Press Releases

DALLAS-- The Howard Hughes Corporation (NYSE: HHC):

Second Quarter Earnings Highlights

• Net operating income (“NOI”) for our income-producing Operating Assets increased 56.4% to $28.5 million for the second quarter 2015, compared to $18.2 million in the second quarter 2014. The increase is primarily related to the opening of new properties in 2014, the most significant of which were Downtown Summerlin in October 2014 and The Outlet Collection at Riverwalk in May 2014, as well as the acquisition of 10-60 Columbia Corporate Center office properties in December 2014.
• Second quarter 2015 adjusted net income decreased (56.0%), or $42.0 million, to $33.0 million, compared to second quarter 2014 adjusted net income of $75.0 million. The decrease is primarily due to large commercial land sales in the second quarter 2014 which were not repeated in the second quarter 2015. We typically do not sell commercial land in our MPCs unless there are compelling strategic reasons to do so. Prior year second quarter results include several large commercial land sales, including a 59-acre land sale to the Houston Methodist Hospital System, bringing a major regional healthcare provider to The Woodlands. The impact was partially offset by the recognition of condominium income at Ward Village and income from recently completed developments in the second quarter of 2015. Adjusted net income excludes the following non-cash items: depreciation and amortization; warrant liability gains and losses; and gains and losses relating to the tax indemnity receivable for periods prior to its settlement in December 2014.
• Master Planned Community (“MPC”) land sales decreased (69.1%) to $46.8 million for the second quarter 2015 compared to $151.2 million for the second quarter 2014 primarily due to $88.0 million of commercial land sales at The Woodlands in the second quarter 2014, as noted above, and a slowdown in single-family lot sales velocity at our Houston, Texas MPCs due to the decrease in oil prices in 2015. Excluding the sale to the Houston Methodist Hospital System for $70.6 million, land sales decreased by $33.8 million, or (41.9%), during the same periods.

The Howard Hughes Corporation Property and Financing Highlights

• Completed construction and placed into service One Lake’s Edge, an eight-story, Class A, multi-family project within Hughes Landing in The Woodlands, comprised of 390 multi-family units, 22,289 square feet of retail and a 750-space parking garage.
• As of July 24, 2015, 88.5% of the units at our Waiea and 81.7% of the units at our Anaha condominium developments at Ward Village were contracted for sale. We have received deposits for substantially all of the contracted units equal to 20% of the sales price and which are now beyond the 30-day rescission period.
• During July 2015, began pre-sales for the first of two Gateway Towers designed by Richard Meier & Partners, which consists of 125 luxury units, and Ae‘o, a 466-unit condominium tower designed by Bohlin Cywinski Jackson located above a to-be-built Whole Foods Market flagship store. Both residential condominium towers are located at Ward Village.

The Howard Hughes Corporation Property and Financing Highlights (continued)

• During August 2015, began construction on two self-storage developments in The Woodlands. The facilities represent approximately 161,000 square feet of storage space in 1,320 units, are expected to cost approximately $17.0 million in the aggregate and be completed by the second quarter 2016.
• Closed on a $14.0 million non-recourse construction loan for Lakeland Village, an 83,400 square foot CVS-anchored mixed-use development located in Bridgeland. The loan bears interest at LIBOR plus 2.35% and has an initial maturity date of May 2018 with two, one-year extension options.
• Extended the $30.0 million non-recourse Bridgeland credit facility for one year. The facility matures on July 15, 2016.

_____________________________________

* Non-recourse debt means that the debt is non-recourse to The Howard Hughes Corporation, but is recourse to the asset securing such debt and/or the subsidiary entity owning such asset.

The Howard Hughes Corporation (NYSE: HHC) or (the “Company”) today announced its results for the second quarter of 2015.

For the three months ended June 30, 2015, net income attributable to common stockholders was $50.6 million, or $0.18 per diluted common share, compared with net loss attributable to common stockholders of $(14.8) million, or $(0.37) per diluted common share, for the three months ended June 30, 2014. Second quarter 2015 net income attributable to common stockholders includes a non-cash $42.6 million warrant gain and $(25.1) million of non-cash depreciation and amortization expense. Excluding these non-cash items, net income attributable to common stockholders, was $33.0 million, or $0.76 per diluted common share. Excluding the $(67.4) million non-cash warrant loss, $(10.9) million non-cash reduction in tax indemnity receivable and $(11.5) million of non-cash depreciation and amortization expense, net income attributable to common stockholders was $75.0 million, or $1.74 per diluted common share for the second quarter 2014.

As we complete and place our developments into service, non-cash depreciation and amortization expense associated with these cash-flowing commercial real estate properties is becoming a more material and growing component of our net income. Adjusted net income is a non-GAAP measure that excludes depreciation and amortization and non-cash warrant liability and tax indemnity receivable gains and losses. The tax indemnity receivable was settled in the fourth quarter 2014 and is not a component of our net income beginning in 2015. The presentation of net income excluding depreciation and amortization is consistent with other companies in the property ownership business, who also typically report an earnings measure that excludes non-cash depreciation and amortization. For a reconciliation of adjusted net income to net income (loss) attributable to common stockholders, please refer to the Supplemental Information contained in this earnings release.

David R. Weinreb, Chief Executive Officer of The Howard Hughes Corporation, stated, “I am pleased with the momentum we are achieving at our larger developments. The launch of pre-sales in July of two new condominium towers totaling 591 units, and the 413 units under contract at the Anaha and Waiea towers under construction at Ward Village are indicative of the strong demand we are seeing for high quality residential housing in our thoughtfully designed urban master planned community in Hawaii. Summerlin in Las Vegas also continues to deliver strong residential sales volume and pricing as this MPC benefits from the recently opened Downtown Summerlin mixed-use project and resurgence of the Las Vegas economy. At the South Street Seaport, we look forward to making some exciting tenant announcements later this year regarding the under construction Pier 17 project and historic area renovation. Homebuilders are continuing to be cautious on the Houston residential market and remain conservative on lot takedown commitments, yet pricing remains high compared to historical levels.”

Business Segment Operating Results

For comparative purposes, MPC land sales and Operating Assets NOI are presented in our Supplemental Information. For a reconciliation of Operating Assets NOI to Operating Assets real estate property earnings before taxes (“REP EBT”), Operating Assets REP EBT to GAAP-basis income (loss), and segment-basis MPC land sales revenue to GAAP-basis land sales revenue, please refer to the Supplemental Information contained in this earnings release. Non-recourse debt means that the debt is non-recourse to The Howard Hughes Corporation, but is recourse to the asset securing such debt and/or the subsidiary entity owning such asset. All construction cost estimates presented herein are exclusive of land costs.

Operating Assets Highlights

NOI from our combined retail, office, multi-family and resort and conference center properties increased $10.3 million, or 56.4%, to $28.5 million for the second quarter 2015, compared to NOI of $18.2 million for the second quarter 2014. These properties are referred to as our “income-producing Operating Assets.” These amounts include our share of NOI from our non-consolidated equity-method ventures and exclude NOI for all periods from properties that are substantially closed for redevelopment and/or were sold during the period.

The $10.3 million increase in NOI in the second quarter 2015 compared to the second quarter 2014 is primarily attributable to the acquisition of the 10-60 Columbia Corporate Center office properties in December 2014, which contributed $2.7 million to the increase, and completion of Downtown Summerlin and The Outlet Collection at Riverwalk, both of which opened in 2014 and contributed a combined $5.6 million to the increase. Two Hughes Landing and 3831 Technology Forest Drive contributed a combined $1.2 million to the increase as they continue to stabilize, and The Woodlands Resort & Conference Center, which completed its renovation in the fourth quarter 2014, contributed $0.6 million to the increase. The remaining $0.2 million of the increase is due to smaller changes in NOI at our other operating assets.

South Street Seaport remains substantially closed while redevelopment of Pier 17 and the renovation of the historic area continue.

During the second quarter 2015, we completed construction and placed into service One Lake’s Edge, an eight-story, Class A, multi-family project within Hughes Landing. The building is comprised of 390 units, 22,289 square feet of retail and a 750-space parking garage. As of July 24, 2015, 39.0% of the units have been leased. We expect to reach stabilized annual NOI of $7.6 million by the end of the second quarter 2017.

Master Planned Communities Highlights

Land sales in our MPC segment, excluding deferred land sales and other revenue, decreased by $(104.4) million, or (69.1%), to $46.8 million for the three months ended June 30, 2014, as compared to $151.2 million for the same period in 2014. Excluding the commercial land sale at The Woodlands to the Houston Methodist Hospital System for $70.6 million in the second quarter 2014, described below, land sales decreased by $(33.8) million, or (41.9%), during the same periods.

Summerlin land sales decreased by $(1.7) million, or (4.5%), to $36.2 million on slightly lower acreage sold. For the second quarter 2015, Summerlin sold a mix of superpad sites and custom lots. Demand remains high for new home developments due to a shortage of resale homes and strong local economic conditions. Price per acre for superpads, Summerlin’s primary residential land product, increased by $44,000, or 8.5%, to $563,000 for the second quarter 2015 compared to the second quarter 2014. The increase in land pricing at Summerlin is due to the scarcity of attractive developable residential land in the Las Vegas market.

Bridgeland land sales decreased to $1.5 million for the second quarter 2015 compared to $6.7 million for the second quarter 2014. Homebuilders are taking a more cautious approach to acquiring finished lots at Bridgeland and The Woodlands due to uncertainty regarding the impact on new home demand resulting from lower oil prices. Consequently, we are receiving bids to acquire lots via future quarterly takedown schedules rather than in large bulk one-time purchases as in the prior year. This approach will likely result in lower lot purchases over the next few quarters than in 2014 when homebuilders were more comfortable making larger commitments. Also, record rainfall in the Houston area in the second quarter 2015 caused construction delays, which negatively impacted new home development and sales, especially at Bridgeland due to the close proximity of large wetlands areas to residential developments within that MPC. Homebuilders are currently developing single-family homes for sale on the significant volume of lots purchased during the second half of 2014, and we expect demand for new lots at Bridgeland to be modest until a portion of these homes are completed and sold later in 2015.

Land sales revenues at The Woodlands decreased by $(97.5) million to $9.1 million in the second quarter 2015 compared to the second quarter 2014 primarily due to fewer residential lot sales and $88.0 million of commercial land sales in the second quarter 2014, including a 59-acre sale to the Houston Methodist Hospital System for $70.6 million, compared to $2.1 million in the second quarter 2015. The range of residential lot types/sizes available for sale is decreasing as The Woodlands’ inventory of residential land for sale diminishes. This factor, combined with a more uncertain economic climate in the greater Houston area due to lower oil prices and a more conservative lot acquisition strategy by homebuilders, is contributing to lower sales velocity.

Strategic Developments Highlights

Pre-sales for the first two market-rate residential condominium towers at Ward Village, Waiea and Anaha, launched in the beginning of 2014, and construction on both towers began later in the year. From April 30, 2015, the last reported sales date, through July 24, 2015, we had strong sales at these towers, entering into 15 sales contracts for Anaha and Waiea, combined, representing 17.9% of the then available units for sale. Sales contracts require a minimum deposit from the buyer equal to 20% of the contracted price and are subject to a 30-day rescission period, after which time the deposit becomes non-refundable. Substantially all of the contracted units at both towers are past their rescission periods.

Waiea will have 174 total units, of which 88.5% have been contracted as of July 24, 2015. Total development costs are expected to be approximately $403 million (excluding land value). We expect to complete the project by the end of 2016. As of June 30, 2015, we have incurred $116.5 million of development costs.

Anaha, will have 317 total units, of which 81.7% have been contracted as of July 24, 2015. Total development costs are expected to be approximately $401 million (excluding land value). We expect to complete the project by mid-2017. As of June 30, 2015, we have incurred $57.7 million of development costs.

In connection with Phase Two of the Ward Village master plan, during July 2015 we launched pre-sales of two new condominium towers: Ae‘o, designed by Bohlin Cywinski Jackson, and one of two Gateway Towers designed by Richard Meier & Partners. As of July 24, 2015, none of the contracted sales have passed their 30-day rescission period.

Ae‘o, the name for the Hawaiian stilt bird, will be a 466 unit condominium tower that will sit on top of a flagship 50,000 square foot Whole Foods Market. We expect to begin construction of the Whole Foods Market space in early 2016 with completion scheduled in 2018. The average condominium unit size at Ae‘o will be approximately 836 square feet. We are finalizing project budgets for the Whole Foods Market and condominium tower. Construction of the condominium units will be subject to obtaining an acceptable level of pre-sales and financing for the project. We have incurred $11.7 million of pre-development costs on this project as of June 30, 2015.

The first of two Gateway Towers will consist of 125 luxury residential condominium units averaging approximately 1,874 square feet per unit and approximately 8,500 square feet of retail. Gateway Towers will include a one-acre park that will serve as the start of a four-acre Village Green that will open up a pedestrian connection from the heart of Ward Village to the center of Kewalo Harbor. We are finalizing the project budget. Construction of the property will be subject to obtaining an acceptable level of pre-sales and financing for the project. We have incurred $24.0 million of pre-development costs as of June 30, 2015.

We began construction of two self-storage facilities in Alden Bridge, a neighborhood within The Woodlands, in the third quarter 2015. One facility located on 4.0 acres will be an approximate 82,000 square foot building and consist of 670 units with an estimated total cost of $8.4 million. The other facility located on 3.1 acres will be an approximate 79,000 square foot building and consist of 650 units with an estimated total cost of $8.4 million. We expect to complete both projects during the second quarter 2016, and are currently seeking financing for these projects.

In May 2015, we closed on a $14.0 million non-recourse financing for Lakeland Village Center. The loan bears interest at LIBOR plus 2.35% and has an initial maturity of May 2018 with two, one-year extension options. During the second quarter 2015, we also extended the final maturity date of the $30.0 million Bridgeland credit facility to July 15, 2016.

For a more complete description of all of our Strategic Developments please refer to “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Strategic Developments” in our Quarterly Report on Form 10-Q for the three months ended June 30, 2015.

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 16 states from New York to Hawai‘i. The Howard Hughes Corporation is traded on the New York Stock Exchange as HHC and is headquartered in Dallas, TX. For additional information about HHC, visit www.howardhughes.com.

Safe Harbor Statement

Statements made in this press release that are not historical facts, including statements accompanied by words such as “will,” “believe,” “expect,” “enables,” “realize,” “plan,” “intend,” “assume,” “transform” and other words of similar expression, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 Quarterly and Annual Reports. 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, except as required by law.

THE HOWARD HUGHES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS   UNAUDITED
		Three Months Ended June 30,						Six Months Ended June 30,
		2015			2014			2015			2014
		(In thousands, except per share amounts)
Revenues:
Master Planned Community land sales		$	45,433		$	153,164		$	93,514		$	200,835
Builder price participation			7,907			3,843			13,605			7,940
Minimum rents			36,989			22,189			72,183			42,549
Tenant recoveries			10,701			6,893			20,368			12,908
Condominium rights and unit sales			86,513			4,358			121,370			7,484
Resort and conference center revenues			11,481			9,622			23,484			19,048
Other land revenues			3,145			2,698			6,438			5,210
Other rental and property revenues			6,994			6,864			13,291			12,310
Total revenues			209,163			209,631			364,253			308,284
Expenses:
Master Planned Community cost of sales			24,236			42,719			48,132			65,797
Master Planned Community operations			11,963			11,389			21,946			20,650
Other property operating costs			19,634			16,600			37,779			30,405
Rental property real estate taxes			6,568			4,241			12,768			7,981
Rental property maintenance costs			2,900			2,174			5,644			4,089
Condominium rights and unit cost of sales			56,765			2,191			79,174			3,762
Resort and conference center operations			8,893			6,412			17,971			13,923
Provision for doubtful accounts			1,266			31			2,075			174
Demolition costs			1,496			3,435			1,613			5,951
Development-related marketing costs			5,594			5,299			11,837			9,522
General and administrative			19,606			17,497			38,569			34,379
Other income, net			(399)			(5,611)			(1,863)			(16,059)
Depreciation and amortization			25,069			11,473			46,579			21,982
Total expenses			183,591			117,850			322,224			202,556
Operating income			25,572			91,781			42,029			105,728
Interest income			271			18,625			407			20,813
Interest expense			(14,685)			(8,897)			(27,931)			(16,218)
Warrant liability gain (loss)			42,620			(67,370)			(66,190)			(163,810)
Reduction in tax indemnity receivable			—			(10,927)			—			(10,927)
Equity in earnings from Real Estate and Other Affiliates			1,081			6,587			2,869			12,655
Income (loss) before taxes			54,859			29,799			(48,816)			(51,759)
Provision for income taxes			4,274			44,532			6,558			49,305
Net income (loss)			50,585			(14,733)			(55,374)			(101,064)
Net income (loss) attributable to noncontrolling interests			(12)			(27)			(12)			(12)
Net income (loss) attributable to common stockholders		$	50,573		$	(14,760)		$	(55,386)		$	(101,076)
Basic income (loss) per share:		$	1.28		$	(0.37)		$	(1.40)		$	(2.56)
Diluted income (loss) per share:		$	0.18		$	(0.37)		$	(1.40)		$	(2.56)

THE HOWARD HUGHES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS   UNAUDITED
		June 30,			December 31,
		2015			2014
		(In thousands, except share amounts)
Assets:
Investment in real estate:
Master Planned Community assets		$	1,648,729		$	1,641,063
Land			319,194			317,211
Buildings and equipment			1,429,386			1,243,979
Less: accumulated depreciation			(192,886)			(157,182)
Developments			1,119,774			914,303
Net property and equipment			4,324,197			3,959,374
Investment in Real Estate and Other Affiliates			55,959			53,686
Net investment in real estate			4,380,156			4,013,060
Cash and cash equivalents			488,629			560,451
Accounts receivable, net			36,122			28,190
Municipal Utility District receivables, net			124,828			104,394
Notes receivable, net			25,138			28,630
Deferred expenses, net			72,705			75,070
Prepaid expenses and other assets, net			278,251			310,136
Total assets		$	5,405,829		$	5,119,931
Liabilities:
Mortgages, notes and loans payable		$	2,286,174		$	1,993,470
Deferred tax liabilities			67,610			62,205
Warrant liabilities			432,270			366,080
Uncertain tax position liability			4,765			4,653
Accounts payable and accrued expenses			437,998			466,017
Total liabilities			3,228,817			2,892,425
Equity:
Preferred stock: $.01 par value; 50,000,000 shares authorized, none issued			—			—
Common stock: $.01 par value; 150,000,000 shares authorized, 39,715,005 shares issued and outstanding as of June 30, 2015 and 39,638,094 shares issued and outstanding as of December 31, 2014			398			396
Additional paid-in capital			2,842,266			2,838,013
Accumulated deficit			(662,320)			(606,934)
Accumulated other comprehensive loss			(7,116)			(7,712)
Total stockholders' equity			2,173,228			2,223,763
Noncontrolling interests			3,784			3,743
Total equity			2,177,012			2,227,506
Total liabilities and equity		$	5,405,829		$	5,119,931

Supplemental Information

June 30, 2015

As 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 real estate property earnings before taxes (“REP EBT”), which represents the operating revenues of the properties less property operating expenses. REP EBT, as it relates to our business, is defined as net income (loss) excluding general and administrative expenses, corporate interest income and depreciation expense, provision for income taxes, warrant liability gain (loss), increase (reduction) in the tax indemnity receivable and corporate other income. We present REP EBT because we use this measure, among others, internally to assess the core operating performance of our assets. However, REP EBT should not be considered as an alternative to GAAP net income (loss).

Reconciliation of REP EBT to GAAP		Three Months Ended June 30,						Six Months Ended June 30,
income (loss) before taxes		2015			2014			2015			2014
		(In thousands)						(In thousands)
REP EBT		$	46,171		$	116,378		$	83,985		$	152,022
General and administrative			(19,606)			(17,497)			(38,569)			(34,379)
Corporate interest income/(expense), net			(13,235)			4,829			(26,447)			(6,151)
Warrant liability gain (loss)			42,620			(67,370)			(66,190)			(163,810)
Reduction in tax indemnity receivable			—			(10,927)			—			(10,927)
Corporate other income, net			396			5,611			1,529			13,686
Corporate depreciation and amortization			(1,487)			(1,225)			(3,124)			(2,200)
Income (loss) before taxes		$	54,859		$	29,799		$	(48,816)		$	(51,759)

Reconciliation of Adjusted Net Income to Net loss			Three Months Ended June 30,
attributable to common stockholders		2015			2014
		(In thousands)
Adjusted Net Income		$	33,022		$	75,010
Depreciation and amortization			(25,069)			(11,473)
Warrant liability loss			42,620			(67,370)
Reduction in tax indemnity receivable			—			(10,927)
Net income (loss) attributable to common stockholders		$	50,573		$	(14,760)

MPC Land Sales Summary Three Months Ended June 30, 2015
		MPC Sales Summary
		Land Sales								Acres Sold					Number of Lots/Units					Price per Acre							Price per Lot/Units
		Three Months Ended June 30,
($ in thousands)		2015				2014				2015			2014		2015			2014		2015				2014			2015				2014
Bridgeland
Residential
Single family - detached		$	1,495			$	6,705			3.7			15.6		19			60		$	404			$	430		$	79			$	112
Total			1,495				6,705			3.7			15.6		19			60			404				430			79				112
Changes in dollars, acres and lots			(5,210	)						(11.9	)				(41	)					(26	)						(33	)
% Change			NM							NM					NM						-6.0	%						-29.5	%
Maryland Communities
No land sales
Summerlin
Residential
Superpad sites			29,256				27,285			52.0			52.6		155			285			563				519			189				96
Single family - detached			—				6,370			—			6.1		—			35			—				1,044			—				182
Custom lots			3,775				4,200			2.5			3.7		6			7			1,510				1,135			629				600
Commercial
Other			3,136				—			3.6			—		—			—			871				—			—				—
Total			36,167				37,855			58.1			62.4		161			327			622				607			205				116
Changes in dollars, acres and lots			(1,688	)						(4.3	)				(166	)					15							89
% Change			-4.5	%						-6.9	%				-50.8	%					2.5	%						76.7	%
The Woodlands
Residential
Single family - detached			7,052				16,266			12.2			23.8		43			100			578				683			164				163
Single family - attached			—				2,388			—			3.3		—			40			—				724			—				60
Commercial
Not for profit			—				—			—			—		—			—			—				—			—				—
Medical			—				70,550			—			58.9		—			—			—				1,198			—				—
Retail			733				17,401			5.0			30.3		—			—			147				574			—				—
Other			1,321				—			0.9			—		—			—			1,468				—			—				—
Total			9,106				106,605			18.1			116.3		43			140			503				917			164				133
Changes in dollars, acres and lots			(97,499	)						(98.2	)				(97	)					(414	)						31
% Change			-91.5	%						-84.4	%				-69.3	%					-45.1	%						23.3	%
Total acreage sales revenue			46,768				151,165			79.9			194.3		223			527
Deferred revenue			(2,500	)			(2,267	)
Special Improvement District revenue *			1,165				4,266
Total segment land sale revenue - GAAP basis		$	45,433			$	153,164
* Applicable exclusively to Summerlin. NM – Not Meaningful

MPC Land Sales Summary Six Months Ended June 30, 2015
			MPC Sales Summary
		Land Sales								Acres Sold					Number of Lots/Units					Price per Acre							Price per Lot/Units
		Six Months Ended June 30,
($ in thousands)		2015				2014				2015			2014		2015			2014		2015				2014			2015				2014
Bridgeland
Residential
Single family - detached		$	6,073			$	6,841			15.5			16.1		60			63		$	392			$	425		$	101			$	109
Total			6,073				6,841			15.5			16.1		60			63			392				425			101				109
Changes in dollars, acres and lots			(768	)						(0.6	)				(3.0	)					(33.0	)						(8	)
% Change			-11.2	%						-3.7	%				-4.8	%					-7.8	%						-7.3	%
Maryland Communities
No land sales
Summerlin
Residential
Superpad sites			46,030				43,566			81.2			83.9		233			406			567				519			198				107
Custom lots			6,320				9,236			4.5			7.5		11			15			1,404				1,231			575				616
Single family - detached			13,650				11,170			14.9			13.0		75			60			916				859			182				186
Commercial
Other			3,136				2,250			3.6			10.0		—			—			871				225			—				—
Total			69,136				66,222			104.2			114.4		319			481			663				579			207				133
Changes in dollars, acres and lots			2,914							(10.2	)				(162.0	)					84.0							74
% Change			4.4	%						-8.9	%				-33.7	%					14.5	%						55.6	%
The Woodlands
Residential
Single family - detached			13,859				33,537			22.0			47.7		80			183			630				703			173				183
Single family - attached			408				3,326			0.8			4.6		9			54			510				723			45				62
Commercial
Not for profit			—				—			5.0			—		—			—			—							—				—
Medical			—				70,550			—			58.9		—			—			—				1,198			—				—
Retail			733				17,401			—			30.3		—			—			147				574			—				—
Other			1,321				—			0.9			—		—			—			1,468				—			—				—
Total			16,321				124,814			28.7			141.5		89			237			569				882			160				156
Changes in dollars, acres and lots			(108,493	)						(112.8	)				(148	)					(313	)						4
% Change			-86.9	%						-79.7	%				-62.4	%					-35.5	%						2.6	%
Total acreage sales revenue			91,530				197,877			148.4			272.0		468			781
Deferred revenue			(2,107	)			(3,925	)
Special Improvement District revenue *			4,091				6,883
Total segment land sale revenue - GAAP basis		$	93,514			$	200,835
* Applicable exclusively to Summerlin.

Operating Assets Net Operating Income

The Company believes that 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 occupancy rates, rental rates, and operating costs. We define NOI as revenues (rental income, tenant recoveries and other income) less expenses (real estate taxes, repairs and maintenance, marketing and other property expenses). NOI also excludes straight line rents and tenant incentives amortization, net interest expense, ground rent amortization, demolition costs, amortization, depreciation, development-related marketing costs and 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 such as lease structure, lease rates and tenant base, which vary by property, have on our operating results, gross margins and investment returns.

Although we believe that NOI provides useful information to the investors about the performance of our Operating Assets due to the exclusions noted above, NOI should only be used as an alternative measure of the financial performance of such assets and not as an alternative to GAAP net income (loss).

Operating Assets NOI and REP EBT
		Three Months Ended June 30,												Six Months Ended June 30,
		2015				2014				Change				2015				2014				Change
		(In thousands)												(In thousands)
Retail
Columbia Regional (a)		$	204			$	—			$	204			$	465			$	—			$	465
Cottonwood Square			146				180				(34	)			305				333				(28	)
Creekside Village Green (b)			186				—				186				225				—				225
Downtown Summerlin (b)			2,450				—				2,450				4,194				—				4,194
Hughes Landing Retail (b)			328				—				328				387				—				387
1701 Lake Robbins (c)			15				—				15				184				—				184
Landmark Mall (d)			(109	)			75				(184	)			(186	)			624				(810	)
Outlet Collection at Riverwalk (e)			1,966				(1,221	)			3,187				3,119				(1,473	)			4,592
Park West			535				524				11				1,175				1,088				87
Ward Village (f)			6,700				6,171				529				13,015				11,800				1,215
20/25 Waterway Avenue			526				343				183				947				764				183
Waterway Garage Retail			184				164				20				354				332				22
Total Retail			13,131				6,236				6,895				24,184				13,468				10,716
Office
10-70 Columbia Corporate Center (g)			3,291				525				2,766				6,524				669				5,855
Columbia Office Properties			65				596				(531	)			80				684				(604	)
One Hughes Landing (h)			1,314				1,491				(177	)			2,636				1,960				676
Two Hughes Landing (i)			648				—				648				851				—				851
2201 Lake Woodlands Drive			(34	)			137				(171	)			(86	)			104				(190	)
9303 New Trails			490				553				(63	)			983				1,020				(37	)
110 N. Wacker			1,529				1,514				15				3,058				3,034				24
One Summerlin (b)			(139	)			—				(139	)			(169	)			—				(169	)
3831 Technology Forest Drive (j)			538				—				538				928				—				928
3 Waterway Square			1,697				1,560				137				3,171				3,127				44
4 Waterway Square			1,482				1,407				75				2,942				2,848				94
1400 Woodloch Forest			435				293				142				763				533				230
Total Office			11,316				8,076				3,240				21,681				13,979				7,702
85 South Street (k)			108				—				108				215				—				215
Millennium Waterway Apartments			993				1,112				(119	)			2,045				2,172				(127	)
One Lake's Edge (b)			(541	)			—				(541	)			(541	)			—				(541	)
The Woodlands Resort & Conference Center (l)			2,588				2,005				583				5,513				3,920				1,593
Total Retail, Office, Multi-family, Resort & Conference Center			27,595				17,429				10,166				53,097				33,539				19,558
The Club at Carlton Woods (b)			(847	)			(799	)			(48	)			(1,693	)			(2,012	)			319
The Woodlands Ground leases			310				112				198				526				222				304
The Woodlands Parking Garages			(95	)			(110	)			15				(271	)			(289	)			18
Other Properties			955				251				704				1,873				531				1,342
Total Other			323				(546	)			869				435				(1,548	)			1,983
Operating Assets NOI - Consolidated and Owned			27,918				16,883				11,035				53,532				31,991				21,541
Redevelopments
South Street Seaport (b)			(387	)			(1,734	)			1,347				(401	)			(3,956	)			3,555
Total Operating Asset Redevelopments			(387	)			(1,734	)			1,347				(401	)			(3,956	)			3,555
Dispositions
Rio West Mall			—				30				(30	)			—				79				(79	)
Total Operating Asset Dispositions			—				30				(30	)			—				79				(79	)
Total Operating Assets NOI - Consolidated			27,531				15,179				12,352				53,131				28,114				25,017
Straight-line lease amortization (m)			1,028				(537	)			1,565				2,224				(973	)			3,197
Demolition costs (n)			(1,496	)			(3,434	)			1,938				(1,613	)			(5,928	)			4,315
Development-related marketing costs			(2,748	)			(2,703	)			(45	)			(5,014	)			(4,779	)			(235	)
Depreciation and amortization			(22,887	)			(9,531	)			(13,356	)			(41,649	)			(18,541	)			(23,108	)
Write-off of lease intangibles and other			—				—				—				(154	)			—				(154	)
Equity in earnings from Real Estate and Other Affiliates			160				767				(607	)			1,044				2,572				(1,528	)
Interest, net			(7,621	)			(3,917	)			(3,704	)			(14,105	)			(5,842	)			(8,263	)
Total Operating Assets REP EBT (o)		$	(6,033	)		$	(4,176	)		$	(1,857	)		$	(6,136	)		$	(5,377	)		$	(759	)

		Three Months Ended June 30,												Six Months Ended June 30,
		2015				2014				Change				2015				2014				Change
		(In thousands)												(In thousands)
Operating Assets NOI - Equity and Cost Method Investments
Millennium Woodlands Phase II		$	111			$	—			$	111			$	7			$	—			$	7
Stewart Title Company			608				861				(253	)			999				1,059				(60	)
Summerlin Baseball Club			803				611				192				569				364				205
The Metropolitan Downtown Columbia (b)			139								139				(369	)			—				(369	)
Woodlands Sarofim # 1			338				389				(51	)			729				790				(61	)
Total NOI - equity investees			1,999				1,861				138				1,935				2,213				(278	)
Adjustments to NOI (p)			(774	)			(48	)			(726	)			(1,454	)			(79	)			(1,375	)
Equity Method Investments REP EBT			1,225				1,813				(588	)			481				2,134				(1,653	)
Less: Joint Venture Partner's Share of REP EBT			(1,065	)			(1,046	)			(19	)			(1,184	)			(1,343	)			159
Equity in earnings from Real Estate and Other Affiliates			160				767				(607	)			(703	)			791				(1,494	)
Distributions from Summerlin Hospital Investment (q)			—				—				—				1,747				1,781				(34	)
Segment equity in earnings from Real Estate and Other Affiliates		$	160			$	767			$	(607	)		$	1,044			$	2,572			$	(1,528	)
Company's Share of Equity Method Investments NOI
Millennium Woodlands Phase II		$	91			$	—			$	91			$	6			$	—			$	6
Stewart Title Company			304				431				(127	)			500				530				(30	)
Summerlin Baseball Club			402				306				96				285				182				103
The Metropolitan Downtown Columbia (b)			69				78				(9	)			(185	)			—				(185	)
Woodlands Sarofim # 1			68				—				68				146				158				(12	)
Total NOI - equity investees		$	934			$	815			$	119			$	752			$	870			$	(118	)

		Economic		Six Months Ended June 30, 2015
		Ownership		Debt			Cash
				(In thousands)
Millennium Woodlands Phase II		81.43%		$	37,700		$	902
Stewart Title Company		50.00%			—			387
Summerlin Baseball Club		50.00%			—			865
The Metropolitan Downtown Columbia (b)		50.00%			56,187			678
Woodlands Sarofim # 1		20.00%			6,084			782

_____________________________________________

(a)		Stabilized annual NOI of $2.2 million is expected by the end of the second quarter 2016.
(b)		Please refer to the discussion regarding this property in our second quarter 2015 Form 10-Q.
(c)		This asset was acquired in July 2014.
(d)		The lower NOI is due to a one-time favorable property tax settlement with the City of Alexandria of $0.7 million that occurred in the first quarter 2014.
(e)		Building was re-opened May 2014. Stabilized annual NOI of $7.8 million is expected by early 2017 based on leases in place as of June 30, 2015.
(f)		NOI increase is primarily due to higher rental rates and increased occupancy.
(g)		In December 2014, we acquired 10–60 Columbia Corporate Center comprised of six adjacent office buildings totaling 699,884 square feet. We acquired 70 Columbia Corporate Center in 2012.
(h)		NOI increase for the six months ended June 30, 2015 is primarily due to increased occupancy. The NOI decrease for the three months ended June 30, 2015 is primarily due to an adjustment to 2014 tenant recoveries.
(i)		Building was placed in service in 2014. Stabilized annual NOI of $5.2 million is expected by the fourth quarter 2015.
(j)		Building was placed in service in 2014 and is 100% leased to a single tenant.
(k)		Building was acquired in 2014.
(l)		The renovation project has increased NOI due to the higher revenue per available room (“RevPAR”) resulting from the new and upgraded rooms. RevPAR is calculated by dividing total room revenues by total occupied rooms for the period.
(m)		The net change in straight-line lease amortization for the three and six months ended June 30, 2015 compared to the same periods in 2014 is primarily due to new leases at Downtown Summerlin and 10-60 Columbia Corporate Center office buildings purchased in December 2014.
(n)		Demolition costs for 2014 relate to Pier 17 and such costs for 2015 relate to the Fulton Market Building, both at South Street Seaport.
(o)		For a detailed breakdown of our Operating Asset segment REP EBT, please refer to Note 15 - Segments in the Condensed Consolidated Financial Statements.
(p)		Adjustments to NOI include straight-line rent and market lease amortization, demolition costs, depreciation and amortization and non-real estate taxes.
(q)		During the first quarters of 2015 and 2014, we received distributions of $1.7 million and $1.8 million, respectively, from our Summerlin Hospital investment. Distributions from the Summerlin Hospital are typically made one time per year in the first quarter.

Commercial Properties NOI
($ in millions)		Square Feet/Number of Units		% Leased (a)			Three Months Ended June 30, 2015			Projected Annual Stabilized NOI (b)			Debt Balance June 30, 2015(c)
Commercial Properties - Stabilized
Retail
Cottonwood Square		77,079		96	%		$	0.1		$	0.6		$	—
1701 Lake Robbins		12,376		100	%			-			0.4			4.6
Landmark Mall (d)		320,325		44	%			(0.1)			0.8			—
Park West		249,177		66	%			0.5			2.1			—
Ward Village		1,273,845		88	%			6.7			24.8			238.7
20/25 Waterway Avenue		50,022		100	%			0.5			1.7			14.3
Waterway Garage Retail		21,513		100	%			0.2			0.8			—
Total Retail - Stabilized		2,004,337		79	%		$	7.9		$	31.2		$	257.6
Office
10-70 Columbia Corporate Center		887,714		90	%		$	3.3		$	13.2		$	100.0
Columbia Office Properties (d)		220,471		47	%			0.1			0.3			—
One Hughes Landing		197,719		100	%			1.3			5.3			52.0
9303 New Trails		97,553		94	%			0.5			2.0			12.9
110 N. Wacker		226,000		100	%			1.5			6.1			28.4
3831 Technology Forest Drive		95,078		100	%			0.5			2.2			22.9
3 Waterway Square		232,021		100	%			1.7			6.8			52.0
4 Waterway Square		218,551		100	%			1.5			5.9			37.8
1400 Woodloch Forest		95,667		100	%			0.4			1.7			—
Total Office - Stabilized		2,270,774		91	%		$	10.8		$	43.5		$	306.0
Multi-family, Resort & Conference Center & Other
85 South Street		21		95	%		$	0.1		$	0.4		$	—
Millennium Waterway Apartments		393		93	%			1.0			4.0			55.6
Other Assets (e)		N/A		N/A				1.1			4.2			—
Total Multi-family, Resort & Conference Center & Other - Stabilized		414		93	%		$	2.2		$	8.6		$	55.6
Total Commercial Properties - Stabilized							$	20.9		$	83.3		$	619.2
Commercial Properties - Recently Developed And Not Yet Stabilized
Retail
Columbia Regional		88,556		77	%		$	0.2		$	2.1		$	22.1
Creekside Village Green		74,581		71	%			0.2			2.2			—
Downtown Summerlin		818,521		82	%			2.5			37.2			276.4
Hughes Landing Retail		123,000		89	%			0.3			3.5			23.4
Outlet Collection at Riverwalk		248,157		91	%			2.0			7.8			55.5
Total Retail - Not Stabilized		1,352,815		83	%		$	5.2		$	52.8		$	377.4
Office
Two Hughes Landing		197,714		88	%		$	0.6		$	5.2		$	31.3
One Summerlin		206,279		54	%			(0.1)			—	(f)		—
Total Office - Not Stabilized		403,993		71	%		$	0.5		$	5.2		$	31.3
Multi-family, Resort & Conference Center & Other
One Lake's Edge		390		39	%		$	(0.5)		$	6.9		$	59.2
The Metropolitan Downtown Columbia Project		380		59	%			0.1			3.4			28.1
The Woodlands Resort & Conference Center		406		N/A	%			2.6			16.4			83.1
Millennium Woodlands Phase II		314		78	%			0.1			4.0			31.7
Total Multi-family, Resort & Conference Center & Other - Not Stabilized		1,490		57	%		$	2.3		$	30.7		$	202.1
Total Commercial Properties - Not Stabilized							$	8.0		$	88.7		$	610.8

($ in millions)		Square Feet/Number of Units		% Leased (a)			Three Months Ended June 30, 2015			Projected Annual Stabilized NOI (b)			Debt Balance June 30, 2015(c)
Under Construction or Renovation
Retail
South Street Seaport		362,000		N/A			$	(0.4)		$	N/A	(g)	$	—
Lakeland Village Center		83,339		18	%			—			1.7			—
Total Retail - Not Stabilized		445,339		18	%		$	(0.4)		$	1.7		$	—
Office
1725-35 Hughes Landing Boulevard		647,000		74	%		$	—		$	10.7	(h)	$	72.6
Three Hughes Landing		324,000		0	%			—			9.1			9.7
Total Office - Not Stabilized		971,000		49	%		$	—		$	19.8		$	82.3
Multi-family, Resort & Conference Center & Other
Waterway Square Hotel (Westin)		302		N/A			$	—		$	9.6		$	11.4
Hughes Landing Hotel (Embassy Suites)		206		N/A				—			4.1			1.1
Total Multi-family, Resort & Conference Center & Other - Under Construction		508		N/A			$	—		$	13.7		$	12.5
Total Commercial Properties - Under Construction							$	(0.4)		$	35.2		$	94.8
Total Commercial Properties
Retail
Stabilized		2,004,337		79	%		$	7.9		$	31.2		$	257.6
Not Stabilized		1,352,815		83	%			5.2			52.8			377.4
Under Construction		445,339		18	%			(0.4)			1.7			—
Total Retail		3,802,491		73	%		$	12.7		$	85.7		$	635.0
Office
Stabilized		2,270,774		91	%		$	10.8		$	43.4		$	306.0
Not Stabilized		403,993		71	%			0.5			5.2			31.3
Under Construction		324,000		49	%			—			19.8			82.3
Total Office		2,998,767		84	%		$	11.3		$	68.4		$	419.6
Multi-family, Resort & Conference Center & Other
Stabilized		414		93	%		$	2.2		$	8.6		$	55.6
Not Stabilized		1,490		57	%			2.3			30.7			202.0
Under Construction		508		N/A				—			13.7			12.5
Total Multi-family, Resort & Conference Center & Other		2,412		65	%		$	4.5		$	53.0		$	270.1
Total Commercial Properties							$	28.5		$	207.1		$	1,324.7

(a)		Percentage leased is as of June 30, 2015 unless a more recent leasing statistic is disclosed in the June 30, 2015 10-Q filing or in this release. Statistic indicates percentage pre-leased for projects under development.
(b)		For stabilized properties, Projected Annual Stabilized NOI is computed as follows:
		i. Retail, Hotel, Resort & Conference Center and Other NOI represents the last twelve months actual NOI generated by the property.
		ii. Office and Multifamily represents the most recent quarter NOI for the property annualized.
		For properties not stabilized or under construction, Projected Annual Stabilized NOI is shown based upon the most recent estimates disclosed in our periodic filings and CEO Letter dated March 13, 2015. We do not necessarily update these projections on a regular basis and such projections may vary based upon many factors, more fully described under “Forward Looking Statements” and “Risk Factors” in our Exchange Act filings. There can be no assurance as to when or if these properties will achieve Projected Annual Stabilized NOI.
(c)		Represents the outstanding balance of the mortgage debt directly attributable to the asset. The total debt balance excludes corporate and other debt not directly attributable to, or secured by, the properties.
(d)		Property is a redevelopment opportunity but is being operated to maximize cash flow “as is” until such time as we begin active redevelopment.
(e)		Amount includes our share of our Equity Method Investments NOI. The Metropolitan Downtown Columbia Project and Millennium Woodlands Phase II are disclosed separately within this schedule.
(f)		One Summerlin projected annual stabilized NOI is included as part of Downtown Summerlin projected annual stabilized NOI.
(g)		Amount not disclosed.
(h)		ExxonMobil has pre-leased 478,000 square feet and has an option on the remaining 160,000 square feet. If the option is exercised, projected annual stabilized NOI would increase to approximately $14.5 million.

 

The Howard Hughes Corporation

Caryn Kboudi, 214-741-7744
caryn.kboudi@howardhughes.com

Source: The Howard Hughes Corporation