NOTE 9 MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable are summarized as follows:


	September 30,		December 31,
(In thousands)	2017		2016
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	1,476,480	$	1,140,118
Special Improvement District bonds		32,266		44,023
Variable-rate debt:
Collateralized mortgages, notes and loans payable (a)		1,505,534		1,524,319
Unamortized bond issuance costs		(7,089)		(5,779)
Deferred financing costs		(13,743)		(11,934)
Total mortgages, notes and loans payable	$	2,993,448	$	2,690,747

(a)

As more fully described below, $179.3 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 September 30, 2017 and December 31, 2016, respectively.

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


					Maximum		Carrying Value
	Initial / Extended	Interest			Facility		September 30,		December 31,
($ in thousands)	Maturity (a)	Rate			Amount		2017		2016
Master Planned Communities
Summerlin South SID Bonds - S124	December 2019	5.95	%				$	104	$	123
Summerlin South SID Bonds - S128	December 2020	7.30	%					390		440
Summerlin South SID Bonds - S132	December 2020	6.00	%					1,082		1,268
The Woodlands Master Credit Facility	April 2020 / April 2021	3.98	%	(b)	$	180,000		150,000		150,000
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	%					3,964		4,159
Summerlin South SID Bonds - S128C	December 2030	6.05	%					4,467		4,600
Summerlin South SID Bonds - S159	June 2035	6.00	%					2,353		2,389
Summerlin West SID Bonds - S812	October 2035	6.00	%					17,019		27,459
Master Planned Communities Total								244,379		255,438

Operating Assets
1701 Lake Robbins	April 2017	5.81	%					—		4,600
Outlet Collection at Riverwalk	October 2017 / October 2018	3.98	%	(b)		54,325		54,325		55,778
1725-35 Hughes Landing Boulevard	June 2018 / June 2019	2.88	%	(b)		143,000		115,999		105,647
The Westin at The Woodlands (c)	August 2018 / August 2019	3.88	%	(b)		57,946		57,946		58,077
110 North Wacker	October 2019	5.21	%	(e)				19,870		22,704
Three Hughes Landing (c)	December 2017 / December 2019	3.58	%	(b)		65,455		43,661		35,053
Lakeland Village Center at Bridgeland	May 2018 / May 2020	3.58	%	(b)		14,000		11,292		9,979
Embassy Suites at Hughes Landing	October 2018 / October 2020	3.73	%	(b)		37,100		31,245		29,461
The Woodlands Resort & Conference Center	December 2018 / December 2020	4.48	%	(b)				67,000		70,000
One Merriweather	February 2020 / February 2021	3.38	%	(b)		49,900		41,271		23,588
Downtown Summerlin	September 2020 / September 2021	3.38	%	(b) (d)		275,885		275,883		302,981
HHC 242 Self-Storage	October 2019 / October 2021	3.83	%	(b)		6,658		6,137		3,708
HHC 2978 Self-Storage Facility	January 2020 / January 2022	3.83	%	(b)		6,368		5,521		1,715
70 Columbia Corporate Center	May 2020 / May 2022	3.23	%	(b)(f)				20,000		20,000
One Mall North	May 2020 / May 2022	3.48	%	(b)(f)				14,463		—
10-60 Columbia Corporate Centers	May 2020 / May 2022	3.20	%	(b)(f)(g)				80,000		80,000
20/25 Waterway Avenue	May 2022	4.79	%					13,708		13,886
Millennium Waterway Apartments	June 2022	3.75	%					55,344		55,584
Ward Village	September 2021 / September 2023	3.69	%	(b)(h)				238,718		238,718
9303 New Trails	December 2023	4.88	%					12,098		12,378
4 Waterway Square	December 2023	4.88	%					35,431		36,249
3831 Technology Forest Drive	March 2026	4.50	%					22,088		22,383
Kewalo Basin Harbor	September 2027	3.98	%	(b)		11,562		—		—
Millennium Six Pines Apartments	August 2028	3.39	%					42,500		42,500
3 Waterway Square	August 2028	3.94	%					50,647		51,590
One Hughes Landing	December 2029	4.30	%					52,000		52,000
Downtown Summerlin SID Bonds - S128	December 2030	6.05	%					2,887		3,350
Two Hughes Landing	December 2030	4.20	%					48,000		48,000
One Lakes Edge	March 2029 / March 2031	4.50	%					69,440		68,874
Hughes Landing Retail	December 2036	3.50	%					35,000		35,000
Columbia Regional Building	February 2037	4.48	%					25,000		22,188
Other								—		235
Capital lease obligations	Various	3.60	%					—		1
Operating Assets Total								1,547,474		1,526,227

Strategic Developments
Waiea and Anaha (i)	November 2017 / November 2019	7.98	%	(b)		410,000		195,269		160,847
Ke Kilohana	December 2019 / December 2020	4.48	%	(b)		142,656		—		—
Two Merriweather	October 2020 / October 2021	3.73	%	(b)		33,156		11,932		—
Ae`o	December 2019 / December 2021	5.23	%	(b)		230,000		1		—
100 Fellowship Drive	May 2022	2.73	%	(b)		51,426		1		—
Strategic Developments Total								207,203		160,847

Other corporate financing arrangements	July 2018	3.00	%					15,224		15,948
Senior Notes	October 2021	6.88	%					—		750,000
Senior Notes	March 2025	5.38	%					1,000,000		—
Unamortized bond issuance costs								(7,089)		(5,779)
Deferred financing costs								(13,743)		(11,934)
Total mortgages, notes, and loans payable							$	2,993,448	$	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 1.23% at September 30, 2017.

(c)

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

(d)

On July 14, 2017, the Downtown Summerlin loan’s original maturity date of July 2017 was modified to be September 13, 2020, at which time we made a $30.0 million paydown on the facility and further extended the new maturity date and extension date. Additionally, the interest rate was reduced from LIBOR plus 2.25% to LIBOR plus 2.15%.

(e)

The $19.9 million outstanding principal balance is swapped to a 5.21% fixed-rate through maturity.

(f)

These three notes are part of one master facility, with all three respective properties collateralizing the total $114.5 million indebtedness.

(g)

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

(h)

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

(i)

The Waiea and Anaha facility was repaid in full on October 27, 2017.

The weighted average interest rate on our mortgages, notes and loans payable, excluding interest rate hedges, was 4.64% and 4.71% as of September 30, 2017 and December 31, 2016, respectively.

Except for the items listed below, all of the mortgage debt is secured by the individual properties listed in the table above and is non-recourse to HHC:

(i)

$1.0 billion of Senior Notes;

(ii)

$275.9 million financing for the Downtown Summerlin development which has maximum recourse of 35% of the outstanding balance, which will reduce to 15.0% upon 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 September 30, 2017, 35% of the outstanding loan balance remains recourse to HHC;

(iii)

$27.2 million, or 50% of the Outlet Collection at Riverwalk outstanding loan balance is recourse to HHC;

(iv)

$15.2 million of Other Corporate Financing Arrangements; and

(v)

$19.9 million of the 110 North 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 September 30, 2017, land, buildings and equipment and developments with a net book value basis of $3.5 billion have been pledged as collateral for our mortgages, notes and loans payable.

As of September 30, 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 refinanced 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 new facility 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 nine months ended September 30, 2017, no new SID bonds were issued and $9.9 million in obligations were assumed by buyers.

Operating Assets

On October 24, 2017, we exercised our one-year extension option on our $54.3 million Outlet Collection at Riverwalk facility which extended the maturity date to October 24, 2018.

On September 13, 2017, we modified and extended our $311.8 million Downtown Summerlin facility with a $30.0 million paydown. The modified loan has a maximum facility of $275.9 million and bears interest at one-month LIBOR plus 2.15% with a maturity of September 13, 2020, with one, one-year extension option.

On August 11, 2017, we closed on a construction loan totaling $11.6 million for Kewalo Harbor, located in Honolulu, Hawai‘i, to be used for improvements benefitting our Ward Village development. The loan bears interest at one-month LIBOR plus 2.75% with a maturity of September 1, 2027. As of September 30, 2017, we had not drawn any proceeds under this loan.

On June 27, 2017, we modified our $94.5 million non-recourse mortgage financing for the 10-60 Columbia Corporate Center and One Mall North office buildings with a $114.5 million loan. This amendment added 70 Columbia Corporate Center, a 170,741 square foot office building in Columbia, Maryland, to the collateral pool and allowed us to draw $20.0 million and fully repay the outstanding balance of the existing indebtedness on the 70 Columbia Corporate Center note.

On April 6, 2017, we paid off a $4.6 million maturing mortgage loan that we assumed as part of the acquisition of 1701 Lake Robbins in July 2014.

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 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.

Strategic Developments

As of October 27, 2017, we repaid the $195.3 million outstanding on our construction loan relating to Waiea and Anaha in conjunction with closing on the sales of units at Anaha.

On October 19, 2017, we closed on a construction loan totaling $64.6 million to be used for Aristocrat and Two Summerlin. The loan bears interest at Wall Street Journal Prime plus 0.40% with a maturity of October 19, 2022.

On May 31, 2017, we closed on a $51.4 million construction loan for 100 Fellowship Drive, located in The Woodlands. The loan bears interest at one-month LIBOR plus 1.50% with a maturity of May 31, 2022.