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 December 31, 2016 and 2015 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, 2016 and 2015, as shown in the Consolidated Balance Sheets (dollars in thousands) (see Note 6, “Real Estate Disposition Activities”).



	12/31/16		12/31/15
Fixed rate unsecured notes (1)	$	4,200,000	$	3,575,000
Term Loan	300,000		300,000
Fixed rate mortgage notes payable—conventional and tax-exempt (2)	1,668,496		1,561,109
Variable rate mortgage notes payable—conventional and tax-exempt (2)	908,262		1,045,182
Total mortgage notes payable and unsecured notes	7,076,758		6,481,291
Credit Facility	—		—
Total mortgage notes payable, unsecured notes and Credit Facility	$	7,076,758	$	6,481,291

_________________________________


(1)	Balances at December 31, 2016 and 2015 exclude $8,930 and $7,601, respectively, of debt discount, and $27,768 and $21,725, respectively, of deferred financing costs, as reflected in unsecured notes, net on the accompanying Consolidated Balance Sheets.


(2)	Balances at December 31, 2016 and 2015 exclude $1,866 and $19,686, respectively, of debt premium, and $11,046 and $14,703, 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, 2016:


•	In January 2016, in conjunction with the disposition of Eaves Trumbull, Avalon 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.


•	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 at 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 October 2016, 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 $297,117,000. The notes mature in October 2026 and were issued at a 2.90% coupon interest rate.


•	In October 2016, the Company issued $350,000,000 principal amount of unsecured notes in a public offering under its existing shelf registration statement for net proceeds of approximately $345,520,000. The notes mature in October 2046 and were issued at a 3.90% coupon interest rate.


•	In November 2016, the Company repaid $250,000,000 principal amount of its 5.70% coupon unsecured notes in advance of its March 2017 scheduled maturity, recognizing a charge of $4,614,000, consisting of a prepayment penalty of $4,403,000 and the write-off of deferred financing costs of $211,000.

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 (1.60% at December 31, 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 no borrowings outstanding under the Credit Facility and had $46,711,000 and $43,049,000 outstanding in letters of credit that reduced the borrowing capacity as of December 31, 2016 and 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 $3,460,572,000, excluding communities classified as held for sale, as of December 31, 2016).

As of December 31, 2016, the Company has guaranteed a $100,000,000 mortgage note payable held by a wholly-owned subsidiary; such mortgage note payable is 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 December 31, 2016 and 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 December 31, 2016 and 2015, respectively.

Scheduled payments and maturities of mortgage notes payable and unsecured notes outstanding at December 31, 2016 are as follows (dollars in thousands):



Year	Secured notes payments		Secured notes maturities		Unsecured notes maturities		Stated interest rate of unsecured notes
2017	$	18,539	$	709,491	$	—	N/A
2018	17,793		76,916		—		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	%
2026	4,859		—		475,000		2.950	%
					300,000		2.900	%
Thereafter	213,685		620,080		350,000		3.900	%
	$	283,477	$	2,293,281	$	4,500,000

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, 2016.