PR Newswire | Aug 3, 2020 04:29PM EDT

08/03 15:28 CDT

The Howard Hughes Corporation(r) Reports Second Quarter 2020 ResultsContinued Strong Performance Across Portfolio of Master Planned Communities Reaffirms Company's Strategic Transformation Plan DALLAS, Aug. 3, 2020

DALLAS, Aug. 3, 2020 /PRNewswire/ -- The Howard Hughes Corporation(r) (NYSE: HHC) (the "Company," "HHC" or "we") announced today operating results for the second quarter ended June 30, 2020. The financial statements, exhibits and reconciliations of non-GAAP measures in the attached Appendix and the Supplemental Information, as available through the Investors section of our website, provide further detail of these results.

"The Howard Hughes Corporation remains unwavering in our commitment to the safety and security of our colleagues, tenants, customers and residents, and the long-term success of our communities," said Paul H. Layne, Chief Executive Officer.

"During the second quarter, we saw remarkable performance in our MPC segment, where both land sales and new home sales-a leading indicator for future land sales-remained strong. These results are comparable to our performance in 2019 and are in keeping with our projections pre-COVID. We believe that this continued strength is a testament to the exceptional quality of life that residents are seeking-now more than ever-including walkable communities in beautiful, natural settings with urban conveniences, outstanding amenities, low density, and expansive open green space with hiking and biking trails.

"As we continue to focus on making the best long-term value decisions for our communities and our shareholders, we have positioned ourselves to be prepared for all eventualities with our first-quarter equity raise and increased liquidity. We ended the second quarter with over $930 million of cash on our balance sheet and only $315 million of net remaining equity commitments to our existing development projects.

"Our operating asset segment performance was bifurcated between the continued strength in our office and, to a lesser extent, our multifamily assets and the COVID-related disruption experienced by our retail and hospitality assets, as well as baseball . Despite its quarter-over-quarter decline, we remain cautiously optimistic about the segment's recovery potential and we have seen reopenings in hospitality and a meaningful pick-up in our retail collections since April.

"At Ward Village in Hawai'i, we saw a continuation of the strong first-quarter results as we continued to execute on sales, most notably at Victoria Place where we are approximately 69.3% pre-sold as of July 28, 2020. Finally, in our Seaport District segment, while construction on the Tin Building resumed in May, our assets in the Seaport District remain closed and we anticipate a gradual reopening of a few, select businesses, including The Rooftop at Pier 17, over the course of the next few months.

"We made continued progress in the execution of our Transformation Plan by continuing to pursue non-core asset sales and by executing on additional reductions of our general and administrative expenses. Importantly, we have also restarted horizontal development in our MPCs to prepare lots for sale to keep pace with builder demand given the strong underlying home sales in our communities. Finally, we have commenced modest investments in pre-development work for the next potential vertical development opportunities in our core MPCs, for when demand returns. While we do not anticipate any new construction starts in the coming quarter, we want to be prepared to be able to move forward the moment that demand materializes.

"Despite recent positive macroeconomic data and the strength of home sales in our award-winning master planned communities, we still face much uncertainty in our economic recovery. I want to thank our employees across the country for their dedication during the most difficult of circumstances over the past several months. We are dedicated to leveraging our resources to help our local economies and our stakeholders recover from the impact of the ongoing COVID-19 crisis."

Second Quarter 2020 Highlights

* Net income attributable to common stockholders decreased to a loss of $34.1 million, or $0.61 per diluted share, for the three months ended June 30, 2020, compared to income of $13.5 million, or $0.31 per diluted share, for the three months ended June 30, 2019, primarily due to no closings on condominium units in 2020 coupled with the temporary closure of hospitality properties and cancellation of the Las Vegas Aviators 2020 baseball season as a result of the COVID-19 pandemic. We closed a portion of Ae'o in early 2019, with no new condominium towers delivered in 2020. * MPC segment earnings before tax ("EBT") decreased by $6.5 million to $42.2 million for the three months ended June 30, 2020, compared to the three months ended June 30, 2019, primarily driven by lower Equity in (losses) earnings from real estate and other affiliates at The Summit. The decrease was partially offset by an increase in land sales in The Woodlands due to an increase in sales in a high-end, exclusive section of The Woodlands community that generates significantly higher value per acre. Bridgeland's land sales, while flat for the three months ended June 30, 2020 compared to the prior period, continued to display strong performance despite the effects of COVID-19. * We continue to maintain a strong liquidity position with $930.6 million cash as of June 30, 2020. * Extended the existing Downtown Summerlin loan and the bridge loan for The Woodlands Towers at the Waterway and The Woodlands Warehouse. * For the three months ended June 30, 2020, we collected 95.4% of our office portfolio billings, 96.6% of our multi-family portfolio billings, 49.7% of our retail portfolio billings and 84.5% of our other portfolio billings. * Total Net operating income ("NOI")(1) from the Operating Assets segment, including our share of NOI from equity investments, decreased by 32.4% to $40.8 million for the three months ended June 30, 2020, compared to $60.4 million for the prior year period. The decrease in NOI was primarily due to the temporary closure of hospitality and retail properties, partially offset by an increase in NOI from the recent acquisition of The Woodlands Towers at the Waterway. * Progressed public pre-sales of our newest project at Ward Village(r), Victoria Place(r), where as of June 30, 2020, we have executed contracts for 236 condominium units, or 67.6% of total units. Across all of Ward Village(r), potential future revenue associated with total contracted units is $1.48 billion. * Seaport District NOI remained relatively flat at a net operating loss of $3.4 million for the three months ended June 30, 2020, compared to the prior year period, primarily due to business closures and cancellation of events related to the COVID-19 pandemic, the effects of which were mitigated by cost management initiatives.

COVID-19 Impact - For the month ended July 31, 2020

* The health and safety of our employees, tenants and customers remains our highest priority. Our Crisis Committee task force continues to prepare buildings for re-occupancy and has implemented a number of processes and communications to provide a safer environment at our properties. * As of July 28, 2020, we collected 96.1% of our Office portfolio billings, 98.5% of our Multi-family portfolio billings, 64.1% of our Retail portfolio billings and 90.2% of our Other portfolio billings in July. * Among our hospitality properties, The Woodlands Resort and Embassy Suites reopened during the quarter, and The Westin at The Woodlands reopened on July 1, 2020. * Our assets in the Seaport District remain closed and we anticipate a gradual reopening of a few, select businesses, including The Rooftop at Pier 17, over the course of the next few months. * At Ward Village, we contracted to sell six additional condominiums at Victoria Place in July 2020, bringing the total executed contracts to 242 condominium units, or 69.3% of total units, as of July 28, 2020. * Through our HHCares program, we made additional contributions to local non-profit organizations that were most impacted by COVID-19 and expressed gratitude to those on the front line by participating in the national Light it Blue campaign as well as giving gifts of appreciation to those serving in the community. We continued to leverage our owned restaurants and partner with our grocery and restaurant tenants to provide food to local hospitals, first responders and displaced hospitality employees.

We are primarily focused on creating shareholder value by increasing our per share net asset value. Often, the nature of our business results in short-term volatility in our net income due to the timing of MPC land sales, recognition of condominium revenue and operating business pre-opening expenses, and, as such, we believe the following metrics summarized below are most useful in tracking our progress towards net asset value creation.

Six Months Ended Three Months Ended June 30, June 30,

($ in thousands) 2020 2019 Change % Change 2020 2019 Change % Change

Operating Assets NOI ^ (1)

Office $ 62,241 $ 39,166 $23,075 58.9 % $ 27,804 $ 20,204 $ 7,600 38 %

Retail 23,089 32,310 (9,221) (28.5) % 8,599 16,065 (7,466) (46) %

Multi-family 8,362 9,187 (825) (9.0) % 3,815 4,826 (1,011) (21) %

Hospitality 2,537 17,389 (14,852) (85.4) % (1,844) 9,531 (11,375) (119) %

Other 674 7,006 (6,332) (90.4) % 623 8,079 (7,456) (92) %

Company's share NOI (a) 7,797 6,777 1,020 15.1 % 1,836 1,688 148 9 %

Total Operating Assets NOI (b) $ 104,700 $ 111,835 $ (7,135) (6.4) % $ 40,833 $ 60,393 $ (19,560) (32) %

Projected stabilized NOI $ 362.3 $ 317.1 $ 45.2 14.3 %Operating Assets ($ in millions)

MPC

Acres Sold - Residential 148 ac. 190 ac. (42) ac. (22.3) % 91 ac. 112 ac. (21) ac. (19) %

Acres Sold - Commercial 16 ac. - ac. 16 ac. - % - ac. - ac. - ac. 100 %

Price Per Acre - Residential $ 589 $ 532 $ 57 10.6 % $ 630 $ 528 $ 102 19 %

Price Per Acre - Commercial $ 131 $ - $ 131 - % $ - $ - $ - 100 %

MPC EBT $ 86,308 $ 87,759 $ (1,451) (1.7) % $ 42,187 $ 48,714 $ (6,527) (13) %

Seaport District NOI ^(1)

Historic District & Pier 17 - $ (3,472) $ (3,002) $ (470) (15.7) % $ (1,611) $ (1,284) $ (327) (25) %Landlord

Multi-family 214 191 23 12.0 % 110 110 - - %

Hospitality (12) 41 (53) (129) % (12) 26 (38) (146) %

Historic District & Pier 17 - (3,336) (3,541) 205 5.8 % (1,256) (888) (368) (41) %Managed Businesses

Events, Sponsorships & (724) (561) (163) (29.1) % (671) (851) 180 21 %Catering Business

Company's share NOI (a) (681) (237) (444) (187.3) % (305) (42) (263) (626) %

Total Seaport District NOI $ (8,011) $ (7,109) $ (902) 12.7 % $ (3,745) $ (2,929) $ (816) 28 %

Strategic Developments

Condominium units contracted to 16 27 (11) (40.7) % 2 11 (9) (82) %sell (c)





(a) Includes Company's share of NOI from non-consolidated assets

(b) Excludes properties sold or in redevelopment

Includes units at our buildings that are open or under construction as of (c) June 30, 2020. Excludes two purchaser defaults at K?'ula in the second quarter of 2020.



Financial Data

^(1)See the accompanying appendix for a reconciliation of GAAP to non-GAAP financial measures and a statement indicating why management believes the non-GAAP financial measure provides useful information for investors.

About The Howard Hughes Corporation(r)

The Howard Hughes Corporation owns, manages and develops commercial, residential and mixed-use real estate throughout the U.S. Its award-winning assets include the country's preeminent portfolio of master planned communities, as well as operating properties and development opportunities including: the Seaport District in New York; Columbia, Maryland; The Woodlands(r), The Woodlands Hills(r), and Bridgeland(r) in the Greater Houston, Texas area; Summerlin(r), Las Vegas; and Ward Village(r) in Honolulu, Hawai'i. The Howard Hughes Corporation's portfolio is strategically positioned to meet and accelerate development based on market demand, resulting in one of the strongest real estate platforms in the country. Dedicated to innovative place making, the Company is recognized for its ongoing commitment to design excellence and to the cultural life of its communities. The Howard Hughes Corporation is traded on the New York Stock Exchange as HHC. For additional information visit www.howardhughes.com.

The Howard Hughes Corporation has partnered with Say, the fintech startup reimagining shareholder communications, to allow investors to submit and upvote questions they would like to see addressed on the Company's second quarter earnings call. Say verifies all shareholder positions and provides permission to participate on the August 4, 2020 call, during which the Company's leadership will be answering top questions. Utilizing the Say platform, The Howard Hughes Corporation elevates its capabilities for responding to Company shareholders, making its investor relations Q&A more transparent and engaging.

The Howard Hughes Corporation will host its investor conference call on Tuesday, August 4, 2020, at 9:00 a.m Central Standard Time (10:00 a.m. Eastern Standard Time) to discuss second quarter 2020 results. To participate, please dial 1-877-883-0383 within the U.S., 1-877-885-0477 within Canada, or 1-412-902-6506 when dialing internationally. All participants should dial in at least five minutes prior to the scheduled start time, using 1867353 as the passcode. In addition to dial-in options, institutional and retail shareholders can participate by going to app.saytechnologies.com/howardhughes. Shareholders can email hello@saytechnologies.com for any support inquiries.

Safe Harbor Statement

We may make forward-looking statements in this press release and in other reports and presentations that we file or furnish with the Securities and Exchange Commission. In addition, our management may make forward-looking statements orally to analysts, investors, creditors, the media and others. Forward-looking statements include:

* the impact of COVID-19, including the recent surge of COVID-19 cases in regions where we operate, on our business and numerous governmental restrictions and other orders instituted in response to the COVID-19 pandemic on our business; * announcement of certain changes, which we refer to as our "Transformation Plan", including new executive leadership, reduction in our overhead expenses, the proposed sale of our non-core assets and accelerated growth in our core MPC assets; * expected performance of our stabilized, income-producing properties and the performance and stabilization timing of properties that we have recently placed into service or are under construction; * capital required for our operations and development opportunities for the properties in our Operating Assets, Seaport District and Strategic Developments segments; * expected commencement and completion for property developments and timing of sales or rentals of certain properties; * the impact of technology on our operations and business; * expected performance of our MPC segment; * forecasts of our future economic performance; and * future liquidity, finance opportunities, development opportunities, development spending and management plans.

These statements involve known and unknown risks, uncertainties and other factors that may have a material impact on any future results, performance and achievements expressed or implied by such forward-looking statements. These risk factors are described in our Annual Report on Form 10-K which has been filed with the Securities and Exchange Commission ("SEC") on February 27, 2020, the Final Prospectus Supplement which has been filed with the SEC on March 30, 2020 and the Quarterly Report on Form 10-Q which has been filed with the SEC on May 11, 2020. Any factor could, by itself, or together with one or more other factors, adversely affect our business, results of operations or financial condition. There may be other factors currently unknown to us that we have not described in our Annual Report that could cause results to differ from our expectations. These forward-looking statements present our estimates and assumptions as of the date of this press release. Except as may be required by law, we undertake no obligation to modify or revise any forward-looking statements to reflect events or circumstances occurring after the date of this release.

Our Financial Presentation

As discussed throughout this release, we use certain non-GAAP performance measures, in addition to the required GAAP presentations, as we believe these measures improve the understanding of our operational results and make comparisons of operating results among peer companies more meaningful. We continually evaluate the usefulness, relevance, limitations and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change. A non-GAAP financial measure used throughout this release is Net operating income ("NOI"). We provide a more detailed discussion about this non-GAAP measure in our reconciliation of non-GAAP measures provided in the appendix in this earnings release.

THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

Six Months Ended June 30, Three Months Ended June 30,

(In thousands, except per share amounts) 2020 2019 2020 2019

Revenues:

Condominium rights and unit sales $ 43 $ 433,932 $ - $ 235,622

Master Planned Communities land sales 96,805 99,633 57,073 58,321

Minimum rents 132,456 108,804 61,469 54,718

Other land, rental and property revenues 46,344 101,253 11,447 59,774

Tenant recoveries 38,077 27,020 17,202 13,512

Builder price participation 16,706 14,564 8,947 9,369

Interest income from sales-type leases 917 - 35 -

Total revenues 331,348 785,206 156,173 431,316

Expenses:

Condominium rights and unit cost of 104,249 358,314 6,348 220,620sales

Master Planned Communities cost of sales 42,661 44,824 25,875 28,006

Operating costs 110,491 140,300 45,885 72,989

Rental property real estate taxes 28,777 19,505 15,199 9,674

Provision for (recovery of) doubtful 3,567 (88) 1,866 (86)accounts

Demolition costs - 599 - 550

Development-related marketing costs 4,629 11,541 1,813 5,839

General and administrative 61,314 58,331 22,233 31,551

Depreciation and amortization 108,600 75,049 46,963 38,918

Total expenses 464,288 708,375 166,182 408,061

Other:

Provision for impairment (48,738) - - -

Gain (loss) on sale or disposal of real 46,124 (150) 8,000 (144)estate and other assets, net

Other (loss) income, net (2,077) 10,461 1,607 10,288

Total other (4,691) 10,311 9,607 10,144

Operating (loss) income (137,631) 87,142 (402) 33,399

Interest income 1,550 4,824 404 2,251

Interest expense (66,845) (47,529) (32,397) (24,203)

Equity in earnings (losses) from real 2,797 16,305 (8,552) 6,354estate and other affiliates

(Loss) income before taxes (200,129) 60,742 (40,947) 17,801

(Benefit) provision for income taxes (40,944) 15,489 (6,844) 4,473

Net (loss) income (159,185) 45,253 (34,103) 13,328

Net (income) loss attributable to (33) 45 19 149noncontrolling interests

Net (loss) income attributable to common $ (159,218) $ 45,298 $ (34,084) $ 13,477stockholders

Basic (loss) income per share: $ (3.22) $ 1.05 $ (0.61) $ 0.31

Diluted (loss) income per share: $ (3.22) $ 1.05 $ (0.61) $ 0.31

THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

June 30, December 31,

(In thousands, except par values and share amounts) 2020 2019

Assets:

Investment in real estate:

Master Planned Communities assets $ 1,670,375 $ 1,655,674

Buildings and equipment 4,033,449 3,813,595

Less: accumulated depreciation (571,752) (507,933)

Land 361,081 353,022

Developments 1,498,478 1,445,997

Net property and equipment 6,991,631 6,760,355

Investment in real estate and other affiliates 119,706 121,757

Net investment in real estate 7,111,337 6,882,112

Net investment in lease receivable 2,754 79,166

Cash and cash equivalents 930,597 422,857

Restricted cash 257,687 197,278

Accounts receivable, net 17,711 12,279

Municipal Utility District receivables, net 320,439 280,742

Notes receivable, net 56,511 36,379

Deferred expenses, net 146,550 133,182

Operating lease right-of-use assets, net 57,882 69,398

Prepaid expenses and other assets, net 343,090 300,373

Total assets $ 9,244,558 $ 8,413,766

Liabilities:

Mortgages, notes and loans payable, net $ 4,401,063 $ 4,096,470

Operating lease obligations 69,607 70,413

Deferred tax liabilities 131,691 180,748

Accounts payable and accrued expenses 902,494 733,147

Total liabilities 5,504,855 5,080,778

Equity:

Preferred stock: $.01 par value; 50,000,000 shares - -authorized, none issued

Common stock: $.01 par value; 150,000,000 sharesauthorized, 55,981,559 issued and 54,931,299outstanding as of June 30, 2020, and 150,000,000 561 437shares authorized, 43,635,893 shares issued and42,585,633 outstanding as of December 31, 2019

Additional paid-in capital 3,941,516 3,343,983

Accumulated deficit (205,621) (46,385)

Accumulated other comprehensive loss (61,111) (29,372)

Treasury stock, at cost, 1,050,260 shares as of (120,530) (120,530)June 30, 2020 and December 31, 2019

Total stockholders' equity 3,554,815 3,148,133

Noncontrolling interests 184,888 184,855

Total equity 3,739,703 3,332,988

Total liabilities and equity $ 9,244,558 $ 8,413,766

Appendix - Reconciliation of Non-GAAP Measures

For the Six and Three Months Ended June 30, 2020 and 2019

Below are GAAP to non-GAAP reconciliations of certain financial measures, as required under Regulation G of the Securities Exchange Act of 1934. Non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be comparable to similarly titled measures.

As a result of our four segments, Operating Assets, Master Planned Communities ("MPC"), Seaport District and Strategic Developments, being managed separately, we use different operating measures to assess operating results and allocate resources among these four segments. The one common operating measure used to assess operating results for our business segments is earnings before tax ("EBT"). EBT, as it relates to each business segment, represents the revenues less expenses of each segment, including interest income, interest expense and equity in earnings of real estate and other affiliates. EBT excludes corporate expenses and other items that are not allocable to the segments. We present EBT because we use this measure, among others, internally to assess the core operating performance of our assets. However, segment EBT should not be considered as an alternative to GAAP net income.

Six Months Ended Three Months Ended June 30, June 30,

(In thousands) 2020 2019 $ Change 2020 2019 $ Change

Operating Assets Segment EBT

Total revenues (a) $ 198,534 $ 201,172 $ (2,638) $ 84,277 $ 109,219 $ (24,942)

Total operating expenses (b) (94,462) (91,639) (2,823) (42,222) (48,727) 6,505

Segment operating income 104,072 109,533 (5,461) 42,055 60,492 (18,437)

Depreciation and amortization (74,084) (56,046) (18,038) (36,995) (28,938) (8,057)

Interest expense, net (49,296) (39,050) (10,246) (23,103) (20,059) (3,044)

Other income, net 167 1,123 (956) 226 1,088 (862)

Equity in earnings from real estate and other affiliates 4,869 2,754 2,115 475 45 430

Gain on sale or disposal of real estate 38,124 - 38,124 - - -

Provision for impairment (48,738) - (48,738) - - -

Segment EBT (24,886) 18,314 (43,200) (17,342) 12,628 (29,970)

MPC Segment EBT

Total revenues 119,359 123,755 (4,396) 68,913 72,859 (3,946)

Total operating expenses (55,692) (65,979) 10,287 (31,970) (38,913) 6,943

Segment operating income 63,667 57,776 5,891 36,943 33,946 2,997

Depreciation and amortization (182) (246) 64 (91) (86) (5)

Interest income, net 16,857 15,826 1,031 8,303 8,283 20

Other income, net - 67 (67) - 72 (72)

Equity in earnings (losses) from real estate and other 5,966 14,336 (8,370) (2,968) 6,499 (9,467)affiliates

Segment EBT 86,308 87,759 (1,451) 42,187 48,714 (6,527)

Seaport District Segment EBT

Total revenues 11,966 19,921 (7,955) 2,272 12,891 (10,619)

Total operating expenses (22,775) (32,405) 9,630 (8,464) (17,972) 9,508

Segment operating loss (10,809) (12,484) 1,675 (6,192) (5,081) (1,111)

Depreciation and amortization (27,651) (12,946) (14,705) (6,776) (6,753) (23)

Interest expense, net (9,679) (3,456) (6,223) (4,626) (1,924) (2,702)

Other loss, net (3,777) (147) (3,630) (409) (61) (348)

Equity in losses from real estate and other affiliates (8,676) (1,083) (7,593) (6,633) (451) (6,182)

Loss on sale or disposal of real estate - (6) 6 - - -

Segment EBT (60,592) (30,122) (30,470) (24,636) (14,270) (10,366)

Six Months Ended Three Months Ended June 30, June 30,

(In thousands) 2020 2019 $ Change 2020 2019 $ Change

Strategic Developments Segment EBT

Total revenues 1,384 440,358 (438,974) 624 236,347 (235,723)

Total operating expenses (116,816) (371,014) 254,198 (12,517) (224,711) 212,194

Segment operating (loss) income (115,432) 69,344 (184,776) (11,893) 11,636 (23,529)

Depreciation and amortization (3,411) (2,316) (1,095) (1,650) (1,260) (390)

Interest income, net 2,988 6,497 (3,509) 1,057 3,235 (2,178)

Other income (loss), net 1,293 310 983 1,668 (383) 2,051

Equity in earnings from real estate and other affiliates 638 298 340 574 261 313

Gain (loss) on sale or disposal of real estate, net 8,000 (144) 8,144 8,000 (144) 8,144

Segment EBT (105,924) 73,989 (179,913) (2,244) 13,345 (15,589)

Consolidated Segment EBT

Total revenues 331,243 785,206 (453,963) 156,086 431,316 (275,230)

Total operating expenses (289,745) (561,037) 271,292 (95,173) (330,323) 235,150

Segment operating income 41,498 224,169 (182,671) 60,913 100,993 (40,080)

Depreciation and amortization (105,328) (71,554) (33,774) (45,512) (37,037) (8,475)

Interest expense, net (39,130) (20,183) (18,947) (18,369) (10,465) (7,904)

Other (loss) income, net (2,317) 1,353 (3,670) 1,485 716 769

Equity in earnings (losses) from real estate and other affiliates 2,797 16,305 (13,508) (8,552) 6,354 (14,906)

Gain (loss) on sale or disposal of real estate, net 46,124 (150) 46,274 8,000 (144) 8,144

Provision for impairment (48,738) - (48,738) - - -

Consolidated segment EBT (105,094) 149,940 (255,034) (2,035) 60,417 (62,452)

Corporate income, expenses and other items (54,091) (104,687) 50,596 (32,068) (47,089) 15,021

Net (loss) income (159,185) 45,253 (204,438) (34,103) 13,328 (47,431)

Net income (loss) attributable to noncontrolling interests (33) 45 (78) 19 149 (130)

Net (loss) income attributable to common stockholders $ (159,218) $ 45,298 $ (204,516) $ (34,084) $ 13,477 $ (47,561)





Includes hospitality revenues for the three and six months ended June 30, (a)2020, of $2.5 million and $19.8 million, respectively, and $25.6 million and $48.5 million for the three and six months ended June 30, 2019, respectively.

Includes hospitality operating costs for the three and six months ended (b)June 30, 2020, of $4.4 million and $17.2 million, respectively, and $16.6 million and $32.2 million for the three and six months ended June 30, 2019, respectively.

NOI

We believe that NOI is a useful supplemental measure of the performance of our Operating Assets and Seaport District portfolio 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 rental and occupancy rates and operating costs. We define NOI as operating revenues (rental income, tenant recoveries and other revenue) less operating expenses (real estate taxes, repairs and maintenance, marketing and other property expenses, including our share of NOI from equity investees). NOI excludes straight-line rents and amortization of tenant incentives, net; interest expense, net; ground rent amortization; demolition costs; other (loss) income; amortization; depreciation; development-related marketing cost; gain on sale or disposal of real estate and other assets, net; provision for impairment and equity in earnings from real estate and other affiliates. All management fees have been eliminated for all internally-managed properties. We use NOI to evaluate our operating performance on a property-by-property basis because NOI allows us to evaluate the impact that property-specific factors such as lease structure, lease rates and tenant base have on our operating results, gross margins and investment returns. Variances between years in NOI typically result from changes in rental rates, occupancy, tenant mix and operating expenses. Although we believe that NOI provides useful information to investors about the performance of our Operating Assets and Seaport District assets, due to the exclusions noted above, NOI should only be used as an additional measure of the financial performance of the assets of this segment of our business and not as an alternative to GAAP Net income (loss). For reference, and as an aid in understanding our computation of NOI, a reconciliation of segment EBT to NOI for Operating Assets and Seaport District has been presented in the tables below.

Six Months Ended June 30, Three Months Ended June 30,

(Unaudited) (Unaudited)

(In thousands) 2020 2019 2020 2019

Total Operating Assets segment EBT (a) $ (24,886) $ 18,314 $ (17,342) $ 12,628

Add back:

Depreciation and amortization 74,084 56,046 36,995 28,938

Interest expense, net 49,296 39,050 23,103 20,059

Equity in earnings from real estate and other affiliates (4,869) (2,754) (475) (45)

Gain on sale or disposal of real estate and other assets, net (38,124) - - -

Provision for impairment 48,738 - - -

Impact of straight-line rent (6,351) (5,382) (3,248) (2,537)

Other 54 (218) (119) (340)

Total Operating Assets NOI - Consolidated 97,942 105,056 38,914 58,703

Redevelopments

110 North Wacker 11 2 10 2

Total Operating Asset Redevelopments NOI 11 2 10 2

Dispositions

100 Fellowship Drive (1,050) - 73 -

Total Operating Asset Dispositions NOI (1,050) - 73 -

Consolidated Operating Assets NOI excluding properties 96,903 105,058 38,997 58,705sold or in redevelopment

Company's Share NOI - Equity investees 4,073 3,152 1,836 1,688

Distributions from Summerlin Hospital Investment 3,724 3,625 - -

Total Operating Assets NOI $ 104,700 $ 111,835 $ 40,833 $ 60,393





(a)Segment EBT excludes corporate expenses and other items that are not allocable to the segments.

Six Months Ended June 30, Three Months Ended June 30,

(Unaudited) (Unaudited)

(In thousands) 2020 2019 2020 2019

Total Seaport District segment EBT (a) $ (60,592) $ (30,122) $ (24,636) $ (14,270)

Add back:

Depreciation and amortization 27,651 12,946 6,776 6,753

Interest expense, net 9,679 3,456 4,626 1,924

Equity in losses from real estate and other affiliates 8,676 1,083 6,633 451

Loss on sale or disposal of real estate - 6 - -

Impact of straight-line rent 1,333 1,246 1,208 491

Other loss, net (b) 5,923 4,513 1,953 1,764

Total Seaport District NOI - Consolidated (7,330) (6,872) (3,440) (2,887)

Company's Share NOI - Equity investees (681) (237) (305) (42)

Total Seaport District NOI $ (8,011) $ (7,109) $ (3,745) $ (2,929)





(a)Segment EBT excludes corporate expenses and other items that are not allocable to the segments.

(b)Includes miscellaneous development-related items as well as the loss related to the write-off of inventory due to the permanent closure of 10 Corso Como Retail and Caf?.

Contact Information:David R. O'ReillyPresident and Chief Financial Officer(214) 741-7744David.O'Reilly@howardhughes.com

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SOURCE The Howard Hughes Corporation