Mortgage Notes Payable, Unsecured Notes and Credit Facility

6 Months Ended

Jun. 30, 2019

Notes Payable, Unsecured Notes and Credit Facility

Mortgage Notes Payable, Unsecured Notes and Credit Facility

The Company's mortgage notes payable, unsecured notes, variable rate unsecured term loans ("Term Loans") and Credit Facility, as defined below, as of June 30, 2019 and December 31, 2018 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 June 30, 2019 and December 31, 2018, as shown in the accompanying Condensed Consolidated Balance Sheets (dollars in thousands) (see Note 6, "Real Estate Disposition Activities").



	6/30/2019		12/31/2018

Fixed rate unsecured notes (1)	$	5,850,000	$	5,400,000
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)	517,039		533,215
Variable rate mortgage notes payable - conventional and tax-exempt (2)	497,850		619,140
Total mortgage notes payable, unsecured notes and Term Loans	7,414,889		7,102,355
Credit Facility	—		—
Total mortgage notes payable, unsecured notes, Term Loans and Credit Facility	$	7,414,889	$	7,102,355

_____________________________________


(1)	Balances at June 30, 2019 and December 31, 2018 exclude $9,346 and $9,879, respectively, of debt discount, and $35,522 and $34,128, respectively, of deferred financing costs, as reflected in unsecured notes, net on the accompanying Condensed Consolidated Balance Sheets.


(2)	Balances at June 30, 2019 and December 31, 2018 exclude $14,530 and $14,590, respectively, of debt discount, and $3,274 and $3,495, respectively, of deferred financing costs, as reflected in mortgage notes payable on the accompanying Condensed Consolidated Balance Sheets.

In addition to the Credit Facility discussed in this Form 10-Q, the following debt activity occurred during the six months ended June 30, 2019:


•	In February 2019, the Company amended and restated the $250,000,000 variable rate unsecured term loan that it originally entered into in February 2017, of which $100,000,000 matures in February 2022 with stated pricing of LIBOR plus 0.90%, which remained the same, and $150,000,000 matures in February 2024 with stated pricing of LIBOR plus 0.85% that decreased from LIBOR plus 1.50%.


•	In April 2019, the Company repaid $13,363,000 of 2.99% fixed rate debt and $33,854,000 of variable rate debt secured by Avalon Natick at par on its maturity date.


•	In May 2019, the Company repaid $7,635,000 principal amount of variable rate debt secured by Eaves Mission Viejo at par in advance of its scheduled maturity date. The Company utilized $3,706,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.


•	In May 2019, the Company repaid $20,800,000 principal amount of variable rate debt secured by AVA Nob Hill at par in advance of its scheduled maturity date. The Company utilized $10,584,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.


•	In May 2019, the Company repaid $38,800,000 principal amount of variable rate debt secured by Avalon Campbell at par in advance of its scheduled maturity date. The Company utilized $22,622,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.


•	In May 2019, the Company repaid $17,600,000 principal amount of variable rate debt secured by Eaves Pacifica at par in advance of its scheduled maturity date. The Company utilized $10,263,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.


•	In May 2019, the Company issued $450,000,000 principal amount of unsecured notes in a public offering under its existing shelf registration statement for net proceeds of approximately $446,877,000. The notes mature in June 2029 and were issued at a 3.30% interest rate. The effective interest rate of the notes is 3.66%, including the impact of an interest rate hedge and offering costs.

In February 2019, the Company entered into a $1,750,000,000 Fifth Amended and Restated Revolving Loan Agreement (the “Credit Facility”) with a syndicate of banks, which replaces its prior $1,500,000,000 credit facility dated as of January 14, 2016. The term of the Credit Facility ends on February 28, 2024.

The Credit Facility bears interest at varying levels based on (i) the London Interbank Offered Rate (“LIBOR”) applicable to the period of borrowing for a particular draw of funds from the facility (e.g., one month to maturity, three months to maturity, etc.) and (ii) the rating levels issued for our unsecured notes. The current stated pricing for drawn borrowings is LIBOR plus 0.775% per annum (3.15% at June 30, 2019), assuming a one month borrowing rate. The stated spread over LIBOR can vary from LIBOR plus 0.70% to LIBOR plus 1.45% based upon the rating of the Company's unsecured notes. The Credit Facility also provides a competitive bid option that is available for borrowings of up to 65% of the Credit Facility amount. This option allows banks that are part of the lender consortium to bid to provide the Company loans at a rate that is lower than the stated pricing provided by the unsecured credit facility. The competitive bid option may result in lower pricing than the stated rate if market conditions allow. The annual facility fee for the Credit Facility remained 0.125%, resulting in a fee of $2,188,000 annually based on the $1,750,000,000 facility size and based on the Company's current credit rating.

The Company had no borrowings outstanding under the Credit Facility as of June 30, 2019 and December 31, 2018. The Company had $35,461,000 and $39,810,000 outstanding in letters of credit that reduced the borrowing capacity as of June 30, 2019 and December 31, 2018, respectively. In addition, the Company had $100,000 outstanding in additional letters of credit as of June 30, 2019.

In the aggregate, secured notes payable mature at various dates from November 2019 through July 2066, and are secured by certain apartment communities (with a net carrying value of $1,667,725,000, excluding communities classified as held for sale, as of June 30, 2019).

The weighted average interest rate of the Company's fixed rate secured notes payable (conventional and tax-exempt) was both 3.8% at June 30, 2019 and December 31, 2018, respectively. The weighted average interest rate of the Company's variable rate secured notes payable (conventional and tax-exempt) including the effect of certain financing related fees, was 3.5% and 3.4% at June 30, 2019 and December 31, 2018, respectively.

Scheduled payments and maturities of secured notes payable and unsecured notes outstanding at June 30, 2019 are as follows (dollars in thousands):



Year	Secured notes principal payments		Secured notes maturities		Unsecured notes and Term Loans maturities		Stated interest rate of unsecured notes and Term Loans
2019	1,931		66,285		—		N/A
2020	8,782		140,429		400,000		3.625	%
2021	9,304		27,844		250,000		3.950	%
					300,000		LIBOR + 0.43%
2022	9,918		—		450,000		2.950	%
					100,000		LIBOR + 0.90%
2023	10,739		—		350,000		4.200	%
					250,000		2.850	%
2024	11,577		—		300,000		3.500	%
					150,000		LIBOR + 0.85%
2025	12,508		—		525,000		3.450	%
					300,000		3.500	%
2026	13,545		—		475,000		2.950	%
					300,000		2.900	%
2027	13,575		186,505		400,000		3.350	%
2028	20,607		—		450,000		3.200	%
Thereafter	200,904		280,436		350,000		3.900	%
					300,000		4.150	%
					300,000		4.350	%
					450,000		3.300	%
	$	313,390	$	701,499	$	6,400,000

The Company was in compliance at June 30, 2019 with customary financial and other covenants under the Credit Facility, the Term Loans and the Company's fixed rate unsecured notes.