Skip to Content
PR Newswire

The Howard Hughes Corporation® Reports Second Quarter 2022 Results

The Howard Hughes Corporation® Reports Second Quarter 2022 Results

The Howard Hughes Corporation® Reports Second Quarter 2022 Results

PR Newswire

HOUSTON, Aug. 3, 2022

HHC reports strong financial results despite macroeconomic headwinds, driven by robust land sales, increased Operating Asset NOI, and continued momentum in condo sales

HOUSTON, Aug. 3, 2022 /PRNewswire/ -- The Howard Hughes Corporation® (NYSE: HHC) (the "Company," "HHC" or "we") today announced operating results for the second quarter ended June 30, 2022. The financial statements, exhibits and reconciliations of non-GAAP measures in the attached Appendix and the Supplemental Information, as available through the Investors section of our website, provide further detail of these results.

(PRNewsfoto/The Howard Hughes Corporation)

The Howard Hughes Corporation® Reports Second Quarter 2022 Results

Second Quarter 2022 Highlights Include:

  • Second quarter net income of $21.6 million, or $0.42 per diluted share, compared to net income of $4.8 million, or $0.09 per diluted share, in the prior-year period.
  • Total Operating Assets net operating income (NOI) totaled $66.3 million in the quarter, a 14.6% increase over the prior-year period. The strong performance of our Operating Asset portfolio was attributable to the strong rent growth and leasing momentum of our latest multi-family assets, with quarterly NOI from this property type rising 59.8% year-over-year, as well as continued improvements in office assets and strong attendance at the Las Vegas Ballpark®.
  • Master Planned Community (MPC) earnings before taxes (EBT) totaled $71.3 million in the quarter—a 2.1% increase over the prior-year quarter—with land price appreciation and higher builder price participation revenue, signifying that housing demand remains outsized relative to supply in Las Vegas and Houston. Excluding equity earnings from The Summit, MPC EBT was up $23.3 million or 45.6%.
  • Subsequent to quarter end, HHC reached an agreement with Discovery Land to expand our joint venture at The Summit to capture the heightened demand of those seeking an ultra-luxury residence in Summerlin®.
  • Closed on 20 condo units in the quarter, 19 of which closed at 'A'ali'i®—the latest completed tower at Ward Village®—generating $17.4 million in condo sales revenue. 'A'ali'i ended the quarter 94.7% sold. Pre-sales at our two towers under construction were strong with Kō'ula now 96.3% pre-sold and Victoria Place fully sold out.
  • The Seaport in New York City had one of its best quarters in its history, generating $27.1 million of revenue. The quarter's results benefited from several concerts and private events on The Rooftop at Pier 17®, driving up foot traffic and increasing revenues at our managed restaurants.
  • Sold The Outlet Collection at Riverwalk®—an approximately 264,000-square-foot retail outlet center in New Orleans—for $34 million, generating net proceeds of $8.2 million. This transaction marked the disposition of the Company's last remaining non-core asset located outside of its core regions.
  • JDM Partners exercised its first option on Douglas Ranch, repurchasing a 9.24% ownership interest for $50 million. HHC also received a $10 million non-refundable deposit to secure a second option to reacquire up to an additional 40.76% stake in Douglas Ranch, which expires on August 18, 2022.
  • Repurchased 2,164,400 shares of common stock funded with $192.3 million of cash on hand at an average price of $88.83 per share. Subsequent to quarter end, HHC repurchased an additional 368,806 shares of common stock for $25.4 million at an average price of $68.98 per share.

"In a quarter that has been headlined by an economic downturn, rising inflation, and recessionary concerns, we performed exceptionally well," commented David R. O'Reilly, Chief Executive Officer of The Howard Hughes Corporation. "The strength of HHC's unique business model and our continued commitment to developing exceptional communities where people want to live, work, and play continued to drive strong results across all of our operating segments. 

"In our MPCs, our Houston and Las Vegas communities continued to outperform with strong land sales fueled by substantial increases in price per acre of land sold. Our Operating Assets segment delivered sizeable NOI growth, driven by continued outpeformance of our multi-family portfolio, improvements in office, and a successful start to the baseball season at the Las Vegas Ballpark, where league-leading attendance added to our strong results. Condo sales at Ward Village remained elevated, with limited remaining unit inventory at our towers under construction and in pre-sales. Finally, at the Seaport, we had a tremendous quarter with a significant increase in visitors for our summer concert series, a complete takeover of The Rooftop at Pier 17 for Ape Fest, and numerous other private events, quickly solidifying the Seaport as a top entertainment and dining venue in New York City. Looking forward, we expect the strong momentum across our segments to continue into the second half of the year.

"As we anticipated—due to rising mortgage rates, inflation, and the surge in sales during 2020 and 2021—the second quarter's new home sales reflected a year-over-year decline, with Summerlin and our Houston MPCs showing a 37% decrease from the previous year. However, home sales remained solid relative to the levels seen prior to the pandemic-driven sales surge. Overall, demand for land in our core markets of Houston, Las Vegas, and Phoenix remains favorable, as lot inventories in these markets are at all-time lows, and homebuilders continue to replenish their available acreage to meet current demand. The continued demand for HHC's land during different market conditions is a testament to the strength of our MPC assets, continued migration trends, and our communities' market-leading quality of life and cost of living. As a result, we expect to see continued strong demand for land sales in our MPCs for the duration of the year.

"With our shares trading significantly below the underlying net asset value of the Company, we continued to buy back shares throughout the quarter, affirming our commitment to unlocking shareholder value. In total, we repurchased nearly 2.2 million shares at an average price of $88.83 per share for approximately $192.3 million. Subsequent to the end of the second quarter, we repurchased approximately 369,000 additional shares at an average price of $68.98 per share for approximately $25.4 million. This brings total share repurchases under our current $250 million authorization to approximately $235 million."

Click Here: Second Quarter 2022 Howard Hughes Quarterly Spotlight
: Second Quarter 2022 live audio webcast

Total Company

  • Net income increased to $21.6 million or $0.42 per diluted share in the quarter, compared to net income of $4.8 million or $0.09 per diluted share in the prior-year period due to strong land sales, increased Operating Asset NOI, and reduced losses at the Seaport.
  • This positive year-over-year performance included Operating Asset NOI of $66.3 million, an $8.5 million increase, and MPC EBT of $71.3 million, a $1.4 million increase. Excluding equity earnings from The Summit, MPC EBT increased $23.3 million.
  • Ended the second quarter with $572.8 million of cash on the balance sheet and total debt of $4.8 billion, with 79% of the balance maturing in 2026 or later.

Operating Assets

  • Total Operating Assets NOI totaled $66.3 million in the quarter, a 14.6% increase compared to $57.9 million in the prior-year period. This is an impressive year-over-year performance, especially considering the $3.8 million of NOI delivered in the second quarter of 2021 by assets that have since been sold including The Outlet Collection at Riverwalk and HHC's former hospitality portfolio.
  • Multi-family NOI increased 59.8% to $11.8 million compared to the second quarter of 2021 due to continued rent growth across the portfolio and strength in the lease-up of our latest multi-family developments that are all at or near full occupancy.
  • Office NOI increased 12.9% to $29.7 million compared to the prior-year period largely due to improved leasing activity at our class-A properties, particularly in The Woodlands® and Downtown Columbia®, as companies recover from the pandemic and employees return to work. During the second quarter, the Company signed an 80,000 square-foot lease with CareFirst at 6100 Merriweather in Downtown Columbia, bringing this asset to 93.5% leased.
  • The Las Vegas Ballpark generated $5.4 million of NOI during the quarter compared to $3.1 million in the prior year period driven by strong fan attendance for the Las Vegas Aviators®, HHC's Triple-A minor league baseball team. This is in comparison to the second quarter of 2021 where the first several games of the season were limited to 50% seating capacity to comply with local COVID restrictions.

MPC

  • MPC EBT totaled $71.3 million in the quarter, a 2.1% increase compared to $69.8 million in the prior-year period.
  • MPC land sales revenue of $85.0 million was 45.7% higher compared to the prior-year period. This increase was primarily driven by increased land sales in Bridgeland® which contributed to a 18.7% increase in residential acres sold across our communities. The price per acre of land sold also increased to approximately $753,000 per acre during the quarter which compares to approximately $603,000 per acre in the prior-year period.
  • Builder price participation revenue rose to $18.5 million during the quarter—an increase of 62.2% from the prior-year period as home prices in our communities continue to escalate.
  • Equity earnings at The Summit decreased $21.9 million year-over-year due to no unit closings in the second quarter compared to 16 in the same period last year as this private Summerlin community moves closer to selling out its remaining inventory.
  • With limited remaining lots and condos to sell at The Summit, we reached an agreement with Discovery Land subsequent to quarter end to expand this community with a second phase of development which is expected to drive tremendous cash proceeds to HHC over the life of the project. The Company contributed an additional 54 acres which will be used to develop 27 custom home sites.
  • A total of 435 new homes were sold in HHC's MPCs during the quarter, a 36.7% decline compared to the prior-year period as home sales in the second quarter of 2021 surged with the economy emerging from the pandemic and historically low mortgage interest rates. Sequentially, new home sales declined 28.0% compared to 604 new homes sold during the first quarter of 2022.

Strategic Developments

  • We sold 20 condominium units at Ward Village during the second quarter, including 19 units at 'A'ali'i, generating $17.4 million in net revenue, and one unit at Waiea®, generating $4.0 million in net revenue. As of the end of the second quarter, 'A'ali'i was 94.7% sold and Waiea was 99.4% sold with just one unit remaining.
  • Contracted to sell 28 units at our two towers under construction. Kō'ula—which is expected to deliver in the third quarter—ended the quarter 96.3% pre-sold. Victoria Place—which is expected to be completed in 2024—is now sold out.
  • The Park Ward Village contracted 11 units during the second quarter and is now 90.6% pre-sold with construction expected to begin in the second half of 2022.
  • Contracted on 627 units at Ulana—Ward Village's ninth condo tower—which will be fully dedicated to workforce housing and ended the quarter 90.1% pre-sold.
  • Commenced construction on our first single-family build-to-rent project, Wingspan, in Bridgeland. This project, which will include 263 homes, is expected to start welcoming its first residents in late 2023.

Seaport

  • The Seaport generated negative NOI of $3.7 million in the quarter, a $0.7 million improvement compared to a $4.4 million loss in the prior-year period.
  • Seaport revenue of $27.1 million rose 165.5% compared to revenue of $10.2 million during the second quarter of 2021 driven by the start of the summer concert series on The Rooftop at Pier 17, including a takeover of Pier 17 for Ape Fest, and increased demand at our managed restaurants.
  • Construction at the Tin Building by Jean-Georges is substantially complete. Hiring and training of new employees has been challenging due to labor shortages, but onboarding is progressing and the Company expects the grand opening to be held in the third quarter.
  • Began site preparation work at 250 Water Street during the second quarter of 2022 following the approval by the City of New York in December 2021 for the transformation of this one-acre parking lot into a mixed-use multi-family and office development.
  • Leading fashion designer Alexander Wang selected the Seaport for its new global headquarters and showroom in New York City, signing a 15-year lease for approximately 46,000 square feet, inclusive of 5,000 square feet of outdoor space, at the Fulton Market Building. The lease brings the building to 100% leased.

Financing Activity

  • In April 2022, the Company closed on a $19.5 million financing of 20/25 Waterway Avenue, replacing the existing loan, with $4.2 million withheld until the release of upcoming tenant expirations. The loan matures in April 2026 with a one-year extension option and bears interest at SOFR plus 2.50% and is interest-only for the first three years with 25-year amortization thereafter.
  • In May 2022, the Company closed on a $51.0 million interest-only refinancing of Millennium Waterway Apartments. The loan bears interest at 3.94% with maturity in June 2032.
  • In May 2022, the Company closed on a $105.0 million interest-only refinancing of Two Lakes Edge. The loan bears interest at 4.39% with maturity in June 2032.
  • In June 2022, the Company closed on a $37.5 million interest-only refinancing of The Lane at Waterway. The loan bears interest at 4.85% with maturity in July 2032.

  • Full-year 2022 guidance remains unchanged from the prior reporting period.
  • Operating Asset NOI is projected to experience strong leasing activity at our latest multi-family developments, offset by no hospitality NOI in 2022 as a result of the sale of our hotel portfolio, as well as reduced non-recurring COVID-related rent recoveries related to certain retail tenants during 2021. We expect 2022 Operating Asset NOI to decline 0% to 2% year-over-year.
  • MPC EBT range is projected to remain higher compared to the earnings we generated on average over 2017 to 2020. In 2021, we experienced outsized land sales, largely due to the closing of a 216-acre superpad in Summerlin. Superpad sales of this size do not occur every year, which is reflective of the projected EBT decline in 2022. We expect 2022 MPC EBT to decline 25% to 30% year-over-year.
  • Condo sales are projected to range between $650 million to $700 million, with gross margins between 26.5% to 27.5%. Projected condo sales are driven by the anticipated closing of units at Kō'ula during the third quarter of 2022 and additional closings at 'A'ali'i.
  • Cash G&A is projected to range between $75 million to $80 million, which excludes anticipated non-cash stock compensation of $10 million to $15 million.

Conference Call & Webcast Information

The Howard Hughes Corporation will host its investor conference call on Thursday, August 4, 2022, at 9:00 a.m. Central Daylight Time (10:00 a.m. Eastern Daylight Time) to discuss second quarter 2022 results. To participate, please dial 1-877-883-0383 within the U.S., 1-866-605-3850 within Canada, or 1-412-902-6506 when dialing internationally. All participants should dial in at least five minutes prior to the scheduled start time, using 5181383 as the passcode. A live audio webcast and Quarterly Spotlight will also be available on the Company's website (www.howardhughes.com. In addition to dial-in options, institutional and retail shareholders can participate by going to app.saytechnologies.com/howardhughes. Shareholders can email  for any support inquiries.

We are primarily focused on creating shareholder value by increasing our per-share net asset value. Often, the nature of our business results in short-term volatility in our net income due to the timing of MPC land sales, recognition of condominium revenue and operating business pre-opening expenses, and, as such, we believe the following metrics summarized below are most useful in tracking our progress towards net asset value creation.


Six Months Ended June 30,


Three Months Ended June 30,

$ in thousands

2022


2021


$ Change

% Change


2022


2021


$ Change

% Change

Operating Assets NOI (1)














Office

$    54,798


$    52,115


$      2,683

5 %


$     29,680


$     26,283


$      3,397

13 %

Retail

27,957


25,312


2,645

10 %


14,932


13,762


1,170

9 %

Multi-family

22,985


13,145


9,840

75 %


11,843


7,410


4,433

60 %

Other

8,107


5,791


2,316

40 %


7,318


4,975


2,343

47 %

Dispositions

628


3,964


(3,336)

(84) %


188


3,758


(3,570)

(95) %

Operating Assets NOI

114,475


100,327


14,148

14 %


63,961


56,188


7,773

14 %

Company's share NOI (a)

9,140


5,830


3,310

57 %


2,386


1,690


696

41 %

Total Operating Assets NOI

$  123,615


$  106,157


$    17,458

16 %


$     66,347


$     57,878


$      8,469

15 %















Projected stabilized NOI Operating
Assets ($ in millions)

$      356.5


$      395.2


$       (38.7)

(10) %






















MPC














Acres Sold - Residential

156


148


8

5 %


112


94


18

19 %

Acres Sold - Commercial

34


26


8

32 %


8


8


— %

Price Per Acre - Residential

$         698


$         618


$           80

13 %


$          753


$          603


$         150

25 %

Price Per Acre - Commercial

$         871


$         288


$         583

203 %


$          175


$          651


$        (477)

(73) %

MPC EBT (1)

$  130,944


$  133,186


$     (2,242)

(2) %


$     71,266


$     69,831


$      1,435

2 %















Seaport NOI (1)














Landlord Operations - Historic
District & Pier 17

$     (5,925)


$     (7,074)


$      1,149

16 %


$      (3,070)


$      (3,834)


$         764

20 %

Multi-family

74


136


(62)

(46) %


206


44


162

NM

Managed Businesses - Historic
District & Pier 17

(861)


(916)


55

6 %


1,769


(256)


2,025

NM

Events, Sponsorships & Catering
Business

286


(665)


951

143 %


411


(229)


640

NM

Seaport NOI

(6,426)


(8,519)


2,093

25 %


(684)


(4,275)


3,591

84 %

Company's share NOI (a)

(5,597)


(282)


(5,315)

NM


(3,022)


(147)


(2,875)

NM

Total Seaport NOI

$   (12,023)


$     (8,801)


$     (3,222)

(37) %


$      (3,706)


$      (4,422)


$         716

16 %















Strategic Developments














Condominium units contracted to
sell (b)

80


91


(11)

(12) %


43


45


(2)

(4) %

(a)

Includes Company's share of NOI from non-consolidated assets

(b)

Includes units at our buildings that are open or under construction as of June 30, 2022



NM - Not Meaningful



(1)

See the accompanying appendix for a reconciliation of GAAP to non-GAAP financial measures and a statement indicating why management believes the non-GAAP financial measure provides useful information for investors.

About The Howard Hughes Corporation®

The Howard Hughes Corporation owns, manages and develops commercial, residential and mixed-use real estate throughout the U.S. Its award-winning assets include the country's preeminent portfolio of master planned communities, as well as operating properties and development opportunities including: the Seaport in New York City; Downtown Columbia®, Maryland; The Woodlands®, The Woodlands Hills®, and Bridgeland® in the Greater Houston, Texas area; Summerlin®, Las Vegas; Ward Village® in Honolulu, Hawai'i; and Douglas Ranch in Phoenix. The Howard Hughes Corporation's portfolio is strategically positioned to meet and accelerate development based on market demand, resulting in one of the strongest real estate platforms in the country. Dedicated to innovative place making, the Company is recognized for its ongoing commitment to design excellence and to the cultural life of its communities. The Howard Hughes Corporation is traded on the New York Stock Exchange as HHC. For additional information visit www.howardhughes.com

The Howard Hughes Corporation has partnered with Say, the fintech startup reimagining shareholder communications, to allow investors to submit and upvote questions they would like to see addressed on the Company's second quarter earnings call. Say verifies all shareholder positions and provides permission to participate on the August 4, 2022 call, during which the Company's leadership will be answering top questions. Utilizing the Say platform, The Howard Hughes Corporation elevates its capabilities for responding to Company shareholders, making its investor relations Q&A more transparent and engaging.

Safe Harbor Statement

Certain statements contained in this press release may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical facts, including, among others, statements regarding the Company's future financial position, results or performance, are forward-looking statements. Those statements include statements regarding the intent, belief, or current expectations of the Company, members of its management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "likely," "may," "plan," "project," "realize," "should," "transform," "will," "would," and other statements of similar expression. Forward-looking statements are not a guaranty of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements. Many of these factors are beyond the Company's abilities to control or predict. Some of the risks, uncertainties and other important factors that may affect future results or cause actual results to differ materially from those expressed or implied by forward-looking statements include: (i) the impact of the COVID-19 pandemic on the Company's business, tenants and the economy in general, including the measures taken by governmental authorities to address it; (ii) general adverse economic and local real estate conditions; (iii) potential changes in the financial markets and interest rates; (iv) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business; (v) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms, if at all; (vi) ability to compete effectively, including the potential impact of heightened competition for tenants and potential decreases in occupancy at our properties; (vii) ability to successfully dispose of non-core assets on favorable terms, if at all; (viii) ability to successfully identify, acquire, develop and/or manage properties on favorable terms and in accordance with applicable zoning and permitting laws; (ix) changes in governmental laws and regulations; (x) increases in operating costs, including construction cost increases as the result of trade disputes and tariffs on goods imported in the United States; (xi) lack of control over certain of the Company's properties due to the joint ownership of such property; (xii) impairment charges; (xiii) the effects of geopolitical instability and risks such as terrorist attacks and trade wars; (xiv) the effects of natural disasters, including floods, droughts, wind, tornadoes and hurricanes; (xv) the inherent risks related to disruption of information technology networks and related systems, including cyber security attacks; and (xvi) the ability to attract and retain key employees. The Company refers you to the section entitled "Risk Factors" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the Company's filings with the Securities and Exchange Commission. Copies of each filing may be obtained from the Company or the Securities and Exchange Commission. The risks included here are not exhaustive and undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to the Company, its management, or persons acting on their behalf are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless otherwise required by law.

Financial Presentation

As discussed throughout this release, we use certain non-GAAP performance measures, in addition to the required GAAP presentations, as we believe these measures improve the understanding of our operational results and make comparisons of operating results among peer companies more meaningful. We continually evaluate the usefulness, relevance, limitations and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change. A non-GAAP financial measure used throughout this release is net operating income (NOI). We provide a more detailed discussion about this non-GAAP measure in our reconciliation of non-GAAP measures provided in the appendix in this earnings release.

Media Contact
The Howard Hughes Corporation
Cristina Carlson, 646-822-6910
Senior Vice President, Head of Corporate Communications
cristina.carlson@howardhughes.com

Investor Relations Contact
The Howard Hughes Corporation
Eric Holcomb, 281-475-2144
Senior Vice President, Investor Relations
eric.holcomb@howardhughes.com

 

THE HOWARD HUGHES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED
 


Six Months Ended
June 30,


Three Months Ended
June 30,

thousands except per share amounts

2022


2021


2022


2021

REVENUES








Condominium rights and unit sales

$   41,036


$   50,028


$    21,420


$    12,861

Master Planned Communities land sales

146,447


95,819


84,979


58,342

Rental revenue

199,164


174,375


104,055


88,476

Other land, rental and property revenues

67,320


64,632


47,783


41,389

Builder price participation

32,967


18,183


18,471


11,389

  Total revenues

486,934


403,037


276,708


212,457









EXPENSES








Condominium rights and unit cost of sales

33,726


68,403


19,546


13,435

Master Planned Communities cost of sales

55,949


40,509


31,263


24,858

Operating costs

151,674


129,841


86,119


71,243

Rental property real estate taxes

28,196


27,707


13,014


13,716

Provision for (recovery of) doubtful accounts

2,132


(2,098)


1,288


(1,520)

General and administrative

41,403


42,100


15,512


20,334

Depreciation and amortization

97,569


99,096


48,976


49,788

Other

5,083


4,190


2,674


2,546

  Total expenses

415,732


409,748


218,392


194,400









OTHER








Provision for impairment


(13,068)



(13,068)

Gain (loss) on sale or disposal of real estate and other assets, net

4,009


21,333


4,018


21,333

Other income (loss), net

493


(10,971)


714


(663)

  Total other

4,502


(2,706)


4,732


7,602









Operating income (loss)

75,704


(9,417)


63,048


25,659









Interest income

278


72


254


31

Interest expense

(55,590)


(65,649)


(28,152)


(31,439)

Gain (loss) on extinguishment of debt

(645)


(35,966)


(363)


(51)

Equity in earnings (losses) from real estate and other affiliates

11,820


23,663


(6,092)


7,867

Income (loss) before income taxes

31,567


(87,297)


28,695


2,067

Income tax expense (benefit)

7,964


(22,755)


7,263


(1,550)

Net income (loss)

23,603


(64,542)


21,432


3,617

Net (income) loss attributable to noncontrolling interests

83


2,789


132


1,224

Net income (loss) attributable to common stockholders

$   23,686


$  (61,753)


$    21,564


$      4,841









Basic income (loss) per share

$       0.46


$      (1.11)


$       0.42


$       0.09

Diluted income (loss) per share

$       0.46


$      (1.11)


$       0.42


$       0.09

 

THE HOWARD HUGHES CORPORATION

CONSOLIDATED BALANCE SHEETS

UNAUDITED
 

thousands except par values and share amounts

June 30,
2022


December 31,
2021

ASSETS




Investment in real estate:




Master Planned Communities assets

$    2,383,096


$     2,282,768

Buildings and equipment

3,939,573


3,962,441

Less: accumulated depreciation

(800,872)


(743,311)

Land

306,948


322,439

Developments

1,520,856


1,208,907

  Net property and equipment

7,349,601


7,033,244

Investment in real estate and other affiliates

240,616


369,949

  Net investment in real estate

7,590,217


7,403,193

Net investment in lease receivable

2,840


2,913

Cash and cash equivalents

572,774


843,212

Restricted cash

349,850


373,425

Accounts receivable, net

96,219


86,388

Municipal Utility District receivables, net

437,378


387,199

Notes receivable, net

5,729


7,561

Deferred expenses, net

127,113


119,825

Operating lease right-of-use assets, net

46,830


57,022

Prepaid expenses and other assets, net

279,130


300,956

  Total assets

$    9,508,080


$     9,581,694





LIABILITIES




Mortgages, notes and loans payable, net

$    4,800,692


$     4,591,157

Operating lease obligations

50,199


69,363

Deferred tax liabilities

207,023


204,837

Accounts payable and accrued expenses

1,006,365


983,167

  Total liabilities

6,064,279


5,848,524





Redeemable noncontrolling interest


22,500





EQUITY




Preferred stock: $0.01 par value; 50,000,000 shares authorized, none issued


Common stock: $0.01 par value; 150,000,000 shares authorized, 56,295,548 issued and
50,262,549 outstanding as of June 30, 2022,  56,173,276 shares issued and 54,065,661
outstanding as of December 31, 2021

564


563

Additional paid-in capital

3,967,194


3,960,418

Retained earnings (accumulated deficit)

7,230


(16,456)

Accumulated other comprehensive income (loss)

2,362


(14,457)

Treasury stock, at cost, 6,032,999 shares as of June 30, 2022, and 2,107,615 shares as
of December 31, 2021

(583,952)


(220,073)

  Total stockholders' equity

3,393,398


3,709,995

Noncontrolling interests

50,403


675

  Total equity

3,443,801


3,710,670

  Total liabilities and equity

$    9,508,080


$     9,581,694

Below are GAAP to non-GAAP reconciliations of certain financial measures, as required under Regulation G of the Securities Exchange Act of 1934. Non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be comparable to similarly titled measures.

As a result of our four segments—Operating Assets, Master Planned Communities (MPC), Seaport and Strategic Developments—being managed separately, we use different operating measures to assess operating results and allocate resources among these four segments. The one common operating measure used to assess operating results for our business segments is earnings before tax (EBT). EBT, as it relates to each business segment, represents the revenues less expenses of each segment, including interest income, interest expense and equity in earnings of real estate and other affiliates. EBT excludes corporate expenses and other items that are not allocable to the segments. We present EBT because we use this measure, among others, internally to assess the core operating performance of our assets. However, segment EBT should not be considered as an alternative to GAAP net income.


Six Months Ended June 30,


Three Months Ended June 30,

thousands

2022


2021


$ Change


2022


2021


$ Change

Operating Assets Segment EBT












Total revenues (a)

$   218,249


$  209,861


$       8,388


$   118,562


$   113,422


$       5,140

Total operating expenses (a)

(97,964)


(100,425)


2,461


(51,349)


(53,191)


1,842

Segment operating income (loss)

120,285


109,436


10,849


67,213


60,231


6,982

Depreciation and amortization

(77,429)


(79,626)


2,197


(38,999)


(39,975)


976

Interest income (expense), net

(41,436)


(37,152)


(4,284)


(21,318)


(18,152)


(3,166)

Other income (loss), net

(478)


(10,254)


9,776


(309)


(156)


(153)

Equity in earnings (losses) from real estate and
other affiliates

17,766


(21,823)


39,589


2,591


(10,419)


13,010

Gain (loss) on sale or disposal of real estate
and other assets, net

4,018



4,018


4,018



4,018

Gain (loss) on extinguishment of debt

(645)


(882)


237


(363)


(46)


(317)

Operating Assets segment EBT

22,081


(40,301)


62,382


12,833


(8,517)


21,350













Master Planned Communities Segment EBT












Total revenues

188,802


122,865


65,937


108,110


74,578


33,532

Total operating expenses

(82,032)


(57,172)


(24,860)


(45,136)


(33,905)


(11,231)

Segment operating income (loss)

106,770


65,693


41,077


62,974


40,673


22,301

Depreciation and amortization

(182)


(170)


(12)


(92)


(98)


6

Interest income (expense), net

22,205


21,372


833


11,783


10,615


1,168

Other income (loss), net

23



23


23



23

Equity in earnings (losses) from real estate and
other affiliates

2,128


46,291


(44,163)


(3,422)


18,641


(22,063)

MPC segment EBT

130,944


133,186


(2,242)


71,266


69,831


1,435













Seaport Segment EBT












Total revenues

37,552


18,351


19,201


28,176


10,898


17,278

Total operating expenses

(47,925)


(28,502)


(19,423)


(29,066)


(15,996)


(13,070)

Segment operating income (loss)

(10,373)


(10,151)


(222)


(890)


(5,098)


4,208

Depreciation and amortization

(15,543)


(13,839)


(1,704)


(7,720)


(7,004)


(716)

Interest income (expense), net

1,272


289


983


1,319


187


1,132

Other income (loss), net

307


(954)


1,261


(43)


(618)


575

Equity in earnings (losses) from real estate and
other affiliates

(8,950)


(688)


(8,262)


(5,239)


(336)


(4,903)

Seaport segment EBT

(33,287)


(25,343)


(7,944)


(12,573)


(12,869)


296













Strategic Developments Segment EBT












Total revenues

42,302


51,766


(9,464)


21,846


13,466


8,380

Total operating expenses

(43,756)


(78,263)


34,507


(25,679)


(18,640)


(7,039)

Segment operating income (loss)

(1,454)


(26,497)


25,043


(3,833)


(5,174)


1,341

Depreciation and amortization

(2,677)


(3,195)


518


(1,345)


(1,597)


252

Interest income (expense), net

6,517


1,760


4,757


2,528


659


1,869

Other income (loss), net

461


14


447


946


14


932

Equity in earnings (losses) from real estate and
other affiliates

876


(117)


993


(22)


(19)


(3)

Gain (loss) on sale or disposal of real estate
and other assets, net

(9)


21,333


(21,342)



21,333


(21,333)

Provision for impairment


(13,068)


13,068



(13,068)


13,068

Strategic Developments segment EBT

3,714


(19,770)


23,484


(1,726)


2,148


(3,874)













Consolidated Segment EBT












Total revenues

486,905


402,843


84,062


276,694


212,364


64,330

Total operating expenses

(271,677)


(264,362)


(7,315)


(151,230)


(121,732)


(29,498)

Segment operating income (loss)

215,228


138,481


76,747


125,464


90,632


34,832

Depreciation and amortization

(95,831)


(96,830)


999


(48,156)


(48,674)


518

Interest income (expense), net

(11,442)


(13,731)


2,289


(5,688)


(6,691)


1,003

Other income (loss), net

313


(11,194)


11,507


617


(760)


1,377

Equity in earnings (losses) from real estate and
other affiliates

11,820


23,663


(11,843)


(6,092)


7,867


(13,959)

Gain (loss) on sale or disposal of real estate
and other assets, net

4,009


21,333


(17,324)


4,018


21,333


(17,315)

Gain (loss) on extinguishment of debt

(645)


(882)


237


(363)


(46)


(317)

Provision for impairment


(13,068)


13,068



(13,068)


13,068

Consolidated segment EBT

123,452


47,772


75,680


69,800


50,593


19,207













Corporate income, expenses and other items

(99,849)


(112,314)


12,465


(48,368)


(46,976)


(1,392)

Net income (loss)

23,603


(64,542)


88,145


21,432


3,617


17,815

Net (income) loss attributable to noncontrolling
interests

83


2,789


(2,706)


132


1,224


(1,092)

Net income (loss) attributable to common
stockholders

$     23,686


$   (61,753)


$    85,439


$     21,564


$        4,841


$     16,723

(a)

Total revenues includes hospitality revenues of $21.6 million for the six months ended June 30, 2021, and $13.9 million for the three months ended June 30, 2021. Total operating expenses includes hospitality operating costs of $18.9 million for the six months ended June 30, 2021, and $11.0 million for the three months ended June 30, 2021. In September 2021, the Company completed the sale of its three hospitality properties.

NOI

We believe that NOI is a useful supplemental measure of the performance of our Operating Assets and Seaport portfolio because it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating real estate properties and the impact on operations from trends in rental and occupancy rates and operating costs. We define NOI as operating revenues (rental income, tenant recoveries and other revenue) less operating expenses (real estate taxes, repairs and maintenance, marketing and other property expenses, including our share of NOI from equity investees). NOI excludes straight-line rents and amortization of tenant incentives, net; interest expense, net; ground rent amortization, demolition costs; other income (loss); amortization; depreciation; development-related marketing cost; gain on sale or disposal of real estate and other assets, net; provision for impairment and equity in earnings from real estate and other affiliates. All management fees have been eliminated for all internally-managed properties. We use NOI to evaluate our operating performance on a property-by-property basis because NOI allows us to evaluate the impact that property-specific factors such as lease structure, lease rates and tenant base have on our operating results, gross margins and investment returns. Variances between years in NOI typically result from changes in rental rates, occupancy, tenant mix and operating expenses. Although we believe that NOI provides useful information to investors about the performance of our Operating Assets and Seaport assets, due to the exclusions noted above, NOI should only be used as an additional measure of the financial performance of the assets of this segment of our business and not as an alternative to GAAP Net income (loss). For reference, and as an aid in understanding our computation of NOI, a reconciliation of segment EBT to NOI for Operating Assets and Seaport has been presented in the tables below.


Six Months Ended
June 30,


Three Months Ended
June 30,

thousands

2022


2021


2022


2021

Operating Assets segment EBT (a)

$    22,081


$  (40,301)


$    12,833


$     (8,517)

Add back:








Depreciation and amortization

77,429


79,626


38,999


39,975

Interest (income) expense, net

41,436


37,152


21,318


18,152

Equity in (earnings) losses from real estate and other affiliates

(17,766)


21,823


(2,591)


10,419

(Gain) loss on sale or disposal of real estate and other assets, net

(4,018)



(4,018)


(Gain) loss on extinguishment of debt

645


882


363


46

Impact of straight-line rent

(5,539)


(9,094)


(3,101)


(3,987)

Other

207


10,239


158


100

Operating Assets NOI

114,475


100,327


63,961


56,188









Company's Share NOI - Equity Investees (b)

4,502


2,075


2,386


1,690

Distributions from Summerlin Hospital Investment

4,638


3,755











Total Operating Assets NOI

$ 123,615


$ 106,157


$    66,347


$    57,878









Seaport segment EBT (a)

$  (33,287)


$  (25,343)


$   (12,573)


$   (12,869)

Add back:








Depreciation and amortization

15,543


13,839


7,720


7,004

Interest (income) expense, net

(1,272)


(289)


(1,319)


(187)

Equity in (earnings) losses from real estate and other affiliates

8,950


688


5,239


336

Impact of straight-line rent

1,704


867


(184)


463

Other (income) loss, net

1,936


1,719


433


978

Seaport NOI

(6,426)


(8,519)


(684)


(4,275)









Company's Share NOI - Equity Investees

(5,597)


(282)


(3,022)


(147)









Total Seaport NOI

$  (12,023)


$     (8,801)


$     (3,706)


$     (4,422)

(a)

Segment EBT excludes corporate expenses and other items that are not allocable to the segments.

(b)

The Company's share of NOI related to 110 North Wacker Drive in 2021 is calculated using our stated ownership of 23% and does not include the impact of the partnership distribution waterfall.

Same Store NOI - Operating Assets Segment

The Company defines Same Store Properties as consolidated and unconsolidated properties that are acquired or placed in-service prior to the beginning of the earliest period presented and owned by the Company through the end of the latest period presented. Same Store Properties exclude properties placed in-service, acquired, repositioned or in development or redevelopment after the beginning of the earliest period presented or disposed of prior to the end of the latest period presented. Accordingly, it takes at least one year and one quarter after a property is acquired or treated as in-service for that property to be included in Same Store Properties.

We calculate Same Store Net Operating Income (Same Store NOI) as Operating Assets NOI applicable to Same Store Properties. Same Store NOI also includes the Company's share of NOI of unconsolidated properties and the annual distribution from a cost basis investment. Same Store NOI is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that Same Store NOI is helpful to investors as a supplemental comparative performance measure of the income generated from the same group of properties from one period to the next. Other companies may not define Same Store NOI in the same manner as we do; therefore, our computation of Same Store NOI may not be comparable to that of other companies. Additionally, we do not control investments in unconsolidated properties and while we consider disclosures of our share of NOI to be useful, they may not accurately depict the legal and economic implications of our investment arrangements.


Six Months Ended June 30,


Three Months Ended June 30,

thousands

2022


2021


$ Change


2022


2021


$ Change

Same Store Office












Houston, TX

$    35,477


$    35,030


$          447


$    19,402


$    16,569


$       2,833

Columbia, MD

12,378


10,062


2,316


6,573


6,120


453

Las Vegas, NV

7,061


7,023


38


3,764


3,594


170

Total Same Store Office

54,916


52,115


2,801


29,739


26,283


3,456













Same Store Retail












Houston, TX

6,327


5,613


714


3,663


2,768


895

Columbia, MD

1,056


938


118


636


506


130

Las Vegas, NV

11,641


12,928


(1,287)


5,839


7,327


(1,488)

Honolulu, HI

8,542


6,220


2,322


4,479


3,403


1,076

Total Same Store Retail

27,566


25,699


1,867


14,617


14,004


613













Same Store Multi-Family












Houston, TX

13,850


8,364


5,486


7,195


4,675


2,520

Columbia, MD

3,267


1,469


1,798


1,654


1,094


560

Las Vegas, NV

3,648


3,312


336


1,800


1,641


159

Company's Share NOI - Equity Investees

3,530


3,327


203


1,786


1,715


71

Total Same Store Multi-Family

24,295


16,472


7,823


12,435


9,125


3,310













Same Store Other












Houston, TX

3,653


3,254


399


1,908


1,708


200

Columbia, MD

(124)


(105)


(19)


(222)


(23)


(199)

Las Vegas, NV

4,417


2,568


1,849


5,513


3,213


2,300

Honolulu, HI

104


90


14


91


91


Company's Share NOI - Equity and Cost
Investees

5,610


4,670


940


600


535


65

Total Same Store Other

13,660


10,477


3,183


7,890


5,524


2,366

Total Same Store NOI

120,437


104,763


15,674


64,681


54,936


9,745













Non-Same Store NOI

3,178


1,394


1,784


1,666


2,942


(1,276)

Total Operating Assets NOI

$  123,615


$  106,157


$    17,458


$    66,347


$    57,878


$       8,469

Cash G&A

The Company defines Cash G&A as General and administrative expense less non-cash stock compensation expense. Cash G&A is a non-GAAP financial measure that we believe is useful to our investors and other users of our financial statements as an indicator of overhead efficiency without regard to non-cash expenses associated with stock compensation. However, it should not be used as an alternative to general and administrative expenses in accordance with GAAP.


Six Months Ended June 30,


Three Months Ended June 30,

thousands

2022


2021


$ Change


2022


2021


$ Change

General and Administrative












General and administrative (G&A)

$    41,403


$    42,100


$         (697)


$    15,512


$    20,334


$     (4,822)

Less: Non-cash stock compensation

(2,691)


(4,781)


2,090


(1,254)


(2,248)


994

Cash G&A (a)

$    38,712


$    37,319


$       1,393


$    14,258


$    18,086


$     (3,828)

(a)

The first quarter of 2022 includes $2.3 million of severance and bonus costs related to our former Chief Financial Officer.

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/the-howard-hughes-corporation-reports-second-quarter-2022-results-301599431.html

SOURCE The Howard Hughes Corporation