The Howard Hughes Corporation® Reports Third Quarter 2020 Results
The Howard Hughes Corporation (HHC) reported third-quarter 2020 results, showing significant sales momentum despite COVID-19 impacts. Net income rose to $139.7 million ($2.51 per diluted share), driven by a $267.5 million gain from the deconsolidation of 110 North Wacker. New home sales grew in master-planned communities, with The Woodlands Hills up 185%. Retail collections improved to 66%, while occupancy rates remained over 90%. The company executed a $750 million bond offering and continued its Transformation Plan, enhancing liquidity and reducing corporate overhead.
- Net income increased to $139.7 million or $2.51 per share, compared to $29.8 million or $0.69 per share in Q3 2019.
- New home sales saw significant growth: Woodlands Hills up 185%, Bridgeland up 32%, Summerlin up 27%.
- Retail collections improved to 66% in Q3 from 49.7% in Q2 2020.
- High occupancy rates in office (97.3%) and multi-family (98.5%) properties.
- Executed a $750 million bond offering, enhancing liquidity.
- Land sales decreased compared to Q3 2019 due to timing related to superpad sales.
- Total net operating income from Operating Assets decreased by 30.7% to $38.2 million.
- Seaport District NOI decreased by $3.2 million to a loss of $6.1 million due to pandemic-related impacts.
THE WOODLANDS, Texas, Nov. 5, 2020 /PRNewswire/ -- The Howard Hughes Corporation® (NYSE: HHC) (the "Company," "HHC" or "we") announced today operating results for the third quarter ended September 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.
"While the impact of COVID-19 affected all of our business segments in the first half of the year, we saw notable performance improvements and significant sales momentum during the third quarter," said David O'Reilly, Interim Chief Executive Officer; President and Chief Financial Officer.
"While third quarter land sales were lower compared to the third quarter of 2019 as a result of timing related to superpad sales in Summerlin, we did experience positive growth in new home sales throughout our regions. Growth in new home sales, a leading indicator for future land sales, continued to expand in our master planned communities (MPCs) as The Woodlands Hills, Bridgeland and Summerlin all saw greater new home sales compared to the third quarter of 2019 with increases of
"Our retail collections improved to
"We completed construction on our
"Condo sales in Ward Village continued to progress throughout the quarter with 24 homes sold, almost exclusively through a digital homebuyer experience. Our future revenue associated with all of our contracted units is
"At the Seaport, we were able to reopen many of the restaurants on a limited basis during the quarter. We also resumed construction on the Tin Building for the Jean-Georges Food Hall and launched our new concept The Greens on Pier 17's rooftop, where guests can reserve their own socially distanced, mini-lawn space overlooking the Brooklyn Bridge and Lower Manhattan waterfront. The Greens was sold out each day this summer and had a 20-thousand-person waitlist which reinforces our view that the Seaport's location and outdoor space is incredibly valuable. This activation was key to retaining the majority of our sponsorship income that would have been lost due to the postponement of the summer concert series.
"During the quarter, we executed on a
"We continue to make progress on our Transformation Plan. Our corporate-overhead cost reduction initiatives are substantially complete, and we continue to pursue the sale of our non-core assets, committed to achieving the maximum value for these dispositions and having the luxury of patience given our current liquidity position. We have resumed modest investment in pre-development work as our regional leaders continue to seek out the best opportunities across multiple asset types to deploy capital at outsized risk-adjusted returns.
"While we continue to feel the impacts of COVID-19, it is encouraging to see the strength in new home sales in our MPCs, the momentum in condo sales at Ward Village, and the improvements within our Operating Assets and the Seaport. We believe our high-quality assets and strategically located master planned communities put The Howard Hughes Corporation in an excellent position to thrive in a post-COVID environment."
Third Quarter 2020 Highlights
- Net income attributable to common stockholders increased to income of
$139.7 million , or$2.51 per diluted share, for the three months ended September 30, 2020, compared to income of$29.8 million , or$0.69 per diluted share, for the three months ended September 30, 2019, primarily due to the$267.5 million gain on the deconsolidation of 110 North Wacker, partially offset by lower land sales revenues due to superpad sales in Summerlin in 2019 that did not recur in 2020, decreased revenues from declines in occupancy at our recently reopened hospitality properties and cancellation of the Las Vegas Aviators 2020 baseball season as a result of the COVID-19 pandemic, and a decrease resulting from a$24.2 million gain on the sale of the Cottonwood Mall during the three months ended September 30, 2019. - We continue to maintain a strong liquidity position with
$857.4 million cash as of September 30, 2020. - On August 18, 2020, the Company issued
$750 million in5.375% senior notes due August 2028. These senior notes will be unsecured senior obligations of the Company and will be guaranteed by certain subsidiaries of the Company. The Company used the net proceeds from this issuance, together with cash on hand, for the repayment of existing indebtedness of approximately$807.9 million . - For the three months ended September 30, 2020, we collected
97.3% of our office portfolio billings,98.5% of our multi-family portfolio billings and96.2% of our other portfolio billings. As several of our tenants have resumed operations with phased reopenings, collections of our retail portfolio billings have increased from49.7% for the three months ended June 2020 to65.7% for three months ended September 30, 2020. - MPC segment earnings before tax ("EBT") decreased by
$25.5 million to$36.6 million for the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to lower land sales revenues primarily driven by reductions in acres sold at Summerlin due to the timing of superpad sales and lower earnings at The Summit. Bridgeland price per acre increased8.3% with acres sold remaining consistent with results in the third quarter of 2019. The Woodlands Hills' price per acre increased9.6% coupled with a103.6% increase in acres sold due to a higher volume and change in product type of lots sold in the third quarter of 2020, compared to the same period in 2019. - Total Net operating income ("NOI")(1) from the Operating Assets segment, including our share of NOI from equity investments, decreased by
30.7% to$38.2 million for the three months ended September 30, 2020, compared to$55.2 million for the prior year period. The decrease in NOI was primarily due to rent deferrals and collection reserves related to our retail properties, declines in occupancy at our recently reopened hospitality properties and cancellation of the Las Vegas Aviators 2020 baseball season, all as a result of the COVID-19 pandemic. - Progressed public pre-sales of our newest project at Ward Village®, Victoria Place®, where as of September 30, 2020, we have executed contracts for 249 condominium units, or
71.3% of total units. Across all of Ward Village®, potential future revenue associated with total contracted units is$1.50 billion . - Seaport District NOI decreased
$3.2 million to a loss of$6.1 million for the three months ended September 30, 2020, compared to the prior year period, primarily due to business closures and cancellation of events related to the COVID-19 pandemic. Multiple changes were made at the Seaport as a result of COVID-19 including expanded outdoor seating at our restaurants, updates to the Tin Building's e-commerce strategy to include grocery and restaurant delivery and the launch of The Greens, which replaced the canceled summer concert series.
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, 2020 | Three Months Ended September 30, | |||||||||||||||||||||||||||
$ in thousands | 2020 | 2019 | Change | % Change | 2020 | 2019 | Change | % Change | ||||||||||||||||||||
Operating Assets NOI | (1) | |||||||||||||||||||||||||||
Office | $ | 86,098 | $ | 61,918 | $ | 24,180 | 39.1 | % | $ | 23,857 | $ | 22,996 | $ | 861 | 4 | % | ||||||||||||
Retail | 30,021 | 47,188 | (17,167) | (36.4) | % | 6,932 | 15,683 | (8,751) | (56) | % | ||||||||||||||||||
Multi-family | 12,286 | 14,503 | (2,217) | (15.3) | % | 3,924 | 5,317 | (1,393) | (26) | % | ||||||||||||||||||
Hospitality | 3,163 | 23,419 | (20,256) | (86.5) | % | 626 | 7,231 | (6,605) | (91) | % | ||||||||||||||||||
Other | 1,257 | 11,153 | (9,896) | (88.7) | % | 583 | 1,896 | (1,313) | (69) | % | ||||||||||||||||||
Company's share NOI (a) | 10,112 | 8,820 | 1,292 | 14.6 | % | 2,315 | 2,043 | 272 | 13 | % | ||||||||||||||||||
Total Operating Assets NOI (b) | $ | 142,937 | $ | 167,001 | $ | (24,064) | (14.4) | % | $ | 38,237 | $ | 55,166 | $ | (16,929) | (31) | % | ||||||||||||
Projected stabilized NOI | $ | 362.3 | $ | 323.1 | $ | 39.2 | 12.1 | % | ||||||||||||||||||||
MPC | ||||||||||||||||||||||||||||
Acres Sold - Residential | 218 | 337 | (119) | (35.4) | % | 70 | 147 | (77) | (53) | % | ||||||||||||||||||
Acres Sold - Commercial | 17 | — | 17 | — | % | 1 | — | 1 | 100 | % | ||||||||||||||||||
Price Per Acre - Residential | $ | 541 | $ | 543 | $ | (2) | (0.3) | % | $ | 445 | $ | 574 | $ | (129) | (22) | % | ||||||||||||
Price Per Acre - Commercial | $ | 131 | $ | — | $ | 131 | — | % | $ | — | $ | — | $ | — | 100 | % | ||||||||||||
MPC EBT | $ | 122,929 | $ | 149,868 | $ | (26,939) | (18.0) | % | $ | 36,621 | $ | 62,109 | $ | (25,488) | (41) | % | ||||||||||||
Seaport District NOI | (1) | |||||||||||||||||||||||||||
Historic District & Pier 17 - | $ | (5,494) | $ | (5,156) | $ | (338) | (6.6) | % | $ | (2,022) | $ | (2,150) | $ | 128 | 6 | % | ||||||||||||
Multi-family | 260 | 303 | (43) | (14.2) | % | 46 | 112 | (66) | (59) | % | ||||||||||||||||||
Hospitality | (12) | 41 | (53) | (129) | % | — | — | — | 100 | % | ||||||||||||||||||
Historic District & Pier 17 - | (4,993) | (4,420) | (573) | (13.0) | % | (1,657) | (879) | (778) | (89) | % | ||||||||||||||||||
Events, Sponsorships & | (3,190) | (536) | (2,654) | (495.1) | % | (2,466) | 25 | (2,491) | 9,964 | % | ||||||||||||||||||
Company's share NOI (a) | (787) | (385) | (402) | (104.4) | % | (106) | (148) | 42 | 28 | % | ||||||||||||||||||
Total Seaport District NOI | $ | (14,216) | $ | (10,153) | $ | (4,063) | 40.0 | % | $ | (6,205) | $ | (3,040) | $ | (3,165) | 104 | % | ||||||||||||
Strategic Developments | ||||||||||||||||||||||||||||
Condominium units contracted to | 27 | 82 | (55) | (67.1) | % | 11 | 55 | (44) | (80) | % | ||||||||||||||||||
(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 September 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 third quarter earnings call. Say verifies all shareholder positions and provides permission to participate on the November 6, 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 Friday, November 6, 2020, at 9:00 a.m Central Standard Time (10:00 a.m. Eastern Standard Time) to discuss third 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 0985696 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 (the "SEC"). In addition, our management may make forward-looking statements orally to analysts, investors, creditors, the media and others. Forward-looking statements include:
- projected impact of COVID-19, including the recent surge of COVID-19 cases in regions where we operate, on our business
- expected impact of 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
- expected performance of each business segment
- forecasts of economic performance
- future liquidity, finance opportunities, development opportunities, development spending and management plans
These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements to materially differ from 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 and quarterly reports on Form 10-Q, copies of which may be obtained on our Investor relations website at www.investor.howardhughes.com. Any factor could, by itself, or together with one or more other factors, adversely affect our business, results of operations, plans, objectives, future performance or financial condition. There may be other factors currently unknown to us that we have not described in our Annual Report or other SEC filings 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.
Contact Information:
David R. O'Reilly
Interim Chief Executive Officer, President and Chief Financial Officer
(214) 741-7744
David.O'Reilly@howardhughes.com
THE HOWARD HUGHES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED | |||||||||||||||
Nine Months Ended | Three Months Ended | ||||||||||||||
thousands, except per share amounts | 2020 | 2019 | 2020 | 2019 | |||||||||||
REVENUES | |||||||||||||||
Condominium rights and unit sales | $ | 185 | $ | 443,931 | $ | 142 | $ | 9,999 | |||||||
Master Planned Communities land sales | 136,053 | 177,001 | 39,248 | 77,368 | |||||||||||
Rental revenue | 241,522 | 206,168 | 70,072 | 70,344 | |||||||||||
Other land, rental and property revenues | 82,092 | 165,054 | 35,748 | 63,801 | |||||||||||
Builder price participation | 25,936 | 24,224 | 9,230 | 9,660 | |||||||||||
Total revenues | 485,788 | 1,016,378 | 154,440 | 231,172 | |||||||||||
EXPENSES | |||||||||||||||
Condominium rights and unit cost of sales | 105,336 | 365,324 | 1,087 | 7,010 | |||||||||||
Master Planned Communities cost of sales | 58,560 | 78,128 | 15,899 | 33,304 | |||||||||||
Operating costs | 168,763 | 221,529 | 58,272 | 81,222 | |||||||||||
Rental property real estate taxes | 44,225 | 28,585 | 15,448 | 9,080 | |||||||||||
Provision for (recovery of) doubtful accounts | 4,954 | (195) | 1,387 | (107) | |||||||||||
Demolition costs | — | 737 | — | 138 | |||||||||||
Development-related marketing costs | 6,541 | 16,874 | 1,912 | 5,341 | |||||||||||
General and administrative | 84,755 | 92,322 | 23,441 | 33,990 | |||||||||||
Depreciation and amortization | 160,995 | 115,142 | 52,395 | 40,093 | |||||||||||
Total expenses | 634,129 | 918,446 | 169,841 | 210,071 | |||||||||||
OTHER | |||||||||||||||
Provision for impairment | (48,738) | — | — | — | |||||||||||
Gain (loss) on sale or disposal of real estate and other | 46,232 | 24,051 | 108 | 24,201 | |||||||||||
Other (loss) income, net | (793) | 11,798 | 1,284 | 1,337 | |||||||||||
Total other | (3,299) | 35,849 | 1,392 | 25,538 | |||||||||||
Operating income (loss) | (151,640) | 133,781 | (14,009) | 46,639 | |||||||||||
Selling profit from sales-type leases | — | 13,537 | — | 13,537 | |||||||||||
Interest income | 1,908 | 7,696 | 358 | 2,872 | |||||||||||
Interest expense | (98,717) | (76,358) | (31,872) | (28,829) | |||||||||||
Gain (loss) on extinguishment of debt | (13,166) | — | (13,166) | — | |||||||||||
Equity in earnings (losses) from real estate and other | 269,635 | 20,847 | 266,838 | 4,542 | |||||||||||
Income (loss) before taxes | 8,020 | 99,503 | 208,149 | 38,761 | |||||||||||
Provision (benefit) for income taxes | 3,203 | 24,207 | 44,147 | 8,718 | |||||||||||
Net income (loss) | 4,817 | 75,296 | 164,002 | 30,043 | |||||||||||
Net (income) loss attributable to noncontrolling interests | (24,325) | (240) | (24,292) | (285) | |||||||||||
Net income (loss) attributable to common stockholders | $ | (19,508) | $ | 75,056 | $ | 139,710 | $ | 29,758 | |||||||
Basic income (loss) per share | $ | (0.38) | $ | 1.74 | $ | 2.52 | $ | 0.69 | |||||||
Diluted income (loss) per share | $ | (0.38) | $ | 1.73 | $ | 2.51 | $ | 0.69 | |||||||
THE HOWARD HUGHES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED | |||||||
September 30, | December 31, | ||||||
thousands except par values and share amounts | 2020 | 2019 | |||||
ASSETS | |||||||
Investment in real estate: | |||||||
Master Planned Communities assets | $ | 1,693,478 | $ | 1,655,674 | |||
Buildings and equipment | 4,069,640 | 3,813,595 | |||||
Less: accumulated depreciation | (600,211) | (507,933) | |||||
Land | 361,418 | 353,022 | |||||
Developments | 1,110,101 | 1,445,997 | |||||
Net property and equipment | 6,634,426 | 6,760,355 | |||||
Investment in real estate and other affiliates | 389,882 | 121,757 | |||||
Net investment in real estate | 7,024,308 | 6,882,112 | |||||
Net investment in lease receivable | 2,928 | 79,166 | |||||
Cash and cash equivalents | 857,390 | 422,857 | |||||
Restricted cash | 233,111 | 197,278 | |||||
Accounts receivable, net | 10,087 | 12,279 | |||||
Municipal Utility District receivables, net | 331,451 | 280,742 | |||||
Notes receivable, net | 52,136 | 36,379 | |||||
Deferred expenses, net | 112,503 | 133,182 | |||||
Operating lease right-of-use assets, net | 57,087 | 69,398 | |||||
Prepaid expenses and other assets, net | 360,244 | 300,373 | |||||
Total assets | $ | 9,041,245 | $ | 8,413,766 | |||
LIABILITIES | |||||||
Mortgages, notes and loans payable, net | $ | 4,219,334 | $ | 4,096,470 | |||
Operating lease obligations | 69,246 | 70,413 | |||||
Deferred tax liabilities | 178,433 | 180,748 | |||||
Accounts payable and accrued expenses | 830,209 | 733,147 | |||||
Total liabilities | 5,297,222 | 5,080,778 | |||||
Redeemable noncontrolling interest | 30,361 | — | |||||
EQUITY | |||||||
Preferred stock: $.01 par value; 50,000,000 shares authorized, none issued | — | — | |||||
Common stock: $.01 par value; 150,000,000 shares authorized, 55,974,883 issued | 561 | 437 | |||||
Additional paid-in capital | 3,942,173 | 3,343,983 | |||||
Accumulated deficit | (65,910) | (46,385) | |||||
Accumulated other comprehensive loss | (42,831) | (29,372) | |||||
Treasury stock, at cost, 1,053,135 shares as of September 30, 2020, and 1,050,260 shares as of December 31, 2019 | (120,706) | (120,530) | |||||
Total stockholders' equity | 3,713,287 | 3,148,133 | |||||
Noncontrolling interests | 375 | 184,855 | |||||
Total equity | 3,713,662 | 3,332,988 | |||||
Total liabilities and equity | $ | 9,041,245 | $ | 8,413,766 | |||
Appendix - Reconciliation of Non-GAAP Measures
For the Nine and Three Months Ended September 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.
Nine Months Ended | Three Months Ended | ||||||||||||||||||||||
thousands | 2020 | 2019 | $ Change | 2020 | 2019 | $ Change | |||||||||||||||||
Operating Assets Segment EBT | |||||||||||||||||||||||
Total revenues (a) | $ | 280,201 | $ | 305,395 | $ | (25,194) | $ | 81,667 | $ | 104,223 | $ | (22,556) | |||||||||||
Total operating expenses (b) | (142,052) | (139,589) | (2,463) | (47,590) | (47,950) | 360 | |||||||||||||||||
Segment operating income (loss) | 138,149 | 165,806 | (27,657) | 34,077 | 56,273 | (22,196) | |||||||||||||||||
Depreciation and amortization | (115,479) | (84,890) | (30,589) | (41,395) | (28,844) | (12,551) | |||||||||||||||||
Interest expense, net | (70,341) | (60,695) | (9,646) | (21,045) | (21,645) | 600 | |||||||||||||||||
Other income (loss), net | 150 | 1,186 | (1,036) | (17) | 63 | (80) | |||||||||||||||||
Equity in earnings (losses) from real estate and | 5,831 | 3,195 | 2,636 | 962 | 441 | 521 | |||||||||||||||||
Gain (loss) on sale or disposal of real estate | 38,232 | — | 38,232 | 108 | — | 108 | |||||||||||||||||
Gain (loss) on extinguishment of debt | (1,521) | — | (1,521) | (1,521) | — | (1,521) | |||||||||||||||||
Selling profit from sales-type leases | — | 13,537 | (13,537) | — | 13,537 | (13,537) | |||||||||||||||||
Provision for impairment | (48,738) | — | (48,738) | — | — | — | |||||||||||||||||
Segment EBT | (53,717) | 38,139 | (91,856) | (28,831) | 19,825 | (48,656) | |||||||||||||||||
MPC Segment EBT | |||||||||||||||||||||||
Total revenues | 171,517 | 216,042 | (44,525) | 52,158 | 92,287 | (40,129) | |||||||||||||||||
Total operating expenses | (78,751) | (109,676) | 30,925 | (23,059) | (43,697) | 20,638 | |||||||||||||||||
Segment operating income (loss) | 92,766 | 106,366 | (13,600) | 29,099 | 48,590 | (19,491) | |||||||||||||||||
Depreciation and amortization | (273) | (334) | 61 | (91) | (88) | (3) | |||||||||||||||||
Interest income, net | 26,033 | 24,376 | 1,657 | 9,176 | 8,550 | 626 | |||||||||||||||||
Other income (loss), net | — | 601 | (601) | — | 534 | (534) | |||||||||||||||||
Equity in earnings (losses) from real estate and | 4,403 | 18,859 | (14,456) | (1,563) | 4,523 | (6,086) | |||||||||||||||||
Segment EBT | 122,929 | 149,868 | (26,939) | 36,621 | 62,109 | (25,488) | |||||||||||||||||
Seaport District Segment EBT | |||||||||||||||||||||||
Total revenues | 16,170 | 43,051 | (26,881) | 4,204 | 23,130 | (18,926) | |||||||||||||||||
Total operating expenses | (34,297) | (59,735) | 25,438 | (11,522) | (27,330) | 15,808 | |||||||||||||||||
Segment operating income (loss) | (18,127) | (16,684) | (1,443) | (7,318) | (4,200) | (3,118) | |||||||||||||||||
Depreciation and amortization | (34,825) | (19,713) | (15,112) | (7,174) | (6,767) | (407) | |||||||||||||||||
Interest expense, net | (12,490) | (8,440) | (4,050) | (2,811) | (4,984) | 2,173 | |||||||||||||||||
Other income (loss), net | (2,187) | (147) | (2,040) | 1,590 | — | 1,590 | |||||||||||||||||
Equity in earnings (losses) from real estate and | (8,964) | (1,788) | (7,176) | (288) | (705) | 417 | |||||||||||||||||
Gain (loss) on sale or disposal of real estate | — | (6) | 6 | — | — | — | |||||||||||||||||
Gain (loss) on extinguishment of debt | (11,645) | — | (11,645) | (11,645) | — | (11,645) | |||||||||||||||||
Segment EBT | (88,238) | (46,778) | (41,460) | (27,646) | (16,656) | (10,990) | |||||||||||||||||
Nine Months Ended | Three Months Ended | ||||||||||||||||||||||
thousands | 2020 | 2019 | $ Change | 2020 | 2019 | $ Change | |||||||||||||||||
Strategic Developments Segment EBT | |||||||||||||||||||||||
Total revenues | $ | 17,749 | $ | 451,873 | $ | (434,124) | $ | 16,365 | $ | 11,515 | $ | 4,850 | |||||||||||
Total operating expenses | (126,738) | (382,341) | 255,603 | (9,922) | (11,327) | 1,405 | |||||||||||||||||
Segment operating (loss) income | (108,989) | 69,532 | (178,521) | 6,443 | 188 | 6,255 | |||||||||||||||||
Depreciation and amortization | (5,054) | (4,386) | (668) | (1,643) | (2,070) | 427 | |||||||||||||||||
Interest income, net | 4,909 | 9,499 | (4,590) | 1,921 | 3,002 | (1,081) | |||||||||||||||||
Other income (loss), net | 1,427 | 664 | 763 | 134 | 354 | (220) | |||||||||||||||||
Equity in earnings (losses) from real estate and | 268,365 | 581 | 267,784 | 267,727 | 283 | 267,444 | |||||||||||||||||
Gain (loss) on sale or disposal of real estate, net | 8,000 | 24,057 | (16,057) | — | 24,201 | (24,201) | |||||||||||||||||
Segment EBT | 168,658 | 99,947 | 68,711 | 274,582 | 25,958 | 248,624 | |||||||||||||||||
Consolidated Segment EBT | |||||||||||||||||||||||
Total revenues | 485,637 | 1,016,361 | (530,724) | 154,394 | 231,155 | (76,761) | |||||||||||||||||
Total operating expenses | (381,838) | (691,341) | 309,503 | (92,093) | (130,304) | 38,211 | |||||||||||||||||
Segment operating income (loss) | 103,799 | 325,020 | (221,221) | 62,301 | 100,851 | (38,550) | |||||||||||||||||
Depreciation and amortization | (155,631) | (109,323) | (46,308) | (50,303) | (37,769) | (12,534) | |||||||||||||||||
Interest expense, net | (51,889) | (35,260) | (16,629) | (12,759) | (15,077) | 2,318 | |||||||||||||||||
Other (loss) income, net | (610) | 2,304 | (2,914) | 1,707 | 951 | 756 | |||||||||||||||||
Equity in earnings (losses) from real estate and | 269,635 | 20,847 | 248,788 | 266,838 | 4,542 | 262,296 | |||||||||||||||||
Gain (loss) on sale or disposal of real estate, net | 46,232 | 24,051 | 22,181 | 108 | 24,201 | (24,093) | |||||||||||||||||
Gain (loss) on extinguishment of debt | (13,166) | — | (13,166) | (13,166) | — | (13,166) | |||||||||||||||||
Selling profit from sales-type leases | — | 13,537 | (13,537) | — | 13,537 | (13,537) | |||||||||||||||||
Provision for impairment | (48,738) | — | (48,738) | — | — | — | |||||||||||||||||
Consolidated segment EBT | 149,632 | 241,176 | (91,544) | 254,726 | 91,236 | 163,490 | |||||||||||||||||
Corporate income, expenses and other items | (144,815) | (165,880) | 21,065 | (90,724) | (61,193) | (29,531) | |||||||||||||||||
Net income (loss) | 4,817 | 75,296 | (70,479) | 164,002 | 30,043 | 133,959 | |||||||||||||||||
Net (income) loss attributable to noncontrolling | (24,325) | (240) | (24,085) | (24,292) | (285) | (24,007) | |||||||||||||||||
Net income (loss) attributable to common | $ | (19,508) | $ | 75,056 | $ | (94,564) | $ | 139,710 | $ | 29,758 | $ | 109,952 | |||||||||||
(a) | Total revenues includes hospitality revenues of |
(b) | Total operating expenses includes hospitality operating costs 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.
Nine Months Ended | Three Months Ended | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
thousands | 2020 | 2019 | 2020 | 2019 | |||||||||||
Total Operating Assets segment EBT (a) | $ | (53,717) | $ | 38,139 | $ | (28,831) | $ | 19,825 | |||||||
Add back: | |||||||||||||||
Depreciation and amortization | 115,479 | 84,890 | 41,395 | 28,844 | |||||||||||
Interest expense, net | 70,341 | 60,695 | 21,045 | 21,645 | |||||||||||
Equity in (earnings) losses from real estate and other | (5,831) | (3,195) | (962) | (441) | |||||||||||
(Gain) loss on sale or disposal of real estate and other | (38,232) | — | (108) | — | |||||||||||
(Gain) loss on extinguishment of debt | 1,521 | — | 1,521 | — | |||||||||||
Selling profit from sales-type leases | — | (13,537) | — | (13,537) | |||||||||||
Provision for impairment | 48,738 | — | — | — | |||||||||||
Impact of straight-line rent | (4,585) | (7,911) | 1,766 | (2,529) | |||||||||||
Other | 123 | 259 | 69 | 477 | |||||||||||
Total Operating Assets NOI - Consolidated | 133,837 | 159,340 | 35,895 | 54,284 | |||||||||||
Redevelopments | |||||||||||||||
110 North Wacker | — | 4 | (11) | 2 | |||||||||||
Total Operating Asset Redevelopments NOI | — | 4 | (11) | 2 | |||||||||||
Dispositions | |||||||||||||||
100 Fellowship Drive | (1,012) | (1,163) | 38 | (1,163) | |||||||||||
Total Operating Asset Dispositions NOI | (1,012) | (1,163) | 38 | (1,163) | |||||||||||
Consolidated Operating Assets NOI excluding | 132,825 | 158,181 | 35,922 | 53,123 | |||||||||||
Company's Share NOI - Equity Investees | 6,388 | 5,195 | 2,315 | 2,043 | |||||||||||
Distributions from Summerlin Hospital Investment | 3,724 | 3,625 | — | — | |||||||||||
Total Operating Assets NOI | $ | 142,937 | $ | 167,001 | $ | 38,237 | $ | 55,166 | |||||||
(a) | Segment EBT excludes corporate expenses and other items that are not allocable to the segments. |
Nine Months Ended | Three Months Ended | |||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
thousands | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Total Seaport District segment EBT (a) | $ | (88,238) | $ | (46,778) | $ | (27,646) | $ | (16,656) | ||||||||
Add back: | ||||||||||||||||
Depreciation and amortization | 34,825 | 19,713 | 7,174 | 6,767 | ||||||||||||
Interest expense, net | 12,490 | 8,440 | 2,811 | 4,984 | ||||||||||||
Equity in (earnings) losses from real estate and other | 8,964 | 1,788 | 288 | 705 | ||||||||||||
(Gain) loss on sale or disposal of real estate | — | 6 | — | — | ||||||||||||
(Gain) loss on extinguishment of debt | 11,645 | — | 11,645 | — | ||||||||||||
Impact of straight-line rent | 2,360 | 1,658 | 1,027 | 412 | ||||||||||||
Other (income) loss, net (b) | 4,525 | 5,405 | (1,398) | 896 | ||||||||||||
Total Seaport District NOI - Consolidated | (13,429) | (9,768) | (6,099) | (2,892) | ||||||||||||
Company's Share NOI - Equity Investees | (787) | (385) | (106) | (148) | ||||||||||||
Total Seaport District NOI | $ | (14,216) | $ | (10,153) | $ | (6,205) | $ | (3,040) | ||||||||
(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 in the first quarter of 2020, and income related to inventory liquidation sales in the third quarter of 2020. |
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SOURCE The Howard Hughes Corporation
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