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Section 1: 8-K (8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 6, 2017

 


 

THE HOWARD HUGHES CORPORATION

(Exact name of registrant as specified in its charter)

 


 

Delaware

 

001-34856

 

36-4673192

(State or other jurisdiction
of incorporation)

 

(Commission File Number)

 

(I.R.S. Employer
Identification No.)

 

One Galleria Tower

13355 Noel Road, 22nd Floor

Dallas, Texas  75240

(Address of principal executive offices)

 

Registrant’s telephone number, including area code:  (214) 741-7744

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 



 

Item 2.02                   Results of Operations and Financial Condition

 

On November 6, 2017, The Howard Hughes Corporation (the “Company”) issued a press release announcing the Company’s financial results for the third quarter ended September 30, 2017. A copy of this press release is attached hereto as Exhibit 99.1.

 

The information contained in this Current Report on Form 8-K pursuant to this “Item 2.02 Results of Operations and Financial Condition” is being furnished.  This information shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section or shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, unless specifically identified therein as being incorporated by reference.

 

Item 7.01                   Regulation FD Disclosure.

 

On November 6, 2017, the Company issued supplemental information for the third quarter ended September 30, 2017. The supplemental information contains key information about the Company. The supplemental information is attached hereto as Exhibit 99.2 and has been posted on our website at www.howardhughes.com under the “Investors” tab.

 

The information contained in this Current Report on Form 8-K pursuant to this “Item 7.01 Regulation FD Disclosure” is being furnished.  This information shall not be deemed to be filed for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section or shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, unless specifically identified therein as being incorporated by reference.

 

Item 9.01                   Financial Statements and Exhibits.

 

(d)                                 Exhibits

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press release dated November 6, 2017 announcing the Company’s financial results for the third quarter ended September 30, 2017.

 

 

 

99.2

 

Supplemental information for the third quarter ended September 30, 2017.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

THE HOWARD HUGHES CORPORATION

 

 

 

 

 

 

By:

/s/ Peter F. Riley

 

 

Peter F. Riley

 

 

Senior Vice President, Secretary and General Counsel

 

Date: November 6, 2017

 

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Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

 

PRESS RELEASE

 

Contact Information:

David R. O’Reilly

Chief Financial Officer

(214) 741-7744

David.OReilly@howardhughes.com

 

THE HOWARD HUGHES CORPORATION® REPORTS THIRD QUARTER 2017 RESULTS

 

Dallas, TX, November 6, 2017 — The Howard Hughes Corporation® (NYSE: HHC) (the “Company”) announced operating results for the third quarter ended September 30, 2017. The financial statements, exhibits and reconciliations of non-GAAP measures in the attached Appendix and the Supplemental Information at Exhibit 99.2 provide further details of these results.

 

Third Quarter 2017 Highlights:

 

·                  Net income attributable to common stockholders was $10.5 million or $0.24 per diluted share for the three months ended September 30, 2017, as compared to $8.0 million, or $0.19 per diluted share, for the three months ended September 30, 2016.

·                  Funds From Operations (“FFO”) was $45.3 million or $1.05 per diluted share for the three months ended September 30, 2017, as compared to $65.7 million or $1.54 per diluted share for the three months ended September 30, 2016.

·                  Core FFO decreased to $60.1 million or $1.39 per diluted share for the three months ended September 30, 2017, as compared to $62.9 million or $1.47 per diluted share, for the three months ended September 30, 2016.

·                  Total NOI from operating assets was $37.5 million, an increase of $5.6 million or 17.6% compared to the third quarter of 2016.

·                  MPC segment revenue was $64.9 million, an increase of $12.2 million or 23.1% compared to the third quarter of 2016.

·                  Sold 52 condominiums at Ward Village, bringing total sales to 1,227 homes or 89% of the available 1,381 residences under construction.

·                  Continued construction on two office buildings in Summerlin: a 180,000 square foot office campus 100% pre-leased to Aristocrat Technologies, and Two Summerlin, an approximate 145,000 square foot Class A office building with a parking structure, which is 11% pre-leased.

·                  Executed 10-Year Employment Agreements with our CEO, David Weinreb, and our President, Grant Herlitz, and received in cash the $50 million purchase price of Mr. Weinreb’s warrants previously issued in the second quarter of 2017. We also issued to Mr. Herlitz a $2 million warrant in exchange for cash on October 2, 2017.

·                  Began closing on the sales of condominiums at Anaha, with 307 homes scheduled to close on or before December 31, 2017, and repaid the $195.3 million construction loan on Waiea and Anaha as of October 27, 2017.

·                  Announced on October 9, 2017 that ESPN will occupy 19,000 square feet of rentable space on the third floor of Pier 17 at the Seaport District in New York through a long-term lease that was executed with ESPN’s studio provider NEP Imaging Group, LLC. ESPN will use the space to broadcast its high profile daily shows from the Seaport District.

 

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·                  Announced the development of a new ballpark for our wholly owned Las Vegas 51s Triple-A professional baseball team and signed a 20-year, $80.0 million naming rights agreement for the future stadium with the Las Vegas Convention and Visitor’s Authority. The ballpark will be located in the Downtown Summerlin area and serve as another amenity for the rapidly growing retail and entertainment destination in the heart of Summerlin’s urban core.

·                  Announced plans to begin construction in the first quarter of 2018 on Three Merriweather in Downtown Columbia, a 12-story, Class A mixed-use building which is 50% pre-leased to a major corporate tenant. This development continues the transformation of Downtown Columbia into a unique live, work, play neighborhood.

·                  Subsequent to the end of the quarter, Howard County closed on the first $48 million tranche of up to $90 million tax increment funding (“TIF”) bonds in Columbia, Maryland. The TIF will provide for a variety of infrastructure improvements to the Merriweather District in Downtown Columbia, paving the way for the acceleration of up to 4.9 million square feet of development opportunities.

 

“As our third quarter results demonstrate, we continue to make substantial progress unlocking value throughout our portfolio across our three business segments. Despite the impact of Hurricane Harvey in Houston, we experienced consistent, steady demand for residential land in our MPC segment. We also continued to increase our operating asset NOI as our existing projects stabilize. We develop when demand warrants new construction, and accordingly, in the third quarter we added three new projects which helped drive an increase in our projected annual stabilized NOI by $17 million to $262 million, excluding the Seaport District and 110 N. Wacker redevelopment. In our Strategic Developments segment, we had our strongest quarter of sales at Ward Village without the launch of a new building as our vision for the community increasingly becomes a reality. We are now approximately 89% sold on our four buildings currently under construction,” said David R Weinreb, Chief Executive Officer. “Finally, we recently made two significant announcements that I believe will have a long term impact on two of our core assets. In the Seaport District, ESPN will be opening live broadcast studios in Pier 17, which will feature several high-profile daily shows. In Summerlin, we announced an $80 million naming rights deal for a new minor league ballpark in Downtown Summerlin for our Triple-A baseball team, the Las Vegas 51s. These two announcements help validate the vision for both the Seaport District and the Downtown Summerlin area and are symbolic of the momentum underway in these two developments.

 

Third Quarter Financial Results

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

(In thousands, except per share amounts)

 

2017

 

2016

 

2017

 

2016

 

Net income attributable to common stockholders

 

$

10,504

 

$

7,973

 

$

19,283

 

$

158,708

 

Basic income per share

 

$

0.25

 

$

0.20

 

$

0.47

 

$

4.02

 

Diluted income per share

 

$

0.24

 

$

0.19

 

$

0.45

 

$

3.72

 

 

 

 

 

 

 

 

 

 

 

Funds from operations (FFO)

 

$

45,304

 

$

65,738

 

$

92,245

 

$

176,850

 

FFO per weighted average diluted share

 

$

1.05

 

$

1.54

 

$

2.14

 

$

4.14

 

 

 

 

 

 

 

 

 

 

 

Core FFO

 

$

60,129

 

$

62,923

 

$

218,581

 

$

232,711

 

Core FFO per weighted average diluted share

 

$

1.39

 

$

1.47

 

$

5.07

 

$

5.45

 

 

 

 

 

 

 

 

 

 

 

AFFO

 

$

55,850

 

$

57,239

 

$

206,398

 

$

221,651

 

AFFO per weighted average diluted share

 

$

1.29

 

$

1.34

 

$

4.79

 

$

5.19

 

 

Net income attributable to common stockholders for the three months ended September 30, 2017 was $10.5 million or $0.24 per diluted share, an increase of $2.5 million or $0.05 per diluted share from the third quarter of 2016 which primarily relates to higher revenues related to MPC land sales, offset by accelerated depreciation in our Operating Assets segment, $6.0 million in higher equity in earnings from joint ventures in 2016 as compared to the same period in 2017, and net losses in 2016 which did not recur. In 2016, net income attributable to common stockholders for the three months ended September 30, 2016 included a $35.7 million impairment for Park West and warrant liability loss of $7.3 million, offset by $27.1 million of gain from acquisition of a joint venture partner’s interest.

 

Net income attributable to common stockholders for the nine months ended September 30, 2017 was $19.3 million or $0.45 per diluted share, a decrease of $139.4 million from the nine months ended September 30, 2016, which is primarily due to a

 

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decrease of $70.2 million, net of tax in gains on sales of properties, including the sale of 80 South Street in 2016 and gains on acquisitions of joint venture partners’ interests in 2016, additional depreciation of $24.9 million, a reduction of $20.4 million in net income generated from condominium rights and unit sales, additional warrant liability losses of $21.8 million and a $46.4 million loss from redemption of senior notes, offset by a $35.7 million impairment for Park West in 2016 which did not recur and $13.8 million of increases in operating results at our MPC segment for the nine month period as compared to prior year.

 

Funds From Operations (“FFO”) was $45.3 million or $1.05 per diluted share, a decrease of $20.4 million or $0.49 per diluted share compared to the third quarter of 2016 which primarily relates to a $27.1 million gain on acquisition of a joint venture partner’s interest in 2016, offset by a warrant liability loss of $7.3 million in 2016. FFO for the nine month period ended September 30, 2017 was $92.2 million or $2.14 per diluted share, a decrease of $84.6 million or $2.00 per diluted share for the nine month period as compared to prior year primarily due to a decrease in gains on acquisition of joint venture partners’ interests of approximately $21.6 million, additional warrant liability losses of $21.8 million and a $46.4 million loss on redemption of senior notes due 2021.

 

Core FFO was $60.1 million or $1.39 per diluted share for the third quarter of 2017, a decrease of $2.8 million or $0.08 per diluted share compared to the same period in 2016 and $218.6 million or $5.07 per diluted share for the nine month period ended September 30, 2017, a decrease of $14.1 million or $0.38 per diluted share compared to the same period in 2016. The decreases in both periods were primarily due to a decline in condominium rights and unit sales under the percentage of completion method, offset by increases in the MPC and Operating Assets segment earnings driven primarily by revenue growth in those segments.

 

Adjusted FFO (“AFFO”) was $55.9 million or $1.29 per diluted share for the three months ended September 30, 2017, a decrease of $1.4 million or $0.05 per diluted share compared to 2016 primarily due to the changes as noted in Core FFO above as well as decreased tenant and capital improvements at Columbia Regional Retail and the Outlet Collection at Riverwalk. Adjusted FFO was $206.4 million or $4.79 per diluted share for the nine month period ended September 30, 2017, a decrease of $15.3 million or $0.40 per diluted share compared to the same period in 2016, consistent with the decrease in Core FFO combined with slight increases in Tenant and capital improvements and Leasing commissions expenditures related to the maintenance of our properties at Landmark Mall and 10-70 Columbia Corporate Center. Please reference FFO, Core FFO and AFFO as defined in the Appendix to this release.

 

Business Segment Operating Results

 

Operating Assets Segment Highlights

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

(In thousands)

 

2017

 

2016

 

2017

 

2016

 

Operating Assets EBT

 

$

(13,162

)

$

(35,943

)

$

(14,308

)

$

(28,175

)

 

 

 

 

 

 

 

 

 

 

Adjusted Operating Assets EBT (a)

 

$

21,824

 

$

20,980

 

$

77,089

 

$

73,007

 

 

 

 

 

 

 

 

 

 

 

Total NOI from Operating Assets (b)

 

$

37,510

 

$

31,891

 

$

121,263

 

$

100,543

 

 


(a)         Adjusted Operating Assets EBT excludes non-cash depreciation and amortization, development-related marketing and demolition costs and is presented here as a useful metric for adjusted operating results for our real estate operating properties.

(b)         Total NOI from Operating Assets is comprised of Operating Assets NOI Excluding Properties Sold or In Redevelopment plus our pro-rata share of NOI — equity investees and Distributions from Summerlin Hospital Investment (our “income-producing Operating Assets”). Prior year comparative Total NOI is recast to conform to current year presentation and exclude the effect of properties sold or closed for redevelopment in either period. The Seaport — Historic Area/Uplands property was placed in service in the current year, with the remaining Seaport District assets still under development in our Strategic Developments segment, and the prior year NOI has been included for comparative purposes.

 

Operating Assets earnings before tax (“EBT”) improved in the three and nine month periods compared to the same periods in prior year primarily due to increases in hospitality revenues and other rental and property revenues as new properties were placed into service and an impairment in 2016 which did not recur, offset by accelerated depreciation of $10.1 million and $18.5 million for the three and nine months ended September 30, 2017.

 

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Adjusted Operating Assets EBT increased $0.8 million, or 4.0% to $21.8 million, compared to $21.0 million for the same three month period in 2016, primarily due to the growth in Operating Assets NOI primarily related to our retail, office, multi-family and hospitality properties, offset by higher interest expense as more properties are placed in service. Adjusted Operating Assets EBT increased $4.1 million, or 5.6% to $77.1 million for the nine months ended September 30, 2017, compared to $73.0 million for the same nine month period in 2016, primarily due to a $20.8 million increase in Consolidated Operating Assets NOI primarily related to our office and hospitality properties compared to 2016 as more properties are placed in service, offset by higher interest expense.

 

Net operating income (“NOI”) from our Operating Assets segment, increased $5.6 million and $20.7 million to $37.5 million and $121.3 million for the three and nine months ended September 30, 2017, respectively, over the comparable periods in 2016. The increases in NOI during these periods were primarily due to continued stabilization of our retail, office, multi-family and hospitality properties placed in service over the last 18 months. See further detail and discussion in the quarterly filing on Form 10 - Q for the period ended September 30, 2017 and in the Supplemental Information to this Earnings Release. For a reconciliation of Operating Assets EBT to Total NOI and Operating Assets EBT to GAAP-basis net income (loss), please refer to the Appendix contained in this Earnings Release.

 

Master Planned Communities Segment Highlights

 

Our MPC revenues fluctuate each period given the nature of the development and sale of land in these large scale, long-term projects, and therefore, we believe a better measurement of performance is the full year result instead of the quarterly result.

 

A summary of our MPC segment results for the three and nine months ended September 30, 2017 and 2016 are shown below:

 

Summary of MPC Residential Land Sales Closed for the Three Months Ended September 30,

 

 

 

Land Sales

 

Acres Sold

 

Price per acre

 

($ In thousands)

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

 

Bridgeland

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

6,458

 

$

4,687

 

17.5

 

12.2

 

$

369

 

$

384

 

Summerlin

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

31,515

 

16,525

 

57.7

 

31.7

 

546

 

521

 

The Woodlands

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

7,494

 

10,581

 

11.1

 

19.9

 

675

 

532

 

Total residential land sales closed in period

 

$

45,467

 

$

31,793

 

86.3

 

63.8

 

 

 

 

 

 

Residential land sales closed for the three months ended September 30, 2017 increased $13.7 million or 43.1% to $45.5 million, compared to $31.8 million for the same period in 2016 primarily due to increased sales at Summerlin and Bridgeland. The velocity of new home sales at Bridgeland had an impact on increased homebuilder demand and, accordingly, the residential land sales velocity at Bridgeland. The increase in average price per acre on Summerlin’s land sales for the nine months ended September 30, 2017 are primarily due to the mix of superpads sold during that period.

 

Summary of MPC Residential Land Sales Closed for the Nine Months Ended September 30,

 

 

 

Land Sales

 

Acres Sold

 

Price per acre

 

($ In thousands)

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

 

Bridgeland

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

23,089

 

$

13,557

 

60.4

 

36.2

 

$

382

 

$

375

 

Summerlin

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

86,715

 

86,157

 

147.1

 

203.5

 

589

 

423

 

The Woodlands

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

23,454

 

14,431

 

39.5

 

26.3

 

594

 

549

 

Total residential land sales closed in period

 

$

133,258

 

$

114,145

 

247.0

 

266.0

 

 

 

 

 

 

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Residential land sales closed for the nine months ended September 30, 2017 increased $19.1 million or 16.7% to $133.3 million, compared to $114.1 million for the same period in 2016 primarily due to increased land sales at Bridgeland and The Woodlands. As of September 30, 2017, there were two superpad sites at Summerlin totaling 56.9 acres and two custom lots under contract which are scheduled to close in the fourth quarter of 2017 for a total of $31.3 million. See the Appendix to this Earnings Release for a reconciliation from land sales closed to land sales revenue in the period.

 

Land development began at The Summit, our joint venture with Discovery Land, in the second quarter of 2015 and continues to progress. For the three and nine months ended September 30, 2017, 2 and 11 custom residential lots closed for $6.5 million and $34.9 million in revenue, respectively, of which we recognized $6.5 million and $21.6 million Equity in earnings in real estate and other affiliates, respectively, compared to 21 lots and 38 lots for $71.7 million and $119.8 million for the same periods in 2016. The significant number of lot closings in 2016 resulted from a backlog of sales contracts executed between the second quarter of 2015 and the second quarter of 2016 when lots were not yet available for sale. As of September 30, 2017, an additional 14 lots were under contract for $50.9 million.

 

Strategic Developments Segment Highlights

 

Strategic Developments segment EBT decreased for the three months ended September 30, 2017 primarily due to a decline in revenues at Waiea, which closed on the sale of most of its units in the fourth quarter of 2016, and a decline in revenues at Anaha, which is nearing completion as discussed below.

 

Strategic Developments segment EBT decreased for the nine months ended September 30, 2017 as compared to the nine month period in 2016 primarily due to the gain on sale from the 80 South Street Assemblage in Seaport of $140.5 million in 2016 as compared to a gain on sale of acreage within our Elk Grove Collection property of $32.2 million in 2017 as well as decreased revenue at Waiea, offset by increased revenue at Ae`o and Ke Kilohana. Opportunistic land sales such as these are unpredictable and typically do not recur as we occasionally sell land for commercial development only when we believe its use will not compete with our existing properties or our Strategic Developments strategy.

 

We have condominiums for sale in Ward Village across five projects, four of which are under construction: Waiea, Anaha, Ae`o, and Ke Kilohana. These four projects total 1,381 units, of which 1,227 or 88.8% were closed or under contract as of September 30, 2017, and 154 units under construction remain unsold. All development cost estimates presented herein are exclusive of land costs.

 

Ward Village Towers Under Construction as of September 30, 2017

 

($ in millions)

 

Total Units

 

Closed or
Under
Contract

 

Percent of
Units Sold

 

Total
Projected
Costs

 

Costs Incurred
to Date

 

Estimated
Completion
Date

 

Waiea

 

174

 

165

 

94.8

%

$

417.3

 

$

396.7

 

Opened

(a)

Anaha

 

317

 

307

 

96.8

 

401.3

 

364.3

 

Q4 2017

(b)

Ae`o

 

466

 

367

 

78.8

 

428.5

 

167.6

 

Q4 2018

 

Ke Kilohana

 

424

 

388

 

91.5

 

218.9

 

48.7

 

2019

 

Total under construction

 

1,381

 

1,227

 

88.8

%

$

1,466.0

 

$

977.3

 

 

 

 


(a)         Waiea opened and customers began occupying units in November 2016. We have closed on 158 units through November 3, 2017.

(b)         Anaha opened and customers began occupying units in October 2017. We have closed on 207 units through November 3, 2017.

 

As our condominium projects advance towards completion, revenue is recognized on qualifying sales contracts under the percentage of completion method. The increase in condominium rights and unit sales for the three months ended September 30, 2017 as compared to the same period in 2016 primarily relates to revenue recognized at our Ae`o and Ke Kilohana, offset by a decline in revenue at Waiea and at Anaha, which closed on a substantial number of units in October. The decrease in condominium rights and unit sales for the nine months ended September 30, 2017 as compared to the same period in 2016 primarily relates to the decline in revenue at Waiea, offset by increased revenue at Anaha, Ae`o and Ke Kilohana.

 

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For a more complete description of the status of our other developments under construction in the Seaport District, The Woodlands, Summerlin, Columbia and Ward Village, please refer to “Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-Q for the quarterly period ended September 30, 2017.

 

Balance Sheet and Other Quarterly Activity

 

As of September 30, 2017, our total consolidated debt equaled approximately 44.4% of our total assets. Our leverage ratio (debt to enterprise value, as defined in the Supplemental Information) was 39.9% as of September 30, 2017. We believe our low-leverage, with a focus on project specific financing, reduces our exposure to potential downturns and provides us with the ability to evaluate new opportunities. At September 30, 2017, we had approximately $601.9 million of cash on hand.

 

On October 27, 2017, we repaid the $195.3 million outstanding on our construction loan relating to Waiea and Anaha in conjunction with closing on the sales of units at Anaha.

 

On October 24, 2017, we exercised our one-year extension option on our $54.3 million Outlet Collection at Riverwalk facility which extended the maturity date to October 24, 2018.

 

On October 19, 2017, we closed on a construction loan totaling $64.6 million to be used for Aristocrat and Two Summerlin. The loan bears interest at Wall Street Journal Prime plus 0.40% with a maturity of October 19, 2022.

 

On September 13, 2017, we modified and extended our $311.8 million Downtown Summerlin facility with a $30.0 million paydown. The modified loan has a maximum facility of $275.9 million and bears interest at one-month LIBOR plus 2.15% with a maturity of September 13, 2020, with one, one-year extension option.

 

On August 11, 2017, we closed on a construction loan totaling $11.6 million for Kewalo Harbor, located in Honolulu, Hawai‘i, to be used for improvements to the harbor adjacent to our Ward Village development. The loan bears interest at one-month LIBOR plus 2.75% with a maturity of September 1, 2027. As of September 30, 2017, we had not drawn any proceeds under this loan.

 

About The Howard Hughes Corporation®

 

The Howard Hughes Corporation owns, manages and develops commercial, residential and mixed-use real estate throughout the U.S. Our properties include master planned communities, operating properties, development opportunities and other unique assets spanning 14 states from New York to Hawai‘i. The Howard Hughes Corporation is traded on the New York Stock Exchange under HHC with major offices in New York, Columbia, MD, Dallas, Houston, Las Vegas and Honolulu. For additional information about HHC, visit www.howardhughes.com or find us on Facebook, Twitter, Instagram, and LinkedIn.

 

Safe Harbor Statement

 

We may make forward-looking statements in this and in other reports and presentations that we file or furbish with the Securities and Exchange Commission. In addition, our management may make forward-looking statements orally to analysts, investors, creditors, the media and others. Forward-looking statements include:

 

·      budgeted costs, future lot sales and estimates and projections of NOI and EBT;

·      forecasts of our future economic performance;

·      expected capital required for our operations and development opportunities at our properties;

·      expected performance of our MPC segment and other current income producing properties;

·      expected commencement and completion for property developments and timing of sales or rentals of certain properties;

·      estimates of our future liquidity, development opportunities, development spending and management plans; and

 

6



 

·      descriptions of assumptions underlying or relating to any of the foregoing.

 

These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements to materially differ from any future results, performance and achievements expressed or implied by such forward-looking statements. These risk factors are described in our Annual Report and are incorporated herein by reference. Any factor could, by itself, or together with one or more other factors, adversely affect our business, results of operations or financial condition. There may be other factors currently unknown to us that we have not described in this press release or in our Annual Report that could cause results to differ from our expectations. These forward-looking statements present our estimates and assumptions as of the date of this press release. Except as may be required by law, we undertake no obligation to modify or revise any forward-looking statements to reflect events or circumstances occurring after the date of this release.

 

7



 

THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

(In thousands, except per share amounts)

 

2017

 

2016

 

2017

 

2016

 

Revenues:

 

 

 

 

 

 

 

 

 

Condominium rights and unit sales

 

$

113,852

 

$

115,407

 

$

342,208

 

$

362,613

 

Master Planned Community land sales

 

54,906

 

44,128

 

177,531

 

147,168

 

Minimum rents

 

44,654

 

44,910

 

136,053

 

128,255

 

Tenant recoveries

 

11,586

 

11,657

 

34,627

 

33,108

 

Hospitality revenues

 

17,776

 

14,088

 

57,190

 

46,126

 

Builder price participation

 

5,472

 

4,483

 

14,613

 

15,631

 

Other land revenues

 

4,561

 

4,053

 

19,606

 

12,225

 

Other rental and property revenues

 

5,929

 

3,538

 

17,309

 

11,335

 

Total revenues

 

258,736

 

242,264

 

799,137

 

756,461

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Condominium rights and unit cost of sales

 

86,531

 

83,218

 

253,209

 

237,759

 

Master Planned Community cost of sales

 

29,043

 

21,432

 

88,288

 

66,128

 

Master Planned Community operations

 

8,180

 

10,674

 

24,881

 

30,454

 

Other property operating costs

 

21,354

 

16,535

 

60,153

 

47,513

 

Rental property real estate taxes

 

7,678

 

7,033

 

21,765

 

21,110

 

Rental property maintenance costs

 

3,380

 

3,332

 

10,016

 

9,217

 

Hospitality operating costs

 

13,525

 

12,662

 

41,534

 

37,379

 

Provision for doubtful accounts

 

448

 

1,940

 

1,728

 

4,629

 

Demolition costs

 

175

 

256

 

303

 

1,218

 

Development-related marketing costs

 

5,866

 

4,716

 

14,787

 

15,586

 

General and administrative

 

22,362

 

21,128

 

63,423

 

61,505

 

Depreciation and amortization

 

35,899

 

23,322

 

96,193

 

71,246

 

Total expenses

 

234,441

 

206,248

 

676,280

 

603,744

 

 

 

 

 

 

 

 

 

 

 

Operating income before other items

 

24,295

 

36,016

 

122,857

 

152,717

 

 

 

 

 

 

 

 

 

 

 

Other:

 

 

 

 

 

 

 

 

 

Provision for impairment

 

 

(35,734

)

 

(35,734

)

Gains on sales of properties

 

237

 

70

 

32,452

 

140,549

 

Other (loss) income, net

 

(160

)

432

 

750

 

9,858

 

Total other

 

77

 

(35,232

)

33,202

 

114,673

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

24,372

 

784

 

156,059

 

267,390

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

1,764

 

196

 

3,171

 

900

 

Interest expense

 

(17,241

)

(16,102

)

(49,547

)

(48,628

)

Loss on redemption of senior notes due 2021

 

 

 

(46,410

)

 

Warrant liability loss

 

 

(7,300

)

(43,443

)

(21,630

)

Gain on acquisition of joint venture partner’s interest

 

 

27,087

 

5,490

 

27,087

 

Equity in earnings from Real Estate and Other Affiliates

 

7,467

 

13,493

 

25,821

 

35,700

 

Income before taxes

 

16,362

 

18,158

 

51,141

 

260,819

 

Provision for income taxes

 

5,846

 

10,162

 

31,846

 

102,088

 

Net income

 

10,516

 

7,996

 

19,295

 

158,731

 

Net income attributable to noncontrolling interests

 

(12

)

(23

)

(12

)

(23

)

Net income attributable to common stockholders

 

$

10,504

 

$

7,973

 

$

19,283

 

$

158,708

 

 

 

 

 

 

 

 

 

 

 

Basic income per share:

 

$

0.25

 

$

0.20

 

$

0.47

 

$

4.02

 

 

 

 

 

 

 

 

 

 

 

Diluted income per share:

 

$

0.24

 

$

0.19

 

$

0.45

 

$

3.72

 

 

8



 

THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

 

 

 

September 30, 

 

December 31,

 

(In thousands, except share amounts)

 

2017

 

2016

 

Assets:

 

 

 

 

 

Investment in real estate:

 

 

 

 

 

Master Planned Community assets

 

$

1,667,496

 

$

1,669,561

 

Buildings and equipment

 

2,155,071

 

2,027,363

 

Less: accumulated depreciation

 

(303,887

)

(245,814

)

Land

 

314,383

 

320,936

 

Developments

 

1,124,079

 

961,980

 

Net property and equipment

 

4,957,142

 

4,734,026

 

Investment in Real Estate and Other Affiliates

 

89,155

 

76,376

 

Net investment in real estate

 

5,046,297

 

4,810,402

 

Cash and cash equivalents

 

601,934

 

665,510

 

Accounts receivable, net

 

9,654

 

10,038

 

Municipal Utility District receivables, net

 

193,100

 

150,385

 

Deferred expenses, net

 

76,692

 

64,531

 

Prepaid expenses and other assets, net

 

796,019

 

666,516

 

Total assets

 

$

6,723,696

 

$

6,367,382

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Mortgages, notes and loans payable

 

$

2,993,448

 

$

2,690,747

 

Deferred tax liabilities

 

237,013

 

200,945

 

Warrant liabilities

 

 

332,170

 

Accounts payable and accrued expenses

 

462,853

 

572,010

 

Total liabilities

 

3,693,314

 

3,795,872

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Preferred stock: $.01 par value; 50,000,000 shares authorized, none issued

 

 

 

Common stock: $.01 par value; 150,000,000 shares authorized, 43,222,932 shares issued and 43,206,550 outstanding as of September 30, 2017 and 39,802,064 shares issued and 39,790,003 outstanding as of December 31, 2016

 

432

 

398

 

Additional paid-in capital

 

3,295,587

 

2,853,269

 

Accumulated deficit

 

(258,629

)

(277,912

)

Accumulated other comprehensive loss

 

(9,017

)

(6,786

)

Treasury stock, at cost, 16,382 shares as of September 30, 2017 and 12,061 shares as of December 31, 2016, respectively

 

(1,763

)

(1,231

)

Total stockholders’ equity

 

3,026,610

 

2,567,738

 

Noncontrolling interests

 

3,772

 

3,772

 

Total equity

 

3,030,382

 

2,571,510

 

Total liabilities and equity

 

$

6,723,696

 

$

6,367,382

 

 

9



 

Appendix — Reconciliations of Non-GAAP Measures

 

September 30, 2017

 

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. Management continually evaluates the usefulness, relevance, limitations, and calculation of the Company’s reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change. The non-GAAP financial measures used herein are Adjusted Operating Assets segment Earnings before tax (“EBT”), Net operating income (“NOI”), MPC Land Sales Closed, Funds from operations (“FFO”), Core funds from operations (“Core FFO”), and Adjusted funds from operations (“AFFO”).

 

Because our three segments, Master Planned Communities, Operating Assets and Strategic Developments, are managed separately, we use different operating measures to assess operating results and allocate resources among these three segments. The one common operating measure used to assess operating results for our business segments is 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, EBT should not be considered as an alternative to GAAP net income.

 

Reconciliation of EBT to income before taxes

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

(In thousands)

 

2017

 

2016

 

2017

 

2016

 

MPC segment EBT

 

$

40,465

 

$

39,537

 

$

137,747

 

$

116,776

 

Operating Assets segment EBT

 

(13,162

)

(35,943

)

(14,308

)

(28,175

)

Strategic Developments segment EBT

 

26,249

 

30,904

 

117,056

 

265,920

 

Total consolidated segment EBT

 

53,552

 

34,498

 

240,495

 

354,521

 

Corporate and other items:

 

 

 

 

 

 

 

 

 

General and administrative

 

(22,362

)

(21,128

)

(63,423

)

(61,505

)

Corporate interest expense, net

 

(12,875

)

(13,263

)

(36,595

)

(39,358

)

Warrant liability loss

 

 

(7,300

)

(43,443

)

(21,630

)

Gain on acquisition of joint venture partner’s interest

 

 

27,087

 

5,490

 

27,087

 

Loss on redemption of senior notes due 2021

 

 

 

(46,410

)

 

Corporate other (expense) income, net

 

(33

)

123

 

878

 

6,190

 

Corporate depreciation and amortization

 

(1,920

)

(1,859

)

(5,851

)

(4,486

)

Total Corporate and other items

 

(37,190

)

(16,340

)

(189,354

)

(93,702

)

Income before taxes

 

$

16,362

 

$

18,158

 

$

51,141

 

$

260,819

 

 

When a development property is placed in service in our Operating Assets segment, depreciation is calculated for the property ratably over the estimated useful lives of each of its components; however, most of our recently developed properties do not reach stabilization until 12 to 36 months after being placed in service due to the timing of tenants taking occupancy and subsequent leasing of remaining unoccupied space during that period. As a result, operating income, EBT and net income will not reflect the ongoing earnings potential of operating assets newly placed in service during this transition period to stabilization. Accordingly, we calculate Adjusted Operating Assets EBT, which excludes depreciation and amortization and development-related demolition and marketing costs and provision for impairment, when applicable, as they do not represent operating costs for stabilized real estate properties. The following table reconciles Adjusted Operating Assets EBT to Operating Assets EBT:

 

Reconciliation of Adjusted Operating Assets EBT to

 

Three Months Ended September 30, 

 

 

 

Nine Months Ended September 30, 

 

 

 

Operating Assets EBT (in thousands)

 

2017

 

2016

 

Change

 

2017

 

2016

 

Change

 

Operating Assets segment EBT

 

$

(13,162

)

$

(35,943

)

$

22,781

 

$

(14,308

)

$

(28,175

)

$

13,867

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

33,885

 

20,732

 

13,153

 

88,918

 

64,546

 

24,372

 

Demolition costs

 

34

 

 

34

 

162

 

 

162

 

Development-related marketing costs

 

1,067

 

457

 

610

 

2,317

 

902

 

1,415

 

Provision for impairment

 

 

35,734

 

(35,734

)

 

35,734

 

(35,734

)

Adjusted Operating Assets segment EBT

 

$

21,824

 

$

20,980

 

$

844

 

$

77,089

 

$

73,007

 

$

4,082

 

 

10



 

NOI

 

We believe that NOI is a useful supplemental measure of the performance of our Operating Assets 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, ground rent amortization, demolition costs, amortization, depreciation, and development-related marketing. 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 factors, which vary by property, such as lease structure, lease rates and tenant base have on our operating results, gross margins and investment returns. Although we believe that NOI provides useful information to investors about the performance of our Operating 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 Operating Assets NOI to Operating Assets EBT has been presented in the table below. Variances between years in NOI typically result from changes in rental rates, occupancy, tenant mix and operating expenses. Please refer to our Operating Assets NOI by asset class and Operating Assets EBT in the Supplemental Information for the three and nine months ended September 30, 2017 and 2016. Below is a reconciliation from NOI to EBT for the Operating Assets segment.

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

(In thousands)

 

2017

 

2016

 

2017

 

2016

 

Total Operating Assets segment EBT

 

$

(13,162

)

$

(35,943

)

$

(14,308

)

$

(28,175

)

 

 

 

 

 

 

 

 

 

 

Straight-line lease amortization

 

1,421

 

2,551

 

5,198

 

9,632

 

Demolition costs

 

(34

)

 

(162

)

 

Development-related marketing costs

 

(1,067

)

(457

)

(2,317

)

(902

)

Provision for impairment

 

 

(35,734

)

 

(35,734

)

Depreciation and Amortization

 

(33,885

)

(20,732

)

(88,918

)

(64,546

)

Write-off of lease intangibles and other

 

(41

)

 

(83

)

35

 

Other income, net

 

(249

)

11

 

(265

)

3,126

 

Equity in earnings from Real Estate Affiliates

 

317

 

(210

)

3,739

 

2,616

 

Interest, net

 

(15,940

)

(12,903

)

(46,004

)

(36,968

)

Total Operating Assets NOI - Consolidated

 

36,316

 

31,531

 

114,504

 

94,566

 

 

 

 

 

 

 

 

 

 

 

Redevelopments

 

 

 

 

 

 

 

 

 

Landmark Mall

 

 

(202

)

 

(526

)

Total Operating Asset Redevelopments NOI

 

 

(202

)

 

(526

)

 

 

 

 

 

 

 

 

 

 

Dispositions

 

 

 

 

 

 

 

 

 

Park West

 

(8

)

411

 

(61

)

1,346

 

Total Operating Asset Dispositions NOI

 

(8

)

411

 

(61

)

1,346

 

 

 

 

 

 

 

 

 

 

 

Consolidated Operating Assets NOI excluding properties sold or in redevelopment

 

$

36,324

 

$

31,322

 

$

114,565

 

$

93,746

 

 

 

 

 

 

 

 

 

 

 

Company’s Share NOI - Equity investees

 

$

1,186

 

$

569

 

$

3,315

 

$

4,181

 

 

 

 

 

 

 

 

 

 

 

Distributions from Summerlin Hospital Investment

 

 

 

3,383

 

2,616

 

 

 

 

 

 

 

 

 

 

 

Total NOI

 

$

37,510

 

$

31,891

 

$

121,263

 

$

100,543

 

 

Reconciliation of MPC Land Sales Closed to GAAP Land Sales Revenue

 

The following table reconciles Total residential and commercial land sales closed in the three and nine months ended September 30, 2017 and 2016, respectively, to Total land sales revenue the three and nine months ended September 30, 2017 and 2016, respectively. Total net recognized (deferred) revenue represents revenues on sales closed in prior periods where revenue was previously deferred and met criteria for recognition in the current periods, offset by revenues deferred on sales closed in the current period.

 

11



 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

(In thousands)

 

2017

 

2016

 

2017

 

2016

 

Total residential land sales closed in period

 

$

45,467

 

$

31,793

 

$

133,258

 

$

114,145

 

Total commercial land sales closed in period

 

 

 

4,299

 

10,753

 

Net recognized (deferred) revenue:

 

 

 

 

 

 

 

 

 

Bridgeland

 

2,234

 

2,523

 

7,356

 

2,435

 

Summerlin

 

3,166

 

7,649

 

22,333

 

13,941

 

Total net recognized (deferred) revenue

 

5,400

 

10,172

 

29,689

 

16,376

 

Special Improvement District revenue

 

4,039

 

2,163

 

10,285

 

5,894

 

Total land sales revenue

 

$

54,906

 

$

44,128

 

$

177,531

 

$

147,168

 

 

FFO, Core FFO, and Adjusted FFO (AFFO)

 

FFO is defined by the National Association of Real Estate Investment Trusts (NAREIT) as net income calculated in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization and impairment charges (which we believe are not indicative of the performance of our operating portfolio). We calculate FFO in accordance with NAREIT’s definition. Since FFO excludes depreciation and amortization and gains and losses from depreciable property dispositions, and impairments, it can provide a performance measure that, when compared year over year, reflects the impact on operations from trends in land sales prices, occupancy rates, rental rates, operating costs, acquisition and development activities, and financing costs. This provides a perspective of our financial performance not immediately apparent from net income determined in accordance with GAAP. Core FFO is calculated by adjusting FFO to exclude the impact of certain non-cash and/or nonrecurring income and expense items, as set forth in the calculation below. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FFO serves as a useful, supplementary measure of the ongoing operating performance of our core operations, and we believe it is used by investors in a similar manner. Finally, AFFO adjusts our Core FFO operating measure to deduct cash spent on recurring tenant improvements and capital expenditures of a routine nature as well as leasing commissions to present an adjusted measure of Core FFO. Core FFO and AFFO are non-GAAP and non-standardized measures and may be calculated differently by other peer companies.

 

While FFO, Core FFO, AFFO and NOI are relevant and widely used measures of operating performance of real estate companies, they do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance. FFO, Core FFO, AFFO, and NOI do not purport to be indicative of cash available to fund our future cash requirements. Further, our computations of FFO, Core FFO AFFO and NOI may not be comparable to those reported by other real estate companies. We have included a reconciliation of FFO, Core FFO, and AFFO to GAAP net income below. Non-GAAP financial measures should not be considered independently, or as a substitute, for financial information presented in accordance with GAAP.

 

12



 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

(In thousands)

 

2017

 

2016

 

2017

 

2016

 

Net income attributable to common shareholders

 

$

10,504

 

$

7,973

 

$

19,283

 

$

158,708

 

Add:

 

 

 

 

 

 

 

 

 

Segment real estate related depreciation and amortization

 

33,979

 

21,463

 

90,342

 

66,760

 

Gains on sales of properties

 

(237

)

(70

)

(32,452

)

(140,549

)

Income tax expense (benefit) adjustments - deferred:

 

 

 

 

 

 

 

 

 

Gains on sales of properties

 

83

 

26

 

12,164

 

52,732

 

Impairment of depreciable real estate properties

 

 

35,734

 

 

35,734

 

Reconciling items related to noncontrolling interests

 

12

 

23

 

12

 

23

 

Our share of the above reconciling items included in earnings from unconsolidated joint ventures

 

963

 

589

 

2,896

 

3,442

 

FFO

 

$

45,304

 

$

65,738

 

$

92,245

 

$

176,850

 

 

 

 

 

 

 

 

 

 

 

Adjustments to arrive at Core FFO:

 

 

 

 

 

 

 

 

 

Acquisition expenses

 

 

526

 

32

 

526

 

Loss on redemption of senior notes due 2021

 

 

 

46,410

 

 

Gain on acquisition of joint venture partner’s interest

 

 

(27,087

)

(5,490

)

(27,087

)

Warrant loss

 

 

7,300

 

43,443

 

21,630

 

Severance expenses

 

361

 

2

 

2,449

 

200

 

Non-real estate related depreciation and amortization

 

1,920

 

1,859

 

5,851

 

4,486

 

Straight-line rent adjustment

 

(2,257

)

(3,045

)

(6,903

)

(11,943

)

Deferred income tax expense (benefit)

 

6,897

 

9,698

 

19,280

 

42,920

 

Non-cash fair value adjustments related to hedging instruments

 

68

 

356

 

399

 

1,099

 

Share based compensation

 

1,663

 

2,238

 

5,352

 

6,755

 

Other non-recurring expenses (development related marketing and demolition costs)

 

6,041

 

4,972

 

15,090

 

16,804

 

Our share of the above reconciling items included in earnings from unconsolidated joint ventures

 

132

 

366

 

423

 

471

 

Core FFO

 

$

60,129

 

$

62,923

 

$

218,581

 

$

232,711

 

 

 

 

 

 

 

 

 

 

 

Adjustments to arrive at Adjusted FFO (“AFFO”):

 

 

 

 

 

 

 

 

 

Tenant and capital improvements

 

(3,541

)

(4,602

)

(10,156

)

(9,343

)

Leasing commissions

 

(738

)

(1,082

)

(2,027

)

(1,717

)

AFFO

 

$

55,850

 

$

57,239

 

$

206,398

 

$

221,651

 

 

 

 

 

 

 

 

 

 

 

FFO per diluted share value

 

$

1.05

 

$

1.54

 

$

2.14

 

$

4.14

 

 

 

 

 

 

 

 

 

 

 

Core FFO per diluted share value

 

$

1.39

 

$

1.47

 

$

5.07

 

$

5.45

 

 

 

 

 

 

 

 

 

 

 

AFFO per diluted share value

 

$

1.29

 

$

1.34

 

$

4.79

 

$

5.19

 

 

13


(Back To Top)

Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

NYSE: HHC Supplemental Information For the quarterly period ended September 30, 2017 The Howard Hughes Corporation 13355 Noel Road, 22nd Floor Phone: 214.741.7744 Dallas, TX 75240 www.howardhughes.com South Street Seaport New York, NY 110 N. Wacker Chicago, IL Downtown Columbia Columbia, MD

 


Forward Looking Statements This presentation includes forward-looking statements. Forward-looking statements give our current expectations relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward -looking statements by the fact that they do not relate strictly to current or historical facts. These statements may include words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “plan,” “project,” “realize,” “should,” “transform,” “would,” and other statements of similar expression. Forward -looking statements should not be relied upon. They give our expectations about the future and are not guarantees. These statements involve known and un known risks, uncertainties and other factors that may cause our actual results, performance and achievements to materially differ from any future results, performance and achievements expressed or implied by such forward-looking statements. For a discussion of the risk factors that could have an impact these forward-looking statements, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 . The statements made herein speak only as of the date of this presentation and we do not undertake to update this information except as required by law. Past performance does not guarantee future results. Performance during time periods shown is limited and may not reflect the performance for the full year or future years, as well as in different economic and market cycles. Non-GAAP Financial Measures Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP), however, we use certain non-GAAP performance measures in this presentation, in addition to GAAP measures, as we believe these measures improve the understanding of our operational re sults and makes comparisons of operating results among peer companies more meaningful. Management continually evaluates the usefulness, relevance, limitations, and calculation of our re ported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change. The non -GAAP financial measures used in this presentation are funds from operations, or FFO, core funds from operations, or Core FFO, adjusted funds from operations, or AFFO, and net operating income, or NOI. FFO is defined by the National Association of Real Estate Investment Trust (NAREIT) as net income calculated in accordance wi th GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization and impairment charges (which we believe are not indicative of the performance of o ur operating portfolio). We calculate FFO in accordance with NAREIT’s definition. Since FFO excludes depreciation and amortization and gains and losses from depreciable property dispositions, and impairments, it can provide a performance measure that, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, acquisition and development activities, and financing costs. This provides a perspective of our financial performance not immediately apparent from net income determined in accordance with GAAP. Core FFO is calculated by adjusting FFO to exclude the impact of certain non -cash and/or nonrecurring income and expense items, as set forth in the calculation herein. These items can vary greatly from period to pe riod, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FFO serves as a useful, supplementary measur e of the ongoing operating performance of the core operations across all segments, and we believe it is used by investors in a similar manner. Finally, AFFO adjusts our Core FFO operating measu re to deduct cash spent on recurring tenant improvements and capital expenditures of a routine nature to present an adjusted measure of Core FFO. Core FFO and AFFO are non -GAAP and non-standardized measures and may be calculated differently by other peer companies. Herein, we define NOI as operating revenues (rental income, tenant recoveries and other revenue) less operating expenses (rea l estate taxes, repairs and maintenance, marketing and other property expenses), plus our share of NOI from equity investees. NOI excludes straight -line rents and amortization of tenant incentives, net interest expense, ground rent amortization, demolition costs, amortization, depreciation, development-related marketing costs and Equity in earnings from Real Estate and Other Affiliates. W e use NOI to evaluate our operating performance on a property -by-property basis because NOI allows us to evaluate the impact that factors, which vary by property, such as lease structure, le ase rates and tenant bases, have on our operating results, gross margins and investment returns. We believe that NOI is a useful supplemental measure of the performance of our Operating Assets becau se 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. While FFO, Core FFO, AFFO and NOI are relevant and widely used measures of operating performance of real estate companies, th ey do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating perfor mance. FFO, Core FFO, AFFO and NOI do not purport to be indicative of cash available to fund our future cash requirements. Further, our computations of FFO, Core FFO, AFFO and NOI may not be com parable to FFO, Core FFO, AFFO and NOI reported by other real estate companies. We have included a reconciliation of FFO, Core FFO and AFFO to GAAP net income in this presentation. Non -GAAP financial measures should not be considered independently, or as a substitute, for financial information presented in accordance with GAAP. Additional Information Our website address is www.howardhughes.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other publicly filed documents are available and may be accessed free of charge through the “Investors” section of our website under the SEC Filings subsection, as soon as re asonably practicable after those documents are filed with, or furnished to, the SEC. Also available through our Investors section of our website are beneficial ownership reports filed by our directors and executive officers on Forms 3, 4 and 5. 1 www.howardhughes.com Cautionary Statements

 


FINANCIAL OVERVIEW PORTFOLIO OVERVIEW PORTFOLIO PERFORMANCE DEBT & OTHER Company Profile (cont'd) 4 Portfolio Key Metrics 11 Stabilized Properties 13 Property-Level Debt 22 Financial Summary 5 Stabilized Properties (cont'd) 14 Ground Leases 23 Balance Sheet 6 Unstabilized Properties 15 Definitions 24 Statement of Operations 7 Under Construction Properties 16 Reconciliation of Non-GAAP 25 Income Reconciliation 8 Acquisitions / Dispositions 17 NOI by Region 9 MPC Land 18 Ward Village Condos 19 Other Assets 20 2www.howardhughes.com Company Profile3 MPC Portfolio10 Lease Expirations12 Debt Summary21 Table of Contents

 


LAS VEGAS--(BUSINESS WIRE)--Oct. 10, 2017--The Howard Hughes Corporation® (NYSE: HHC) announced today its plans to develop and construct a baseball stadium in Downtown Summerlin® on approximately eight acres just south of City National Arena, the National Hockey League practice facility for the Vegas Golden Knights. The new stadium, to be named the Las Vegas Ballpark, will be the future home of the Las Vegas 51s, the city’s professional baseball team. The team, a member of the Pacific Coast League (PCL) and a Triple-A affiliate of the New York Mets, is wholly owned by The Howard Hughes Corporation, which acquired full ownership interest earlier this year. NEW YORK--(BUSINESS WIRE)--Oct. 10, 2017--The Howard Hughes Corporation® (NYSE: HHC) announced today that ESPN will occupy approximately 19,000-square-feet of rentable space within its waterfront development at Pier 17, part of the company’s revitalization of Seaport District NYC in Lower Manhattan. The long-term lease has been executed with ESPN’s studio provider at the Seaport, NEP Imaging Group, LLC. In celebration of the announcement, Pier 17’s façade was lit “ESPN red” yesterday evening, marking the first time the building has been fully illuminated. The grand opening of the Pier 17 rooftop is scheduled for summer 2018. DALLAS--(BUSINESS WIRE)--Oct. 5, 2017--The Howard Hughes Corporation® (NYSE:HHC) announced today that it has entered into a new employment agreement with President, Grant Herlitz, for a term of ten years through 2027. In addition, Mr. Herlitz completed the acquisition of 87,951 warrants with a strike price of $117.01 and a term of six years at fair market value by making a payment of $2.0 million to the company. The warrant cannot be sold or hedged for five years except in the event of a change in control, termination without cause or the separation of the executive from the company for good reason. Mr. Herlitz’s agreement follows the recent announcement that the company finalized a 10-year employment agreement with Chief Executive Officer, David R. Weinreb. As part of that agreement, Mr. Weinreb invested an additional $50 million into the company in the form of warrants. Exchange / Ticker Share Price - September 30, 2017 Diluted Earnings / Share FFO / Diluted Share Core FFO / Diluted Share AFFO / Diluted Share NYSE: HHC $ $ $ $ $ 117.93 0.24 1.05 1.39 1.29 For more press releases, please visit www.howardhughes.com/press $ in millions $ in millions Ae`o 77% Summerlin 83% Q3-17 MPC EBT $40.5M Q3-17 Condo Gross Profit $27.3M Waiea -27% Bridgeland 17% Anaha 50% 3 www.howardhughes.com Q3-17 Condo Gross Profit Waiea ($7.3) Anaha 13.6 Ke Kilohana - Ae`o 21.0 Total $27.3 Q3-17 MPC EBT Bridgeland $7.0 Columbia (0.3) Summerlin 34.3 The Woodlands (0.5) Total $40.5 Q3-17 MPC & Condominium Results Operating Portfolio by Region Recent Company Highlights Company Overview - Q3-17 Company Profile - Summary & Results

 


$ in millions Hotel 3% $ in millions $ in millions $ in millions Retail 29% Retail 27% Retail 12% Hotel 29% Hotel 13% Hotel 4% Other 8% Multifamily 11% Retail 33% Projected Stabilized NOI $44.2M Projected Stabilized NOI $124.7M Projected Stabilized NOI $261.5M Projected Stabilized NOI $92.6M Other 5% Office 58% Multifamily 13% Other 2% Multifamily 27% Office 27% Office 43% Office 48% 9% $ in millions $ in millions $ in millions $ in millions Retail 34% Retail 37% Hotel 27% Hotel 11% Other Multifamily Hotel Q3-17 Under Construction NOI $0.0M Q3-17 Total NOI $37.5M Q3-17 Unstabilized NOI $11.7M Q3-17 Stabilized NOI $25.8M Retail 44% 9% 4% Other 4% Multifamily 10% Office 17% Office 39% Mult amily Office 49% Note: Path to Projected Annual Stabilized NOI charts exclude Seaport NOI until we have greater clarity with respect to the performance of our tenants, however the operating portion of Seaport is included in Q3 Operating Results by Property Type. See page 16 for Stabilized NOI Yield and other project information. 4 www.howardhughes.com Total Currently Stabilized Currently Unstabilized Currently Under Construction Q3-17 - Operating Results by Property Type Retail & Office S.F. 7,661,369 Multifamily Units 2,619 Hotel Keys 979 Other Units 1,438 Projected Stabilized NOI $261.5 Retail & Office S.F. 4,489,724 Multifamily Units 1,109 Hotel Keys 205 Other Units - Projected Stabilized NOI $124.7 Retail & Office S.F. 2,027,045 Multifamily Units 514 Hotel Keys 708 Other Units 1,438 Projected Stabilized NOI $92.6 Retail & Office S.F. 1,144,600 Multifamily Units 996 Hotel Keys 66 Other Units - Projected Stabilized NOI $44.2 Total Currently Stabilized Currently Unstabilized Currently Under Construction Path to Projected Annual Stabilized NOI Company Profile - Summary & Results (cont'd)

 


Company Profile Share price1 Market Capitalization2 Enterprise Value3 Weighted avg. shares - basic Weighted avg. shares - diluted Total diluted share equivalents outstanding1 $117.93 $5.1b $7.5b 42,845 43,267 43,380 $122.84 $5.3b $7.7b 40,373 43,051 43,401 $117.25 $5.1b $7.3b 39,799 42,757 43,194 $114.10 $4.9b $6.9b 39,492 42,753 42,973 $114.50 $4.9b $7.1b 39,502 42,760 43,030 $117.93 $5.1b $7.5b 40,860 43,098 43,380 $114.50 $4.9b $7.1b 39,489 42,719 43,030 Earnings Profile Operating Segment Income Revenues Expenses Company's Share of Equity Method Investments NOI and Cost Basis Invesment Net Operating Income4 Avg. NOI margin $77,878 ($41,554) $1,186 $79,848 ($42,198) $1,385 $79,856 ($39,265) $4,129 $76,000 ($38,340) $888 $71,240 ($39,918) $569 $237,582 ($123,019) $6,700 $207,057 ($113,311) $6,797 $37,510 $39,035 $44,720 $38,548 $31,891 $121,263 $100,543 48% 49% 56% 51% 45% 51% 49% MPC Segment Earnings Total revenues Total expenses5 Interest income, net6 Equity in earnings in Real Estate and Other Affiliates MPC Segment EBT6 $64,929 ($37,299) $6,355 $6,480 $78,076 ($40,762) $5,990 $9,792 $68,706 ($35,357) $5,557 $5,280 $77,902 ($41,592) $5,468 $20,928 $52,762 ($32,178) $5,253 $13,700 $211,711 ($113,418) $17,902 $21,552 $175,403 ($96,818) $15,617 $22,574 $40,465 $53,096 $44,186 $62,706 $39,537 $137,747 $116,776 Condo Gross Profit Revenues7 Expenses7 Condo Net Income Debt Summary Total debt payable8 Fixed rate Weighted avg. rate - fixed Variable rate Weighted avg. rate - variable Short term condominium financing Weighted avg. rate - short term condominium financing Leverage ratio (debt to enterprise value) $113,852 ($86,531) $148,211 ($106,195) $80,145 ($60,483) $123,021 ($81,566) $115,407 ($83,218) $342,208 ($253,209) $362,613 ($237,759) $27,321 $42,016 $19,662 $41,455 $32,189 $88,999 $124,854 $3,014,280 $1,508,746 4.99% $1,310,265 3.67% $195,269 7.98% 39.90% $3,023,122 $1,514,192 5.06% $1,324,125 3.64% $184,805 7.92% 39.10% $2,771,492 $1,324,634 4.94% $1,309,169 3.45% $137,689 7.68% 38.04% $2,708,460 $1,184,141 5.89% $1,363,472 3.33% $160,847 7.47% 38.95% $2,865,456 $1,152,897 5.99% $1,425,276 3.08% $287,283 7.28% 39.92% $3,014,280 $1,508,746 4.99% $1,310,265 3.67% $195,269 7.98% 39.90% $2,865,456 $1,152,897 5.99% $1,425,276 3.08% $287,283 7.28% 40.00% (1) Presented as of period end date (2) Market capitalization = Closing share price at of the last trading day of the respective period times total diluted share equivalents outstanding as of the date presented. (3) Enterprise Value = (Market capitalization+ book value of debt + noncontrolling interest) - cash and equivalents. (4) Net Operating Income = Operating Assets NOI excluding properties sold or in redevelopment + Company's Share of Equity Method Investments NOI and the annual Distribution from our Cost Basis Investment. (5) Expenses include both actual and estimated future costs of sales allocated on a relative sales value to land parcels sold, including MPC-level G&A and real estate taxes on remaining residential and commercial land. (6) MPC Segment EBT (Earnings before tax, as discussed in our GAAP financial statements), includes negative interest expense relating to capitalized interest for the segment relating to debt held in other segments and at corporate. (7) Revenues represent "Condominium rights and unit sales" and expenses represent "Condominium rights and unit cost of sales" as stated in our GAAP financial statements, based on the percentage of completion method ("POC"). (8) Represents Total mortgages, notes, and loans payable, as stated in our GAAP financial statements, excluding unamortized deferred financing costs and bond issuance costs. 5 www.howardhughes.com Q3 YTD 2016 Q3 YTD 2017 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Financial Summary

 


(In thousands) ASSETS (1) Stock options assume net share settlement calculated for the year-to-date period presented. (2) Warrants assume net share settlement and incremental shares for dilution calculated as of the date presented. 6 www.howardhughes.com Investment in real estate: Unaudited Unaudited Master Planned Community assets $ 1,667,496 $ 1,660,523 Buildings and equipment 2,155,071 1,900,172 Less: accumulated depreciation (303,887) (242,034) Land 314,383 314,400 Developments 1,124,079 976,209 Net property and equipment 4,957,142 4,609,270 Investment in Real Estate and Other Affiliates 89,155 78,890 Net investment in real estate 5,046,297 4,688,160 Cash and cash equivalents 601,934 653,041 Accounts receivable, net 9,654 38,310 Municipal Utility District receivables, net 193,100 171,691 Deferred expenses, net 76,692 64,053 Prepaid expenses and other assets, net 796,019 820,240 Property held for sale — 34,888 $ 1,669,561 $ 1,642,842 2,027,363 1,772,401 (245,814) (232,969) 320,936 322,462 961,980 1,036,927 4,734,026 4,541,663 76,376 57,811 4,810,402 4,599,474 665,510 445,301 10,038 11,626 150,385 139,946 64,531 61,804 666,516 463,431 — — Total Assets $ 6,723,696 $ 6,470,383 $ 6,367,382 $ 5,721,582 LIABILITIES AND EQUITY Liabilities Mortgages, notes and loans payable $ 2,993,448 $ 2,847,002 Deferred tax liabilities 237,013 156,882 Warrant liabilities — 329,390 Uncertain tax position liability — 19,987 Accounts payable and accrued expenses 462,853 603,237 $ 2,690,747 $ 2,443,962 200,945 89,221 332,170 307,760 — 1,396 572,010 515,354 Total Liabilities $ 3,693,314 $ 3,956,498 $ 3,795,872 $ 3,357,693 Equity Preferred stock: $.01 par value; 50,000,000 shares authorized, none issued $ — $ — Common stock: $.01 par value; 150,000,000 shares authorized 432 398 Additional paid-in capital 3,295,587 2,856,335 Accumulated deficit (258,629) (321,507) Accumulated other comprehensive loss (9,017) (23,818) Treasury stock, at cost, 16,382 shares as of September 30, 2017 and 12,061 shares as of December 31, 2016 (1,763) (1,295) Total stockholders' equity 3,026,610 2,510,113 Noncontrolling interests 3,772 3,772 $ — $ — 398 398 2,853,269 2,847,823 (277,912) (480,215) (6,786) (7,889) (1,231) — 2,567,738 2,360,117 3,772 3,772 Total Equity $ 3,030,382 $ 2,513,885 $ 2,571,510 $ 2,363,889 Total Liabilities and Equity $ 6,723,696 $ 6,470,383 $ 6,367,382 $ 5,721,582 Share Count Details (in thousands) Shares outstanding at end of period 43,207 39,839 Dilutive effect of stock options1 171 299 Dilutive effect of warrants2 2 2,892 39,790 39,715 289 316 2,894 2,873 Total Diluted Share Equivalents Outstanding 43,380 43,030 42,973 42,904 FY 2015 FY 2016 Q3 2016 Q3 2017 Balance Sheet

 


7 www.howardhughes.com (In thousands) Revenues: Unaudited Unaudited Condominium rights and unit sales $ 113,852 $ 115,407 Master Planned Community land sales 54,906 44,128 Minimum rents 44,654 44,910 Tenant recoveries 11,586 11,657 Hospitality revenues 17,776 14,088 Builder price participation 5,472 4,483 Other land revenues 4,561 4,053 Other rental and property revenues 5,929 3,538 Unaudited Unaudited $ 342,208 $ 362,613 177,531 147,168 136,053 128,255 34,627 33,108 57,190 46,126 14,613 15,631 19,606 12,225 17,309 11,335 Total revenues $ 258,736 $ 242,264 $ 799,137 $ 756,461 Expenses: Condominium rights and unit cost of sales 86,531 83,218 Master Planned Community cost of sales 29,043 21,432 Master Planned Community operations 8,180 10,674 Other property operating costs 21,354 16,535 Rental property real estate taxes 7,678 7,033 Rental property maintenance costs 3,380 3,332 Hospitality operating costs 13,525 12,662 Provision for doubtful accounts 448 1,940 Demolition costs 175 256 Development-related marketing costs 5,866 4,716 General and administrative 22,362 21,128 Depreciation and amortization 35,899 23,322 253,209 237,759 88,288 66,128 24,881 30,454 60,153 47,513 21,765 21,110 10,016 9,217 41,534 37,379 1,728 4,629 303 1,218 14,787 15,586 63,423 61,505 96,193 71,246 Total expenses $ 234,441 $ 206,248 $ 676,280 $ 603,744 Operating income before other items $ 24,295 $ 36,016 Other: Provision for impairment — (35,734) Gains on sales of properties 237 70 Other (loss) income, net (160) 432 $ 122,857 $ 152,717 — (35,734) 32,452 140,549 750 9,858 Total other $ 77 $ (35,232) $ 33,202 $ 114,673 Operating Income $ 24,372 $ 784 Interest income 1,764 196 Interest expense (17,241) (16,102) Loss on redemption of senior notes due 2021 — — Warrant liability loss — (7,300) Gain on acquisition of joint venture partner's interest — 27,087 Equity in earnings from Real Estate and Other Affiliates 7,467 13,493 Income before taxes 16,362 18,158 Provision for income taxes (5,846) (10,162) Net income 10,516 7,996 Net income attributable to noncontrolling interests (12) (23) $ 156,059 $ 267,390 3,171 900 (49,547) (48,628) (46,410) — (43,443) (21,630) 5,490 27,087 25,821 35,700 51,141 260,819 (31,846) (102,088) 19,295 158,731 (12) (23) Net income attributable to common stockholders $ 10,504 $ 7,973 $ 19,283 $ 158,708 Basic income per share $ 0.25 $ 0.20 Diluted income per share $ 0.24 $ 0.19 $ 0.47 $ 4.02 $ 0.45 $ 3.72 YTD Q3 2016 YTD Q3 2017 Q3 2016 Q3 2017 Comparative Statement of Operations: Total Portfolio

 


8www.howardhughes.com (In thousands) RECONCILIATION OF NET INCOME TO FFO Net income attributable to common shareholders$10,504$7,973 Add: Segment real estate related depreciation and amortization33,97921,463 Gains on sales of properties(237)(70) Income tax expense (benefit) adjustments - deferred Gains on sales of properties8326 Impairment of depreciable real estate properties—35,734 Reconciling items related to noncontrolling interests1223 Our share of the above reconciling items included in earnings from unconsolidated joint ventures963589 $19,283$158,708 90,342 66,760 (32,452)(140,549) 12,16452,732 —35,734 1223 2,8963,442 FFO$45,304$65,738 $92,245$176,850 Adjustments to arrive at Core FFO: Acquisition expenses$—$526 Loss on redemption of senior notes due 2021—— Gain on acquisition of joint venture partner's interest—(27,087) Warrant loss—7,300 Severance expenses3612 Non-real estate related depreciation and amortization1,9201,859 Straight-line amortization(2,257)(3,045) Deferred income tax expense (benefit) 6,897 9,698 Non-cash fair value adjustments related to hedging instruments68356 Share based compensation1,6632,238 Other non-recurring expenses (development related marketing and demolition costs)6,0414,972 Our share of the above reconciling items included in earnings from unconsolidated joint ventures132366 $32$526 46,410— (5,490)(27,087) 43,44321,630 2,449200 5,8514,486 (6,903)(11,943) 19,28042,920 3991,099 5,3526,755 15,09016,804 423471 Core FFO$60,129$62,923 $218,581$232,711 Adjustments to arrive at AFFO: Tenant and capital improvements$(3,541)$(4,602) Leasing Commissions(738)(1,082) $(10,156)$(9,343) (2,027)(1,717) AFFO$55,850$57,239 $206,398$221,651 FFO per diluted share value$1.05$1.54 Core FFO per diluted share value$1.39$1.47 AFFO per diluted share value$1.29$1.34 $2.14$4.14 $5.07$5.45 $4.79$5.19 YTD Q3 2016 YTD Q3 2017 Q3 2016 Q3 2017 Reconciliation of Net Income to FFO, Core FFO and AFFO

 


Dollars in thousands Total 3Q17 SF/Units 3Q17 SF/Units 3Q17 3Q17 Stabilized Property Ownership Annualized NOI Stabilize Stabilized Properties Office - Houston Office - Columbia Office - Other (d) Retail - Houston Retail - Columbia Retail - Hawaii Retail - Other Multi-Family - Houston Multi-Family - Columbia Multi-Family - New York Hospitality - Houston Other Assets (e) Total Stabilized Properties (f) 100% 100% 100% 100% 100% 100% 100% 100% 50% 100% 100% NA 1,484,906 1,087,523 226,000 233,362 89,199 1,027,316 341,418 707 380 22 205 NA 1,425,460 969,506 226,000 225,635 89,199 956,105 325,386 674 340 21 169 NA 1,433,360 975,216 226,000 230,083 89,199 962,317 335,355 695 353 21 NA NA 96% 89% 100% 97% 100% 93% 95% 95% 89% 95% 82% NA 97% 90% 100% 99% 100% 94% 98% 98% 93% 95% NA NA $38,272 $13,372 ($333) $7,992 $1,440 $19,384 $6,521 $5,907 $2,869 $419 $4,251 $10,506 $39,605 $14,761 $6,100 $7,195 $2,200 $19,460 $7,200 $9,100 $3,500 $600 $4,500 $10,506 NA NA NA NA NA NA NA NA NA NA NA NA $110,599 $124,727 NA Unstabilized Properties Office - Houston Office - Columbia Office - Summerlin Retail - Houston (g) Retail - Summerlin Multi-Family - Houston Multi-Family - Summerlin Hospitality - Houston Self Storage - Houston Total Unstabilized Properties 100% 100% 100% 100% 100% 100% 50% 100% 100% 652,569 207,254 206,279 158,135 802,808 390 124 708 1,438 321,117 98,412 160,871 113,831 666,821 364 109 438 335 370,131 130,049 191,449 127,592 760,911 374 118 49% 47% 78% 72% 83% 93% 88% 62% 23% 57% 63% 93% 81% 95% 96% 95% NA 23% $3,222 $1,133 $3,476 $2,461 $17,396 $4,647 $992 $12,750 $8 $14,500 $5,100 $5,700 $3,797 $26,300 $7,500 $1,100 $27,000 $1,600 3.0 3.0 1.0 0.5 1.0 1.0 1.0 3.0 2.0 335 $46,084 $92,597 2.3 Under Construction Properties Office - Houston Office - Columbia Office - Summerlin Retail - Houston Retail - Hawaii Multi-Family - Houston Multi-Family - Columbia Multi-Family - Summerlin Hospitality - New York Total Under Construction Properties 100% 100% 100% 100% 100% 100% 50% 100% 35% 203,000 450,000 325,000 60,300 106,300 292 437 267 66 - - - - - - - - - 203,000 72,523 196,000 35,000 88,400 - 25 - - NA NA NA NA NA NA NA NA NA 100% 16% 60% 58% 83% 0% 6% 0% 0% NA NA NA NA NA NA NA NA NA $5,100 $12,800 $7,600 $1,668 $3,790 $3,500 $4,000 $4,400 $1,300 2.0 5.4 2.5 3.0 2.3 2.0 2.0 3.0 1.0 NA $44,158 3.1 Total/ Wtd. Avg for Portfolio $156,683 $261,483 2.8 Notes (a) Includes our share of NOI for our joint ventures. (b) Annualized 3Q17 NOI includes distribution received from cost method investment in 1Q17. For purposes of this calculation, this one time annual distribution is not annualized. (c) Table above excludes Seaport NOI until we have greater clarity with respect to the performance of our tenants. See page 16 for Stabilized NOI Yield and other project information. (d) Represents NOI at 110 N. Wacker for 3Q17 and is not shown annualized. The 3Q17 operating loss is the result of terminating the existing lease with our current tenant to begin re-development in early 2018. (e) Other assets are primarily made up of Kewalo Basin, Summerlin Baseball and Summerlin Hockey ground lease, and our share of other equity method investments not included in other categories. (f) For Stabilized Properties, the difference between 3Q17 NOI and Stabilized NOI is attributable to a number of factors which may include timing, free rent or other temporary abatements, tenant turnover and market factors. (g) Retail - Houston is inclusive of retail in The Woodlands and Bridgeland. 9 www.howardhughe s.com %3Q17Time to (a)SF / UnitsOccupiedLeased% Occupied% Leased(b)NOI (c)(Years) NOI by Region

 


Commercial 19% Commercial 37% Master Planned Communities - ReRmeaminianigniSnagleSaable AbclreesA(car)es Commercial 100% Residential 63% Residential 81% Stabilized 8% InIcnocmoemPer-oPdruocdinugciAnsgsAetsss-ets Stabilized & Unstabilized Stabilized 49% Unstabilized 50% Stabilized 50% Unstabilized 51% Unstabilized 92% ($ in thousands) MPC Performance - 3Q17 & 3Q16 MPC Net Contribution (3Q17) (b) MPC Net Contribution (3Q16) (b) Operating Asset Performance - 2017 & Future Annualized 3Q17 In-Place NOI Est. Stabilized NOI (Future) Wtd. Avg. Time to Stab. (yrs.) Note (a) Commercial acres may be developed internally or sold. (b) Reconciliation from GAAP MPC segment earnings before tax (EBT) measure to MPC Net Contribution for the three months ended September 30, 2017 is found on Reconciliation of Non-GAAP Measures on page 25. (c) Total excludes NOI from non-core operating assets, and NOI from core assets within Hawaii and New York as these regions are not defined as master planned communities. 10 www.howardhughes.com $130,525 $222,866 — $19,556 $43,104 3.5 $84,949 $130,506 2.2 $26,020 $49,256 1.8 $18,975 $18,062 ($314) ($298) ($11,440) ($1,984) $30,726 $20,344 Total (c) Maryland Texas Nevada MPC Portfolio

 


MPC Regions Non-MPC Regions Operating - Stabilized Properties Office s.f. Retail s.f. Multifamily units Hotel Rooms Self Storage Operating - Unstabilized Properties Office s.f. Retail s.f. (a) Multifamily units Hotel rooms Self Storage Operating - Under Construction Properties Office s.f. Retail s.f. (b) Multifamily units Hotel rooms Self Storage Residential Land Total gross acreage/condos (c) Current Residents (c) Remaining saleable acres/condos Estimated price per acre (d) Commercial Land Total acreage remaining Estimated price per acre (e) Notes Portfolio Key Metrics herein include square feet, units and rooms included in joint venture projects. Sq. ft. and units are not shown at share. (a) Retail s.f. within the Summerlin region excludes 381,767 sq. ft. of anchors. (b) Retail s.f. within New York region excludes Pier 17 and Uplands, pending final plans for this project. (c) Acreage and current residents shown as of December 31, 2016. (d) Residential pricing: average 2016 acreage pricing for Bridgeland, Summerlin and The Woodlands. Summerlin avarage pricing excludes the sale of approximately 117 acres to Pulte with an atypical economic structure. Pro forma acreage pricing for The Woodlands Hills. (e) Commercial pricing: estimate of current value based upon recent sales, third party appraisals and third party MPC experts. The Woodlands Hills commercial is valued at cost. 11 www.howardhughes.com Hawaii Honolulu, HI Seaport New York, NY Other Total Non-MPC - - 226,000 1,027,316 - 341,418 - 22 - - - - - - - - - - - - - - - - - - - - - - - - - 106,300 - - - - - - 66 - - - - 1,381 n.a. n.a. n.a. n.a. n.a. 153 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 226,000 1,368,734 22 - - - - - - - - 106,300 - 66 - 1,381 - 153 - - Woodlands Houston, TX Woodlands Hills Houston, TX Bridgeland Houston, TX Summerlin Las Vegas, NV Columbia Columbia, MD Total MPC Regions 1,484,906 - - - 1,087,523 233,362 - - - 89,199 707 - - - 380 205 - - - - - - - - - 652,569 - - 206,279 207,254 74,669 - 83,466 802,808 - 390 - - 124 - 708 - - - - 1,438 - - - - 203,000 - - 325,000 450,000 60,300 - - - - 292 - - 267 437 - - - - - - - - - - 28,475 ac. 2,055 ac. 11,400 ac. 22,500 ac. 16,450 ac. 115,000 - 8,300 107,000 112,000 257 1,439 2,432 3,550 n.a. $560 $207 $372 $577 n.a. 743 171 1,530 826 107 $957 $552 $394 $759 $316 2,572,429 322,561 1,087 205 - 1,066,102 960,943 514 708 1,438 978,000 60,300 996 - - 80,880 ac. 342,300 7,678 3,377 Portfolio Key Metrics

 


Office and Retail Lease Expirations Total Office and Retail Portfolio as of September 30, 2017 30% 25% Years 20% 15% 10% 5% 0% Office Expirations Retail Expirations Wtd. Avg. Wtd. Avg. Annualized Cash Rent Per Leased Sq. Ft. Annualized Cash Rent Per Leased Sq. Ft. Annualized Cash Rent ($ in thousands) Percentage of Annualized Cash Rent Annualized Cash Rent ($ in thousands) Percentage of Annualized Cash Rent Expiration Year 2017(1) 2018 2019 2020 2021 2022 2023 2024 2025 2026 Thereafter $3,004 3,897 7,455 8,294 5,189 7,568 10,940 10,537 9,599 947 12,217 3.77% 4.89% 9.36% 10.41% 6.51% 9.50% 13.74% 13.23% 12.05% 1.19% 15.34% $3,868 8,543 5,362 6,578 6,632 5,365 6,872 4,643 25,391 5,580 20,762 3.88% 8.58% 5.38% 6.60% 6.66% 5.39% 6.90% 4.66% 25.49% 5.60% 20.85% $34.56 23.46 28.18 27.58 32.90 10.54 29.25 24.52 33.78 35.99 29.98 $29.41 39.59 34.35 49.21 27.81 48.09 37.01 35.59 54.70 38.09 24.35 $79,647 100.00% $99,596 100.00% Total (1) Represents remaining lease expirations in 2017. % of Annualized Cash Rent Expiring 12www.howardhughes.com Weighte D.C. - 7 d Avg. Years Lease Term N.Y. - 12 Blended - 10 y ears Office Retail 2017 Office Retail 2018 Office Retail 2019 Office Retail 2020 Office Retail 2021 Office Retail 2022 Office Retail 2023 Office Retail 2024 Office Retail 2025 Office Retail 2026 Office Retail 2027+ HoustonLas VegasColumbiaHawaiiOther Office Retail Lease Expirations

 


Dollars in thousands Office 100% 197,714 96% 96% 5,621 6,000 Two Hughes Landing Houston, TX 100% 24,119 100% 100% 3 NA 2201 Lake Woodlands Houston, TX 100% 95,078 100% 100% 2,251 2,251 3831 Technology Forest Houston, TX 100% 218,551 100% 100% 6,856 6,856 4 Waterway Square Houston, TX 100% 888,307 91% 92% 10,706 12,400 10-70 Columbia Corporate Center Columbia, MD 100% 97,671 100% 100% 1,861 1,861 One Mall North Columbia, MD 100% 7,900 0% 100% (28) (28) 2000 Woodlands Parkway (a) Houston, TX Total Office 2,798,429 $51,311 $60,466 Retail 100% 12,376 64% 100% 261 400 1701 Lake Robbins Houston, TX 100% 21,513 100% 100% 761 800 Waterway Garage Retail Houston, TX 100% 89,199 100% 100% 1,440 2,200 Columbia Regional Columbia, MD 100% 77,080 93% 96% 660 700 Cottonwood Square Salt Lake City, UT Total Retail 1,691,295 $35,337 $36,055 Notes (a) Lease was signed in Q2 2017 and tenant will occupy the space in November 2017. 13www.howardhughes.com Outlet Collection at RiverwalkNew Orleans, LA100%264,33896%99%5,8616,500 Ward Village RetailHonolulu, HI100%1,027,31684%84%19,38419,460 One Lakes Edge RetailHouston, TX100%23,28093%93%975NA 20/25 Waterway AvenueHouston, TX100%50,062100%100%1,8911,891 Hughes Landing RetailHouston, TX100%126,13199%99%$4,104$4,104 110 N. WackerChicago, IL100%226,000100%100%(333)6,100 Columbia Office PropertiesColumbia, MD100%101,54561%61%805500 1400 Woodloch ForestHouston, TX100%95,66797%97%1,8901,890 3 Waterway SquareHouston, TX100%232,021100%100%6,9006,900 9303 New TrailsHouston, TX100%97,96758%58%8431,800 1735 Hughes Landing BoulevardHouston, TX100%318,170100%100%7,6967,696 One Hughes LandingHouston, TX100%197,719100%100%$6,240$6,240 3Q17 % Leased 3Q17 % Occ. Rentable Sq. Ft. / Units % Ownership Location Property Annualized Est. Stab. NOI Annualized 3Q17 NOI Stabilized Properties

 


Dollars in thousands Residential 100% 393 95% 97% 2,649 4,600 Millennium Waterway Apartments Houston, TX 50% 380 89% 93% 2,867 3,500 The Metropolitan Columbia, MD Total Residential 1,109 $9,194 $13,200 Hotel Total Hotel 205 $4,251 $4,500 Other 100% NA NA NA 1,637 1,637 Woodlands Ground Leases Houston, TX Lease NA NA NA 215 215 Kewalo Basin Harbor Honolulu, HI 100% NA NA NA 358 358 Clark County LV Stadium Las Vegas, NV Total Other NA NA NA $10,506 $10,506 Total Stabilized $110,599 $124,727 14www.howardhughes.com Other AssetsVarious100%NANANA1,7041,704 Hockey Ground LeaseLas Vegas, NV100%NANANA483483 Summerlin Hospital DistributionLas Vegas, NV100%NANANA3,3823,382 Sarofim Equity InvestmentHouston, TX20%NANANA$2,727$2,727 Embassy Suites at Hughes LandingHouston, TX100%20582%NA$4,251$4,500 85 South StreetNew York, NY100%2295%95%419600 Millennium Six Pines ApartmentsHouston, TX100%31496%100%$3,259$4,500 3Q17 % Leased 3Q17 % Occ. Rentable Sq. Ft. / Units % Ownership Location Property Annualized Est. Stab. NOI Annualized 3Q17 NOI Stabilized Properties (cont'd)

 


Dollars in thousands Office 100% 331,754 67% 69% 53,994 74,994 3,746 6,900 2020 1725 Hughes Landing Houston, TX One Summerlin (c) Las Vegas, NV 100% 206,279 78% 93% — — 3,476 5,700 2018 Total Office 1,066,102 $185,125 $243,343 $7,831 $25,300 Retail 100% 83,466 60% 72% 13,278 16,274 613 1,700 2018 Lakeland Village Center Houston, TX 960,943 $448,411 $453,357 $19,857 $30,097 Total Retail Residential 50% 124 88% 95% 20,760 20,760 992 1,100 2018 Constellation Las Vegas, NV 514 $102,489 $102,489 $5,639 $8,600 Total Residential Hotel 100% 302 71% NA 91,602 97,224 5,436 10,500 2020 The Westin at The Woodlands Houston, TX 708 $163,962 $169,584 $12,749 $27,000 Total Hotel Other 100% 784 21% 21% 7,688 8,476 (49) 800 2020 HHC 2978 Self-Storage Houston, TX 1,438 $15,762 $17,083 $8 $1,600 Total Other Total Unstabilized $915,749 $985,856 $46,084 $92,597 Notes (a) With the exception of Hotel properties, Percentage Occupied and Percentage Leased are as of September 30, 2017. Each Hotel property Percentage Occupied is the average for Q3 2017. (b) Company estimates of stabilized NOI are based on current leasing velocity, excluding inflation and organic growth. (c) One Summerlin development costs are combined with Downtown Summerlin. 15www.howardhughes.com HHC 242 Self-StorageHouston, TX100%65426%26%$8,074$8,607$57$8002020 The Woodlands Resort & Conference CenterHouston, TX100%40655%NA$72,360$72,360$7,313$16,5002020 One Lakes EdgeHouston, TX100%39093%96%$81,729$81,729$4,647$7,5002018 Downtown Summerlin (c)Las Vegas, NV100%802,80883%95%419,354421,30417,39626,3002018 Creekside Village GreenHouston, TX100%74,66986%91%$15,779$15,779$1,848$2,0972017 One MerriweatherColumbia, MD100%207,25448%63%66,33978,1871,1335,1002020 Three Hughes LandingHouston, TX100%320,81531%44%$64,792$90,162($524)$7,6002020 Est. Stab. Date 3Q17 % Leased (a) 3Q17 % Occ. (a) Rentable Sq. Ft. / Units % Ownership Location Project Name Annualized Est. Stab. NOI (b) Annualized 3Q17 NOI Est. Total Cost (Excl. Land) Develop. Costs Incurred Unstabilized Properties

 


Dollars in thousands, except per sq. ft. and unit amounts Owned & Managed Office 130,000 Two Merriweather Columbia, MD 100% 58% Under construction Q3 2016 Q2 2020 21,105 40,941 3,685 9% 145,000 Two Summerlin Las Vegas, NV 100% 11% Under construction Q2 2017 2020 4,010 49,320 3,500 7% Total Office 978,000 $37,775 $338,400 $25,518 Retail Seaport - Uplands / Pier 173 Lake Woodlands Crossing New York, NY 100% 446,773 53% Under construction Q4 2013 Q1 2021 $427,271 $731,000 $43,000 - $58,000 6% - 8% 60,300 58% Houston, TX 100% Pending Construction Q4 2017 Q4 2020 248 15,381 1,700 11% Total Retail 507,073 $427,519 $746,381 $44,700 - $59,700 Multifamily m.flats/Ten.M Building4 437 $1,982 Columbia, MD 50% Under construction Q1 2016 Q3 2019 90,038 109,345 8,100 7% Total Multifamily 996 $102,106 $210,732 $15,999 Total Under Construction $567,400 $1,295,513 $86,217 - $101,217 (1) With the exception of Two Summerlin and Three Merriweather, represents leases signed as of September 30, 2017 and is calculated as the total leased square feet divided by total leasable square feet, expressed as a percentage. (2) Represents management's estimate of the first quarter of operations in which the asset may be stabilized. (3) Seaport - Uplands / Pier 17 Estimated Rentable sq. ft. and costs are inclusive of the Tin Building, the status of which is still pending. Develop. Costs Incurred and Est. Total Costs are shown net of insurance proceeds of approximately $55 million. (4) Total Develop. Costs Incurred, Est. Total Cost, and Est. Stabilized NOI shown gross, not at share. 16 www.howardhughes.com Downtown Summerlin Apartments Las Vegas, NV 100% 267 $1,928 Pending Construction Q4 2017 Q3 2020 1,283 59,276 4,400 7% Creekside Apartments Houston, TX 100% 292 $1,538 Under construction Q1 2017 Q4 2019 $10,785 $42,111 $3,499 8% Project Status Est. Number of Units % Ownership City, State Project Name Stabilized NOI Yield Est. Stabilized NOI Est. Total Cost (Excl. Land) Develop. Costs Incurred Est. Stabilized Date2 Const. Start Date Monthly Est. Rent Per Unit Three Merriweather Columbia, MD 100% 320,000 50% Pending Construction Q1 2018 2023 1,806 138,200 9,200 7% Aristocrat Las Vegas, NV 100% 180,000 100% Under construction Q2 2017 Q1 2019 3,575 46,661 4,071 9% 100 Fellowship Dr Houston, TX 100% 203,000 100% Under construction Q2 2017 Q4 2019 $7,279 $63,278 $5,062 8% Project Status Percent Pre-Leased1 Est. Rentable Sq. Ft. % Ownership City, State Project Name Stabilized NOI Yield Est. Stabilized NOI Est. Total Cost (Excl. Land) Develop. Costs Incurred Est. Stabilized Date2 Const. Start Date Under Construction Properties

 


In thousands, except rentable sq. ft. and acres 3Q 2017 Acquisitions Ownership Sq. Ft./ Acres Price No acquisition activity in 3Q17 3Q 2017 Dispositions Sale Price Ownership Sq. Ft./ Acres 8/15/2017 Lakemoor (Volo) Land NA 100% Lakemoor, IL 40.0 $600 17www.howardhughes.com Date Sold Property Type of % Ownership Location Rentable Date Acquired Property Type of % Ownership Location RentableAcquisition Acquisition / Disposition Activity

 


Woodlands Woodlands Hills Bridgeland Summerlin Maryland Total Dollars in thousands Revenues: Residential land sale revenues Commercial land sale revenues Builder price participation Other land sale revenues $7,493 - 125 1,738 $10,582 - 102 1,553 $0 - - 7 $0 - - 2 $6,458 2,234 49 162 $4,687 2,523 160 96 $38,521 199 5,298 2,231 $26,181 155 4,221 2,087 $0 - - 413 $0 - - 413 $52,472 2,433 5,472 4,551 $41,450 2,678 4,483 4,151 Total revenues $9,356 $12,237 $7 $2 $8,904 $7,466 $46,249 $32,644 $413 $413 $64,929 $52,762 Expenses: Cost of sales - residential land Cost of sales - commercial land Real estate taxes Land sales operations Depreciation and amortization ($3,722) - (1,493) (3,366) (30) ($5,619) - (1,194) (4,199) (30) $0 - (24) (239) - $0 - (23) (87) - ($2,187) (647) (582) (1,203) (19) ($1,524) (731) (411) (1,373) (23) ($22,373) (113) 1,671 (d) (2,241) (24) ($13,489) (69) (629) (2,115) (16) $0 - (154) (549) (1) $0 - (160) (483) (3) ($28,282) (760) (582) (7,598) (74) ($20,632) (800) (2,417) (8,257) (72) Total Expenses ($8,612) ($11,042) ($263) ($110) ($4,638) ($4,062) ($23,080) ($16,318) ($704) ($646) ($37,297) ($32,178) Net interest capitalized (expense) Equity in earnings from real estate affiliates (1,092) - (1,240) - 133 - 148 - 2,698 - 2,366 - 4,617 6,480 3,982 13,699 - - (3) 6,356 6,480 5,253 13,699 - EBT ($348) ($45) ($123) $40 $6,963 $5,770 $34,266 $34,007 ($291) ($236) $40,467 $39,536 Key Performance Metrics: Residential Total acres closed in current period Price per acre achieved Avg. gross margins Commercial Total acres closed in current period Price per acre achieved Avg. gross margins Avg. combined before-tax net margins 11.1 $675 50% 19.9 $532 47% - NM NM - NM NM 17.5 $369 66% 12.2 $384 67% 57.7 $546 42% 31.7 $521 48% - NM NM - NM NM - NM NM 50% - NM NM 47% - NM NM NM - NM NM NM - NM NM NM - NM NM NM - NM NM NM - NM NM NM - NM NM NM - NM NM NM Woodlands Woodlands Hills Bridgeland Summerlin Maryland Key Valuation Metrics: Remaining saleable acres Residential Commercial Projected est. % superpads / lot size Projected est. % single-family detached lots / lot size Projected est. % single-family attached lots / lot size Projected est. % custom homes / lot size Estimated builder sale velocity (blended total - TTM) (b) Gross margin range (GAAP), net of MUDs (c) Gross margin range (Cash), net of MUDs (c) Residential sellout / Commercial buildout date estimate Residential Commercial 257 743 / / / / 36 50.3% 97.0% 1,439 171 / / / / — NM 80.0% 2,432 1,530 / / / / 47 NM 85.5% 3,550 826 / / / / 82 NM 66.8% NM 107 (a) NM NM NM NM NM NM NM 0% 72% 28% 0% — 0.29 ac 0.08 ac — 0% 87% 13% 0% — 0.32 ac 0.13 ac — 0% 89% 10% 1% — 0.16 ac 0.12 ac 1.0 ac 79% 0% 0% 21% 0.25 ac — — 0.4 ac 2022 2025 2029 2028 2036 2045 2035 2039 — 2020 Notes (a) Does not include 31 commercial acres held in the Strategic Development segment in Downtown Columbia. (b) Represents the average monthly builder homes sold over the last twelve months ended September 30, 2017. (c) GAAP gross margin is based on GAAP revenues and expenses which exclude revenues deferred on sales closed where revenue did not meet criteria for recognition, and includes revenues previously deferred that met criteria for recognition in the current period. Gross margin for each MPC may vary from period to period based on the locations of the land sold and the related costs associated with developing the land sold. Projected cash gross margin includes all future projected revenue less all future projected development costs, net of expected reimbursable costs, and capitalized overhead, taxes and interest. (d) Summerlin property taxes for 3Q 2017 are shown net of a $2.4M property tax abatement. 18 www.howardhughes.com 3Q 2017 3Q 2016 3Q 2017 3Q 2016 3Q 2017 3Q 2016 3Q 2017 3Q 2016 3Q 2017 3Q 2016 3Q 2017 3Q 2016 Master Planned Community Land

 


Key Metrics Development progress Financial Summary (Dollars in thousands, except per sq. ft.) Deposit Reconciliation (Dollars in thousands) Notes (a) We began delivering units at Waiea in November 2016. As of September 30, 2017, we've closed 158 units, we have 7 under contract, and 9 units remaining to be sold. (b) Ke Kilohana consists of 375 workforce units and 49 market rate units. (c) Total deposits held for future use are shown in Other Assets on the balance sheet. U/C = Under Construction 19 www.howardhughes.com Type of building Ultra-Luxury Luxury Upscale Workforce Number of units 174 317 466 424 Avg. unit s.f. 2,174 1,417 836 694 Condo s.f. 378,238 449,205 389,368 294,273 Street retail s.f. 8,200 16,100 68,300 21,900 Stabilized retail NOI ($ in thousands) $453 $1,152 $1,557 $1,081 Stabilization year 2017 2019 2019 2020 Status Opened U/C U/C U/C Start date (actual or est.) 2Q14 4Q14 1Q16 4Q16 Completion date (actual or est.) Complete 4Q17 4Q18 2019 Total development cost ($m) $417.3 $401.3 $428.5 $218.9 Cost-to-date ($m) $396.7 $364.3 $167.6 $48.7 1,381 1,094 1,511,084 114,500 $4,243 $1,466.0 $977.3 Remaining to be funded ($m) $20.6 $37.0 $260.9 $170.2 $488.7 # of units closed or under contract through 3Q17 165 307 367 388 Total % of units closed or under contract 94.8% 96.8% 78.8% 91.5% Number of units closed or under contract (current quarter) 0 5 46 1 Square footage closed or under contract (total) 340,061 419,187 291,279 257,644 Total % square footage closed or under contract 89.9% 93.3% 74.8% 87.6% Target condo profit margin at completion (excl. land cost) — — — — Total cash received (closings & deposits) — — — — Total GAAP revenue recognized — — — — Expected avg. price per sq. ft. $1,900 - $1,950 $1,100 - $1,150 $1,300 - $1,350 $700 - $750 Expected construction costs per retail sq. ft. — — — — Deposits from sales commitment spent towards construction $117,916 $80,803 $48,858 $12,411 held for future use (c) $13,772 $232,447 $40,078 $6,941 Total deposits from sales commitment $131,688 $313,249 $88,936 $19,352 1,227 88.8% 52 1,308,171 86.6% ~30% $1,026,602 $1,202,160 $1,300 - $1,325 ~$1,100 $259,987 $293,238 $553,225 Total Ke Kilohana (b) Ae'o Anaha Waiea (a) Ward Village Condominiums

 


Planned Future Development Landmark Mall Alexandria, VA 100% 33 Plan to transform the mall into an open-air, mixed-use community. In January 2017, we acquired the 11.4 acre Macy's site for $22.2 million. Mall is completely vacant. We are evaluating potential redevelopment opportunities. Century Plaza Mall Birmingham, AL 100% 59 Kendall Town Center Kendall, FL 100% 70 Zoned for 730,000 Sq. Ft. of commercial space. Currently undergoing re-entitlement process. AllenTowne Allen, TX 100% 238 Located 27 miles north of Downtown Dallas. Agricultural property tax exemptions are in place for most of the property, which reduces carrying costs. Maui Ranch Land Maui, HI 100% 20 Two, non-adjacent, ten-acre parcels zoned for native vegetation. 20 www.howardhughes.com Fashion Show Air Rights Las Vegas, NV 80% N/A Air rights above the Fashion Show Mall located on the Las Vegas Strip. Bridges at Mint Hill Charlotte, NC 91% 210 Zoned for approximately 1.3 million Sq. Ft. of commercial uses. West Windsor West Windsor, NJ 100% 658 Zoned for approximately 6 million Sq. Ft. of commercial uses. Circle T Ranch and Power Center Westlake, TX 50% 207 50/50 joint venture with Hillwood Development Company. Sold 72-acres to an affiliate of Charles Schwab Corporation. Cottonwood Mall Holladay, UT 100% 54 Under contract to sell in separate parcels. First closing expected in 2018. The Elk Grove Collection Elk Grove, CA 100% 64 Plan to build a 400,000 Sq. Ft. outlet retail center. Recently sold 36 acres for $36 million in total proceeds. Notes Acres % Own City, State Property Name Other Assets

 


(In thousands) Fixed-rate debt: Collateralized mortgages, notes and loans payable Special Improvement District bonds Variable-rate debt: Collateralized mortgages, notes and loans payable, excluding condominium financing Condominium financing Mortgages, notes and loans payable Deferred financing costs, net Unamortized bond issuance costs Total consolidated mortgages, notes and loans payable Total unconsolidated mortgages, notes and loans payable at pro-rata share Total Debt $ 1,476,480 32,266 $ 1,140,118 44,023 1,310,265 195,269 1,363,472 160,847 $ 3,014,280 (7,089) (13,743) $ 2,708,460 (5,779) (11,934) $ 2,993,448 $ 2,690,747 $ 80,931 $ 55,481 $ 3,074,379 $ 2,746,228 Net Debt on a Segment Basis, at share (In thousands) Segment Basis (a) $ Mortgages, notes and loans payable, excluding condominium financing (a) Condominium financing Less: cash and cash equivalents (a) Special Improvement District receivables Municipal Utility District receivables Net Debt $ 244,379 — (105,552) (55,841) (193,100) 1,591,472 — (63,231) — — $ 55,956 195,269 (23,505) — — $ 1,891,807 195,269 (192,288) (55,841) (193,100) $ 987,303 — (450,145) — — $ 2,879,110 195,269 (642,433) (55,841) (193,100) $ (110,114) $ 1,528,241 $ 227,720 $ 1,645,847 $ 537,158 $ 2,183,005 Consolidated Debt Maturities and Contractual Obligations by Final Due Date (b) (In thousands) Mortgages, notes and loans payable Interest Payments Ground lease and other leasing commitments Total consolidated debt maturities and contractual obligations $ 29,752 139,073 9,885 $ 824,684 353,065 14,504 $ 544,861 164,611 11,830 $ 1,614,983 204,420 293,377 $ 3,014,280 861,169 329,596 $ 178,710 $ 1,192,253 $ 721,302 $ 2,112,780 $ 4,205,045 (a) Each segment includes our share of related cash and debt balances for all joint ventures included in Investments in Real estate and Other Affiliates. Please see our Liquidity and Capital Resources discussion in the Form 10-Q for Q3 2017 for further details. (b) Mortgages, notes and loans payable and condominium financing are presented based on extended maturity date. Extension periods generally can be exercised at our option at the initial maturity date, subject to customary extension terms that are based on property performance as of the initial maturity date and/or extension date. Such extension terms may include, but are not limited to, minimum debt service coverage, minimum occupancy levels or condominium sales levels, as applicable, and other performance criteria. We may have to pay down a portion of the loan in order to obtain the extension if we are not in compliance with the respective covenants. 21 www.howardhughes.com Total 5 years and thereafter 3-5 years 2-3 years 1 year Total Non-Segment Amounts Segment Totals Strategic Developments Operating Assets Master Planned Communities December 31, 2016 September 30, 2017 Debt Summary

 


The Woodlands Master Credit Facility (b) $150,000 L+275 Floating 3.98% Apr-20 / Apr-21 $215,000 Outlet Collection at Riverwalk $54,325 L+275 Floating 3.98% Oct-17 / Oct-18 The Westin at The Woodlands $57,946 L+265 Floating 3.88% Aug-18 / Aug-19 Three Hughes Landing $43,661 L+235 Floating 3.58% Dec-17 / Dec-19 Embassy Suites at Hughes Landing $31,245 L+250 Floating 3.73% Oct-18 / Oct-20 One Merriweather $41,271 L+215 Floating 3.38% Feb-20 / Feb-21 HHC 242 Self-Storage $6,137 L+260 Floating 3.83% Oct-19 / Oct-21 70 Columbia Corporate Center $20,000 L+200 Floating 3.23% May-20 / May-22 10-60 Corporate Centers $80,000 L+175 Floating / Swap 3.20% May-20 / May-22 Millennium Waterway Apartments $55,344 3.75% Fixed 3.75% Jun-22 9303 New Trails $12,098 4.88% Fixed 4.88% Dec-23 3831 Technology Forest Drive $22,088 4.50% Fixed 4.50% Mar-26 Millennium Six Pines Apartments $42,500 3.39% Fixed 3.39% Aug-28 One Hughes Landing $52,000 4.30% Fixed 4.30% Dec-29 One Lakes Edge $69,440 4.50% Fixed 4.50% Mar-29 / Mar-31 Columbia Regional Building $25,000 4.48% Fixed 4.48% Feb-37 Strategic Developments Ke Kilohana $0 L+325 Floating 4.48% Dec-19 / Dec-20 Ae'o $1 L+400 Floating 5.23% Dec-19 / Dec-21 $207,203 Total (d) $1,966,790 Notes (a) Extended maturity assumes all extension options are exercised. (b) The Woodlands Master Credit Facility and Downtown Summerlin have been extended to 2021. (c) Subsequent to quarter end, the loan was fully repaid on October 27, 2017. (d) Excludes JV debt, Corporate level debt, and SID bond debt related to Summerlin MPC & Retail. 22www.howardhughes.com 100 Fellowship Drive $1 L+150 Floating 2.73% May-22 Two Merriweather $11,932 L+250 Floating 3.73% Oct-20 / Oct-21 Waiea and Anaha (c) $195,269 L+675 Floating 7.98% Nov-17 / Nov-19 $1,544,587 Hughes Landing Retail $35,000 3.50% Fixed 3.50% Dec-36 Two Hughes Landing $48,000 4.20% Fixed 4.20% Dec-30 3 Waterway Square $50,647 3.94% Fixed 3.94% Aug-28 Kewalo Basin Harbor $0 L+275 Floating 3.98% Sep-27 4 Waterway Square $35,431 4.88% Fixed 4.88% Dec-23 Ward Village $238,718 L+250 Floating / Swap 3.69% Sep-21 / Sep-23 20/25 Waterway Avenue $13,708 4.79% Fixed 4.79% May-22 One Mall North $14,463 L+225 Floating 3.48% May-20 / May-22 HHC 2978 Self-Storage$5,521 L+260 Floating 3.83% Jan-20 / Jan-22 Downtown Summerlin (b) $275,883 L+225 Floating 3.38% Sep-20 / Sep-21 The Woodlands Resort & Conference Center $67,000 L+325 Floating 4.48% Dec-18 / Dec-20 Lakeland Village Center at Bridgeland $11,292 L+235 Floating 3.58% May-18 / May-20 110 N. Wacker $19,870 5.21% Fixed / Swap 5.21% Oct-19 1725-35 Hughes Landing Boulevard$115,999 L+165 Floating 2.88% Jun-18 / Jun-19 Operating Assets Bridgeland Credit Facility $65,000 4.60% Fixed 4.60% Nov-20 / Nov-22 Q3 2017 Contract Interest Rate Current Annual Initial / Extended Asset Principal Balance Interest Rate Hedge Interest Rate Maturity (a) Master Planned Communities Property Level Debt

 


Minimum Contractual Ground Lease Payments ($ in thousands) Future Cash Payments Year Ended December 31 Pro-Rata Share Three months ended 2016 Remaining 2017 2018 Thereafter Total Ground Leased Asset Expiration Date September 30, 2017 Riverwalk (a) Seaport Kewalo Basin Harbor 100% 100% 100% 2045-2046 2031 (b) 2049 $786 392 75 $3,300 1,429 300 $1,012 392 75 $2,718 1,594 300 $59,599 205,641 9,200 $63,329 207,627 9,575 $5,029 $1,479 $4,612 $274,440 $280,531 (a) Includes base ground rent, deferred ground rent and the participation rent floor, as applicable. (b) Initial expiration is 12/30/2031 but subject to extension options through 12/31/2072. owardhughes.com 23www.h Summary of Ground Leases

 


Under Construction - Projects in the Strategic segment for which construction has commenced as of September 30, 2017, unless otherwise noted. This excludes MPC and condominium development. Unstabilized - Properties in the Operating segment that have not been in service for more than 36 months and do not exceed 90% occupancy. If an office, retail or multi-family property has been in service for more than 36 months but does not exceed 90% occupancy, the asset is considered underperforming and is included in Stabilized. Stabilized - Properties in the Operating segment that have been in service for more than 36 months or have reached 90% occupancy, which ever occurs first. If an office, retail or multifamily property has been in service for more than 36 months but does not exceed 90% occupany, the asset is considered underperforming. Net Operating Income (NOI) - We define NOI as operating cash revenues (rental income, tenant recoveries and other revenue) less operating cash 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, ground rent amortization, demolition costs, amortization, depreciation, development-related marketing costs and, unless otherwise indicated, Equity in earnings from Real Estate and Other Affiliates. We use NOI to evaluate our operating performance on a property-by-property basis because NOI allows us to evaluate the impact that factors, which vary by property, such as lease structure, lease rates and tenant base have on our operating results, gross margins and investment returns. We believe that net operating income (“NOI”) is a useful supplemental measure of the performance of our Operating Assets 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. 24www.howardhughes.com Definitions

 


Reconciliation of Operating Assets segment EBT to Total NOI: (In thousands) Total Operating Assets segment EBT $ (13,162) $ (9,068) $ 7,922 $ 5,191 $ (35,943) $ (14,308) $ (28,175) Straight-line lease amortization Demolition costs Development-related marketing costs Depreciation and Amortization Provision for impairment Write-off of lease intangibles and other Other income, net Equity in earnings from Real Estate Affiliates Interest, net Total Operating Assets NOI - Consolidated 1,421 (34) (1,067) (33,885) — (41) (249) 317 (15,940) 1,816 (63) (832) (32,244) — (15) 162 37 (15,540) 1,961 (65) (418) (22,789) — (27) (178) 3,385 (14,524) 1,057 (194) (46) (21,767) — (61) 1,475 185 (13,458) 2,551 — (457) (20,732) (35,734) — 11 (210) (12,903) 5,198 (162) (2,317) (88,918) — (83) (265) 3,739 (46,004) 9,632 — (902) (64,546) (35,734) 35 3,126 2,616 (36,968) 36,316 37,611 40,577 38,000 31,531 114,504 94,566 Redevelopments Landmark Mall Total Operating Asset Redevelopments NOI — — — (150) (202) — (526) — — — (150) (202) — (526) Dispositions Park West Total Operating Asset Dispositions NOI (8) (39) (14) 490 411 (61) 1,346 (8) (39) (14) 490 411 (61) 1,346 Consolidated Operating Assets NOI excluding properties sold or in redevelopment $ 36,324 $ 37,650 $ 40,591 $ 37,660 $ 31,322 $ 114,565 $ 93,746 Company's Share NOI - Equity investees $ 1,186 $ 1,385 $ 746 $ 888 $ 569 $ 3,315 $ 4,181 Distributions from Summerlin Hospital Investment — — 3,383 — — 3,383 2,616 Total NOI $ 37,510 $ 39,035 $ 44,720 $ 38,548 $ 31,891 $ 121,263 $ 100,543 (a) - Effective January 1, 2017, we moved South Street Seaport assets under construction and related activities out of the Operating Assets segment into the Strategic Developments segment. Amounts for all 2016 periods presented have been adjusted from previous filings to reflect this change. Reconciliation of MPC Land Sales Closed to GAAP Land Sales Revenue: (In thousands) Total residential land sales closed in period Total commercial land sales closed in period Net recognized (deferred) revenue: Bridgeland Summerlin Total net recognized (deferred) revenue Special Improvement District bond revenue Total land sales revenue - GAAP basis $ 45,467 — $ 31,793 — 2,234 3,166 2,523 7,649 5,400 10,172 4,039 2,163 $ 54,906 $ 44,128 Total MPC segment revenue - GAAP basis $ 64,929 $ 52,762 Reconciliation of MPC segment EBT to MPC Net Contribution: (In thousands) Three Months Ended September 30, MPC segment EBT Plus: Cost of sales - land Depreciation and amortization MUD and SID bonds collections, net Less: MPC development expenditures MPC land acquisitions Equity in earnings in Real Estate and Other Affiliates MPC Net Contribution $ 40,465 $ 39,537 29,043 76 1,643 21,432 72 6,544 (45,772) — (6,480) (35,823) — (13,700) $ 18,975 $ 18,062 Reconciliation of Segment EBTs to Net Income (In thousands) Three Months Ended September 30, MPC segment EBT Operating Assets segment EBT Strategic Developments segment EBT Corporate and other items Income before taxes Provision for income taxes Net income Net income attributable to noncontrolling interests Net income attributable to common stockholders $ 40,465 (13,162) 26,249 (37,190) $ 39,537 (35,943) 30,904 (16,340) 16,362 (5,846) 18,158 (10,162) 10,516 7,996 (12) (23) $ 10,504 $ 7,973 25 www.howardhughes.com 2016 2017 2016 2017 Q3 2016 Q3 2017 Q3 YTD 2016 (a) Q3 YTD 2017 Q3 2016 (a) Q4 2016 (a) Q1 2017 Q2 2017 Q3 2017 Reconciliation of Non-GAAP Measures

 

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