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

Stocks in this article: HHC

About the Howard Hughes Corporation

The Howard Hughes Corporation owns, manages and develops commercial, residential and mixed-use real estate throughout the United States. Our properties include master planned communities, commercial mixed-use, retail and office properties, development opportunities and other unique assets spanning 18 states from New York to Hawaii. The Howard Hughes Corporation is traded on the New York Stock Exchange under the ticker symbol “HHC” and is headquartered in Dallas, Texas. For more information, visit www.howardhughes.com.

Safe Harbor Statement

Statements made in this press release that are not historical facts, including statements accompanied by words such as “will,” “believe,” “expect,” “enables,” “realize,” “plan,” “intend,” “transform” and other words of similar expression, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s expectations, estimates, assumptions and projections as of the date of this release and are not guarantees of future performance. Actual results may differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ materially are set forth as risk factors in The Howard Hughes Corporation’s filings with the Securities and Exchange Commission, including its Quarterly and Annual Reports. The Howard Hughes Corporation cautions you not to place undue reliance on the forward-looking statements contained in this release. The Howard Hughes Corporation does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release.

       
 
THE HOWARD HUGHES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 2012 2011
(In thousands, except per share amounts)
Revenues:
Master Planned Community land sales $ 62,408 $ 38,918 $ 182,643 $ 114,610
Builder price participation 1,539 1,465 5,747 3,816
Minimum rents 20,012 18,080 82,621 71,178
Tenant recoveries 5,419 4,786 23,351 19,323
Condominium unit sales - 2,572 267 22,067
Resort and conference center revenues 9,828 8,544 39,782 15,744
Other land revenues 4,640 4,040 18,073 13,133
Other rental and property revenues   4,521     6,688     24,402     15,818  
Total revenues   108,367     85,093     376,886     275,689  
Expenses:
Master Planned Community cost of sales 26,202 18,201 89,298 70,108
Master Planned Community operations 9,544 11,334 40,506 33,647
Rental property real estate taxes 3,060 2,477 13,643 10,270
Rental property maintenance costs 2,351 1,798 8,655 7,076
Other property operating costs 16,729 16,136 63,035 50,549
Condominium unit cost of sales - 743 96 14,465
Resort and conference center operations 7,362 6,868 29,112 13,220
Provision for (recovery of) doubtful accounts 939 (409 ) 1,224 (235 )
General and administrative 8,527 11,186 34,423 32,342
Depreciation and amortization   6,711     3,190     24,429     16,782  
Total expenses   81,425     71,524     304,421     248,224  
 
Operating income 26,942 13,569 72,465 27,465
 
Interest income 2,389 2,779 9,437 9,876
Interest expense (321 ) - (964 ) -
Warrant liability gain (loss) (22,293 ) 822 (185,017 ) 101,584
Reduction in tax indemnity receivable (8,605 ) - (20,260 ) -
Equity in earnings from Real Estate Affiliates 251 791 3,683 8,578
Investment in Real Estate Affiliate basis adjustment - - (6,053 )
Early extinguishment of debt   -     -     -     (11,305 )
Income (loss) before taxes (1,637 ) 17,961 (120,656 ) 130,145
Provision (benefit) for income taxes   (816 )   (13,981 )   6,887     (18,325 )
Net income (loss) (821 ) 31,942 (127,543 ) 148,470
Net income attributable to noncontrolling interests   (108 )   (513 )   (745 )   (1,290 )
Net income (loss) attributable to common stockholders $ (929 ) $ 31,429   $ (128,288 ) $ 147,180  
 
Basic earnings (loss) per share: $ (0.01 ) $ 0.83   $ (3.36 ) $ 3.88  
 
Diluted earnings (loss) per share: $ (0.01 ) $ 0.80   $ (3.36 ) $ 1.17  
 
   
 

THE HOWARD HUGHES CORPORATION

CONSOLIDATED BALANCE SHEETS

 
 
December 31, December 31,
2012 2011
Assets: (In thousands, except share amounts)
Investment in real estate:
Master Planned Community assets $ 1,563,122 $ 1,602,437
Land 252,593 234,190
Buildings and equipment 657,268 545,343
Less: accumulated depreciation (112,491 ) (91,605 )
Developments in progress   273,613     207,760  
Net property and equipment 2,634,105 2,498,125
Investment in Real Estate Affiliates   32,179     58,790  
Net investment in real estate 2,666,284 2,556,915
Cash and cash equivalents 229,197 227,566
Accounts receivable, net 13,905 20,089
Municipal Utility District receivables, net 89,720 86,599
Notes receivable, net 27,953 35,354
Tax indemnity receivable, including interest 319,622 331,771
Deferred expenses, net 12,891 10,338
Prepaid expenses and other assets, net   143,470     130,961  
Total assets $ 3,503,042   $ 3,399,593  
 
Liabilities:
Mortgages, notes and loans payable $ 688,312 $ 606,477
Deferred tax liabilities 77,147 75,966
Warrant liabilities 123,573 127,764
Uncertain tax position liability 132,492 129,939
Accounts payable and accrued expenses   170,521     129,848  
Total liabilities   1,192,045     1,069,994  
 
Commitments and Contingencies (see Note 10)
 
Equity:
Preferred stock: $.01 par value; 50,000,000 shares authorized, none issued - -
Common stock: $.01 par value; 150,000,000 shares authorized,
39,498,912 shares issued and outstanding as of December 31, 2012, and
37,945,707 shares issued and outstanding as of December 31, 2011 395 379
Additional paid-in capital 2,824,031 2,711,109
Accumulated deficit (509,613 ) (381,325 )
Accumulated other comprehensive loss   (9,575 )   (5,578 )
Total stockholders' equity 2,305,238 2,324,585
Noncontrolling interests   5,759     5,014  
Total equity   2,310,997     2,329,599  
Total liabilities and equity $ 3,503,042   $ 3,399,593  
 
 
 

Supplemental Information

 
December 31, 2012

 

As our three segments, Master Planned Communities, Operating Assets and Strategic Developments, are managed separately, we use different operating measures to assess operating results and allocate resources among these three segments. The one common operating measure used to assess operating results for our business segments is real estate property earnings before taxes (“REP EBT”), which represents the operating revenues of the properties less property operating expenses. REP EBT, as it relates to our business, is defined as net income (loss) excluding general and administrative expenses, corporate interest income and depreciation expense, provision (benefit) for income taxes, warrant liability gain (loss), the reduction in tax indemnity receivable, equity in earnings from Real Estate Affiliates and Investment in Real Estate Affiliate basis adjustment. We present REP EBT because we use this measure, among others, internally to assess the core operating performance of our assets. However, REP EBT should not be considered as an alternative to GAAP net income (loss) attributable to common stockholders or GAAP net income (loss).

           

Reconciliation of REP EBT to GAAP-net income (loss)

Three Months Ended December 31,

Twelve Months Ended December 31,

 

2012 2011 2012 2011
(In thousands) (In thousands)
Real estate property EBT:
Segment basis $ 34,759 $ 25,972 $ 109,705 $ 62,197
Real Estate Affiliates   (251 )   287     (3,683 )   (12,210 )
34,508 26,259 106,022 49,987
General and administrative (8,527 ) (11,186 ) (34,423 ) (32,342 )

Corporate interest income, net

3,339 1,286 10,153 8,595
Warrant liability gain (loss) (22,293 ) 822 (185,017 ) 101,584
Benefit (provision) for income taxes 816 13,981 (6,887 ) 18,325
Reduction in tax indemnity receivable (8,605 ) - (20,260 ) -
Equity in earnings from Real Estate Affiliates 251 791 3,683 8,578
Investment in Real Estate Affiliate basis adjustment - - - (6,053 )
Corporate depreciation   (308 )   (11 )   (814 )   (204 )
Net income (loss) $ (819 ) $ 31,942   $ (127,543 ) $ 148,470  
 
                             
 

MPC Sales Summary

 
Land Sales Acres Sold Number of Lots/Units Price per acre Price per lot

Three Months Ended December 31, 2012

($ In thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Columbia

 

Residential
Single family - detached

 

$ - $ - - - - - $ - $ - $ - $ -
Townhomes

 

- 2,227 - 0.8 - 15 - 2,784 - 148
Commercial
Apartments

 

  -     - - - - -   -   -   -   -
- 2,227 - 0.8 - 15 - 2,784 - 148
 
Bridgeland
Residential
Single family - detached

 

4,692 2,861 16.6 11.0 76 58 283 260 62 49
Commercial
Not-for-profit

 

  -     - - - - -   -   -   -   -
4,692 2,861

16.6

11.0

76 58 283 260 62 49
 
Summerlin
Residential
Single family - detached

 

3,126 4,743 4.3 21.1 37 107 727 225 84 44
Custom lots

 

380 679 0.5 1.0 1 2 760 679 380 340
Commercial
Retail

 

- - - - - - - - - -
Not-for-profit

 

  -     - - - - -   -   -   -   -
3,506 5,422

4.8

22.1

38 109 730 245 92 50
 
The Woodlands
Residential
Single family - detached

 

44,776 20,839 90.4 60.6 381 216 495 344 118 96
Single family - attached

 

- 348 - 0.7 - 12 - 497 - 29
Commercial
Office and other

 

2,632 4,413 3.8 10.8 - - 693 409 - -
Retail

 

6,654 1,250 17.2 1.5 - - 387 833 - -
Other

 

  -     - - - - -   -   -   -   -
54,062 26,850

111.4

73.6

381 228 485 365 118 93
                 
Total acreage sales revenue

 

  62,260     37,360

132.8

107.5

495 410
Deferred revenue (222 ) 164
Special Improvement District revenue   370     1,392
Total segment land sale revenues 62,408 38,916
Less: Real Estate Affiliates land sales revenue   -     -
Total land sales revenue - GAAP basis $ 62,408   $ 38,916
 
                           
 

MPC Sales Summary

 
Land Sales Acres Sold Number of Lots/Units Price per acre Price per lot
Year Ended December 31, 2012
($ In thousands) 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
 
Columbia
Residential
Single family - detached $ - $ 1,480 - 1.4 - 7 $ - $ 1,040 $ - $ 211
Townhomes 4,156 5,538 1.2 1.8 28 39 3,463 3,077 148 142
Commercial
Apartments   5,300     -   18.7 - - -   283   -   -   -
9,456 7,018 19.9 3.2 28 46 475 2,193 148 153
 
Bridgeland
Residential
Single family - detached 21,875 16,707 80.5 63.2 389 318 272 265 56 53
Commercial
Not-for-profit   -     -   - - - -   -   -   -   -
21,875 16,707 80.5 63.2 389 318 272 265 56 53
 
Summerlin
Residential
Single family - detached 26,899 30,247 75.9 83.5 390 419 354 362 69 72
Custom lots 4,141 679 5.3 1.0 10 2 781 694 414 340
Commercial
Retail 784 - 1.0 - - - 784 - - -
Not-for-profit   -     3,616   - 16.1 - -   -   225   -   -
31,824 34,542 82.2 100.6 400 421 387 343 78 73
 
The Woodlands
Residential
Single family - detached 100,235 76,362 241.6 210.4 979 826 415 363 102 92
Single family - attached - 1,235 - 3.0 - 46 - 409 - 27
Commercial
Office and other 9,069 6,213 14.2 14.0 - - 639 449 - -
Retail 7,904 6,365 18.4 12.0 - - 430 547 - -
Other   50     1,839   0.8 5.0 - -   63   348   -   -
117,258 92,014 275.0 244.4 979 872 426 376 102 89
                   
Total acreage sales revenue   180,413     150,281   457.6 411.4 1,796 1,657
Deferred revenue (2,092 ) 5,680
Special Improvement District revenue   4,322     5,420  
Total segment land sale revenues 182,643 161,381
Less: Real Estate Affiliates land sales revenue   -     (46,771 )
Total land sales revenue - GAAP basis $ 182,643   $ 114,610  
 
 

Operating Assets Net Operating Income

The Company believes that NOI is a useful supplemental measure of the performance of our Operating Assets 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 occupancy rates, rental rates, and operating costs. We define NOI as property specific revenues (rental income, tenant recoveries and other income) less expenses (real estate taxes, repairs and maintenance, marketing and other property expenses). NOI also excludes straight line rents, property specific net interest expense, depreciation, ground rent, other amortization expenses, and equity in earnings from Real Estate Affiliates.

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