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Mortgages, Notes and Loans Payable, Net
 9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
Mortgages, Notes and Loans Payable, Net
6. Mortgages, Notes and Loans Payable, Net

Mortgages, notes and loans payable, net are summarized as follows: 
thousands
September 30, 2022
December 31, 2021
Fixed-rate debt
Unsecured 5.375% Senior Notes due 2028
$750,000 $750,000 
Unsecured 4.125% Senior Notes due 2029
650,000 650,000 
Unsecured 4.375% Senior Notes due 2031
650,000 650,000 
Secured mortgages, notes and loans payable1,204,101 1,006,428 
Special Improvement District bonds61,949 69,131 
Variable-rate debt (a)
Secured Bridgeland Notes due 2026275,000 275,000 
Secured mortgages, notes and loans payable1,084,277 1,238,857 
Unamortized deferred financing costs (b)(47,916)(48,259)
Total mortgages, notes and loans payable, net$4,627,411 $4,591,157 
(a)The Company has entered into derivative instruments to manage a portion of the variable interest rate exposure. See Note 8 - Derivative Instruments and Hedging Activities for additional information.
(b)Deferred financing costs 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).

Debt Collateral 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 percentage of the loan balance. As of September 30, 2022, land, buildings and equipment and developments with a net book value of $4.7 billion have been pledged as collateral for HHC’s mortgages, notes and loans payable. 

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 September 30, 2022, the Company had $242.2 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. As of September 30, 2022, 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.

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. During the nine months ended September 30, 2022, no new SID bonds were issued and obligations of $5.9 million were assumed by buyers.

Debt Compliance As of September 30, 2022, the Company did not meet the debt service coverage ratios for the One Hughes Landing, Two Hughes Landing and 4 Waterway Square loans, which did not have a material impact on the Company’s liquidity or its ability to operate the assets.
Financing Activity During the Nine Months Ended September 30, 2022

The Company’s borrowing activity is summarized as follows: 
thousandsInitial / Extended Maturity (a)Interest RateCarrying Value
Balance at December 31, 2021
$4,591,157 
Borrowings:
Two SummerlinFebruary 2027 / February 20293.43 %40,800 
20/25 Waterway AvenueApril 2026 / April 20275.48 %(b),(c)14,500 
One MerriweatherFebruary 20323.53 %(d)49,800 
Two MerriweatherFebruary 20323.83 %(d)25,600 
Millennium Waterway ApartmentsJune 20323.94 %(d)51,000 
Two Lakes EdgeJune 20324.39 %(d)105,000 
The Lane at WaterwayJuly 20324.85 %(d)37,500 
Draws on mortgages, notes and loans payable252,109 
Repayments:
20/25 Waterway AvenueMay 20224.79 %(12,487)
Millennium Waterway ApartmentsJune 20223.75 %(50,516)
Two Lakes EdgeOctober 2022 / October 20232.40 %(b)(69,031)
Outlet Collection at RiverwalkOctober 2022 / October 20233.50 %(b)(26,258)
Kō‘ulaMarch 2023 / March 20243.14 %(b)(238,682)
The Lane at WaterwayAugust 2023 / August 20241.85 %(b)(27,729)
Senior Secured Credit FacilitySeptember 20234.61 %(74,482)
Repayments on mortgages, notes and loans payable(35,353)
Other:
Special Improvement District bond assumptionsApril 20514.13 %(5,860)
Deferred financing costs, net343 
Balance at September 30, 2022
$4,627,411 
(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 Secured Overnight Financing Rate (SOFR) of 2.98% at September 30, 2022. Interest rates associated with loans which have been paid off reflect the interest rate at December 31, 2021.
(c)In April 2022, the Company closed on a $19.5 million financing of 20/25 Waterway Avenue, replacing the existing loan, with $5.0 million undrawn funds to be released and drawn upon upcoming tenant leasings. The loan is interest-only for the first three years with 25-year amortization thereafter.
(d)These financings are interest-only.

Additional Financing Activity In August 2022, the Company closed on a $392.0 million construction loan for the development of The Park Ward Village. The loan bears interest at SOFR plus 3.90% with an initial maturity of February 2026, and a one-year extension option. There were no outstanding borrowings as of September 30, 2022.