DALLAS-- The Howard Hughes Corporation (NYSE: HHC) today announced that it has entered into a definitive agreement to acquire from Morgan Stanley Real Estate Investing its 57.5% legal interest, which equates to a 47.5% economic interest based on the parties’ financial arrangement, in The Woodlands Master Planned Community located in Houston, Texas for $117.5 million. The purchase consideration consists of $20 million in cash payable at closing and a $97.5 million non-interest bearing promissory note due December 1, 2011. The acquisition has been approved by the Board of Directors of The Howard Hughes Corporation, is subject to customary closing conditions and is anticipated to close on July 1, 2011. The Howard Hughes Corporation, including its predecessors, has been an investor in The Woodlands since 2004 and its partner, Morgan Stanley Real Estate Investing, has been an investor since 1997. Upon completion of the purchase, The Woodlands will become a wholly owned subsidiary of The Howard Hughes Corporation.

The Woodlands is one of the most successful large-scale master planned communities (MPCs) in the U.S., comprising over 28,000 acres with over 97,000 residents and 1,700 employers. At March 31, 2011 The Woodlands had approximately 1,372 acres of unsold residential land, representing approximately 4,532 lots, and approximately 936 acres of unsold land for commercial use. The Woodlands also has full or partial ownership interests in commercial properties totaling approximately 434,328 square feet of office space, 203,282 square feet of retail and service space, 865 rental apartment units, and also owns and operates a 440 room conference center facility and a 36-hole country club. Please refer to the tables below for more information regarding The Woodlands residential and commercial land, and commercial property assets.

The Woodlands generated $36.3 million and $120.3 million of revenues for the three months ended March 31, 2011 and the year ended December 31, 2010, respectively. The first quarter 2011 revenues include $18.5 million from the sale of 217 residential lots, and $3.4 million from the sale of five acres of commercial lots. For the full year 2010, The Woodlands sold 789 residential lots for $70.1 million of revenues and 57 acres of commercial lots for $23.9 million of revenues. As of March 31, 2011, The Woodlands had approximately $573 million of total assets, $332 million of third-party debt and $57 million of cash. A complete description of The Woodlands’ historical operating results is included in The Howard Hughes Corporation 10-Q for the three months ended March 31, 2011 and 10-K for the year ended December 31, 2010.

David R. Weinreb, CEO of The Howard Hughes Corporation, stated, "This strategic acquisition provides Howard Hughes with a world-class master planned community developer and operator, a brand widely recognized throughout the U.S., and very attractive residential and commercial assets. By owning all of The Woodlands, we can unleash and integrate the management expertise and intellectual property of The Woodlands across our full MPC portfolio.”

Mr. Weinreb continued, “For almost four decades The Woodlands organization has thoughtfully planned and developed a community desirable to residents and business, and in the process created a strong brand known for quality and excellence. We expect to generate significant financial benefits by combining the Howard Hughes and The Woodlands MPC organizations.”

Grant Herlitz, President of The Howard Hughes Corporation, commented, “Few organizations have been able to successfully execute on all aspects of the complicated master planned community business. The Woodlands has not only created consistent demand at premium pricing for its residential land, but also has thoughtfully planned that development to generate strong demand for commercial properties from businesses seeking access to a desirable labor market. We believe the opportunity to develop commercial properties at The Woodlands will contribute materially to our future profitability.”

           
The Woodlands Debt Table          
($ in thousands)            
        Borrowing    
        Base   March 31, 2011
        Value   Balance

On-Balance Sheet Debt

          
             
Master Credit Facility:          
4 Waterway Square     $ 29,050    
20 Waterway Avenue     5,250    
Waterway Garage       3,185    
Club at Carlton Woods     6,920    
Commercial and residential        
land, and other assets     228,005    
Total Master Credit Facility       272,410   $ 270,000
             
Woodlands Resort & Conference Ctr. mortgage         36,100
9303 New Trails mortgage           13,142
25 Waterway mortgage           4,605
Various mortgages secured primarily by land         7,803
Total on-balance sheet debt       $ 331,650
Less: Unrestricted cash at March 31, 2011         57,343
Net on-balance sheet debt       $ 274,307
             

Off-Balance Sheet Debt

          
             
Millennium Waterway Apartments mortgage       $ 46,932
Forest View Apartments mortgage         3,068
Timbermill Apartments mortgage         3,026
Woodlands Sarofim #1 Ltd.:          
1440/1442 Lake Front Circle mortgage         3,360
9186 Six Pines mortgage           3,920
Total off-balance sheet debt       $ 60,306
           
 
     
The Woodlands Commercial Properties Table    
($ in thousands)    
                                             
    Economic                       Net Operating Income (NOI) (1)            
Property Name/   Ownership       Property   Year   %   Sqr. Feet/       Projected       March 31, 2011    
Location   %       Type   Completed   Leased   Keys   2010   Annual       Debt    
    (2)                           (3)            

Wholly Owned

                                            
4 Waterway Square   100 %       Office   2010   98.4 %   218,551   $ 15     $ 5,500         $ 29,050   (4)
9303 New Trails   100 %       Office   2008   72.0 %   97,705     1,094       1,216           13,142    
2201 Lake Woodlands Drive   100 %       Office   1994   100.0 %   24,024     322       332           0    
20 Waterway Avenue   100 %       Retail   2009   100.0 %   26,530     258       744           5,250   (4)
25 Waterway Avenue   100 %       Retail   2007   94.7 %   23,442     416       718           4,605    
Woodlands Resort & Conf. Center   100 %       Hotel   2002   55.6 %   440 keys     4,379       7,962           36,100    
Ground Leases   100 %       Ground Leases   N/A   N/A     N/A     337       344           0    
100%-owned commercial properties total                           $ 6,821     $ 16,816         $ 88,147    
                                             

Partially Owned

                                            
Millennium Waterway Apartments   83.55 %       Apartments   2010   80.9 %   393 keys     ($668 )   $ 4,600         $ 46,932    
Forest View Apartments   50 %   (5)   Apartments   1993   94.5 %   256 keys     716       716           3,068    
Timbermill Apartments   50 %   (5)   Apartments   1995   95.4 %   216 keys     547       568           3,026    
1400 Woodloch Forest   25 %   (6)   Office   1981   71.9 %   94,048     1,078       788           0    
Woodlands Sarofim #1 Ltd.:                                            
1440/1442 Lake Front Circle   20 %       Industrial   1990   91.9 %   75,255     750       748           3,360    
9186 Six Pines   20 %       Industrial   2002   100.0 %   56,795     823       832           3,922    
Stewart Title   50 %       Title Company   N/A   N/A     N/A     1,207       120           0    
Partially-owned commercial properties total                           $ 4,453     $ 8,372         $ 60,308    
                                             

Unstabilized Properties

                                            
Waterway Garage Retail   100 %       Retail   2011   19.0 %   21,260   $ 0     $ 0    

(7)

   $ 0    
Waterway Garage   100 %       Garage   2009   N/A     1,988 spaces     (908 )     (780 )  

(8)

     3,185   (4)
Woodloch Forest Garage   100 %       Garage   2008   N/A     1,000 spaces     (132 )     (140 )         0    
The Club at Carlton Woods   100 %       Country Club   2001   N/A     547 members     (5,425 )     (4,272 )   (9)     6,920   (4)
Unstabilized commercial properties total                             ($6,465 )     ($5,192 )       $ 10,105    
                                             
Notes:                                            
(1) NOI includes revenue and expenses according to U.S. GAAP, excluding straight-line rent, market lease amortization, depreciation and amortization.
(2) Economic and legal ownership interests are the same unless otherwise indicated.
(3) Projected Annual NOI represents an estimate of forward 12-month property NOI based on in-place leases as of June 28, 2011. Millenium Waterway Apartments projected to reach $4.6 million stabilized NOI in 2011. Conference Center, parking garages and Carlton Woods based on 2011 estimate.
(4) Represents allocated debt under bank facility based on borrowing base values as of March 31, 2011.
(5) Actual ownership interest is 1%, but The Woodlands receives 50% of the cash flow and a 5% management fee.
(6) The Howard Hughes Corporation owns the remaining 75% interest in this asset.
(7) Expected to be completed in next 60 days. A single tenant has signed a triple-net lease for 19% of space and the remaining 81% is being marketed for lease.
(8) $4.6 million value based on an appraisal dated December 2, 2009. Garage is underutilized and has excess capacity for future commercial development.
(9) 36-hole golf course and country club operated as an amenity for residents. The club opened in 2001, added 20 net new members in 2010, and is expected to reach break even upon achieving approximately 800 members.
 
 
 
The Woodlands Residential and Commercial Land Sales Table
First Quarters 2010 and 2011
($ in thousands)
        Three Months Ended March 31,
        Land Sales   Acres Sold   Number of Lots/Units   Price per Acre   Price per Lot
        2011   2010   2011   2010   2011   2010   2011   2010   2011   2010
        ($ in thousands)
                                             

Residential Land Sales

                                        
    Single family - detached   $ 17,251   $ 19,348     54   61   217   264   $ 320   $ 320   $ 79   $ 73
    Single family - attached     -     -         -   -   -     -     -     -     -
    Home price participation     1,284     772     -   -   -   -     -     -     -     -
    Institutional land sales     -     -     -   -   -   -     -     -     -     -
    Subtotal     18,535     20,120     54   61   217   264                
   

 

                                        

Commercial Land Sales

                                        
    Office and other     1,800     -     3   -             566     -        
    Retail     1,638     4,470     2   15             862     264        
    Subtotal     3,438     4,470     5   15                        
                                             
Total acreage sales revenue     21,973     24,590                                  
Deferred revenue     -     (632 )                                
                                             
    Total   $ 21,973   $ 23,958                                  
                                                   
 
 
The Woodlands Residential and Commercial Land Sales Table
Years Ended 2008 through 2010
($ in thousands)
      Year Ended December 31,
      Land Sales   Acres Sold   Number of Lots/Units   Price per Acre   Price per Lot
      2010   2009   2008   2010   2009   2008   2010   2009   2008   2010   2009   2008   2010   2009   2008
                                                               
                                                               

Residential Land Sales

                                                            
Single family - detached   $ 65,230     $ 48,060   $ 79,006   181   135   210   737   557   680   $ 360   $ 356   $ 376   $ 89   $ 86   $ 116
Single family - attached     988       -     6,966   4   0   12   52   0   187     279     -     604     19     -     37
Home price participation     3,895       3,289     6,191   0   0   0   0   0   0     -     -     -     -     -     -
Institutional land sales     -       2,227     628   0   0   0   0   0   0     -     50     61     -     -     -
Subtotal       70,113       53,576     92,791   185   135   222   789   557   867                        
                                                               

Commercial Land Sales

                                                            
Office and other     18,651       11,619     22,185   40   28   24                 466     412     926            
Retail       5,238       674     4,889   17   3   7                 306     261     740            
Subtotal       23,889       12,293     27,074   57   31   31                 418     399     885            
                                                               
Total acreage sales revenue     94,002       65,869     119,865                                                
Deferred revenue     (239 )     143     261                                                
                                                               
Total     $ 93,763     $ 66,012   $ 120,126                                                
                                                                       
 

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 New York to Hawaii.

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. In addition to The Woodlands, Howard Hughes’ MPC portfolio includes Bridgeland in Houston, Maryland in Columbia, Md. and Summerlin in Las Vegas.

Bridgeland, approximately 30 miles southwest of The Woodlands, encompasses more than 11,400 acres, with a plan including a carefully designed network of trails totaling over 60 miles that will provide pedestrian connectivity to distinct residential villages. The community will feature over 3000 acres of unique waterways, lakes, trails, parks and open space, as well as an expansive town center with room for employment, retail, educational and entertainment facilities.

Maryland Communities of Columbia, Emerson and Fairwood combined account for more than 16,000 acres. Columbia is embarking on a new phase in its growth with the launch of a 30-year master plan development of downtown Columbia. Columbia Town Center has an approved master plan to create up to 13 million square feet of mixed-use development. The plan includes up to 5,500 residential units, approximately one million square feet of retail, five million square feet of commercial office space and 640 hotel rooms.

Summerlin spans the western rim of the Las Vegas Valley and is located about 7.5 miles from the Strip; the 22,500-acre community offers the best of suburban living with all the amenities and accessibility to world-class dining, shopping and entertainment. Home to nearly 100,000 residents Summerlin is comprised of hundreds of neighborhoods and dozens of villages—all connected by a 150-mile-long trail system and nearly 150 parks. The Shops at Summerlin Center is a retail project with the potential to be developed with retail, office, hotel and multi-family residential.

Operating Assets

The Howard Hughes Corporation’s operating assets are primarily retail properties including Ward Centers (Honolulu, Hawaii), South Street Seaport (Manhattan, N.Y.), Landmark Mall (Alexandria, Va.), Park West (Peoria, Ariz.), Rio West Mall (Gallup, N.M.), Riverwalk Marketplace (New Orleans, La.) and Cottonwood Square (Holladay, Utah).

Strategic Development Opportunities

The Howard Hughes Corporation owns an unparalleled pipeline of near, mid and long-term real estate with over 21,000,000 square feet of future development. These range from Summerlin Centre in Las Vegas, Cottonwood Mall in Salt Lake City and Ala Moana Tower in Honolulu.

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

This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are accompanied by words as such “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or words or phrases of similar import. Similarly, statements herein that describe the transaction involving The Woodlands, including its financial impact, and other statements of management’s beliefs, intentions or goals also 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 include, but are not limited to, The Howard Hughes Corporation’s ability to successfully integrate and apply the management expertise and intellectual property of The Woodlands and the other risks and important factors contained and identified in The Howard Hughes Corporation’s filings with the Securities and Exchange Commission. Such filings include The Howard Hughes Corporation’s Annual Report on Form 10-K for the year ended December 31, 2010 filed on April 8, 2011 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 filed on May 10, 2011. The Howard Hughes Corporation cautions you not to place undue reliance on the forward-looking statement contained in this release and 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.

 

 

Source: The Howard Hughes Corporation

Contact:

The Howard Hughes Corporation

Kay Weinmann, 214-741-7744

kay.weinmann@howardhughes.com

www.howardhughes.com