MORTGAGES, NOTES AND LOANS PAYABLE, NET

12 Months Ended

Dec. 31, 2019

Mortgages, notes and loans payable, net are summarized as follows:



	December 31,
(In thousands)	2019			2018
Fixed-rate debt:
Unsecured 5.375% Senior Notes	$	1,000,000		$	1,000,000
Secured mortgages, notes and loans payable	884,935			648,707
Special Improvement District bonds	23,725			15,168
Variable-rate debt:
Mortgages, notes and loans payable (a)	2,229,958			1,551,336
Unamortized bond issuance costs	(5,249		)	(6,096		)
Unamortized deferred financing costs (b)	(36,899		)	(27,902		)
Total mortgages, notes and loans payable, net	$	4,096,470		$	3,181,213

(a)

As more fully described below, $630.1 million and $615.0 million of variable-rate debt has been swapped to a fixed rate for the term of the related debt as of December 31, 2019 and 2018. An additional $184.3 million and $50.0 million of variable-rate debt was subject to interest rate collars as of December 31, 2019 and December 31, 2018, and $75.0 million of variable-rate debt was capped at a maximum interest rate as of December 31, 2019 and 2018.


(b)	Deferred financing fees are amortized to interest expense over the terms of the respective financing agreements using the effective interest method (or other methods which approximate the effective interest method).

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



					Maximum		Carrying Value
	Initial / Extended	Interest			Facility		December 31,		December 31,
($ in thousands)	Maturity (a)	Rate			Amount		2019		2018
Operating Assets
Three Hughes Landing	March 2020	4.33	%	(b)	$	61,200	$	59,822	$	55,759
The Woodlands Towers at the Waterway	June 2020	3.68	%	(b), (c)			336,570		—
The Woodlands Warehouse	June 2020	3.68	%	(b), (c)			7,230		—
Downtown Summerlin	September 2020 / September 2021	3.88	%	(b)			259,179		266,755
Two Merriweather	October 2020 / October 2021	4.23	%	(b)	33,156		28,216		24,000
Outlet Collection at Riverwalk	October 2021	4.23	%	(b)			30,615		47,552
100 Fellowship Drive	May 2022	3.23	%	(b)	51,426		47,916		35,481
20/25 Waterway Avenue	May 2022	4.79	%				13,131		13,395
Millennium Waterway Apartments	June 2022	3.75	%				53,032		54,083
HHC 242 Self-Storage	December 2021 / December 2022	4.33	%	(b)			5,499		6,604



					Maximum	Carrying Value
	Initial / Extended	Interest			Facility	December 31,	December 31,
($ in thousands)	Maturity (a)	Rate			Amount	2019	2018
HHC 2978 Self-Storage	December 2021 / December 2022	4.33	%	(b)		5,395	6,042
Lake Woodlands Crossing Retail	January 2023	3.53	%	(b)	15,523	12,163	9,539
Lakeside Row	July 2022 / July 2023	3.98	%	(b)	34,231	23,958	—
Senior Secured Credit Facility	September 2023	4.61	%	(d)	700,000	615,000	615,000
The Woodlands Resort & Conference Center	December 2021 / December 2023	4.23	%	(b)		62,500	62,500
Lakefront North	December 2022 / December 2023	3.73	%	(b)	51,821	32,731	21,120
9303 New Trails	December 2023	4.88	%			11,196	11,610
4 Waterway Square	December 2023	4.88	%			32,789	33,998
Creekside Park West	March 2023 / March 2024	3.98	%	(b)	18,000	8,505	—
6100 Merriweather	September 2022 / September 2024	4.48	%	(b)	89,844	36,418	—
Tanager Apartments	October 2021 / October 2024	3.98	%	(b)		29,165	—
Two Summerlin	October 2022 / October 2025	4.25	%			33,183	14,431
3831 Technology Forest Drive	March 2026	4.50	%			21,137	21,571
Kewalo Basin Harbor	September 2027	4.48	%	(b)	11,562	11,110	3,499
Millennium Six Pines Apartments	August 2028	3.39	%			42,500	42,500
3 Waterway Square	August 2028	3.94	%			47,647	49,013
One Lakes Edge	March 2029	4.50	%			69,440	69,440
Aristocrat	September 2029	3.67	%			38,055	21,296
Creekside Park Apartments	October 2029	3.52	%			37,730	—
One Hughes Landing	December 2029	4.30	%			52,000	52,000
Two Hughes Landing	December 2030	4.20	%			48,000	48,000
Hockey Ground Lease SIDS	December 2030	6.05	%			135	141
Downtown Summerlin SID Bonds - S128	December 2030	6.05	%			2,569	2,652
Constellation Apartments	January 2033	4.07	%			24,200	24,200
Hughes Landing Retail	December 2036	3.50	%			35,000	35,000
Columbia Regional Building	February 2037	4.48	%			24,664	25,000
Las Vegas Ballpark	December 2039	4.92	%			51,231	26,766
Operating Assets Total						2,249,631	1,698,947
Master Planned Communities
Summerlin South SID Bonds - S128	December 2020	7.30	%			—	213
Summerlin South SID Bonds - S132	December 2020	6.00	%			—	562
The Woodlands Master Credit Facility	October 2022 / October 2024	4.23	%	(b)	250,000	107,500	150,000
Bridgeland Credit Facility	October 2022 / October 2024	4.23	%	(b)	250,000	107,500	65,000
Summerlin South SID Bonds - S151	June 2025	6.00	%			—	913
Summerlin South SID Bonds - S128C	December 2030	6.05	%			2,014	3,211
Summerlin West SID Bonds - S812	October 2035	6.00	%			1,960	6,709
Summerlin West SID Bonds - S814	April 2049	4.00	%			16,310	—
Master Planned Communities Total						235,284	226,608
Seaport District
250 Water Street	November 2022 / November 2023	5.23	%	(b)	100,000	100,000	129,723
Seaport District	June 2024	6.10	%	(e)	250,000	250,000	—
Seaport District Total						350,000	129,723
Strategic Developments
Ke Kilohana	December 2019 / December 2020	5.75	%	(b)		—	96,757
‘A‘ali‘i	June 2022 / June 2023	4.83	%	(b)	293,700	30,717	—
Two Lakes Edge	October 2022 / October 2023	3.88	%	(b)	74,035	38,214	—
110 North Wacker	April 2022 / April 2024	4.73	%	(b), (f)	558,900	184,300	50,000
Millennium Phase III Apartments	August 2023 / August 2024	3.48	%	(b)	30,700	1	—
Juniper Apartments	September 2022 / September 2024	4.48	%	(b)	85,657	34,610	—
Other SID Bonds	December 2020 / December 2030	6.00% - 7.30%		(g)		737	767
8770 New Trails	June 2021 / January 2032	4.89	%	(h)	35,487	15,124	—
Strategic Developments Total						303,703	147,524
Other corporate financing arrangements	May 2023	4.33	%	(i)		—	12,409



				Maximum	Carrying Value
	Initial / Extended	Interest		Facility	December 31,			December 31,
($ in thousands)	Maturity (a)	Rate		Amount	2019			2018
Senior Notes	March 2025	5.38	%		1,000,000			1,000,000
Unamortized bond issuance costs					(5,249		)	(6,096		)
Unamortized deferred financing costs					(36,899		)	(27,902		)
Total mortgages, notes, and loans payable					$	4,096,470		$	3,181,213

(a)

Maturity dates presented represent initial maturity dates and the extended or final maturity dates as contractually stated. HHC has the option to exercise extension periods at the initial maturity date, subject to extension terms that are based on current property performance projections. Extension terms may include 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, HHC may have to pay down a portion of the loan to obtain the extension.


(b)	The interest rate presented is based on the one-month LIBOR, three-month LIBOR or Prime rate, as applicable, which was 1.73%, 1.90% and 4.75%, respectively, at December 31, 2019. Interest rates associated with loans which have been paid off reflect the prior year interest rate.


(c)	100.0% of the outstanding principal of the $343.8 million is recourse to the Company but not currently secured by any mortgage.


(d)	100.0% of the outstanding principal of the $615.0 million Term Loan is swapped to a fixed rate equal to 4.61%.


(e)	The loan initially bears interest at 6.10% and will begin bearing interest at one-month LIBOR plus 4.10%, subject to a LIBOR cap of 2.30% and LIBOR floor of 0.00%, at the earlier of June 20, 2021 or the date certain debt coverage ratios are met.


(f)	100.0% of the outstanding principal of the $184.3 million is subject to fixed interest rate collar contracts for the remaining term of the debt.


(g)	Includes SID Bonds related to Two Summerlin, Aristocrat, Tanager Apartments, and Las Vegas Ballpark. Maturity dates range between December 2020 and December 2030 and interest rates range between 6.00% and 7.30%.


(h)	Concurrent with the closing of the $35.5 million construction loan for 8770 New Trails on June 27, 2019, the Company entered into an interest rate swap which is designated as a cash flow hedge. The Loan will bear interest at one-month LIBOR plus 2.45% but it is currently swapped to a fixed rate equal to 4.89%.


(i)	The Company completed the sale of its corporate aircraft during the quarter ended December 31, 2019.

The weighted-average interest rate on the Company’s mortgages, notes and loans payable, excluding interest rate hedges, was 4.75% and 5.06% as of December 31, 2019 and 2018, respectively.

HHC’s mortgages, notes and loans payable are secured by the properties listed in the table above and are non-recourse to HHC except for:


i.	100%, or $1.0 billion of Senior Notes due 2025;


ii.	100%, or $336.6 million of The Woodlands Towers at the Waterway outstanding balance;


iii.	100%, or $7.2 million of The Woodlands Warehouse outstanding balance;


iv.	35%, or $90.7 million of the Downtown Summerlin outstanding balance;


v.	35%, or $35.0 million of the 250 Water Street outstanding loan balance;


vi.	50%, or $15.3 million, of the Outlet Collection at Riverwalk outstanding loan balance;


vii.	18%, or $33.2 million, of the 110 North Wacker outstanding loan balance;


viii.	25%, or $7.3 million of the Tanager Apartments outstanding loan balance;


ix.	25%, or $6.0 million of the Lakeside Row outstanding loan balance;


x.	25%, or $8.7 million of the Juniper Apartments outstanding loan balance;


xi.	25%, or $7.7 million of the ‘A‘ali‘i outstanding loan balance; and


xii.	25%, or $9.1 million of the 6100 Merriweather outstanding loan balance.

The Woodlands Land Development Company has recourse loans totaling $35.7 million for 100 Fellowship Drive, Lakefront North, Three Hughes Landing, The Woodlands Resort & Conference Center and Lake Woodlands Crossing Retail. The debt is not recourse to HHC; however, it is partially recourse to The Woodlands Land Development Company, which is a subsidiary of HHC.

Certain of the Company’s 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 December 31, 2019, land, buildings and equipment and developments with a net book value basis of $6.9 billion have been pledged as collateral for HHC’s mortgages, notes and loans payable.

The following table summarizes the contractual obligations relating to the Company’s mortgages, notes and loans payable as of December 31, 2019 based on extended maturity dates:



	Mortgages, notes
	and loans payable
(In thousands)	principal payments
2020	$	424,933
2021	320,641
2022	137,825
2023	967,129
2024	764,615
Thereafter	1,523,475
Total principal payments	4,138,618
Unamortized deferred financing costs, net and unamortized underwriting fees	(42,148		)
Total mortgages, notes and loans payable	$	4,096,470

As of December 31, 2019, the Company was in compliance with all financial covenants included in the debt agreements governing its indebtedness.

Recent Financing Activity

On January 7, 2020, the Company closed on a $43.4 million construction loan for the development of Creekside Park Apartments Phase II. The loan bears interest at LIBOR plus 1.75% with an initial maturity date of January 7, 2024 and a one-year extension option.

Financing Activity During the Year Ended December 31, 2019

Operating Assets

On December 30, 2019, the Company closed on a $343.8 million bridge loan for the acquisitions of The Woodlands Towers at the Waterway and The Woodlands Warehouse. The loan bears interest at one-month LIBOR plus 1.95% with a maturity of June 30, 2020. The Company is currently documenting long-term financing and anticipates closing in the first quarter of 2020.

On December 5, 2019, the Company modified and extended the $61.2 million loan for Three Hughes Landing. The loan bears interest at one-month LIBOR plus 2.60% and the extended maturity date is now March 5, 2020, at which point the Company anticipates Three Hughes Landing will be added to the Senior Secured Credit Facility.

On October 24, 2019, the Company modified and extended the $47.9 million loan for Outlet Collection at Riverwalk. The total commitment was reduced to $30.9 million, including the required paydown of $15.0 million. The loan bears interest at one-month LIBOR plus 2.50% and matures October 24, 2021.

On September 13, 2019, the Company closed on a $37.7 million multi-family loan and security agreement for Creekside Park Apartments. The loan bears interest at 3.52% with a maturity of October 1, 2029.

On August 1, 2019, the Company modified its $64.6 million construction loan, of which $31.1 million relates to Aristocrat and $33.5 million relates to Two Summerlin. The original loan bears interest at Wall Street Journal Prime plus 0.40% with a maturity of October 19, 2022. As part of the modification, the $33.5 million Two Summerlin note was amended to bear interest at 4.25% with an initial maturity of October 18, 2022 and one, 36-month extension option. The Company closed on a new $38.3 million note for Aristocrat which bears interest at 3.67% with a maturity of September 1, 2029. A portion of the proceeds for the new Aristocrat note were used to extinguish the original Aristocrat note.

On April 9, 2019, the Company modified the HHC 242 Self-Storage and HHC 2978 Self-Storage facilities to reduce the total commitments to $5.5 million and $5.4 million, respectively. The loans have an initial maturity date of December 31, 2021 and a one-year extension option.

On March 12, 2019, the Company closed on an $18.0 million construction loan for Creekside Park West, bearing interest at one-month LIBOR plus 2.25% with an initial maturity date of March 12, 2023 and a one-year extension option.

On February 28, 2019, the Company amended the $62.5 million Woodlands Resort & Conference Center financing to extend the initial maturity date to December 30, 2021. The financing bears interest at one-month LIBOR plus 2.50% and has two, one-year extension options.

In December 2018, the Company repaid the $174.0 million outstanding balance on the construction loan relating to Ae‘o. Three repayments were made in conjunction with closing on the sales of units at the property.

On December 17, 2018, the Company closed on a $51.8 million construction loan for Lakefront North. The loan bears interest at one-month LIBOR plus 2.00% with an initial maturity of December 17, 2022, and a one-year extension option.

On September 18, 2018, certain wholly-owned subsidiaries (the “Borrowers”) of the Company entered into a $700.0 million loan agreement (the “Loan Agreement”), which provides for a $615.0 million term loan (the “Term Loan”) and an $85.0 million revolver loan (the “Revolver Loan” and together with the Term Loan, the “Senior Secured Credit Facility” or the “Loans”), with Wells Fargo Bank, National Association, as administrative agent and a lender, as well as other lenders. The Loans bear interest at one-month LIBOR plus 1.65% and mature September 18, 2023. The Borrowers have a one-time right to request an increase of $50.0 million in the aggregate amount of the Revolver Loan commitment. Concurrent with the funding of the Term Loan on September 21, 2018, the Company entered into a swap agreement to fix 100% of the outstanding principal of the Term Loan to an overall rate equal to 4.61%.

The Loans are secured by a first priority security interest in certain of the Company’s properties which are directly owned by the Borrowers (the “Mortgaged Properties”). In connection with the Loans, the Company provided the administrative agent, on behalf of the lenders, a non-recourse carve-out guarantee and a hazardous materials indemnity agreement.

The Borrowers drew $615.0 million under the Term Loan at closing. All the net proceeds after costs and fees related to the Loans were used to repay all outstanding indebtedness encumbering the Mortgaged Properties, including debt held by lenders not party to the Loan Agreement. The total debt repaid was approximately $608.7 million and was associated with the following Mortgaged Properties: 10-60 Columbia Corporate Centers, 70 Columbia Corporate Center, One Mall North, One Merriweather, Embassy Suites at Hughes Landing, The Westin at The Woodlands, 1725-1735 Hughes Landing Boulevard and Ward Village. The Mortgaged Properties also include Creekside Village Green and 1701 Lake Robbins. As of December 31, 2019, the Company has not made any draws under the Revolver Loan.

The Company evaluated the terms of the Loans to determine if the new debt instruments should be accounted for as modifications or extinguishments on a lender-by-lender basis, per Mortgaged Property subject to refinancing. The majority of the transaction was accounted for as a debt modification. As a result, in 2018, the Company capitalized $8.6 million in related fees and costs and recognized a $0.7 million loss on debt extinguishment and modification, which was primarily related to third-party fees incurred in procuring the Loans. The $0.7 million loss was included in Interest expense in the Consolidated Statements of Operations in 2018.

On September 11, 2018, the Company closed on an $89.8 million construction loan for 6100 Merriweather and an $85.7 million construction loan for Juniper Apartments. Each loan bears interest at one-month LIBOR plus 2.75%, has an initial maturity date of September 11, 2022, has two, one-year extension options and is cross-collateralized.

On July 27, 2018, the Company closed on a $34.2 million construction loan for Lakeside Row, bearing interest at one-month LIBOR plus 2.25% with an initial maturity date of July 27, 2022 and a one-year extension option.

On July 20, 2018, the Company closed on a $51.2 million construction note for Las Vegas Ballpark, bearing interest at 4.92% per annum and maturing on December 15, 2039. The note is secured by the ballpark and by the proceeds of the Naming Rights and Marketing agreement between the Company and the Las Vegas Convention and Visitors Authority, which provides an annual payment of $4.0 million to the Company in each of the next 20 years.

On April 13, 2018, the Company repaid the $11.8 million loan for Lakeland Village Center at Bridgeland.

On March 26, 2018, the Company closed on a $44.1 million construction loan for Tanager Apartments, bearing interest at one-month LIBOR plus 2.25% with an initial maturity date of October 1, 2021 and a three-year extension option.

On January 25, 2018, the Company closed on a $15.5 million construction loan for Lake Woodlands Crossing Retail. The loan bears interest at one-month LIBOR plus 1.80%, matures on January 25, 2023 and has an initial maximum recourse of 50% of the outstanding balance prior to completion of construction, at which point the repayment guarantee will reduce to 15% provided the project is 90% leased.

Master Planned Communities

On October 17, 2019, the Company closed on a $250.0 million credit facility secured by land and certain other collateral in The Woodlands and Bridgeland MPCs. The loan bears interest at one-month LIBOR plus 2.50% with an initial maturity of October 17, 2022 and two one-year extension options. The new loan refinanced The Woodlands Master Credit Facility and Bridgeland Credit Facility with a combined principal balance of $215.0 million and a weighted-average interest rate of one-month LIBOR plus 2.87%.

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 the Company 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 the Company previously paid with respect to such proportionate share of the bond. In the year ended December 31, 2019, one new SID bond was issued and $22.3 million in obligations were assumed by buyers. The $32.0 million SID bears interest at 4.0% and matures April 2049. In the year ended December 31, 2018, no new SID bonds were issued and $10.9 million in obligations were assumed by buyers.

Seaport District

On November 19, 2019, the Company closed on a $100.0 million note payable for 250 Water Street. The note bears interest at one-month LIBOR plus 3.50% with an initial maturity date of November 18, 2022 and a one-year extension option. The Company extinguished the previous note on the property at a $4.9 million discount in the fourth quarter of 2019.

On June 20, 2019, the Company closed on a $250.0 million term loan for the redevelopment of the Seaport District. The loan initially bears interest at 6.10% and matures on June 1, 2024. The loan’s interest rate will change to one-month LIBOR plus 4.10%, subject to a LIBOR cap of 2.30% and LIBOR floor of 0.00%, at the earlier of June 20, 2021 or the date certain debt coverage ratios are met.

On May 17, 2019, the Company modified the facility for its Mr. C Seaport joint venture to increase the total commitment to $41.0 million. The loan bears interest at one-month LIBOR plus 4.50%, with an initial maturity of May 16, 2022 and one, six-month extension option.

Strategic Developments

On August 6, 2019, the Company closed on a $30.7 million construction loan for Millennium Phase III Apartments. The loan bears interest at one-month LIBOR plus 1.75% with an initial maturity date of August 6, 2023 and a one-year extension option.

On June 27, 2019, the Company closed on a $35.5 million construction loan for 8770 New Trails. The loan bears interest at one-month LIBOR plus 2.45% with an initial maturity date of June 27, 2021 and a 127-month extension option. The Company entered into a swap agreement to fix the interest rate to 4.89%.

On June 6, 2019, the Company closed on a $293.7 million construction loan for ‘A‘ali‘i, bearing interest at one-month LIBOR plus 3.10% with an initial maturity date of June 6, 2022 and a one-year extension option.

On June 5, 2019, the Company paid off the construction loan for Ke Kilohana with a commitment amount of $142.7 million. Total draws were approximately $121.7 million and were paid off from the proceeds of condominium sales.

On May 23, 2019, the Company and its joint venture partners closed on an amendment to increase the $512.6 million construction loan for 110 North Wacker to $558.9 million, and modify the commitments included in the loan syndication. The amendment also increased the Company’s guarantee from $92.3 million to $100.6 million. In addition, the Company also guaranteed an additional

$46.3 million, the increase in principal of the construction loan, which would become payable in fiscal year 2020 if a certain leasing threshold is not achieved. The leasing threshold was met in December 2019.

On October 11, 2018, the Company closed on a $74.0 million construction loan for Two Lakes Edge, bearing interest at one-month LIBOR plus 2.15% with an initial maturity date of October 11, 2022 and a one-year extension option.

On January 19, 2018, the Company paid off the $18.9 million mortgage loan for 110 North Wacker and settled the related swap liability of $0.3 million.