DALLAS--The Howard Hughes Corporation (NYSE: HHC) today announced its results for the fourth quarter and full year 2010. Howard Hughes completed its separation from GGP on November 9, 2010 and subsequently appointed a new executive management team.

On November 22, 2010, The Howard Hughes Corporation appointed David R. Weinreb as Chief Executive Officer and Grant Herlitz as President. On February 28, 2011, Howard Hughes appointed Andrew C. Richardson as Chief Financial Officer effective March 28, 2011.

Since the spin-off, the Company has achieved several key objectives and begun initiatives to position Howard Hughes to maximize value for stockholders. Highlights include the commencement of a comprehensive evaluation of all of the Company’s assets, which to date has resulted in a prioritization of those properties for which development, joint ventures, and/or sales can be initiated in the shorter term. Management has empowered local property managers to take more responsibility for their operations, with an emphasis on re-evaluating past practices and aggressively containing costs. In addition, the Company recently hired several experienced leasing professionals to drive revenues at its operating assets. Howard Hughes also made significant progress in building its independent public company infrastructure, and implementing its accounting, human resource and information technology systems.

Net loss attributable to common stockholders was $(4.6) million, or $(0.12) per share, for the fourth quarter 2010 compared with $(535.9) million, or $(14.21) per share, for the quarter ended December 31, 2009. Net loss attributable to common stockholders was $(69.4) million, or $(1.84) per share, for the year ended December 31, 2010, compared with $(703.6) million, or $(18.66) per share, for the year ended December 31, 2009.

The Howard Hughes Corporation recorded $503.4 million of non-cash impairment charges for the year ended December 31, 2010 compared to $680.3 million for the year ended December 31, 2009.

The Howard Hughes Corporation evaluates its real estate assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Recoverability means that the expected cumulative undiscounted future cash flows of an asset are less than its carrying value. The analysis ignores when the future cash flows are expected to be received while we own the assets and therefore does not consider expected economic returns. If estimated future cumulative undiscounted cash flows are less than carrying value, then the asset must be written down to its fair value. The process for deriving fair value involves discounting the expected future cash flows at a rate of return that an investor would require based on the risk profile of the cash flows and returns available in the market for other investments having similar risk. Other inputs such as appraisals and recent transactions for comparable properties may also be used. Book value for assets that have been recently impaired from an accounting perspective may more likely reflect market value than book values of assets that have not been impaired; consequently, unimpaired assets may be expected to generate above or below market returns relative to their respective book values. The lower book basis resulting from an impairment charge increases reported profitability from the asset in future periods, but has no impact on cash flow.

For a more complete description of impairments, please refer to Item 7 beginning on page 29 and Footnotes 2 and 3 to The Howard Hughes Consolidated and Combined Financial Statements contained in the Company’s Form 10-K for the fiscal year ended December 31, 2010.

David R. Weinreb, CEO of The Howard Hughes Corporation, stated "Our executive management team is optimistic about the depth, strength and quality of the Company’s development pipeline. We are establishing a comprehensive long-term strategic plan for each of our assets which will allow us to focus our resources on the most attractive opportunities within our portfolio. I believe that the Company’s unique collection of assets provides us with a great opportunity to create long-term value for our stockholders.”

ABOUT THE HOWARD HUGHES CORPORATION

The Howard Hughes Corporation owns, manages and develops commercial, residential and mixed-use real estate throughout the country. Created from a selected subset of 34 assets previously held by General Growth Properties, the Company's properties include master planned communities, operating properties, development opportunities, and other unique assets spanning 18 states from Hawaii to New York.

Master Planned Communities

The Howard Hughes Corporation owns, develops, and sells property in four master planned communities that include over 14,000 acres of marketable land, including Summerlin in Las Vegas, Bridgeland and The Woodlands in Houston, and Columbia, Fairwood, and Emerson in Columbia Maryland.

Operating Assets

The Howard Hughes Corporation’s operating assets are primarily retail and include Ward Centers (Honolulu, HI), South Street Seaport (Manhattan, NY), Landmark Mall (Alexandria, VA), Park West (Peoria, AZ), Rio West Mall (Gallup, NM), Riverwalk Marketplace (New Orleans, LA) and Cottonwood Square (Holladay, UT).

Strategic Development Opportunities

The Howard Hughes Corporation owns a diverse pipeline of near, mid and long-term real estate developments. These range from air rights and surface parking lots to aging properties poised for redevelopment.

For more information on the company, please visit our website at: www.howardhughes.com or contact Kay Weinmann via e-mail at kay.weinmann@howardhughes.com or by telephone at (214) 741-7744.

Safe Harbor Statement

Statements made in this press release that are not historical facts, including statements accompanied by words such as “will,” “believe,” “expect” or similar words, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this press release related to future operating performance, the creation of long-term value for our stockholders and progress on some of the Company’s larger developments are forward-looking statements. These statements are based on management’s expectations, estimates, assumptions and projections as of the date of this release and are not guarantees of future performance. Actual results may differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ materially are set forth as risk factors in The Howard Hughes Corporation’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2010 filed today. The Howard Hughes Corporation cautions you not to place undue reliance on the forward-looking statements contained in this release. The Howard Hughes Corporation does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release.

The Howard Hughes Corporation
Consolidated and Combined Statements of Income (Loss)
(In thousands, except per share amounts)
                 
    Three Months Ended   Year Ended
    December 31,   December 31,
      2010       2009       2010       2009  
Revenues:                
Minimum rent   $ 16,577     $ 16,263     $ 66,926     $ 65,653  
Tenant recoveries     4,676       4,815       18,567       19,642  
Master Planned Community land sales     24,511       3,898       38,058       34,563  
Builder price participation     781       1,867       4,124       5,687  
Other land sale revenues     1,271       1,388       5,384       5,747  
Other rental and property revenues     3,024       2,737       9,660       5,056  
Total revenues     50,840       30,968       142,719       136,348  
                 
Expenses:                
Master Planned Community cost of sales     16,387       1,871       23,388       22,020  
Master Planned Community sales operations     5,388       6,611       29,041       27,042  
Rental property real estate taxes     3,369       3,700       14,530       13,813  
Rental property maintenance costs     1,729       1,941       6,495       5,586  
Other property operating costs     10,698       9,220       37,893       34,810  
Provision for doubtful accounts     681       1,358       1,782       2,539  
General and administrative     9,076       4,260       21,538       23,023  
Provisions for impairment     502,778       499,587       503,356       680,349  
Depreciation and amortization     4,028       4,620       16,563       19,841  
Total expenses     554,134       533,168       654,586       829,023  
Operating loss     (503,294 )     (502,200 )     (511,867 )     (692,675 )
                 
Interest income     251       1,202       369       1,689  
Interest expense     (534 )     (209 )     (2,422 )     (977 )
Warrant liability expense     (140,900 )     -       (140,900 )     -  
Loss before income taxes, equity in income (loss) from Real Estate Affiliates, reorganization items and noncontrolling interests     (644,477 )     (501,207 )     (654,820 )     (691,963 )
                 
Benefit from (provision for) income taxes     651,062       (841 )     633,459       23,969  
Equity in income (loss) from Real Estate Affiliates     3,019       (30,326 )     9,413       (28,209 )
Reorganization items     (14,153 )     (2,843 )     (57,282 )     (6,674 )
Income (loss) from continuing operations     (4,549 )     (535,217 )     (69,230 )     (702,877 )
Discontinued operations - loss on dispositions     -       (939 )     -       (939 )
Net income (loss)     (4,549 )     (536,156 )     (69,230 )     (703,816 )
Allocation to noncontrolling interests     (81 )     304       (201 )     204  
Net income (loss) attributable to common stockholders   $ (4,630 )   $ (535,852 )   $ (69,431 )   $ (703,612 )
                 
Basic and Diluted Income (Loss) Per Share:                
Continuing operations   $ (0.12 )   $ (14.19 )   $ (1.84 )   $ (18.64 )
Discontinued operations     -       (0.02 )     -       (0.02 )
Total basic and diluted income (loss) per share   $ (0.12 )   $ (14.21 )   $ (1.84 )   $ (18.66 )
                 
Weighted Average Shares of Common Stock:                
Basic     37,753       37,716       37,726       37,716  
Diluted     37,753       37,716       37,726       37,716  
 
The Howard Hughes Corporation
Consolidated and Combined Balance Sheets
(In thousands)
         
    December 31,
      2010       2009  
    (Consolidated)   (Combined)
Assets:        
Investment in real estate:        
Master Planned Community assets   $ 1,350,648     $ 1,742,226  
Land     180,976       193,130  
Buildings and equipment     343,006       451,279  
Less accumulated depreciation     (83,390 )     (85,639 )
Developments in progress     293,403       300,621  
Net property and equipment     2,084,643       2,601,617  
Investment in and loans to/from Real Estate Affiliates     149,543       140,558  
Net investment in real estate     2,234,186       2,742,175  
Cash and cash equivalents     284,682       3,204  
Accounts receivable, net     8,154       9,145  
Notes receivable     38,954       8,214  
Tax indemnity receivable, including interest     323,525       -  
Deferred expenses, net     6,619       7,444  
Prepaid expenses and other assets     126,587       135,045  
Total assets   $ 3,022,707     $ 2,905,227  
         
Liabilities:        
Liabilities not subject to compromise:        
Mortgages, notes and loans payable   $ 318,660     $ 208,860  
Deferred tax liabilities     78,680       782,817  
Warrant liability     227,348       -  
Uncertain tax position liability     140,076       66,129  
Accounts payable and accrued expenses     78,836       68,062  
Liabilities not subject to compromise     843,600       1,125,868  
Liabilities subject to compromise     -       275,839  
Total liabilities     843,600       1,401,707  
         
Equity:        

Common stock: $.01 par value; 100,000,000 shares authorized, 37,904,506 shares issued as of December 31, 2010

     379       -  
Additional paid-in capital     2,708,036       -  
GGP equity     -       1,504,364  
Accumulated deficit     (528,505 )     -  
Accumulated other comprehensive loss     (1,627 )     (1,744 )
Total stockholders' equity     2,178,283       1,502,620  
Noncontrolling interests in consolidated ventures     824       900  
Total equity     2,179,107       1,503,520  
Total liabilities and equity   $ 3,022,707     $ 2,905,227  
 

Supplemental Information

December 31, 2010
 
Operating Assets Net Operating Income and EBT
                 
    Three Months Ended        
    December 31,   Year Ended December 31,
      2010       2009       2010       2009  
   

 

  

(In thousands)

        
Operating Assets                
Ward Centers   $ 5,761     $ 4,598     $ 22,980     $ 22,152  
110 N. Wacker     2,039       1,417       6,628       4,988  
South Street Seaport     946       890       3,898   (1 )   4,524  
Columbia Office Properties     602       834       2,765       2,880  
Rio West Mall     419       503       1,899       2,040  
Landmark Mall     370       538       1,519       2,372  
Riverwalk Marketplace     350       694       955       868  
Cottonwood Square     111       92       484       507  
Park West     112       (66 )     366       138  
Other properties     94       108       1,058       1,667  
Total operating assets NOI   $ 10,804     $ 9,608     $ 42,552     $ 42,136  
                 
Straight-line and market lease amortization rent     (480 )     (492 )     (142 )     (199 )
Provisions for impairment     (80,401 )     (50,541 )     (80,923 )     (50,964 )
Depreciation and amortization     (3,909 )     (4,338 )     (16,017 )     (17,367 )
Interest, net     (3,132 )     (3,203 )     (16,145 )     (13,957 )
Operating assets EBT   $ (77,118 )   $ (48,966 )   $ (70,675 )   $ (40,351 )
                 
(1) Includes a $1.2 million provision for bad debt expense related to a single tenant.        
 
Reconciliation of EBT to GAAP-basis loss from continuing operations        
                 
    Three Months Ended   Year Ended
    December 31,   December 31,
      2010       2009       2010       2009  
    (In thousands)
Real estate property EBT:                
Operating Assets segment   $ (77,118 )   $ (48,966 )   $ (70,675 )   $ (40,351 )
MPC segment     (395,230 )     (11,797 )     (385,242 )     (55,409 )
Strategic Developments segment     (18,901 )     (469,841 )     (26,458 )     (603,802 )
Less: Real Estate Affiliates     (3,252 )     33,657       (10,007 )     30,622  
Consolidated properties     (494,501 )     (496,947 )     (492,382 )     (668,940 )
General and administrative     (9,076 )     (4,260 )     (21,538 )     (17,643 )
Strategic Initiatives     -       -       -       (5,380 )
Warrant liability expense     (140,900 )     -       (140,900 )     -  
Benefit from (provision for) income taxes     651,062       (841 )     633,459       23,969  
Equity in income of unconsolidated Real Estate Affiliates     3,019       (30,326 )     9,413       (28,209 )
Reorganization costs     (14,153 )     (2,843 )     (57,282 )     (6,674 )
Loss from continuing operations   $ (4,549 )   $ (535,217 )   $ (69,230 )   $ (702,877 )
 

Operating Assets Net Operating Income (“NOI”)

The Company believes that NOI is a useful supplemental measure of the performance of its Operating Assets. We define NOI as property specific revenues (rental income, tenant recoveries and other income) less expenses (real estate taxes, repairs and maintenance, marketing and other property expenses) and excluding the operations of properties held for disposition. NOI also excludes straight line rents, market lease amortization, impairments, depreciation and other amortization expense. Other real estate companies may use different methodologies for calculating NOI, and accordingly, the NOI of our Operating Assets may not be comparable to other real estate companies.

The Company also believes that NOI 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 occupancy rates, rental rates, and operating costs. This measure thereby provides an operating perspective not immediately apparent from GAAP continuing operations or net income attributable to common stockholders. The Company uses NOI to evaluate its operating performance on a property-by-property basis because NOI allows the Company to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on the Company’s operating results, gross margins and investment returns. NOI should only by used as an alternative measure of the financial performance of such assets and not as an alternative to GAAP operating income (loss) or net income (loss) available to common stockholders.

MPC Land Sales Summary
 
        Land Sales   Acres Sold   Number of Lots/Units   Price per acre   Price per lot
        Year Ended December 31,
        2010   2009     2010   2009   2010   2009     2010   2009     2010   2009
Residential Land Sales       ($ in thousands)
Columbia   Single Family - detached   $2,400   $500     2   1   12   4     $1,275   $531     $200   $125
    Townhomes   3,031   3,006     2   2   29   33     1,832   1,775     105   91
    High/Mid Apartments   --   3,125     --   8   --   164     --   379     --   19
    Single Family - detached (Fairwood)   --   15,000     --   239   --   636     --   63     --   24
                                                   
Bridgeland   Single Family - detached   15,123   10,239     58   41   289   204     259   251     52   50
                                                   
Summerlin   Single Family - detached   8,909   --     17   --   95   --     519   --     94   --
    Custom Lots   2,252   550     2   0   4   1     1,204   1,618     563   550
                                                   
Woodlands   Single Family - detached   65,230   47,917     181   135   737   557     360   354     89   86
    Single Family - attached   988   --     4   --   52   --     279   --     19   --
Subtotal       97,933   80,337     266   426   1,218   1,599                    
                                                   
Commercial Land Sales                                                  
Summerlin   Retail   --   4,564     --   4   --   --     --   1,047     --   --
                                                   
Bridgeland   Not-for-Profit   1,600   741     20   15   --   --     80   50     --   --
                                                   
Woodlands   Office and other   10,597   3,603     21   49   --   --     496   74     --   --
    Apartments and assisted living   4,879   7,150     12   19   --   --     392   370     --   --
    Retail   5,843   674     20   3   --   --     290   261     --   --
    Hotel   2,331   3,379     3   5   --   --     719   672     --   --
Subtotal       25,250   20,111     76   95                            
Total acreage sales revenues   123,183   100,448                                      
Deferred Revenue       3,994   (3,409)                                      
SID       749   248                                      
Venture partner's share The Woodlands partnership acreage sales   (42,687)   (29,794)                                      
Total MPC segment land sales revenues   $85,239   $67,493                                      
 

 

 

Source: The Howard Hughes Corporation

Contact:

The Howard Hughes Corporation

Kay Weinmann, 214-741-7744

kay.weinmann@howardhughes.com