fees and legal expenses of approximately $1.1 million.

The five-year term loan is initially priced at LIBOR plus 175 bps, and can range from LIBOR plus 145 bps to 205 bps based on the Company’s leverage ratio. The seven-year term loan is initially priced at LIBOR plus 200 bps, and can range from LIBOR plus 170 bps to 230 bps, also based on the Company’s leverage ratio. The Company also entered into forward interest rate swap agreements which convert the LIBOR rates to fixed rates for the new term loans beginning July 1, 2014 through their maturities. As a result, the effective fixed interest rates will be 3.37% for the five-year term loan and 4.27% for the seven-year term loan beginning July 1, 2014, based on the Company’s leverage ratio at closing.

Prior Credit Facility

From January 26, 2012 through August 1, 2013, the Company had a $300 million secured credit facility comprised of a four-year $75 million term loan and a three-year $225 million revolving credit facility, subject to collateral in place. This facility had combined and replaced two prior secured facilities which were due to expire in 2012. In connection with the credit facility, the Company paid participating lender fees and closing and transaction costs of approximately $4.0 million. In addition, the Company wrote off $2.6 million of unamortized fees associated with the terminated stabilized property and development credit facilities.

Scheduled Principal Payments

Scheduled principal payments on mortgage loans payable and the credit facility at December 31, 2013, due on various dates from 2014 to 2029, are as follows:


2014	$ 157,823,000	(a)
2015	68,821,000
2016	293,039,000	(b)
2017	62,962,000
2018	70,199,000
Thereafter	66,948,000
	$ 719,792,000

(a)

Substantially all 2014 debt requirements will be refinanced from the proceeds of the unsecured term loans which closed on February 11, 2014 (see above).

(b) Includes $153.5 million subject to two one-year extension options.

Derivative Financial Instruments

At December 31, 2013, the Company had a mortgage loan payable of approximately $11.9 million (included in mortgage loans payable – real estate held for sale/conveyance on the consolidated balance sheet) subject to an interest rate swap. The interest rate swap converted the LIBOR-based variable rate to a fixed rate of 5.2% per annum. At that date, the Company had accrued liabilities of $0.6 million (included in accounts payable and accrued liabilities on the consolidated balance sheet) relating to the fair value of the interest rate swap applicable to the existing mortgage loan payable. Charges and/or credits relating to the changes in the fair value of the interest rate swap are made to accumulated other comprehensive income (loss), noncontrolling interests (minority interests in consolidated joint ventures and limited partners’ interest), or operations (included in interest expense),as appropriate.

The following is a summary of the derivative financial instruments held by the Company at December 31, 2013 and December 31, 2012:

Notional values

Balance

Fair value

Designation/

December 31,

Maturity

sheet

December 31,

Cash flow

Derivative

Count

2013

Count

2012

date

location

2013

2012

Interest

Accrued

rate swaps

liabilities

Qualifying

Consolidated

$ 11,894,000

(a)

$ 31,417,000

(a)

2018

Consolidated

$ 647,000

$ 1,577,000

(a) For the years ended December 31, 2013 and 2012, $11.9 million and $12.2 million, respectively, are included in mortgage loans payable - real estate held for sale/conveyance on the consolidated balance sheets.

The following presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations and the consolidated statements of equity for 2013, 2012 and 2011, respectively:


		Amount of gain recognized in other
		comprehensive income (loss) (effective portion)
Designation/		Years ended December 31,
Cash flow	Derivative	2013		2012	2011

Qualifying	Consolidated	$ 1,260,000	(a)	$ 836,000	$ (398,000)
	Cedar/RioCan
Qualifying	Joint Venture	$ -		$ 118,000	$ (118,000)

(a) For the year ended December 31, 2013, $1,058,000 was reclassified from other comprehensive income to interest expense in the consolidated statements of operations, of which $309,000 was included in discontinued operations.

As of December 31, 2013, the Company believes it has no significant risk associated with non-performance of the financial institutions which are the counterparties to its derivative contracts. Additionally, based on the rates in effect as of December 31, 2013, if a counterparty were to default, the Company would receive a net interest benefit.