Howard Hughes (HHH) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Presents unaudited condensed consolidated financial statements and notes for Q1 2024 and 2023 Item 1. Financial Statements Presents unaudited condensed consolidated financial statements and notes for Q1 2024 and 2023 Condensed Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2024, and December 31, 2023 | Metric | March 31, 2024 (thousands) | December 31, 2023 (thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total assets | $ 9,635,891 | $ 9,577,003 | | Net investment in real estate | $ 7,360,632 | $ 7,167,254 | | Cash and cash equivalents | $ 462,700 | $ 631,548 | | Total liabilities | $ 6,623,136 | $ 6,518,079 | | Mortgages, notes, and loans payable, net | $ 5,391,243 | $ 5,302,620 | | Condominium deposit liabilities | $ 528,536 | $ 478,870 | | Total equity | $ 3,012,755 | $ 3,058,924 | Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net income (loss) for the three months ended March 31, 2024 and 2023 | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | Change (thousands) | YoY Change | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :----------------- | :--------- | | Total revenues | $ 171,138 | $ 196,289 | $ (25,151) | -12.8% | | Condominium rights and unit sales | $ 23 | $ 6,087 | $ (6,064) | -99.6% | | Master Planned Communities land sales | $ 32,415 | $ 59,361 | $ (26,946) | -45.4% | | Rental revenue | $ 107,751 | $ 97,864 | $ 9,887 | 10.1% | | Total expenses | $ 193,550 | $ 191,058 | $ 2,492 | 1.3% | | Operating income (loss) | $ (16,727) | $ 14,942 | $ (31,669) | -212.0% | | Net income (loss) attributable to common stockholders | $ (52,477) | $ (22,745) | $ (29,732) | -130.7% | | Basic income (loss) per share | $ (1.06) | $ (0.46) | $ (0.60) | -130.4% | Condensed Consolidated Statements of Comprehensive Income (Loss) Reports net income (loss) and other comprehensive income (loss) components for the three months ended March 31, 2024 and 2023 | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net income (loss) | $ (52,467) | $ (22,627) | | Other comprehensive income (loss): Interest rate caps and swaps (net of tax) | $ 2,625 | $ (5,330) | | Comprehensive income (loss) | $ (49,842) | $ (27,957) | Condensed Consolidated Statements of Equity Outlines changes in stockholders' equity, including retained earnings and accumulated other comprehensive income (loss) | Metric | March 31, 2024 (thousands) | December 31, 2023 (thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Total stockholders' equity | $ 2,946,625 | $ 2,992,871 | | Retained earnings (accumulated deficit) | $ (436,173) | $ (383,696) | | Accumulated other comprehensive income (loss) | $ 3,897 | $ 1,272 | Condensed Consolidated Statements of Cash Flows Summarizes cash flows from operating, investing, and financing activities for the three months ended March 31, 2024 and 2023 | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net cash used in operating activities | $ (171,239) | $ (144,270) | | Net cash used in investing activities | $ (73,636) | $ (94,096) | | Net cash provided by financing activities | $ 83,648 | $ 28,601 | | Cash, cash equivalents, and restricted cash at end of period | $ 891,830 | $ 889,172 | - The $27.0 million net increase in cash used in operating activities was primarily due to an $18.9 million increase in interest payments and a $5.5 million increase in net cash used associated with condominiums, partially offset by a $12.2 million decrease in MPC development expenditures[213] - The $20.5 million decrease in net cash used in investing activities was primarily due to a $13.7 million decrease in cash used in property development and redevelopment expenditures and a $12.3 million increase in proceeds from the sale of Creekside Park Medical Plaza, partially offset by an increase in investments in unconsolidated ventures of $6.4 million[214] - The $55.0 million increase in cash provided by financing activities was primarily due to an increase in proceeds from mortgages, notes, and loans payable of $57.0 million[215] Note 1. Presentation of Financial Statements and Significant Accounting Policies Details financial statement presentation and significant accounting policies, including the planned Seaport Entertainment spinoff - Howard Hughes Holdings Inc. (HHH) announced its intent to form a new division, Seaport Entertainment, which is expected to be spun off as an independent, publicly traded company in 2024, aiming to refine HHH's identity as a pure-play real estate company focused on master planned communities[22][23][149] | Component | March 31, 2024 (thousands) | December 31, 2023 (thousands) | | :------------------------ | :-------------------------- | :-------------------------- | | Straight-line rent receivables | $ 89,761 | $ 87,669 | | Tenant receivables | $ 3,770 | $ 4,780 | | Other receivables | $ 17,586 | $ 22,596 | | Accounts receivable, net | $ 111,117 | $ 115,045 | - The Company consolidates Teravalis, its newest large-scale master planned community in the West Valley of Phoenix, Arizona, as a Variable Interest Entity (VIE) where it holds an 88.0% interest and is considered the primary beneficiary[32] Note 2. Investments in Unconsolidated Ventures Information on equity method investments in unconsolidated ventures, including carrying values and share of earnings | Metric | March 31, 2024 (thousands) | December 31, 2023 (thousands) | Share of Earnings/Dividends (Q1 2024, thousands) | Share of Earnings/Dividends (Q1 2023, thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Carrying Value | $ 213,433 | $ 220,258 | N/A | N/A | | Total Share of Earnings/Dividends | N/A | N/A | $ (19,135) | $ (4,802) | | The Summit (MPC) | $ 43,189 | $ 59,112 | $ (15,923) | $ 4,630 | | Tin Building by Jean-Georges (Seaport) | $ 13,583 | $ 11,658 | $ (9,661) | $ (10,208) | | Floreo (MPC) | $ 57,092 | $ 55,880 | $ 1,212 | $ (522) | - The Company's maximum exposure to loss on its Floreo investment is limited to the $57.1 million aggregate carrying value, as it has not made any other firm commitments to fund amounts on behalf of this VIE, despite providing a collateral maintenance obligation[55] Note 3. Acquisitions and Dispositions Reports on significant property acquisitions and dispositions, including sales of Creekside Park Medical Plaza and other assets - In February 2024, the Company completed the sale of Creekside Park Medical Plaza for $14.0 million, resulting in a gain of $4.8 million[62] - In 2023, the Company acquired the Grogan's Mill Village Center for $5.9 million and completed the sale of Memorial Hermann Medical Office for $9.6 million (gain of $3.2 million), two self-storage facilities for $30.5 million (gain of $16.1 million), and two land parcels in Honolulu for $6.3 million (gain of $4.7 million)[61][63][64] Note 4. Impairment Confirms no impairment charges for long-lived assets or unconsolidated ventures during the reporting periods - No impairment charges were recorded for long-lived assets or investments in unconsolidated ventures during the three months ended March 31, 2024, and 2023[66][68] Note 5. Other Assets and Liabilities Details components of other assets and liabilities, including condominium deposits and construction payables | Component | March 31, 2024 (thousands) | December 31, 2023 (thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Security, escrow, and other deposits | $ 83,708 | $ 81,891 | | Special Improvement District receivable, net | $ 75,447 | $ 74,899 | | Interest rate derivative assets | $ 14,856 | $ 10,318 | | Other assets, net | $ 283,175 | $ 283,047 | | Component | March 31, 2024 (thousands) | December 31, 2023 (thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Condominium deposit liabilities | $ 528,536 | $ 478,870 | | Construction payables | $ 297,086 | $ 257,227 | | Accrued interest | $ 30,305 | $ 54,301 | | Accrued payroll and other employee liabilities | $ 15,491 | $ 33,314 | | Accounts payable and other liabilities | $ 1,108,131 | $ 1,076,040 | Note 6. Mortgages, Notes, and Loans Payable, Net Breakdown of company debt, including fixed and variable-rate components and available undrawn commitments | Debt Type | March 31, 2024 (thousands) | December 31, 2023 (thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Fixed-rate debt | $ 3,597,886 | $ 3,601,121 | | Variable-rate debt | $ 1,840,049 | $ 1,751,489 | | Unamortized deferred financing costs | $ (46,692) | $ (49,990) | | Total mortgages, notes, and loans payable, net | $ 5,391,243 | $ 5,302,620 | - As of March 31, 2024, the Company's secured mortgage loans had $1.0 billion of undrawn lender commitment available to be drawn for property development, subject to certain restrictions[79] - As of March 31, 2024, the Company was in compliance with all property-level debt covenants with the exception of six property-level debt instruments, which resulted in restricted excess net cash flow from the underlying properties[82] Note 7. Fair Value Presents fair value measurements for financial instruments, including derivative assets and debt | Asset | March 31, 2024 (Total, thousands) | Level 1 (thousands) | Level 2 (thousands) | Level 3 (thousands) | | :-------------------------- | :-------------------------------- | :------------------ | :------------------ | :------------------ | | Interest rate derivative assets | $ 14,856 | $ — | $ 14,856 | $ — | | Instrument | March 31, 2024 (Carrying Amount, thousands) | March 31, 2024 (Estimated Fair Value, thousands) | December 31, 2023 (Carrying Amount, thousands) | December 31, 2023 (Estimated Fair Value, thousands) | | :-------------------------- | :------------------------------------------ | :----------------------------------------------- | :------------------------------------------ | :----------------------------------------------- | | Fixed-rate debt | $ 3,597,886 | $ 3,264,288 | $ 3,601,121 | $ 3,294,431 | | Variable-rate debt | $ 1,840,049 | $ 1,840,049 | $ 1,751,489 | $ 1,751,489 | Note 8. Derivative Instruments and Hedging Activities Describes use of interest rate derivatives to manage variable interest rate exposure and their fair values - The Company uses interest rate swaps, collars, and caps to manage its variable interest rate exposure, with $1.8 billion of variable-rate debt outstanding as of March 31, 2024[91][227] | Metric | March 31, 2024 (thousands) | December 31, 2023 (thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Total fair value derivative assets | $ 14,856 | $ 10,318 | - Over the next 12 months, the Company estimates that $4.3 million of net gain will be reclassified to Interest expense from derivatives[95] Note 9. Commitments and Contingencies Outlines legal proceedings, remediation costs, and other commitments like letters of credit and surety bonds - In April 2024, a jury found partially in favor of IMH Columbia, LLC in a lawsuit regarding the Columbia development, awarding $17.0 million in damages, which HHH plans to appeal[101] - The Company incurred an additional $3.0 million charge in the first quarter of 2024 to fund the final remediation expenditures related to window construction defects at Waiea in Ward Village, bringing the total estimated cost to $158.4 million[103] | Metric | March 31, 2024 (thousands) | December 31, 2023 (thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Letters of credit | $ 3,900 | $ 3,900 | | Surety bonds | $ 461,600 | $ 470,400 | Note 10. Income Taxes Details income tax expense (benefit) and effective tax rates for the three months ended March 31, 2024 and 2023 | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Income tax expense (benefit) | $ (17,195) | $ (1,278) | | Income (loss) before income taxes | $ (69,662) | $ (23,905) | | Effective tax rate | 24.7 % | 5.3 % | Note 11. Accumulated Other Comprehensive Income (Loss) Reports the balance and changes in accumulated other comprehensive income (loss) | Metric | March 31, 2024 (thousands) | December 31, 2023 (thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Balance at period end | $ 3,897 | $ 1,272 | | Net current-period other comprehensive Income (loss) | $ 2,625 | $ (5,330) (Q1 2023) | Note 12. Earnings Per Share Presents basic and diluted earnings per share, net income (loss), and weighted-average shares outstanding | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) attributable to common stockholders | $ (52,477) | $ (22,745) | | Weighted-average common shares outstanding - basic | 49,663 | 49,455 | | Basic income (loss) per share | $ (1.06) | $ (0.46) | | Diluted income (loss) per share | $ (1.06) | $ (0.46) | - The Company repurchased 13,234 shares in Q1 2024, primarily related to stock received for the payment of withholding taxes due on employee share issuances under share-based compensation plans[237] Note 13. Revenues Breaks down total revenues by source and segment, including condominium, land sales, and rental revenue | Revenue Source | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | Change (thousands) | YoY Change | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :----------------- | :--------- | | Condominium rights and unit sales | $ 23 | $ 6,087 | $ (6,064) | -99.6% | | Master Planned Communities land sales | $ 32,415 | $ 59,361 | $ (26,946) | -45.4% | | Rental revenue | $ 107,751 | $ 97,864 | $ 9,887 | 10.1% | | Builder price participation | $ 12,566 | $ 14,009 | $ (1,443) | -10.3% | | Total revenues | $ 171,138 | $ 196,289 | $ (25,151) | -12.8% | | Segment | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | Change (thousands) | YoY Change | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :----------------- | :--------- | | Operating Assets revenues | $ 110,152 | $ 100,925 | $ 9,227 | 9.1% | | Master Planned Communities revenues | $ 48,875 | $ 77,013 | $ (28,138) | -36.5% | | Seaport revenues | $ 11,502 | $ 11,897 | $ (395) | -3.3% | | Strategic Developments revenues | $ 593 | $ 6,440 | $ (5,847) | -90.8% | - The aggregate amount of the transaction price allocated to the Company's remaining unsatisfied performance obligations as of March 31, 2024, is $3.5 billion, expected to be recognized as revenue over the next three years and thereafter[125] Note 14. Leases Provides details on operating lease right-of-use assets, obligations, and future minimum rent commitments | Metric | March 31, 2024 (thousands) | December 31, 2023 (thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease right-of-use assets | $ 45,649 | $ 44,897 | | Operating lease obligations | $ 53,065 | $ 51,584 | | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Operating lease cost | $ 1,729 | $ 1,708 | | Variable lease cost | $ 663 | $ 392 | | Total lease cost | $ 2,392 | $ 2,100 | | Period | Total Minimum Rent (thousands) | | :---------------- | :----------------------------- | | Remainder of 2024 | $ 191,134 | | 2025 | $ 247,340 | | 2026 | $ 233,614 | | 2027 | $ 222,423 | | 2028 | $ 200,565 | | Thereafter | $ 848,934 | | Total | $ 1,944,010 | Note 15. Segments Presents financial information by business segment: Operating Assets, MPC, Seaport, and Strategic Developments - The Company operates through four business segments: Operating Assets, Master Planned Communities (MPC), Seaport, and Strategic Developments, each managed separately due to differing operating strategies and expertise[133][134] | Segment | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Operating Assets Segment EBT | $ (7,856) | $ (6,300) | | MPC Segment EBT | $ 24,251 | $ 62,372 | | Seaport Segment EBT | $ (28,032) | $ (27,179) | | Strategic Developments Segment EBT | $ (5,414) | $ (3,400) | | Total Segment EBT | $ (17,051) | $ 25,493 | | Segment | March 31, 2024 (thousands) | December 31, 2023 (thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Operating Assets | $ 3,561,321 | $ 3,577,694 | | Master Planned Communities | $ 3,435,883 | $ 3,358,821 | | Seaport | $ 486,713 | $ 485,898 | | Strategic Developments | $ 1,840,743 | $ 1,638,955 | | Total segment assets | $ 9,324,660 | $ 9,061,368 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis of financial condition, operations, and liquidity for Q1 2024, including segment results Forward-Looking Information Discusses forward-looking statements, key risks, and uncertainties affecting future operations and financial results - The report contains forward-looking statements regarding future operations, including accelerated growth in Master Planned Communities (MPC) assets, expected performance of properties, capital requirements, and the potential spinoff of Seaport Entertainment[138][140] - Key risks and uncertainties include macroeconomic conditions (e.g., capital market volatility, recession, inflation), inability to obtain operating and development capital, rising interest rates, competition, extreme weather conditions, and challenges in obtaining governmental permits and regulatory approvals for property development[140][144] Overview Explains HHH's business model and the strategic rationale behind the planned Seaport Entertainment spinoff - HHH's business model involves a unique value-creation cycle where Master Planned Community (MPC) land sales fund strategic developments, which then transition to operating assets, increasing recurring Net Operating Income (NOI) and further supporting MPC land sales[146] - The planned separation of Seaport Entertainment from Howard Hughes in 2024 aims to refine HHH's identity as a pure-play real estate company focused solely on its portfolio of acclaimed master planned communities[149] Results of Operations Analyzes the company's financial performance, including net income (loss) and segment-specific results - Net income attributable to common stockholders decreased to a net loss of $52.5 million for Q1 2024, compared to a net loss of $22.7 million for the prior-year period[152] - The decrease in net income was primarily attributed to reduced Master Planned Communities (MPC) commercial land sales, lower equity earnings from The Summit, and increased General & Administrative (G&A) expenses associated with the anticipated spinoff of Seaport Entertainment[152] Operating Assets Details revenues, expenses, and Net Operating Income (NOI) for the Operating Assets segment | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total revenues | $ 110,152 | $ 100,925 | | Total operating expenses | $ (51,395) | $ (47,599) | | Segment EBT | $ (7,856) | $ (6,300) | | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Operating Assets NOI | $ 58,264 | $ 54,310 | - Office Net Operating Income (NOI) increased $2.8 million primarily due to strong leasing activity and abatement expirations at various properties in The Woodlands and Summerlin. Multi-family NOI increased $1.1 million primarily due to continued lease-up at newer properties, Marlow in Downtown Columbia and Starling at Bridgeland[160] Master Planned Communities Analyzes revenues, equity earnings, and Net Contribution for the Master Planned Communities segment | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total revenues | $ 48,875 | $ 77,013 | | Equity in earnings (losses) from unconsolidated ventures | $ (14,711) | $ 4,108 | | Segment EBT | $ 24,251 | $ 62,372 | - The decrease in MPC EBT was primarily due to a $20.6 million decrease in equity earnings at The Summit (due to low remaining inventory) and a $12.7 million decrease in MPC sales, net of MPC cost of sales at Bridgeland (due to fewer commercial acres sold)[166][167] | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | MPC Net Contribution | $ (24,874) | $ (7,607) | - MPC Net Contribution decreased by $17.3 million primarily due to lower MPC land sales and MUD and SID bond collections, net, partially offset by a decrease in MPC development expenditures[173] Seaport Examines the Seaport segment's revenues, expenses, and NOI, noting its unique business risks - The Seaport segment is characterized by a greater range of possible outcomes due to its nature as a non-stabilized operating asset, development project, and operating business, influenced by seasonality, potential sponsorship and event revenue, and business operating risks from various start-up businesses[178] | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total revenues | $ 11,502 | $ 11,897 | | Segment EBT | $ (28,032) | $ (27,179) | | Category | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Landlord Operations | $ (4,853) | $ (4,290) | | Managed Businesses | $ (3,142) | $ (2,536) | | Tin Building | $ 2,258 | $ 2,415 | | Events and Sponsorships | $ (2,926) | $ (1,202) | | Seaport NOI | $ (8,605) | $ (5,585) | - The decrease in Seaport NOI was primarily due to increased costs associated with the planned spinoff of Seaport Entertainment, lower sponsorship revenue, and reduced restaurant revenues across the portfolio related to poor weather conditions[191] Strategic Developments Reports on condominium sales, costs, and pre-sales activity within the Strategic Developments segment | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Condominium rights and unit sales | $ 23 | $ 6,087 | | Condominium rights and unit cost of sales | $ (3,861) | $ (4,536) | | Segment EBT | $ (5,414) | $ (3,400) | - Condominium sales, net of cost of sales, decreased by $2.4 million due to no condominium closings during Q1 2024, compared to one unit at Kō'ula and four units at 'A'ali'i during the prior-year period[198] - A $3.0 million charge was incurred in Q1 2024 to fund the final remediation expenditures related to window construction defects at Waiea in Ward Village[198] - The Company launched public pre-sales for The Launiu, its eleventh condominium project at Ward Village, in February 2024, with 182 units (37.5% of available units) pre-sold as of March 31, 2024[152][203] - Public pre-sales for The Ritz-Carlton Residences in The Woodlands launched in late March 2024, with 56 units (50.5% of available units) pre-sold as of March 31, 2024[152][204] - As of March 31, 2024, Victoria Place is 100% pre-sold (349 units), The Park Ward Village is 94.9% pre-sold (517 of 545 units), Ulana Ward Village is 100% pre-sold (696 units), and Kalae is 90.0% pre-sold (296 of 329 units)[199][200][201][202] Corporate Income, Expenses, and Other Items Covers general and administrative expenses, corporate interest, and income tax impacts | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | General and administrative | $ (30,902) | $ (23,553) | | Corporate interest expense, net | $ (17,582) | $ (24,195) | | Income tax (expense) benefit | $ 17,195 | $ 1,278 | | Total Corporate income, expenses, and other items | $ (35,416) | $ (48,120) | - General and administrative expenses increased $7.3 million, primarily attributable to increased legal and consulting fees related to the planned spinoff of Seaport Entertainment[209] - Corporate interest expense, net, decreased $6.6 million primarily due to higher interest income driven by higher interest rates and higher average account balances, and due to the change in value related to derivative instruments[209] Liquidity and Capital Resources Assesses the company's cash position, debt, and expected sources and uses of capital - The Company maintains a strong liquidity position with $462.7 million of cash and cash equivalents and $1.0 billion of undrawn lender commitment available for property development as of March 31, 2024[152][210] | Metric | Three Months Ended March 31, 2024 (thousands) | Three Months Ended March 31, 2023 (thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Cash provided by (used in) operating activities | $ (171,239) | $ (144,270) | | Cash provided by (used in) investing activities | $ (73,636) | $ (94,096) | | Cash provided by (used in) financing activities | $ 83,648 | $ 28,601 | - Short-term liquidity is expected from Master Planned Communities (MPC) land sales, condominium closings, cash generated from operating assets, first mortgage financings, and deposits from condominium sales[217] | Obligation | Remaining in 2024 (thousands) | 2025 (thousands) | 2026 (thousands) | 2027 (thousands) | 2028 (thousands) | Thereafter (thousands) | Total (thousands) | | :------------------------------------ | :----------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | :--------------------- | :---------------- | | Mortgages, notes, and loans payable | $ 257,027 | $ 547,809 | $ 988,528 | $ 302,229 | $ 835,522 | $ 2,506,820 | $ 5,437,935 | | Interest payments | $ 230,416 | $ 264,470 | $ 209,688 | $ 157,034 | $ 131,845 | $ 279,899 | $ 1,273,352 | | Ground lease commitments | $ 1,944 | $ 2,937 | $ 2,992 | $ 3,049 | $ 3,108 | $ 240,242 | $ 254,272 | | Total | $ 489,387 | $ 815,216 | $ 1,201,208 | $ 462,312 | $ 970,475 | $ 3,026,961 | $ 6,965,559 | - As of March 31, 2024, the Company had $5.4 billion of outstanding debt, and its proportionate share of the debt of its unconsolidated ventures totaled $144.2 million[221] Item 3. Quantitative and Qualitative Disclosures about Market Risk Discusses market risks, primarily interest rate risk from variable-rate financings, and derivative use to manage exposure - The Company is subject to interest rate risk from its variable-rate financings and uses derivative instruments, including interest rate swaps, caps, and collars, to manage this exposure[226][227] - As of March 31, 2024, a 1.00% increase in floating interest rates would increase annual interest costs by approximately $11.4 million[228] Item 4. Controls and Procedures Confirms effective disclosure controls and procedures as of March 31, 2024, with no material changes to internal controls - The Company's disclosure controls and procedures were evaluated and concluded to be effective as of March 31, 2024[230] - There were no changes to the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting during the period[231] PART II - OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings Refers to Note 9 for detailed information on legal proceedings and related commitments - Legal proceedings are detailed in Note 9 - Commitments and Contingencies, which includes ongoing litigation related to the Columbia development and remediation costs for Waiea construction defects[234] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the 2023 Annual Report on Form 10-K - There are no material changes to the risk factors previously disclosed in the Company's 2023 Annual Report[235] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports Q1 2024 common stock repurchases, mainly for employee share taxes, and remaining repurchase authorization | Period | Total shares purchased | Average price paid per share | Approximate dollar value of shares that may yet be purchased under the plans or programs (thousands) | | :-------------------- | :--------------------- | :--------------------------- | :----------------------------------------------------------------------------------------------- | | January 1 - 31, 2024 | 2,092 | $ 80.08 | $ 15,009.6 | | February 1 - 29, 2024 | 11,119 | $ 78.79 | $ 15,009.6 | | March 1 - 31, 2024 | 23 | $ 76.60 | $ 15,009.6 | | Total | 13,234 | $ 78.99 | N/A | - All 13,234 shares repurchased during the first quarter of 2024 were related to stock received by the Company for the payment of withholding taxes due on employee share issuances under share-based compensation plans[237] Item 3. Default Upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported[238] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the Company[239] Item 5. Other Information William A. Ackman and Pershing Square Funds terminated their Rule 10b5-1 Purchase Plan on January 4, 2024 - William A. Ackman, Chairman of the Board, and the affiliated Pershing Square Funds terminated their Rule 10b5-1 Purchase Plan on January 4, 2024, which was intended to purchase additional shares to bring their beneficial ownership to approximately 39%[241] Item 6. Exhibits Lists all exhibits filed with the Quarterly Report, including certifications and Inline XBRL documents - The report includes certifications (31.1, 31.2, 32.1) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104) as exhibits[244]