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The Howard Hughes Corporation Reports Fourth Quarter And Full Year 2012 Results

The Howard Hughes Corporation (NYSE: HHC):

Fourth Quarter Highlights
  • Fourth quarter 2012 net income was $30.0 million, excluding the $(22.3) million non-cash warrant loss and $(8.6) million non-cash loss relating to a reduction in the tax indemnity receivable, compared to the fourth quarter 2011 net income of $30.6 million, excluding the $0.8 million non-cash warrant gain.
  • Master Planned Community (“MPC”) land sales were $62.3 million for the fourth quarter 2012 compared to $37.4 million for the fourth quarter 2011.
  • Net operating income (“NOI”) for our income-producing Operating Assets was $11.5 million for fourth quarter 2012, compared to $15.2 million in the fourth quarter of 2011. Fourth quarter 2012 results include the impact of Superstorm Sandy on South Street Seaport’s NOI, generating a $(5.6) million negative variance compared to 2011. Substantially all of the lost income caused by the storm will be covered by insurance.
  • Retired 6,083,333 Sponsor warrants for $80.5 million in cash and the issuance of 1,525,272 shares of common stock. As a result of the transactions, shareholders now own 10.1% more of the Company.
  • ONE Ala Moana luxury condominium project in Honolulu, HI, launched pre-sales and sold all 206 units after 29 hours of public sales for approximately $1,170 per square foot. Construction of the tower is expected to begin in first half of 2013.
  • Announced the master plan to transform Ward Centers in Honolulu, HI, into an urban master planned community called Ward Village, which when fully developed will contain over 4,000 condominium units and over one million square feet of retail and other commercial space. Phase One of the redevelopment will consist of two market rate, mixed-use residential towers totaling 500 units, one workforce housing tower containing at least 125 units and the renovation of the IBM building into a world-class sales center. The IBM building renovation is underway, and construction of the residential towers is expected to begin in 2014.
  • Dillard’s, Inc. and Macy’s, Inc. committed to become anchor tenants for The Shops at Summerlin downtown mixed-use development in Las Vegas, NV. The 1.5 million square foot project is expected to begin construction in 2013.
  • Obtained all approvals needed to begin construction of a 380-unit apartment building on Parcel D in Columbia, MD, and in February 2013 began construction.
  • Began construction on One Hughes Landing, a 195,000 square foot Class A office building which is 28% pre-leased at The Woodlands in Houston, TX; part of the Hughes Landing mixed use development close to the Town Center.

Full Year Highlights
  • 2012 net income was $77.0 million, excluding the $(185.0) million non-cash warrant loss and $(20.3) million non-cash loss relating to a reduction in the tax indemnity receivable, compared to the 2011 net income of $60.8 million, excluding the $101.6 million non-cash warrant gain and $(15.2) million of non-recurring charges.
  • Generated $180.4 million in Master Planned Community land sales revenue for 2012, a $30.1 million increase from $150.3 million in 2011.
  • NOI for our income-producing Operating Assets was $62.0 million for 2012, compared to $55.6 million in 2011.
  • Began construction on two Class A office towers in The Woodlands, 3 Waterway and One Hughes Landing, containing approximately 427,000 square feet. 3 Waterway is 90% leased, and both buildings will be completed in 2013.
  • August 2012 auction of 375 lots at The Woodlands generated an aggregate 49%, or $16.7 million, increase in price of the lots compared to the selling prices before the auction.
  • Acquired our partner’s equity interest in the 393-unit Millennium Waterway apartment property located in The Woodlands for $6.9 million, representing a $72 million purchase price for the building, with proceeds from a $55.6 million ten-year non-recourse mortgage at a 3.75% interest rate, generating $4.2 million of cash for the company. The property’s stabilized annual NOI is approximately $4.9 million.
  • Commenced construction on Millennium Woodlands Phase II, a 314-unit Class A apartment building located in The Woodlands, which is being developed through a joint venture with the same developer with whom we developed the Millennium Waterway apartments.
  • Commenced Phase Two of the Ward Village Shops, part of Ward Centers in Honolulu, HI, a $26.2 million project to build 57,000 square feet of new retail space for Pier 1 Imports and Nordstrom Rack, whose relocation opens space for future redevelopment in Ward Village. The tenants are expected to take occupancy in late 2013 or early 2014 and should together contribute approximately $1.0 million of incremental annual NOI.
  • TJ Maxx took occupancy of 36,000 square feet of newly completed space and Bed, Bath & Beyond will occupy 30,000 square feet at Ward Centers in early 2013. Both of these tenants are expected to contribute approximately $2.0 million of incremental combined annual NOI to Ward Centers.
  • Completed the ground lease amendment with the Economic Development Corporation of the City of New York which permits the redevelopment of Pier 17. Obtained unanimous Landmarks Commission approval with the support of Community Board 1 for the design, and in February 2013, obtained City Planning Commission approval for the Pier 17 redevelopment.
  • Announced the redevelopment of Riverwalk Marketplace into the first upscale urban outlet center in the U.S. Upon completion, the property will comprise approximately 250,000 square feet of retail space.
  • Entered into agreements with Whole Foods Market and The Columbia Association to lease 77.9% of the approximately 88,000 square foot Columbia Regional Building, located in Downtown Columbia, MD. The redevelopment is expected to cost approximately $23.0 million and to generate approximately $1.8 million of annual NOI based on pre-leasing to date. This architecturally important building currently has $1.0 million of annual carrying costs. The restoration and redevelopment of the building will serve as a catalyst for future development in the Columbia Town Center area. Construction is expected to begin in the first quarter of 2013.
  • Acquired 70 Columbia Corporate Center, a 169,590 square foot Class A office building in Columbia, MD, by assuming a $16.0 million non-recourse mortgage bearing interest at 4.25% and by providing a commitment to fund $5.0 million for leasing. Secured a 76,308 square foot tenant which will increase occupancy to 68.7% in 2013 and increase annual NOI to approximately $1.9 million.
  • Completed $348.6 million of non-recourse financing commitments in 2012, the proceeds of which will primarily be used to fund vertical commercial and horizontal land development activities.
  • On February 8, 2013, we closed a $95.0 million financing for the redevelopment of The Woodlands Resort and Conference Center. The loan refinanced a $36.1 million mortgage and will provide a majority of the capital for the $75.0 million redevelopment.

The Howard Hughes Corporation (NYSE: HHC) or (the “Company”) today announced its results for the fourth quarter and full year 2012.

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