UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 6, 2017

THE HOWARD HUGHES CORPORATION

(Exact name of registrant as specified in its charter)

One Galleria Tower

13355 Noel Road, 22nd Floor

Dallas, Texas  75240

(Address of principal executive offices)

Registrant’s telephone number, including area code:  (214) 741-7744

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Item 2.02                   Results of Operations and Financial Condition

On November 6, 2017, The Howard Hughes Corporation (the “Company”) issued a press release announcing the Company’s financial results for the third quarter ended September 30, 2017. A copy of this press release is attached hereto as Exhibit 99.1.

The information contained in this Current Report on Form 8-K pursuant to this “Item 2.02 Results of Operations and Financial Condition” is being furnished.  This information shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section or shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, unless specifically identified therein as being incorporated by reference.

Item 7.01                   Regulation FD Disclosure.

On November 6, 2017, the Company issued supplemental information for the third quarter ended September 30, 2017. The supplemental information contains key information about the Company. The supplemental information is attached hereto as Exhibit 99.2 and has been posted on our website at www.howardhughes.com under the “Investors” tab.

The information contained in this Current Report on Form 8-K pursuant to this “Item 7.01 Regulation FD Disclosure” is being furnished.  This information shall not be deemed to be filed for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section or shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, unless specifically identified therein as being incorporated by reference.

Item 9.01                   Financial Statements and Exhibits.

(d)                                 Exhibits

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 6, 2017

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Exhibit 99.1

PRESS RELEASE

Contact Information:

David R. O’Reilly

Chief Financial Officer

(214) 741-7744

David.OReilly@howardhughes.com

THE HOWARD HUGHES CORPORATION® REPORTS THIRD QUARTER 2017 RESULTS

Dallas, TX, November 6, 2017 — The Howard Hughes Corporation® (NYSE: HHC) (the “Company”) announced operating results for the third quarter ended September 30, 2017. The financial statements, exhibits and reconciliations of non-GAAP measures in the attached Appendix and the Supplemental Information at Exhibit 99.2 provide further details of these results.

Third Quarter 2017 Highlights:

·                  Net income attributable to common stockholders was $10.5 million or $0.24 per diluted share for the three months ended September 30, 2017, as compared to $8.0 million, or $0.19 per diluted share, for the three months ended September 30, 2016.

·                  Funds From Operations (“FFO”) was $45.3 million or $1.05 per diluted share for the three months ended September 30, 2017, as compared to $65.7 million or $1.54 per diluted share for the three months ended September 30, 2016.

·                  Core FFO decreased to $60.1 million or $1.39 per diluted share for the three months ended September 30, 2017, as compared to $62.9 million or $1.47 per diluted share, for the three months ended September 30, 2016.

·                  Total NOI from operating assets was $37.5 million, an increase of $5.6 million or 17.6% compared to the third quarter of 2016.

·                  MPC segment revenue was $64.9 million, an increase of $12.2 million or 23.1% compared to the third quarter of 2016.

·                  Sold 52 condominiums at Ward Village, bringing total sales to 1,227 homes or 89% of the available 1,381 residences under construction.

·                  Continued construction on two office buildings in Summerlin: a 180,000 square foot office campus 100% pre-leased to Aristocrat Technologies, and Two Summerlin, an approximate 145,000 square foot Class A office building with a parking structure, which is 11% pre-leased.

·                  Executed 10-Year Employment Agreements with our CEO, David Weinreb, and our President, Grant Herlitz, and received in cash the $50 million purchase price of Mr. Weinreb’s warrants previously issued in the second quarter of 2017. We also issued to Mr. Herlitz a $2 million warrant in exchange for cash on October 2, 2017.

·                  Began closing on the sales of condominiums at Anaha, with 307 homes scheduled to close on or before December 31, 2017, and repaid the $195.3 million construction loan on Waiea and Anaha as of October 27, 2017.

·                  Announced on October 9, 2017 that ESPN will occupy 19,000 square feet of rentable space on the third floor of Pier 17 at the Seaport District in New York through a long-term lease that was executed with ESPN’s studio provider NEP Imaging Group, LLC. ESPN will use the space to broadcast its high profile daily shows from the Seaport District.

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·                  Announced the development of a new ballpark for our wholly owned Las Vegas 51s Triple-A professional baseball team and signed a 20-year, $80.0 million naming rights agreement for the future stadium with the Las Vegas Convention and Visitor’s Authority. The ballpark will be located in the Downtown Summerlin area and serve as another amenity for the rapidly growing retail and entertainment destination in the heart of Summerlin’s urban core.

·                  Announced plans to begin construction in the first quarter of 2018 on Three Merriweather in Downtown Columbia, a 12-story, Class A mixed-use building which is 50% pre-leased to a major corporate tenant. This development continues the transformation of Downtown Columbia into a unique live, work, play neighborhood.

·                  Subsequent to the end of the quarter, Howard County closed on the first $48 million tranche of up to $90 million tax increment funding (“TIF”) bonds in Columbia, Maryland. The TIF will provide for a variety of infrastructure improvements to the Merriweather District in Downtown Columbia, paving the way for the acceleration of up to 4.9 million square feet of development opportunities.

“As our third quarter results demonstrate, we continue to make substantial progress unlocking value throughout our portfolio across our three business segments. Despite the impact of Hurricane Harvey in Houston, we experienced consistent, steady demand for residential land in our MPC segment. We also continued to increase our operating asset NOI as our existing projects stabilize. We develop when demand warrants new construction, and accordingly, in the third quarter we added three new projects which helped drive an increase in our projected annual stabilized NOI by $17 million to $262 million, excluding the Seaport District and 110 N. Wacker redevelopment. In our Strategic Developments segment, we had our strongest quarter of sales at Ward Village without the launch of a new building as our vision for the community increasingly becomes a reality. We are now approximately 89% sold on our four buildings currently under construction,” said David R Weinreb, Chief Executive Officer. “Finally, we recently made two significant announcements that I believe will have a long term impact on two of our core assets. In the Seaport District, ESPN will be opening live broadcast studios in Pier 17, which will feature several high-profile daily shows. In Summerlin, we announced an $80 million naming rights deal for a new minor league ballpark in Downtown Summerlin for our Triple-A baseball team, the Las Vegas 51s. These two announcements help validate the vision for both the Seaport District and the Downtown Summerlin area and are symbolic of the momentum underway in these two developments.

Third Quarter Financial Results

Net income attributable to common stockholders for the three months ended September 30, 2017 was $10.5 million or $0.24 per diluted share, an increase of $2.5 million or $0.05 per diluted share from the third quarter of 2016 which primarily relates to higher revenues related to MPC land sales, offset by accelerated depreciation in our Operating Assets segment, $6.0 million in higher equity in earnings from joint ventures in 2016 as compared to the same period in 2017, and net losses in 2016 which did not recur. In 2016, net income attributable to common stockholders for the three months ended September 30, 2016 included a $35.7 million impairment for Park West and warrant liability loss of $7.3 million, offset by $27.1 million of gain from acquisition of a joint venture partner’s interest.

Net income attributable to common stockholders for the nine months ended September 30, 2017 was $19.3 million or $0.45 per diluted share, a decrease of $139.4 million from the nine months ended September 30, 2016, which is primarily due to a

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decrease of $70.2 million, net of tax in gains on sales of properties, including the sale of 80 South Street in 2016 and gains on acquisitions of joint venture partners’ interests in 2016, additional depreciation of $24.9 million, a reduction of $20.4 million in net income generated from condominium rights and unit sales, additional warrant liability losses of $21.8 million and a $46.4 million loss from redemption of senior notes, offset by a $35.7 million impairment for Park West in 2016 which did not recur and $13.8 million of increases in operating results at our MPC segment for the nine month period as compared to prior year.

Funds From Operations (“FFO”) was $45.3 million or $1.05 per diluted share, a decrease of $20.4 million or $0.49 per diluted share compared to the third quarter of 2016 which primarily relates to a $27.1 million gain on acquisition of a joint venture partner’s interest in 2016, offset by a warrant liability loss of $7.3 million in 2016. FFO for the nine month period ended September 30, 2017 was $92.2 million or $2.14 per diluted share, a decrease of $84.6 million or $2.00 per diluted share for the nine month period as compared to prior year primarily due to a decrease in gains on acquisition of joint venture partners’ interests of approximately $21.6 million, additional warrant liability losses of $21.8 million and a $46.4 million loss on redemption of senior notes due 2021.

Core FFO was $60.1 million or $1.39 per diluted share for the third quarter of 2017, a decrease of $2.8 million or $0.08 per diluted share compared to the same period in 2016 and $218.6 million or $5.07 per diluted share for the nine month period ended September 30, 2017, a decrease of $14.1 million or $0.38 per diluted share compared to the same period in 2016. The decreases in both periods were primarily due to a decline in condominium rights and unit sales under the percentage of completion method, offset by increases in the MPC and Operating Assets segment earnings driven primarily by revenue growth in those segments.

Adjusted FFO (“AFFO”) was $55.9 million or $1.29 per diluted share for the three months ended September 30, 2017, a decrease of $1.4 million or $0.05 per diluted share compared to 2016 primarily due to the changes as noted in Core FFO above as well as decreased tenant and capital improvements at Columbia Regional Retail and the Outlet Collection at Riverwalk. Adjusted FFO was $206.4 million or $4.79 per diluted share for the nine month period ended September 30, 2017, a decrease of $15.3 million or $0.40 per diluted share compared to the same period in 2016, consistent with the decrease in Core FFO combined with slight increases in Tenant and capital improvements and Leasing commissions expenditures related to the maintenance of our properties at Landmark Mall and 10-70 Columbia Corporate Center. Please reference FFO, Core FFO and AFFO as defined in the Appendix to this release.

Business Segment Operating Results

Operating Assets Segment Highlights

(a)         Adjusted Operating Assets EBT excludes non-cash depreciation and amortization, development-related marketing and demolition costs and is presented here as a useful metric for adjusted operating results for our real estate operating properties.

(b)         Total NOI from Operating Assets is comprised of Operating Assets NOI Excluding Properties Sold or In Redevelopment plus our pro-rata share of NOI — equity investees and Distributions from Summerlin Hospital Investment (our “income-producing Operating Assets”). Prior year comparative Total NOI is recast to conform to current year presentation and exclude the effect of properties sold or closed for redevelopment in either period. The Seaport — Historic Area/Uplands property was placed in service in the current year, with the remaining Seaport District assets still under development in our Strategic Developments segment, and the prior year NOI has been included for comparative purposes.

Operating Assets earnings before tax (“EBT”) improved in the three and nine month periods compared to the same periods in prior year primarily due to increases in hospitality revenues and other rental and property revenues as new properties were placed into service and an impairment in 2016 which did not recur, offset by accelerated depreciation of $10.1 million and $18.5 million for the three and nine months ended September 30, 2017.

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Adjusted Operating Assets EBT increased $0.8 million, or 4.0% to $21.8 million, compared to $21.0 million for the same three month period in 2016, primarily due to the growth in Operating Assets NOI primarily related to our retail, office, multi-family and hospitality properties, offset by higher interest expense as more properties are placed in service. Adjusted Operating Assets EBT increased $4.1 million, or 5.6% to $77.1 million for the nine months ended September 30, 2017, compared to $73.0 million for the same nine month period in 2016, primarily due to a $20.8 million increase in Consolidated Operating Assets NOI primarily related to our office and hospitality properties compared to 2016 as more properties are placed in service, offset by higher interest expense.

Net operating income (“NOI”) from our Operating Assets segment, increased $5.6 million and $20.7 million to $37.5 million and $121.3 million for the three and nine months ended September 30, 2017, respectively, over the comparable periods in 2016. The increases in NOI during these periods were primarily due to continued stabilization of our retail, office, multi-family and hospitality properties placed in service over the last 18 months. See further detail and discussion in the quarterly filing on Form 10 - Q for the period ended September 30, 2017 and in the Supplemental Information to this Earnings Release. For a reconciliation of Operating Assets EBT to Total NOI and Operating Assets EBT to GAAP-basis net income (loss), please refer to the Appendix contained in this Earnings Release.

Master Planned Communities Segment Highlights

Our MPC revenues fluctuate each period given the nature of the development and sale of land in these large scale, long-term projects, and therefore, we believe a better measurement of performance is the full year result instead of the quarterly result.

A summary of our MPC segment results for the three and nine months ended September 30, 2017 and 2016 are shown below:

Summary of MPC Residential Land Sales Closed for the Three Months Ended September 30,

Residential land sales closed for the three months ended September 30, 2017 increased $13.7 million or 43.1% to $45.5 million, compared to $31.8 million for the same period in 2016 primarily due to increased sales at Summerlin and Bridgeland. The velocity of new home sales at Bridgeland had an impact on increased homebuilder demand and, accordingly, the residential land sales velocity at Bridgeland. The increase in average price per acre on Summerlin’s land sales for the nine months ended September 30, 2017 are primarily due to the mix of superpads sold during that period.

Summary of MPC Residential Land Sales Closed for the Nine Months Ended September 30,

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Residential land sales closed for the nine months ended September 30, 2017 increased $19.1 million or 16.7% to $133.3 million, compared to $114.1 million for the same period in 2016 primarily due to increased land sales at Bridgeland and The Woodlands. As of September 30, 2017, there were two superpad sites at Summerlin totaling 56.9 acres and two custom lots under contract which are scheduled to close in the fourth quarter of 2017 for a total of $31.3 million. See the Appendix to this Earnings Release for a reconciliation from land sales closed to land sales revenue in the period.

Land development began at The Summit, our joint venture with Discovery Land, in the second quarter of 2015 and continues to progress. For the three and nine months ended September 30, 2017, 2 and 11 custom residential lots closed for $6.5 million and $34.9 million in revenue, respectively, of which we recognized $6.5 million and $21.6 million Equity in earnings in real estate and other affiliates, respectively, compared to 21 lots and 38 lots for $71.7 million and $119.8 million for the same periods in 2016. The significant number of lot closings in 2016 resulted from a backlog of sales contracts executed between the second quarter of 2015 and the second quarter of 2016 when lots were not yet available for sale. As of September 30, 2017, an additional 14 lots were under contract for $50.9 million.

Strategic Developments Segment Highlights

Strategic Developments segment EBT decreased for the three months ended September 30, 2017 primarily due to a decline in revenues at Waiea, which closed on the sale of most of its units in the fourth quarter of 2016, and a decline in revenues at Anaha, which is nearing completion as discussed below.

Strategic Developments segment EBT decreased for the nine months ended September 30, 2017 as compared to the nine month period in 2016 primarily due to the gain on sale from the 80 South Street Assemblage in Seaport of $140.5 million in 2016 as compared to a gain on sale of acreage within our Elk Grove Collection property of $32.2 million in 2017 as well as decreased revenue at Waiea, offset by increased revenue at Ae`o and Ke Kilohana. Opportunistic land sales such as these are unpredictable and typically do not recur as we occasionally sell land for commercial development only when we believe its use will not compete with our existing properties or our Strategic Developments strategy.

We have condominiums for sale in Ward Village across five projects, four of which are under construction: Waiea, Anaha, Ae`o, and Ke Kilohana. These four projects total 1,381 units, of which 1,227 or 88.8% were closed or under contract as of September 30, 2017, and 154 units under construction remain unsold. All development cost estimates presented herein are exclusive of land costs.

Ward Village Towers Under Construction as of September 30, 2017

(a)         Waiea opened and customers began occupying units in November 2016. We have closed on 158 units through November 3, 2017.

(b)         Anaha opened and customers began occupying units in October 2017. We have closed on 207 units through November 3, 2017.

As our condominium projects advance towards completion, revenue is recognized on qualifying sales contracts under the percentage of completion method. The increase in condominium rights and unit sales for the three months ended September 30, 2017 as compared to the same period in 2016 primarily relates to revenue recognized at our Ae`o and Ke Kilohana, offset by a decline in revenue at Waiea and at Anaha, which closed on a substantial number of units in October. The decrease in condominium rights and unit sales for the nine months ended September 30, 2017 as compared to the same period in 2016 primarily relates to the decline in revenue at Waiea, offset by increased revenue at Anaha, Ae`o and Ke Kilohana.

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For a more complete description of the status of our other developments under construction in the Seaport District, The Woodlands, Summerlin, Columbia and Ward Village, please refer to “Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-Q for the quarterly period ended September 30, 2017.

Balance Sheet and Other Quarterly Activity

As of September 30, 2017, our total consolidated debt equaled approximately 44.4% of our total assets. Our leverage ratio (debt to enterprise value, as defined in the Supplemental Information) was 39.9% as of September 30, 2017. We believe our low-leverage, with a focus on project specific financing, reduces our exposure to potential downturns and provides us with the ability to evaluate new opportunities. At September 30, 2017, we had approximately $601.9 million of cash on hand.

On October 27, 2017, we repaid the $195.3 million outstanding on our construction loan relating to Waiea and Anaha in conjunction with closing on the sales of units at Anaha.

On October 24, 2017, we exercised our one-year extension option on our $54.3 million Outlet Collection at Riverwalk facility which extended the maturity date to October 24, 2018.

On October 19, 2017, we closed on a construction loan totaling $64.6 million to be used for Aristocrat and Two Summerlin. The loan bears interest at Wall Street Journal Prime plus 0.40% with a maturity of October 19, 2022.

On September 13, 2017, we modified and extended our $311.8 million Downtown Summerlin facility with a $30.0 million paydown. The modified loan has a maximum facility of $275.9 million and bears interest at one-month LIBOR plus 2.15% with a maturity of September 13, 2020, with one, one-year extension option.

On August 11, 2017, we closed on a construction loan totaling $11.6 million for Kewalo Harbor, located in Honolulu, Hawai‘i, to be used for improvements to the harbor adjacent to our Ward Village development. The loan bears interest at one-month LIBOR plus 2.75% with a maturity of September 1, 2027. As of September 30, 2017, we had not drawn any proceeds under this loan.

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 14 states from New York to Hawai‘i. The Howard Hughes Corporation is traded on the New York Stock Exchange under HHC with major offices in New York, Columbia, MD, Dallas, Houston, Las Vegas and Honolulu. For additional information about HHC, visit www.howardhughes.com or find us on Facebook, Twitter, Instagram, and LinkedIn.

Safe Harbor Statement

We may make forward-looking statements in this and in other reports and presentations that we file or furbish with the Securities and Exchange Commission. In addition, our management may make forward-looking statements orally to analysts, investors, creditors, the media and others. Forward-looking statements include:

·      budgeted costs, future lot sales and estimates and projections of NOI and EBT;

·      forecasts of our future economic performance;

·      expected capital required for our operations and development opportunities at our properties;

·      expected performance of our MPC segment and other current income producing properties;

·      expected commencement and completion for property developments and timing of sales or rentals of certain properties;

·      estimates of our future liquidity, development opportunities, development spending and management plans; and

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·      descriptions of assumptions underlying or relating to any of the foregoing.

These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements to materially differ from any future results, performance and achievements expressed or implied by such forward-looking statements. These risk factors are described in our Annual Report and are incorporated herein by reference. Any factor could, by itself, or together with one or more other factors, adversely affect our business, results of operations or financial condition. There may be other factors currently unknown to us that we have not described in this press release or in our Annual Report that could cause results to differ from our expectations. These forward-looking statements present our estimates and assumptions as of the date of this press release. Except as may be required by law, we undertake no obligation to modify or revise any forward-looking statements to reflect events or circumstances occurring after the date of this release.

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THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

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THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

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Appendix — Reconciliations of Non-GAAP Measures

September 30, 2017

We use certain non-GAAP performance measures, in addition to the required GAAP presentations, as we believe these measures improve the understanding of our operational results and make comparisons of operating results among peer companies more meaningful. Management continually evaluates the usefulness, relevance, limitations, and calculation of the Company’s reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change. The non-GAAP financial measures used herein are Adjusted Operating Assets segment Earnings before tax (“EBT”), Net operating income (“NOI”), MPC Land Sales Closed, Funds from operations (“FFO”), Core funds from operations (“Core FFO”), and Adjusted funds from operations (“AFFO”).

Because 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 EBT. EBT, as it relates to each business segment, represents the revenues less expenses of each segment, including interest income, interest expense and Equity in earnings of real estate and other affiliates. EBT excludes corporate expenses and other items that are not allocable to the segments. We present EBT because we use this measure, among others, internally to assess the core operating performance of our assets. However, EBT should not be considered as an alternative to GAAP net income.

When a development property is placed in service in our Operating Assets segment, depreciation is calculated for the property ratably over the estimated useful lives of each of its components; however, most of our recently developed properties do not reach stabilization until 12 to 36 months after being placed in service due to the timing of tenants taking occupancy and subsequent leasing of remaining unoccupied space during that period. As a result, operating income, EBT and net income will not reflect the ongoing earnings potential of operating assets newly placed in service during this transition period to stabilization. Accordingly, we calculate Adjusted Operating Assets EBT, which excludes depreciation and amortization and development-related demolition and marketing costs and provision for impairment, when applicable, as they do not represent operating costs for stabilized real estate properties. The following table reconciles Adjusted Operating Assets EBT to Operating Assets EBT:

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NOI

We believe that NOI is a useful supplemental measure of the performance of our Operating Assets portfolio 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 rental and occupancy rates and operating costs. We define NOI as operating revenues (rental income, tenant recoveries and other revenue) less operating expenses (real estate taxes, repairs and maintenance, marketing and other property expenses, including our share of NOI from equity investees). NOI excludes straight-line rents and amortization of tenant incentives, net interest expense, ground rent amortization, demolition costs, amortization, depreciation, and development-related marketing. All management fees have been eliminated for all internally-managed properties. We use NOI to evaluate our operating performance on a property-by-property basis because NOI allows us to evaluate the impact that factors, which vary by property, such as lease structure, lease rates and tenant base have on our operating results, gross margins and investment returns. Although we believe that NOI provides useful information to investors about the performance of our Operating Assets, due to the exclusions noted above, NOI should only be used as an additional measure of the financial performance of the assets of this segment of our business and not as an alternative to GAAP net income (loss). For reference, and as an aid in understanding our computation of NOI, a reconciliation of Operating Assets NOI to Operating Assets EBT has been presented in the table below. Variances between years in NOI typically result from changes in rental rates, occupancy, tenant mix and operating expenses. Please refer to our Operating Assets NOI by asset class and Operating Assets EBT in the Supplemental Information for the three and nine months ended September 30, 2017 and 2016. Below is a reconciliation from NOI to EBT for the Operating Assets segment.

Reconciliation of MPC Land Sales Closed to GAAP Land Sales Revenue

The following table reconciles Total residential and commercial land sales closed in the three and nine months ended September 30, 2017 and 2016, respectively, to Total land sales revenue the three and nine months ended September 30, 2017 and 2016, respectively. Total net recognized (deferred) revenue represents revenues on sales closed in prior periods where revenue was previously deferred and met criteria for recognition in the current periods, offset by revenues deferred on sales closed in the current period.

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FFO, Core FFO, and Adjusted FFO (AFFO)

FFO is defined by the National Association of Real Estate Investment Trusts (NAREIT) as net income calculated in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization and impairment charges (which we believe are not indicative of the performance of our operating portfolio). We calculate FFO in accordance with NAREIT’s definition. Since FFO excludes depreciation and amortization and gains and losses from depreciable property dispositions, and impairments, it can provide a performance measure that, when compared year over year, reflects the impact on operations from trends in land sales prices, occupancy rates, rental rates, operating costs, acquisition and development activities, and financing costs. This provides a perspective of our financial performance not immediately apparent from net income determined in accordance with GAAP. Core FFO is calculated by adjusting FFO to exclude the impact of certain non-cash and/or nonrecurring income and expense items, as set forth in the calculation below. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FFO serves as a useful, supplementary measure of the ongoing operating performance of our core operations, and we believe it is used by investors in a similar manner. Finally, AFFO adjusts our Core FFO operating measure to deduct cash spent on recurring tenant improvements and capital expenditures of a routine nature as well as leasing commissions to present an adjusted measure of Core FFO. Core FFO and AFFO are non-GAAP and non-standardized measures and may be calculated differently by other peer companies.

While FFO, Core FFO, AFFO and NOI are relevant and widely used measures of operating performance of real estate companies, they do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance. FFO, Core FFO, AFFO, and NOI do not purport to be indicative of cash available to fund our future cash requirements. Further, our computations of FFO, Core FFO AFFO and NOI may not be comparable to those reported by other real estate companies. We have included a reconciliation of FFO, Core FFO, and AFFO to GAAP net income below. Non-GAAP financial measures should not be considered independently, or as a substitute, for financial information presented in accordance with GAAP.

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