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Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2012	May 07, 2012
Document and Entity Information
Entity Registrant Name	Howard Hughes Corp
Entity Central Index Key	0001498828
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		37,942,707
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2012	Dec. 31, 2011
Investment in real estate:
Master Planned Community assets	$ 1,601,385	$ 1,602,437
Land	238,699	236,363
Buildings and equipment	559,192	556,786
Less: accumulated depreciation	(96,692)	(92,494)
Developments in progress	200,552	195,034
Net property and equipment	2,503,136	2,498,126
Investments in Real Estate Affiliates	63,091	62,595
Net investment in real estate	2,566,227	2,560,721
Cash and cash equivalents	209,974	227,566
Accounts receivable, net	13,991	15,644
Municipal Utility District receivables, net	90,428	86,599
Notes receivable, net	33,690	35,354
Tax indemnity receivable, including interest	333,750	331,771
Deferred expenses, net	11,609	10,338
Prepaid expenses and other assets, net	130,619	127,156
Total assets	3,390,288	3,395,149
Liabilities:
Mortgages, notes and loans payable	598,287	606,477
Deferred tax liabilities	77,868	75,966
Warrant liabilities	249,615	127,764
Uncertain tax position liability	131,934	129,939
Accounts payable and accrued expenses	113,944	125,404
Total liabilities	1,171,648	1,065,550
Commitments and Contingencies (see Note 12)
Equity:
Preferred stock: $.01 par value; 50,000,000 shares authorized, none issued
Common stock: $.01 par value; 150,000,000 shares authorized, 37,945,707 shares issued and outstanding as of March 31, 2012 and 37,945,707 shares issued and outstanding as of December 31, 2011	379	379
Additional paid-in capital	2,711,980	2,711,109
Accumulated deficit	(493,583)	(381,325)
Accumulated other comprehensive loss	(5,886)	(5,578)
Total stockholders' equity	2,212,890	2,324,585
Noncontrolling interest	5,750	5,014
Total equity	2,218,640	2,329,599
Total liabilities and equity	$ 3,390,288	$ 3,395,149

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2012	Dec. 31, 2011
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	37,945,707	37,945,707
Common stock, shares outstanding	37,945,707	37,945,707

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Revenues:
Master Planned Community land sales	$ 36,089	$ 23,392
Builder price participation	813	521
Minimum rents	18,898	16,719
Tenant recoveries	5,871	4,524
Condominium unit sales	134	3,764
Resort and conference center revenues	9,657
Other land revenues	3,516	1,248
Other rental and property revenues	4,787	2,933
Total revenues	79,765	53,101
Expenses:
Master Planned Community cost of sales	18,739	15,436
Master Planned Community operations	9,713	5,714
Rental property real estate taxes	3,839	3,474
Rental property maintenance costs	1,959	1,559
Condominium unit cost of sales	59	2,980
Resort and conference center operations	7,414
Other property operating costs	14,058	9,721
Provision for doubtful accounts		11
General and administrative	9,822	5,017
Depreciation and amortization	5,058	3,199
Total expenses	70,661	47,111
Operating income	9,104	5,990
Interest income	2,332	2,512
Interest expense	0
Warrant liability loss	(121,851)	(126,045)
Equity in earnings from Real Estate Affiliates	2,677	5,513
Loss before taxes	(107,738)	(112,030)
Provision for income taxes	(3,784)	(2,457)
Net loss from continuing operations	(111,522)	(114,487)
Net loss	(111,522)	(114,487)
Net earnings attributable to noncontrolling interests	(736)	(28)
Net loss attributable to common stockholders	$ (112,258)	$ (114,515)
Basic Loss Per Share: (in dollars per share)	$ (2.96)	$ (3.02)
Diluted Loss Per Share: (in dollars per share)	$ (2.96)	$ (3.02)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Comprehensive Loss, Net of Tax:
Net loss	$ (111,522)	$ (114,487)
Other comprehensive income (loss):
Interest rate swap	102
Capitalized swap interest	(410)
Pension plan adjustment		(65)
Other comprehensive loss	(308)	(65)
Comprehensive loss	(111,830)	(114,552)
Comprehensive earnings attributable to noncontrolling interests	(736)	(28)
Comprehensive loss attributable to common stockholders	$ (112,566)	$ (114,580)

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests in Consolidated Ventures
Balance at Dec. 31, 2010	$ 2,179,107	$ 379	$ 2,708,036	$ (528,505)	$ (1,627)	$ 824
Balance (in shares) at Dec. 31, 2010		37,904,506
Increase (Decrease) in Stockholders' Equity
Net income (loss)	(114,487)			(114,515)		28
Distributions to noncontrolling interests	(62)					(62)
Pension plan adjustment	(65)				(65)
Stock plan activity	129		129
Stock plan activity (in shares)		20,000
Balance at Mar. 31, 2011	2,064,622	$ 379	2,708,165	(643,020)	(1,692)	790
Balance (in shares) at Mar. 31, 2011		37,924,506
Balance at Dec. 31, 2011	2,329,599	$ 379	2,711,109	(381,325)	(5,578)	5,014
Balance (in shares) at Dec. 31, 2011		37,945,707
Increase (Decrease) in Stockholders' Equity
Net income (loss)	(111,522)			(112,258)		736
Interest rate swaps, net of tax of $101	102				102
Capitalized swap interest, net of tax of $244	(410)				(410)
Stock plan activity	871		871
Balance at Mar. 31, 2012	$ 2,218,640	$ 379	$ 2,711,980	$ (493,583)	$ (5,886)	$ 5,750
Balance (in shares) at Mar. 31, 2012		37,945,707

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) $ in Thousands	3 Months Ended
	Mar. 31, 2012 USD ($)
Interest rate swaps, tax	$ 101
Capitalized swap interest, tax	$ 244

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash Flows from Operating Activities:
Net loss	$ (111,522)	$ (114,487)
Adjustments to reconcile net loss to cash provided by operating activities:
Equity in earnings from Real Estate Affiliates, net of distributions	(151)	(1,619)
Provision for doubtful accounts		11
Depreciation	4,214	2,748
Amortization	844	451
Amortization of deferred financing costs and debt market rate adjustments	156	(1,709)
Amortization of intangibles other than in-place leases	(44)	33
Straight-line rent amortization	(265)	(835)
Deferred income taxes	3,728	2,423
Restricted stock and stock option amortization	871
Warrant liability loss	121,851	126,045
Master Planned Community and condominium development expenditures	(24,284)	(18,687)
Master Planned Community and condominium cost of sales	17,857	18,416
Net changes :
Accounts and notes receivable	3,770	(75)
Prepaid expenses and other assets	(2,791)	(387)
Deferred expenses	(1,432)	(62)
Accounts payable and accrued expenses	(13,193)	(7,538)
Other, net	(487)	(58)
Cash (used in) provided by operating activities	(878)	4,670
Cash Flows from Investing Activities:
Real estate and property expenditures	(7,605)	(9,140)
Investments in Real Estate Affiliates	(345)	(10)
Distributions received from Real Estate Affiliates in excess of income		79
Increase in restricted cash	(1,001)
Cash used in investing activities	(8,951)	(9,071)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgages, notes and loans payable	217
Principal payments on mortgages, notes and loans payable	(7,465)	(1,738)
Deferred financing costs	(515)
Proceeds from issuance of management warrants		2,000
Distributions to noncontrolling interests		(62)
Cash (used in) provided by financing activities	(7,763)	200
Net change in cash and cash equivalents	(17,592)	(4,201)
Cash and cash equivalents at beginning of period	227,566	284,682
Cash and cash equivalents at end of period	209,974	280,481
Supplemental Disclosure of Cash Flow Information:
Interest paid	6,070	3,597
Interest capitalized	6,692	4,224
Income taxes paid	132
Non-Cash Investing and Financing Transactions:
Special Improvement District bond transfers associated with land sales	978
Change in accrued capital expenditures included in accounts payable and accrued expenses	$ 1,711	$ (5,687)

BASIS OF PRESENTATION AND ORGANIZATION

3 Months Ended

Mar. 31, 2012

BASIS OF PRESENTATION AND ORGANIZATION

BASIS OF PRESENTATION AND ORGANIZATION

NOTE 1 BASIS OF PRESENTATION AND ORGANIZATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as issued by the SEC. Such condensed consolidated financial statements do not include all of the information and disclosures required by GAAP for complete financial statements. In addition, readers of this Quarterly Report on Form 10-Q (“Quarterly Report”) should refer to The Howard Hughes Corporation’s (“HHC” or the “Company”) audited Consolidated Financial Statements for the year ended December 31, 2011 which are included in the Company’s Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended December 31, 2011. Capitalized terms used, but not defined in this Quarterly Report have the same meanings as in the Annual Report. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. In 2011, we reclassified $2.4 million of deferred income taxes from accounts payable and accrued expenses on the Condensed Consolidated Statements of Cash Flows to conform to the 2012 presentation. The results for the interim period ended March 31, 2012 and 2011 are not necessarily indicative of the results to be expected for the full fiscal year.

As more fully described in Note 3, on July 1, 2011 we acquired from our partner the remaining 47.5% economic interest in The Woodlands not owned by us. As a result of the acquisition, beginning on July 1, 2011, we consolidated the financial results of The Woodlands which were previously accounted for under the equity method. Our financial statements as of and for the three months ended March 31, 2012 are not comparable to the same period in 2011 due to the consolidation of The Woodlands.

Management has evaluated all material events occurring subsequent to the date of the condensed consolidated financial statements up to the date and time this Quarterly Report is filed on Form 10-Q.

Sponsor and Management Warrants

On November 9, 2010 (the “Effective Date”), we issued warrants to purchase 8.0 million shares of our common stock to certain of the sponsors (the “Sponsors Warrants”) with an estimated initial value of approximately $69.5 million. The initial exercise price for the warrants of $50.00 per share is subject to adjustment for future stock dividends, splits or reverse splits of our common stock or certain other events. Approximately 6.1 million warrants are immediately exercisable and approximately 1.9 million warrants are exercisable upon 90 days prior notice for the first 6.5 years after issuance and are subsequently exercisable without notice any time thereafter. The Sponsors Warrants expire on November 9, 2017.

In November 2010 and February 2011, we entered into certain warrant agreements (the “Management Warrants”) with David R. Weinreb, our Chief Executive Officer, Grant Herlitz, our President, and Andrew C. Richardson, our Chief Financial Officer, in each case prior to his appointment to such position. The Management Warrants representing 2,862,687 underlying shares were issued pursuant to such agreements at fair value in exchange for a combined total of approximately $19.0 million in cash from such executives at the commencement of their respective employment. Mr. Weinreb and Mr. Herlitz’s warrants have exercise prices of $42.23 per share and Mr. Richardson’s warrant has an exercise price of $54.50 per share. Generally, the Management Warrants become exercisable in November 2016 and expire by February 2018.

The estimated $199.2 million fair value for the Sponsors Warrants and estimated $50.4 million fair value for the Management Warrants as of March 31, 2012, have been recorded as a liability because the holders of these warrants could require HHC to settle such warrants in cash upon a change of control. The fair values were estimated using an option pricing model and Level 3 inputs due to the unavailability of comparable market data. The estimated fair values for the Sponsor Warrants and Management Warrants were $275.8 million and $79.6 million, respectively as of March 31, 2011. Changes in the fair value of the Sponsors Warrants and the Management Warrants are recognized in earnings and, accordingly, warrant liability losses reflecting increases in value of approximately $121.9 million and $126.0 million were recognized for the quarters ended March 31, 2012 and 2011, respectively.

- Definition

The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.

+ References

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-Name Accounting Research Bulletin (ARB)
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+ Details

EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2012

EARNINGS PER SHARE

EARNINGS PER SHARE

NOTE 2 EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of any potentially dilutive common shares. The dilutive effect of options and non-vested stock issued under stock-based compensation plans is computed using the “treasury stock” method. The dilutive effect of the Sponsors Warrants and Management Warrants are computed using the if-converted method. Gains, if any, associated with the Sponsors Warrants and Management Warrants are excluded from the numerator in computing diluted earnings per share because inclusion of such gains in the computation would be anti-dilutive.

Information related to our EPS calculations is summarized as follows:

	Three Months Ended March 31,
(In thousands, except per share amounts)	2012			2011
	(In thousands)

Basic EPS:
Numerator:
Net loss from continuing operations	$	(111,522	)	$	(114,487	)
Net earnings attributable to noncontrolling interests	(736		)	(28		)
Net loss attributable to common stockholders	$	(112,258	)	$	(114,515	)

Denominator:
Weighted average number of common shares outstanding - basic	37,903			37,905

*Diluted EPS :**
Numerator:
Net loss attributable to common stockholders	$	(112,258	)	$	(114,515	)
Less: Warrant liability gain	—			—
Adjusted net loss available to common stockholders	$	(112,258	)	$	(114,515	)
Denominator:
Weighted average number of common shares outstanding - basic	37,903			37,905
Restricted stock and stock options	—			—
Warrants	—			—
Weighted average number of common shares outstanding - diluted	37,903			37,905

Basic Loss Per Share:	$	(2.96	)	$	(3.02	)

Diluted Loss Per Share:	$	(2.96	)	$	(3.02	)

*Due to the net loss for the three months ended March 31, 2012 and 2011, basic shares were used to calculate diluted earnings per share. Inclusion of such securities would result in anti-dilution.

The diluted EPS computation as of March 31, 2012 excludes 731,437 stock options 42,553 shares of restricted stock and 10,862,687 Sponsors and Management warrants because their inclusion would have been anti-dilutive. The diluted EPS computations as of March 31, 2011 excludes 653,837 stock options, 26,895 shares of restricted stock and 10,862,687 Sponsors and Management Warrants because their inclusion would have been anti-dilutive.

ACQUISITION

3 Months Ended

Mar. 31, 2012

ACQUISITION

ACQUISITION

NOTE 3 ACQUISITION

On July 1, 2011, we acquired our partner’s 47.5% economic interest (represented by a 57.5% legal interest) in TWCPC Holdings, L.P., The Woodlands Operating Company, L.P. and TWLDC Holdings, L.P. (collectively referred to as “The Woodlands”) for $117.5 million. The Woodlands is located near Houston, Texas. We made the acquisition so that we can control attractive residential and commercial future development opportunities and assets as well as to internalize The Woodlands platform to benefit our MPC business. As a result of the acquisition, we now consolidate The Woodlands operations and our condensed consolidated financial statements are therefore not comparable to prior periods. Please refer to Note 14 — Segments for a presentation of the results as if we owned 100% of The Woodlands for all periods presented. Prior to such acquisition, we accounted for The Woodlands using the equity method.

Pro Forma Information

The following pro forma information for the three months ended March 31, 2011 was prepared as if The Woodlands acquisition had occurred as of the beginning of such period:

	Three Months Ended March 31,
	2011
	(In thousands)
Total Revenues	$	90,261
Net loss	(110,590		)

The pro forma information reflects adjustments for (1) purchase accounting, including (a) depreciation for the step-up in basis for property, plant and equipment (b) amortization of in-place and above/below market leases (c) Land Cost of Sales increase for step-up in land basis for finished lots acquired and sold and (d) amortization of deferred financing costs, prepaid commissions and deferred profits which were eliminated and (2) adjustments for interest expense which is capitalizable in accordance with the Company’s interest capitalization policy.

The pro forma information is not necessarily indicative of the results that would have occurred had the acquisition occurred as of the beginning of the period presented, nor is it necessarily indicative of future results.

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

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-Paragraph 3
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+ Details

IMPAIRMENT

3 Months Ended

Mar. 31, 2012

IMPAIRMENT

IMPAIRMENT

NOTE 4 IMPAIRMENT

The generally accepted accounting principles related to accounting for the impairment or disposal of long-lived assets require that if impairment indicators exist and the undiscounted cash flows expected to be generated by an asset are less than its carrying amount, an impairment provision should be recorded to write down the carrying amount of such asset to its fair value. The impairment analysis does not consider the timing of future cash flows and whether the asset is expected to earn an above or below market rate of return. We review our real estate assets, including operating assets, land held for development and sale and developments in progress, for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Our investment in each of the Real Estate Affiliates is evaluated periodically and as deemed necessary for recoverability and valuation declines that are other-than-temporary. If the decrease in value of our investment in a Real Estate Affiliate is deemed to be other-than-temporary, our investment in such Real Estate Affiliate is reduced to its estimated fair value.

There were no impairment charges recorded for the quarters ended March 31, 2012 and 2011.

FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2012

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS

In May 2011, the FASB issued “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, and it is effective for fiscal years beginning after December 15, 2011. The adoption of this policy did not have an impact on our financial statements.

The following table presents, for each of the fair value hierarchy levels required under ASC 820, “Fair Value Measurement,” our assets and liabilities that are measured at fair value on a recurring basis.

	March 31, 2012								December 31, 2011
	Fair Value Measurements Using								Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)								(In thousands)
Liabilities
Warrants	$	249,615	$	—	$	—	$	249,615	$	127,764	$	—	$	—	$	127,764
Interest rate swaps	4,166		—		4,166		—		4,367		—		4,367		—

The valuation of warrants is based on an option pricing valuation model. The inputs to the model include the fair value of the stock underlying to the warrants, exercise price of the warrants, term, restrictions, expected volatility, risk-free interest rate and dividend yield.

The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts and includes consideration of counterparty credit risk. The variable cash receipts are based on an expectation of future interest rates derived from observable market interest rate curves.

The following table presents a reconciliation of the beginning and ending balances of our warrants which are presented in the table above as a fair value measurement using significant unobservable inputs (Level 3):

	(In thousands)
Balance as of December 31, 2011	$	127,764
Warrant liability loss	121,851
Balance as of March 31, 2012	$	249,615

The significant unobservable input used in the fair value measurement of our warrants designated as Level 3 is as follows:

	Fair Value		Valuation Technique	Unobservable Input	Range Median or Average
	(In thousands)
Warrants	$	249,615	Option Pricing Valuation Model	Expected Volatility (a)	27%-33% (29.4%)

(a) Based on the asset volatility of comparable companies.

The estimated fair values of the Company’s financial instruments that are not measured at fair value on a recurring basis are as follows:

	March 31, 2012				December 31, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In thousands)
Fixed-rate debt	$	82,374	$	82,655	$	83,164	$	85,047
Variable-rate debt (a)	462,019		462,019		468,100		468,100
SID bonds (b)	53,894		53,894		55,213		55,213
Total	$	598,287	$	598,568	$	606,477	$	608,360

(a) As more fully described in Note 7, $172.0 million of variable-rate debt entered into during 2011 has been swapped to a fixed rate for the term of the related debt.

(b) Due to the uncertain repayment terms of Special Improvement District “SID” bonds, the carrying value approximates fair value.

The fair value of debt in the table above was estimated using Level 2 inputs based on quoted market prices for publicly traded debt, recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, the current London Interbank Offered Rate (“LIBOR”), a widely quoted market interest rate which is frequently the index used to determine the rate at which we borrow funds, U.S. Treasury obligation interest rates and on the discounted estimated future cash payments to be made on such debt. The discount rates reflect our judgment as to what the approximate current lending rates for loans or groups of loans with similar maturities and credit quality would be if credit markets were operating efficiently and assume that the debt is outstanding through maturity. We have utilized available market information or present value techniques to estimate the amounts required to be disclosed. Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist in specific loans, it is unlikely that the estimated fair value of any of such debt could be realized by immediate settlement of the obligation.

The carrying amounts of cash and cash equivalents and accounts and notes receivable approximate fair value because of the short-term maturity of these instruments.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44A, 44B
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15C, 15D
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15A
-Subparagraph a-d
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15B
-Subparagraph a, b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 3, 10, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 32, 33, 34
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 159
-Paragraph 17-22, 27, 28
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258

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-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 21
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611

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Reference 11: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
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-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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+ Details

REAL ESTATE AFFILIATES

3 Months Ended

Mar. 31, 2012

REAL ESTATE AFFILIATES

REAL ESTATE AFFILIATES

NOTE 6 REAL ESTATE AFFILIATES

In the ordinary course of business, we enter into partnerships or joint ventures primarily for the development and operations of real estate assets. These partnerships or joint ventures are typically characterized by a non-controlling ownership interest with decision making and distribution of expected gains and losses being proportionate to the ownership interest. We account for these partnerships and joint ventures in accordance with ASC 810, as amended (“ASC 810”).

In accordance with ASC 810, we assess our joint ventures at inception to determine if any meet the qualifications of a variable interest entity (“VIE”). We consider a partnership or joint venture a VIE if: (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity); or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events outlined in ASC 810, we reassess our initial determination of whether the partnership or joint venture is a VIE. We also perform a qualitative assessment of each VIE to determine if we are the primary beneficiary, as required by ASC 810.

We account for investments in joint ventures deemed to be variable interest entities for which we are not considered to be the primary beneficiary using the equity method, and investments in joint ventures where we have virtually no influence on the joint venture’s operating and financial policies, on the cost method. Generally, the operating agreements with respect to our Real Estate Affiliates provide that assets, liabilities and funding obligations are shared in accordance with our ownership percentages.

The Bridges at Mint Hill, LLC, Parcel D Development, LLC, and the HHMK Development, LLC joint venture entities included in the table below are VIEs. The aggregate carrying value of the unconsolidated VIEs was $3.6 million and $3.2 million as of March 31, 2012 and December 31, 2011, respectively, and was classified as Investments in Real Estate Affiliates in the Condensed Consolidated Balance Sheet. Because these joint ventures are in the pre-development stage, there were no earnings for the three months ended March 31, 2012. We did not hold an interest in any VIEs as of or during the three months ended March 31, 2011. Our maximum exposure to loss as a result of these investments is limited to the aggregate carrying value of the investment, as we have not provided any guarantees on behalf of these VIEs. Our initial ownership in the Bridges at Mint Hill, LLC is 79.0%, and our ownership percentage could increase to 90.5% if we are required to make a $4.5 million cash contribution to the venture related to the mortgage secured land to be contributed by our partner.

Below is a summary of our Investments in Real Estate Affiliates:

	Economic Ownership				Carrying Value				Share of Earnings
	March 31,		December 31,		March 31,		December 31,		Three months ended March 31,
	2012		2011		2012		2011		2012		2011
	(In percentages)				(In thousands)				(In thousands)

The Woodlands (a)					$	—	$	—	$	—	$	1,619
Circle T	50.00	%	50.00	%	9,004		9,004		—		—
Millennium Waterway Apartments (b) (c)	83.55	%	83.55	%	22,218		21,998		220		—
Woodlands Sarofim #1 (b)	20.00	%	20.00	%	2,474		2,456		18		—
Stewart Title (b)	50.00	%	50.00	%	3,552		3,643		59		—
Forest View/ Timbermill Apartments (b) (d)	50.00	%	50.00	%	9,350		9,346		4		—
Bridges at Mint Hill, LLC	79.00	%	79.00	%	322		180		—		—
Parcel D Development, LLC	50.00	%	50.00	%	3,289		2,990		—		—
HHMK Development, LLC	50.00	%	50.00	%	—		—		—		—
					50,209		49,617		301		1,619

Cost basis investments (e)					12,882		12,978		2,376		3,894
Investment in Real Estate Affiliates					$	63,091	$	62,595	$	2,677	$	5,513

(a)	As of July 1, 2011, The Woodlands is consolidated and no longer a Real Estate Affiliate (Refer to Note 3).
(b)	Equity investment owned by The Woodlands, which was a non-consolidated investment as of March 31, 2011.
(c)	On April 23, 2012, we agreed to acquire our partner’s interest in the Millennium Waterway Apartments at an implied valuation of $74.1 million for the property. The purchase is expected to close during the second quarter of 2012 upon completion of a $55.4 million ten-year agency financing.
(d)	On April 19, 2012, the joint ventures owning the Forest View and Timbermill apartments completed their sale to a third party. Our share of the distributable cash, after repayment of debt and transaction expenses, was $8.6 million. Also in April, we received approximately $0.8 million in distributions from earnings from these joint ventures.
(e)	Share of Earnings represents dividends received from Summerlin Hospital Medical Center.

As of March 31, 2012, approximately $59.8 million of indebtedness was secured by the properties owned by our Real Estate Affiliates in which our share was approximately $43.6 million (Millennium Waterway Apartments - $39.4 million; Woodlands Sarofim #1 - $1.4 million; and Forest View/Timbermill Apartments - $2.8 million) based upon our economic ownership. All of this debt is non-recourse to us.

MORTGAGES, NOTES AND LOANS PAYABLE

3 Months Ended

Mar. 31, 2012

MORTGAGES, NOTES AND LOANS PAYABLE

MORTGAGES, NOTES AND LOANS PAYABLE

NOTE 7 MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable are summarized as follows:

	March 31,		December 31,
	2012		2011
	(In thousands)
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	82,374	$	83,164
Special Improvement District bonds	53,894		55,213
Variable-rate debt:
Collateralized mortgages, notes and loans payable (a)	462,019		468,100
Total mortgages, notes and loans payable	$	598,287	$	606,477

(a)	As noted in the table below, $172.0 million of variable-rate debt has been swapped to a fixed rate for the term of the related debt.

The following table presents our mortgages, notes, and loans payable by property:

				Maximum		Carrying Value
		Interest		Facility		March 31,		December 31,
Property	Final Maturity	Rate		Amount		2012		2011
						(In thousands)

110 N. Wacker (a)	October 2019	5.21	%			$	29,000	$	29,000

Bridgeland
Note #1	May 2026	6.50	%			14,976		15,138
Note #2	December 2017	6.50	%			3,071		3,180
Note #3	June 2033	6.50	%			2,044		2,053
Note #4	December 2021	6.50	%			213		233
Bridgeland Total						20,304		20,604

Special Improvement District
Summerlin South - S108	December 2016	5.95	%			1,302		1,302
Summerlin South - S124	December 2019	5.95	%			378		378
Summerlin South - S128	December 2020	7.30	%			862		862
Summerlin South - S128C	December 2030	6.05	%			5,956		5,956
Summerlin South - S132	December 2020	7.88	%			5,352		5,378
Summerlin South - S151	June 2025	6.00	%			12,183		12,293
Summerlin West - S808	April 2021	5.71	%			318		682
Summerlin West - S809	April 2023	6.65	%			468		1,000
Summerlin West - S810	April 2031	7.13	%			22,483		22,770
The Shops at Summerlin Centre - S128	December 2030	6.05	%			3,829		3,829
The Shops at Summerlin Centre - S108	December 2016	5.95	%			713		713
SID Payable to Nevada Cancer Institute	December 2019	5.95	%			50		50
Special Improvement District bonds Total						53,894		55,213

The Woodlands
Master Credit Facility (b)	March 2015	5.00	%	$	270,000	176,703		183,000
Resort and Conference Center (c)	October 2013	6.00	%			36,100		36,100
2201 Lake Woodlands Drive	November 2016	5.25	%			4,709		4,803
Weiner Tract	January 2013	6.25	%			1,436		1,479
Land in Montgomery Co.	December 2012	6.00	%			616		649
Land in Harris Co.	January 2013	6.00	%			370		381
Capital lease obligation	—	2.72	%			121		147
CVS	upon sale	3.25	%			101		101
4 Waterway Square	December 2023	4.88	%			40,789		41,000
9303 New Trails	December 2023	4.88	%			13,928		14,000
3 Waterway Square (d)	January 2017	3.25	%	$	43,295	216		—
The Woodlands Total						275,089		281,660

Ward Centers
Victoria Ward (e)	September 2016	3.43	%	$	250,000	220,000		220,000
Ward Centers Total						220,000		220,000
						$	598,287	$	606,477

(a)	Loan has a stated interest rate of one-month LIBOR + 2.25%. The $29.0 million outstanding principal balance is swapped to a 5.21% fixed rate through maturity.
(b)	Loan bears interest at one-month LIBOR + 4.00% and has a 1.00% LIBOR floor.
(c)	Loan bears interest at one-month LIBOR + 5.00% and has a 1.00% LIBOR floor. The rate increased by 0.5% on September 23, 2011 and 0.5% on March 23, 2012, and increases by 0.5% every six months thereafter until maturity.
(d)	Loan bears interest at PRIME + 2.65% for a balance up to $0.5 million. For balance over $0.5 million, loan bears interest of LIBOR + 2.65%.
(e)	Loan has a stated interest rate of one-month LIBOR + 2.50%. $143.0 million of the outstanding principal balance is swapped to a 3.81% fixed rate through maturity.

The weighted average interest rate on our mortgages, notes and loans payable was 4.69% and 4.68% as of March 31, 2012 and December 31, 2011, respectively.

Collateralized Mortgages, Notes and Loans Payable

As of March 31, 2012, we had $598.3 million of collateralized mortgages, notes and loans payable. Approximately $275.1 million of the debt included in the table above is related to The Woodlands, which was consolidated on July 1, 2011. All of the debt is non-recourse and is secured by the individual properties as listed in the table above, except for The Woodlands Master Credit Facility and Resort and Conference Center Loans which are recourse to the partnerships that directly own The Woodlands operations, and a $7.0 million corporate recourse guarantee associated with the 110 N. Wacker mortgage, which is more fully discussed below. The Bridgeland MPC loan is secured by approximately 7,164 acres of land within the Bridgeland MPC and a security interest in its Municipal Utility District receivables. In addition, certain of our loans contain provisions which grant the lender a security interest in the operating cash flow of the property that represents the collateral for the loan. Such provisions are not expected to impact our operations in 2012. Certain mortgage notes may be prepaid, but may be subject to a prepayment penalty equal to a yield-maintenance premium, defeasance or a percentage of the loan balance.

The Woodlands Master Credit Facility is a $270.0 million facility consisting of a $170.0 million term loan and a $100.0 million revolving credit line (together, the “TWL Facility”). As of March 31, 2012, the TWL Facility had an outstanding balance of $176.7 million. The TWL Facility bears interest at one-month LIBOR plus 4.0% with a 1.0% LIBOR floor, has a March 29, 2014 initial maturity date and a one-year extension at borrower’s option. The TWL Facility also contains certain restrictions or covenants that, among other things, require the maintenance of specified financial ratios, restrict the incurrence of additional indebtedness at The Woodlands, and limit distributions from The Woodlands to us. Until The Woodlands leverage, as defined by the credit agreement, is less than a 40.0% loan to value ratio, we must amortize the debt on a dollar for dollar basis for any distributions that we make from The Woodlands. We have not distributed and do not currently intend to distribute cash from The Woodlands; therefore, this distribution provision has had no impact on us. As of March 31, 2012, leverage was approximately 44.6%. There was $19.9 million of undrawn and available borrowing capacity under the TWL Facility based on the collateral underlying the facility and covenants as of March 31, 2012. The TWL Facility also requires mandatory principal amortization payments during its initial term and during the extension period, if exercised. Repayments of $25.0 million and $30.0 million are required on March 29 of 2013 and, if extended, 2014, respectively. Furthermore, $10.0 million is due on each of June 29, September 29 and December 29, 2014 during the extension period.

The Woodlands Resort and Conference Center loan has a $36.1 million outstanding balance as of March 31, 2012 matures on October 30, 2012 and may be extended for one year at our option. The loan bears interest at one-month LIBOR plus 5.0% as of March 31, 2012 and has a 1.0% LIBOR floor. The interest rate increased by 0.5% on September 23, 2011 and 0.5% on March 23, 2012, and increases by 0.5% every six months thereafter until maturity. The loan is secured by a 440-room and 40-acre conference center and resort located within The Woodlands, and requires the maintenance of specified financial ratios.

On February 2, 2012, we secured non-recourse financing totaling $43.3 million for 3 Waterway Square. Proceeds will be used to construct an eleven-story, 232,774-square foot office building in The Woodlands. The loan matures on January 31, 2015 and has two one-year extension options. The loan bears interest at LIBOR plus 2.65%.

On December 5, 2011, we secured a $41.0 million loan for 4 Waterway Square and a $14.0 million loan for 9303 New Trails. The non-recourse mortgages mature on December 11, 2023 and have fixed interest rates of 4.88%.

On September 30, 2011, the Company closed on a $250.0 million first mortgage financing secured by the Ward Centers in Honolulu, Hawaii, that bears interest at LIBOR plus 2.50%. The loan matures on September 29, 2016, and $143.0 million of the principal balance was swapped to a 3.81% fixed rate for the term of the loan. The loan may be drawn to a maximum $250.0 million to fund capital expenditures at the property, provided that the outstanding principal balance cannot exceed 65.0% of the property’s appraised value and the borrowers are required to have a minimum 10.0% debt yield in order to draw additional loan proceeds under the facility. The loan also permits partial repayment during its term in connection with property releases for development.

On May 10, 2011, the Company closed a $29.0 million first mortgage financing secured by its office building located at 110 N. Wacker Drive in Chicago, Illinois and bearing interest at LIBOR plus 2.25%. At closing, the interest rate on the loan was swapped to a 5.21% fixed rate for the term of the loan. The loan matures on October 31, 2019 and its term is coterminous with the expiration of the first term of the existing tenant’s lease. The loan has an interest-only period through April 2015 and, thereafter, amortizes ratably to $12.0 million through maturity. The Company provided a $7.0 million repayment guarantee for the loan, which is reduced on a dollar for dollar basis during the amortization period.

On April 26, 2012, we closed on a 10 year, fixed rate loan with interest at 4.79% secured by 20/25 Waterway Avenue. The proceeds from the loan were $13.6 million.

As of March 31, 2012, $1.1 billion of land, buildings and equipment and developments in progress (before accumulated depreciation) have been pledged as collateral for our mortgages, notes and loans payable of which $7.0 million is recourse to HHC.

Special Improvement District Bonds

The Summerlin master planned community uses Special Improvement District bonds to finance certain common infrastructure. These bonds are issued by the municipalities and, although unrated, are secured by the assessments on the land and included in mortgages, notes and loan payable on the condensed consolidated balance sheets. They are tax exempt to the holders of the notes for federal income tax purposes. The majority of proceeds from each bond issued is held in a construction escrow and dispersed to us as infrastructure projects are completed, inspected by the municipalities and approved for reimbursement and, accordingly, the unspent proceeds of the Special Improvement District bonds have been classified as a receivable. The Summerlin master planned community pays the debt service on the bonds semi-annually, but receives reimbursement of all principal paid from most of the purchasers of its land; therefore, the asset and liability balances relating to the Special Improvement District bonds offset. In addition, as Summerlin sells land, the purchasers assume a proportionate share of the bond obligation.

As of March 31, 2012, the Company was in compliance with all of the financial covenants related to its debt agreements.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References + Details

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Mar. 31, 2012

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 8 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are primarily exposed to interest rate risks related to our variable interest debt, and we seek to manage this risk by utilizing interest rate derivatives. Our objectives in using interest rate derivatives are to add stability to interest costs by reducing our exposure to interest rate movements. To accomplish this objective and predictability, we primarily use interest rate swaps and caps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The outstanding derivatives at March 31, 2012 were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three months ended March 31, 2012, the amount of ineffectiveness recorded in earnings was insignificant.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. Over the next 12 months, we estimate that an additional $2.2 million will be reclassified as an increase to interest expense.

As of March 31, 2012, the Company had gross notional amounts of $172.0 million of interest rate swaps and a $100.0 million interest rate cap that were designated as cash flow hedges of interest risk. The fair value of the interest rate cap derivative was insignificant.

The table below presents the fair value of the Company’s derivative financial instruments which are included in accounts payable and accrued liabilities in the Condensed Consolidated Balance Sheets:

	March 31,			December 31,
	2012			2011
	Fair Value			Fair Value
	(In thousands)

Interest Rate Swaps	$	(4,166	)	$	(4,367	)
Total derivatives designated as hedging instruments	$	(4,166	)	$	(4,367	)

The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Income Statement:

	Three months ended March 31,						Three months ended March 31,
	2012			2011			2012			2011
Cash Flow Hedges	Amount of (Loss) Recognized in OCI			Amount of Gain (Loss) Recognized in OCI		Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings	Amount of (Loss) Reclassified from Accumulated OCI into Earnings			Amount of Gain or (Loss) Reclassified from Accumulated OCI into Earnings
	(In thousands)						(In thousands)

Interest Rate Swaps	$	(391	)	$	—	Interest Expense	$	(493	)	$	—
	$	(391	)	$	—		$	(493	)	$	—

- Definition

The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items.

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+ Details

INCOME TAXES

3 Months Ended

Mar. 31, 2012

INCOME TAXES

INCOME TAXES

NOTE 9 INCOME TAXES

We are taxed as a C corporation. One of our consolidated entities, Victoria Ward, Limited (“Ward”, substantially all of which is owned by us) elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the taxable year beginning January 1, 2002. To qualify as a REIT, Ward must meet a number of organizational and operational requirements, including requirements to distribute at least 90% of its ordinary taxable income and to distribute to stockholders or pay tax on 100% of capital gains and to meet certain asset and income tests. Ward has satisfied such REIT distribution requirements for 2011, and presently we intend to continue to operate Ward as a REIT.

As a REIT, Ward is ordinarily not subject to income taxes; however, Ward is required to make annual distributions to its stockholders, and the stockholders are taxed on these distributions.

Realization of a deferred tax benefit is dependent upon generating sufficient taxable income in future periods. Our net operating loss carry-forwards are currently scheduled to expire in subsequent years through 2032. Some of the net operating loss carry-forward amounts are subject to annual limitations under Section 382 of the Code. This annual limitation under Section 382 is subject to modification if a taxpayer recognizes what are called ‘‘built-in gain items.” It is possible that we could, in the future, experience a change in control pursuant to Section 382 that could put additional limits on the benefit of deferred tax assets.

As described in the Annual Report, pursuant to the Tax Matters Agreement, GGP has indemnified us from and against 93.75% of any and all losses, claims, damages, liabilities and reasonable expenses to which we become subject (the “Tax Indemnity Cap”), in each case solely to the extent directly attributable to certain taxes related to sales of certain assets in our Master Planned Communities segment prior to March 31, 2010, in an amount up to $303.8 million, plus interest and penalties related to these amounts so long as GGP controls the action in the Tax Court related to the dispute with the IRS. The unrecognized tax benefits and related accrued interest recorded through March 31, 2012 are primarily related to the taxes that are the subject of the Tax Indemnity Cap. We have recorded interest income receivable on the tax indemnity receivable in the amounts of $30.2 million and $28.0 million as of March 31, 2012 and December 31, 2011, respectively.

On May 6, 2011, GGP filed Tax Court petitions on behalf of the two former taxable REIT subsidiaries of GGP seeking a redetermination of federal income tax for the years 2007 and 2008. The petitions seek to overturn determinations by the IRS that the taxpayers were liable for combined deficiencies totaling $144.1 million. On October 20, 2011, GGP filed a motion in the United States Tax Court to consolidate the cases of the two former taxable REIT subsidiaries of GGP subject to litigation with the Internal Revenue Service due to the common nature of the cases’ facts and circumstances and the issues being litigated. The United States Tax Court granted the motion to consolidate. The litigation is currently in the discovery phase.

Unrecognized tax benefits recorded pursuant to uncertain tax positions were $101.4 million as of March 31, 2012 and December 31, 2011, excluding interest, none of which would impact our effective tax rate. Accrued interest related to these unrecognized tax benefits amounted to $30.5 million as of March 31, 2012 and $28.5 million as of December 31, 2011. We recognized an increase in interest expense related to the unrecognized tax benefits of $2.0 million for the three months ended March 31, 2012. Based on the expected outcome of existing examinations or examinations that may commence, or as a result of the expiration of the statute of limitations for specific jurisdictions, management does not believe that the unrecognized tax benefits, excluding accrued interest, for tax positions taken regarding previously filed tax returns will materially increase or decrease during the next twelve months.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph h
-Article 4

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 136, 172
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
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+ Details

STOCK-BASED PLANS

3 Months Ended

Mar. 31, 2012

STOCK-BASED PLANS

STOCK-BASED PLANS

NOTE 10 STOCK-BASED PLANS

Our stock based plans are described, and informational disclosures provided, in the notes to the Consolidated Financial Statements included in the Form 10-K for the year ended December 31, 2011. The following table summarizes our stock option plan activity:

	Stock Options		Weighted Average Exercise Price
Stock Options Outstanding at December 31, 2011	712,640		$	57.72
Granted	30,000		64.14
Forfeited	(13,700	)	62.55
Stock Options Outstanding at March 31, 2012	728,940		$	57.89

Options granted vest ratably over five years and expire ten years after the grant date and generally do not become exercisable until 2017.

During the first three months of 2012, there were no restricted common stock shares awarded, and as of March 31, 2012, 42,553 restricted common stock shares remained outstanding.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 123R
-Paragraph 64, 65, A240
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 93-6
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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-Number Topic 14

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+ Details

OTHER ASSETS AND LIABILITIES

3 Months Ended

Mar. 31, 2012

OTHER ASSETS AND LIABILITIES

OTHER ASSETS AND LIABILITIES

NOTE 11 OTHER ASSETS AND LIABILITIES

Prepaid Expenses and Other Assets

The following table summarizes the significant components of prepaid expenses and other assets.

	March 31,		December 31,
	2012		2011
	(In thousands)
Special Improvement District receivables	$	40,696	$	40,580
Other receivables	4,178		4,181
Federal income tax receivable	5,401		5,393
Prepaid expenses	7,995		6,507
Below-market ground leases	20,595		20,680
Security and escrow deposits	18,585		17,266
Above-market tenant leases	1,114		1,014
Uncertain tax position asset	12,633		11,935
In-place leases	11,411		11,865
Intangibles	3,000		3,074
Other	5,011		4,661
	$	130,619	$	127,156

Accounts Payable and Accrued Expenses

The following table summarizes the significant components of accounts payable and accrued expenses.

	March 31, 2012		December 31, 2011
	(In thousands)
Construction payable	$	8,194	$	8,923
Accounts payable and accrued expenses	37,035		45,078
Membership deposits	17,028		16,033
Above-market ground leases	2,709		2,748
Deferred gains/income	8,450		5,739
Accrued interest	2,493		2,747
Accrued real estate taxes	4,695		3,439
Tenant and other deposits	6,401		5,966
Insurance reserve	4,025		4,728
Accrued payroll and other employee liabilities	5,063		9,658
Interest rate swap	4,166		4,367
Other	13,685		15,978
	$	113,944	$	125,404

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2012

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

NOTE 12 COMMITMENTS AND CONTINGENCIES

In the normal course of business, from time to time, we are involved in legal proceedings relating to the ownership and operations of our properties. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material effect on our consolidated financial position, results of operations or liquidity.

We had outstanding letters of credit and surety bonds of $36.1 million as of March 31, 2012 and $41.6 million as of December 31, 2011. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.

On December 12, 2011, we entered into a non-binding Letter of Intent (“LOI”) with the New York City Economic Development Corporation (“EDC”) which will enable us to pursue redevelopment plans for the South Street Seaport. The EDC is the ground lessor and the LOI describes the business terms of future amendments to the ground lease, the first of which must be finalized by June 30, 2012. During the earlier of the construction period and 30 months, we will be entitled to a total $1.5 million rent reduction. We also must provide a completion guarantee to New York City for the project. We agreed to pay approximately $1.1 million of esplanade maintenance costs over a five-year period as consideration for entering into the LOI. This obligation will continue to exist regardless of whether the ground lease is amended.

See Note 9 for our obligations related to uncertain tax positions for disclosure of additional contingencies.

- Definition

The entire disclosure for commitments and contingencies.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Interpretation (FIN)
-Number 14
-Paragraph 3
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-Publisher FASB
-Name Accounting Standards Codification
-Topic 440
-SubTopic 10
-Section 50
-Paragraph 2
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-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6449706&loc=d3e16207-108621

+ Details

TRANSACTIONS WITH GGP AND WITH RELATED PARTIES

3 Months Ended

Mar. 31, 2012

TRANSACTIONS WITH GGP AND WITH RELATED PARTIES

TRANSACTIONS WITH GGP AND WITH RELATED PARTIES

NOTE 13 TRANSACTIONS WITH GGP AND WITH RELATED PARTIES

Prior to the Effective Date, we entered into a transition services agreement (the “TSA”) whereby GGP agreed to provide to us, on a transitional basis, certain specified services on an interim basis for various terms not exceeding 24 months following the Separation, subject to our right of earlier termination. Concurrently, we entered into a Reverse Transition Services Agreement (“RTSA”) whereby we agreed to provide GGP with certain income tax and accounting support services, also subject to earlier termination prior to its scheduled expiration of November 9, 2013. We incurred $0.2 million of expenses related to the TSA and we received negligible reimbursements under the RTSA for the three months ended March 31, 2011. No services have been provided under the TSA and RTSA for the three months ended March 31, 2012, and we do not expect to provide or incur any services in the future.

In addition, GGP is the sole tenant at our 110 N. Wacker office property. Under the 110 N. Wacker lease agreement, we recognized approximately $1.5 million of rental income from GGP and its subsidiaries for both the three months ended March 31, 2012 and 2011.

In January 2011, we entered into a Transition Agreement with TPMC Realty Services Group, Inc. (“TPMC”). David Weinreb, a director and our CEO, is the sole equity owner and the chief executive officer of TPMC and Grant Herlitz, our president, is the president of TPMC. The Transition Agreement provided for, among other things, certain mutual transactions and services that facilitated the continuity of Company management, the net value of which were not material for the three months ended March 31, 2011. Additionally, reflected in our general and administrative expense for the three months ended March 31, 2011 are reimbursements to TPMC of $0.9 million related to Mr. Weinreb’s employment agreement with us.

We also entered into a lease agreement for 3,253 square feet of office space in Los Angeles, California with an affiliate of TPMC, which commenced on May 1, 2011. Annual rental expense relating to the lease is approximately $111,965 per year and the lease expires in July 2016.

On January 31, 2011, we terminated a Management Services Agreement with Brookfield Advisors LP. Pursuant to the agreement which was executed on August 6, 2010. Brookfield Advisors LP provided us services that included strategic advice, project development oversight, financial planning, financing consultation, internal controls expertise and community and investor relations. This agreement provided for payments to Brookfield Advisors LP of $0.5 million per month.

- Definition

The entire disclosure for related party transactions, including the nature of the relationship(s), a description of the transactions, the amount of the transactions, the effects of any change in the method of establishing the terms of the transaction from the previous period, stated interest rate, expiration date, terms and manner of settlement per the agreement with the related party, and amounts due to or from related parties. If the entity and one or more other entities are under common ownership or management control and this control affects the operating results or financial position, disclosure includes the nature of the control relationship even if there are no transactions between the entities. Disclosure may also include the aggregate amount of current and deferred tax expense for each statement of earnings presented where the entity is a member of a group that files a consolidated tax return, the amount of any tax related balances due to or from affiliates as of the date of each statement of financial position presented, the principal provisions of the method by which the consolidated amount of current and deferred tax expense is allocated to the members of the group and the nature and effect of any changes in that method. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Article 4
-Section 08
-Paragraph k

Reference 2: http://www.xbrl.org/2003/role/presentationRef
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-Name Regulation S-X (SX)
-Number 210
-Article 3A
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 57
-Paragraph 1-4
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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+ Details

SEGMENTS

3 Months Ended

Mar. 31, 2012

SEGMENTS

SEGMENTS

NOTE 14 SEGMENTS

We have three business segments which offer different products and services. Our three segments are managed separately because each requires different operating strategies or management expertise and are reflective of our current management’s operating philosophies and methods. In addition, our current segments or assets within such segments could change in the future as development of certain properties commences or other operational or management changes occur. We do not distinguish or group our combined operations on a geographic basis. Furthermore, all operations are within the United States and no customer or tenant comprises more than 10% of revenues. Our reportable segments are as follows:

· Master Planned Communities — includes the development and sale of land, in large-scale, long-term community development projects in and around Las Vegas, Nevada; Houston, Texas; and Columbia, Maryland. In periods prior to July 1, 2011, this segment included certain commercial properties and other ownership interests owned by The Woodlands, and we had presented The Woodlands operations at our 52.5% proportionate economic share for segment reporting. Beginning July 1, 2011 when we acquired our partner’s 47.5% economic interest in The Woodlands, for segment reporting, we also presented The Woodlands historical financial information at 100% so that operating performance between periods is comparable.

· Operating Assets — includes commercial, mixed-use and retail properties currently generating revenues, many of which we believe there is an opportunity to redevelop or reposition the asset to increase operating performance.

· Strategic Developments — includes all properties held for development and redevelopment, including the current rental property operations (primarily retail and other interests in real estate at such locations), as well as our one residential condominium project located in Natick (Boston), Massachusetts.

The assets included in each segment as of March 31, 2012, are contained in the following chart:

[See the EDGAR documents for referenced chart details.]

As our segments 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 the business segments is Real Estate Property Earnings Before Taxes (“REP EBT”) which represents the operating revenues of the properties less property operating expenses, as further described below. Management believes that REP EBT provides useful information about the operating performance of all of our assets, projects and property.

REP EBT, as it relates to our business, is defined as net income (loss) from continuing operations excluding general and administrative expenses, corporate interest income and depreciation expense, benefit from income taxes, warrant liability gain (loss) and the effects of the previously mentioned items within our equity in earnings (loss) from Real Estate Affiliates. We present REP EBT because we use this measure, among others, internally to assess the core operating performance of our assets. We also present this measure because we believe certain investors use it as a measure of a company’s historical operating performance and its ability to service and incur debt. We believe that the inclusion of certain adjustments to net income (loss) from continuing operations to calculate REP EBT is appropriate to provide additional information to investors because REP EBT excludes certain non-recurring and non-cash items, which we believe are not indicative of our core operating performance. REP 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, it has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.

As more fully discussed in this report, on July 1, 2011, we acquired our partner’s interest in The Woodlands’ master planned community. We now own 100% of The Woodlands and consolidate its operations. As such, The Woodlands operating results for historical periods when this investment was a Real Estate Affiliate are now analyzed internally on a non-GAAP consolidation basis by management in order to provide management comparability between periods for analyzing operating results. Segment information presented herein has also been restated for the three months ended March 31, 2011, to reflect The Woodlands on a consolidation basis and provide comparability for all periods. Prior to July 1, 2011, we had presented the operations of our equity method Real Estate Affiliates using the non-GAAP proportionate share method for segment reporting purposes. Under this method, we had presented our share of the revenues and expenses of these Real Estate Affiliates aggregated with the revenues and expenses of consolidated or combined properties. We previously reported the proportionate method because our 52.5% economic interest in The Woodlands represented a significant portion of our Master Planned Community segment. The remaining Real Estate Affiliates, including equity investments owned by The Woodlands, primarily represent entities that own single assets rather than a large business such as The Woodlands; therefore, we no longer use the proportionate share method for any Real Estate Affiliates. Rather, we account for the results of our Real Estate Affiliates other than The Woodlands using the equity or cost method, as appropriate.

Segment operating results are as follows:

	Three Months Ended March 31, 2012
	Consolidated Properties			Real Estate Affiliates			Segment Basis
	(In thousands)
Master Planned Communities
Land sales	$	36,089		$	—		$	36,089
Builder price participation	813			—			813
Minimum rents	132			—			132
Other land revenues	3,485			—			3,485
Other rental and property revenues	16			—			16
Total revenues	40,535			—			40,535
Cost of sales - land	18,679			—			18,679
Land sales operations	7,489			—			7,489
Land sales real estate and business taxes	2,085			—			2,085
Rental property maintenance costs	4			—			4
Depreciation and amortization	2			—			2
Interest income	(70		)	—			(70		)
Interest expense (1)	(3,414		)	—			(3,414		)
Total expenses	24,775			—			24,775
MPC EBT	15,760			—			15,760

Operating Assets
Minimum rents	18,522			—			18,522
Tenant recoveries	5,830			—			5,830
Resort and conference center revenues	9,657			—			9,657
Other rental and property revenues	4,726			—			4,726
Total revenues	38,735			—			38,735
Rental property real estate taxes	2,619			—			2,619
Rental property maintenance costs	1,858			—			1,858
Resort and conference center operations	7,414			—			7,414
Other property operating costs	13,774			—			13,774
Depreciation and amortization	4,857			—			4,857
Interest income	(45		)	—			(45		)
Interest expense	3,346			—			3,346
Equity in Earnings from Real Estate Affiliates (2)	—			(2,677		)	(2,677		)
Total expenses	33,823			(2,677		)	31,146
Operating Assets EBT	4,912			2,677			7,589

Strategic Developments
Minimum rents	243			—			243
Tenant recoveries	34			—			34
Overage rent revenue	52			—			52
Condominium unit sales	134			—			134
Other land revenue	32			—			32
Total revenues	495			—			495

Condominium sales operations	117			—			117
Real estate taxes	1,219			—			1,219
Rental property maintenance costs	115			—			115
Other property operating costs	408			—			408
Depreciation and amortization	59			—			59
Interest expense	74			—			74
Total expenses	1,992			—			1,992
Strategic Developments EBT	(1,497		)	—			(1,497		)
REP EBT	$	19,175		$	2,677		$	21,852

(1) Negative interest expense relates to interest capitalized on debt assigned to our Operating Assets Segment.

(2) Includes the $2.4 million cash distribution from Summerlin Hospital Medical Center which is a Real Estate Affiliate accounted for using the cost method as described above.

	Three Months Ended March 31, 2011
	Consolidated Properties			Real Estate Affiliates			Segment Basis
	(In thousands)
Master Planned Communities
Land sales	$	23,392		$	21,408		$	44,800
Builder price participation	521			565			1,086
Minimum rents	—			7			7
Other land revenues	1,247			1,680			2,927
Total revenues	25,160			23,660			48,820
Cost of sales - land	15,436			11,490			26,926
Land sales operations	4,241			1,822			6,063
Land sales real estate and business taxes	1,511			1,007			2,518
Depreciation and amortization	—			23			23
Interest income	(1,165		)	(186		)	(1,351		)
Interest expense (1)	(2,526		)	(877		)	(3,403		)
Total expenses	17,497			13,279			30,776
Venture partner share of The Woodlands EBT	—			(4,931		)	(4,931		)
MPC EBT	7,663			5,450			13,113

Operating Assets
Minimum rents	16,507			1,400			17,907
Tenant recoveries	4,482			569			5,051
Resort and conference center revenues	—			8,665			8,665
Other rental and property revenues	1,899			2,866			4,765
Total revenues	22,888			13,500			36,388
Rental property real estate taxes	2,488			487			2,975
Rental property maintenance costs	1,356			131			1,487
Resort and conference center operations	—			6,701			6,701
Other property operating costs	8,372			3,914			12,286
Provision for doubtful accounts	163			(9		)	154
Depreciation and amortization	3,128			1,864			4,992
Interest income	(16		)	(1		)	(17		)
Interest expense	2,540			1,313			3,853
Equity in Earnings from Real Estate Affiliates (2)	—			(3,288		)	(3,288		)
Total expenses	18,031			11,112			29,143
Venture partner share of The Woodlands EBT	—			(702		)	(702		)
Operating Assets EBT	4,857			1,686			6,543

Strategic Developments
Minimum rents	213			—			213
Tenant recoveries	42			—			42
Condominium unit sales	3,764			—			3,764
Other rental and property revenues	1,034			—			1,034
Total revenues	5,053			—			5,053

Condominium unit cost of sales	2,980			—			2,980
Real estate taxes	986			—			986
Rental property maintenance costs	203			—			203
Other property operating costs	1,159			—			1,159
Depreciation and amortization	58			—			58
Total expenses	5,386			—			5,386
Strategic Developments EBT	(333		)	—			(333		)
REP EBT	$	12,187		$	7,136		$	19,323

(1) Negative interest expense relates to interest capitalized on debt assigned to our Operating Assets Segment.

(2) Includes the $3.9 million cash distribution from Summerlin Hospital Medical Center which is a Real Estate Affiliate accounted for using the cost method as described above.

The following reconciles REP EBT to GAAP-basis income (loss) from continuing operations:

	Three Months Ended March 31,
	2012			2011
	(In thousands)
Reconciliation of REP EBT to GAAP-basis income (loss) from continuing operations

Real estate property EBT:
Segment basis	$	21,852		$	19,323
Real Estate Affiliates	(2,677		)	(7,136		)
	19,175			12,187
General and administrative	(9,822		)	(5,017		)
Interest income	2,217			1,331
Interest expense	6			14
Warrant liability loss	(121,851		)	(126,045		)
Provision for income taxes	(3,784		)	(2,457		)
Equity in earnings from Real Estate Affiliates	2,677			5,513
Corporate depreciation	(140		)	(13		)
Net income (loss) from continuing operations	$	(111,522	)	$	(114,487	)

The following reconciles segment revenue to GAAP-basis consolidated and combined revenues:

	Three Months Ended March 31,
	2012		2011
	(In thousands)
Reconciliation of Segment Basis Revenues to GAAP Revenues

Master Planned Communities - Total Segment	$	40,535	$	48,820
Operating Assets - Total Segment	38,735		36,388
Strategic Developments - Total Segment	495		5,053
Total Segment revenues	79,765		90,261
Less: The Woodlands revenues	—		(37,160		)
Total revenues - GAAP basis	$	79,765	$	53,101

The assets by segment and the reconciliation of total segment assets to the total assets in the condensed consolidated balance sheets at March 31, 2012 and December 31, 2011 are summarized as follows:

	March 31,		December 31,
	2012		2011
	(In thousands)
Master Planned Communities	$	1,780,851	$	1,778,515
Operating Assets	860,163		869,186
Strategic Developments	196,100		189,807
Total segment assets	2,837,114		2,837,508
Corporate and other	553,174		557,641
Total assets	$	3,390,288	$	3,395,149

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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-Number 131
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+ Details