NOTE 9 MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable are summarized as follows:


	March 31,		December 31,
(In thousands)	2017		2016
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	1,283,481	$	1,140,118
Special Improvement District bonds		40,886		44,023
Variable-rate debt:
Collateralized mortgages, notes and loans payable (a)		1,447,125		1,524,319
Deferred Financing Costs, net		(21,238)		(17,713)
Total mortgages, notes and loans payable	$	2,750,254	$	2,690,747

(a)

As more fully described below, $181.2 million and $182.1 million of variable‑rate debt has been swapped to a fixed-rate for the term of the related debt as of March 31, 2017 and December 31, 2016, respectively.

The following table presents our mortgages, notes, and loans payable by property, presented in order of extended maturity date:


					Maximum		Carrying Value
	Initial / Extended	Interest			Facility		March 31,		December 31,
($ in thousands)	Maturity (a)	Rate			Amount		2017		2016
Master Planned Communities
The Woodlands Master Credit Facility	August 2018	3.68	%	(b)	$	150,000		150,000		150,000
Summerlin South SID Bonds - S124	December 2019	5.95	%				$	123	$	123
Summerlin South SID Bonds - S128	December 2020	7.30	%					440		440
Summerlin South SID Bonds - S132	December 2020	6.00	%					1,248		1,268
Bridgeland Credit Facility	November 2020 / November 2022	4.60	%	(b)		65,000		65,000		65,000
Summerlin South SID Bonds - S151	June 2025	6.00	%					4,159		4,159
Summerlin South SID Bonds - S128C	December 2030	6.05	%					4,600		4,600
Summerlin South SID Bonds - S159	June 2035	6.00	%					2,389		2,389
Summerlin West SID Bonds - S812	October 2035	6.00	%					24,576		27,459
Master Planned Communities Total								252,535		255,438

Operating Assets
1701 Lake Robbins	April 2017	5.81	%					4,600		4,600
1725-35 Hughes Landing Boulevard	June 2018 / June 2019	2.58	%	(b)		143,000		109,876		105,647
70 Columbia Corporate Center	July 2017 / July 2019	3.18	%	(b)				20,000		20,000
Downtown Summerlin (c)	July 2017 / July 2019	3.18	%	(b)		311,800		305,888		302,981
The Westin at The Woodlands (c)	August 2018 / August 2019	3.58	%	(b)		69,300		58,077		58,077
110 N. Wacker	October 2019	5.21	%	(d)				21,759		22,704
Outlet Collection at Riverwalk	October 2017 / October 2019	3.68	%	(b)		56,100		55,293		55,778
Three Hughes Landing (c)	December 2017 / December 2019	3.28	%	(b)		65,455		36,462		35,053
Lakeland Village Center at Bridgeland	May 2018 / May 2020	3.28	%	(b)		14,000		10,644		9,979
Embassy Suites at Hughes Landing	October 2018 / October 2020	3.43	%	(b)		37,100		30,223		29,461
The Woodlands Resort & Conference Center	December 2018 / December 2020	4.18	%	(b)				70,000		70,000
One Merriweather	February 2020 / February 2021	3.08	%	(b)		49,900		34,072		23,588
HHC 242 Self-Storage	October 2019 / October 2021	3.53	%	(b)		6,658		4,995		3,708
10-60 Columbia Corporate Centers / One Mall North	May 2020 / May 2022	3.04	%	(b)(e)				94,463		80,000
20/25 Waterway Avenue	May 2022	4.79	%					13,825		13,886
Millennium Waterway Apartments	June 2022	3.75	%					55,584		55,584
Ward Village	September 2021 / September 2023	3.54	%	(b)(f)				238,718		238,718
9303 New Trails	December 2023	4.88	%					12,286		12,378
4 Waterway Square	December 2023	4.88	%					35,979		36,249
3831 Technology Forest Drive	March 2026	4.50	%					22,282		22,383
Millennium Six Pines Apartments	August 2028	3.39	%					42,500		42,500
3 Waterway Square	August 2028	3.94	%					51,279		51,590
One Lakes Edge	March 2029	4.50	%					69,440		68,874
One Hughes Landing	December 2029	4.30	%					52,000		52,000
Downtown Summerlin SID Bonds - S128	December 2030	6.05	%					3,350		3,350
Two Hughes Landing	December 2030	4.20	%					48,000		48,000
Hughes Landing Retail	December 2036	3.50	%			35,000		35,000		35,000
Columbia Regional Building	February 2037	4.48	%			25,000		25,000		22,188
Other								237		235
Capital lease obligations	various	3.60	%					—		1
Operating Assets Total								1,561,832		1,524,512

Strategic Developments
Waiea and Anaha (g)	November 2017 / November 2019	7.68	%	(b)		410,000		137,689		160,847
Ke Kilohana	December 2019 / December 2020	4.18	%	(b)		142,656		—		—
Two Merriweather	October 2020 / October 2021	3.43	%	(b)		33,156		—		—
Ae`o	December 2019 / December 2021	4.93	%	(b)		230,000		—		—
HHC 2978 Self-Storage Facility	January 2020 / January 2022	3.53	%	(b)		6,368		3,729		1,715
Strategic Developments Total								141,418		162,562

Other Corporate Financing Arrangements	June 2018	3.00	%					15,707		15,948
Senior Notes	October 2021	6.88	%					—		750,000
Senior Notes	March 2025	5.38	%					800,000		—
Deferred Financing Costs (h)								(21,238)		(17,713)
Total mortgages, notes, and loans payable							$	2,750,254	$	2,690,747

(a)

Maturity dates presented include initial maturity date as well as the extended or final maturity date as contractually stated. Extension periods generally can be exercised at our option at the initial maturity date, subject to customary extension terms that are based on property performance at the initial maturity date. Such extension terms may include, but are not limited to, minimum debt service coverage, minimum occupancy levels or condominium sales levels, as applicable and other performance criteria. In certain cases due to property performance not meeting covenants, we may have to pay down a portion of the loan in order to obtain the extension.

(b)

The interest rate presented is based on the one month LIBOR rate, which was 0.93% at March 31, 2017.

(c)

Based on current performance of Downtown Summerlin, Three Hughes Landing and The Westin at The Woodlands, a paydown may be required in order to exercise the extension option.

(d)

The $21.8 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.

(f)

$119.4 million of the outstanding principal balance is swapped to a 3.64% fixed-rate through maturity.

(g)

The Waiea and Anaha facility originally provided available financing of up to $600 million and is now reduced to $410 million subsequent to paydowns made on the loan in fourth quarter 2016. The facility is a non-recourse construction loan cross-collateralized by the condominium towers bearing interest at one-month LIBOR plus 6.75% with an initial maturity date of November 6, 2017, and two, one-year extension options. In August 2016, the original financing agreement was modified. The modification allowed for an immediate advance on the loan of $50 million, returning a substantial portion of the project’s prior cash equity contribution to us and provided for an additional distribution of up to $113 million from Waiea’s initial bulk closing in November 2016. Waiea and Anaha sales proceeds are to be applied to the loan balance as well as fund any construction costs remaining for the condominium towers until the loan is repaid in full. The interest rate and maturity date remained unchanged.

(h)

As of December 31, 2016, this amount included $5.6 million of unamortized underwriting fees which were written-off in March 2017 in conjunction with the redemption of the senior notes due 2021. See Note 5 – Recent Transactions for additional information.

The weighted average interest rate on our mortgages, notes and loans payable, excluding interest rate hedges, was 4.41% and 4.71% as of March 31, 2017 and December 31, 2016, 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)

$800.0 million of Senior Notes;

(ii)

$311.8 million financing for the Downtown Summerlin development which has an initial maximum recourse of 35% 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, 2017, 35% of the outstanding loan balance remains recourse to HHC;

(iii)

$56.1 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, 2017, 50% of the outstanding loan balance remains recourse to HHC;

(iv)

$15.7 million of Other Corporate Financing Arrangements; and

(v)

$7.0 million of the 110 N. Wacker mortgage.

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 subject to a prepayment penalty equal to a yield maintenance premium, defeasance, or a percentage of the loan balance. As of March 31, 2017, land, buildings and equipment and developments with a net book value basis of $3.2 billion have been pledged as collateral for our mortgages, notes and loans payable.

As of March 31, 2017, we were in compliance with all financial covenants included in the debt agreements governing our indebtedness.

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 had an August 2016 initial maturity date with two, one–year extension options. In July 2016, we exercised our first one-year extension option, which reduced the total commitment to $175.0 million. Semi-annual principal payments of $25.0 million began on December 31, 2016 and continue through the second, optional one-year extension period. The TWL Facility and The Woodlands Resort & Conference Center loans are recourse to the entities that directly own The Woodlands operations. 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. On April 27, 2017, TWL Facility was upsized to increase the facility by $30.0 million for a total of $180.0 million, providing the ability to fund the development of Creekside Park Apartments or for other corporate purposes. The amended revolver bears interest at one-month LIBOR plus 2.75% with an initial maturity date of April 27, 2020 and a one-year extension option.

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 the three months ended March 31, 2017, no new SID bonds were issued and $2.5 million in obligations were assumed by buyers.

Operating Assets

On April 6, 2017, we paid $4.6 million cash in full satisfaction of the $4.6 million mortgage loan that we assumed as part of the acquisition of 1701 Lake Robbins in July 2014. The non-recourse, fixed interest mortgage loan was due to mature in April 2017.

On January 19, 2017, we closed on a non-recourse financing totaling $25.0 million replacing the $23.0 million construction loan on the Columbia Regional Building, a retail building located in Columbia, Maryland. The loan, which matures on February 11, 2037, bears interest at 4.48% and is interest only for two years, then begins amortizing on a 30-year basis.

On January 17, 2017, we amended and restated our $80.0 million non-recourse mortgage financing for the 10-60 Columbia Corporate Center office buildings with a $94.5 million loan. This amendment added One Mall North, a 97,500 square foot office building in Columbia, Maryland, to the collateral pool and allowed us to draw $14.5 million. The loan bears interest at one-month LIBOR plus 1.75% and has an initial maturity date of May 6, 2020, with two, one-year extension options.

On November 25, 2016, we amended and extended our $73.5 million construction loan for One Lakes Edge with a $71.9 million mortgage. Contemporaneously with this amendment, we made a $3.0 million principal reduction payment as required by the loan agreement. The loan bears interest at one-month LIBOR plus 3.50%. On February 23, 2017, we refinanced the One Lakes Edge construction loan with a $69.4 million Fannie Mae loan with an initial maturity of March 2029 and two, one year extensions. The new loan has a fixed rate of 4.50% and is interest only for four years, then begins amortizing on a 30-year basis.