DALLAS-- The Howard Hughes Corporation (NYSE: HHC) today announced its results for the first quarter 2011.

Net loss attributable to common stockholders was $(114.5) million, or $(3.02) per share, for the three months ended March 31, 2011 compared with $(20.5) million, or $(0.54) per share, for the three months ended March 31, 2010. Net loss attributable to common stockholders for the first quarter 2011 includes a $126.0 million, or $(3.33) per share, non-cash charge relating to the increase in estimated value of outstanding warrants. Excluding the non-cash warrant charge, net income attributable to common stockholders would have been $11.5 million, or $0.30 per share.

Master Planned Community (MPC) land sales, including our 52.5% proportionate share of The Woodlands land sales, were $34.3 million for the first quarter 2011, a $19.2 million increase over $15.1 million of land sales for the first quarter 2010. Summerlin MPC’s $14.1 million of residential and $3.6 million of commercial lot sales in the first quarter 2011 were responsible for a majority of the increase over 2010. Summerlin had no land sale revenue in the first quarter 2010 due to the weaker Las Vegas real estate market in the prior year.

Howard Hughes’ thirteen Operating Assets generated $13.5 million of net operating income (NOI) for the three months ended March 31, 2011, a $2.9 million increase over the first quarter 2010. First quarter 2011 NOI includes a $3.9 million cash distribution from the Summerlin Hospital Medical Center, a real estate affiliate accounted for using the cost method, representing our share of its profits from 2008 through 2010.

For a reconciliation of Operating Assets NOI to Operating Assets earnings before taxes (EBT,) Operating Assets EBT to GAAP-basis loss from continuing operations, and segment-basis MPC land sales revenue to GAAP-basis land sales revenue, please refer to the Supplemental Information contained in this earnings release.

During the first four months of 2011, Howard Hughes continued to build its senior management team. The Company hired Peter Riley as its General Counsel, John E. DeWolf as its Senior Vice President and head of the Maryland, New Jersey and Virginia Developments, and David Striph as its Senior Vice President and head of Hawaii. Prior to joining The Howard Hughes Corporation, these executives had years of success in their respective fields of expertise. Peter Riley is based in the Dallas, Texas headquarters, John DeWolf is based in Columbia, Marylandand David Striph is based in Honolulu, Hawaii.

David R. Weinreb, CEO of The Howard Hughes Corporation, stated, "We continue to be patient and selective in filling our senior management ranks, and are pleased to have Peter, John and David join Howard Hughes. As we move forward in developing our assets, the Company will benefit from their talent and experience.”

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. 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 OPERATIONS
 
      Three Months Ended March 31,
        2011       2010  
      (Consolidated)   (Combined)
      (In thousands)
Revenues:          
Master Planned Community land sales     $ 23,392     $ 3,215  
Builder price participation       521       744  
Minimum rents       16,719       17,031  
Tenant recoveries       4,524       4,819  
Condominium unit sales       3,764       -  
Other land sale revenues       1,248       1,111  
Other rental and property revenues       2,933       1,870  
Total revenues       53,101       28,790  
Expenses:          
Master Planned Community cost of sales       15,436       1,326  
Master Planned Community land sales operations       5,628       8,491  
Rental property real estate taxes       3,474       2,978  
Rental property maintenance costs       1,559       1,844  
Condominium unit cost of sales       2,980       -  
Other property operating costs       9,592       8,472  
Provision for doubtful accounts       11       101  
General and administrative       5,232       4,135  
Provisions for impairment       -       278  
Depreciation and amortization       3,199       4,450  
Total operating expenses       47,111       32,075  
           
Operating income (loss)       5,990       (3,285 )
           
Interest income       2,512       105  
Interest expense       -       (712 )
Warrant liability expense       (126,045 )     -  
Loss before income taxes, income from Real Estate          
Affiliates, reorganization items and noncontrolling interests       (117,543 )     (3,892 )
Provision for income taxes       (2,457 )     (1,486 )
Income from Real Estate Affiliates       5,513       1,492  
Reorganization items       -       (16,595 )
Loss from continuing operations       (114,487 )     (20,481 )
Allocation to noncontrolling interests       (28 )     (48 )
Net loss attributable to common stockholders     $ (114,515 )   $ (20,529 )
           
Basic and Diluted Loss Per Share:          
Continuing operations     $ (3.02 )   $ (0.54 )
Total basic and diluted loss per share     $ (3.02 )   $ (0.54 )
 
 
 
CONSOLIDATED BALANCE SHEETS
           
      March 31,   December 31,
        2011       2010  
Assets:     (In thousands)
Investment in real estate:          
Master Planned Community assets     $ 1,348,531     $ 1,350,648  
Land       180,976       180,976  
Buildings and equipment       342,797       343,006  
Less accumulated depreciation       (86,116 )     (83,390 )
Developments in progress       293,954       293,403  
Net property and equipment       2,080,142       2,084,643  
Investment in and loans to/from Real Estate Affiliates       151,093       149,543  
Net investment in real estate       2,231,235       2,234,186  
Cash and cash equivalents       280,481       284,682  
Accounts receivable, net       7,094       8,154  
Notes receivable       38,883       38,954  
Tax indemnity receivable, including interest       325,555       323,525  
Deferred expenses, net       6,076       6,619  
Prepaid expenses and other assets       137,223       126,587  
Total assets     $ 3,026,547     $ 3,022,707  
           
Liabilities:          
Mortgages, notes and loans payable     $ 314,924     $ 318,660  
Deferred tax liabilities       79,639       78,680  
Warrant liabilities       355,393       227,348  
Uncertain tax position liability       142,329       140,076  
Accounts payable and accrued expenses       69,640       78,836  
Total liabilities       961,925       843,600  
           
Commitments and Contingencies       -       -  
           
Equity:          
Common stock: $.01 par value; 100,000,000 shares authorized,          
37,924,506 shares issued as of March 31, 2011 and          
37,904,506 shares issued as of December 31, 2010       379       379  
Additional paid-in capital       2,708,165       2,708,036  
Accumulated deficit       (643,020 )     (528,505 )
Accumulated other comprehensive loss       (1,692 )     (1,627 )
Total stockholders' equity       2,063,832       2,178,283  
Noncontrolling interests in consolidated ventures       790       824  
Total equity       2,064,622       2,179,107  
Total liabilities and equity     $ 3,026,547     $ 3,022,707  
                   
                   
 

Supplemental Information

March 31, 2011

As our three segments, Master Planned Communities, Operating Assets and Strategic Developments, are managed separately, different operating measures are utilized to assess operating results and allocate resources. The one common operating measure used to assess operating results for our business segments is real estate property earnings before taxes (“EBT”) which represents the operating revenues of the properties less property operating expenses. EBT is defined as net income (loss) from continuing operations as adjusted for: (1) reorganization items; (2) income tax provision (benefit); (3) warrant liability expense; and (4) general and administrative costs. The net income from our Real Estate Affiliates, at our proportionate share, is similarly adjusted for items (1) through (4) immediately above. Management believes that EBT provides useful information about the operating performance of all our assets, projects and property. However, EBT should not be considered as an alternative to GAAP net income (loss) attributable to common stockholders or GAAP net income (loss) from continuing operations.

      Three Months Ended March 31,
        2011       2010  
EBT by segment and reconciliation of EBT to     (In thousands)
GAAP-basis loss from continuing operations          
           
Real estate property EBT:          
Operating Assets segment     $ 10,010     $ 1,981  
MPC segment       9,831       951  
Strategic Developments segment       (333 )     (1,034 )
Real Estate Affiliates       (5,774 )     (1,655 )
Consolidated properties       13,734       243  
General and administrative       (5,232 )     (4,135 )
Warrant liability expense       (126,045 )     -  
Benefit from (provision for) income taxes       (2,457 )     (1,486 )
Income from Real Estate Affiliates       5,513       1,492  
Reorganization costs       -       (16,595 )
Loss from continuing operations     $ (114,487 )   $ (20,481 )
 
 
 
MPC Sales Summary
 
          Land Sales     Acres Sold     Number of Lots/Units     Price per acre     Price per lot
          Three Months Ended March 31,
          2011   2010     2011   2010     2011   2010     2011   2010     2011   2010
          ($ in thousands)
Residential Land Sales                                                  
Columbia   Townhomes     $ 939     $ -       -   -     7   -     $ 2,864   $ -     $ 134   $ -
                                                       
Bridgeland   Single family - detached       3,721       2,870       13   11     63   52       286     264       59     55
                                                       
Summerlin   Single family - detached       14,076       -       35   -     196   -       408     -       72     -
                                                       
Woodlands   Single family - detached       17,251       19,348       54   61     217   264       320     309       79     71
    Subtotal       35,987       22,218       102   72     483   316                    
                                                       
Commercial Land Sales                                                  
Summerlin   Not-for-profit       3,616       -       16   -     -   -       225     -       -     -
                                                       
Woodlands   Office and other       1,800       -       3   -     -   -       566     -       -     -
    Retail       1,638       4,470       2   15     -   -       862     264       -     -
    Subtotal       7,054       4,470       21   15                              
Total acreage sales revenue       43,041       26,688                                          
Deferred revenue       (1,841 )     345                                          
Deferred revenue - Woodlands       -       (632 )                                        
Special Improvement District revenue       2,881       -                                          
Venture partner's share of The Woodlands                                                          
Partnerships acreage sales       (9,827 )     (11,314 )                                        
Total segment land sales revenue     $ 34,254     $ 15,087                                          
                                                       
Total segment land sales revenue     $ 34,254     $ 15,087                                          
Less: Real Estate Affiliates land sales revenue       (10,862 )     (11,872 )                                        
Total land sales revenue - GAAP basis     $ 23,392     $ 3,215                                          
                                                           
                                                           
 

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.

 

                        
                         
     

Net Operating Income (NOI)

            
     

Three Months Ended March 31,

     Increase     % Increase
        2011         2010       (Decrease)     (Decrease)
      (In thousands)
Operating Assets                        
Ward Centers     $ 5,587       $ 5,942       $ (355 )     (6.0 )%
110 N. Wacker       1,530         1,530         -       0.0  
South Street Seaport       567         891         (324 )     (36.4 )
Columbia Office Properties       721         718         3       0.4  
Rio West Mall       372         553         (181 )     (32.7 )
Landmark Mall       333         384         (51 )     (13.3 )
Riverwalk Marketplace       164         (19 )       183       963.2  
Cottonwood Square       82         121         (39 )     (32.2 )
Park West       114         126         (12 )     (9.5 )
Other properties       4,017   (*)     346         3,671       1,061.0  
Total Operating Assets NOI       13,487         10,592         2,895       27.3  
                         
Straight-line and market lease amortization rent       765         420         345       82.1  
Provision for impairment       -         (252 )       (252 )     (100.0 )
Depreciation and amortization       (3,063 )       (4,352 )       (1,289 )     (29.6 )
Interest, net       (1,179 )       (4,427 )       (3,248 )     (73.4 )
Operating Assets EBT     $ 10,010       $ 1,981       $ 8,029       405.3 %
                         
                         
(*) Includes $3.9 million distribution from Summerlin Hospital Medical Center.
 

 

 

Source: The Howard Hughes Corporation

Contact:

The Howard Hughes Corporation

Kay Weinmann, 214-741-7744

kay.weinmann@howardhughes.com