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

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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