Mortgage Notes Payable, Unsecured Notes and Credit Facility

The Company’s mortgage notes payable, unsecured notes, variable rate unsecured term loan (the “Term Loan”) and Credit Facility, as defined below, as of September 30, 2016 and December 31, 2015 are summarized below (dollars in thousands). The following amounts and discussion do not include the mortgage notes related to the communities classified as held for sale, if any, as of September 30, 2016 and December 31, 2015, as shown in the accompanying Condensed Consolidated Balance Sheets (dollars in thousands) (see Note 6, “Real Estate Disposition Activities”).



	9/30/2016		12/31/2015

Fixed rate unsecured notes (1)	$	3,800,000	$	3,575,000
Term Loan	300,000		300,000
Fixed rate mortgage notes payable - conventional and tax-exempt (2)	1,672,758		1,561,109
Variable rate mortgage notes payable - conventional and tax-exempt (2)	908,621		1,045,182
Total mortgage notes payable and unsecured notes	6,681,379		6,481,291
Credit Facility	170,000		—
Total mortgage notes payable, unsecured notes and Credit Facility	$	6,851,379	$	6,481,291

_____________________________________


(1)	Balances at September 30, 2016 and December 31, 2015 exclude $6,882 and $7,601, respectively, of debt discount, and $22,871 and $21,725, respectively, of deferred financing costs, as reflected in unsecured notes, net on the accompanying Condensed Consolidated Balance Sheets.


(2)	Balances at September 30, 2016 and December 31, 2015 exclude $6,501 and $19,686, respectively, of debt premium, and $12,157 and $14,703, respectively, of deferred financing costs, as reflected in mortgage notes payable on the accompanying Condensed Consolidated Balance Sheets.

The following debt activity occurred during the nine months ended September 30, 2016:


•	In January 2016, in conjunction with the disposition of Eaves Trumbull, Avalon at Stratford was substituted as collateral for the outstanding fixed rate mortgage note secured by Eaves Trumbull.


•	In January 2016, in conjunction with the acquisition of Avalon Hoboken, the Company assumed a fixed rate secured mortgage note with a principal balance of $67,904,000 and a contractual interest rate of 4.18% maturing in December 2020.


•	In February 2016, the Company repaid the $16,212,000 fixed rate mortgage note secured by Archstone Lexington, with an effective interest rate of 3.32% at par and without penalty in advance of its March 2016 maturity date. Upon repayment, Archstone Lexington was substituted as collateral for the outstanding fixed rate mortgage note secured by Avalon Walnut Ridge I.


•	In April 2016, the Company repaid $134,500,000 of variable rate debt secured by Avalon Walnut Creek at par in advance of its March 2046 maturity date, recognizing a non-cash charge of $2,461,000 for the write-off of deferred financing costs.


•	In May 2016, the Company issued $475,000,000 principal amount of unsecured notes in a public offering under its existing shelf registration statement for net proceeds of approximately $471,751,000. The notes mature in May 2026 and were issued at a 2.95% coupon rate. The notes have an effective interest rate of approximately 3.35%, including the effect of an interest rate hedge and offering costs.


•	In August 2016, Avalon Wilshire, Avalon Mission Oaks and Avalon Encino were substituted as collateral for the outstanding fixed rate mortgage notes secured by Eaves Nanuet, Avalon Shrewsbury and Avalon at Freehold, respectively.


•	In September 2016, the Company repaid $250,000,000 principal amount of its 5.75% coupon unsecured notes pursuant to its scheduled maturity.


•	In September 2016, in conjunction with the acquisition of Avalon Columbia Pike, the Company assumed a fixed rate secured mortgage note with a principal balance of $70,507,000 and a contractual interest rate of 3.38% maturing in November 2019.

In January 2016, the Company extended the maturity of its revolving variable rate unsecured credit facility (the “Credit Facility”) from April 2017 to April 2020, and amended other provisions in the Credit Facility. In addition, pursuant to an option available under the terms of the Credit Facility, with the approval of the syndicate of lenders, the Company increased the aggregate facility size from $1,300,000,000 to $1,500,000,000 (the "Credit Facility Increase"). The Company may further extend the term for up to nine months, provided the Company is not in default and upon payment of a $1,500,000 extension fee. In connection with the Credit Facility Increase, the applicable margin over reference rates used to determine the applicable interest rates on the Company's borrowings from time to time decreased. 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 (1.36% at September 30, 2016), assuming a one month borrowing rate. The stated spread over LIBOR can vary from LIBOR plus 0.80% to LIBOR plus 1.55% based on the Company's credit ratings. In addition, a competitive bid option is available for borrowings up to 65% of the Credit Facility amount, which allows banks that are part of the lender consortium to bid to make loans at a rate that is lower than the stated rate if market conditions allow. In connection with the Credit Facility Increase, the annual facility fee was also amended to lower the fee to 0.125% from 0.15%, resulting in a fee of 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 $170,000,000 outstanding under the Credit Facility as of September 30, 2016 and no borrowings outstanding under the Credit Facility as of December 31, 2015. The Company had $53,137,000 and $43,049,000 outstanding in letters of credit that reduced the borrowing capacity as of September 30, 2016 and December 31, 2015, respectively.

In the aggregate, secured notes payable mature at various dates from February 2017 through July 2066, and are secured by certain apartment communities (with a net carrying value of $3,482,680,000, excluding communities classified as held for sale, as of September 30, 2016).

As of September 30, 2016, the Company has guaranteed $100,000,000 of mortgage notes payable held by wholly-owned subsidiaries; all such mortgage notes payable are consolidated for financial reporting purposes. The weighted average interest rate of the Company’s fixed rate mortgage notes payable (conventional and tax-exempt) was 4.4% and 4.6% at September 30, 2016 and December 31, 2015, respectively. The weighted average interest rate of the Company’s variable rate mortgage notes payable (conventional and tax-exempt), the Term Loan and its Credit Facility, including the effect of certain financing related fees, was 2.3% and 1.8% at September 30, 2016 and December 31, 2015, respectively.

Scheduled payments and maturities of mortgage notes payable and unsecured notes outstanding at September 30, 2016 are as follows (dollars in thousands):



Year	Secured notes payments		Secured notes maturities		Unsecured notes maturities		Stated interest rate of unsecured notes

2016	$	4,536	$	—	$	—	N/A
2017	18,671		709,591		250,000		5.700	%
2018	17,793		76,669		—		N/A
2019	4,696		655,386		—		N/A
2020	3,624		118,729		250,000		6.100	%
					400,000		3.625	%
2021	3,551		27,844		250,000		3.950	%
					300,000		LIBOR + 1.450%
2022	3,795		—		450,000		2.950	%
2023	4,040		—		350,000		4.200	%
					250,000		2.850	%
2024	4,310		—		300,000		3.500	%
2025	4,585		84,835		525,000		3.450	%
					300,000		3.500	%
Thereafter	218,644		620,080		475,000		2.950	%
	$	288,245	$	2,293,134	$	4,100,000

The Company was in compliance at September 30, 2016 with customary financial and other covenants under the Credit Facility, the Term Loan, and the Company’s fixed rate unsecured notes.