Mortgage Notes Payable, Unsecured Notes and Credit Facility

The Company's mortgage notes payable, unsecured notes, variable rate unsecured term loans (the “Term Loans”) and Credit Facility, as defined below, as of December 31, 2018 and 2017 are summarized below. The following amounts and discussion do not include the mortgage notes related to the communities classified as held for sale, if any, as of December 31, 2018 and 2017, as shown on the Consolidated Balance Sheets (dollars in thousands) (see Note 6, “Real Estate Disposition Activities”).



	12/31/18		12/31/17
Fixed rate unsecured notes (1)	$	5,400,000	$	5,350,000
Variable rate unsecured notes (1)	300,000		300,000
Term Loans (1)	250,000		250,000
Fixed rate mortgage notes payable—conventional and tax-exempt (2)	533,215		593,987
Variable rate mortgage notes payable—conventional and tax-exempt (2)	619,140		910,326
Total mortgage notes payable and unsecured notes and Term Loans	7,102,355		7,404,313
Credit Facility	—		—
Total mortgage notes payable, unsecured notes, Term Loans and Credit Facility	$	7,102,355	$	7,404,313

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(1)	Balances at December 31, 2018 and 2017 exclude $9,879 and $10,850, respectively, of debt discount, and $34,128 and $36,386, respectively, of deferred financing costs, as reflected in unsecured notes, net on the accompanying Consolidated Balance Sheets.


(2)	Balances at December 31, 2018 and 2017 exclude $14,590 and $16,351 of debt discount, respectively, and $3,495 and $11,256, respectively, of deferred financing costs, as reflected in mortgage notes payable, net on the accompanying Consolidated Balance Sheets.

The following debt activity occurred during the year ended December 31, 2018:


•	In February 2018, the Company repaid $15,174,000 principal amount of 6.60% fixed rate debt secured by Avalon Oaks West in advance of its scheduled maturity date, incurring a charge of $426,000, consisting of a prepayment penalty of $152,000 and the non-cash write-off of unamortized deferred financing costs of $274,000.


•	In February 2018, the Company repaid $11,038,000 principal amount of 4.61% fixed rate debt secured by AVA Pasadena at par in advance of its scheduled maturity date.

•

In March 2018, the Company issued $300,000,000 principal amount of unsecured notes in a public offering under its existing shelf registration statement for net proceeds of approximately $296,210,000. The notes mature in April 2048 and were issued at a 4.35% interest rate. The effective interest rate of the notes for the first 10 years is 3.97%, including the impact of an interest rate hedge and offering costs, and for the remainder of the term the effective interest rate is 4.39%.


•	In April 2018, the Company repaid $13,380,000 principal amount of 3.06% fixed rate debt secured by Avalon Andover at par at its scheduled maturity date.


•	In June 2018, the Company repaid $15,295,000 principal amount of 6.90% fixed rate debt secured by Avalon Orchards in advance of its scheduled maturity date, incurring a charge of $635,000, consisting of a prepayment penalty of $282,000 and the non-cash write-off of unamortized deferred financing costs of $353,000.


•	In August 2018, the Company repaid $95,859,000 aggregate principal amount of variable rate debt secured by Avalon Calabasas, of which $51,449,000 was repaid at par at its scheduled maturity date, and $44,410,000 was repaid at par in advance of its April 2028 maturity date. The Company recognized a non-cash charge of $1,690,000 for the write-off of unamortized debt discount.


•	In December 2018, the Company repaid $250,000,000 principal amount of its 6.10% unsecured notes in advance of its March 2020 scheduled maturity, recognizing a charge of $8,926,000, consisting of a prepayment penalty of $8,579,000 and a non-cash write-off of deferred financing costs of $347,000.


•	In December 2018, in conjunction with the formation of the NYC Joint Venture as discussed in Note 5, "Investments in Real Estate Entities," the following financing activities took place:


◦	The Company repaid $93,800,000 of variable rate debt secured by Avalon Bowery Place I in advance of its November 2037 maturity date. In conjunction with the repayment, the Company recognized a charge of $5,837,000, consisting of a prepayment penalty of $2,874,000 and the non-cash write-off of unamortized deferred financing costs of $2,963,000.


◦	The Company entered into a $93,800,000 fixed rate note secured by Avalon Bowery Place I, with a contractual interest rate of 4.01%, maturing in January 2029.


◦	The Company entered into a $39,639,000 fixed rate note secured by Avalon Bowery Place II, with a contractual interest rate of 4.01%, maturing in January 2029.


◦	The Company entered into a $12,500,000 fixed rate note secured by Avalon Morningside Park, with a contractual interest rate of 3.95%, maturing in January 2029.


◦	The Company entered into a $150,000,000 fixed rate note secured by Avalon West Chelsea and AVA High Line, a dual-branded community, with a contractual interest rate of 4.01%, maturing in January 2029.


◦	The NYC Joint Venture then assumed the aggregate $295,939,000 of new borrowings discussed above, as well as the previously outstanding $100,000,000 fixed rate note secured by Avalon Morningside Park with a contractual interest rate of 3.50%.

At December 31, 2018, the Company has a $1,500,000,000 revolving variable rate unsecured credit facility with a syndicate of banks (the "Credit Facility") which matures in April 2020. The Company may extend the maturity for up to nine months, provided the Company is not in default and upon payment of a $1,500,000 extension fee. The Credit Facility bears interest at varying levels based on the London Interbank Offered Rate (“LIBOR”), rating levels achieved on the Company's unsecured notes and on a maturity schedule selected by the Company. The current stated pricing is LIBOR plus 0.825% per annum (3.33% at December 31, 2018), assuming a one month borrowing rate. The annual facility fee is 0.125% (or approximately $1,875,000 annually based on the $1,500,000,000 facility size and based on the Company's current credit rating).

The Company had no borrowings outstanding under the Credit Facility and had $39,810,000 and $47,315,000 outstanding in letters of credit that reduced the borrowing capacity as of December 31, 2018 and 2017, respectively.

In the aggregate, secured notes payable mature at various dates from April 2019 through July 2066, and are secured by certain apartment communities (with a net carrying value of $1,827,953,000, excluding communities classified as held for sale, as of December 31, 2018).

The weighted average interest rate of the Company's fixed rate secured notes payable (conventional and tax-exempt) was 3.8% and 4.0% at December 31, 2018 and 2017, respectively. The weighted average interest rate of the Company's variable rate secured notes payable (conventional and tax exempt), the Term Loans and its Credit Facility, including the effect of certain financing related fees, was 3.4% and 3.2% at December 31, 2018 and 2017, respectively.

Scheduled payments and maturities of secured notes payable and unsecured notes outstanding at December 31, 2018 are as follows (dollars in thousands):



Year	Secured notes payments		Secured notes maturities		Unsecured notes maturities		Stated interest rate of unsecured notes
2019	3,824		114,722		—		N/A
2020	2,682		140,430		400,000		3.625	%
2021	2,204		27,844		250,000		3.950	%
					300,000		LIBOR + 0.43%
2022	2,318		—		450,000		2.950	%
					100,000		LIBOR + .90%
2023	2,439		—		350,000		4.200	%
					250,000		2.850	%
2024	2,577		—		300,000		3.500	%
					150,000		LIBOR + 1.50%
2025	2,708		84,835		525,000		3.450	%
					300,000		3.500	%
2026	2,845		—		475,000		2.950	%
					300,000		2.900	%
2027	2,270		185,100		400,000		3.350	%
2028	912		—		450,000		3.200	%
Thereafter	30,296		544,349		350,000		3.900	%
					300,000		4.150	%
					300,000		4.350	%
	$	55,075	$	1,097,280	$	5,950,000

The Company's unsecured notes are redeemable at the Company's option, in whole or in part, generally at a redemption price equal to the greater of (i) 100% of their principal amount or (ii) the sum of the present value of the remaining scheduled payments of principal and interest discounted at a rate equal to the yield on U.S. Treasury securities with a comparable maturity plus a spread between 20 and 45 basis points depending on the specific series of unsecured notes, plus accrued and unpaid interest to the redemption date. The indenture under which the Company's unsecured notes were issued, the Company's Credit Facility agreement and the Company's Term Loan agreement contain limitations on the amount of debt the Company can incur or the amount of assets that can be used to secure other financing transactions, and other customary financial and other covenants, with which the Company was in compliance at December 31, 2018.