NOTE 8 MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable are summarized as follows:


	June 30,		December 31,
	2015		2014
	(In thousands)
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	1,030,090	$	1,008,165
Special Improvement District bonds		17,516		22,389
Variable-rate debt:
Collateralized mortgages, notes and loans payable (a)		1,238,568		962,916
Total mortgages, notes and loans payable	$	2,286,174	$	1,993,470

(a)

As more fully described below, $212.0 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		June 30,		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	July 2016	5.00	%		$	30,000		25,106		10
Summerlin South SID Bonds - S108	December 2016	5.95	%					411		563
Summerlin South SID Bonds - S124	December 2019	5.95	%					177		236
Summerlin South SID Bonds - S128	December 2020	6.05	%					535		623
Summerlin South SID Bonds - S128C	December 2030	6.05	%					5,025		5,274
Summerlin South SID Bonds - S132	December 2020	6.00	%					1,844		2,936
Summerlin South SID Bonds - S151	June 2025	6.00	%					4,714		6,211
Summerlin West SID Bonds - S808/S810	April 2031	6.00	%					1,069		2,805
The Woodlands Master Credit Facility (c)	August 2018	2.94	%	(b)		200,000		192,663		176,663
Master Planned Communities Total								247,418		211,195

Operating Assets
10-60 Columbia Corporate Centers (d)	May 2022	2.67	%	(b)				80,000		—
70 Columbia Corporate Center	July 2019	2.44	%	(b)				20,000		20,000
Columbia Regional Building	March 2018	2.19	%	(b)		23,008		22,122		20,513
Downtown Summerlin	July 2019	2.44	%	(b)		311,800		276,417		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	%					52,000		52,000
Two Hughes Landing	September 2018	2.84	%	(b)		41,230		31,250		19,992
Hughes Landing Retail	December 2018	2.14	%	(b)		36,575		23,393		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	October 2019	5.21	%	(e)				28,370		29,000
9303 New Trails	December 2023	4.88	%					12,906		13,074
One Lake's Edge	November 2018	2.69	%	(b)		73,525		59,169		40,787
Outlet Collection at Riverwalk	October 2018	2.94	%	(b)		64,400		55,454		47,118
3831 Technology Forest Drive	March 2026	4.50	%					22,940		—
The Woodlands Resort & Conference Center	February 2019	3.69	%	(b)		95,000		83,109		76,027
Ward Village (f)	September 2016	3.36	%	(b)		250,000		238,716		238,716
20/25 Waterway Avenue	May 2022	4.79	%					14,221		14,330
3 Waterway Square	August 2028	3.94	%					52,000		52,000
4 Waterway Square	December 2023	4.88	%					37,797		38,289
Capital lease obligations	various	3.60	%					91		135
Operating Assets Total								1,173,880		972,483

Strategic Developments
1725-35 Hughes Landing Boulevard	June 2019	2.09	%	(b)		143,000		72,617		47,513
Lakeland Village Center	May 2020	2.54	%	(b)		14,000		—		—
Three Hughes Landing	December 2019	2.54	%	(b)		65,455		9,695		—
Hughes Landing Hotel	October 2020	2.69	%	(b)		37,100		1,133		—
Waiea and Anaha Condominiums	November 2019	6.94	%	(b)		600,000		7,985		—
Waterway Square Hotel	August 2019	2.84	%	(b)		69,300		11,369		—
Strategic Developments Total								102,799		47,513

Other Corporate Financing Arrangements	June 2018	3.00	%			22,700		19,313		19,968
Senior Notes	October 2021	6.88	%					750,000		750,000
Unamortized underwriting fees								(7,236)		(7,689)
							$	2,286,174	$	1,993,470

(a)

Maturity date includes any extension periods that 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, which was 0.19% at June 30, 2015.

(c)

The Woodlands Credit Facility was amended and restated on July 31, 2015.

(d)

$40.0 million of the outstanding principal balance is swapped to a 3.41% fixed rate maturity.

(e)

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

(f)

$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 4.43% and 4.61% as of June 30, 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. 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 June 30, 2015, land, buildings and equipment and developments with a cost basis of $2.5 billion have been pledged as collateral for our mortgages, notes and loans payable.

As of June 30, 2015, we were in compliance with all of the financial covenants related to our debt agreements.

Master Planned Communities

The Woodlands Master Credit Facility was amended and restated on July 31, 2015 to a $200.0 million maximum facility amount consisting of a $100.0 million term loan and a $100.0 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 $175.0 million for the first extension and semi-annual principal payments of $25.0 million during the second extension period. 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. The amendment also modified certain covenants to allow for more construction loan guarantees by the entities that directly own The Woodlands than would otherwise have been permitted by the prior facility. As of June 30, 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. 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 $130.3 million has been utilized as of June 30, 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%. In June 2015, we obtained a one-year extension for the revolver, which now matures on July 15, 2016. 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.

Operating Assets

On May 6, 2015, we closed on an $80.0 million non-recourse mortgage financing for the 10-60 Columbia Corporate Center office 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 non-recourse mortgage financing for 3831 Technology Forest Drive. The loan bears fixed interest at 4.50% and matures on March 24, 2026.

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.