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08.05.2023 16:05
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THE HOWARD HUGHES CORPORATION® REPORTS FIRST QUARTER 2023 RESULTS
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PR Newswire
HOUSTON, May 8, 2023
MPC land sales, a sharp recovery in new homes sold, Operating Assets
NOI growth, and solid leasing momentum all drive a strong start to the year
HOUSTON, May 8, 2023 /PRNewswire/ -- The Howard Hughes Corporation® (NYSE: HHC) (the "Company," "HHC" or "we") today announced operating results for the first quarter ended March 31, 2023. 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.
First Quarter 2023 Highlights:
- Net loss per diluted share of $(0.46) compared to net income per diluted share of $0.04 in the prior-year period
- MPC EBT of $62 million increased 5% year-over-year driven by land sales—including a 109-acre commercial sale in Bridgeland®—higher residential price per acre, and strong builder price participation revenue
- New home sales rebounded to 552 units—a 120% sequential increase compared to the 2022 fourth quarter
- Total Operating Assets NOI of $59 million increased 3% year-over-year with improved financial and leasing performance in office, retail, and multi-family
- Contracted to sell 35 condo units in Ward Village®
THE HOWARD HUGHES CORPORATION® REPORTS FIRST QUARTER 2023 RESULTS
"We started 2023 on a positive note, delivering solid first quarter performance in our MPC and Operating Assets segments," commented David R. O'Reilly, Chief Executive Officer of The Howard Hughes Corporation. "Despite continued market headwinds, HHC's unique business model once again proved its resiliency, with meaningful MPC land sales—most notably in Bridgeland—and sequential and year-over-year NOI growth in Operating Assets.
"In our MPC segment, with mortgage rates stabilizing in the new year and many homebuilders offering incentives, we saw homebuyers step back into the market during the first quarter. New home sales—which are a leading indicator of our future land sales—increased sharply to 552 homes, or more than double sales levels recorded in the 2022 fourth quarter. Although residential land sales were down in the first quarter as expected, we continued to see declining inventories of finished homes while homebuyer demand began to rise, resulting in improving homebuilder interest for our acreage. As a result, we anticipate increased residential land sales in the coming quarters as homebuilders purchase new lots to meet higher demand.
"In Operating Assets, the strong leasing momentum we experienced during 2022 continued, with sequentially higher leasing rates in our office, multi-family, and retail portfolios. This incredible achievement during a time of market uncertainty further exemplifies the quality of HHC's world-class assets. In office, we continued to defy market trends, executing nearly 130,000 square feet of new or expanded leases in our highly-amenitized Class-A towers.
"In Hawai'i, we continued to advance our development plan for Ward Village, commencing construction on Ulana—our final workforce housing project which is 99% presold—in early January. With strong demand for premium condos in Honolulu, we also recently announced development of The Launiu, which we expect will be delivered in 2027 and encompass 498 premium residences. During the quarter, condo sales remained favorable, with our team contracting to sell a total of 35 homes, many of which were at Kalae®—our 10th condo building which launched presales only six months ago and is remarkably already 80% presold.
"At the Seaport, the Tin Building by Jean-Georges achieved 7-day-per-week operations throughout the first quarter. This milestone, together with improved efficiencies and continued growth in foot traffic, resulted in significantly reduced losses. Although we still have work ahead to stabilize this one-of-a-kind culinary marketplace, we are extremely pleased with the strong customer demand, positive media attention, and favorable culinary reviews received to date."
Click Here: First Quarter 2023 Howard Hughes Quarterly Spotlight Video
Click Here: First Quarter 2023 Earnings Call Webcast
Financial Highlights
Total Company
- HHC reported a loss of $22.7 million or $(0.46) per diluted share in the quarter, compared to net income of $2.1 million or $0.04 per diluted share in the prior-year period.
- The year-over-year decline was primarily due to equity losses from the Tin Building, reduced inventory and fewer condos sold at 'A'ali'i® in Ward Village, non-recurring equity earnings related to the sale of 110 North Wacker in the prior-year period, and higher interest expense.
- Closed the first quarter with $417.7 million of cash on the balance sheet and total debt of $4.8 billion, with 87% of the balance maturing in 2026 or later and only $226 million maturing in 2023 and 2024. At quarter end, 100% of the Company's debt was fixed, capped, or hedged.
MPC
- MPC EBT totaled $62.4 million in the quarter, a 5% increase compared to $59.7 million in the prior-year period.
- MPC land sales revenue was $59.4 million, a $2.1 million or 3% decrease compared to the prior year. This reduction was primarily a result of reduced residential lots sold in Bridgeland and The Woodlands Hills®, partially offset by new Aria Isle custom lot sales in The Woodlands® and a higher average price per acre sold.
- Commercial land sales declined $0.8 million year-over-year, with a 109-acre sale in Bridgeland in the current quarter largely offsetting sales in Summerlin® and Bridgeland during the prior-year period.
- Builder price participation revenue remained strong at $14.0 million, representing only a 3% year-over-year decline as home prices began to normalize following the surge in home values throughout 2022.
- The average price per acre of residential land sold was approximately $836,000 during the quarter—representing a 49% year-over-year increase—primarily due to MPC sales mix and custom lots sold in The Woodlands for $2.9 million per acre. Excluding custom lot sales, the average price per acre increased 14%.
- New homes sold in HHC's communities totaled 552 units—representing a sharp 120% increase compared to the 2022 fourth quarter. Year-over-year, new home sales were down 9%.
Operating Assets
- Total Operating Assets NOI, including contribution from unconsolidated ventures, totaled $59.2 million in the quarter, representing a $1.9 million or 3% improvement compared to $57.3 million in the prior-year period. Excluding retail assets divested in 2022, NOI increased $3.4 million or 6% year-over-year.
- Office NOI of $27.7 million increased $2.6 million year-over-year largely due to strong lease-up activity, abatement expirations, and tenant recoveries at various properties in The Woodlands—most notably at 9950 Woodloch Forest. These increases were partially offset by lower occupancy at One Hughes Landing in The Woodlands and various properties in Downtown Columbia®. During the quarter, HHC executed new or expanded office leases totaling 68,000 square feet in The Woodlands, 34,000 square feet in Downtown Columbia, and 27,000 square feet in Summerlin.
- Multi-family NOI of $12.6 million increased $1.5 million compared to the first quarter of 2022 due to winter weather-related insurance recoveries in the Houston region and 7% average in-place rent growth, partially offset by NOI losses from Starling at Bridgeland and Marlow in Downtown Columbia that are in the early stages of lease-up. Despite these losses, both properties have experienced strong leasing, with Starling at Bridgeland already 47% leased and Marlow now 25% leased.
- Retail NOI of $14.6 million increased $2.5 million over the prior-year period due to a strengthened tenant base and retail sales growth in Downtown Summerlin, as well as increased tenant recoveries in The Woodlands and Ward Village. At quarter end, the retail portfolio was 96% leased, representing a 5% increase compared to the prior year.
- The Company's share of NOI from unconsolidated ventures of $4.9 million declined $1.9 million year-over-year primarily due to lower annual distributions from the Summerlin Hospital.
Strategic Developments
- Closed on five condo units in the first quarter—including four at 'A'ali'i and one at Kō'ula®—generating $6.1 million in revenue. At quarter end, 'A'ali'i and Kō'ula were 96% and 98% sold, respectively.
- Contracted to sell three units at The Park Ward Village, ending the quarter 92% pre-sold.
- Commenced construction and closed on a new $264 million construction loan for Ulana in early January. During the quarter, 10 condo units were contracted with the project 99% pre-sold at March 31, 2023.
- Contracted to sell 22 condo units at Kalae. This development is now 80% pre-sold with construction expected to begin in the second half of 2023.
- Announced development of The Launiu—Ward Village's 11th condo building which will include 498 residences. This project is currently expected to commence pre-sales late in 2023 or in early 2024 and be completed in 2027.
Seaport
- Seaport revenue of $11.9 million increased $2.5 million or 27% compared to the first quarter of 2022 primarily due to rental revenue related to the Tin Building.
- Seaport generated negative NOI of $5.6 million, representing a $0.2 million year-over-year improvement. Including $9.6 million of losses from unconsolidated ventures—primarily related to the Tin Building by Jean-Georges—Total Seaport NOI was a loss of $15.2 million.
- At the Tin Building, the marketplace was open seven days per week, and foot traffic and sales were strong despite winter seasonality in the Seaport. As a result, equity losses improved by $6.5 million sequentially to $9.2 million for the quarter. Inefficiencies resulting from increased employee costs, menu refinements, and continued start-up costs contributed to the equity losses, but are expected to subside in the coming quarters.
Full-Year 2023 Guidance
- Full-year 2023 guidance remains unchanged from the prior reporting period.
- MPC EBT is projected to be comparable to earnings generated on average during 2017 and 2018, prior to a period of outsized land and home sales in Summerlin, Bridgeland, and The Woodlands Hills during the COVID-19 pandemic. During 2022, a slower housing market, which was largely driven by a precipitous rise in mortgage rates and shrinking home affordability, softened new home sales and homebuilder demand for new acreage. Although new home sales started to rise, and homebuilder interest in new acreage improved in the first quarter, the Company does not expect a full recovery in land sales in the near-term. As a result, 2023 MPC EBT is expected to decline 25% to 35% year-over-year.
- Operating Assets NOI is projected to benefit from multi-family rent growth and new developments in Bridgeland, Downtown Columbia, and Summerlin encompassing nearly 1,400 units. The office portfolio is expected to benefit from strong leasing momentum experienced throughout 2022, but free rent periods on many of the new leases and the impact of some tenant vacancies during 2023 will likely result in a modest year-over-year decline in office NOI. Overall, excluding the $3.4 million contribution from divested retail assets in the prior year, Operating Assets NOI is expected to be in a range of down 2% to up 2% year-over-year.
- Condo sales revenues are projected to range between $45 million and $55 million, with gross margins between 25% to 28%. Projected condo sales revenues are driven by the closing of remaining units at 'A'ali'i and Kō'ula, which were 96% and 98% sold, respectively, as of March 31, 2023. The next major condo project scheduled to be completed is Victoria Place, which is expected to be delivered in mid-2024 and is already 100% pre-sold.
- Cash G&A is projected to range between $80 million and $85 million, which excludes anticipated non-cash stock compensation of approximately $5 million.
Conference Call & Webcast Information
The Howard Hughes Corporation will host its first quarter 2023 earnings conference call on Tuesday, May 9, 2023, at 9:00 a.m. Central Time (10:00 a.m. Eastern Time). Please visit The Howard Hughes Corporation's website to listen to the earnings call via a live webcast. To access the call via telephone, please dial 877-270-2148 within the U.S., 866-605-3850 within Canada, or +1 412-902-6510 when dialing internationally. All participants should dial in at least five minutes prior to the scheduled start time using 10173042 as the passcode.
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.
| | Three Months Ended March 31, | |||||
| $ in thousands | 2023 | | 2022 | | $ Change | % Change |
| Operating Assets NOI (1) | | | | | | |
| Office | $ 27,728 | | $ 25,118 | | $ 2,610 | 10 % |
| Retail | 14,608 | | 12,134 | | 2,474 | 20 % |
| Multi-family | 12,633 | | 11,142 | | 1,491 | 13 % |
| Other | (476) | | 789 | | (1,265) | (160) % |
| Dispositions | (183) | | 1,331 | | (1,514) | (114) % |
| Operating Assets NOI | 54,310 | | 50,514 | | 3,796 | 8 % |
| Company's share of NOI from unconsolidated ventures | 4,860 | | 6,754 | | (1,894) | (28) % |
| Total Operating Assets NOI | $ 59,170 | | $ 57,268 | | $ 1,902 | 3 % |
| | | | | | | |
| Projected stabilized NOI Operating Assets ($ in millions) | $ 363.5 | | $ 356.3 | | $ 7.2 | 2 % |
| | | | | | | |
| MPC | | | | | | |
| Acres Sold - Residential | 32 | | 44 | | (12) | (28) % |
| Acres Sold - Commercial | 109 | | 26 | | 82 | NM |
| Price Per Acre - Residential | $ 836 | | $ 562 | | $ 274 | 49 % |
| Price Per Acre - Commercial | $ 247 | | $ 1,083 | | $ (835) | (77) % |
| MPC EBT | $ 62,372 | | $ 59,678 | | $ 2,694 | 5 % Werbung Mehr Nachrichten zur Howard Hughes Inc Aktie kostenlos abonnieren
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