I’m actually really impressed with these results. Hospitality/retail divisions sucked wind in Q2 but I hope everyone expected that to happen. On the other hand, all the MPC’s are doing VERY well and sales are solid and growing and office leasing is strong and over 95% of rents have been paid to date.
I think we are going to see a generational shift to the suburbs like we did in the 50’s-60’s as people look to leave cities after recent events (riots, COVID). This hugely benefits HHC as they not only have some of the best locations, but they 100% control the pace of development and thus price, in them.
Now, some of you are going to automatically say, “what about Ward Village”. My response is that Ward is different.
Why?
it’s a volcanic island, the ability for residents to move significantly far away from the city is limited
they are having a serious housing shortage, again, limiting residents options
COVID cases in Hawaii are only ~2500 people and only 8% have required hospitalizations so while residents may be watching on the news what is happening in the continental US, they are not actually “feeling” the same fear residents of NYC, LA, etc are.
While other US cities were ravaged by protests and riots and large scale destruction, Hawaii remained comparatively relatively unscathed, again, lessening the desire for residents to “leave the city”
Results to date at Ward have proven this thesis but we need to wait and see how it plays out in Q3/4.
Results:
The Howard Hughes Corporation® Reports Second Quarter 2020 Results
Continued Strong Performance Across Portfolio of Master Planned Communities Reaffirms Company’s Strategic Transformation Plan
Dallas, TX, August 3, 2020 – TheHoward Hughes Corporation® (NYSE: HHC) (the “Company,” “HHC” or “we”) announced today operating results for the second quarter ended June 30, 2020.
“The Howard Hughes Corporation remains unwavering in our commitment to the safety and security of our colleagues, tenants, customers and residents, and the long-term success of our communities,” said Paul H. Layne, Chief Executive Officer.
“During the second quarter, we saw remarkable performance in our MPC segment, where both land sales and new home sales—a leading indicator for future land sales—remained strong. These results are comparable to our performance in 2019 and are in keeping with our projections pre-COVID. We believe that this continued strength is a testament to the exceptional quality of life that residents are seeking—now more than ever—including walkable communities in beautiful, natural settings with urban conveniences, outstanding amenities, low density, and expansive open green space with hiking and biking trails.
“As we continue to focus on making the best long-term value decisions for our communities and our shareholders, we have positioned ourselves to be prepared for all eventualities with our first-quarter equity raise and increased liquidity. We ended the second quarter with over $930 million of cash on our balance sheet and only $315 million of net remaining equity commitments to our existing development projects.
“Our operating asset segment performance was bifurcated between the continued strength in our office and, to a lesser extent, our multifamily assets and the COVID-related disruption experienced by our retail and hospitality assets, as well as baseball . Despite its quarter-over-quarter decline, we remain cautiously optimistic about the segment’s recovery potential and we have seen reopenings in hospitality and a meaningful pick-up in our retail collections since April.
“At Ward Village in Hawai’i, we saw a continuation of the strong first-quarter results as we continued to execute on sales, most notably at Victoria Place where we are approximately 69.3% pre-sold as of July 28, 2020. Finally, in our Seaport District segment, while construction on the Tin Building resumed in May, our assets in the Seaport District remain closed and we anticipate a gradual reopening of a few, select businesses, including The Rooftop at Pier 17, over the course of the next few months.
“We made continued progress in the execution of our Transformation Plan by continuing to pursue non-core asset sales and by executing on additional reductions of our general and administrative expenses. Importantly, we have also restarted horizontal development in our MPCs to prepare lots for sale to keep pace with builder demand given the strong underlying home sales in our communities. Finally, we have commenced modest investments in pre-development work for the next potential vertical development opportunities in our core MPCs, for when demand returns. While we do not anticipate any new construction starts in the coming quarter, we want to be prepared to be able to move forward the moment that demand materializes.
“Despite recent positive macroeconomic data and the strength of home sales in our award-winning master planned communities, we still face much uncertainty in our economic recovery. I want to thank our employees across the country for their dedication during the most difficult of circumstances over the past several months. We are dedicated to leveraging our resources to help our local economies and our stakeholders recover from the impact of the ongoing COVID-19 crisis.”
Second Quarter 2020 Highlights
•
Net income attributable to common stockholders decreased to a loss of $34.1 million, or $0.61 per diluted share, for the three months ended June 30, 2020, compared to income of $13.5 million, or $0.31 per diluted share, for the three months ended June 30, 2019, primarily due to no closings on condominium units in 2020 coupled with the temporary closure of hospitality properties and cancellation of the Las Vegas Aviators 2020 baseball season as a result of the COVID-19 pandemic. We closed a portion of Ae‘o in early 2019, with no new condominium towers delivered in 2020.
•
MPC segment earnings before tax (“EBT”) decreased by $6.5 million to $42.2 million for the three months ended June 30, 2020, compared to the three months ended June 30, 2019, primarily driven by lower Equity in (losses) earnings from real estate and other affiliates at The Summit. The decrease was partially offset by an increase in land sales in The Woodlands due to an increase in sales in a high-end, exclusive section of The Woodlands community that generates significantly higher value per acre. Bridgeland’s land sales, while flat for the three months ended June 30, 2020 compared to the prior period, continued to display strong performance despite the effects of COVID-19.
•
We continue to maintain a strong liquidity position with $930.6 million cash as of June 30, 2020.
•
Extended the existing Downtown Summerlin loan and the bridge loan for The Woodlands Towers at the Waterway and The Woodlands Warehouse.
•
For the three months ended June 30, 2020, we collected 95.4% of our office portfolio billings, 96.6% of our multi-family portfolio billings, 49.7% of our retail portfolio billings and 84.5% of our other portfolio billings.
•
Total Net operating income (“NOI”)(1) from the Operating Assets segment, including our share of NOI from equity investments, decreased by 32.4% to $40.8 million for the three months ended June 30, 2020, compared to $60.4 million for the prior year period. The decrease in NOI was primarily due to the temporary closure of hospitality and retail properties, partially offset by an increase in NOI from the recent acquisition of The Woodlands Towers at the Waterway.
•
Progressed public pre-sales of our newest project at Ward Village®, Victoria Place®, where as of June 30, 2020, we have executed contracts for 236 condominium units, or 67.6% of total units. Across all of Ward Village®, potential future revenue associated with total contracted units is $1.48 billion.
•
Seaport District NOI remained relatively flat at a net operating loss of $3.4 million for the three months ended June 30, 2020, compared to the prior year period, primarily due to business closures and cancellation of events related to the COVID-19 pandemic, the effects of which were mitigated by cost management initiatives.
COVID-19 Impact – For the month ended July 31, 2020
•
The health and safety of our employees, tenants and customers remains our highest priority. Our Crisis Committee task force continues to prepare buildings for re-occupancy and has implemented a number of processes and communications to provide a safer environment at our properties.
•
As of July 28, 2020, we collected 96.1% of our Office portfolio billings, 98.5% of our Multi-family portfolio billings, 64.1% of our Retail portfolio billings and 90.2% of our Other portfolio billings in July.
•
Among our hospitality properties, The Woodlands Resort and Embassy Suites reopened during the quarter, and The Westin at The Woodlands reopened on July 1, 2020.
•
Our assets in the Seaport District remain closed and we anticipate a gradual reopening of a few, select businesses, including The Rooftop at Pier 17, over the course of the next few months.
•
At Ward Village, we contracted to sell six additional condominiums at Victoria Place in July 2020, bringing the total executed contracts to 242 condominium units, or 69.3% of total units, as of July 28, 2020.
•
Through our HHCares program, we made additional contributions to local non-profit organizations that were most impacted by COVID-19 and expressed gratitude to those on the front line by participating in the national Light it Blue campaign as well as giving gifts of appreciation to those serving in the community. We continued to leverage our owned restaurants and partner with our grocery and restaurant tenants to provide food to local hospitals, first responders and displaced hospitality employees.
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.
Six Months Ended
June 30,
Three Months Ended June 30,
($ in thousands)
2020
2019
Change
% Change
2020
2019
Change
% Change
Operating Assets NOI
(1)
Office
$
62,241
$
39,166
$23,075
58.9
%
$
27,804
$
20,204
$
7,600
38
%
Retail
23,089
32,310
(9,221)
(28.5
)%
8,599
16,065
(7,466
)
(46
)%
Multi-family
8,362
9,187
(825)
(9.0
)%
3,815
4,826
(1,011
)
(21
)%
Hospitality
2,537
17,389
(14,852)
(85.4
)%
(1,844
)
9,531
(11,375
)
(119
)%
Other
674
7,006
(6,332)
(90.4
)%
623
8,079
(7,456
)
(92
)%
Company’s share NOI (a)
7,797
6,777
1,020
15.1
%
1,836
1,688
148
9
%
Total Operating Assets NOI (b)
$
104,700
$
111,835
$
(7,135
)
(6.4
)%
$
40,833
$
60,393
$
(19,560
)
(32
)%
Projected stabilized NOI Operating Assets ($ in millions)
$
362.3
$
317.1
$
45.2
14.3
%
MPC
Acres Sold – Residential
148
ac.
190
ac.
(42
) ac.
(22.3
)%
91
ac.
112
ac.
(21
) ac.
(19
)%
Acres Sold – Commercial
16
ac.
—
16
ac.
—
%
—
—
—
100%
Price Per Acre – Residential
$
589
$
532
$
57
10.6
%
$
630
$
528
$
102
19
%
Price Per Acre – Commercial
$
131
$
—
$
131
—
%
$
—
$
—
$
—
100%
MPC EBT
$
86,308
$
87,759
$
(1,451
)
(1.7
)%
$
42,187
$
48,714
$
(6,527
)
(13
)%
Seaport District NOI
(1)
Historic District & Pier 17 – Landlord
$
(3,472
)
$
(3,002
)
$
(470
)
(15.7
)%
$
(1,611
)
$
(1,284
)
$
(327
)
(25
)%
Multi-family
214
191
23
12.0
%
110
110
—
—
%
Hospitality
(12
)
41
(53
)
(129
)%
(12
)
26
(38
)
(146
)%
Historic District & Pier 17 – Managed Businesses
(3,336
)
(3,541
)
205
5.8
%
(1,256
)
(888
)
(368
)
(41
)%
Events, Sponsorships & Catering Business
(724
)
(561
)
(163
)
(29.1
)%
(671
)
(851
)
180
21
%
Company’s share NOI (a)
(681
)
(237
)
(444
)
(187.3
)%
(305
)
(42
)
(263
)
(626
)%
Total Seaport District NOI
$
(8,011
)
$
(7,109
)
$
(902
)
12.7
%
$
(3,745
)
$
(2,929
)
$
(816
)
28
%
Strategic Developments
Condominium units contracted to sell (c)
16
27
(11
)
(40.7
)%
2
11
(9
)
(82
)%
(a)
Includes Company’s share of NOI from non-consolidated assets
(b)
Excludes properties sold or in redevelopment
(c)
Includes units at our buildings that are open or under construction as of June 30, 2020. Excludes two purchaser defaults at Kō’ula in the second quarter of 2020.