The Howard Hughes Corporation

Second-quarter operating assets NOI was $68 million, up 3% year over year, and same-store NOI rose 4%. Office NOI was $34 million, up $4 million or 13% year over year; multifamily NOI was a record $13 million, up 10%; retail NOI was just under $13 million, down 11%. In MPCs, second-quarter EBT declined 23% year over year due mainly to timing of Summerlin super pad land sales, while new home sales totaled 605, up 39% year over year. Seaport revenues fell 19% year over year, but foot traffic rose 89% sequentially and revenue increased 92% from the first quarter. Full-year guidance was raised: MPC EBT is now expected to be flat to down 10% year over year versus prior guidance of down 25% to down 35%; operating assets NOI is now expected to be up 1% to 4% year over year versus prior guidance of down 2% to up 2%; Ward Village 2023 condo sales are expected to be $40 million to $45 million with gross margins of 10% to 13%; cash G&A remains $80 million to $85 million. The company ended the quarter with $389 million of cash, had $4.9 billion of debt outstanding, and noted $273 million of maturities through 2024.

David O’Reilly emphasized that the company is seeing stronger underlying demand across its portfolio, especially in master-planned communities, where higher mortgage rates have shifted more buyers toward the new-home market. He said land pricing remains strong, with more acres expected to close in the second half at similar pricing, and he sounded more confident on full-year MPC results than earlier in the year. On development, he said the company is not stopping projects, but it is being selective and waiting for financing to close before breaking ground.

Carlos Olea highlighted the guidance increases and tied them to better-than-expected year-to-date results plus a favorable second-half outlook. He said MPC EBT guidance improved by about $70 million at the midpoint, operating assets NOI guidance moved up to 1% to 4% growth, and Ward Village condo sales were adjusted to $40 million to $45 million with gross margins of 10% to 13% because of closeout pricing on a small portion of inventory. He also noted $389 million of cash at quarter end, $223 million of remaining equity contribution needed for current projects, $4.9 billion of debt outstanding, and 98% of debt fixed, capped, or swapped. He added that the company sold two self-storage facilities for about $30 million after quarter end, creating a $16 million gain to be recognized in Q3.

Analysts focused on the Ward Village discounting, asking whether it signaled weaker economics; management said the discounts were only for less than 3% of units in completed buildings and would not materially affect overall building margins, which remain targeted at 25% to 30%. Questions also centered on the reorganization to Howard Hughes Holdings and whether it was driven by debt or ratings pressure; management said it is a structural move to separate real estate and non-real estate assets and avoid covenant issues, with no incremental G&A. On Seaport, analysts asked about ESPN’s lease and the Tin Building’s slower ramp; management said ESPN runs through December 2025 and backfilling should not be a problem, while Tin Building revenue is strongest in full-service dining but lagging in quick service, retail, and e-commerce. Analysts also pressed on Teravalis timing and the impact of rates on development, and management said lot settlements are expected later this year, while new starts may slow until financing improves.