Howard Hughes (HHH) - 2024 Q1 - Quarterly Results

First Quarter 2024 Results Overview Howard Hughes Holdings Inc. reported strong Q1 2024 momentum in core businesses, driven by accelerated new home sales and condominium demand, alongside 7% growth in Operating Assets NOI First Quarter 2024 Highlights and CEO Commentary The company reported strong Q1 2024 performance with accelerated new home sales, robust condo demand, and 7% Operating Assets NOI growth, while progressing on the Seaport Entertainment spinoff Q1 2024 Key Performance Indicators | Metric | Value/Status | Change/Note | | :--- | :--- | :--- | | Net Loss per Diluted Share | $(1.06) | Compared to $(0.46) in prior-year period | | Operating Assets NOI | $63 million | +7% Year-over-Year | | New Home Sales | 654 units | +24% vs Q4 2023; highest in three years | | Condo Sales (Contracted) | 196 units | Achieved $6 billion in total sales since Ward Village's inception | | Full-Year 2024 Guidance | Unchanged | MPC EBT ~$300M, Op. Asset NOI ~$250M, Condo Sales ~$700M | - New home sales climbed to 654, the highest quarterly total in three years, signaling strong future demand for residential land[4] - The company launched pre-sales for The Ritz-Carlton Residences in The Woodlands, pre-selling over 50% of inventory for approximately $250 million in future revenue within one week[5][6] - Significant progress has been made on the anticipated spinoff of Seaport Entertainment, which is expected to be finalized in the coming months, allowing HHH to operate as a pure-play real estate company[7] Financial Highlights This section details the company's Q1 2024 financial performance across its segments, including net loss, operating assets, master planned communities, strategic developments, and Seaport Total Company The company reported a Q1 2024 net loss of $52.5 million or $(1.06) per diluted share, primarily due to reduced commercial land sales and increased G&A, while maintaining strong liquidity Q1 2024 vs Q1 2023 Net Loss | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Loss | $52.5 million | $22.7 million | | Net Loss per Diluted Share | $(1.06) | $(0.46) | - The company maintains a strong liquidity position with $462.7 million of cash and cash equivalents and $1.0 billion of undrawn lender commitment[10] Operating Assets Total Operating Assets NOI, including unconsolidated ventures, increased 7% year-over-year to $63.5 million, driven by strong performance in Office and Multi-family segments Operating Assets NOI Breakdown (Q1 2024 vs Q1 2023) | Category | Q1 2024 NOI | YoY Change | Key Drivers | | :--- | :--- | :--- | :--- | | Total Operating Assets | $63.5 million | +7% | Office and Multi-family performance | | Office | $30.6 million | +10% | Strong leasing, abatement expirations | | Multi-family | $13.8 million | +9% | Strong lease-up and 4% rent growth | - The new 263-unit single-family build-to-rent community, Wingspan, is leasing strongly since its late 2023 opening, with 28% of all units leased by quarter-end[10] Master Planned Communities (MPC) MPC EBT for Q1 2024 decreased 61% to $24.3 million due to land sale timing, yet new home sales rose 18% to 654 units, supporting the full-year EBT outlook of approximately $300 million - MPC EBT declined 61% to $24.3 million compared to $62.4 million in the prior-year period, mainly due to the timing of land sales[10] - New home sales in HHH's communities totaled 654 units, an 18% increase compared to the prior-year quarter and a 24% increase from Q4 2023[11] - In Arizona, the first 52 acres of residential land in Teravalis were sold at a strong average price of $758,000 per acre, contributing $1.2 million to MPC equity earnings[11] Strategic Developments The Strategic Developments segment experienced exceptional pre-sale activity, with 182 units contracted for $299.0 million at The Launiu and 56 units pre-sold at The Ritz-Carlton Residences, The Woodlands - Pre-sales for The Launiu in Ward Village launched in February, with 182 units (38% of the tower) contracted by quarter-end, representing $299.0 million in future revenue[11] - The Ritz-Carlton Residences in The Woodlands pre-sold 56 units, or 50% of available residences, at prices that exceeded expectations[11] - The company incurred a $3.0 million charge for remediation at Waiea in Ward Village but is vigorously pursuing recovery of costs from the general contractor[11] Seaport Seaport revenue declined 3% to $11.5 million, resulting in a total NOI loss of $17.5 million, primarily due to weather impacts and spinoff-related costs, despite improved equity losses from Tin Building Seaport Financial Performance (Q1 2024) | Metric | Q1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | $11.5 million | -3% | | Negative NOI | $(8.6) million | -$3.0 million | | Total Negative NOI (incl. ventures) | $(17.5) million | -$2.3 million | | Tin Building Equity Losses | $(8.7) million | +$0.4 million improvement | - The increased NOI loss was primarily due to sales mix and increased costs associated with the stand-up of Seaport Entertainment in anticipation of the spinoff[12] Full Year 2024 Guidance This section reaffirms the company's full-year 2024 guidance, including projections for MPC EBT, Operating Assets NOI, and condo sales revenue Guidance Summary The company reaffirmed its full-year 2024 guidance, projecting MPC EBT of approximately $300 million, Operating Assets NOI around $250 million, and condo sales revenue between $675 million and $725 million Full-Year 2024 Guidance Mid-Points/Ranges | Metric | Projected Value | Notes | | :--- | :--- | :--- | | MPC EBT | ~$300 million | Expected to modestly decline 10-15% YoY | | Operating Assets NOI | ~$250 million | Expected to be up 1% to 4% YoY | | Condo Sales Revenues | $675M - $725M | Gross margins of 28% to 30% | | Cash G&A | $80M - $90M | Excludes ~$25M in spinoff costs | - Projected condo sales are driven by the closing of units at Victoria Place, which is 100% pre-sold and expected to be completed late in Q4 2024[16] - Operating Assets NOI guidance includes approximately $5.0 million from the Las Vegas Aviators and Ballpark, which are expected to be part of the Seaport Entertainment spinoff[16] Financial Statements & Reconciliations This section provides consolidated financial statements and reconciliations of non-GAAP measures, offering a comprehensive view of the company's financial position and performance Key Metrics Summary This section summarizes key performance metrics for Q1 2024, highlighting a 7% increase in Total Operating Assets NOI, a 61% decrease in MPC EBT, and a 15% increase in Total Seaport NOI loss Key Metrics Summary (Three Months Ended March 31) | Metric ($ in thousands) | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Operating Assets NOI | $63,486 | $59,170 | 7% | | MPC EBT | $24,251 | $62,372 | (61)% | | Total Seaport NOI | $(17,507) | $(15,176) | (15)% | | Acres Sold - Commercial | 4 | 109 | (97)% | | Price Per Acre - Residential | $600 | $836 | (28)% | Consolidated Statements of Operations For Q1 2024, total revenues were $171.1 million, with the net loss attributable to common stockholders widening to $52.5 million, or $(1.06) per share Consolidated Statements of Operations (Unaudited, in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenues | $171,138 | $196,289 | | Total expenses | $193,550 | $191,058 | | Operating income (loss) | $(16,727) | $14,942 | | Net income (loss) | $(52,467) | $(22,627) | | Diluted income (loss) per share | $(1.06) | $(0.46) | Consolidated Balance Sheets As of March 31, 2024, total assets were $9.64 billion, total liabilities $6.62 billion, and total equity $3.01 billion, reflecting slight changes from year-end 2023 Consolidated Balance Sheet Highlights (Unaudited, in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total assets | $9,635,891 | $9,577,003 | | Cash and cash equivalents | $462,700 | $631,548 | | Net investment in real estate | $7,360,632 | $7,167,254 | | Total liabilities | $6,623,136 | $6,518,079 | | Mortgages, notes, and loans payable, net | $5,391,243 | $5,302,620 | | Total equity | $3,012,755 | $3,058,924 | Segment Earnings Before Tax (EBT) This section details Q1 2024 EBT for each segment, with Master Planned Communities reporting $24.3 million in positive EBT, while Operating Assets, Seaport, and Strategic Developments reported losses Segment EBT (Q1 2024 vs Q1 2023, in thousands) | Segment | Q1 2024 EBT | Q1 2023 EBT | | :--- | :--- | :--- | | Operating Assets | $(7,856) | $(6,300) | | Master Planned Communities (MPC) | $24,251 | $62,372 | | Seaport | $(28,032) | $(27,179) | | Strategic Developments | $(5,414) | $(3,400) | Reconciliation of Non-GAAP Measures This section provides reconciliations of GAAP to non-GAAP measures, including Net Operating Income (NOI), Same Store NOI, and Cash G&A, to enhance understanding of operational results - The company uses non-GAAP measures like Net Operating Income (NOI) to provide a performance measure that reflects revenues and expenses directly associated with owning and operating real estate properties[33][34] Net Operating Income (NOI) Total Operating Assets NOI for Q1 2024 increased to $63.5 million, while Total Seaport NOI showed a larger loss of $17.5 million Total Operating Assets NOI Reconciliation (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Operating Assets segment EBT | $(7,856) | $(6,300) | | Operating Assets NOI | $58,264 | $54,310 | | Total Operating Assets NOI | $63,486 | $59,170 | Total Seaport NOI Reconciliation (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Seaport segment EBT | $(28,032) | $(27,179) | | Seaport NOI | $(8,605) | $(5,585) | | Total Seaport NOI | $(17,507) | $(15,176) | Same Store NOI - Operating Assets Segment Total Same Store NOI for Operating Assets increased by $4.7 million to $63.9 million in Q1 2024, driven by growth in Office and Multi-family NOI Same Store NOI by Property Type (in thousands) | Property Type | Q1 2024 | Q1 2023 | $ Change | | :--- | :--- | :--- | :--- | | Total Same Store Office | $30,599 | $27,785 | $2,814 | | Total Same Store Retail | $14,572 | $14,733 | $(161) | | Total Same Store Multi-family | $16,117 | $14,444 | $1,673 | | Total Same Store NOI | $63,886 | $59,188 | $4,698 | Cash G&A Cash G&A for Q1 2024 significantly increased to $29.1 million, primarily due to $9.2 million in expenses related to the Seaport Entertainment spinoff Cash G&A Reconciliation (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | General and administrative (G&A) | $30,902 | $23,553 | | Less: Non-cash stock compensation | $(1,841) | $(3,443) | | Cash G&A | $29,061 | $20,110 | - G&A expense for Q1 2024 includes $9.2 million of expenses associated with the planned spinoff of Seaport Entertainment[44]