The Howard Hughes Corporation® Reports Second Quarter 2020 Results
The Howard Hughes Corporation (HHC) reported Q2 2020 results, revealing a net loss of $34.1 million, or $0.61 per diluted share, compared to a profit of $13.5 million in Q2 2019. The decline was attributed to COVID-19 impacts, including halted condominium closings and temporary closures of hospitality properties. However, strong performance in the Master Planned Communities (MPC) segment was noted, with stable land sales. Liquidity remains robust at $930 million in cash, despite a 32.4% drop in net operating income from operating assets. Retail and hospitality segments faced significant challenges during the pandemic.
- Strong land sales and new home sales within the MPC segment, comparable to 2019 performance.
- Liquidity is strong with over $930 million in cash on hand.
- Continued progress in condominium sales at Victoria Place, with 69.3% pre-sold.
- Net income loss of $34.1 million, significantly down from a profit in the prior year.
- 32.4% decrease in total net operating income from operating assets.
- COVID-19 severely impacted retail and hospitality assets, affecting revenue streams.
DALLAS, Aug. 3, 2020 /PRNewswire/ -- The Howard Hughes Corporation® (NYSE: HHC) (the "Company," "HHC" or "we") announced today operating results for the second quarter ended June 30, 2020. 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.
"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
"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
"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 and84.5% 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 and90.2% 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 | Three Months Ended | ||||||||||||||||||||||||||||||
($ in thousands) | 2020 | 2019 | Change | % Change | 2020 | 2019 | Change | % Change | |||||||||||||||||||||||
Operating Assets NOI | (1) | ||||||||||||||||||||||||||||||
Office | $ | 62,241 | $ | 39,166 | 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 | $ | 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. | — | ac. | 16 | ac. | — | % | — | ac. | — | ac. | — | 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 - | $ | (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 - | (3,336) | (3,541) | 205 | 5.8 | % | (1,256) | (888) | (368) | (41) | % | |||||||||||||||||||||
Events, Sponsorships & | (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 | 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. | ||||
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 District in New York; Columbia, Maryland; The Woodlands®, The Woodlands Hills®, and Bridgeland® in the Greater Houston, Texas area; Summerlin®, Las Vegas; and Ward Village® in Honolulu, Hawai'i. 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 place making, 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 second quarter earnings call. Say verifies all shareholder positions and provides permission to participate on the August 4, 2020 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.
The Howard Hughes Corporation will host its investor conference call on Tuesday, August 4, 2020, at 9:00 a.m Central Standard Time (10:00 a.m. Eastern Standard Time) to discuss second quarter 2020 results. To participate, please dial 1-877-883-0383 within the U.S., 1-877-885-0477 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 1867353 as the passcode. 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.
Safe Harbor Statement
We may make forward-looking statements in this press release and in other reports and presentations that we file or furnish with the Securities and Exchange Commission. In addition, our management may make forward-looking statements orally to analysts, investors, creditors, the media and others. Forward-looking statements include:
- the impact of COVID-19, including the recent surge of COVID-19 cases in regions where we operate, on our business and numerous governmental restrictions and other orders instituted in response to the COVID-19 pandemic on our business;
- announcement of certain changes, which we refer to as our "Transformation Plan", including new executive leadership, reduction in our overhead expenses, the proposed sale of our non-core assets and accelerated growth in our core MPC assets;
- expected performance of our stabilized, income-producing properties and the performance and stabilization timing of properties that we have recently placed into service or are under construction;
- capital required for our operations and development opportunities for the properties in our Operating Assets, Seaport District and Strategic Developments segments;
- expected commencement and completion for property developments and timing of sales or rentals of certain properties;
- the impact of technology on our operations and business;
- expected performance of our MPC segment;
- forecasts of our future economic performance; and
- future liquidity, finance opportunities, development opportunities, development spending and management plans.
These statements involve known and unknown risks, uncertainties and other factors that may have a material impact on any future results, performance and achievements expressed or implied by such forward-looking statements. These risk factors are described in our Annual Report on Form 10-K which has been filed with the Securities and Exchange Commission ("SEC") on February 27, 2020, the Final Prospectus Supplement which has been filed with the SEC on March 30, 2020 and the Quarterly Report on Form 10-Q which has been filed with the SEC on May 11, 2020. Any factor could, by itself, or together with one or more other factors, adversely affect our business, results of operations or financial condition. There may be other factors currently unknown to us that we have not described in our Annual Report that could cause results to differ from our expectations. These forward-looking statements present our estimates and assumptions as of the date of this press release. Except as may be required by law, we undertake no obligation to modify or revise any forward-looking statements to reflect events or circumstances occurring after the date of this release.
Our 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.
THE HOWARD HUGHES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED | ||||||||||||||||
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
(In thousands, except per share amounts) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | ||||||||||||||||
Condominium rights and unit sales | $ | 43 | $ | 433,932 | $ | — | $ | 235,622 | ||||||||
Master Planned Communities land sales | 96,805 | 99,633 | 57,073 | 58,321 | ||||||||||||
Minimum rents | 132,456 | 108,804 | 61,469 | 54,718 | ||||||||||||
Other land, rental and property revenues | 46,344 | 101,253 | 11,447 | 59,774 | ||||||||||||
Tenant recoveries | 38,077 | 27,020 | 17,202 | 13,512 | ||||||||||||
Builder price participation | 16,706 | 14,564 | 8,947 | 9,369 | ||||||||||||
Interest income from sales-type leases | 917 | — | 35 | — | ||||||||||||
Total revenues | 331,348 | 785,206 | 156,173 | 431,316 | ||||||||||||
Expenses: | ||||||||||||||||
Condominium rights and unit cost of sales | 104,249 | 358,314 | 6,348 | 220,620 | ||||||||||||
Master Planned Communities cost of sales | 42,661 | 44,824 | 25,875 | 28,006 | ||||||||||||
Operating costs | 110,491 | 140,300 | 45,885 | 72,989 | ||||||||||||
Rental property real estate taxes | 28,777 | 19,505 | 15,199 | 9,674 | ||||||||||||
Provision for (recovery of) doubtful accounts | 3,567 | (88) | 1,866 | (86) | ||||||||||||
Demolition costs | — | 599 | — | 550 | ||||||||||||
Development-related marketing costs | 4,629 | 11,541 | 1,813 | 5,839 | ||||||||||||
General and administrative | 61,314 | 58,331 | 22,233 | 31,551 | ||||||||||||
Depreciation and amortization | 108,600 | 75,049 | 46,963 | 38,918 | ||||||||||||
Total expenses | 464,288 | 708,375 | 166,182 | 408,061 | ||||||||||||
Other: | ||||||||||||||||
Provision for impairment | (48,738) | — | — | — | ||||||||||||
Gain (loss) on sale or disposal of real estate and other assets, net | 46,124 | (150) | 8,000 | (144) | ||||||||||||
Other (loss) income, net | (2,077) | 10,461 | 1,607 | 10,288 | ||||||||||||
Total other | (4,691) | 10,311 | 9,607 | 10,144 | ||||||||||||
Operating (loss) income | (137,631) | 87,142 | (402) | 33,399 | ||||||||||||
Interest income | 1,550 | 4,824 | 404 | 2,251 | ||||||||||||
Interest expense | (66,845) | (47,529) | (32,397) | (24,203) | ||||||||||||
Equity in earnings (losses) from real estate and other affiliates | 2,797 | 16,305 | (8,552) | 6,354 | ||||||||||||
(Loss) income before taxes | (200,129) | 60,742 | (40,947) | 17,801 | ||||||||||||
(Benefit) provision for income taxes | (40,944) | 15,489 | (6,844) | 4,473 | ||||||||||||
Net (loss) income | (159,185) | 45,253 | (34,103) | 13,328 | ||||||||||||
Net (income) loss attributable to noncontrolling interests | (33) | 45 | 19 | 149 | ||||||||||||
Net (loss) income attributable to common stockholders | $ | (159,218) | $ | 45,298 | $ | (34,084) | $ | 13,477 | ||||||||
Basic (loss) income per share: | $ | (3.22) | $ | 1.05 | $ | (0.61) | $ | 0.31 | ||||||||
Diluted (loss) income per share: | $ | (3.22) | $ | 1.05 | $ | (0.61) | $ | 0.31 | ||||||||
THE HOWARD HUGHES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED | ||||||||
June 30, | December 31, | |||||||
(In thousands, except par values and share amounts) | 2020 | 2019 | ||||||
Assets: | ||||||||
Investment in real estate: | ||||||||
Master Planned Communities assets | $ | 1,670,375 | $ | 1,655,674 | ||||
Buildings and equipment | 4,033,449 | 3,813,595 | ||||||
Less: accumulated depreciation | (571,752) | (507,933) | ||||||
Land | 361,081 | 353,022 | ||||||
Developments | 1,498,478 | 1,445,997 | ||||||
Net property and equipment | 6,991,631 | 6,760,355 | ||||||
Investment in real estate and other affiliates | 119,706 | 121,757 | ||||||
Net investment in real estate | 7,111,337 | 6,882,112 | ||||||
Net investment in lease receivable | 2,754 | 79,166 | ||||||
Cash and cash equivalents | 930,597 | 422,857 | ||||||
Restricted cash | 257,687 | 197,278 | ||||||
Accounts receivable, net | 17,711 | 12,279 | ||||||
Municipal Utility District receivables, net | 320,439 | 280,742 | ||||||
Notes receivable, net | 56,511 | 36,379 | ||||||
Deferred expenses, net | 146,550 | 133,182 | ||||||
Operating lease right-of-use assets, net | 57,882 | 69,398 | ||||||
Prepaid expenses and other assets, net | 343,090 | 300,373 | ||||||
Total assets | $ | 9,244,558 | $ | 8,413,766 | ||||
Liabilities: | ||||||||
Mortgages, notes and loans payable, net | $ | 4,401,063 | $ | 4,096,470 | ||||
Operating lease obligations | 69,607 | 70,413 | ||||||
Deferred tax liabilities | 131,691 | 180,748 | ||||||
Accounts payable and accrued expenses | 902,494 | 733,147 | ||||||
Total liabilities | 5,504,855 | 5,080,778 | ||||||
Equity: | ||||||||
Preferred stock: $.01 par value; 50,000,000 shares authorized, none issued | — | — | ||||||
Common stock: $.01 par value; 150,000,000 shares authorized, 55,981,559 issued and 54,931,299 outstanding as of June 30, 2020, and 150,000,000 shares authorized, 43,635,893 shares issued and 42,585,633 outstanding as of December 31, 2019 | 561 | 437 | ||||||
Additional paid-in capital | 3,941,516 | 3,343,983 | ||||||
Accumulated deficit | (205,621) | (46,385) | ||||||
Accumulated other comprehensive loss | (61,111) | (29,372) | ||||||
Treasury stock, at cost, 1,050,260 shares as of June 30, 2020 and December 31, 2019 | (120,530) | (120,530) | ||||||
Total stockholders' equity | 3,554,815 | 3,148,133 | ||||||
Noncontrolling interests | 184,888 | 184,855 | ||||||
Total equity | 3,739,703 | 3,332,988 | ||||||
Total liabilities and equity | $ | 9,244,558 | $ | 8,413,766 | ||||
Appendix - Reconciliation of Non-GAAP Measures
For the Six and Three Months Ended June 30, 2020 and 2019
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 District 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.
Six Months Ended | Three Months Ended | |||||||||||||||||||||||
(In thousands) | 2020 | 2019 | $ Change | 2020 | 2019 | $ Change | ||||||||||||||||||
Operating Assets Segment EBT | ||||||||||||||||||||||||
Total revenues (a) | $ | 198,534 | $ | 201,172 | $ | (2,638) | $ | 84,277 | $ | 109,219 | $ | (24,942) | ||||||||||||
Total operating expenses (b) | (94,462) | (91,639) | (2,823) | (42,222) | (48,727) | 6,505 | ||||||||||||||||||
Segment operating income | 104,072 | 109,533 | (5,461) | 42,055 | 60,492 | (18,437) | ||||||||||||||||||
Depreciation and amortization | (74,084) | (56,046) | (18,038) | (36,995) | (28,938) | (8,057) | ||||||||||||||||||
Interest expense, net | (49,296) | (39,050) | (10,246) | (23,103) | (20,059) | (3,044) | ||||||||||||||||||
Other income, net | 167 | 1,123 | (956) | 226 | 1,088 | (862) | ||||||||||||||||||
Equity in earnings from real estate and other affiliates | 4,869 | 2,754 | 2,115 | 475 | 45 | 430 | ||||||||||||||||||
Gain on sale or disposal of real estate | 38,124 | — | 38,124 | — | — | — | ||||||||||||||||||
Provision for impairment | (48,738) | — | (48,738) | — | — | — | ||||||||||||||||||
Segment EBT | (24,886) | 18,314 | (43,200) | (17,342) | 12,628 | (29,970) | ||||||||||||||||||
MPC Segment EBT | ||||||||||||||||||||||||
Total revenues | 119,359 | 123,755 | (4,396) | 68,913 | 72,859 | (3,946) | ||||||||||||||||||
Total operating expenses | (55,692) | (65,979) | 10,287 | (31,970) | (38,913) | 6,943 | ||||||||||||||||||
Segment operating income | 63,667 | 57,776 | 5,891 | 36,943 | 33,946 | 2,997 | ||||||||||||||||||
Depreciation and amortization | (182) | (246) | 64 | (91) | (86) | (5) | ||||||||||||||||||
Interest income, net | 16,857 | 15,826 | 1,031 | 8,303 | 8,283 | 20 | ||||||||||||||||||
Other income, net | — | 67 | (67) | — | 72 | (72) | ||||||||||||||||||
Equity in earnings (losses) from real estate and other | 5,966 | 14,336 | (8,370) | (2,968) | 6,499 | (9,467) | ||||||||||||||||||
Segment EBT | 86,308 | 87,759 | (1,451) | 42,187 | 48,714 | (6,527) | ||||||||||||||||||
Seaport District Segment EBT | ||||||||||||||||||||||||
Total revenues | 11,966 | 19,921 | (7,955) | 2,272 | 12,891 | (10,619) | ||||||||||||||||||
Total operating expenses | (22,775) | (32,405) | 9,630 | (8,464) | (17,972) | 9,508 | ||||||||||||||||||
Segment operating loss | (10,809) | (12,484) | 1,675 | (6,192) | (5,081) | (1,111) | ||||||||||||||||||
Depreciation and amortization | (27,651) | (12,946) | (14,705) | (6,776) | (6,753) | (23) | ||||||||||||||||||
Interest expense, net | (9,679) | (3,456) | (6,223) | (4,626) | (1,924) | (2,702) | ||||||||||||||||||
Other loss, net | (3,777) | (147) | (3,630) | (409) | (61) | (348) | ||||||||||||||||||
Equity in losses from real estate and other affiliates | (8,676) | (1,083) | (7,593) | (6,633) | (451) | (6,182) | ||||||||||||||||||
Loss on sale or disposal of real estate | — | (6) | 6 | — | — | — | ||||||||||||||||||
Segment EBT | (60,592) | (30,122) | (30,470) | (24,636) | (14,270) | (10,366) | ||||||||||||||||||
Six Months Ended | Three Months Ended | |||||||||||||||||||||||
(In thousands) | 2020 | 2019 | $ Change | 2020 | 2019 | $ Change | ||||||||||||||||||
Strategic Developments Segment EBT | ||||||||||||||||||||||||
Total revenues | 1,384 | 440,358 | (438,974) | 624 | 236,347 | (235,723) | ||||||||||||||||||
Total operating expenses | (116,816) | (371,014) | 254,198 | (12,517) | (224,711) | 212,194 | ||||||||||||||||||
Segment operating (loss) income | (115,432) | 69,344 | (184,776) | (11,893) | 11,636 | (23,529) | ||||||||||||||||||
Depreciation and amortization | (3,411) | (2,316) | (1,095) | (1,650) | (1,260) | (390) | ||||||||||||||||||
Interest income, net | 2,988 | 6,497 | (3,509) | 1,057 | 3,235 | (2,178) | ||||||||||||||||||
Other income (loss), net | 1,293 | 310 | 983 | 1,668 | (383) | 2,051 | ||||||||||||||||||
Equity in earnings from real estate and other affiliates | 638 | 298 | 340 | 574 | 261 | 313 | ||||||||||||||||||
Gain (loss) on sale or disposal of real estate, net | 8,000 | (144) | 8,144 | 8,000 | (144) | 8,144 | ||||||||||||||||||
Segment EBT | (105,924) | 73,989 | (179,913) | (2,244) | 13,345 | (15,589) | ||||||||||||||||||
Consolidated Segment EBT | ||||||||||||||||||||||||
Total revenues | 331,243 | 785,206 | (453,963) | 156,086 | 431,316 | (275,230) | ||||||||||||||||||
Total operating expenses | (289,745) | (561,037) | 271,292 | (95,173) | (330,323) | 235,150 | ||||||||||||||||||
Segment operating income | 41,498 | 224,169 | (182,671) | 60,913 | 100,993 | (40,080) | ||||||||||||||||||
Depreciation and amortization | (105,328) | (71,554) | (33,774) | (45,512) | (37,037) | (8,475) | ||||||||||||||||||
Interest expense, net | (39,130) | (20,183) | (18,947) | (18,369) | (10,465) | (7,904) | ||||||||||||||||||
Other (loss) income, net | (2,317) | 1,353 | (3,670) | 1,485 | 716 | 769 | ||||||||||||||||||
Equity in earnings (losses) from real estate and other affiliates | 2,797 | 16,305 | (13,508) | (8,552) | 6,354 | (14,906) | ||||||||||||||||||
Gain (loss) on sale or disposal of real estate, net | 46,124 | (150) | 46,274 | 8,000 | (144) | 8,144 | ||||||||||||||||||
Provision for impairment | (48,738) | — | (48,738) | — | — | — | ||||||||||||||||||
Consolidated segment EBT | (105,094) | 149,940 | (255,034) | (2,035) | 60,417 | (62,452) | ||||||||||||||||||
Corporate income, expenses and other items | (54,091) | (104,687) | 50,596 | (32,068) | (47,089) | 15,021 | ||||||||||||||||||
Net (loss) income | (159,185) | 45,253 | (204,438) | (34,103) | 13,328 | (47,431) | ||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | (33) | 45 | (78) | 19 | 149 | (130) | ||||||||||||||||||
Net (loss) income attributable to common stockholders | $ | (159,218) | $ | 45,298 | $ | (204,516) | $ | (34,084) | $ | 13,477 | $ | (47,561) | ||||||||||||
(a) | Includes hospitality revenues for the three and six months ended June 30, 2020, of | |||
(b) | Includes hospitality operating costs for the three and six months ended June 30, 2020, of | |||
NOI
We believe that NOI is a useful supplemental measure of the performance of our Operating Assets and Seaport District 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, including our share of NOI from equity investees). NOI excludes straight-line rents and amortization of tenant incentives, net; interest expense, net; ground rent amortization; demolition costs; other (loss) income; 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 District 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). For reference, and as an aid in understanding our computation of NOI, a reconciliation of segment EBT to NOI for Operating Assets and Seaport District has been presented in the tables below.
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
(In thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Total Operating Assets segment EBT (a) | $ | (24,886) | $ | 18,314 | $ | (17,342) | $ | 12,628 | ||||||||
Add back: | ||||||||||||||||
Depreciation and amortization | 74,084 | 56,046 | 36,995 | 28,938 | ||||||||||||
Interest expense, net | 49,296 | 39,050 | 23,103 | 20,059 | ||||||||||||
Equity in earnings from real estate and other affiliates | (4,869) | (2,754) | (475) | (45) | ||||||||||||
Gain on sale or disposal of real estate and other assets, net | (38,124) | — | — | — | ||||||||||||
Provision for impairment | 48,738 | — | — | — | ||||||||||||
Impact of straight-line rent | (6,351) | (5,382) | (3,248) | (2,537) | ||||||||||||
Other | 54 | (218) | (119) | (340) | ||||||||||||
Total Operating Assets NOI - Consolidated | 97,942 | 105,056 | 38,914 | 58,703 | ||||||||||||
Redevelopments | ||||||||||||||||
110 North Wacker | 11 | 2 | 10 | 2 | ||||||||||||
Total Operating Asset Redevelopments NOI | 11 | 2 | 10 | 2 | ||||||||||||
Dispositions | ||||||||||||||||
100 Fellowship Drive | (1,050) | — | 73 | — | ||||||||||||
Total Operating Asset Dispositions NOI | (1,050) | — | 73 | — | ||||||||||||
Consolidated Operating Assets NOI excluding properties | 96,903 | 105,058 | 38,997 | 58,705 | ||||||||||||
Company's Share NOI - Equity investees | 4,073 | 3,152 | 1,836 | 1,688 | ||||||||||||
Distributions from Summerlin Hospital Investment | 3,724 | 3,625 | — | — | ||||||||||||
Total Operating Assets NOI | $ | 104,700 | $ | 111,835 | $ | 40,833 | $ | 60,393 | ||||||||
(a) | Segment EBT excludes corporate expenses and other items that are not allocable to the segments. | ||||
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
(In thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Total Seaport District segment EBT (a) | $ | (60,592) | $ | (30,122) | $ | (24,636) | $ | (14,270) | ||||||||
Add back: | ||||||||||||||||
Depreciation and amortization | 27,651 | 12,946 | 6,776 | 6,753 | ||||||||||||
Interest expense, net | 9,679 | 3,456 | 4,626 | 1,924 | ||||||||||||
Equity in losses from real estate and other affiliates | 8,676 | 1,083 | 6,633 | 451 | ||||||||||||
Loss on sale or disposal of real estate | — | 6 | — | — | ||||||||||||
Impact of straight-line rent | 1,333 | 1,246 | 1,208 | 491 | ||||||||||||
Other loss, net (b) | 5,923 | 4,513 | 1,953 | 1,764 | ||||||||||||
Total Seaport District NOI - Consolidated | (7,330) | (6,872) | (3,440) | (2,887) | ||||||||||||
Company's Share NOI - Equity investees | (681) | (237) | (305) | (42) | ||||||||||||
Total Seaport District NOI | $ | (8,011) | $ | (7,109) | $ | (3,745) | $ | (2,929) | ||||||||
(a) | Segment EBT excludes corporate expenses and other items that are not allocable to the segments. | ||||
(b) | Includes miscellaneous development-related items as well as the loss related to the write-off of inventory due to the permanent closure of 10 Corso Como Retail and Café. | ||||
Contact Information:
David R. O'Reilly
President and Chief Financial Officer
(214) 741-7744
David.O'Reilly@howardhughes.com
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SOURCE The Howard Hughes Corporation
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