Howard Hughes Holdings Inc. Reports Third Quarter 2024 Results

Strong demand for MPC residential land and impressive financial performance across the portfolio solidify positive full-year outlook with upgraded guidance in all segments

THE WOODLANDS, Texas, Nov. 04, 2024 (GLOBE NEWSWIRE) -- Howard Hughes Holdings Inc. (NYSE: HHH) (the "Company,” "HHH,” or "we”) today announced operating results for the third quarter ended September 30, 2024. 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.

Third Quarter 2024 Highlights:

• Net income from continuing operations per diluted share of $1.95 compared to $0.64 in the prior-year
• Master Planned Community (MPC) EBT of $145 million sets a new quarterly record-driven by a 184% year-over-year increase in residential land sales revenue at an average price of $1 million per acre-and contributed to a $30 million increase in the full-year MPC EBT guidance mid-point to $330 million
• Total Operating Assets NOI of $65 million was up 8% year-over-year-led by strong office and multi-family performance-and contributed to a $2 million increase in the full-year NOI guidance mid-point to $257 million
• Contracted to sell 29 condominium units in Ward Village^® and The Woodlands^®-representing $57 million of future revenue
• Completed the spinoff of Seaport Entertainment Group on July 31, 2024, providing increased focus on HHH's real estate operations and MPC development going forward
• Subsequent to quarter end, Victoria Place^®-the 7th condominium tower in Ward Village-was completed with increased guidance expectations for condo sales revenue of $760 million at ~27.5% gross margins

"In our MPC segment, we delivered record quarterly EBT of $145 million as homebuilder demand for incremental acreage remained at elevated levels. During the quarter, we closed on the sale of 191 residential acres at an impressive average price of $1 million per acre-representing a strong 13% year-over-year pricing increase. With this incredible pace of land sales and pricing, as well as a solid new home market and low inventories of vacant lots in our MPCs, we anticipate continued momentum for additional land sales going forward. As a result, we have meaningfully raised our 2024 full-year MPC EBT guidance range by $30 million to a new mid-point of $330 million.

"In Operating Assets, we delivered strong 8% year-over-year NOI growth, with solid gains in our office and multi-family portfolios. In office, we continued to benefit from expiring rent abatements in The Woodlands and Summerlin^® which are the result of remarkable leasing performance in recent years. In multi-family, we achieved a second consecutive quarter of record NOI driven by incremental lease-up at our newest properties, as well as by continued strong demand at our stabilized assets which are almost entirely full. For the full year, we now expect record Operating Assets NOI-including the contribution from joint ventures-of approximately $257 million, up $2 million compared to our previous guidance.

"In Strategic Developments, pre-sales for our future condominium developments in Hawai'i and Texas continued at a solid pace with 29 units contracted during the quarter, bringing our inventory of available units to 88% pre-sold. In early November, subsequent to quarter end, we delivered Victoria Place-our seventh completed condominium tower in Hawai'i. Closings for this project will begin this week, and we expect to achieve approximately $760 million of condo revenue, representing the highest revenue achieved on any tower in the history of Ward Village. In Texas, we recently broke ground on The Ritz-Carlton Residences, The Woodlands. This ultra-luxury condo development on the shores of Lake Woodlands has seen incredible demand since its launch with pre-sales achieving a record price per square-foot for the Houston market.

"And finally, we closed on our first sale of Municipal Utility District (MUD) receivables in Bridgeland^® during the quarter, allowing us to create a liquidity mechanism to further enhance our self-funding model. We used the proceeds to significantly pay down Bridgeland's line of credit, allowing us to expand our borrowing capacity, which improves our liquidity and provides greater optionality for the future. Looking forward, we are exploring opportunities to continue improving our liquidity by accelerating the monetization of other MUD receivables.”

Click Here: Third Quarter 2024 Howard Hughes Quarterly Spotlight Video

Click Here: Third Quarter 2024 Earnings Call Webcast

Financial Highlights

Total Company

• HHH reported net income from continuing operations of $96.5 million, or $1.95 per diluted share in the quarter, compared to $32.1 million or $0.64 per diluted share in the prior-year period. This improvement was primarily driven by increased MPC residential land sales, improved NOI performance from Operating Assets, and the final settlement of the construction defect dispute at Waiea in Ward Village.
• The Company continues to maintain a strong liquidity position with $400.7 million of cash and cash equivalents, $1.5 billion of undrawn lender commitment available to be drawn for property development, and limited near-term debt maturities.
• On July 31, 2024, HHH completed the spinoff of Seaport Entertainment Group Inc. (SEG), with holders of HHH common stock receiving one share of SEG common stock for every nine shares of HHH common stock. All current and historical net income and losses related to SEG are reflected in discontinued operations in the Company's financial statements.

• MPC EBT of $144.8 million represented a new quarterly all-time high for HHH, increasing 71% compared to $84.8 million in the prior-year period.
• The average price per acre of residential land sold was approximately $1.0 million during the quarter, up 13% year-over-year, and the second-highest quarterly result in HHH history.
• MPC land sales of $198.2 million increased $122.9 million year-over-year, primarily due to 129 acres of superpad sales in Summerlin at an average price per acre of $1.3 million, compared to 39 acres of superpad sales at the same average price in the prior year.
• In Teravalis^TM, 18 acres of residential land in Floreo were sold at a strong average price per acre of $762,000.
• Builder price participation declined $6.3 million year-over-year as fewer homes were closed with sales prices over the predetermined breakpoints, driven in part by higher prices per acre achieved on land sold to homebuilders in recent years.
• MPC equity earnings were $0.4 million-representing a $13.9 million year-over-year decrease-primarily related to the successful sellout of clubhouse condominium units at The Summit during the prior-year period.

• Total Operating Assets NOI-including the contribution from unconsolidated ventures-totaled $64.8 million in the quarter. This represented an 8% increase compared to $60.0 million in the prior-year period.
• Office NOI of $31.8 million increased 9% year-over-year primarily due to abatement expirations and improved lease-up in The Woodlands and Summerlin. During the quarter, 114,000 square feet of new or expanded office leases were executed, and the stabilized office portfolio was 88% leased at quarter end.
• Multi-family NOI of $15.9 million-a new quarterly all-time high for HHH- increased 15% compared to the prior-year period primarily due to continued lease-up and improved performance at Marlow in Downtown Columbia^®, Tanager Echo in Summerlin, and Starling at Bridgeland. At quarter end, the stabilized multi-family portfolio was 95% leased.
• Retail NOI of $13.0 million increased 2% year-over-year primarily due to improved occupancy in the ground floor retail at Juniper and Marlow in Downtown Columbia. At quarter end, the retail portfolio was 94% leased.

• In Hawai'i, contracted to sell 20 units representing $31.2 million of future revenue at The Launiu-HHH's 11th tower in Ward Village which commenced pre-sales in February. Pre-sales to date have been strong with 55% of the units already pre-sold at quarter end.
• Contracted to sell four condos at The Park Ward Village^® and Kalae^®. At quarter end, these towers were 96% and 92% pre-sold, respectively.
• Contracted to sell five residences at The Ritz Carlton Residences, The Woodlands. At quarter end, 77 condos-or 69% of available units-were pre-sold and represented future revenue of $333.5 million. Subsequent to quarter end, in early October, the Company broke ground on this development, with completion expected in 2027.
• During the quarter, the Company recovered $90.0 million of insurance proceeds related to the settlement of construction defect claims at Waiea in Ward Village-including window remediation expenditures incurred since 2020. In conjunction with this settlement, the Company also recognized $12.1 million of additional condominium rights and unit cost of sales to settle final project costs previously incurred by the Waiea general contractor.
• Subsequent to quarter end, the Company completed Victoria Place-a 349-unit condominium development that is 100% pre-sold. Unit closings are expected to commence in November, contributing to approximately $760 million of anticipated condo sales revenue in the fourth quarter with approximately 27.5% gross margins.

• In September 2024, the Company transferred the reimbursement rights for $193.4 million of existing MUD receivables and $10.4 million of related accrued interest, as well as $32.6 million of anticipated future MUD receivables, for total cash consideration of $176.7 million, recognizing a GAAP loss of $51.5 million.
• The cash consideration for the MUD receivable sale was provided by the issuance of third-party tax-exempt bonds that will be serviced by the MUD reimbursement cash flows. If the MUD reimbursement cash flows are consistent with the Company's expectations, these anticipated future MUD receivables could be either returned to Bridgeland or could be sold in a future transaction. However, if a delay or other event causes a shortfall to bondholders, the cash flows from the $32.6 million of anticipated future MUD receivables would then be used to service the bonds. There are no obligations of the Company to service the bonds or provide any additional collateral.
• Proceeds from the MUD receivable sale were used to pay down the Bridgeland Notes by $192.0 million to a balance of $283.0 million at the end of the third quarter. This transaction supported the modification of the Bridgeland Notes from a capacity of $475 million to $600 million and a maturity extension from September 2026 to September 2029 subsequent to quarter end.
• Subsequent to quarter end in October, closed on a $38.0 million loan to refinance the construction loan for Starling at Bridgeland. The five-year non-recourse loan bears interest at 5.35%.
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• MPC EBT is expected to significantly benefit from solid demand for new homes and strong residential land sales across our MPCs. In the fourth quarter, HHH expects continued momentum and incremental land sales in Bridgeland and The Woodlands Hills^®. In Summerlin, following the successful sale of 217 acres of superpads year-to-date, the Company does not anticipate additional closings in the fourth quarter but does expect strong prospects for additional sales in 2025. For the full-year in 2024, growth in residential land sales revenue-including record acres sold and record pricing-are expected to be largely offset by reduced EBT associated with exceptional commercial land sales and builder price participation during 2023, as well as limited inventory of custom lots available to sell at Aria Isle in The Woodlands and the Summit in Summerlin due to their significant past success. As a result, 2024 MPC EBT, which was previously expected to decline 10% to 15% year-over-year with a mid-point of $300 million, is being raised to be in a range of down 1% to down 6% year-over-year with a mid-point of approximately $330 million.
• Operating Assets NOI, including the contribution from unconsolidated ventures, is projected to benefit from increased occupancy at new multi-family developments in Downtown Columbia, Summerlin, and Bridgeland, as well as improved retail leasing and new tenants in Downtown Columbia, Ward Village, and The Woodlands. The office portfolio is expected to benefit from strong leasing momentum experienced in the last two years, partially offset by free rent periods on many of the new leases and the impact of some tenant vacancies. 2024 Operating Assets NOI is expected to be a new full-year segment record, increasing 5% to 8% year-over-year with a mid-point of approximately $257 million. This compares to previous guidance which contemplated a 3% to 6% year-over-year increase-inclusive of $3.1 million of NOI from the Las Vegas Ballpark, which is now reflected in discontinued operations.
• Condo sales revenues, which were previously projected to range between $730 million and $750 million, are now expected to range between $755 million and $765 million. Gross margin is now expected to be in a range of 27% to 28%. Projected condo sales revenues will be driven entirely by the closing of units at Victoria Place-a 349-unit upscale development in Ward Village that was 100% pre-sold and delivered in early November, subsequent to quarter end. This guidance contemplates approximately $10 million to $20 million of condo sales revenues for Victoria Place occurring in the first quarter of 2025 due to the timing of condo closings.
• Cash G&A is now projected to range between $83 million and $88 million, excluding approximately $9 million of anticipated non-cash stock compensation. This compares to the previous range of $80 million to $90 million. G&A expenses of approximately $33 million incurred during the year to complete the spinoff of Seaport Entertainment are reflected in discontinued operations.

Howard Hughes Holdings Inc. will host its third quarter 2024 earnings conference call on Tuesday, November 5, 2024, at 12:00 p.m. Eastern Time (11:00 a.m. Central Time). Please visit the Howard Hughes website to listen to the earnings call via a live webcast. For listeners who wish to participate in the question-and-answer session via telephone, please preregister using HHH's earnings call registration website. All registrants will receive dial-in information and a PIN allowing them to access the live call. An on-demand replay of the earnings call will be available on the Company's website.

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.