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
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