The Howard Hughes Corporation Reports Third Quarter 2012 Results

  The Howard Hughes Corporation Reports Third Quarter 2012 Results

Business Wire

DALLAS -- November 09, 2012

The Howard Hughes Corporation (NYSE: HHC):

Third Quarter Highlights

  *Third quarter 2012 net income was $14.9 million, excluding the $(64.3)
    million non-cash warrant loss compared to the third quarter 2011 net loss
    of $(5.6) million, excluding the $169.9 million non-cash warrant gain.
  *Master Planned Community land sales were $40.4 million for the third
    quarter 2012 compared to $32.2 million for the third quarter 2011.
  *Net operating income for our income-producing Operating Assets was $16.1
    million for third quarter 2012, up from $13.5 million in the third quarter
    of 2011.
  *Acquired a 169,590 square foot Class A office building in Columbia, MD by
    assuming a $16.0 million non-recourse mortgage bearing interest at 4.25%
    and our commitment to fund $5.0 million for leasing.
  *Commenced Phase Two of the Ward Village Shops - part of Ward Centers in
    Honolulu, HI - a $26.0 million project to build 57,000 square feet of new
    retail space for Pier 1 Imports and Nordstrom Rack, whose relocation opens
    space for future redevelopment. The tenants are expected to take occupancy
    in late 2013/early 2014 and should contribute approximately $1.0 million
    of incremental annual NOI to Ward Centers.
  *Announced the master plan to transform Ward Centers into an urban master
    planned community called Ward Village. Ward Village, when fully developed,
    will contain over 4,000 condominium units and over one million square feet
    of retail and other commercial space. Phase One of the redevelopment will
    consist of two market rate, mixed-use residential towers, one reserved
    housing tower and the renovation of the IBM building. Construction on
    Phase One is expected to begin in 2014.
  *Closed on $40.0 million of mezzanine capital commitments for the ONE Ala
    Moana condominium development, including $3.0 million of non-refundable
    capital for pre-development costs.
  *Entered into a letter of intent with Macy’s to become a 180,000 square
    foot anchor tenant at the Shops at Summerlin. This project is expected to
    contain 1.5 million square feet of mixed use development, including
    retail, entertainment and 198,000 square feet of office space. We expect
    Macy’s will be a catalyst for the launch of this project in 2013.
  *Commenced construction on Millennium Woodlands Phase II, a 314-unit Class
    A apartment building located in The Woodlands, which is being developed
    through a joint venture with the same developer with whom we developed the
    Millennium Waterway Apartments.

The Howard Hughes Corporation (NYSE: HHC) today announced its results for the
third quarter 2012.

For the three months ended September 30, 2012, net loss attributable to common
stockholders was $(49.4) million compared with net income of $164.3 million
for the three months ended September 30, 2011. Excluding the $(64.3) million
warrant loss, net income attributable to common stockholders for the three
months ended September 30, 2012 was $14.9 million compared with a net loss,
excluding the $169.9 million warrant gain, of $(5.6) million for the three
months ended September 30, 2011.

Beginning with the acquisition of our former partner’s 47.5% interest in The
Woodlands on July 1, 2011, we consolidated the financial results of The
Woodlands. Prior to the acquisition, we accounted for our interest in The
Woodlands as an unconsolidated real estate affiliate. Consequently, our
statement of operations for the nine months ended September 30, 2012 is not
comparable to the same period in 2011.

If The Woodlands acquisition had occurred on January 1, 2011, total revenues
of the Company for the nine months ended September 30, 2011 would have been
approximately $276.2 million, on a pro forma basis, compared to $268.5 million
for the nine months ended September 30, 2012. The principal reason for the
$7.7 million decrease in revenues, on a pro forma basis, is $9.1 million of
lower condominium sales at the Nouvelle at Natick property as a result of the
sale of the last two units owned by the Company in the second quarter of 2012.
For a more complete comparison of operating results between periods, please
refer to Item 2 – Management’s Discussion and Analysis of Financial Condition
and Results of Operations included in our Form 10-Q for the period ended
September 30, 2012.

David R. Weinreb, CEO of The Howard Hughes Corporation, stated, “During the
third quarter we made significant progress on advancing several of our
developments from the Seaport in New York City to Ward Centers in Honolulu.
Obtaining Macy’s as a lead anchor tenant for the Shops at Summerlin is a
significant milestone and we anticipate beginning construction on this 1.5
million square foot development in 2013. We also announced the upcoming launch
of sales and construction of our 206-unit Ala Moana condominium project,
called ONE Ala Moana, and commenced work on our newest 200,000 square foot
office tower at The Woodlands, One Hughes Landing.”

Weinreb continued, “Our financial position and liquidity remain strong. With
$273 million of unrestricted cash, a conservatively leveraged balance sheet
and positive cash flow from our master planned communities and operating
assets, we are well-positioned to undertake all of our major development
initiatives.”

Business Segments

For comparative purposes, Master Planned Communities (“MPC”) land sales and
Operating Assets net operating income (“NOI”) relating to The Woodlands, and a
discussion of results as if we consolidated The Woodlands during the nine
months ended September 30, 2011 are presented in our Supplemental Information.
For a reconciliation of Operating Assets NOI to Operating Assets real estate
property earnings before taxes (“REP EBT”), Operating Assets REP EBT to
GAAP-basis income (loss), and segment-basis MPC land sales revenue to
GAAP-basis land sales revenue, refer to the Supplemental Information contained
in this earnings release.

Master Planned Communities

Land sales in our MPC segment, excluding deferred land sales and other
revenue, increased $8.3 million to $40.4 million for the three months ended
September 30, 2012 as compared to the three months ended September 30, 2011
primarily due to the increased residential and commercial land sales of $5.5
million and $2.8 million, respectively. Residential land sales increased at
Summerlin and Bridgeland by $8.7 million offset by lower land sales at
Columbia of $2.3 million. Commercial land sales increased by $2.8 million due
to a $5.3 million land sale at Columbia for the development of an apartment
complex offset by lower commercial land sales at The Woodlands of $2.5
million. In addition, deferred residential sales of $2.0 million were
recognized in 2011 related to Summerlin which did not reoccur in 2012.

The Houston, Texas economy remains strong. ExxonMobil is constructing a three
million square foot corporate campus just south of The Woodlands and is
expected to begin relocating employees to this new location starting in 2014
and ending in 2015. We anticipate this development will further increase the
demand for housing and commercial space at The Woodlands and Bridgeland master
planned communities. The latest phase of construction on the greater Houston
area’s perimeter loop, the Grand Parkway, will bisect the Bridgeland community
and will connect the ExxonMobil campus, the airport and the Energy Corridor,
which we believe will serve as another catalyst for growth.

At Summerlin, existing inventory levels for both new and resale homes continue
to decline resulting in improved pricing. Summerlin sold 95 and 362
residential lots during the three and nine months ended September 30, 2012,
respectively, compared to none and 312 residential lots during the three and
nine months ended September 30, 2011, respectively. Summerlin’s pipeline
remains robust, with 147 residential lots under contract representing
approximately $11.8 million of sales, of which $3.7 million and $8.1 million
are expected to close in 2012 and 2013, respectively, if all sales are
completed. The Shops at Summerlin project is expected to create added value
for the community and positively impact prices for lots and homes as the
market continues to normalize.

Operating Assets

NOI from the combined retail, office and resort and conference center and
multi-family properties was $16.1 million for the three months ended September
30, 2012, compared to NOI of $13.5 million for the three months ended
September 30, 2011. This includes our share of NOI of our non-consolidated
ventures of $0.3 million for the three months ended September 30, 2012 and
$1.1 million for the three months ended September 30, 2011. The $2.6 million
increase in NOI in the third quarter 2012 compared to the third quarter 2011
is primarily attributable to 4 Waterway Square, 9303 New Trails, 20/25
Waterway Avenue and the Millennium Waterway apartments, all located at The
Woodlands, reaching stabilized NOI in late 2011/early 2012.

On July 26, 2012, we announced the redevelopment of Riverwalk Marketplace,
located in New Orleans, LA, into the first upscale urban outlet center named
The Outlet Collection at Riverwalk. Our plans currently anticipate expanding
the existing gross leasable area by approximately 44,000 square feet to
244,000 square feet. The redevelopment is contingent upon obtaining an
acceptable amount of pre-leasing for the property and financing.

On August 15, 2012, we acquired 70 Columbia Corporate Center, a 169,590 square
foot Class A office building by assuming a $16.0 million non-recourse mortgage
bearing a 4.25% interest rate and maturing in August 2017. At closing, we
funded $5.0 million into escrow for capital expenditures, tenant improvements
and leasing commissions at the property. We are entitled to a 10.0% cumulative
preferred return, after debt service, on our invested capital in the property.
Cash flow is then split pro-rata according to each party’s capital
contribution between us and the lender, to amortize the mortgage. Excess
proceeds from a capital event, after repayment of outstanding debt and the
preferred return will be split 30% to the lender and 70% to us. At closing, we
signed a 76,308 square foot tenant which will increase occupancy to
approximately 68.7% and annual NOI to approximately $1.9 million.

During the second quarter of 2012, we substantially completed construction of
69,923 square feet of retail space at Phase One of Ward Village Shops at Ward
Centers in Honolulu, HI. TJ Maxx took occupancy of 35,744 square feet in May
2012, and we are seeking a tenant for the remaining approximately 34,000
square foot space. We expect that when the space is fully leased our total
construction costs will be approximately $17.0 million. We also announced and
began development on Phase Two of Ward Village Shops, which will encompass
57,000 square feet of retail space and is expected to cost approximately $26.0
million. Pier 1 Imports and Nordstrom Rack are being relocated from other
space at Ward Centers and will occupy Phase Two. Both of these tenants are
expected to contribute an incremental $1.0 million of combined annual NOI when
they take possession in late 2013/early 2014.

On October 10, 2012, we announced plans to transform Ward Centers into an
urban master planned community called Ward Village that will feature retail,
dining, entertainment, along with market-rate and affordable housing situated
in public open spaces and pedestrian friendly streets. Our plan, which is
fully entitled, is to build more than 4,000 residential units and over one
million square feet of retail and other commercial space. Phase One of the
redevelopment will consist of two mixed-use residential towers, one reserved
housing tower and the renovation of the IBM building. One of the towers will
be constructed on the site being vacated by Pier 1 Imports. We anticipate
breaking ground on Phase One in 2014 with an expected completion date of 2016.

Strategic Developments

On July 6, 2012, we sold 11.5 acres at Alameda Plaza consisting of 104,705
square feet of mostly vacant retail space for $4.5 million. Our net earnings
recognized on the sale were $2.0 million. We are continuing to explore the
sale of the remaining 10.5 acres consisting of 85,636 square feet of mostly
vacant retail space.

On July 18, 2012, we announced the development of a 66-acre mixed use site
called Hughes Landing at Lake Woodlands, located in The Woodlands, TX, and
north of Houston. Hughes Landing will have up to eight office buildings,
hotel, retail and multi-family residential housing. We announced construction
of the first office building, One Hughes Landing, an eight story, 195,227
square foot Class A building. Construction of this building is expected to
begin in the fall of 2012 with completion anticipated in the fall of 2013.
Total budgeted construction costs are $45.0 million (exclusive of land value),
and we anticipate closing on a $38.0 million financing in the fourth quarter
2012.

On September 17, 2012, our joint venture to develop a 206-unit condominium
tower at the Ala Moana shopping center located in Honolulu, HI, closed on two
$20.0 million non-recourse mezzanine loan commitments with two investors. $3.0
million of the $40.0 million provided by the mezzanine lenders may be drawn
and used to fund the pre-development costs of the venture. Per the terms of
the mezzanine loans, the venture is not required to repay this $3.0 million if
the construction loan fails to close or if the project does not go forward, of
which approximately $2.0 million has been funded as of September 30, 2012 and
is non-interest bearing. The mezzanine loans, have a blended interest rate of
12.0%, must be drawn in full at the construction loan closing date and mature
on April 30, 2018 with the option to extend for one year. We currently
anticipate approval of the condominium documents in the fourth quarter of 2012
and expect to begin pre-sales before the end of 2012. We anticipate that the
construction loan will close in June 2013 and construction is expected to
begin in the second quarter of 2013 with anticipated completion at the end of
2014, subject to obtaining an acceptable level of pre-sales and construction
financing.

On September 19, 2012, we announced a letter of intent with Macy’s to become
the first anchor tenant for the Shops at Summerlin, located in downtown
Summerlin, NV. Macy’s will occupy approximately 180,000 square feet of space.
When completed, the Shops at Summerlin will contain a one million square foot
fashion center, 280,000 square feet of big box and junior anchor retail space
and a 198,000 square foot office building. We currently expect that the Macy’s
announcement will be a precursor to obtaining retail commitments sufficient to
begin the project in 2013.

During the third quarter 2012, Millennium Woodlands Phase II, LLC, our joint
venture with The Dinerstein Companies to develop a 314-unit Class A apartment
building in The Woodlands, TX, commenced construction. We have a 81.4%
ownership interest in the venture. The project is expected to cost
approximately $53.9 million (including our contributed land valued at $15.5
million) and the venture obtained a $37.7 million construction loan, which is
non-recourse to us, to construct the building. Please refer to Note 7 – Real
Estate Affiliates in our Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2012 for a more detailed description of this joint
venture.

About the Howard Hughes Corporation

The Howard Hughes Corporation owns, manages and develops commercial,
residential and mixed-use real estate throughout the United States. Our
properties include master planned communities, commercial mixed-use, retail
and office properties, development opportunities and other unique assets
spanning 18 states from New York to Hawaii. The Howard Hughes Corporation is
traded on the New York Stock Exchange under the ticker symbol “HHC”, and is
headquartered in Dallas, Texas. For more information, visit
www.howardhughes.com.

Safe Harbor Statement

Statements made in this press release that are not historical facts, including
statements accompanied by words such as “will,” “believe,” “expect,”
“enables,” “realize,” “plan,” “intend,” “transform” and other words of similar
expression, are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are based on
management’s expectations, estimates, assumptions and projections as of the
date of this release and are not guarantees of future performance. Actual
results may differ materially from those expressed or implied in these
statements. Factors that could cause actual results to differ materially are
set forth as risk factors in The Howard Hughes Corporation’s filings with the
Securities and Exchange Commission, including its Quarterly and Annual
Reports. The Howard Hughes Corporation cautions you not to place undue
reliance on the forward-looking statements contained in this release. The
Howard Hughes Corporation does not undertake any obligation to publicly update
or revise any forward-looking statements to reflect future events, information
or circumstances that arise after the date of this release.

                                                     
THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



(UNAUDITED)
                                                            
                           Three Months Ended September     Nine Months Ended September
                           30,                              30,
                           2012          2011             2012           2011
                           (In thousands, except per share amounts)
Revenues:
      Master Planned
      Community land       $ 40,218        $ 34,152         $ 120,235        $ 75,692
      sales
      Builder price          1,867           1,233            4,208            2,351
      participation
      Minimum rents          23,135          19,403           62,609           53,098
      Tenant                 6,065           5,398            17,932           14,537
      recoveries
      Condominium            -               9,071            267              19,495
      unit sales
      Resort and
      conference             8,328           7,200            29,954           7,200
      center
      revenues
      Other land             6,385           5,537            13,433           9,093
      revenues
      Other rental
      and property          8,817         4,679          19,879         9,130   
      revenues
            Total           94,815        86,673         268,517        190,596 
            revenues
Expenses:
      Master Planned
      Community cost         21,439          27,033           63,096           51,907
      of sales
      Master Planned
      Community              9,936           10,734           30,962           22,313
      operations
      Rental
      property real          3,574           2,010            10,583           7,793
      estate taxes
      Rental
      property               2,263           2,155            6,304            5,278
      maintenance
      costs
      Other property
      operating              16,933          14,961           46,306           34,413
      costs
      Condominium
      unit cost of           -               5,470            96               13,722
      sales
      Resort and
      conference             6,965           6,352            21,750           6,352
      center
      operations
      Provision for
      (recovery of)          240             (141    )        285              174
      doubtful
      accounts
      General and            9,339           8,673            25,896           21,156
      administrative
      Depreciation
      and                   6,764         7,208          17,715         13,592  
      amortization
            Total           77,453        84,455         222,993        176,700 
            expenses
                                                                             
Operating income             17,362          2,218            45,524           13,896
                                                                             
Interest income              2,375           2,341            7,048            7,097
Interest expense             (445    )       -                (646     )       -
Early extinguishment         -               (11,305 )        -                (11,305 )
of debt
Warrant liability            (64,303 )       169,897          (162,724 )       100,762
gain (loss)
Reduction in tax             (2,873  )       -                (11,655  )       -
indemnity receivable
Investment in Real
Estate Affiliate                             (6,053  )                         (6,053  )
basis adjustment
Equity in earnings
from Real Estate            310           166            3,432          7,787   
Affiliates
Income (loss) before         (47,574 )       157,264          (119,021 )       112,184
taxes
Provision (benefit)         2,618         (7,760  )       7,703          (4,344  )
for income taxes
Net income (loss)            (50,192 )       165,024          (126,724 )       116,528
Net income (loss)
attributable to             781           (729    )       (637     )      (777    )
noncontrolling
interests
Net income (loss)
attributable to            $ (49,411 )     $ 164,295       $ (127,361 )     $ 115,751 
common stockholders
                                                                             
Basic income (loss)        $ (1.30   )     $ 4.33          $ (3.36    )     $ 3.05    
per share:
                                                                             
Diluted income             $ (1.30   )     $ (0.14   )      $ (3.36    )     $ 0.38    
(loss) per share:

                                                        
THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS



(UNAUDITED)
                                                                 
                                          September 30,          December 31,
                                          2012                   2011
Assets:                                   (In thousands, except share amounts)
Investment in real estate:
     Master Planned Community             $  1,585,514           $ 1,602,437
     assets
     Land                                    253,867               236,363
     Buildings and equipment                 646,459               556,786
     Less: accumulated depreciation          (106,387   )          (92,494   )
     Developments in progress               224,370             195,034   
              Net property and               2,603,823             2,498,126
              equipment
     Investment in Real Estate              36,162              62,595    
     Affiliates
              Net investment in              2,639,985             2,560,721
              real estate
Cash and cash equivalents                    272,854               227,566
Accounts receivable, net                     13,425                15,644
Municipal Utility District                   105,487               86,599
receivables, net
Notes receivable, net                        28,677                35,354
Tax indemnity receivable, including          326,150               331,771
interest
Deferred expenses, net                       12,740                10,338
Prepaid expenses and other assets,          124,752             127,156   
net
              Total assets                $  3,524,070          $ 3,395,149 
                                                                 
Liabilities:
Mortgages, notes and loans payable        $  683,804             $ 606,477
Deferred tax liabilities                     75,538                75,966
Warrant liabilities                          290,488               127,764
Uncertain tax position liability             135,468               129,939
Accounts payable and accrued                136,760             125,404   
expenses
     Total liabilities                      1,322,058           1,065,550 
                                                                 
Commitments and Contingencies (see
Note 13)
                                                                 
Equity:
Preferred stock: $.01 par value;
50,000,000 shares authorized, none           -                     -
issued
Common stock: $.01 par value;
150,000,000 shares authorized,
37,973,640 shares issued and
outstanding as of September 30,                                  
2012 and
37,945,707 shares issued and             379                  379
outstanding as of December 31, 2011
Additional paid-in capital                   2,714,258             2,711,109
Accumulated deficit                          (508,686   )          (381,325  )
Accumulated other comprehensive             (9,590     )         (5,578    )
loss
     Total stockholders' equity              2,196,361             2,324,585
Noncontrolling interests                    5,651               5,014     
     Total equity                           2,202,012           2,329,599 
              Total liabilities and       $  3,524,070          $ 3,395,149 
              equity
                                                                             
                                                                             

                           Supplemental Information

                              September 30, 2012

As our three segments, Master Planned Communities, Operating Assets and
Strategic Developments, are managed separately, we use different operating
measures to assess operating results and allocate resources among these three
segments. The one common operating measure used to assess operating results
for our business segments is real estate property earnings before taxes (“REP
EBT”), which represents the operating revenues of the properties less property
operating expenses. REP EBT, as it relates to our business, is defined as net
income (loss) excluding general and administrative expenses, corporate
interest income and depreciation expense, provision (benefit) for income
taxes, warrant liability gain (loss), the reduction in tax indemnity
receivable, equity in earnings from Real Estate Affiliates and Investment in
Real Estate Affiliate basis adjustment. We present REP EBT because we use this
measure, among others, internally to assess the core operating performance of
our assets. However, REP EBT should not be considered as an alternative to
GAAP net income (loss) attributable to common stockholders or GAAP net income
(loss).

                                                           
                                                                   
Reconciliation
of REP EBT to      Three Months Ended September   Nine Months Ended September
GAAP-net           30,                            30,
income (loss)
                  2012          2011             2012             2011
                   (In thousands)                 (In thousands)
                                                                   
Real estate
property EBT:
Segment basis      $ 26,830      $ (358    )      $ 74,946         $ 36,225
Real Estate         (310    )    (166    )       (3,432   )      (12,497 )
Affiliates
                     26,520        (524    )        71,514           23,728
General and          (9,339  )     (8,673  )        (25,896  )       (21,156 )
administrative
Corporate
interest             2,315         2,616            6,814            7,309
income
Warrant
liability gain       (64,303 )     169,897          (162,724 )       100,762
(loss)
Benefit
(provision)          (2,618  )     7,760            (7,703   )       4,344
for income
taxes
Reduction in
tax indemnity        (2,873  )     -                (11,655  )       -
receivable
Equity in
earnings from        310           166              3,432            7,787
Real Estate
Affiliates
Investment in
Real Estate
Affiliate            -             (6,053  )        -                (6,053  )
basis
adjustment
Corporate           (204    )    (165    )       (506     )      (193    )
depreciation
Net income         $ (50,192 )   $ 165,024       $ (126,724 )     $ 116,528 
(loss)

                                                                                                      
    MPC Sales Summary
    
                                      Land Sales              Acres Sold    Number of    Price per acre    Price per lot
                                                                            Lots/Units
                                      Three Months Ended September 30,
    ($ in                          2012         2011       2012   2011   2012   2011  2012    2011      2012    2011
    thousands)
                                                                                                                   
    Residential Land Sales
    Maryland -     Single family      $ -          $ 630      -      0.5    -      3     $ -     $ 1,260   $ -     $ 210
    Columbia       - detached
                   Townhomes            -            1,697    -      0.5    -      12      -       -         -       141
                                                                                                                   
    Bridgeland     Single family        6,170        5,149    22.2   20.3   104    103     278     254       59      50
                   - detached
                                                                                                                   
    Summerlin      Single family        7,213        -        21.2   -      94     -       341     -         77      -
                   - detached (1)
                   Custom lots          515          -        0.6    -      1      -       805     -         515     -
                                                                                                                   
    The            Single family        19,898       19,949   52.3   53.5   235    216     380     373       85      92
    Woodlands      - detached (2)
                   Single family       -          887      -      2.3    -      34      -       386       -       26
                   - attached
                   Subtotal            33,796     28,312   96.3   77.1   434    368
                                                                                                                   
    Commercial
    Land Sales
    Maryland -     Apartments           5,300        -        18.7   -      -      -       284     -         -       -
    Columbia
    Summerlin      Not-for-profit       -            -        -      -      -      -       -       -
                   Retail               -            -        -      -      -      -       -       -
                                                                                                                   
    The            Office and           1,330        -        10.4   -                     128     -
    Woodlands      other
                   Retail               -            2,001    1.2    5.0                   -       400
                   Other               -          1,839    -      5.3                   -       347
                   Subtotal            6,630      3,840    30.3   10.3
                                                  
    Total acreage sales revenue        40,426     32,152
                                                                                                                   
    Deferred revenue                    (1,051 )     2,000
    Special Improvement District       843        -
    revenue
    Total land sales - GAAP basis     $ 40,218    $ 34,152
                                                                                                                   
(1) The Summerlin 2012 revenue per acre of $341,000 includes 41 single family finished lots that average $691,543 per
    acre and 53 super pad lots that average $230,000 per acre.
(2) The Woodlands 2011 lot sales revenues have been restated to include fixed price builder payments collected at lot
    closing to conform with the 2012 lot sales presentation.

    
    
    MPC Sales Summary
                                                                                                                         
                                         Land Sales                      Acres Sold          Number of          Price per acre         Price per lot
                                                                                             Lots/Units
                                         Nine Months Ended September 30,
    ($ in thousands)                     2012            2011            2012      2011      2012      2011     2012       2011        2012      2011
                                                                                                                                                 
    Residential
    Land Sales
    Maryland -        Single family      $ -             $ 1,480         -         1.4       -         7        $ -        $ 1,057     $ -       $ 211
    Columbia          - detached
                      Townhomes            4,156           3,311         1.2       1.0       28        24         -          -           148       138
                                                                                                                                                 
    Bridgeland        Single family        17,183          13,846        63.9      52.2      313       260        269        265         55        53
                      - detached
                                                                                                                                                 
    Summerlin         Single family        23,773          25,504        71.6      62.4      353       312        332        409         67        82
                      - detached (1)
                      Custom lots          3,761           -             4.8       -         9         -          784        -           418       -
                                                                                                                                                 
    The               Single family        55,459          55,523        151.2     149.8     598       610        367        371         93        91
    Woodlands         - detached (2)
                      Single family       -             887          -         2.3       -         34         -          386                   26
                      - attached
                      Subtotal            104,332       100,551      292.7     269.1     1,301     1,247
                                                                                                                                                 
    Commercial
    Land Sales
    Maryland -        Apartments           5,300           -             18.7      -         -         -          284        -           -         -
    Columbia
    Summerlin         Not-for-profit       -               3,615         -         16.0      -         -          -          226
                      Retail               784             -             1.0       -         -         -          784        -
                                                                                                                                                 
    The               Office and           6,437           1,800         10.4      3.2                            619        563
    Woodlands         other
                      Retail               1,250           5,115         1.2       10.5                           1042       487
                      Other               50            1,839        0.8       5.3                            63         347
                      Subtotal            13,821        12,369       32.1      35.0
                                                        
    Total
    acreage                               118,153       112,920 
    sales
    revenue
                                                                                                                                                 
    Deferred                               (1,870  )       5,516
    revenue
    Special
    Improvement                           3,952         4,028   
    District
    revenue
    Total
    segment                                120,235         122,464
    land sales
    The
    Woodlands                             -             (46,772 )
    acreage
    sales (3)
    Total land sales - GAAP basis        $ 120,235      $ 75,692  
                                                                                                                                                 
(1) The Summerlin 2012 revenue per acre of $332,000 includes 121 single family finished lots that average $688,516 per acre and 232 super pad lots
    that average $226,452 per acre.
(2) The Woodlands 2011 lot sales revenues have been restated to include fixed price builder payments collected at lot closing to conform with the 2012
    lot sales presentation.
(3) The Woodlands acreage sales for the six months ended June 30, 2011 are deducted from total segment land sales to derive total land sales - GAAP
    basis because The Woodlands operating results were not consolidated during this period.
    
    

                    Operating Assets Net Operating Income

The Company believes that NOI is a useful supplemental measure of the
performance of our Operating Assets because it provides a performance measure
that, when compared year over year, reflects the revenues and expenses
directly associated with owning and operating real estate properties and the
impact on operations from trends in occupancy rates, rental rates, and
operating costs. We define NOI as property specific revenues (rental income,
tenant recoveries and other income) less expenses (real estate taxes, repairs
and maintenance, marketing and other property expenses). NOI also excludes
straight line rents, property specific net interest expense, depreciation,
ground rent, other amortization expenses, and equity in earnings from Real
Estate Affiliates.

We use NOI to evaluate our operating performance on a property-by-property
basis because NOI allows us to evaluate the impact that factors such as lease
structure, lease rates and tenant base, which vary by property, have on our
operating results, gross margins and investment returns.

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

                                                          
Operating Assets NOI and REP EBT
                                                                     
                       Three Months Ended            Nine Months Ended September
                       September 30,                 30,
                       2012           2011           2012            2011
                       (In thousands)                (In thousands)
  Operating
  Assets NOI
  Retail
  Ward Centers         $ 5,616        $ 5,630        $ 16,735        $ 16,449
  South Street           1,878          1,866          4,085           3,404
  Seaport (a)
  Rio West Mall          265            286            995             963
  Landmark Mall          153            108            662             627
  (a)
  Riverwalk
  Marketplace            94             130            573             339
  (a)
  Cottonwood             97             83             320             299
  Square
  Park West              251            159            739             490
  20/25 Waterway         407            375            1,242           902
  Avenue
  Waterway              (8     )      (8      )     2             6       
  Garage Retail
    Total Retail        8,753        8,629        25,353        23,479  
  Office
  110 N. Wacker          1,517          1,526          4,554           4,518
  Columbia
  Office                 593            326            1,698           1,662
  Properties
  70 Columbia
  Corporate              (8     )       -              (8      )       -
  Center
  4 Waterway             1,478          426            4,140           1,102
  Square
  9303 New               475            299            1,435           852
  Trails
  1400 Woodloch          440            239            1,202           649
  Forest
  2201 Lake
  Woodlands             23           83           21            249     
  Drive
    Total Office        4,518        2,899        13,042        9,032   
                                                                     
  Millennium
  Waterway               1,147          -              1,407           -
  Apartments (b)
  The Woodlands
  Resort and            1,363        848          8,205         6,050   
  Conference
  Center
  Total Retail,
  Office,
  Multi-family,         15,781       12,376       48,007        38,561  
  Resort and
  Conference
  Center
                                                                     
  The Club at            (1,081 )       (1,420  )      (3,383  )       (3,933  )
  Carlton Woods
  The Woodlands
  Parking                (236   )       (469    )      (729    )       (906    )
  Garages
  The Woodlands          98             97             289             312
  Ground Leases
  Other                 260          (148    )     1,037         1,173   
  Properties
    Total Other         (959   )      (1,940  )     (2,786  )      (3,354  )
    Total
    Operating           14,822       10,436       45,221        35,207  
    Assets NOI -
    Consolidated
                                                                     
                                                                     
  Straight-line
  lease                  (449   )       506            (32     )       1,318
  amortization
  Early
  Extinguishment         -              (11,305 )      -               (11,305 )
  of debt
  Depreciation
  and                    (6,440 )       (6,961  )      (16,969 )       (17,168 )
  amortization
  Equity in
  earnings from          310            166            3,432           3,139
  Real Estate
  Affiliates
  Interest               (4,265 )       (4,004  )      (11,239 )       (11,378 )
  expense, net
  Less:
  Partners'
  share of              -            -            -             (1,067  )
  Operating
  Assets REP EBT
    Total
    Operating          $ 3,978       $ (11,162 )    $ 20,413       $ (1,254  )
    Assets REP
    EBT (c)
                                                                               
                                                                               

                                                             
                            Three Months Ended            Nine Months Ended
                            September 30,                  September 30,
                            2012          2011             2012         2011
                            (In thousands)                 (In thousands)
                                                                        
  Operating Assets
  NOI - Equity and
  Cost Method
  Investments
      Millennium
      Waterway              $ -           $ 779            $ 1,768      $ 741
      Apartments (b)
      Woodlands               61            364              537          1,138
      Sarofim # 1
      Stewart Title           665           323              1,333        667
      (title company)
      Forest
      View/Timbermill        (25   )      465            557        1,317  
      Apartments (d)
      Total NOI -
      equity                  701           1,931            4,195        3,863
      investees
                                                                        
      Adjustments to         (22   )      (1,412 )        (1,473 )    (3,748 )
      NOI (e)
      Equity Method
      Investments REP         679           519              2,722        115
      EBT
      Less: Joint
      Venture                (369  )      (388   )        (1,666 )    (905   )
      Partner's Share
      of REP EBT
      Equity in
      earnings (loss)
      from Real              310         131            1,056      (790   )
      Estate
      Affiliates
                                                                        
      Distributions
      from Summerlin         -           35             2,376      3,929  
      Hospital
      Investment
                                                                        
      Segment equity
      in earnings
      from Real             $ 310        $ 166           $ 3,432     $ 3,139  
      Estate
      Affiliates
                                                                        
                                                                        
  Company's Share of
  Equity Method
  Investments NOI
      Millennium
      Waterway              $ -           $ 651            $ 1,477      $ 619
      Apartments (b)
      Woodlands               12            73               107          228
      Sarofim # 1
      Stewart Title           333           162              667          334
      (title company)
      Forest
      View/Timbermill        (13   )      233            279        659    
      Apartments (d)
      Total NOI -
      equity                $ 332        $ 1,119         $ 2,530     $ 1,840  
      investees
                                                                        
                                                                        
                            Economic      September
                                          30, 2012
                            Ownership    Debt
                                          (In
                                          thousands)
      Millennium                          not
      Waterway                83.55 %     applicable
      Apartments (b)
      Woodlands               20.00 %     $ 6,882
      Sarofim #1
      Stewart Title           50.00 %       -
      (title company)
      Forest                              not
      View/Timbermill         50.00 %     applicable
      Apartments (d)
                                                                        
  (a) Straight-line ground rent amortization was excluded from 2011 to conform
      with 2012.
      On May 31, 2012, we acquired our partner’s interest in the 393-unit
  (b) Millennium Waterway Apartments. NOI for periods prior to June 1, 2012 is
      included in Operating Assets NOI - Equity and Cost Method Investments.
  (c) For a detailed breakdown of our Operating Assets segment EBT, refer to Note
      15. Such amounts in prior periods include The Woodlands as if consolidated.
      On April 19, 2012, the joint ventures owning the Forest View and Timbermill
  (d) 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.
  (e) Adjustments to NOI primarily include straight-line and market lease
      amortization, depreciation and amortization and non-real estate taxes.

Contact:

The Howard Hughes Corporation
Christopher Stang, 214-741-7744
christopher.stang@howardhughes.com