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Solid third quarter results driven by Ward Village® condo sales and strong MPC performance
HOUSTON, Nov. 2, 2022 /PRNewswire/ -- The Howard Hughes Corporation® (NYSE: HHC) (the "Company," "HHC" or "we") today announced operating results for the third quarter ended September 30, 2022. 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 2022 Highlights Include:
"The third quarter's results reflected solid financial performance despite significant macroeconomic uncertainty," commented David R. O'Reilly, Chief Executive Officer of The Howard Hughes Corporation. "While our segments were not immune to the market headwinds, our acclaimed portfolio of mixed-use assets performed well, generating increased MPC EBT, robust condo sales, and strong NOI in our world-class multi-family and office portfolios.
"In Hawai'i, we welcomed the first residents to Kō'ula—our sixth condo tower to open at Ward Village—generating significant earnings in the quarter. The successful completion of this tower represents another milestone in our vision to develop a premier MPC in the heart of Honolulu. With strong demand for housing in this market, we continue to see record-breaking sales momentum for our development projects. In September, we launched pre-sales on our tenth condo tower—Kalae—which has been met with exceptional demand and more than 40% of units being under contract as of the end of October.
"At the Seaport, we celebrated the grand opening of the Tin Building by Jean-Georges, a one-of-a-kind culinary marketplace featuring dining and retail experiences from around the world. Since its opening, the marketplace has been met with tremendous crowds, strong sales, and significant acclaim from the media. At Pier 17, we continued to experience increased foot traffic and revenue at all of our managed restaurants, as well as on The Rooftop. With the Tin Building by Jean-Georges now open, the Seaport has firmly established itself as a premier dining and entertainment venue in New York City which we expect will continue to drive improved financial results.
"In Operating Assets, we experienced strong NOI growth within our multi-family and office portfolios. In multi-family, our stabilized assets experienced continued strong demand, with all properties at or near full stabilized occupancy and average in-place effective rent growth of nearly 13% compared to the prior year. With additional multi-family development projects nearing completion, we expect continued strong NOI growth. We also continued to make significant progress with the lease-up of our Class-A office buildings. In The Woodlands, we contracted nearly 94,000 square-feet of space to a diverse mix of companies during the quarter. Together with an exceptional initial lease-up at 1700 Pavilion—our newest office tower in Downtown Summerlin—we are making significant progress towards meaningful NOI growth from our office portfolio in the years ahead.
"In our MPCs, we delivered another quarter of strong results which were highlighted by solid land sales in Bridgeland, record prices for residential acres sold, and continued growth in builder price participation revenue. Despite these favorable results, our homebuilders reported a 48% reduction in new home sales as rising mortgage rates, inflation, and market uncertainty weighed on buyer sentiment. In the near-term, we believe these market headwinds will contribute to some reductions in residential land sales relative to the unprecedented levels of activity seen in 2021. However, we expect favorable demand for our land will continue as homebuilder lot inventories remain at historic lows in all of our core markets. Together with continued migration into our highly desirable MPCs—which offer a low cost of living, outstanding amenities, and exceptional quality of life—we expect to finish the year on a strong note."
Click Here: Third Quarter 2022 Howard Hughes Quarterly Spotlight
Click Here: Third Quarter 2022 live audio webcast
Third Quarter 2022 Highlights
Total Company
Operating Assets
Strategic Developments
Seaport
Financing Activity
Full-Year 2022 Guidance
Conference Call & Webcast Information
The Howard Hughes Corporation will host its investor conference call on Thursday, November 3, 2022, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss third quarter 2022 results. To participate, please dial 1-877-883-0383 within the U.S., 1-866-605-3850 within Canada, or 1-412-902-6506 when dialing internationally. All participants should dial in at least five minutes prior to the scheduled start time, using 0392401 as the passcode. A live audio webcast and Quarterly Spotlight will also be available on the Company's website ( wwww.howardhughes.com ). In addition to dial-in options, institutional and retail shareholders can participate by going to app.saytechnologies.com/howardhughes. Shareholders can email hello@saytechnologies.com for any support inquiries.
We are primarily focused on creating shareholder value by increasing our per-share net asset value. Often, the nature of our business results in short-term volatility in our net income due to the timing of MPC land sales, recognition of condominium revenue and operating business pre-opening expenses, and, as such, we believe the following metrics summarized below are most useful in tracking our progress towards net asset value creation.
Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||||
$ in thousands | 2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | |||||
Operating Assets NOI (1) | |||||||||||||
Office | $ 83,338 | $ 79,929 | $ 3,409 | 4 % | $ 28,540 | $ 27,814 | $ 726 | 3 % | |||||
Retail | 41,163 | 40,889 | 274 | 1 % | 13,206 | 15,577 | (2,371) | (15) % | |||||
Multi-family | 34,710 | 22,353 | 12,357 | 55 % | 11,725 | 9,208 | 2,517 | 27 % | |||||
Other | 13,759 | 13,266 | 493 | 4 % | 5,652 | 7,475 | (1,823) | (24) % | |||||
Dispositions | 162 | 6,865 | (6,703) | (98) % | (466) | 2,901 | (3,367) | (116) % | |||||
Operating Assets NOI | 173,132 | 163,302 | 9,830 | 6 % | 58,657 | 62,975 | (4,318) | (7) % | |||||
Company's share NOI (a) | 11,279 | 5,783 | 5,496 | 95 % | 2,139 | (47) | 2,186 | NM | |||||
Total Operating Assets NOI | $ 184,411 | $ 169,085 | $ 15,326 | 9 % | $ 60,796 | $ 62,928 | $ (2,132) | (3) % | |||||
Projected stabilized NOI Operating | $ 360.4 | $ 368.6 | $ (8.2) | (2) % | |||||||||
Acres Sold - Residential | 216 | 232 | (16) | (7) % | 60 | 84 | (24) | (29) % | |||||
Acres Sold - Commercial | 51 | 27 | 24 | 87 % | 17 | 2 | 15 | NM | |||||
Price Per Acre - Residential | $ 722 | $ 604 | $ 118 | 20 % | $ 790 | $ 580 | $ 210 | 36 % | |||||
Price Per Acre - Commercial | $ 735 | $ 370 | $ 365 | 99 % | $ 436 | $ 1,683 | $ (1,247) | (74) % | |||||
MPC EBT (1) | $ 206,327 | $ 187,306 | $ 19,021 | 10 % | $ 75,383 | $ 54,120 | $ 21,263 | 39 % | |||||
Seaport NOI (1) | |||||||||||||
Landlord Operations | $ (10,260) | $ (11,226) | $ 966 | 9 % | $ (4,335) | $ (4,152) | $ (183) | (4) % | |||||
Landlord Operations - Multi-family | 96 | 84 | 12 | 14 % | 22 | (52) | 74 | 142 % | |||||
Managed Businesses | 149 | 7 | 142 | NM | 1,010 | 923 | 87 | 9 % | |||||
Tin Building | 1,612 | — | 1,612 | NM | 1,612 | — | 1,612 | NM | |||||
Events and Sponsorships | 3,545 | (909) | 4,454 | NM | 3,259 | (244) | 3,503 | NM | |||||
Seaport NOI | (4,858) | (12,044) | 7,186 | 60 % | 1,568 | (3,525) | 5,093 | 144 % | |||||
Company's share NOI (a) | (19,851) | (320) | (19,531) | NM | (11,034) | (38) | (10,996) | NM | |||||
Total Seaport NOI | $ (24,709) | $ (12,364) | $ (12,345) | (100) % | $ (9,466) | $ (3,563) | $ (5,903) | (166) % | |||||
Strategic Developments | |||||||||||||
Condominium units contracted to | 85 | 152 | (67) | (44) % | 5 | 61 | (56) | (92) % |
(a) | Includes Company's share of NOI from non-consolidated assets |
(b) | Includes units at our buildings that are open or under construction as of September 30, 2022 |
NM - Not Meaningful | |
Financial Data | |
(1) | See the accompanying appendix for a reconciliation of GAAP to non-GAAP financial measures and a statement indicating why management believes the non-GAAP financial measure provides useful information for investors. |
About The Howard Hughes Corporation®
The Howard Hughes Corporation owns, manages and develops commercial, residential and mixed-use real estate throughout the U.S. Its award-winning assets include the country's preeminent portfolio of master planned communities, as well as operating properties and development opportunities including: the Seaport in New York City; Downtown Columbia® in Maryland; The Woodlands®, The Woodlands Hills®, and Bridgeland® in the Greater Houston, Texas area; Summerlin® in Las Vegas; Ward Village® in Honolulu, Hawai'i; and Teravalis™ in the Greater Phoenix, Arizona area. The Howard Hughes Corporation's portfolio is strategically positioned to meet and accelerate development based on market demand, resulting in one of the strongest real estate platforms in the country. Dedicated to innovative placecmaking, the Company is recognized for its ongoing commitment to design excellence and to the cultural life of its communities. The Howard Hughes Corporation is traded on the New York Stock Exchange as HHC. For additional information visit www.howardhughes.com.
The Howard Hughes Corporation has partnered with Say, the fintech startup reimagining shareholder communications, to allow investors to submit and upvote questions they would like to see addressed on the Company's third quarter earnings call. Say verifies all shareholder positions and provides permission to participate on the November 3, 2022 call, during which the Company's leadership will be answering top questions. Utilizing the Say platform, The Howard Hughes Corporation elevates its capabilities for responding to Company shareholders, making its investor relations Q&A more transparent and engaging.
Safe Harbor Statement
Certain statements contained in this press release may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical facts, including, among others, statements regarding the Company's future financial position, results or performance, are forward-looking statements. Those statements include statements regarding the intent, belief, or current expectations of the Company, members of its management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "likely," "may," "plan," "project," "realize," "should," "transform," "will," "would," and other statements of similar expression. Forward-looking statements are not a guaranty of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements. Many of these factors are beyond the Company's abilities to control or predict. Some of the risks, uncertainties and other important factors that may affect future results or cause actual results to differ materially from those expressed or implied by forward-looking statements include: (i) the impact of the COVID-19 pandemic on the Company's business, tenants and the economy in general, including the measures taken by governmental authorities to address it; (ii) general adverse economic and local real estate conditions; (iii) potential changes in the financial markets and interest rates; (iv) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business; (v) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms, if at all; (vi) ability to compete effectively, including the potential impact of heightened competition for tenants and potential decreases in occupancy at our properties; (vii) ability to successfully dispose of non-core assets on favorable terms, if at all; (viii) ability to successfully identify, acquire, develop and/or manage properties on favorable terms and in accordance with applicable zoning and permitting laws; (ix) changes in governmental laws and regulations; (x) increases in operating costs, including construction cost increases as the result of trade disputes and tariffs on goods imported in the United States; (xi) lack of control over certain of the Company's properties due to the joint ownership of such property; (xii) impairment charges; (xiii) the effects of geopolitical instability and risks such as terrorist attacks and trade wars; (xiv) the effects of natural disasters, including floods, droughts, wind, tornadoes and hurricanes; (xv) the inherent risks related to disruption of information technology networks and related systems, including cyber security attacks; and (xvi) the ability to attract and retain key employees. The Company refers you to the section entitled "Risk Factors" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the Company's filings with the Securities and Exchange Commission. Copies of each filing may be obtained from the Company or the Securities and Exchange Commission. The risks included here are not exhaustive and undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to the Company, its management, or persons acting on their behalf are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless otherwise required by law.
Financial Presentation
As discussed throughout this release, we use certain non-GAAP performance measures, in addition to the required GAAP presentations, as we believe these measures improve the understanding of our operational results and make comparisons of operating results among peer companies more meaningful. We continually evaluate the usefulness, relevance, limitations and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change. A non-GAAP financial measure used throughout this release is net operating income (NOI). We provide a more detailed discussion about this non-GAAP measure in our reconciliation of non-GAAP measures provided in the appendix in this earnings release.
Media Contact
The Howard Hughes Corporation
Cristina Carlson, 646-822-6910
Senior Vice President, Head of Corporate Communications
cristina.carlson@howardhughes.com
Investor Relations Contact
The Howard Hughes Corporation
Eric Holcomb, 281-475-2144
Senior Vice President, Investor Relations
eric.holcomb@howardhughes.com
THE HOWARD HUGHES CORPORATION | |||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
UNAUDITED | |||||||
Nine Months Ended | Three Months Ended | ||||||
thousands except per share amounts | 2022 | 2021 | 2022 | 2021 | |||
REVENUES | |||||||
Condominium rights and unit sales | $ 459,681 | $ 50,191 | $ 418,645 | $ 163 | |||
Master Planned Communities land sales | 199,032 | 152,124 | 52,585 | 56,305 | |||
Rental revenue | 296,081 | 269,590 | 96,917 | 95,215 | |||
Other land, rental and property revenues | 119,870 | 120,982 | 52,550 | 56,350 | |||
Builder price participation | 51,819 | 29,338 | 18,852 | 11,155 | |||
Total revenues | 1,126,483 | 622,225 | 639,549 | 219,188 | |||
EXPENSES | |||||||
Condominium rights and unit cost of sales | 329,026 | 68,485 | 295,300 | 82 | |||
Master Planned Communities cost of sales | 75,304 | 63,928 | 19,355 | 23,419 | |||
Operating costs | 236,763 | 219,866 | 85,089 | 90,025 | |||
Rental property real estate taxes | 40,314 | 42,519 | 12,118 | 14,812 | |||
Provision for (recovery of) doubtful accounts | 2,238 | (1,944) | 106 | 154 | |||
General and administrative | 60,874 | 61,133 | 19,471 | 19,033 | |||
Depreciation and amortization | 147,584 | 155,395 | 50,015 | 56,299 | |||
Other | 7,985 | 8,253 | 2,902 | 4,063 | |||
Total expenses | 900,088 | 617,635 | 484,356 | 207,887 | |||
OTHER | |||||||
Provision for impairment | — | (13,068) | — | — | |||
Gain (loss) on sale or disposal of real estate and other assets, net | 4,009 | 60,474 | — | 39,141 | |||
Other income (loss), net | 2,497 | (12,278) | 2,004 | (1,307) | |||
Total other | 6,506 | 35,128 | 2,004 | 37,834 | |||
Operating income (loss) | 232,901 | 39,718 | 157,197 | 49,135 | |||
Interest income | 1,273 | 84 | 995 | 12 | |||
Interest expense | (79,963) | (97,205) | (24,373) | (31,556) | |||
Gain (loss) on extinguishment of debt | (645) | (37,543) | — | (1,577) | |||
Equity in earnings (losses) from real estate and other affiliates | 19,528 | 15,815 | 7,708 | (7,848) | |||
Income (loss) before income taxes | 173,094 | (79,131) | 141,527 | 8,166 | |||
Income tax expense (benefit) | 41,822 | (16,706) | 33,858 | 6,049 | |||
Net income (loss) | 131,272 | (62,425) | 107,669 | 2,117 | |||
Net (income) loss attributable to noncontrolling interests | 510 | 4,725 | 427 | 1,936 | |||
Net income (loss) attributable to common stockholders | $ 131,782 | $ (57,700) | $ 108,096 | $ 4,053 | |||
Basic income (loss) per share | $ 2.59 | $ (1.04) | $ 2.19 | $ 0.07 | |||
Diluted income (loss) per share | $ 2.59 | $ (1.04) | $ 2.19 | $ 0.07 |
THE HOWARD HUGHES CORPORATION | |||
CONSOLIDATED BALANCE SHEETS | |||
UNAUDITED | |||
thousands except par values and share amounts | September 30, | December 31, | |
ASSETS | |||
Investment in real estate: | |||
Master Planned Communities assets | $ 2,396,689 | $ 2,282,768 | |
Buildings and equipment | 4,177,563 | 3,962,441 | |
Less: accumulated depreciation | (841,363) | (743,311) | |
Land | 307,037 | 322,439 | |
Developments | 1,085,302 | 1,208,907 | |
Net property and equipment | 7,125,228 | 7,033,244 | |
Investment in real estate and other affiliates | 261,615 | 369,949 | |
Net investment in real estate | 7,386,843 | 7,403,193 | |
Net investment in lease receivable | 2,897 | 2,913 | |
Cash and cash equivalents | 354,605 | 843,212 | |
Restricted cash | 571,703 | 373,425 | |
Accounts receivable, net | 95,364 | 86,388 | |
Municipal Utility District receivables, net | 506,666 | 387,199 | |
Notes receivable, net | 4,700 | 7,561 | |
Deferred expenses, net | 123,815 | 119,825 | |
Operating lease right-of-use assets, net | 47,629 | 57,022 | |
Prepaid expenses and other assets, net | 414,459 | 300,956 | |
Total assets | $ 9,508,681 | $ 9,581,694 | |
LIABILITIES | |||
Mortgages, notes and loans payable, net | $ 4,627,411 | $ 4,591,157 | |
Operating lease obligations | 51,716 | 69,363 | |
Deferred tax liabilities | 228,396 | 204,837 | |
Accounts payable and accrued expenses | 1,050,267 | 983,167 | |
Total liabilities | 5,957,790 | 5,848,524 | |
Redeemable noncontrolling interest | — | 22,500 | |
EQUITY | |||
Preferred stock: $0.01 par value; 50,000,000 shares authorized, none issued | — | — | |
Common stock: $0.01 par value; 150,000,000 shares authorized, 56,307,386 issued and | 564 | 563 | |
Additional paid-in capital | 3,969,840 | 3,960,418 | |
Retained earnings (accumulated deficit) | 115,326 | (16,456) | |
Accumulated other comprehensive income (loss) | 9,884 | (14,457) | |
Treasury stock, at cost, 6,406,385 shares as of September 30, 2022, and 2,107,615 | (609,724) | (220,073) | |
Total stockholders' equity | 3,485,890 | 3,709,995 | |
Noncontrolling interests | 65,001 | 675 | |
Total equity | 3,550,891 | 3,710,670 | |
Total liabilities and equity | $ 9,508,681 | $ 9,581,694 |
Appendix – Reconciliation of Non-GAAP Measures
Below are GAAP to non-GAAP reconciliations of certain financial measures, as required under Regulation G of the Securities Exchange Act of 1934. Non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be comparable to similarly titled measures.
As a result of our four segments—Operating Assets, Master Planned Communities (MPC), Seaport and Strategic Developments—being managed separately, we use different operating measures to assess operating results and allocate resources among these four segments. The one common operating measure used to assess operating results for our business segments is earnings before tax (EBT). EBT, as it relates to each business segment, represents the revenues less expenses of each segment, including interest income, interest expense and equity in earnings of real estate and other affiliates. EBT excludes corporate expenses and other items that are not allocable to the segments. We present EBT because we use this measure, among others, internally to assess the core operating performance of our assets. However, segment EBT should not be considered as an alternative to GAAP net income.
Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||
thousands | 2022 | 2021 | $ Change | 2022 | 2021 | $ Change | |||||
Operating Assets Segment EBT | |||||||||||
Total revenues (a) | $ 327,742 | $ 334,933 | $ (7,191) | $ 109,493 | $ 125,072 | $ (15,579) | |||||
Total operating expenses (a) | (146,958) | (161,516) | 14,558 | (48,994) | (61,091) | 12,097 | |||||
Segment operating income (loss) | 180,784 | 173,417 | 7,367 | 60,499 | 63,981 | (3,482) | |||||
Depreciation and amortization | (115,143) | (123,850) | 8,707 | (37,714) | (44,224) | 6,510 | |||||
Interest income (expense), net | (64,776) | (55,179) | (9,597) | (23,340) | (18,027) | (5,313) | |||||
Other income (loss), net | (57) | (10,539) | 10,482 | 421 | (285) | 706 | |||||
Equity in earnings (losses) from real estate and | 21,898 | (36,931) | 58,829 | 4,132 | (15,108) | 19,240 | |||||
Gain (loss) on sale or disposal of real estate | 4,018 | 39,141 | (35,123) | — | 39,141 | (39,141) | |||||
Gain (loss) on extinguishment of debt | (645) | (1,455) | 810 | — | (573) | 573 | |||||
Operating Assets segment EBT | 26,079 | (15,396) | 41,475 | 3,998 | 24,905 | (20,907) | |||||
Master Planned Communities Segment EBT | |||||||||||
Total revenues | 266,990 | 194,926 | 72,064 | 78,188 | 72,061 | 6,127 | |||||
Total operating expenses | (113,087) | (92,646) | (20,441) | (31,055) | (35,474) | 4,419 | |||||
Segment operating income (loss) | 153,903 | 102,280 | 51,623 | 47,133 | 36,587 | 10,546 | |||||
Depreciation and amortization | (286) | (272) | (14) | (104) | (102) | (2) | |||||
Interest income (expense), net | 35,697 | 31,734 | 3,963 | 13,492 | 10,362 | 3,130 | |||||
Other income (loss), net | 23 | — | 23 | — | — | — | |||||
Equity in earnings (losses) from real estate and | 16,990 | 54,568 | (37,578) | 14,862 | 8,277 | 6,585 | |||||
Gain (loss) on extinguishment of debt | — | (1,004) | 1,004 | — | (1,004) | 1,004 | |||||
MPC segment EBT | 206,327 | 187,306 | 19,021 | 75,383 | 54,120 | 21,263 | |||||
Seaport Segment EBT | |||||||||||
Total revenues | 70,053 | 39,494 | 30,559 | 32,501 | 21,143 | 11,358 | |||||
Total operating expenses | (79,329) | (53,721) | (25,608) | (31,404) | (25,219) | (6,185) | |||||
Segment operating income (loss) | (9,276) | (14,227) | 4,951 | 1,097 | (4,076) | 5,173 | |||||
Depreciation and amortization | (25,194) | (22,926) | (2,268) | (9,651) | (9,087) | (564) | |||||
Interest income (expense), net | 3,003 | 666 | 2,337 | 1,731 | 377 | 1,354 | |||||
Other income (loss), net | 289 | (2,088) | 2,377 | (18) | (1,134) | 1,116 | |||||
Equity in earnings (losses) from real estate and | (20,223) | (1,697) | (18,526) | (11,273) | (1,009) | (10,264) | |||||
Seaport segment EBT | (51,401) | (40,272) | (11,129) | (18,114) | (14,929) | (3,185) | |||||
Strategic Developments Segment EBT | |||||||||||
Total revenues | 461,655 | 52,575 | 409,080 | 419,353 | 809 | 418,544 | |||||
Total operating expenses | (344,271) | (84,971) | (259,300) | (300,515) | (6,708) | (293,807) | |||||
Segment operating income (loss) | 117,384 | (32,396) | 149,780 | 118,838 | (5,899) | 124,737 | |||||
Depreciation and amortization | (4,083) | (4,936) | 853 | (1,406) | (1,741) | 335 | |||||
Interest income (expense), net | 12,334 | 2,610 | 9,724 | 5,817 | 850 | 4,967 | |||||
Other income (loss), net | 1,361 | 19 | 1,342 | 900 | 5 | 895 | |||||
Equity in earnings (losses) from real estate and | 863 | (125) | 988 | (13) | (8) | (5) | |||||
Gain (loss) on sale or disposal of real estate | (9) | 21,333 | (21,342) | — | — | — | |||||
Provision for impairment | — | (13,068) | 13,068 | — | — | — | |||||
Strategic Developments segment EBT | 127,850 | (26,563) | 154,413 | 124,136 | (6,793) | 130,929 | |||||
Consolidated Segment EBT | |||||||||||
Total revenues | 1,126,440 | 621,928 | 504,512 | 639,535 | 219,085 | 420,450 | |||||
Total operating expenses | (683,645) | (392,854) | (290,791) | (411,968) | (128,492) | (283,476) | |||||
Segment operating income (loss) | 442,795 | 229,074 | 213,721 | 227,567 | 90,593 | 136,974 | |||||
Depreciation and amortization | (144,706) | (151,984) | 7,278 | (48,875) | (55,154) | 6,279 | |||||
Interest income (expense), net | (13,742) | (20,169) | 6,427 | (2,300) | (6,438) | 4,138 | |||||
Other income (loss), net | 1,616 | (12,608) | 14,224 | 1,303 | (1,414) | 2,717 | |||||
Equity in earnings (losses) from real estate and | 19,528 | 15,815 | 3,713 | 7,708 | (7,848) | 15,556 | |||||
Gain (loss) on sale or disposal of real estate | 4,009 | 60,474 | (56,465) | — | 39,141 | (39,141) | |||||
Gain (loss) on extinguishment of debt | (645) | (2,459) | 1,814 | — | (1,577) | 1,577 | |||||
Provision for impairment | — | (13,068) | 13,068 | — | — | — | |||||
Consolidated segment EBT | 308,855 | 105,075 | 203,780 | 185,403 | 57,303 | 128,100 | |||||
Corporate income, expenses and other items | (177,583) | (167,500) | (10,083) | (77,734) | (55,186) | (22,548) | |||||
Net income (loss) | 131,272 | (62,425) | 193,697 | 107,669 | 2,117 | 105,552 | |||||
Net (income) loss attributable to noncontrolling | 510 | 4,725 | (4,215) | 427 | 1,936 | (1,509) | |||||
Net income (loss) attributable to common | $ 131,782 | $ (57,700) | $ 189,482 | $ 108,096 | $ 4,053 | $ 104,043 |
(a) | Total revenues includes hospitality revenues of $35.6 million for the nine months ended September 30, 2021, and $14.0 million for the three months ended September 30, 2021. Total operating expenses includes hospitality operating costs of $30.5 million for the nine months ended September 30, 2021, and $11.7 million for the three months ended September 30, 2021. In September 2021, the Company completed the sale of its three hospitality properties. |
NOI
We believe that NOI is a useful supplemental measure of the performance of our Operating Assets and Seaport portfolio because it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating real estate properties and the impact on operations from trends in rental and occupancy rates and operating costs. We define NOI as operating revenues (rental income, tenant recoveries and other revenue) less operating expenses (real estate taxes, repairs and maintenance, marketing and other property expenses). NOI excludes straight-line rents and amortization of tenant incentives, net; interest expense, net; ground rent amortization, demolition costs; other income (loss); amortization; depreciation; development-related marketing cost; gain on sale or disposal of real estate and other assets, net; provision for impairment and equity in earnings from real estate and other affiliates. All management fees have been eliminated for all internally-managed properties. We use NOI to evaluate our operating performance on a property-by-property basis because NOI allows us to evaluate the impact that property-specific factors such as lease structure, lease rates and tenant base have on our operating results, gross margins and investment returns. Variances between years in NOI typically result from changes in rental rates, occupancy, tenant mix and operating expenses. Although we believe that NOI provides useful information to investors about the performance of our Operating Assets and Seaport assets, due to the exclusions noted above, NOI should only be used as an additional measure of the financial performance of the assets of this segment of our business and not as an alternative to GAAP Net income (loss). This amount is presented as Operating NOI and Seaport NOI throughout this document. Total Operating NOI and Total Seaport NOI represent NOI as defined above with the addition of our share of NOI from equity investees.
For reference, and as an aid in understanding our computation of NOI, a reconciliation of segment EBT to NOI for Operating Assets and Seaport has been presented in the tables below.
Nine Months Ended | Three Months Ended | ||||||
thousands | 2022 | 2021 | 2022 | 2021 | |||
Operating Assets segment EBT (a) | $ 26,079 | $ (15,396) | $ 3,998 | $ 24,905 | |||
Add back: | |||||||
Depreciation and amortization | 115,143 | 123,850 | 37,714 | 44,224 | |||
Interest (income) expense, net | 64,776 | 55,179 | 23,340 | 18,027 | |||
Equity in (earnings) losses from real estate and other affiliates | (21,898) | 36,931 | (4,132) | 15,108 | |||
(Gain) loss on sale or disposal of real estate and other assets, net | (4,018) | (39,141) | — | (39,141) | |||
(Gain) loss on extinguishment of debt | 645 | 1,455 | — | 573 | |||
Impact of straight-line rent | (7,283) | (10,030) | (1,744) | (936) | |||
Other | (312) | 10,454 | (519) | 215 | |||
Operating Assets NOI | 173,132 | 163,302 | 58,657 | 62,975 | |||
Company's Share NOI - Equity Investees | 6,641 | 2,028 | 2,139 | (47) | |||
Distributions from Summerlin Hospital Investment | 4,638 | 3,755 | — | — | |||
Total Operating Assets NOI | $ 184,411 | $ 169,085 | $ 60,796 | $ 62,928 | |||
Seaport segment EBT (a) | $ (51,401) | $ (40,272) | $ (18,114) | $ (14,929) | |||
Add back: | |||||||
Depreciation and amortization | 25,194 | 22,926 | 9,651 | 9,087 | |||
Interest (income) expense, net | (3,003) | (666) | (1,731) | (377) | |||
Equity in (earnings) losses from real estate and other affiliates | 20,223 | 1,697 | 11,273 | 1,009 | |||
Impact of straight-line rent | 1,519 | 1,265 | (185) | 398 | |||
Other (income) loss, net | 2,610 | 3,006 | 674 | 1,287 | |||
Seaport NOI | (4,858) | (12,044) | 1,568 | (3,525) | |||
Company's Share NOI - Equity Investees (b) | (19,851) | (320) | (11,034) | (38) | |||
Total Seaport NOI | $ (24,709) | $ (12,364) | $ (9,466) | $ (3,563) |
(a) Segment EBT excludes corporate expenses and other items that are not allocable to the segments. |
(b) The Company's share of NOI related to Tin Building by Jean-Georges is calculated using our current partnership funding provisions. |
Same Store NOI - Operating Assets Segment
The Company defines Same Store Properties as consolidated and unconsolidated properties that are acquired or placed in-service prior to the beginning of the earliest period presented and owned by the Company through the end of the latest period presented. Same Store Properties exclude properties placed in-service, acquired, repositioned or in development or redevelopment after the beginning of the earliest period presented or disposed of prior to the end of the latest period presented. Accordingly, it takes at least one year and one quarter after a property is acquired or treated as in-service for that property to be included in Same Store Properties.
We calculate Same Store Net Operating Income (Same Store NOI) as Operating Assets NOI applicable to Same Store Properties. Same Store NOI also includes the Company's share of NOI of unconsolidated properties and the annual distribution from a cost basis investment. Same Store NOI is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that Same Store NOI is helpful to investors as a supplemental comparative performance measure of the income generated from the same group of properties from one period to the next. Other companies may not define Same Store NOI in the same manner as we do; therefore, our computation of Same Store NOI may not be comparable to that of other companies. Additionally, we do not control investments in unconsolidated properties and while we consider disclosures of our share of NOI to be useful, they may not accurately depict the legal and economic implications of our investment arrangements.
Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||
thousands | 2022 | 2021 | $ Change | 2022 | 2021 | $ Change | |||||
Same Store Office | |||||||||||
Houston, TX | $ 54,527 | $ 52,924 | $ 1,603 | $ 19,050 | $ 17,894 | $ 1,156 | |||||
Columbia, MD | 18,259 | 16,387 | 1,872 | 5,881 | 6,325 | (444) | |||||
Las Vegas, NV | 10,560 | 10,620 | (60) | 3,499 | 3,597 | (98) | |||||
Total Same Store Office | 83,346 | 79,931 | 3,415 | 28,430 | 27,816 | 614 | |||||
Same Store Retail | |||||||||||
Houston, TX | 10,083 | 9,381 | 702 | 3,756 | 3,768 | (12) | |||||
Columbia, MD | 1,520 | 1,180 | 340 | 464 | 242 | 222 | |||||
Las Vegas, NV | 17,328 | 18,377 | (1,049) | 5,687 | 5,449 | 238 | |||||
Honolulu, HI | 11,521 | 11,237 | 284 | 3,318 | 5,529 | (2,211) | |||||
Total Same Store Retail | 40,452 | 40,175 | 277 | 13,225 | 14,988 | (1,763) | |||||
Same Store Multi-Family | |||||||||||
Houston, TX | 20,937 | 14,448 | 6,489 | 7,087 | 6,084 | 1,003 | |||||
Columbia, MD | 4,934 | 2,856 | 2,078 | 1,667 | 1,387 | 280 | |||||
Las Vegas, NV | 5,543 | 5,158 | 385 | 1,895 | 1,846 | 49 | |||||
Company's Share NOI - Equity Investees | 5,440 | 5,032 | 408 | 1,910 | 1,705 | 205 | |||||
Total Same Store Multi-Family | 36,854 | 27,494 | 9,360 | 12,559 | 11,022 | 1,537 | |||||
Same Store Other | |||||||||||
Houston, TX | 5,303 | 5,066 | 237 | 1,650 | 1,812 | (162) | |||||
Columbia, MD | (141) | (59) | (82) | (17) | 46 | (63) | |||||
Las Vegas, NV | 8,293 | 8,043 | 250 | 3,876 | 5,475 | (1,599) | |||||
Honolulu, HI | 222 | 214 | 8 | 118 | 124 | (6) | |||||
Company's Share NOI - Equity and Cost | 5,839 | 5,622 | 217 | 229 | 952 | (723) | |||||
Total Same Store Other | 19,516 | 18,886 | 630 | 5,856 | 8,409 | (2,553) | |||||
Total Same Store NOI | 180,168 | 166,486 | 13,682 | 60,070 | 62,235 | (2,165) | |||||
Non-Same Store NOI | 4,243 | 2,599 | 1,644 | 726 | 693 | 33 | |||||
Total Operating Assets NOI | $ 184,411 | $ 169,085 | $ 15,326 | $ 60,796 | $ 62,928 | $ (2,132) |
Cash G&A
The Company defines Cash G&A as General and administrative expense less non-cash stock compensation expense. Cash G&A is a non-GAAP financial measure that we believe is useful to our investors and other users of our financial statements as an indicator of overhead efficiency without regard to non-cash expenses associated with stock compensation. However, it should not be used as an alternative to general and administrative expenses in accordance with GAAP.
Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||
thousands | 2022 | 2021 | $ Change | 2022 | 2021 | $ Change | |||||
General and Administrative | |||||||||||
General and administrative (G&A) | $ 60,874 | $ 61,133 | $ (259) | $ 19,471 | $ 19,033 | $ 438 | |||||
Less: Non-cash stock compensation | (3,989) | (7,418) | 3,429 | (1,298) | (2,637) | 1,339 | |||||
Cash G&A (a) | $ 56,885 | $ 53,715 | $ 3,170 | $ 18,173 | $ 16,396 | $ 1,777 |
(a) The first quarter of 2022 includes $2.3 million of severance and bonus costs related to our former Chief Financial Officer. |
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SOURCE The Howard Hughes Corporation