Mortgages, Notes and Loans Payable, Net

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Mortgages, Notes and Loans Payable, Net

7. Mortgages, Notes and Loans Payable, Net

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

	December 31,
thousands	2021		2020
Fixed-rate debt
Unsecured 5.375% Senior Notes due 2025	$	—	$	1,000,000
Unsecured 5.375% Senior Notes due 2028	750,000		750,000
Unsecured 4.125% Senior Notes due 2029	650,000		—
Unsecured 4.375% Senior Notes due 2031	650,000		—
Secured mortgages, notes and loans payable	1,006,428		590,517
Special Improvement District bonds	69,131		34,305
Variable-rate debt (a)
Secured Bridgeland Notes due 2026	275,000		—
Mortgages, notes and loans payable (a)	1,238,857		1,945,344
Unamortized bond issuance costs	—		(4,355)
Unamortized deferred financing costs (b)	(48,259)		(28,442)
Total mortgages, notes and loans payable, net	$	4,591,157	$	4,287,369

(a)The Company has entered into derivative instruments to manage a portion of the variable interest rate exposure. See Note 9 - Derivative Instruments and Hedging Activities for additional information.

(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).

Credit Facilities In 2018, the Company entered into a $700.0 million loan agreement, which provided 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), which is included in Variable-rate debt above. Concurrent with the sale of The Westin at The Woodlands and Embassy Suites at Hughes Landing in September 2021, $181.8 million was repaid on the Term Loan, of which $69.8 million was directly associated with the properties sold. Refer to Note 3 - Acquisitions and Dispositions for additional information. As of December 31, 2021, the Company had $316.7 million of outstanding borrowings on the Term Loan. The Company has a one-time right to request an increase of $50.0 million in the aggregate amount of the Revolver Loan commitment. As of December 31, 2021, the Company had no outstanding borrowings under the Revolver Loan. The Loans are secured by a first priority security interest in certain of the Company’s properties.

In 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 provided for a $100.0 million term loan and a $150.0 million revolver loan. In September 2021, the Company repaid the $100.0 million term loan and the $50.0 million outstanding borrowings under the revolver portion of the loan. As a result, the Company no longer has access to the $150.0 million revolver loan. These borrowings were replaced by a $275.0 million loan for Bridgeland. See the table below for additional detail.

Special Improvement District Bonds 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. For the year ended December 31, 2021, $45.4 million in SID bonds were issued and obligations of $8.8 million were assumed by buyers.

Debt Compliance Due to the COVID-19 pandemic, the Company experienced a decline in operating results for certain retail and hospitality properties resulting in the Company not meeting its required debt service coverage ratio for the $615.0 million Term Loan portion of the Senior Secured Credit Facility as of December 31, 2020. As a result, the excess net cash flow after debt service from the underlying properties became restricted. While the restricted cash could not be used for general corporate purposes, it could be used to fund operations of the underlying assets and did not have a material impact on the Company’s liquidity. As a result of payments on the Term Loan, the Company met the debt service coverage ratio as of September 30, 2021, and December 31, 2021. As two consecutive quarters of compliance were required to release the restricted cash requirement, $43.0 million of restricted cash as of December 31, 2021, qualifies for release.

As of December 31, 2021, the Company did not meet the debt service coverage ratio for the Two Hughes Landing loan. As a result, the excess net cash flow after debt service from the underlying property became restricted and cannot be used for general corporate purposes, but can continue to be used to fund operations of the underlying asset. This restriction does not have a material impact on the Company’s liquidity.

As of December 31, 2021, apart from the Two Hughes Landing loan described above, the Company was in compliance with all financial covenants included in the agreements governing its indebtedness.

Financing Activity The Company’s borrowing activity is summarized as follows:

thousands	Initial / Extended Maturity (a)	Interest Rate		Carrying Value
Balance at December 31, 2020				$	4,287,369
Issuances:
Senior Notes due 2029	February 2029	4.13%	(c)	650,000
Senior Notes due 2031	February 2031	4.38%	(c)	650,000
Bridgeland Notes due 2026	September 2026	2.40%	(b),(d)	275,000
Special Improvement District bonds	April 2051	4.13%		45,425
Borrowings:
Victoria Place	September 2024 / September 2026	5.25%	(b),(e)	42,718
1725 Hughes Landing	January 2027 / January 2030	4.10%	(b),(f)	61,207
1735 Hughes Landing	January 2027 / January 2030	4.10%	(b),(f)	58,793
Tanager Apartments	May 2031	3.13%	(g)	58,500
Lakeside Row	September 2031	3.15%	(i)	35,500
1201 Lake Robbins	October 2031	3.83%	(j)	250,000
Three Hughes Landing	December 2031	3.55%	(k)	70,000
The Woodlands Warehouse	January 2032	3.65%		13,700
Draws on existing mortgages, notes and loans payable				257,444
Repayments:
1201 Lake Robbins	June 2021	2.49%	(b),(l)	(273,070)
The Woodlands Warehouse	June 2021	2.49%	(b),(l)	(7,230)
Tanager Apartments	October 2021 / October 2024	2.50%	(b),(g)	(39,992)
‘A‘ali‘i	June 2022 / June 2023	4.10%	(b),(h)	(249,744)
Lakeside Row	July 2022 / July 2023	2.39%	(b),(i)	(31,940)
Senior Secured Credit Facility	September 2023	4.61%	(f),(m)	(298,344)
The Woodlands Resort	December 2021 / December 2023	3.00%	(b),(m)	(62,500)
The Woodlands Master Credit Facility	October 2022 / October 2024	2.64%	(b),(d)	(75,000)
Bridgeland Credit Facility	October 2022 / October 2024	2.64%	(b),(d)	(75,000)
Repayments on existing mortgages, notes and loans payable				(27,519)
Redemptions
Senior Notes due 2025	March 2025	5.38%	(l)	(1,000,000)
Other:
Special Improvement District bond assumptions	April 2049	4.00%		(8,697)
Deferred financing costs, net				(15,463)
Balance at December 31, 2021				$	4,591,157

(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 certain terms which 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 of 0.10% or Secured Overnight Financing Rate (SOFR) of 0.05%, as applicable, at December 31, 2021. Interest rates associated with loans which have been paid off reflect the interest rate at December 31, 2020.

(c)In February 2021, the Company issued $650 million in 4.125% Senior Notes due 2029 and $650 million in 4.375% Senior Notes due 2031. Interest is paid semi-annually in February and August of each year, beginning in August 2021. These notes will be unsecured senior obligations of the Company and are guaranteed by certain subsidiaries of the Company.

(d)In September 2021, the Company closed on a $275.0 million financing secured by MUD receivables and land in Bridgeland, retiring an existing $250.0 million credit facility secured by MUD receivables, land and certain other collateral in both The Woodlands and Bridgeland MPCs. The loan required a $27.5 million fully refundable deposit and has a net effective interest rate of SOFR plus 2.30%, subject to a SOFR floor of 0.10%, with maturity in September 2026.

(e)In March 2021, the Company closed on a $368.2 million construction loan for the development of Victoria Place in Ward Village. The loan bears interest at LIBOR, with a floor of 0.25%, plus 5.00%, with an initial maturity of September 2024 and two one-year extension options. Concurrent with the funding of the loan, the Company entered into interest rate cap agreements with a total notional amount of $368.2 million and a LIBOR strike rate of 2.00%.

(f)In December 2021, the Company closed on a $127.0 million non-recourse financing of 1725/1735 Hughes Landing with $7 million withheld for future costs. The loan bears interest at LIBOR plus 3.95%, subject to a floor of 0.15%, with an initial maturity of January 2027 and three one-year extension options. Proceeds from this financing were used to pay a portion of the Senior Secured Credit Facility.

(g)In April 2021, the Company closed on a $58.5 million loan to replace the existing construction loan for Tanager Apartments in Downtown Summerlin.

(h)In November 2021, the Company paid off the $249.7 million outstanding loan balance relating to ‘A‘ali‘i using proceeds from condo sales.

(i)In July 2021, the Company closed on a $35.5 million loan to replace the existing construction loan for Lakeside Row in Bridgeland.

(j)In October 2021, the Company closed on a $250.0 million non-recourse, interest-only loan for 1201 Lake Robbins.

(k)In November 2021, the Company closed on a $70.0 million non-recourse financing for Three Hughes Landing. This 10-year, fixed-rate financing bears interest at 3.55%. The financing is interest-only for the first four years, with 30-year amortization thereafter.

(l)The Company used the net proceeds from the February 2021 issuance of Senior Notes due 2029 and 2031, as well as available cash on hand, as follows: (1) repurchased its $1.0 billion 5.375% Senior Notes due 2025; resulting in a $35.1 million loss on extinguishment of debt and (2) repaid $280.3 million outstanding under its loans for 1201 Lake Robbins and The Woodlands Warehouse maturing June 2021, resulting in a $10.0 million loss on the settlement of the rate-lock agreement associated with these loans.

(m)Concurrent with the sale of the Company’s Hospitality properties in September 2021, the entire $62.5 million loan on The Woodlands Resort was repaid and $69.8 million of debt associated with The Westin at The Woodlands and Embassy Suites at Hughes Landing was repaid on the Senior Secured Credit Facility. See Note 3 - Acquisitions and Dispositions for additional detail.

Additional Financing Activity in 2021 In April 2021, the Company closed on an $82.6 million construction loan for the development of Marlow, a multi-family development in Columbia. The loan bears interest at LIBOR plus 2.95% with an initial maturity of April 2025 and a one-year extension option, with no amounts drawn as of December 31, 2021.

In April 2021, the Company closed on a $42.7 million construction loan for the development of Starling at Bridgeland. The loan bears interest at LIBOR plus 2.75%, subject to an overall interest rate floor of 3.75%, and an initial maturity date of April 2026, and a one-year extension option, with $4.0 million drawn as of December 31, 2021.

In June 2021, the Company closed on an extension of the $35.5 million loan for 8770 New Trails, extending the final maturity date to January 2032.

In September 2021, the Company closed on a $59.5 million construction loan for the development of Tanager Echo, a multi-family development in Summerlin. The loan bears interest at LIBOR, with a floor of 0.10%, plus 2.90% with an initial maturity of September 2025 and two one-year extension options and an immaterial amount drawn as of December 31, 2021. In October 2021, the Company entered into an interest rate cap agreement with a notional amount equal to the loan amount and a LIBOR strike rate of 2.50%.

In September 2021, the Company closed on a $75.0 million construction loan for the development of 1700 Pavilion, an office development in Summerlin. The loan bears interest at LIBOR, with a floor of 0.10%, plus 3.80% with an initial maturity of September 2025 and two one-year extension options and an immaterial amount drawn as of December 31, 2021. In October 2021, the Company entered into an interest rate cap agreement with a notional amount equal to the loan amount and a LIBOR strike rate of 2.50%.

In October 2021, the Company closed on an extension of the $27.2 million loan for Outlet Collection at Riverwalk, extending the initial maturity date to October 2022 with a one-year extension option and modifying the interest rate to SOFR plus 3.00% with a total floor of 3.50%.

Financing Activity in 2022 In January 2022, the Company closed on a $49.8 million non-recourse, interest-only financing of One Merriweather. The loan bears interest at 3.525% with maturity in February 2032. Proceeds from this financing were used to pay a portion of the Senior Secured Credit Facility.

In January 2022, the Company closed on a $25.6 million non-recourse, interest-only financing of Two Merriweather which was previously unencumbered. The loan bears interest at 3.825% with maturity in February 2032.

In February 2022, the Company closed on a $40.8 million non-recourse financing of Two Summerlin which was previously unencumbered. The loan bears interest at SOFR plus 1.75% with an initial maturity of February 2027 and two one-year extension options. Concurrent with the funding of the loan, the Company entered into an interest rate swap agreement with a notional amount equal to the loan and an interest rate of 3.425%.

In February 2022, the Company paid $28.4 million on the Senior Secured Credit Facility with cash on hand.

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

					Carrying Value December 31,
thousands	Initial / Extended Maturity (a)	Interest Rate			2021	2020
Operating Assets
20/25 Waterway Avenue	May 2022	4.79	%		12,564	12,855
Millennium Waterway Apartments	June 2022	3.75	%		50,813	51,946
Lake Woodlands Crossing Retail	January 2023	4.61	%	(b),(c)	12,329	12,329
Senior Secured Credit Facility	September 2023	4.61	%	(b),(c)	316,656	615,000
Two Lakes Edge	October 2022 / October 2023	2.40	%	(b)	68,806	66,198
Outlet Collection at Riverwalk	October 2022 / October 2023	3.50	%	(b)	26,742	28,679
The Woodlands Resort	December 2021 / December 2023	3.00	%	(b)	—	62,500
9303 New Trails	December 2023	4.88	%		10,308	10,763
4 Waterway Square	December 2023	4.88	%		30,185	31,519
Creekside Park West	March 2023 / March 2024	4.61	%	(b),(c)	15,497	14,719
The Lane at Waterway	August 2023 / August 2024	1.85	%	(b)	27,279	22,167
6100 Merriweather	September 2022 / September 2024	2.85	%	(b)	66,345	62,040
Juniper Apartments	September 2022 / September 2024	2.85	%	(b)	72,762	65,808
Creekside Park The Grove	January 2024 / January 2025	4.61	%	(b),(c)	39,503	16,468
9950 Woodloch Forest	March 2025	2.05	%	(b)	83,820	71,106
Ae‘o Retail	October 2025	2.90	%	(b)	29,883	30,532
Ke Kilohana Retail	October 2025	2.90	%	(b)	9,129	9,327
3831 Technology Forest Drive	March 2026	4.50	%		20,210	20,686
Kewalo Basin Harbor	September 2027	2.85	%	(b)	11,479	11,562
Millennium Six Pines Apartments	August 2028	3.39	%		42,500	42,500
3 Waterway Square	August 2028	3.94	%		44,747	46,224
One Lakes Edge	March 2029	4.50	%		68,648	69,440
Aristocrat	September 2029	3.67	%		36,095	37,093
Creekside Park Apartments	October 2029	3.52	%		37,730	37,730
1725 Hughes Landing Boulevard	January 2027 / January 2030	4.10	%	(b)	61,207	—
1735 Hughes Landing Boulevard	January 2027 / January 2030	4.10	%	(b)	58,793	—
One Hughes Landing	December 2029	4.30	%		49,578	50,815
Two Hughes Landing	December 2030	4.20	%		47,184	48,000
Other SID Bonds	December 2030	6.05	%	(d)	2,639	2,785
Tanager Apartments	May 2031	3.13	%		58,500	39,744
Lakeside Row	September 2031	3.15	%		35,500	31,566
1201 Lake Robbins	October 2031	3.83	%		250,000	273,070
Three Hughes Landing	December 2031	3.55	%		70,000	—
The Woodlands Warehouse	January 2032	3.65	%		13,700	7,230
8770 New Trails	January 2032	4.89	%	(e)	35,482	35,417
Constellation Apartments	January 2033	4.07	%		24,200	24,200

					Carrying Value December 31,
thousands	Initial / Extended Maturity (a)	Interest Rate			2021		2020
Hughes Landing Retail	December 2036	3.50	%		33,633		34,328
Columbia Regional Building	February 2037	4.48	%		23,805		24,244
Las Vegas Ballpark	December 2039	4.92	%		46,528		48,173
Operating Assets Total					1,944,779		2,068,763
Master Planned Communities
The Woodlands Master Credit Facility	October 2022 / October 2024	2.64	%	(b)	—		75,000
Bridgeland Credit Facility	October 2022 / October 2024	2.64	%	(b)	—		75,000
Bridgeland Notes due 2026	September 2026	2.40	%	(b)	275,000		—
Summerlin South SID Bonds	June 2025 - April 2051	4.00% - 6.05%		(f)	66,492		31,520
Master Planned Communities Total					341,492		181,520
Seaport
250 Water Street	November 2022 / November 2023	4.61	%	(b),(c)	100,000		100,000
Seaport Total					100,000		100,000
Strategic Developments
‘A‘ali‘i	June 2022 / June 2023	4.10	%	(b)	—		154,601
Kō‘ula	March 2023 / March 2024	4.61	%	(b),(c)	150,183		65,282
Victoria Place	September 2024 / September 2026	5.25	%	(b),(g)	49,000		—
Starling at Bridgeland	April 2026 / April 2027	3.75	%	(b)	3,960		—
Tanager Echo	September 2025 / September 2027	3.00	%	(b),(h)	1		—
1700 Pavillion	September 2025 / September 2027	3.90	%	(b),(i)	1		—
Strategic Developments Total					203,145		219,883
Senior Notes due 2025	March 2025	5.38	%		—		1,000,000
Senior Notes due 2028	August 2028	5.38	%		750,000		750,000
Senior Notes due 2029	February 2029	4.13	%		650,000		—
Senior Notes due 2031	February 2031	4.38	%		650,000		—
Unamortized bond issuance costs					—		(4,355)
Unamortized deferred financing costs					(48,259)		(28,442)
Total mortgages, notes and loans payable,net					$	4,591,157	$	4,287,369

(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 certain terms which 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 of 0.10% or SOFR of 0.05%, as applicable, at December 31, 2021. Interest rates associated with loans which have been paid off reflect the interest rate at December 31, 2020.

(c)$615 million of outstanding debt has been swapped to a fixed rate equal to 4.61%.

(d)Includes SID bonds related to Downtown Summerlin, Hockey Ground Lease, Las Vegas Ballpark, Tanager Apartments, Two Summerlin, Tanager Echo and 1700 Pavillion.

(e)Concurrent with the closing of the $35.5 million construction loan for 8770 New Trails in 2019, the Company entered into an interest rate swap. The Loan bears interest at one-month LIBOR plus 2.45% but it is currently swapped to a fixed rate equal to 4.89%.

(f)Includes SID bonds with various maturity dates ranging from June 2025 to April 2051 and interest rates ranging from 4.00% to 6.05%.

(g)In the first quarter of 2021, the Company closed on a $368.2 million construction loan for the development of Victoria Place in Ward Village, which bears interest at LIBOR, with a floor of 0.25%, plus 5.00%. Concurrently, the Company entered into interest rate cap agreements with a total notional amount of $368.2 million and a LIBOR strike rate of 2.00%.

(h)In the third quarter of 2021, the Company closed on a $59.5 million construction loan for the development of Tanager Echo, which bears interest at LIBOR, with a floor of 0.10%, plus 2.90%. The Company entered into an interest rate cap agreement with a LIBOR strike rate of 2.50%.

(i)In the third quarter of 2021, the Company closed on a $75.0 million construction loan for the development of 1700 Pavillion, which bears interest at LIBOR, with a floor of 0.10%, plus 3.80%. The Company entered into an interest rate cap agreement with a LIBOR strike rate of 2.50%.

The weighted-average interest rate on the Company’s mortgages, notes and loans payable, excluding interest rate hedges, was 4.17% as of December 31, 2021, and 4.34% as of December 31, 2020.

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

thousands	Recourse %		Amount
Recourse to HHC
Senior Notes due 2028	100	%	$	750,000
Senior Notes due 2029	100	%	650,000
Senior Notes due 2031	100	%	650,000
Kō‘ula	25	%	37,546
250 Water Street	35	%	35,000
Juniper Apartments	25	%	18,190
6100 Merriweather	25	%	16,586
Outlet Collection at Riverwalk	50	%	13,371
Total recourse to HHC			2,170,693
Recourse to The Woodlands Land Development Company (TWLDC) (a)
Two Lake's Edge	25	%	17,202
9950 Woodloch Forest	20	%	16,764
Creekside Park The Grove	25	%	9,876
The Lane at Waterway	35	%	9,547
Lake Woodlands Crossing Retail	50	%	6,165
Creekside Park West	25	%	3,874
Total recourse to TWLDC			63,428
Total			$	2,234,121

(a)This debt is partially recourse to The Woodlands Land Development Company which is a wholly owned 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, 2021, land, buildings and equipment and developments with a net book value basis of $4.2 billion have been pledged as collateral for HHC’s mortgages, notes and loans payable. 

Scheduled Maturities The following table summarizes the contractual obligations relating to the Company’s mortgages, notes and loans payable as of December 31, 2021, based on extended maturity dates:

thousands	Mortgages, notes and loans payable principal payments
2022		$	103,022
2023		547,744
2024		343,950
2025		172,275
2026		359,603
Thereafter		3,112,822
Total principal payments		4,639,416
Unamortized deferred financing and bond issuance costs		(48,259)
Total mortgages, notes and loans payable		$	4,591,157