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To the Shareholders of The Howard Hughes Corporation from the Chief Executive Officer:
As I reflect on the past two years, I am proud of our team and their numerous accomplishments, grateful for the dedication and tireless efforts that have made these achievements possible, and sharply focused on continuing our outstanding performance. 2013 is pivotal for The Howard Hughes Corporation as we transition from planning to building and continue to unlock the value of our portfolio.
Our financial results for 2012 reflect the exemplary efforts of our management team and employees. Revenues totaled $377 million, operating income and income from non-consolidated affiliates totaled $76 million compared to $36 million in 2011. These strong operating results permitted us to invest $155 million in pre-development, construction, and to retire the majority of the outstanding Sponsor warrants, while ending the year with a cash balance $2 million higher than at the end of 2011. We have a strong balance sheet with only 19.9% net debt against the book value of our assets. We generated $153 million of operating cash flow in 2012 up from $87 million in 2011. We have used this cash to invest in the assets and opportunities that we believe have the most potential for creating extraordinary value.
Our long-term goal is to increase the value of the company on a per-share basis. We do this by improving our assets through the development process and by opportunistically deploying excess cash. In the fourth quarter, we purchased approximately 6.1 million of the 8 million Sponsor warrants issued as part of our emergence as a public company. These warrants had a strike price of $50.00 per share and a November 2017 expiration date. They were the most expensive and dilutive security in our capital structure. Before their retirement, the warrants represented an economic drag on our per-share progress as every dollar of appreciation of our stock price above $50.00 would require us to generate $1.16 of value. The repurchase of these warrants in exchange for $81 million of cash and 1.5 million shares is a break-even proposition for the company if our stock price equals $81.10 in 2017, a price which we expect will be well below the potential value of our stock at that time. As a result of retiring the warrants, our shareholders now own 10.1% more of the company.