NOTE 8 MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable are summarized as follows:


	December 31,
(In thousands)	2015		2014
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	1,087,642	$	1,008,165
Special Improvement District bonds		53,739		22,389
Variable-rate debt:
Collateralized mortgages, notes and loans payable (a)		1,314,973		962,916
Deferred Financing Costs, net of accumulated amortization of $12.7 million and $6.9 million, respectively		(12,392)		(14,663)
Total mortgages, notes and loans payable	$	2,443,962	$	1,978,807

(a)

As more fully described below, $209.5 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		December 31,		December 31,
($ In thousands)	Maturity (a)	Rate			Amount		2015		2014
Master Planned Communities
Bridgeland Land Loan	November 2022	4.60	%	(b)	$	65,000	$	40,072	$	15,874
Bridgeland Development Loan	N/A	5.00	%					—		10
Summerlin South SID Bonds - S108	December 2016	5.95	%					—		563
Summerlin South SID Bonds - S124	December 2019	5.95	%					159		236
Summerlin South SID Bonds - S128	December 2020	6.05	%					534		623
Summerlin South SID Bonds - S128C	December 2030	6.05	%					4,856		5,274
Summerlin South SID Bonds - S132	December 2020	6.00	%					1,676		2,936
Summerlin South SID Bonds - S151	June 2025	6.00	%					4,534		6,211
Summerlin South SID Bonds - S159	June 2035	6.00	%					9,020		—
Summerlin West SID Bonds - S808/S810	April 2031	6.00	%					1,047		2,805
Summerlin West SID Bonds - S812	October 2035	6.00	%					28,328		—
The Woodlands Master Credit Facility	August 2018	3.11	%	(b)		200,000		192,663		176,663
Master Planned Communities Total								282,889		211,195

Operating Assets
10-60 Columbia Corporate Centers	May 2022	2.76	%	(b)(d)				80,000		—
70 Columbia Corporate Center	July 2019	2.61	%	(b)				20,000		20,000
Columbia Regional Building	March 2018	2.36	%	(b)		23,008		22,188		20,513
Downtown Summerlin	July 2019	2.61	%	(b)		311,800		289,804		229,153
Downtown Summerlin SID Bonds - S108	December 2016	5.95	%					235		310
Downtown Summerlin SID Bonds - S128	December 2030	6.05	%					3,350		3,431
One Hughes Landing	December 2029	4.30	%					52,000		52,000
Two Hughes Landing	December 2030	4.20	%					48,000		19,992
1725-35 Hughes Landing Boulevard	June 2019	2.01	%	(b)		143,000		89,677		47,513
Hughes Landing Hotel	October 2020	2.86	%	(b)		37,100		20,064		—
Hughes Landing Retail	December 2018	2.31	%	(b)		36,575		28,726		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)				26,481		29,000
9303 New Trails	December 2023	4.88	%					12,734		13,074
One Lake's Edge	November 2018	2.86	%	(b)		73,525		67,517		40,787
Outlet Collection at Riverwalk	October 2018	3.11	%	(b)		64,400		56,100		47,118
3831 Technology Forest Drive	March 2026	4.50	%					22,759		—
The Woodlands Resort & Conference Center	December 2020	3.11	%	(b)				85,000		76,027
Ward Village	September 2016	3.42	%	(b)(c)		250,000		238,716		238,716
20/25 Waterway Avenue	May 2022	4.79	%					14,112		14,330
3 Waterway Square	August 2028	3.94	%					52,000		52,000
4 Waterway Square	December 2023	4.88	%					37,293		38,289
Capital lease obligations	various	3.60	%					52		135
Operating Assets Total								1,326,992		1,019,996

Strategic Developments
HHC 242 Self Storage Facility	October 2021	2.96	%	(b)		6,658		—		—
Lakeland Village Center	May 2020	2.71	%	(b)		14,000		—		—
Three Hughes Landing	December 2019	2.71	%	(b)		65,455		23,268		—
Waiea and Anaha Condominiums	November 2019	7.11	%	(b)		600,000		27,817		—
Waterway Square Hotel	August 2019	3.01	%	(b)		69,300		33,361		—
Strategic Developments Total								84,446		—

Other Corporate Financing Arrangements	June 2018	3.00	%					18,794		19,968
Senior Notes	October 2021	6.88	%					750,000		750,000
Unamortized underwriting fees								(6,767)		(7,689)

Deferred Financing Costs, net of accumulated amortization of $12.7 million and $6.9 million, respectively							(12,392)			(14,663)

Total mortgages, notes, and loans payable							$	2,443,962	$	1,978,807

(a)

Maturity date includes any extension periods that can be exercised at our option and are subject to customary extension terms such as minimum debt service coverage, minimum occupancy levels and other performance criteria.

(b)

The interest rate presented is based on the one month LIBOR rate which was 0.36% at December 31, 2015.

(c)

$143.0 million of the outstanding principal balance is swapped to a 3.81% fixed rate to maturity. As of December 31, 2015, there is no undrawn availability on this facility.

(d)

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

(e)

The $26.5 million outstanding principal balance is swapped to a 5.21% fixed rate to maturity.

The weighted average interest rate on our mortgages, notes and loans payable, excluding interest rate hedges, was 4.44% and 4.61% as of December 31, 2015 and 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 with an initial maximum recourse of 35.0% assuming the loan is fully drawn, 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%, 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 2016. 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 December 31, 2015, land, buildings and equipment and developments with a cost basis of $2.3 billion have been pledged as collateral for our mortgages, notes and loans payable.

The following table summarizes the contractual obligations relating to our mortgages, notes and loans payable as of December 31, 2015 based on final maturity dates:


	Mortgages, notes
	and loans payable
(In thousands)	principal payments

2016	$	272,269
2017		38,464
2018		342,670
2019		504,135
2020		111,488
Thereafter		1,187,328
Total	$	2,456,354

As of December 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 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 December 31, 2015, there was $7.3 million remaining to be drawn based on the collateral value underlying the facility.

On November 9, 2015, we refinanced $15.2 million of existing debt related to both the Bridgeland Land Loan and the Bridgeland Development Loan. The refinanced loan bears interest at one-month LIBOR plus 3.15%, with a 4.60% floor rate, and has an initial maturity date of November 2020 with two, one-year extension options. The proceeds are intended to provide working capital at Bridgeland for development efforts to meet the demand of homebuilders for finished lots in the community.

The Summerlin Master Planned Community uses 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. In 2015, $54.0 million in new SIDs were issued to finance our Summerlin MPC projects and are being held in a third-party escrow account. Subsequent to issuance, $16.7 million in bond obligations were assumed by buyers relating to 2015 and 2014 land sales.

Operating Assets

On December 30, 2015, we refinanced our $95.0 million construction financing for The Woodlands Resort & Conference Center with an $85.0 million mortgage. The loan bears interest at LIBOR plus 2.75% and has an initial maturity date of December 30, 2018, with two, one-year extension options.

On November 24, 2015, we refinanced a $41.2 million construction financing and closed on a new $48.0 million loan for Two Hughes Landing. The loan bears fixed interest at 4.20% and matures in December 2030.

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.

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

On October 3, 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 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. The loan has an initial maximum recourse of 35.0% assuming the loan is fully drawn, 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. Upon completion of the project and achievement of a 1.25x debt service coverage ratio, 90.0% occupancy and a minimum level of tenant sales per square foot for 12 months, the recourse amount will decrease to 10.0% of the outstanding principal. Due to the recent opening, we have not met these criteria.

On June 30, 2014, we closed on a $143.0 million non-recourse construction financing for 1725 & 1735 Hughes Landing Boulevard bearing interest at one-month LIBOR plus 1.65%. The loan has an initial maturity date of June 30, 2018, with a one-year extension option.

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 Columbia Corporate Center (“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.

On December 20, 2013, we closed on a $36.6 million non‑recourse loan for the construction of Hughes Landing Retail, a 123,000 square foot retail component of Hughes Landing bearing interest at one-month LIBOR plus 1.95%. The loan has an initial maturity date of December 20, 2016, with two, one–year extension options.

On November 25, 2013, we closed on a $73.5 million non‑recourse loan for the construction of an eight‑story, Class A, multi‑family project within Hughes Landing called One Lakes Edge. The loan bears interest at one-month LIBOR plus 2.50% with an initial maturity date of November 25, 2016, with two, one–year extension options.

On October 24, 2013, we closed on a $64.4 million partial recourse construction loan for the Outlet Collection at Riverwalk. The loan bears interest at one-month LIBOR plus 2.75%, with an initial maturity date of October 24, 2016 with two, one–year extension options. The initial recourse amount of 50.0% 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 12 months. Due to the recent opening, we have not met these criteria.

On August 2, 2013, we refinanced the existing $43.3 million construction loan on 3 Waterway Square, an 11-story, 232,000 square foot office building in The Woodlands, with a non-recourse first mortgage financing totaling $52.0 million. The loan bears interest at 3.94% and matures on August 11, 2028.

On March 15, 2013, we closed on a non‑recourse financing totaling $23.0 million for the redevelopment of the Columbia Regional Building, a retail building located in Columbia, Maryland. The loan bears interest at one-month LIBOR plus 2.00%. The loan matures on March 15, 2016, and has two, one–year extension options.

Strategic Developments

On February 25, 2016, we closed on a $49.9 million non-recourse construction loan for One Merriweather, bearing interest at one-month LIBOR plus 2.15% with an initial maturity date of February 25, 2020, with a one-year extension option.

On January 27, 2016, we closed on a $6.4 million non-recourse construction loan for the HHC 2978 Self-Storage Facility, bearing interest at one-month LIBOR plus 2.60% with an initial maturity date of January 2020, with two one-year extension options.

On October 23, 2015, we closed on a $6.7 million non-recourse construction loan for the HHC 242 Self-Storage Facility, bearing interest at one-month LIBOR plus 2.60% with an initial maturity date of October 2019, with two one-year extension options.

On May 15, 2015, we closed on a $14.0 million non-recourse construction loan for Lakeland Village Center, bearing interest at one-month LIBOR plus 2.35% with an initial maturity date of May 2018, with two one-year extension options.

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 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.

Corporate

On October 2, 2013, we issued $750.0 million in aggregate principal amount of 6.875% Senior Notes due 2021 (the “Senior Notes”) and received approximately $741.3 million of net cash proceeds. 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.