NOTE 9 MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable are summarized as follows:


	March 31,		December 31,
(In thousands)	2016		2015
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	1,060,664	$	1,087,642
Special Improvement District bonds		53,202		53,739
Variable-rate debt:
Collateralized mortgages, notes and loans payable (a)		1,441,551		1,314,973
Deferred Financing Costs, net of accumulated amortization of $13.1 million and $12.7 million, respectively		(11,779)		(12,392)
Total mortgages, notes and loans payable	$	2,543,638	$	2,443,962

(a)

As more fully described below, $208.5 million and $209.5 million of variable‑rate debt has been swapped to a fixed rate for the term of the related debt as of March 31, 2016 and December 31, 2015, respectively.

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		2016		2015
Master Planned Communities
Bridgeland Credit Facility	November 2022	4.60	%		$	65,000	$	50,284	$	40,072
Summerlin South SID Bonds - S124	December 2019	5.95	%					159		159
Summerlin South SID Bonds - S128	December 2020	6.05	%					534		534
Summerlin South SID Bonds - S128C	December 2030	6.05	%					4,855		4,856
Summerlin South SID Bonds - S132	December 2020	6.00	%					1,645		1,676
Summerlin South SID Bonds - S151	June 2025	6.00	%					4,534		4,534
Summerlin South SID Bonds - S159	June 2035	6.00	%					9,020		9,020
Summerlin West SID Bonds - S808/S810	April 2031	6.00	%					1,026		1,047
Summerlin West SID Bonds - S812	October 2035	6.00	%					27,844		28,328
The Woodlands Master Credit Facility	August 2018	3.19	%	(b)		200,000		192,663		192,663
Master Planned Communities Total								292,564		282,889

Operating Assets
10-60 Columbia Corporate Centers	May 2022	2.80	%	(b)(e)				80,000		80,000
70 Columbia Corporate Center	July 2019	2.69	%	(b)				20,000		20,000
Columbia Regional Building	March 2018	2.44	%	(b)		23,008		22,188		22,188
Downtown Summerlin	July 2019	2.69	%	(b)		311,800		291,950		289,804
Downtown Summerlin SID Bonds - S108	December 2016	5.95	%					235		235
Downtown Summerlin SID Bonds - S128	December 2030	6.05	%					3,350		3,350
One Hughes Landing	December 2029	4.30	%					52,000		52,000
Two Hughes Landing	December 2030	4.20	%					48,000		48,000
1725-35 Hughes Landing Boulevard	June 2019	2.09	%	(b)		143,000		101,441		89,677
Hughes Landing Hotel	October 2020	2.94	%	(b)		37,100		23,824		20,064
Hughes Landing Retail	December 2018	2.39	%	(b)		36,575		32,399		28,726
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	%	(d)				25,537		26,481
9303 New Trails	December 2023	4.88	%					12,647		12,734
One Lakes Edge	November 2018	2.69	%	(b)		73,525		69,047		67,517
Outlet Collection at Riverwalk	October 2018	3.19	%	(b)		64,400		56,100		56,100
3831 Technology Forest Drive	March 2026	4.50	%					22,665		22,759
The Westin at The Woodlands	August 2019	3.09	%	(b)		69,300		49,658		33,361
The Woodlands Resort & Conference Center	December 2020	3.19	%	(b)				85,000		85,000
Ward Village	September 2016	3.46	%	(b)(c)		250,000		238,716		238,716
20/25 Waterway Avenue	May 2022	4.79	%					14,056		14,112
3 Waterway Square	August 2028	3.94	%					52,000		52,000
4 Waterway Square	December 2023	4.88	%					37,037		37,293
Capital lease obligations	various	3.60	%					49		52
Operating Assets Total								1,398,083		1,360,353

Strategic Developments
HHC 2978 Self Storage Facility	January 2022	3.04	%	(b)		6,368		—		—
HHC 242 Self Storage Facility	October 2021	3.04	%	(b)		6,658		—		—
Lakeland Village Center	May 2020	2.79	%	(b)		14,000		6,694		—
One Merriweather	February 2020	2.59	%	(b)		49,900		—		—
Three Hughes Landing	December 2019	2.79	%	(b)		65,455		28,710		23,268
Waiea and Anaha Condominiums	November 2019	7.19	%	(b)		600,000		67,340		27,817
Strategic Developments Total								102,744		51,085

Other Corporate Financing Arrangements	June 2018	3.00	%			22,700		18,553		18,794
Senior Notes	October 2021	6.88	%					750,000		750,000
Unamortized underwriting fees								(6,527)		(6,767)

Deferred Financing Costs, net of accumulated amortization of $13.1 million and $12.7 million, respectively								(11,779)		(12,392)

Total mortgages, notes, and loans payable							$	2,543,638	$	2,443,962

(a)

Maturity date includes any extension periods that can be exercised at our option and which may be 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 0.44% at March 31, 2016.

(c)

$143.0 million of the outstanding principal balance is swapped to a 3.81% fixed rate maturity. As of March 31, 2016 there is no undrawn availability on this facility. Management expects to refinance this note.

(d)

The $25.5 million outstanding principal balance is swapped to a 5.21% fixed rate through maturity.

(e)

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

The weighted average interest rate on our mortgages, notes and loans payable, excluding interest rate hedges, was 4.50% and 4.44% as of March 31, 2016 and December 31, 2015, respectively.

All of the mortgage debt is secured by the individual properties 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. As of March 31, 2016, 35% of the outstanding loan balance is recourse to HHC;

(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. As of March 31, 2016, 50% of the outstanding loan balance is recourse to HHC;

(iv)

$20.4 million of Other Corporate Financing Arrangements; and

(v)

$7.0 million of 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 March 31, 2016, 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, 2016, we were in compliance with all of the financial covenants related to our debt agreements.

Master Planned Communities

On November 9, 2015, we refinanced $15.2 million of existing debt in connection with closing on a modification and upsize of the Bridgeland Credit Facility. The refinanced loan bears interest at three-month LIBOR plus 3.15%, with a 4.60% floor, 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 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 March 31, 2016, there was $7.3 million available to be drawn based on the collateral value underlying the facility.

The Summerlin MPC uses SID bonds to finance certain common infrastructure improvements. These bonds are issued by the municipalities and 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 MPC 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 SID bonds were issued and $16.7 million in SID bonds were assumed by buyers in connection with 2015 and 2014 land sales.

Operating Assets

On December 30, 2015, we refinanced our 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.

Strategic Developments

On February 25, 2016, we closed on a $49.9 million non-recourse construction loan for One Merriweather. The loan bears interest at one-month LIBOR plus 2.15% with an initial maturity date of February 25, 2020, with a one-year extension option. No amounts were drawn related to this loan as of March 31, 2016.

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. No amounts were drawn related to this loan as of March 31, 2016.

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. No amounts were drawn related to this loan as of March 31, 2016.

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.

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. 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 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.