NOTE 9 MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable are summarized as follows:


	March 31,		December 31,
	2015		2014
	(In thousands)
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	1,030,671	$	1,008,165
Special Improvement District bonds		18,736		22,389
Variable-rate debt:
Collateralized mortgages, notes and loans payable (a)		1,074,210		962,916
Total mortgages, notes and loans payable	$	2,123,617	$	1,993,470

(a)

As more fully described below, $172.0 million of variable‑rate debt has been swapped to a fixed rate for the term of the related debt.

The following table presents our mortgages, notes, and loans payable by property:


				Maximum		Carrying Value
		Interest		Facility		March 31,		December 31,
$ In thousands	Maturity (a)	Rate		Amount		2015		2014
Master Planned Communities
Bridgeland Land Loan	June 2022	5.50	%			$	15,874	$	15,874
Bridgeland Development Loan	June 2015	5.00	%(b)	$	30,000		15,389		10
Summerlin South SID Bonds - S108	December 2016	5.95	%				548		563
Summerlin South SID Bonds - S124	December 2019	5.95	%				236		236
Summerlin South SID Bonds - S128	December 2020	6.05	%				623		623
Summerlin South SID Bonds - S128C	December 2030	6.05	%				5,097		5,274
Summerlin South SID Bonds - S132	December 2020	6.00	%				2,538		2,936
Summerlin South SID Bonds - S151	June 2025	6.00	%				4,885		6,211
Summerlin West SID Bonds - S808/S810	April 2031	6.00	%				1,069		2,805
The Woodlands Master Credit Facility	August 2018	2.93	%(b)		250,000		196,663		176,663
Master Planned Communities Total							242,922		211,195

Operating Assets
70 Columbia Corporate Center	July 2019	2.43	%(b)				20,000		20,000
Columbia Regional Building	March 2018	2.18	%(b)		23,008		20,627		20,513
Downtown Summerlin	July 2019	2.43	%(b)		311,800		256,955		229,153
Downtown Summerlin SID Bonds - S108	December 2016	5.95	%				310		310
Downtown Summerlin SID Bonds - S128	December 2030	6.05	%				3,431		3,431
One Hughes Landing	December 2029	4.30	%(b)				52,000		52,000
Two Hughes Landing	September 2018	2.83	%(b)		41,230		27,927		19,992
Hughes Landing Retail	December 2018	2.13	%(b)		36,575		21,518		17,424
1701 Lake Robbins	April 2017	5.81	%				4,600		4,600
Millennium Waterway Apartments	June 2022	3.75	%				55,584		55,584
110 N. Wacker (c)	October 2019	5.21	%(b)				29,000		29,000
9303 New Trails	December 2023	4.88	%				12,991		13,074
Outlet Collection at Riverwalk	October 2018	2.93	%(b)		64,400		51,306		47,118
3831 Technology Forest Drive	March 2026	4.50	%				23,000		—
The Woodlands Resort & Conference Center	February 2019	3.68	%(b)		95,000		83,109		76,027
Ward Village (d)	September 2016	3.35	%(b)		250,000		238,716		238,716
20/25 Waterway Avenue	May 2022	4.79	%				14,274		14,330
3 Waterway Square	August 2028	3.94	%				52,000		52,000
4 Waterway Square	December 2023	4.88	%				38,044		38,289
Capital lease obligations	various	3.60	%				123		135
Operating Assets Total							1,005,515		931,696

Strategic Developments
1725-35 Hughes Landing Boulevard	June 2019	2.08	%(b)		143,000		63,815		47,513
Three Hughes Landing	December 2019	2.53	%(b)		65,455		—		—
Hughes Landing Hotel	October 2020	2.68	%(b)		37,100		—		—
One Lake's Edge	November 2018	2.68	%(b)		73,525		49,184		40,787
Waiea and Anaha Condominiums	November 2019	6.93	%(b)		600,000		—		—
Waterway Square Hotel	August 2019	2.83	%(b)		69,300		—		—
Strategic Developments Total							112,999		88,300

Other Corporate Financing Arrangements	June 2018	3.00	%		22,700		19,645		19,968
Senior Notes	October 2021	6.88	%				750,000		750,000
Unamortized underwriting fees							(7,464)		(7,689)
						$	2,123,617	$	1,993,470

(a)

Maturity date includes any extension periods which can be exercised at our option and are subject to customary extension terms.

(b)

The interest rate presented is based on the one month LIBOR rate, as applicable, at March 31, 2015 which was 0.1756%.

(c)

The $29.0 million outstanding principal balance is swapped to a 5.21% fixed rate through maturity.

(d)

$143.0 million of the outstanding principal balance is swapped to a 3.81% fixed rate maturity.

The weighted average interest rate on our mortgages, notes and loans payable, inclusive of interest rate hedges, was 4.53% and 4.61% as of March 31, 2015 and December 31, 2014, respectively.

All of the mortgage debt is secured by the individual properties as listed in the table above and is non-recourse to HHC, except for:

(i)

$750.0 million of Senior Notes;

(ii)

$311.8 million financing for the Downtown Summerlin development which has an initial maximum recourse of 35.0% of the outstanding balance, which will reduce to 15.0% upon completion of the project and achievement of a 1.15:1.0 debt service coverage ratio. The recourse further reduces to 10% upon achievement of a 1.25:1.0 debt service coverage ratio, a 90% occupancy level, and average tenant sales of at least $500.00 per net rentable square foot;

(iii)

$64.4 million of construction financing for the Outlet Collection at Riverwalk with an initial maximum recourse of 50% of the outstanding balance, which will be reduced to 25.0% upon completion of the project and the achievement of an 11.0% debt yield and a minimum level of tenant sales per square foot for twelve months;

(iv)

$20.4 million of Other Corporate Financing Arrangements; and

(v)

$7.0 million parent guarantee associated with the 110 N. Wacker mortgage.

The Woodlands Master Credit Facility and The Woodlands Resort & Conference Center loans are recourse to the entities that directly own The Woodlands operations. Certain of our loans contain provisions which grant the lender a security interest in the operating cash flow of the property that represents the collateral for the loan. Such provisions are not expected to impact our operations in 2015. Certain mortgage notes may be prepaid, but may be subject to a prepayment penalty equal to a yield-maintenance premium, defeasance, or a percentage of the loan balance. As of March 31, 2015, land, buildings and equipment and developments with a cost basis of $2.4 billion have been pledged as collateral for our mortgages, notes and loans payable.

As of March 31, 2015, we were in compliance with all of the financial covenants related to our debt agreements.

Master Planned Communities

The Woodlands Master Credit Facility is a $250.0 million credit facility consisting of a $125.0 million term loan and a $125.0 million revolver (together, the “TWL Facility”). The TWL Facility bears interest at one-month LIBOR plus 2.75% and has an August 2016 initial maturity date with two, one–year extension options. The extension options require a reduction of the total commitment to $220.0 million for the first extension and $185.0 million for the second extension. The TWL Facility also contains certain covenants that, among other things, require the maintenance of specified financial ratios, limit the incurrence of additional recourse indebtedness at The Woodlands, and limit distributions from The Woodlands to us based on a loan‑to‑value test. As of March 31, 2015, there is no undrawn availability based on the collateral value underlying the facility.

The Bridgeland Land Loan bears a fixed interest rate of 5.50% for the first five years and three-month LIBOR plus 2.75% for the remaining term and matures in June 2022. Beginning on June 29, 2014, annual principal payments are required in the amount of 5.00% of the then outstanding principal balance. In addition, Bridgeland has a revolving credit facility with aggregate maximum borrowing capacity of $140.0 million, of which $115.7 million has been utilized as of March 31, 2015, and which has a $30.0 million maximum outstanding loan amount at any time. The revolving loan bears interest at the greater of 5.00% or one-month LIBOR plus 3.25% and matures on June 29, 2015. We expect to refinance this loan prior to its maturity. This loan is intended to provide working capital at Bridgeland to accelerate development efforts to meet the demand of homebuilders for finished lots in the community. The Bridgeland loans are cross‑collateralized and cross‑defaulted and the Bridgeland Master Planned Community serves as collateral for the loans. The loans also require that Bridgeland maintain a minimum $3.0 million cash balance and a minimum net worth of $250.0 million. Additionally, we are restricted from making cash distributions from Bridgeland unless the revolving credit facility has no outstanding balance and one year of real estate taxes and debt service on the term loan have been escrowed with the lender.

The Summerlin Master Planned Community uses Special Improvement District (“SID”) bonds to finance certain common infrastructure improvements. These bonds are issued by the municipalities and, although unrated, are secured by the assessments on the land. The majority of proceeds from each bond issued is held in a construction escrow and disbursed to us as infrastructure projects are completed, inspected by the municipalities and approved for reimbursement. Accordingly, the SID bonds have been classified as debt, and the Summerlin Master Planned Community pays the debt service on the bonds semi‑annually. As Summerlin sells land, the buyers assume a proportionate share of the bond obligation at closing, and the residential sales contracts provide for the reimbursement of the principal amounts that we previously paid with respect to such proportionate share of the bond.

Operating Assets

On May 6, 2015, we closed on a $80.0 million non-recourse mortgage financing for the 10-60 Columbia Corporate Center buildings. The loan bears interest at LIBOR plus 1.75% and has an initial maturity date of May 6, 2020, with two, one-year extension options.

On March 25, 2015, we closed on a $23.0 million loan for 3831 Technology Forest Drive. The loan bears fixed interest at 4.50% and matures on March 24, 2026.

On November 10, 2014 we refinanced our $38.0 million loan and closed on a new $52.0 million loan for One Hughes Landing. The loan bears fixed interest at 4.30% and matures on December 1, 2029.

On July 18, 2014, we assumed a $4.6 million non-recourse mortgage loan at 1701 Lake Robbins. The loan bears fixed interest at 5.81% and has a maturity date of April 2017.

On July 15, 2014, we closed a $311.8 million financing for the construction of Downtown Summerlin development bearing interest at one-month LIBOR plus 2.25%. The loan has an initial maturity date of July 15, 2017, with two, one-year extension options.

On April 15, 2014, we paid $17.0 million cash in full satisfaction of the $16.0 million participating loan that we assumed as part of the acquisition of 70 CCC in August 2012. The non-recourse, interest only promissory note was due to mature on August 31, 2017 and included a participation right to the lender for 30.0% of the appreciation in the market value of the property after our 10.0% cumulative preferred return and repayment of the outstanding debt and our contributed equity. The final payment included approximately $0.7 million for this participation right based upon the appraised value of the property. On June 27, 2014, we closed on a new $20.0 million loan for 70 CCC that bears interest at one-month LIBOR plus 2.25% and has an initial maturity date of July 2017 with two, one-year extension options.

The $250.0 million non‑recourse first mortgage financing secured by Ward Village in Honolulu, Hawaii, bears interest at one-month LIBOR plus 2.50%. The loan may be drawn to a maximum $250.0 million to fund capital expenditures at the property, provided that the outstanding principal balance cannot exceed 65% of the property’s appraised value, and the borrowers are required to have a minimum 10.0% debt yield to draw additional loan proceeds under the facility. The loan permits partial repayment during its term in connection with property releases for development. In the third quarter of 2013, certain properties securing the loan were approved for condominium development. As a result, the properties were removed from the collateral pool and a minor principal paydown of the loan was required. The loan matures in September 2016, and $143.0 million of the principal balance was swapped to a 3.80% fixed rate for the term of the loan. The loan had a weighted‑average interest rate of 3.35% as of March 31, 2015. The undrawn portion of this loan was $11.3 million as of March 31, 2015.

Strategic Developments

On December 5, 2014 we closed on a $65.5 million non-recourse financing for the construction of Three Hughes Landing. The loan bears interest at one-month LIBOR plus 2.35%. The loan has an initial maturity date of December 5, 2017 with two, one-year extension options.

On November 6, 2014 we closed on a $600.0 million non-recourse construction loan for the Waiea and Anaha Condominium towers bearing interest at one-month LIBOR plus 6.75%. The loan has an initial maturity date of November 6, 2017, with two, one-year extension options.

On October 2, 2014, we closed on a $37.1 million construction financing for our Hughes Landing Hotel. The loan bears interest at one-month LIBOR plus 2.50%. The loan has an initial maturity of October 2018, with two, one-year extension options.

On August 6, 2014, we closed on a $69.3 million non-recourse construction financing for the Waterway Hotel bearing interest at one-month LIBOR plus 2.65%. The loan has an initial maturity of August 2018, with a one-year extension option. The development will be a 302-room Westin-branded hotel that will be owned and managed by us.

On June 30, 2014, we closed on a $143.0 million non-recourse construction financing for two office buildings bearing interest at one-month LIBOR plus 1.90%. The loan has an initial maturity date of June 30, 2018, with a one-year extension option.

Corporate

The $750.0 million in aggregate principal amount of 6.875% Senior Notes matures in 2021 (the “Senior Notes”). Interest is payable semiannually, on April 1 and October 1 of each year starting in April 2014. At any time prior to October 1, 2016, we may redeem up to 35% of the Senior Notes at a price equal to 106.875% using the proceeds from equity offerings. We may redeem all or part of the Senior Notes at any time on or after October 1, 2016 with a declining call premium thereafter to maturity. The Senior Notes contain customary terms and covenants for non‑investment grade senior notes and have no maintenance covenants.