Note 10. Mortgage Loans Payable and Unsecured Credit Facilities

Debt relating to continuing operations is comprised of the following at December 31, 2014 and 2013:


	December 31, 2014			December 31, 2013
		Interest rates			Interest rates
	Balance	Weighted		Balance	Weighted
Description	outstanding	average	Range	outstanding	average	Range
Fixed-rate mortgages	$ 393,388,000	5.4%	3.1% - 7.5%	$ 458,207,000	5.5%	3.1% - 7.5%
Variable-rate mortgage	-	-		58,085,000	2.9%
Total property-specific mortgages	393,388,000	5.4%		516,292,000	5.2%
Unsecured credit facilities:
Revolving facility	72,000,000	1.9%		153,500,000	2.3%
Term loan	50,000,000	1.9%		50,000,000	2.3%
Term loan	75,000,000	3.2%		-	-
Term loan	75,000,000	4.1%		-	-
	272,000,000	2.8%		203,500,000	2.3%

	$ 665,388,000	4.3%		$ 719,792,000	4.3%

Mortgage Loans Payable

Mortgage loan activity for 2014 and 2013 is summarized as follows:


	Years ended December 31,
	2014	2013
Balance, beginning of year	$ 516,292,000	$ 589,168,000
Mortgages on properties held for sale	(15,249,000)	-
Mortgage loan assumptions	53,439,000	-
Repayments	(161,094,000)	(72,876,000)
Balance, end of the year	$ 393,388,000	$ 516,292,000

During 2014 and 2013, the Company repaid the following mortgage loans payable:


	Repayment	Maturity	Principal Payoff
Property	Date	Date	Amount
2014
Virginia Little Creek	February 3, 2014	September 1, 2021	$ 295,000
Upland Square	February 11, 2014	October 26, 2014	$ 57,839,000
Kings Plaza	April 1, 2014	July 1, 2014	$ 7,188,000
Coliseum Marketplace	April 1, 2014	July 1, 2014	$ 11,045,000
Liberty Marketplace	April 1, 2014	July 1, 2014	$ 8,171,000
Trexler Mall	May 11, 2014	May 11, 2014	$ 19,479,000
Yorktowne Plaza	June 2, 2014	July 1, 2014	$ 18,726,000
Quartermaster Plaza	June 5, 2014	October 1, 2014	$ 11,217,000
Fieldstone Marketplace	July 11, 2014	July 11, 2014	$ 16,878,000
Mechanicsburg Center	August 1, 2014	November 1, 2014	$ 8,215,000
Smithfield Plaza	October 21, 2014	May 11, 2016	$ 6,616,000
Elmhurst Square	December 11, 2014	December 11, 2014	$ 3,638,000

2013
East Chestnut	January 2, 2013	April 1, 2018	$ 1,538,000
Academy Plaza	January 10, 2013	March 10, 2013	$ 8,633,000
Fort Washington	January 29, 2013	January 29, 2013	$ 5,384,000
General Booth	February 1, 2013	August 1, 2013	$ 4,960,000
Kempsville Crossing	February 1, 2013	August 1, 2013	$ 5,592,000
Smithfield Plaza	February 1, 2013	August 1, 2013	$ 3,200,000
Suffolk Plaza	February 1, 2013	August 1, 2013	$ 4,185,000
Virginia Little Creek	February 1, 2013	August 1, 2013	$ 4,484,000
Carbondale Plaza	June 17, 2013	May 1, 2015	$ 4,721,000
Port Richmond	July 30, 2013	August 1, 2013	$ 13,690,000
Timpany Plaza	November 1, 2013	January 1, 2014	$ 7,610,000

During 2014 and 2013, in connection with these repayments, the Company incurred charges relating to early extinguishment of mortgage loans payable (prepayment penalties and accelerated amortization of deferred financing costs) of $825,000 and $106,000, respectively, included in continuing operations. In addition, during 2013, in connection with these repayments, the Company incurred charges relating to early extinguishment of mortgage loans payable (prepayment penalties and accelerated amortization of deferred financing costs) of $437,000, included in discontinued operations.

Mortgage Loans Payable – Real Estate Held for Sale/Conveyance

The Company had no debt included in mortgage loans payable – real estate held for sale/conveyance at December 31, 2014. Debt included in mortgage loans payable – real estate held for sale/conveyance is comprised of the following at December 31, 2013:


	December 31, 2013
		Interest rates
	Balance	Weighted
Description	outstanding	average	Range

Fixed-rate mortgages (a)	$ 22,848,000	5.4%	5.2% - 6.1%

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

Unsecured Revolving Credit Facility and Term Loans

On August 13, 2013, the Company entered into a $310 million unsecured credit facility which, as amended on February 5, 2015, consists of (1) a $260 million revolving credit facility, expiring on February 5, 2019, and (2) a $50 million term loan, expiring on February 5, 2020. The revolving credit facility may be extended, at the Company’s option, for an additional one-year period, subject to customary conditions. Under an accordion feature, the facility can be increased to $750 million, subject to customary conditions and lending commitments. Borrowings under the revolving credit facility component can range from LIBOR plus 135 bps to 195 bps (150 bps on February 5, 2015) and borrowing under the term loan component can range from 130 to 190 bps (145 bps on February 5, 2015), each based on the Company’s leverage ratio. As of December 31, 2014, the Company had $187.7 million available for additional borrowings under the revolving credit facility.

On February 11, 2014, the Company closed $150 million of unsecured term loans comprised 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. As amended on February 5, 2015, borrowing under the five-year $75 million term loan can range from LIBOR plus 130 bps to 190 bps (145 bps on February 5, 2015) and borrowings under the seven-year $75 million term loan can range from LIBOR plus 170 bps to 230 bps (180 bps on February 5, 2015), each based on the Company’s leverage ratio. Additionally, the Company has entered into forward interest rate swap agreements which convert the LIBOR rates to fixed rates for these term loans beginning July 1, 2014 through their maturities. Reflecting the February 5, 2015 amendment, the new effective fixed interest rates are 3.1% for the five-year $75 million term loan and 4.1% for the seven-year $75 million term loan.

On February 5, 2015, the Company closed $100 million of new unsecured term loans comprised of a five-year $50 million term loan maturing February 5, 2020 (all of which was borrowed at closing), and a seven-year $50 million term loan maturing February 5, 2022. Proceeds from the seven-year term loan can be drawn at any time from closing until July 1, 2015. Borrowings under the five-year $50 million term loan can range from 130 to 190 bps (145 bps on February 5, 2015) and borrowing under the seven-year $50 million term loan can range from LIBOR plus 155 bps to 215 bps (170 bps as of February 5, 2015), each based on the Company’s leverage ratio. Additionally, the Company entered into forward interest rate swap agreements which converted the LIBOR rates to fixed rates for these term loans beginning July 1, 2015 through their maturities. As a result, the effective fixed interest rates will be 2.9% for the five-year $50 million term loan and 3.4% for the seven-year $50 million term loan.

The Company’s unsecured credit facility and term loans contain financial covenants including, but not limited to, maximum debt leverage, maximum secured debt, minimum fixed charge coverage, and minimum net worth. In addition, the facility contains restrictions including, but not limited to, limits on indebtedness, certain investments and distributions. The Company’s failure to comply with the covenants or the occurrence of an event of default under the facility could result in the acceleration of the related debt. As of December 31, 2014, the Company is in compliance with all financial covenants.

Scheduled Principal Payments

Scheduled principal payments on mortgage loans payable, term loans, and the credit facility at December 31, 2014, due on various dates from 2015 to 2029, are as follows:


2015	$ 110,479,000	(a)
2016	133,018,000
2017	62,923,000
2018	20,158,000
2019	149,037,000	(b)
Thereafter	189,773,000	(c)
	$ 665,388,000

(a) To be substantially refinanced with the proceeds from unsecured term loans which closed on February 5, 2015.

(b) As amended on February 5, 2015, includes $72.0 million applicable to the unsecured revolving credit facility, subject to a one-year extension option, originally due in 2016.

Derivative Financial Instruments

As discussed above, on February 11, 2014, the Company closed $150 million of unsecured term loans for which it entered into forward interest rate swap agreements, which became effective on July 1, 2014.

On May 29, 2014, the Company sold Townfair Center, which collateralized an $11.8 million mortgage loan payable subject to an interest rate swap having a fair value recorded as a liability of $0.7 million. At closing, the buyer assumed both the outstanding mortgage loan payable and the related interest rate swap, and the aforementioned $0.7 million was removed from both accumulated other comprehensive loss and accounts payable and accrued liabilities.

At December 31, 2014, the Company had $2,777,000 on the consolidated balance sheet included in accounts payable and accrued liabilities relating to the fair value of the interest rate swaps applicable to the $150 million unsecured term loans which closed on February 11, 2014. Charges and/or credits relating to the changes in the fair value of the interest rate swaps 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 applicable. Over time, the unrealized gains and losses recorded in accumulated other comprehensive loss will be reclassified into earnings as an increase or reduction to interest expense in the same periods in which the hedged interest payments affect earnings. The Company estimates that approximately $2.7 million of accumulated other comprehensive loss will be reclassified as a charge to earnings within the next twelve months.

The following is a summary of the derivative financial instruments held by the Company at December 31, 2014 and December 31, 2013:


			Notional values					Balance	Fair value
Designation/			December 31,		December 31,		Maturity	sheet	December 31,	December 31,
Cash flow	Derivative	Count	2014	Count	2013		date	location	2014	2013
Qualifying	Interest rate swaps	2	$ 150,000,000	-	$ -		2019/2021	Accounts payable and accrued liabilities	$ 2,777,000	$ -
Qualifying	Interest rate swap	-	$ -	1	$ 11,894,000	(a)	-	Accounts payable and accrued liabilities	$ -	$ 647,000

(a) Amount is an interest rate swap related to mortgage loans payable - real estate held for sale/conveyance on the consolidated balance sheet.

The following presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations and the consolidated statements of equity 2014 and 2013, respectively:


		Gain (loss) recognized in other
		comprehensive income
		(effective portion)
Designation/		Years ended December 31,
Cash flow	Derivative	2014	2013
Qualifying	Interest rate swaps	$ (3,650,000)	$ 202,000

		Gain (loss) recognized in other
		comprehensive income
		reclassified into earnings (effective portion)
		Years ended December 31,
	Classification	2014	2013
	Continuing Operations	$ 1,663,000	$ 749,000
	Discontinued Operations	$ 129,000	$ 309,000

As of December 31, 2014, 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, 2014, if a counterparty were to default, the Company would receive a net interest benefit.