The Howard Hughes Corporation Reports Fourth Quarter and Full Year 2012 Results

DALLAS--()--The Howard Hughes Corporation (NYSE: HHC):

Fourth Quarter Highlights

  • Fourth quarter 2012 net income was $30.0 million, excluding the $(22.3) million non-cash warrant loss and $(8.6) million non-cash loss relating to a reduction in the tax indemnity receivable, compared to the fourth quarter 2011 net income of $30.6 million, excluding the $0.8 million non-cash warrant gain.
  • Master Planned Community (“MPC”) land sales were $62.3 million for the fourth quarter 2012 compared to $37.4 million for the fourth quarter 2011.
  • Net operating income (“NOI”) for our income-producing Operating Assets was $11.5 million for fourth quarter 2012, compared to $15.2 million in the fourth quarter of 2011. Fourth quarter 2012 results include the impact of Superstorm Sandy on South Street Seaport’s NOI, generating a $(5.6) million negative variance compared to 2011. Substantially all of the lost income caused by the storm will be covered by insurance.
  • Retired 6,083,333 Sponsor warrants for $80.5 million in cash and the issuance of 1,525,272 shares of common stock. As a result of the transactions, shareholders now own 10.1% more of the Company.
  • ONE Ala Moana luxury condominium project in Honolulu, HI, launched pre-sales and sold all 206 units after 29 hours of public sales for approximately $1,170 per square foot. Construction of the tower is expected to begin in first half of 2013.
  • Announced the master plan to transform Ward Centers in Honolulu, HI, into an urban master planned community called Ward Village, which 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 totaling 500 units, one workforce housing tower containing at least 125 units and the renovation of the IBM building into a world-class sales center. The IBM building renovation is underway, and construction of the residential towers is expected to begin in 2014.
  • Dillard’s, Inc. and Macy’s, Inc. committed to become anchor tenants for The Shops at Summerlin downtown mixed-use development in Las Vegas, NV. The 1.5 million square foot project is expected to begin construction in 2013.
  • Obtained all approvals needed to begin construction of a 380-unit apartment building on Parcel D in Columbia, MD, and in February 2013 began construction.
  • Began construction on One Hughes Landing, a 195,000 square foot Class A office building which is 28% pre-leased at The Woodlands in Houston, TX; part of the Hughes Landing mixed use development close to the Town Center.

Full Year Highlights

  • 2012 net income was $77.0 million, excluding the $(185.0) million non-cash warrant loss and $(20.3) million non-cash loss relating to a reduction in the tax indemnity receivable, compared to the 2011 net income of $60.8 million, excluding the $101.6 million non-cash warrant gain and $(15.2) million of non-recurring charges.
  • Generated $180.4 million in Master Planned Community land sales revenue for 2012, a $30.1 million increase from $150.3 million in 2011.
  • NOI for our income-producing Operating Assets was $62.0 million for 2012, compared to $55.6 million in 2011.
  • Began construction on two Class A office towers in The Woodlands, 3 Waterway and One Hughes Landing, containing approximately 427,000 square feet. 3 Waterway is 90% leased, and both buildings will be completed in 2013.
  • August 2012 auction of 375 lots at The Woodlands generated an aggregate 49%, or $16.7 million, increase in price of the lots compared to the selling prices before the auction.
  • Acquired our partner’s equity interest in the 393-unit Millennium Waterway apartment property located in The Woodlands for $6.9 million, representing a $72 million purchase price for the building, with proceeds from a $55.6 million ten-year non-recourse mortgage at a 3.75% interest rate, generating $4.2 million of cash for the company. The property’s stabilized annual NOI is approximately $4.9 million.
  • 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.
  • Commenced Phase Two of the Ward Village Shops, part of Ward Centers in Honolulu, HI, a $26.2 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 in Ward Village. The tenants are expected to take occupancy in late 2013 or early 2014 and should together contribute approximately $1.0 million of incremental annual NOI.
  • TJ Maxx took occupancy of 36,000 square feet of newly completed space and Bed, Bath & Beyond will occupy 30,000 square feet at Ward Centers in early 2013. Both of these tenants are expected to contribute approximately $2.0 million of incremental combined annual NOI to Ward Centers.
  • Completed the ground lease amendment with the Economic Development Corporation of the City of New York which permits the redevelopment of Pier 17. Obtained unanimous Landmarks Commission approval with the support of Community Board 1 for the design, and in February 2013, obtained City Planning Commission approval for the Pier 17 redevelopment.
  • Announced the redevelopment of Riverwalk Marketplace into the first upscale urban outlet center in the U.S. Upon completion, the property will comprise approximately 250,000 square feet of retail space.
  • Entered into agreements with Whole Foods Market and The Columbia Association to lease 77.9% of the approximately 88,000 square foot Columbia Regional Building, located in Downtown Columbia, MD. The redevelopment is expected to cost approximately $23.0 million and to generate approximately $1.8 million of annual NOI based on pre-leasing to date. This architecturally important building currently has $1.0 million of annual carrying costs. The restoration and redevelopment of the building will serve as a catalyst for future development in the Columbia Town Center area. Construction is expected to begin in the first quarter of 2013.
  • Acquired 70 Columbia Corporate Center, 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 by providing a commitment to fund $5.0 million for leasing. Secured a 76,308 square foot tenant which will increase occupancy to 68.7% in 2013 and increase annual NOI to approximately $1.9 million.
  • Completed $348.6 million of non-recourse financing commitments in 2012, the proceeds of which will primarily be used to fund vertical commercial and horizontal land development activities.
  • On February 8, 2013, we closed a $95.0 million financing for the redevelopment of The Woodlands Resort and Conference Center. The loan refinanced a $36.1 million mortgage and will provide a majority of the capital for the $75.0 million redevelopment.

The Howard Hughes Corporation (NYSE: HHC) or (the “Company”) today announced its results for the fourth quarter and full year 2012.

The Howard Hughes Corporation achieved important milestones and accomplishments for 2012 within each of its business segments. Master planned community land sales increased $30.1 million to $180.4 million on a “same property” basis for the year ended December 31, 2012, a 20.0% increase over 2011. Net operating income from our income-producing operating assets increased by $6.4 million to $62.0 million for 2012 compared to 2011. The increase is net of a $(3.4) million fourth quarter 2012 NOI loss at the South Street Seaport due to Superstorm Sandy, compared to $2.2 million of NOI in fourth quarter 2011. We also completed the lease amendment with the City of New York to permit the redevelopment of Pier 17 at South Street Seaport. The Landmarks Commission and City Planning Commission each unanimously approved our redevelopment plans.

At Ward Centers, we announced our vision for the redevelopment of the 60-acre property into a world-class urban master planned community called Ward Village, and also entered into leases with major tenants which will add approximately $3.0 million of incremental annual NOI to the property by early 2014. For more information regarding the Ward Village development, please visit www.avisionforward.com. In early 2013, we intend to begin redevelopment on Riverwalk Marketplace to transform it into the first upscale outlet center in the U.S. located in an urban location.

Several development projects are underway or are expected to be launched in 2013. ONE Ala Moana condominium project sold out after 29 hours of public sales and should begin development in the first half of 2013. The 380-unit apartment project at the Columbia Town Center, which we are developing with local partners, began construction in February 2013. We have 427,000 square feet of Class A office space under construction at The Woodlands with a 2013 delivery date; and our Millennium Woodlands Phase II joint venture at The Woodlands began construction on a 314-unit apartment building in 2012. We are also pre-leasing The Shops at Summerlin now that we have obtained commitments from Macy’s and Dillard’s for 180,000 and 200,000 square feet, respectively, created a catalyst for leasing the remainder of the 1.5 million square foot mixed use project.

For a more complete description of the status of our developments, please refer to Item 7 beginning on page 38 of The Howard Hughes Corporation Consolidated and Combined Financial Statements contained in our Form 10-K for the year ended December 31, 2012.

Fourth quarter 2012 net income attributable to common stockholders includes a $(22.3) million warrant loss and a $(8.6) million loss relating to a reduction in the tax indemnity receivable. Excluding these non-cash charges, net income attributable to common stockholders was $30.0 million, or $0.77 per diluted common share. Excluding the $0.8 million warrant gain, net income attributable to common stockholders was $30.6 million, or $0.80 per diluted common share for the three months ended December 31, 2011.

For the year ended December 31, 2012, net loss attributable to common stockholders was $(128.3) million compared with net income attributable to common stockholders of $147.2 million for the year ended December 31, 2011. Excluding the $(185.0) million warrant loss and $(20.3) million loss relating to a reduction in the tax indemnity receivable, net income attributable to common stockholders for the year ended December 31, 2012, was $77.0 million, or $2.02 per diluted common share, compared with net income attributable to common stockholders of $60.8 million, excluding the $101.6 million warrant gain, a $(11.3) million after-tax loss from refinancing mortgage debt carried on our books at a discount, and a non-cash $(3.8) million after-tax loss to adjust the basis of our equity investment in The Woodlands prior to its consolidation, or $1.56 per diluted common share, for the year ended December 31, 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 using the equity method; consequently, our statement of operations for the twelve months ended December 31, 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 year ended December 31, 2011, would have been approximately $357.5 million, on a pro forma basis, compared to $376.9 million for the year ended December 31, 2012. The principal reason for the $19.4 million increase in revenues, on a pro forma basis, is increases in Master Planned Community land sales, Minimum rents, and Resort and conference center revenues. For a more complete comparison of operating results between periods, please refer Item 7 beginning on page 38 of The Howard Hughes Corporation Consolidated and Combined Financial Statements contained in our Form 10-K for the year ended December 31, 2012

David R. Weinreb, CEO of The Howard Hughes Corporation, stated, “During 2012, we made tremendous progress in advancing the development of our most important assets. Our master planned communities also generated strong performance, and the Las Vegas housing market, where our Summerlin MPC is located, appears to be in a sustainable and strengthening recovery. We have the balance sheet, financial and human capital to realize the full potential of our irreplaceable assets.”

Mr. Weinreb continued, “2013 will be a pivotal year, as we begin construction on several of our new developments and redevelopments, such as the South Street Seaport. I believe that our visibility in the markets will increase significantly as construction activities begin, and we will be able to provide more financial information about each project as they get underway.”

Business Segment Operating Results

For comparative purposes, Master Planned Communities land sales and Operating Assets NOI relating to The Woodlands, and a discussion of results as if we consolidated The Woodlands during the year ended December 31, 2011, are presented in this earnings release 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 Summary

Land sales in our MPC segment, excluding deferred land sales and other revenue, increased $24.9 million, or 66.6%, to $62.3 million for the three months ended December 31, 2012, as compared to the three months ended December 31, 2011. The increase in revenues was primarily caused by a $23.6 million increase in residential land sales at The Woodlands. Approximately 78% of The Woodlands lot sales in the fourth quarter 2012 were a result of the auctions we held in August 2012. The auction resulted in a $50.4 million aggregate sales price for the 375 lots offered representing a $16.7 million, or 49%, increase in price compared to sales prices prior to the auction. The auction also resulted in an acceleration of homebuilder closings on the lots. Higher sales of non-core commercial land at The Woodlands increased commercial revenues by $3.6 million.

For the year ended December 31, 2012, land sales, excluding deferred land sales and other revenue, increased $30.1 million to $180.4 million compared to the year ended December 31, 2011, primarily due to the residential lot auction at The Woodlands, $5.2 million of increased sales at Bridgeland and a $5.1 million increase in commercial land sales, respectively.

The Houston, TX, economy remains strong. The expected influx in 2014 and 2015 of 10,000 employees to ExxonMobil’s three million square foot corporate campus which is under construction just south of The Woodlands is driving demand for residential housing and commercial space at The Woodlands and Bridgeland. 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. In the Las Vegas market, 44,902 homes were sold in 2012, the third-best year on record, and the median single family home price increased 24.2%, according to the Greater Las Vegas Association of Realtors. In addition, the number of single-family homes available for sale on the Multiple Listing Service at December 31, 2012, declined 24.1% from the prior year, representing an approximate five-week supply of inventory. Summerlin sold 38 and 109 residential lots during the three months ended December 31, 2012 and 2011, respectively, and sold 400 and 421 residential lots during the years ended December 31, 2012 and 2011, respectively. Summerlin’s pipeline remains robust, with 110 residential lots under contract representing approximately $9.3 million of sales revenue as of December 31, 2012, if all sales are completed. In addition, Summerlin has an outparcel in escrow representing $2.6 million of sales revenue.

Operating Assets Summary

NOI from the combined retail, office and resort and conference center and multi-family properties was $11.5 million for the three months ended December 31, 2012, compared to NOI of $15.2 million for the three months ended December 31, 2011. This includes our share of NOI of our non-consolidated ventures of $0.3 million for the three months ended December 31, 2012, and $2.1 million for the three months ended December 31, 2011. The $3.8 million decrease in NOI in the fourth quarter 2012 compared to the fourth quarter 2011 is primarily attributable to the negative impact of Superstorm Sandy at South Street Seaport. The Uplands portion of the property suffered damage due to flooding, but the Pier 17 structure was not damaged. Remediation efforts are ongoing, and the property is only partially operating. We believe that our insurance will cover substantially all of the cost of repairing the property and will also compensate us for any income that has been lost as a result of the storm.

The South Street Seaport had a fourth quarter 2012 NOI loss of $(3.4) million, compared to NOI of $2.2 million for fourth quarter 2011. This $(5.6) million negative variance was partially offset by a $4.1 million combined increase at 4 Waterway Square, 9303 New Trails, 1400 Woodloch Forest, Millennium Waterway apartments, and the Woodlands Resort and Conference Center, all located at The Woodlands, due to several properties reaching stabilized NOI and improved occupancy and operating results compared to 2011.

NOI from the combined retail, office and resort and conference center and multi-family properties was $62.0 million for the year ended December 31, 2012, compared to NOI of $55.6 million for the year ended December 31, 2011. This includes our share of NOI of our non-consolidated ventures of $2.8 million for the year ended December 31, 2012, and $3.9 million for the year ended December 31, 2011. The $6.4 million increase in NOI in 2012 compared to 2011 is primarily attributable to a combined increase of $11.9 million at 4 Waterway Square, 9303 New Trails, 1400 Woodloch Forest, Millennium Waterway apartments, and the Woodlands Resort and Conference Center, all located at The Woodlands, partially offset by the decrease at South Street Seaport caused by Superstorm Sandy.

Strategic Developments Summary

In December 2012, our ONE Ala Moana condominium development joint venture launched pre-sales and sold all 206 units after 29 hours of public sales for an average selling price of $1,170 per square foot. We expect to close on the first mortgage construction financing and to begin construction during the first half of 2013. Upon closing the construction loan, the venture will fully draw on the $40.0 million of committed mezzanine loans, and we will sell our condominium rights to the venture at a $47.5 million valuation.

During 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.

Subsequent Event

On February 8, 2013, we closed on a $95.0 million non-recourse loan which refinanced the existing $36.1 million mortgage on The Woodlands Resort and Conference Center and will fund the majority of the costs of the $75.0 million redevelopment of the property. The new loan bears interest at LIBOR plus 3.50%, has a three-year initial term and contains three one-year extension options. We believe that the redevelopment will enable the property to meet increasing demand for world-class hospitality driven by the strength of the Houston economy. The redevelopment will replace 206 rooms originally built in the 1970s with 184 new guest rooms and suites, and will renovate 222 existing guest rooms and suites. The project also includes construction of a 1,000-foot lazy river amenity, a 120-seat prime steakhouse and restaurant and the renovation and expansion of the arrival areas and conference center space. The entire facility will continue to operate during the redevelopment, and the rooms being replaced will not be taken out of service until the new rooms are completed.

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
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 2012 2011
(In thousands, except per share amounts)
Revenues:
Master Planned Community land sales $ 62,408 $ 38,918 $ 182,643 $ 114,610
Builder price participation 1,539 1,465 5,747 3,816
Minimum rents 20,012 18,080 82,621 71,178
Tenant recoveries 5,419 4,786 23,351 19,323
Condominium unit sales - 2,572 267 22,067
Resort and conference center revenues 9,828 8,544 39,782 15,744
Other land revenues 4,640 4,040 18,073 13,133
Other rental and property revenues   4,521     6,688     24,402     15,818  
Total revenues   108,367     85,093     376,886     275,689  
Expenses:
Master Planned Community cost of sales 26,202 18,201 89,298 70,108
Master Planned Community operations 9,544 11,334 40,506 33,647
Rental property real estate taxes 3,060 2,477 13,643 10,270
Rental property maintenance costs 2,351 1,798 8,655 7,076
Other property operating costs 16,729 16,136 63,035 50,549
Condominium unit cost of sales - 743 96 14,465
Resort and conference center operations 7,362 6,868 29,112 13,220
Provision for (recovery of) doubtful accounts 939 (409 ) 1,224 (235 )
General and administrative 8,527 11,186 34,423 32,342
Depreciation and amortization   6,711     3,190     24,429     16,782  
Total expenses   81,425     71,524     304,421     248,224  
 
Operating income 26,942 13,569 72,465 27,465
 
Interest income 2,389 2,779 9,437 9,876
Interest expense (321 ) - (964 ) -
Warrant liability gain (loss) (22,293 ) 822 (185,017 ) 101,584
Reduction in tax indemnity receivable (8,605 ) - (20,260 ) -
Equity in earnings from Real Estate Affiliates 251 791 3,683 8,578
Investment in Real Estate Affiliate basis adjustment - - (6,053 )
Early extinguishment of debt   -     -     -     (11,305 )
Income (loss) before taxes (1,637 ) 17,961 (120,656 ) 130,145
Provision (benefit) for income taxes   (816 )   (13,981 )   6,887     (18,325 )
Net income (loss) (821 ) 31,942 (127,543 ) 148,470
Net income attributable to noncontrolling interests   (108 )   (513 )   (745 )   (1,290 )
Net income (loss) attributable to common stockholders $ (929 ) $ 31,429   $ (128,288 ) $ 147,180  
 
Basic earnings (loss) per share: $ (0.01 ) $ 0.83   $ (3.36 ) $ 3.88  
 
Diluted earnings (loss) per share: $ (0.01 ) $ 0.80   $ (3.36 ) $ 1.17  
 
   
 

THE HOWARD HUGHES CORPORATION

CONSOLIDATED BALANCE SHEETS

 
 
December 31, December 31,
2012 2011
Assets: (In thousands, except share amounts)
Investment in real estate:
Master Planned Community assets $ 1,563,122 $ 1,602,437
Land 252,593 234,190
Buildings and equipment 657,268 545,343
Less: accumulated depreciation (112,491 ) (91,605 )
Developments in progress   273,613     207,760  
Net property and equipment 2,634,105 2,498,125
Investment in Real Estate Affiliates   32,179     58,790  
Net investment in real estate 2,666,284 2,556,915
Cash and cash equivalents 229,197 227,566
Accounts receivable, net 13,905 20,089
Municipal Utility District receivables, net 89,720 86,599
Notes receivable, net 27,953 35,354
Tax indemnity receivable, including interest 319,622 331,771
Deferred expenses, net 12,891 10,338
Prepaid expenses and other assets, net   143,470     130,961  
Total assets $ 3,503,042   $ 3,399,593  
 
Liabilities:
Mortgages, notes and loans payable $ 688,312 $ 606,477
Deferred tax liabilities 77,147 75,966
Warrant liabilities 123,573 127,764
Uncertain tax position liability 132,492 129,939
Accounts payable and accrued expenses   170,521     129,848  
Total liabilities   1,192,045     1,069,994  
 
Commitments and Contingencies (see Note 10)
 
Equity:
Preferred stock: $.01 par value; 50,000,000 shares authorized, none issued - -
Common stock: $.01 par value; 150,000,000 shares authorized,
39,498,912 shares issued and outstanding as of December 31, 2012, and
37,945,707 shares issued and outstanding as of December 31, 2011 395 379
Additional paid-in capital 2,824,031 2,711,109
Accumulated deficit (509,613 ) (381,325 )
Accumulated other comprehensive loss   (9,575 )   (5,578 )
Total stockholders' equity 2,305,238 2,324,585
Noncontrolling interests   5,759     5,014  
Total equity   2,310,997     2,329,599  
Total liabilities and equity $ 3,503,042   $ 3,399,593  
 
 
 

Supplemental Information

 
December 31, 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 GAAP-net income (loss)

Three Months Ended
December 31,

Twelve Months Ended
December 31,

 

2012 2011 2012 2011
(In thousands) (In thousands)
Real estate property EBT:
Segment basis $ 34,759 $ 25,972 $ 109,705 $ 62,197
Real Estate Affiliates   (251 )   287     (3,683 )   (12,210 )
34,508 26,259 106,022 49,987
General and administrative (8,527 ) (11,186 ) (34,423 ) (32,342 )

Corporate interest income, net

3,339 1,286 10,153 8,595
Warrant liability gain (loss) (22,293 ) 822 (185,017 ) 101,584
Benefit (provision) for income taxes 816 13,981 (6,887 ) 18,325
Reduction in tax indemnity receivable (8,605 ) - (20,260 ) -
Equity in earnings from Real Estate Affiliates 251 791 3,683 8,578
Investment in Real Estate Affiliate basis adjustment - - - (6,053 )
Corporate depreciation   (308 )   (11 )   (814 )   (204 )
Net income (loss) $ (819 ) $ 31,942   $ (127,543 ) $ 148,470  
 
                             
 

MPC Sales Summary

 
Land Sales Acres Sold Number of Lots/Units Price per acre Price per lot

Three Months Ended December 31, 2012

($ In thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Columbia

 

Residential
Single family - detached

 

$ - $ - - - - - $ - $ - $ - $ -
Townhomes

 

- 2,227 - 0.8 - 15 - 2,784 - 148
Commercial
Apartments

 

  -     - - - - -   -   -   -   -
- 2,227 - 0.8 - 15 - 2,784 - 148
 
Bridgeland
Residential
Single family - detached

 

4,692 2,861 16.6 11.0 76 58 283 260 62 49
Commercial
Not-for-profit

 

  -     - - - - -   -   -   -   -
4,692 2,861

16.6

11.0

76 58 283 260 62 49
 
Summerlin
Residential
Single family - detached

 

3,126 4,743 4.3 21.1 37 107 727 225 84 44
Custom lots

 

380 679 0.5 1.0 1 2 760 679 380 340
Commercial
Retail

 

- - - - - - - - - -
Not-for-profit

 

  -     - - - - -   -   -   -   -
3,506 5,422

4.8

22.1

38 109 730 245 92 50
 
The Woodlands
Residential
Single family - detached

 

44,776 20,839 90.4 60.6 381 216 495 344 118 96
Single family - attached

 

- 348 - 0.7 - 12 - 497 - 29
Commercial
Office and other

 

2,632 4,413 3.8 10.8 - - 693 409 - -
Retail

 

6,654 1,250 17.2 1.5 - - 387 833 - -
Other

 

  -     - - - - -   -   -   -   -
54,062 26,850

111.4

73.6

381 228 485 365 118 93
                 
Total acreage sales revenue

 

  62,260     37,360

132.8

107.5

495 410
Deferred revenue (222 ) 164
Special Improvement District revenue   370     1,392
Total segment land sale revenues 62,408 38,916
Less: Real Estate Affiliates land sales revenue   -     -
Total land sales revenue - GAAP basis $ 62,408   $ 38,916
 
                           
 

MPC Sales Summary

 
Land Sales Acres Sold Number of Lots/Units Price per acre Price per lot
Year Ended December 31, 2012
($ In thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Columbia
Residential
Single family - detached $ - $ 1,480 - 1.4 - 7 $ - $ 1,040 $ - $ 211
Townhomes 4,156 5,538 1.2 1.8 28 39 3,463 3,077 148 142
Commercial
Apartments   5,300     -   18.7 - - -   283   -   -   -
9,456 7,018 19.9 3.2 28 46 475 2,193 148 153
 
Bridgeland
Residential
Single family - detached 21,875 16,707 80.5 63.2 389 318 272 265 56 53
Commercial
Not-for-profit   -     -   - - - -   -   -   -   -
21,875 16,707 80.5 63.2 389 318 272 265 56 53
 
Summerlin
Residential
Single family - detached 26,899 30,247 75.9 83.5 390 419 354 362 69 72
Custom lots 4,141 679 5.3 1.0 10 2 781 694 414 340
Commercial
Retail 784 - 1.0 - - - 784 - - -
Not-for-profit   -     3,616   - 16.1 - -   -   225   -   -
31,824 34,542 82.2 100.6 400 421 387 343 78 73
 
The Woodlands
Residential
Single family - detached 100,235 76,362 241.6 210.4 979 826 415 363 102 92
Single family - attached - 1,235 - 3.0 - 46 - 409 - 27
Commercial
Office and other 9,069 6,213 14.2 14.0 - - 639 449 - -
Retail 7,904 6,365 18.4 12.0 - - 430 547 - -
Other   50     1,839   0.8 5.0 - -   63   348   -   -
117,258 92,014 275.0 244.4 979 872 426 376 102 89
                   
Total acreage sales revenue   180,413     150,281   457.6 411.4 1,796 1,657
Deferred revenue (2,092 ) 5,680
Special Improvement District revenue   4,322     5,420  
Total segment land sale revenues 182,643 161,381
Less: Real Estate Affiliates land sales revenue   -     (46,771 )
Total land sales revenue - GAAP basis $ 182,643   $ 114,610  
 
 

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
December 31,

Year Ended
December 31,

2012 2011 2012 2011
(In thousands) (In thousands)
Operating Assets NOI
Retail
Ward Centers $ 5,310 $ 5,032 $ 22,045 $ 21,481
South Street Seaport (3,446 ) 2,246 639 5,650
Rio West Mall 255 356 1,250 1,319
Landmark Mall 261 110 923 737
Riverwalk Marketplace (352 ) 79 221 418
Cottonwood Square 112 81 432 380
Park West 91 86 830 576
20/25 Waterway Avenue 340 408 1,582 1,310
Waterway Garage Retail   95     1     97     7  
Total Retail   2,666     8,399     28,019     31,878  
Office
110 N. Wacker 1,519 1,597 6,073 6,115
Columbia Office Properties 606 987 2,304 2,649
70 Columbia Corporate Center 148 - 140 -
4 Waterway Square 1,404 537 5,544 1,639
9303 New Trails 384 (110 ) 1,819 742
1400 Woodloch Forest 793 - 1,995 649
2201 Lake Woodlands Drive   32     83     53     332  
Total Office   4,886     3,094     17,928     12,126  
 
Millennium Waterway Apartments (a) 1,182 - 2,589 -
The Woodlands Resort and Conference Center   2,465     1,676     10,670     7,726  
Total Retail, Office, Multi-family, Resort and Conference Center   11,199     13,169     59,206     51,730  
 
The Club at Carlton Woods (859 ) (1,193 ) (4,242 ) (5,126 )
The Woodlands Parking Garages (399 ) (298 ) (1,128 ) (1,204 )
The Woodlands Ground leases 115 91 404 403
Other Properties   666     357     1,703     1,530  
Total Other   (477 )   (1,043 )   (3,263 )   (4,397 )
Total Operating Assets NOI- Consolidated 10,722 12,126 55,943 47,333
 
 
Straight-line lease amortization (704 ) (400 ) (736 ) 918
Provisions for impairment - - - -
Ground Rent - -
Early extinguishment of debt - - - (11,305 )
Depreciation and amortization (6,349 ) (3,141 ) (23,318 ) (20,309 )
Equity in earnings from Real Estate Affiliates 251 787 3,683 3,926
Interest, net (4,865 ) (1,397 ) (16,104 ) (12,775 )
Less: Partners' share of Operating Assets REP EBT   -     1,492     -     425  
Total Operating Assets REP EBT (b) $ (945 ) $ 9,467   $ 19,468   $ 8,213  
 
 
Operating Assets NOI - Equity and Cost Method Investments
Millennium Waterway Apartments (a) $ - $ 1,830 $ 1,768 $ 2,571
Woodlands Sarofim # 1 84 351 621 1,489
Stewart Title (title company) 543 402 1,876 1,069
Forest View/Timbermill Apartments (c)   (70 )   509     487     1,826  
Total NOI - equity investees 557 3,092 4,752 6,955
 
Adjustments to NOI (d)   (3 )   (114 )   (1,476 )   (3,862 )
Equity Method Investments REP EBT 554 2,978 3,276 3,093
Less: Joint Venture Partner's Share of REP EBT   (303 )   (2,156 )   (1,969 )   (3,061 )
Equity in earnings (loss) from Real Estate Affiliates   251     822     1,307     32  
 
Distributions from Summerlin Hospital Investment   -     (35 )   2,376     3,894  
 
Segment equity in earnings from Real Estate Affiliates $ 251   $ 787   $ 3,683   $ 3,926  
 
 
Company's Share of Equity Method Investments NOI
Millennium Waterway Apartments (a) $ - $ 1,529 $ 1,477 $ 2,148
Woodlands Sarofim # 1 17 70 124 298
Stewart Title (title company) 271 201 938 535
Forest View/Timbermill Apartments (c)   (35 )   254     244     913  
Total NOI - equity investees $ 253   $ 2,054   $ 2,783   $ 3,894  
 
 
 
Economic December 31, 2012
Ownership Debt Cash
(In thousands)
Woodlands Sarofim #1 20.00 % 6,882 811
Stewart Title(title company) 50.00 % - 426
Forest View/Timbermill Apartments (c) 50.00 % not applicable 1,258
 
 

(a) On May 31, 2012, we acquired our partner's interest in the 393-unit Millennium Waterway Apartments. NOI for periods prior to June 1, 2012, is included in Operating Assets NOI - Equity and Cost Method Investment.

 
(b) For a detailed breakdown of our Operating Asset segment REP EBT, refer to Note 17 in the Consolidated and Combined Financial Statements. Such amounts in prior periods include The Woodlands as if consolidated.
 
(c) On April 19, 2012, the joint ventures owning the Forest View and Timbermill 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.
 
(d) Adjustments to NOI include straight-line and market lease amortization, depreciation and amortization and non-real estate taxes.

Contacts

The Howard Hughes Corporation
Caryn Kboudi, 214-741-7744
caryn.kboudi@howardhughes.com

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Contacts

The Howard Hughes Corporation
Caryn Kboudi, 214-741-7744
caryn.kboudi@howardhughes.com