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Quarterly Results

Q4 2021
The Howard Hughes Corporation® Reports Fourth Quarter 2021 Results

Outstanding fourth quarter performance punctuates strongest year in HHC's 11-year history with record-breaking annual results across virtually every segment of the business

HOUSTON, Feb. 28, 2022 /PRNewswire/ -- The Howard Hughes Corporation® (NYSE: HHC) (the "Company," "HHC" or "we") announced today operating results for the fourth quarter ended December 31, 2021. The financial statements, exhibits and reconciliations of non-GAAP measures in the attached Appendix and the Supplemental Information, as available through the Investors section of our website, provide further detail of these results.

 

Full Year 2021 Highlights Included:

 

  • Reported full-year net income of $56.1 million, or $1.03 per diluted share.
  • Total Operating Asset net operating income (NOI), including contribution from equity investments, totaled $226.5 million in 2021, an 18.6% year-over-year increase. The strong performance of our Operating Asset portfolio was largely driven by recovery in retail, leasing volumes at our newly constructed multi-family properties, and a resurgence at Las Vegas Ballpark®.
  • Master Planned Community (MPC) earnings before taxes (EBT) totaled $316.6 million in 2021, the highest amount in the history of the Company and a 51.2% year-over-year increase, attributed to outsized land sales, particularly in Summerlin®.
  • Completed construction and closed on the sale of 663 units during the fourth quarter at Ward Village's fifth tower—'A'ali'i—generating $453.3 million in net revenue. Sales momentum for condos at our towers under-construction—Kō'ula and Victoria Place—and our latest tower in pre-sales—The Park Ward Village—remains at a record pace with 603 units contracted to sell in 2021. The Park Ward Village alone has contracted 459 units since launching pre-sales in July 2021, representing 84.2% of total units.
  • Acquired Douglas Ranch in October 2021—a fully entitled, "shovel-ready" MPC in Phoenix's West Valley spanning nearly 37,000 acres for $600 million.
  • Repurchased 1,023,284 shares of common stock funded with $96.6 million of cash on hand at an average price of $94.42 per share.
  • Completed the sale of Century Park in December 2021—a 63-acre, 1.3 million-square-foot office campus in West Houston's Energy Corridor—generating net proceeds of $25.0 million. In 2021, HHC sold five non-core assets, resulting in $195.6 million of net proceeds after debt repayment.

 

"We produced outstanding results during the fourth quarter which propelled HHC's full-year results to unprecedented levels in 2021," said David R. O'Reilly, Chief Executive Officer of The Howard Hughes Corporation. "Our performance over the past year is a clear indication that the walkable, amenity-rich communities we are creating are where today's families and educated workforce want to live, work, and play, and where leading corporations want to locate. All of our segments met or exceeded guidance for the full year, and we expect this momentum to carry into 2022 due to the strong market dynamics that exist in our communities.

"Our MPCs saw a 51% year-over-year increase in earnings in 2021 as demand for residential land from homebuilders remained exceptionally strong. Lot supply is at all-time lows in the Houston and Las Vegas regions while demand continues to accelerate due to the influx of residents leaving high-density cities. This imbalance leaves HHC well-positioned to continue its delivery of strong land sales in 2022, which will include contracting on over 1,000 lots at Douglas Ranch—HHC's latest MPC, acquired in October 2021.

"Operating Asset NOI in 2021 climbed to its highest level on record, rising 19% compared to 2020, fueled by the rapid lease-up of new multi-family product, continued improvements in retail collections, and a resurgence of activity at Las Vegas Ballpark following no Minor League Baseball season in 2020. These results demonstrate the robust demand we are seeing across the portfolio which will be met by additional product with over 2 million square feet of new development currently underway.

"It was an incredible year for condo sales at Ward Village, which achieved the highest sales volume in the community's history. During the year, we completed construction on Ward Village's fifth mixed-use tower, 'A'ali'i; made substantial progress at our two towers under construction, Kō'ula and Victoria Place; and launched pre-sales for the community's eighth and ninth condo towers, The Park Ward Village and Ulana Ward Village.

"Despite the impacts of COVID-19, supply constraints, and a tight labor market, the Seaport experienced greatly improved results and displayed remarkable resilience as evidenced by the 68% increase in visitors at Pier 17 when compared to pre-pandemic levels in 2019. With the addition of new restaurants and experiences—including the soon to be opened Tin Building—the Seaport should continue its reemergence as a vibrant Manhattan destination.

"The results of 2021 were achieved while reducing G&A costs by $40 million, or 33% from our pre-COVID run rate as we continue to streamline our business and focus our efforts on delivering maximized risk-adjusted returns for our shareholders. Our communities are well positioned to continue generating strong results over the long term and we look forward to another prosperous year in 2022."

Click Here : Fourth Quarter 2021 Howard Hughes Quarterly Spotlight

Full-Year Highlights

Total Company

  • Net income increased to $56.1 million, or $1.03 per diluted share, in 2021, compared to a net loss of $26.2 million, or $0.50 per diluted share, in 2020, due to strong operating performance from MPCs, Operating Assets and Ward Village condo sales, coupled with lower general and administrative (G&A) costs compared to the prior year.
  • The robust financial results produced in 2021 included Operating Asset NOI of $226.5 million, a $35.4 million increase; MPC EBT of $316.6 million, a $107.2 million increase; and condominium profit of $120.9 million, a $130.0 million increase, all compared to the prior year.
  • Maintained a strong balance sheet with $843.2 million of cash on hand and limited near-term debt maturities after taking advantage of the capital markets and terming out a significant portion of our debt at lower rates. The strength of HHC's balance sheet has allowed us to deploy significant amounts of capital in 2021 including our acquisition of Douglas Ranch, share buybacks, and the ability to continue unlocking value through the development of new projects across the portfolio.
  • Sold five non-core assets in 2021, resulting in $195.6 million of net proceeds. Since the fourth quarter of 2019, HHC has disposed of 13 non-core assets totaling approximately $401.0 million of net proceeds after debt repayment.

Operating Assets

  • Total Operating Assets NOI, including contribution from equity investments, totaled $226.5 million in 2021, an 18.6% increase compared to $191.1 million in the prior year.
  • Retail NOI increased 43.9% year-over-year to $57.6 million due to higher rent collections which climbed to 88.8% during the fourth quarter of 2021 and the receipt of one-time payments related to COVID-19 rent deferrals received throughout the year.
  • Las Vegas Ballpark generated $6.0 million of NOI as the Las Vegas Aviators® were able to host a full Minor League Baseball season compared to a $3.6 million loss in 2020 due to no Minor League Baseball season as a result of COVID-19.
  • Multi-family NOI increased 75.0% to $32.9 million compared to 2020 due to accelerated lease-up in our latest developments, including Two Lakes Edge, The Lane at Waterway and Juniper Apartments, which opened in 2020 and are already stabilized at 100%, 99% and 97% leased, respectively.
  • Office NOI decreased 3.9% year-over-year to $109.8 million largely due to the expiration of a short-term lease in June 2020 at 9950 Woodloch Forest.
  • In September 2021, we closed on the sale of three hotels based in The Woodlands for $252.0 million, generating $119.7 million of net proceeds after debt repayment. In 2021, these assets generated $5.0 million of NOI.

MPC

  • MPC EBT totaled $316.6 million in 2021, a 51.2% increase compared to EBT of $209.4 million in 2020.
  • The increase in EBT from the prior year is attributed to significant land sales at our MPCs in Las Vegas and Houston. In Summerlin alone, we closed on a large superpad spanning 216 acres which delivered $135 million in revenue during December 2021.
  • At The Summit—our joint-venture, private community with Discovery Land in Summerlin—we experienced an accelerated pace in lot sales and condo closings, delivering $59.4 million in earnings to HHC. This is in comparison to earnings of $17.8 million in 2020.
  • The price per acre of residential land across all our communities increased 2.0% in 2021 to $583,000 per acre compared to $573,000 per acre in the prior year. The price per acre is based on the weighted average of residential acreage sold across all of HHC's various MPCs during 2021.
  • New home sales—a leading indicator of future land sales—increased to 2,761 homes in 2021, eclipsing 2020 new home sales of 2,724.

Strategic Developments

  • Completed construction at 'A'ali'i and closed on 663 units during the fourth quarter of 2021, totaling $453.3 million in net revenue. As of the end of the fourth quarter, 'A'ali'i was 89.6% sold.
  • Contracted to sell 144 units at our two towers under construction—Kō'ula and Victoria Place—which ended the year 89.4% and 99.1% pre-sold, respectively.
  • Our latest tower in pre-sales, The Park Ward Village, launched its campaign in July and ended the year 84.2% pre-sold. The sales pace for this tower has been so strong that The Park Ward Village is now Ward Village's fastest-selling tower since inception—surpassing Victoria Place which held the previous record.
  • In 2021, we began construction on 319,000 square feet of office and retail space, 1,124 multi-family units and 349 condominium units across several regions including The Woodlands, Bridgeland, Downtown Columbia, Summerlin, and Ward Village.
  • In March 2022, Ward Village will advance the lottery for Ulana Ward Village, our ninth condominium project, which is a mixed-use residence adjacent to the new Ka Laʻi o Kukuluāeʻo Park that will offer 696 homes reserved for qualified Hawaiʻi residents.

Seaport

  • The Seaport reported an $18.2 million loss in NOI in 2021, a 4.4% decline in NOI compared to the prior year.
  • Despite the decline in NOI, total foot traffic at Pier 17 increased 68% in 2021 when compared to pre-pandemic foot traffic in 2019.
  • The Rooftop at Pier 17® was the site of the summer and winter versions of The Greens, the 2021 summer concert series as well as several major events including ESPN's The ESPYS.
  • In 2021, we opened two new restaurants by Andrew Carmellini—Carne Mare and Mister Dips—and rebranded David Chang's Bar Wayō to Ssäm Bar, all of which are located at Pier 17. These openings further establish the Seaport as a culinary hot spot which continues to attract attention and improve the Seaport's operating results despite the tight labor market and supply constraints that exist today.
  • Construction of the core and shell of the Tin Building is complete and the marketplace is expected to have its grand opening in the first half of 2022.
  • In December 2021, we obtained final approval from the City of New York to transform the one-acre parking lot at 250 Water Street into a mixed-use development that will include multi-family rental units, office and retail space.
  • Also in December 2021, we secured a ground lease extension at the Seaport for an additional 48 years from its current expiration in 2072 until 2120.

Financing Activity

  • In 2021, we closed on $2.1 billion of permanent financings and $628 million of construction financings to support development spending at our latest projects actively under construction.
  • Executing on nearly $3 billion in financings not only extended the term of our maturities but also demonstrated our ability to take advantage of what has been a historically low rate environment.
  • The most notable financing closed in 2021 was February's issuance of the two-tranche $1.3 billion Senior Notes due 2029 and 2031. Proceeds were used to repurchase our $1 billion Senior Notes due 2025 and to repay all of the approximately $280 million outstanding under our loans for 1201 Lake Robbins and The Woodlands Warehouse.

Full-Year 2022 Guidance

  • Operating Asset NOI is projected to experience strong leasing activity, predominately at our latest multi-family developments that will be offset by no hospitality NOI in 2022 and less non-recurring income received from COVID-related tenant payments compared to 2021. We expect 2022 Operating Asset NOI to decline 0% to 2% year over year. 
  • MPC EBT range is projected to remain higher compared to the earnings we have generated on average over 2017 to 2020. In 2021, we experienced outsized land sales, particularly due to the closing of a 216-acre superpad in Summerlin. Superpad sales of this size do not occur every year which is reflective of the projected EBT decline in 2022. We expect 2022 MPC EBT to decline 25% to 30% year over year.
  • Condo sales are projected to range between $650 million to $700 million, with gross margins between 26.5% to 27.5%. Projected condo sales are driven by the closing of units at Kō'ula during the third quarter of 2022 and additional closings at 'A'ali'i which ended 2021 90% sold.
  • Cash G&A is projected to range between $75 million to $80 million, which excludes anticipated non-cash stock compensation of $10 million to $15 million.

Conference Call & Webcast Information

The Howard Hughes Corporation will host its investor conference call on Tuesday, March 1, 2022, at 9:00 a.m. Central Standard Time (10:00 a.m. Eastern Standard Time) to discuss fourth quarter 2021 results. To participate, please dial 1-877-883-0383 within the U.S., 1-866-605-3850 within Canada, or 1-412-902-6506 when dialing internationally. All participants should dial in at least five minutes prior to the scheduled start time, using 1436938 as the passcode. A live audio webcast and Quarterly Spotlight will also be available on the Company's website (www.howardhughes.com ). In addition to dial-in options, institutional and retail shareholders can participate by going to app.saytechnologies.com/howardhughes. Shareholders can email hello@saytechnologies.com  for any support inquiries.

We are primarily focused on creating shareholder value by increasing our per-share net asset value. Often, the nature of our business results in short-term volatility in our net income due to the timing of MPC land sales, recognition of condominium revenue and operating business pre-opening expenses, and, as such, we believe the following metrics summarized below are most useful in tracking our progress towards net asset value creation.

   

Year Ended December 31,

 

Three Months Ended December 31,

$ in thousands

 

2021

 

2020

 

$ Change

% Change

 

2021

 

2020

 

$ Change

% Change

Operating Assets NOI

(1)

                         

Office

$  109,838

 

$  114,303

 

$     (4,465)

(4)%

 

$     29,909

 

$     28,205

 

$      1,704

6%

Retail

57,571

 

40,019

 

17,552

44%

 

14,639

 

9,998

 

4,641

46%

Multi-family

32,895

 

18,798

 

14,097

75%

 

10,542

 

6,512

 

4,030

62%

Other

13,492

 

2,528

 

10,964

434%

 

226

 

1,271

 

(1,045)

(82)%

Redevelopments and Dispositions

4,870

 

3,938

 

932

24%

 

48

 

(237)

 

285

120%

Operating Assets NOI

218,666

 

179,586

 

39,080

22%

 

55,364

 

45,749

 

9,615

21%

Company's share NOI (a)

7,836

 

11,474

 

(3,638)

(32)%

 

2,053

 

1,362

 

691

51%

Total Operating Assets NOI

(b)

$  226,502

 

$  191,060

 

$    35,442

19%

 

$     57,417

 

$     47,111

 

$    10,306

22%

                           

Projected stabilized NOI Operating Assets ($ in millions)

$      368.3

 

$      364.8

 

$          3.5

1%

             
                           

MPC

                         

Acres Sold - Residential

565

 

377

 

188

50%

 

333

 

160

 

173

108%

Acres Sold - Commercial

67

 

17

 

50

296%

 

40

 

 

40

100%

Price Per Acre - Residential

$         583

 

$         574

 

$             9

2%

 

$          568

 

$          614

 

$          (46)

(7)%

Price Per Acre - Commercial

$         254

 

$         130

 

$         124

95%

 

$          174

 

$            —

 

$         174

100%

MPC EBT

(1)

$  316,607

 

$  209,423

 

$   107,184

51%

 

$   129,301

 

$     86,494

 

$    42,807

49%

                           

Seaport NOI

(1)

                         

Landlord Operations - Historic District & Pier 17

$   (15,027)

 

$     (8,526)

 

$     (6,501)

(76)%

 

$      (3,801)

 

$      (3,032)

 

$        (769)

(25)%

Multi-family

(5)

 

290

 

(295)

(102)%

 

(89)

 

30

 

(119)

(397)%

Hospitality

 

(12)

 

12

100%

 

 

 

100%

Managed Businesses - Historic District & Pier 17

(1,057)

 

(5,638)

 

4,581

81%

 

(1,064)

 

(645)

 

(419)

(65)%

Events, Sponsorships & Catering Business

(1,474)

 

(2,588)

 

1,114

43%

 

(565)

 

602

 

(1,167)

(194)%

Seaport NOI

(17,563)

 

(16,474)

 

(1,089)

(7)%

 

(5,519)

 

(3,045)

 

(2,474)

(81)%

Company's share NOI (a)

(592)

 

(911)

 

319

35%

 

(272)

 

(124)

 

(148)

(119)%

Total Seaport NOI

$   (18,155)

 

$   (17,385)

 

$        (770)

(4)%

 

$      (5,791)

 

$      (3,169)

 

$     (2,622)

83%

                           

Strategic Developments

                         

Condominium units contracted to sell (c)

183

 

304

 

(121)

(40)%

 

24

 

28

 

(4)

(14)%

   

(a) 

Includes Company's share of NOI from non-consolidated assets

(b) 

Excludes properties sold

(c) 

Includes units at our buildings that are open or under construction as of December 31, 2021. Prior period activity excludes two purchaser defaults at Kō'ula in the second quarter of 2020. Additionally, as construction at Victoria Place began in February 2021, units under contract for the three months and year ended December 31, 2020, were adjusted to include units contracted at Victoria Place, which were previously excluded from this metric as construction had not yet commenced. This adjustment includes 19 units for the three months ended December 31, 2020, and 268 units for the year ended December 31, 2020.

 

Financial Data

(1)

See the accompanying appendix for a reconciliation of GAAP to non-GAAP financial measures and a statement indicating why management believes the non-GAAP financial measure provides useful information for investors.

About The Howard Hughes Corporation®

The Howard Hughes Corporation owns, manages and develops commercial, residential and mixed-use real estate throughout the U.S. Its award-winning assets include the country's preeminent portfolio of master planned communities, as well as operating properties and development opportunities including: the Seaport in New York City; Downtown Columbia ®, Maryland; The Woodlands ® , The Woodlands Hills®, and Bridgeland ® in the Greater Houston, Texas area; Summerlin ® , Las Vegas; Ward Village ® in Honolulu, Hawai'i; and Douglas Ranch in Phoenix. The Howard Hughes Corporation's portfolio is strategically positioned to meet and accelerate development based on market demand, resulting in one of the strongest real estate platforms in the country. Dedicated to innovative place making, the Company is recognized for its ongoing commitment to design excellence and to the cultural life of its communities. The Howard Hughes Corporation is traded on the New York Stock Exchange as HHC. For additional information visit www.howardhughes.com

The Howard Hughes Corporation has partnered with Say, the fintech startup reimagining shareholder communications, to allow investors to submit and upvote questions they would like to see addressed on the Company's fourth quarter earnings call. Say verifies all shareholder positions and provides permission to participate on the March 1, 2022 call, during which the Company's leadership will be answering top questions. Utilizing the Say platform, The Howard Hughes Corporation elevates its capabilities for responding to Company shareholders, making its investor relations Q&A more transparent and engaging.

Safe Harbor Statement

Certain statements contained in this press release may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical facts, including, among others, statements regarding the Company's future financial position, results or performance, are forward-looking statements. Those statements include statements regarding the intent, belief, or current expectations of the Company, members of its management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "likely," "may," "plan," "project," "realize," "should," "transform," "will," "would," and other statements of similar expression. Forward-looking statements are not a guaranty of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements. Many of these factors are beyond the Company's abilities to control or predict. Some of the risks, uncertainties and other important factors that may affect future results or cause actual results to differ materially from those expressed or implied by forward-looking statements include: (i) the impact of the COVID-19 pandemic on the Company's business, tenants and the economy in general, including the measures taken by governmental authorities to address it; (ii) general adverse economic and local real estate conditions; (iii) potential changes in the financial markets and interest rates; (iv) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business; (v) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms, if at all; (vi) ability to compete effectively, including the potential impact of heightened competition for tenants and potential decreases in occupancy at our properties; (vii) ability to successfully dispose of non-core assets on favorable terms, if at all; (viii) ability to successfully identify, acquire, develop and/or manage properties on favorable terms and in accordance with applicable zoning and permitting laws; (ix) changes in governmental laws and regulations; (x) increases in operating costs, including construction cost increases as the result of trade disputes and tariffs on goods imported in the United States; (xi) lack of control over certain of the Company's properties due to the joint ownership of such property; (xii) impairment charges; (xiii) the effects of geopolitical instability and risks such as terrorist attacks and trade wars; (xiv) the effects of natural disasters, including floods, droughts, wind, tornadoes and hurricanes; (xv) the inherent risks related to disruption of information technology networks and related systems, including cyber security attacks; and (xvi) the ability to attract and retain key employees. The Company refers you to the section entitled "Risk Factors" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the Company's filings with the Securities and Exchange Commission. Copies of each filing may be obtained from the Company or the Securities and Exchange Commission. The risks included here are not exhaustive and undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to the Company, its management, or persons acting on their behalf are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless otherwise required by law.

Financial Presentation

As discussed throughout this release, 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. We continually evaluate the usefulness, relevance, limitations and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change. A non-GAAP financial measure used throughout this release is net operating income (NOI). We provide a more detailed discussion about this non-GAAP measure in our reconciliation of non-GAAP measures provided in the appendix in this earnings release.

Media Contact
The Howard Hughes Corporation
Cristina Carlson, 646-822-6910
Senior Vice President, Head of Corporate Communications
cristina.carlson@howardhughes.com

Investor Relations
The Howard Hughes Corporation
John Saxon, 281-929-7808
Chief of Staff
john.saxon@howardhughes.com

Carlos A. Olea, 281-929-7751
Chief Financial Officer
carlos.olea@howardhughes.com

 

THE HOWARD HUGHES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

 
 

Year Ended
December 31,

 

Three Months Ended
December 31,

thousands except per share amounts

2021

 

2020

 

2021

 

2020

REVENUES

             

Rental revenue

$  369,330

 

$  323,182

 

$    99,740

 

$    81,660

Master Planned Communities land sales

346,217

 

233,044

 

194,093

 

96,991

Condominium rights and unit sales

514,597

 

1,143

 

464,406

 

958

Other land, rental and property revenues

152,619

 

105,048

 

31,637

 

22,956

Builder price participation

45,138

 

37,072

 

15,800

 

11,136

 Total revenues

1,427,901

 

699,489

 

805,676

 

213,701

               

EXPENSES

             

Operating costs

293,999

 

226,791

 

74,133

 

58,028

Master Planned Communities cost of sales

153,630

 

101,505

 

89,702

 

42,945

Condominium rights and unit cost of sales

414,199

 

108,229

 

345,714

 

2,893

Rental property real estate taxes

55,398

 

52,815

 

12,879

 

8,590

Provision for (recovery of) doubtful accounts

(459)

 

6,009

 

1,485

 

1,055

Demolition costs

355

 

 

163

 

Development-related marketing costs

10,313

 

8,166

 

2,252

 

1,625

General and administrative

81,990

 

109,402

 

20,857

 

24,647

Depreciation and amortization

205,100

 

217,467

 

49,705

 

56,472

 Total expenses

1,214,525

 

830,384

 

596,890

 

196,255

               

OTHER

             

Provision for impairment

(13,068)

 

(48,738)

 

 

Gain (loss) on sale or disposal of real estate and other assets, net

53,079

 

59,942

 

(7,395)

 

13,710

Other income (loss), net

(11,515)

 

130

 

763

 

923

 Total other

28,496

 

11,334

 

(6,632)

 

14,633

               

Operating income (loss)

241,872

 

(119,561)

 

202,154

 

32,079

               

Interest income

107

 

2,368

 

23

 

460

Interest expense

(130,036)

 

(132,257)

 

(32,831)

 

(33,540)

Gain (loss) on extinguishment of debt

(38,014)

 

(13,169)

 

(471)

 

(3)

Equity in earnings (losses) from real estate and other affiliates

(9,852)

 

271,099

 

(25,667)

 

1,464

Income (loss) before income taxes

64,077

 

8,480

 

143,208

 

460

Income tax expense (benefit)

15,153

 

11,653

 

31,859

 

8,450

Net income (loss)

48,924

 

(3,173)

 

111,349

 

(7,990)

Net (income) loss attributable to noncontrolling interests

7,176

 

(22,981)

 

2,451

 

1,344

Net income (loss) attributable to common stockholders

$   56,100

 

$  (26,154)

 

$  113,800

 

$    (6,646)

               

Basic income (loss) per share

$       1.03

 

$      (0.50)

 

$       2.09

 

$      (0.12)

Diluted income (loss) per share

$       1.03

 

$      (0.50)

 

$       2.09

 

$      (0.12)

 

THE HOWARD HUGHES CORPORATION

CONSOLIDATED BALANCE SHEETS

UNAUDITED

 
 

December 31,

thousands except par values and share amounts

2021

 

2020

ASSETS

     

Investment in real estate:

     

Master Planned Communities assets

$      2,282,768

 

$     1,687,519

Buildings and equipment

3,962,441

 

4,115,493

Less: accumulated depreciation

(743,311)

 

(634,064)

Land

322,439

 

363,447

Developments

1,208,907

 

1,152,674

  Net property and equipment

7,033,244

 

6,685,069

Investment in real estate and other affiliates

369,949

 

377,145

  Net investment in real estate

7,403,193

 

7,062,214

Net investment in lease receivable

2,913

 

2,926

Cash and cash equivalents

843,212

 

1,014,686

Restricted cash

373,425

 

228,311

Accounts receivable, net

86,388

 

66,726

Municipal Utility District receivables, net

387,199

 

314,394

Notes receivable, net

7,561

 

622

Deferred expenses, net

119,825

 

112,097

Operating lease right-of-use assets, net

57,022

 

56,255

Prepaid expenses and other assets, net

300,956

 

282,101

   Total assets

$      9,581,694

 

$     9,140,332

       

LIABILITIES

     

Mortgages, notes and loans payable, net

$      4,591,157

 

$     4,287,369

Operating lease obligations

69,363

 

68,929

Deferred tax liabilities

204,837

 

187,639

Accounts payable and accrued expenses

983,167

 

852,258

   Total liabilities

5,848,524

 

5,396,195

       

Redeemable noncontrolling interest

22,500

 

29,114

       

EQUITY

     

Preferred stock: $0.01 par value; 50,000,000 shares authorized, none issued

 

Common stock: $0.01 par value; 150,000,000 shares authorized, 56,173,276 issued and 54,065,661 outstanding as of December 31, 2021, and 56,042,814 shares issued and 54,972,256 outstanding as of December 31, 2020

563

 

562

Additional paid-in capital

3,960,418

 

3,947,278

Accumulated deficit

(16,456)

 

(72,556)

Accumulated other comprehensive loss

(14,457)

 

(38,590)

Treasury stock, at cost, 2,107,615 shares as of December 31, 2021, and 1,070,558 shares as of December 31, 2020

(220,073)

 

(122,091)

   Total stockholders' equity

3,709,995

 

3,714,603

Noncontrolling interests

675

 

420

   Total equity

3,710,670

 

3,715,023

   Total liabilities and equity

$      9,581,694

 

$     9,140,332

 

Appendix – Reconciliation of Non-GAAP Measures

 

Below are GAAP to non-GAAP reconciliations of certain financial measures, as required under Regulation G of the Securities Exchange Act of 1934. Non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be comparable to similarly titled measures.

As a result of our four segments—Operating Assets, Master Planned Communities (MPC), Seaport and Strategic Developments—being managed separately, we use different operating measures to assess operating results and allocate resources among these four segments. The one common operating measure used to assess operating results for our business segments is earnings before tax (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, segment EBT should not be considered as an alternative to GAAP net income.

 

Year Ended December 31,

 

Three Months Ended December 31,

thousands

2021

 

2020

 

$ Change

 

2021

 

2020

 

$ Change

Operating Assets Segment EBT

                     

Total revenues (a)

$   442,698

 

$  372,057

 

$    70,641

 

$   107,765

 

$     91,856

 

$     15,909

Total operating expenses (a)

(209,020)

 

(185,480)

 

(23,540)

 

(47,504)

 

(43,428)

 

(4,076)

Segment operating income (loss)

233,678

 

186,577

 

47,101

 

60,261

 

48,428

 

11,833

Depreciation and amortization

(163,031)

 

(162,324)

 

(707)

 

(39,181)

 

(46,845)

 

7,664

Interest income (expense), net

(75,391)

 

(91,411)

 

16,020

 

(20,212)

 

(21,070)

 

858

Other income (loss), net

(10,746)

 

540

 

(11,286)

 

(207)

 

390

 

(597)

Equity in earnings (losses) from real estate and other affiliates

(67,042)

 

(7,366)

 

(59,676)

 

(30,111)

 

(13,197)

 

(16,914)

Gain (loss) on sale or disposal of real estate and other assets, net

39,168

 

38,232

 

936

 

27

 

 

27

Gain (loss) on extinguishment of debt

(1,926)

 

(1,521)

 

(405)

 

(471)

 

 

(471)

Provision for impairment

 

(48,738)

 

48,738

 

 

 

Operating Assets segment EBT

(45,290)

 

(86,011)

 

40,721

 

(29,894)

 

(32,294)

 

2,400

                       

Master Planned Communities Segment EBT

                     

Total revenues

409,746

 

283,953

 

125,793

 

214,820

 

112,436

 

102,384

Total operating expenses

(193,851)

 

(128,597)

 

(65,254)

 

(101,205)

 

(49,846)

 

(51,359)

Segment operating income (loss)

215,895

 

155,356

 

60,539

 

113,615

 

62,590

 

51,025

Depreciation and amortization

(366)

 

(365)

 

(1)

 

(94)

 

(92)

 

(2)

Interest income (expense), net

42,683

 

36,587

 

6,096

 

10,949

 

10,554

 

395

Equity in earnings (losses) from real estate and other affiliates

59,399

 

17,845

 

41,554

 

4,831

 

13,442

 

(8,611)

Gain (loss) on extinguishment of debt

(1,004)

 

 

(1,004)

 

 

 

MPC segment EBT

316,607

 

209,423

 

107,184

 

129,301

 

86,494

 

42,807

                       

Seaport Segment EBT

                     

Total revenues

55,008

 

23,814

 

31,194

 

15,514

 

7,644

 

7,870

Total operating expenses

(77,198)

 

(46,112)

 

(31,086)

 

(23,477)

 

(11,815)

 

(11,662)

Segment operating income (loss)

(22,190)

 

(22,298)

 

108

 

(7,963)

 

(4,171)

 

(3,792)

Depreciation and amortization

(30,867)

 

(41,602)

 

10,735

 

(7,941)

 

(6,777)

 

(1,164)

Interest income (expense), net

357

 

(12,512)

 

12,869

 

(309)

 

(22)

 

(287)

Other income (loss), net

(3,730)

 

(2,616)

 

(1,114)

 

(1,642)

 

(429)

 

(1,213)

Equity in earnings (losses) from real estate and other affiliates

(1,988)

 

(9,292)

 

7,304

 

(291)

 

(328)

 

37

Gain (loss) on extinguishment of debt

 

(11,648)

 

11,648

 

 

(3)

 

3

Seaport segment EBT

(58,418)

 

(99,968)

 

41,550

 

(18,146)

 

(11,730)

 

(6,416)

                       

Strategic Developments Segment EBT

                     

Total revenues

520,109

 

19,407

 

500,702

 

467,534

 

1,658

 

465,876

Total operating expenses

(436,698)

 

(135,160)

 

(301,538)

 

(351,727)

 

(8,422)

 

(343,305)

Segment operating income (loss)

83,411

 

(115,753)

 

199,164

 

115,807

 

(6,764)

 

122,571

Depreciation and amortization

(6,512)

 

(6,545)

 

33

 

(1,576)

 

(1,491)

 

(85)

Interest income (expense), net

3,701

 

6,312

 

(2,611)

 

1,091

 

1,403

 

(312)

Other income (loss), net

2,536

 

2,165

 

371

 

2,517

 

738

 

1,779

Equity in earnings (losses) from real estate and other affiliates

(221)

 

269,912

 

(270,133)

 

(96)

 

1,547

 

(1,643)

Gain (loss) on sale or disposal of real estate and other assets, net

13,911

 

21,710

 

(7,799)

 

(7,422)

 

13,710

 

(21,132)

Provision for impairment

(13,068)

 

 

(13,068)

 

 

 

Strategic Developments segment EBT

83,758

 

177,801

 

(94,043)

 

110,321

 

9,143

 

101,178

                       

Consolidated Segment EBT

                     

Total revenues

1,427,561

 

699,231

 

728,330

 

805,633

 

213,594

 

592,039

Total operating expenses

(916,767)

 

(495,349)

 

(421,418)

 

(523,913)

 

(113,511)

 

(410,402)

Segment operating income (loss)

510,794

 

203,882

 

306,912

 

281,720

 

100,083

 

181,637

Depreciation and amortization

(200,776)

 

(210,836)

 

10,060

 

(48,792)

 

(55,205)

 

6,413

Interest income (expense), net

(28,650)

 

(61,024)

 

32,374

 

(8,481)

 

(9,135)

 

654

Other income (loss), net

(11,940)

 

89

 

(12,029)

 

668

 

699

 

(31)

Equity in earnings (losses) from real estate and other affiliates

(9,852)

 

271,099

 

(280,951)

 

(25,667)

 

1,464

 

(27,131)

Gain (loss) on sale or disposal of real estate and other assets, net

53,079

 

59,942

 

(6,863)

 

(7,395)

 

13,710

 

(21,105)

Gain (loss) on extinguishment of debt

(2,930)

 

(13,169)

 

10,239

 

(471)

 

(3)

 

(468)

Provision for impairment

(13,068)

 

(48,738)

 

35,670

 

 

 

Consolidated segment EBT

296,657

 

201,245

 

95,412

 

191,582

 

51,613

 

139,969

                       

Corporate income, expenses and other items

(247,733)

 

(204,418)

 

(43,315)

 

(80,233)

 

(59,603)

 

(20,630)

Net income (loss)

48,924

 

(3,173)

 

52,097

 

111,349

 

(7,990)

 

119,339

Net (income) loss attributable to noncontrolling interests

7,176

 

(22,981)

 

30,157

 

2,451

 

1,344

 

1,107

Net income (loss) attributable to common stockholders

$     56,100

 

$   (26,154)

 

$    82,254

 

$   113,800

 

$      (6,646)

 

$   120,446

   

(a)

Total revenues includes hospitality revenues of $35.6 million for the year ended December 31, 2021, $35.2 million for the year ended December 31, 2020, zero for the three months ended December 31, 2021, and $7.3 million for the three months ended December 31, 2020. Total operating expenses includes hospitality operating costs of $30.5 million for the year ended December 31, 2021, $32.3 million for the year ended December 31, 2020, $0.1 million for the for the three months ended December 31, 2021, and $7.5 million for the three months ended December 31, 2020. In September 2021, the Company completed the sale of its three hospitality properties.

 

NOI

 

We believe that NOI is a useful supplemental measure of the performance of our Operating Assets and Seaport 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, net; ground rent amortization, demolition costs; other income (loss); amortization; depreciation; development-related marketing cost; gain on sale or disposal of real estate and other assets, net; provision for impairment and equity in earnings from real estate and other affiliates. 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 property-specific factors such as lease structure, lease rates and tenant base have on our operating results, gross margins and investment returns. Variances between years in NOI typically result from changes in rental rates, occupancy, tenant mix and operating expenses. Although we believe that NOI provides useful information to investors about the performance of our Operating Assets and Seaport 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 segment EBT to NOI for Operating Assets and Seaport has been presented in the tables below.

 

Year Ended
December 31,

 

Three Months Ended
December 31,

thousands

2021

 

2020

 

2021

 

2020

Operating Assets segment EBT (a)

$  (45,290)

 

$  (86,011)

 

$   (29,894)

 

$   (32,294)

Add back:

             

Depreciation and amortization

163,031

 

162,324

 

39,181

 

46,845

Interest (income) expense, net

75,391

 

91,411

 

20,212

 

21,070

Equity in (earnings) losses from real estate and other affiliates

67,042

 

7,366

 

30,111

 

13,197

(Gain) loss on sale or disposal of real estate and other assets, net

(39,168)

 

(38,232)

 

(27)

 

(Gain) loss on extinguishment of debt

1,926

 

1,521

 

471

 

Provision for impairment

 

48,738

 

 

Impact of straight-line rent

(14,715)

 

(7,630)

 

(4,685)

 

(3,045)

Other

10,449

 

99

 

(5)

 

(24)

Operating Assets NOI

218,666

 

179,586

 

55,364

 

45,749

               

Company's Share NOI - Equity Investees (b)

4,081

 

7,750

 

2,053

 

1,362

Distributions from Summerlin Hospital Investment

3,755

 

3,724

 

 

               

Total Operating Assets NOI

$ 226,502

 

$ 191,060

 

$    57,417

 

$    47,111

               

Seaport segment EBT (a)

$  (58,418)

 

$  (99,968)

 

$   (18,146)

 

$   (11,730)

Add back:

             

Depreciation and amortization

30,867

 

41,602

 

7,941

 

6,777

Interest (income) expense, net

(357)

 

12,512

 

309

 

22

Equity in (earnings) losses from real estate and other affiliates

1,988

 

9,292

 

291

 

328

(Gain) loss on extinguishment of debt

 

11,648

 

 

3

Impact of straight-line rent

1,632

 

2,801

 

367

 

441

Other (income) loss, net (c)

6,725

 

5,639

 

3,719

 

1,114

Seaport NOI

(17,563)

 

(16,474)

 

(5,519)

 

(3,045)

               

Company's Share NOI - Equity Investees

(592)

 

(911)

 

(272)

 

(124)

               

Total Seaport NOI

$  (18,155)

 

$  (17,385)

 

$     (5,791)

 

$     (3,169)

   

(a) 

Segment EBT excludes corporate expenses and other items that are not allocable to the segments.

(b) 

During the third quarter of 2020, 110 North Wacker was completed and placed in service, resulting in the deconsolidation of 110 North Wacker and subsequent treatment as an equity method investment. The Company's share of NOI related to 110 North Wacker is calculated using our stated ownership of 23% and does not include the impact of the partnership distribution waterfall.

(c)

Includes miscellaneous development-related items as well as the loss related to the write-off of inventory due to the permanent closure of 10 Corso Como Retail and Café in the first quarter of 2020 and income related to inventory liquidation sales in the third quarter of 2020.

 

Same Store NOI - Operating Assets Segment

 

The Company defines Same Store Properties as consolidated and unconsolidated properties that are acquired or placed in-service prior to the beginning of the earliest period presented and owned by the Company through the end of the latest period presented. Same Store Properties exclude properties placed in-service, acquired, repositioned or in development or redevelopment after the beginning of the earliest period presented or disposed of prior to the end of the latest period presented. Accordingly, it takes at least one year and one quarter after a property is acquired or treated as in-service for that property to be included in Same Store Properties.

We calculate Same Store Net Operating Income (Same Store NOI) as Operating Assets NOI applicable to Same Store Properties. Same Store NOI also includes the Company's share of NOI of unconsolidated properties and the annual distribution from a cost basis investment. Same Store NOI is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that Same Store NOI is helpful to investors as a supplemental comparative performance measure of the income generated from the same group of properties from one period to the next. Other companies may not define Same Store NOI in the same manner as we do; therefore, our computation of Same Store NOI may not be comparable to that of other companies. Additionally, we do not control investments in unconsolidated properties and while we consider disclosures of our share of NOI to be useful, they may not accurately depict the legal and economic implications of our investment arrangements.

 

Year Ended December 31,

 

Three Months Ended December 31,

thousands

2021

 

2020

 

$ Change

 

2021

 

2020

 

$ Change

Same Store Office

                     

Houston, TX

$    69,469

 

$    80,314

 

$   (10,845)

 

$    18,866

 

$    19,684

 

$         (818)

Columbia, MD

22,659

 

20,033

 

2,626

 

6,272

 

4,420

 

1,852

Las Vegas, NV

14,416

 

13,616

 

800

 

3,796

 

3,598

 

198

Total Same Store Office

106,544

 

113,963

 

(7,419)

 

28,934

 

27,702

 

1,232

                       

Same Store Retail

                     

Houston, TX

12,640

 

12,031

 

609

 

3,379

 

3,808

 

(429)

Columbia, MD

2,226

 

2,272

 

(46)

 

555

 

643

 

(88)

Las Vegas, NV

24,732

 

15,520

 

9,212

 

6,356

 

3,892

 

2,464

Honolulu, HI

16,199

 

9,389

 

6,810

 

4,498

 

1,733

 

2,765

Other

1,998

 

646

 

1,352

 

(45)

 

(482)

 

437

Total Same Store Retail

57,795

 

39,858

 

17,937

 

14,743

 

9,594

 

5,149

                       

Same Store Multi-Family

                     

Houston, TX

15,943

 

14,409

 

1,534

 

4,676

 

3,569

 

1,107

Columbia, MD

 

 

 

 

 

Las Vegas, NV

6,799

 

4,687

 

2,112

 

1,642

 

1,276

 

366

Company's Share NOI - Equity Investees

6,665

 

6,630

 

35

 

1,633

 

1,543

 

90

Total Same Store Multi-Family

29,407

 

25,726

 

3,681

 

7,951

 

6,388

 

1,563

                       

Same Store Other

                     

Houston, TX

6,762

 

5,892

 

870

 

1,696

 

1,857

 

(161)

Columbia, MD

(42)

 

(25)

 

(17)

 

17

 

(18)

 

35

Las Vegas, NV

6,510

 

(3,048)

 

9,558

 

(1,533)

 

(372)

 

(1,161)

Honolulu, HI

238

 

(290)

 

528

 

24

 

(198)

 

222

Company's Share NOI - Equity and Cost Investees

6,302

 

5,557

 

745

 

680

 

532

 

148

Total Same Store Other

19,770

 

8,086

 

11,684

 

884

 

1,801

 

(917)

Total Same Store NOI

213,516

 

187,633

 

25,883

 

52,512

 

45,485

 

7,027

                       

Non-Same Store NOI

12,986

 

3,427

 

9,559

 

4,905

 

1,626

 

3,279

Total Operating Assets NOI

$  226,502

 

$  191,060

 

$    35,442

 

$    57,417

 

$    47,111

 

$    10,306

 

Cash G&A

 

The Company defines Cash G&A as General and administrative expense less non-cash stock compensation expense. Cash G&A is a non-GAAP financial measure that we believe is useful to our investors and other users of our financial statements as an indicator of overhead efficiency without regard to non-cash expenses associated with stock compensation. However, it should not be used as an alternative to general and administrative expenses in accordance with GAAP.

 

Year Ended December 31,

 

Three Months Ended December 31,

thousands

2021

 

2020

 

$ Change

 

2021

 

2020

 

$ Change

General and Administrative

                     

General and administrative (G&A)

$    81,990

 

$  109,402

 

$   (27,412)

 

$    20,857

 

$    24,647

 

$     (3,790)

Less: Non-cash stock compensation

(9,886)

 

(5,785)

 

(4,101)

 

(2,468)

 

(1,982)

 

(486)

Cash G&A

$    72,104

 

$  103,617

 

$   (31,513)

 

$    18,389

 

$    22,665

 

$     (4,276)

 

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/the-howard-hughes-corporation-reports-fourth-quarter-2021-results-301492067.html

SOURCE The Howard Hughes Corporation