Howard Hughes Holdings Inc. Q2 2024 10-Q Filing

TL;DR

HHH Q2 10-Q is in: Real estate sales data for Q2 and H1 2024 released.

AI Summary

Howard Hughes Holdings Inc. filed its 10-Q for the period ending June 30, 2024. The company, formerly known as Howard Hughes Holding Corp, reported on its real estate operations, including land sales and condominium unit sales for the second quarter and first half of 2024. The filing details financial performance and operational segments within its real estate investment trust structure.

Why It Matters

This filing provides investors with an update on Howard Hughes Holdings' financial performance and operational activities for the second quarter of 2024, crucial for assessing the company's real estate development and investment strategies.

Risk Assessment

Risk Level: medium — Real estate investment trusts are subject to market fluctuations, interest rate changes, and economic downturns, which can impact property values and sales.

Key Numbers

• 0001981792 — Central Index Key (Unique identifier for Howard Hughes Holdings Inc. in SEC filings.)
• 001-41779 — SEC File Number (The company's SEC registration number.)

Key Players & Entities

• Howard Hughes Holdings Inc. (company) — Filer of the 10-Q
• Howard Hughes Holding Corp (company) — Former name of the company
• 20240630 (date) — End of the reporting period
• 20240726 (date) — Filing date

FAQ

Key Financial Figures

• $0.01 — ch registered: Common stock, par value $0.01 per share HHH New York Stock Exchange

Filing Documents

• hhh-20240630.htm (10-Q) — 2230KB
• hhh20240630ex311.htm (EX-31.1) — 10KB
• hhh20240630ex312.htm (EX-31.2) — 10KB
• hhh20240630ex321.htm (EX-32.1) — 7KB
• hhh-20240630_g1.jpg (GRAPHIC) — 257KB
• 0001628280-24-033188.txt ( ) — 11673KB
• hhh-20240630.xsd (EX-101.SCH) — 82KB
• hhh-20240630_cal.xml (EX-101.CAL) — 108KB
• hhh-20240630_def.xml (EX-101.DEF) — 398KB
• hhh-20240630_lab.xml (EX-101.LAB) — 846KB
• hhh-20240630_pre.xml (EX-101.PRE) — 627KB
• hhh-20240630_htm.xml (XML) — 1801KB

Financial Statements

Financial Statements Condensed Consolidated Financial Statements (Unaudited) 2 Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statements of Operations 3 Condensed Consolidated Statements of Comprehensive Income (Loss) 4 Condensed Consolidated Statements of Equity 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 8 Note 1. Presentation of Financial Statements and Significant Accounting Policies 8 Note 2. Investments in Unconsolidated Ventures 10 Note 3. Acquisitions and Dispositions 13 Note 4. Impairment 14 Note 5. Other Assets and Liabilities 14 Note 6. Mortgages, Notes, and Loans Payable, Net 15 Note 7. Fair Value 17 Note 8. Derivative Instruments and Hedging Activities 18 Note 9. Commitments and Contingencies 20 Note 10. Income Taxes 22 Note 11. Accumulated Other Comprehensive Income (Loss) 22 Note 12. Earnings Per Share 23 Note 13. Revenues 24 Note 14. Leases 25 Note 15. Segments 27 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 30 Forward-Looking Information 31 Overview 33 Results of Operations 36 Liquidity and Capital Resources 51 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 54 Item 4.

Controls and Procedures

Controls and Procedures 54 PART II Item 1.

Legal Proceedings

Legal Proceedings 55 Item 1A.

Risk Factors

Risk Factors 55 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 55 Item 3. Default Upon Senior Securities 55 Item 4. Mine Safety Disclosures 55 Item 5 . Other Information 56 Item 6. Exhibits 56

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents PART I

Condensed Consolidated Financial Statements (Unaudited)

Item 1. Condensed Consolidated Financial Statements (Unaudited) HOWARD HUGHES HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) thousands except par values and share amounts June 30, 2024 December 31, 2023 ASSETS Master Planned Communities assets $ 2,485,480 $ 2,445,673 Buildings and equipment 4,310,446 4,177,677 Less: accumulated depreciation ( 1,093,519 ) ( 1,032,226 ) Land 309,758 303,685 Developments 1,539,701 1,272,445 Net investment in real estate 7,551,866 7,167,254 Investments in unconsolidated ventures 213,752 220,258 Cash and cash equivalents 436,758 631,548 Restricted cash 469,008 421,509 Accounts receivable, net 109,682 115,045 Municipal Utility District receivables, net 631,142 550,884 Deferred expenses, net 153,409 142,561 Operating lease right-of-use assets 44,947 44,897 Other assets, net 292,927 283,047 Total assets $ 9,903,491 $ 9,577,003 LIABILITIES Mortgages, notes, and loans payable, net $ 5,511,985 $ 5,302,620 Operating lease obligations 52,910 51,584 Deferred tax liabilities, net 76,406 87,835 Accounts payable and other liabilities 1,225,471 1,076,040 Total liabilities 6,866,772 6,518,079 Commitments and Contingencies (see Note 9) EQUITY Preferred stock: $ 0.01 par value; 50,000,000 shares authorized, none issued — — Common stock: $ 0.01 par value; 150,000,000 shares authorized, 56,709,660 issued, and 50,236,422 outstanding as of June 30, 2024, 56,495,791 shares issued, and 50,038,014 outstanding as of December 31, 2023 567 565 Additional paid-in capital 3,996,126 3,988,496 Retained earnings (accumulated deficit) ( 415,081 ) ( 383,696 ) Accumulated other comprehensive income (loss) 3,935 1,272 Treasury stock, at cost, 6,473,238 shares as of June 30, 2024, and 6,457,777 shares as of December 31, 2023 ( 614,974 ) ( 613,766 ) Total stockholders' equity 2,970,573 2,992,871 Noncontrolling interests 66,146 66,053 Total equity 3,036,719 3,058,924 Total liabilities and equity $ 9,903,491 $

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents HOWARD HUGHES HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, Six Months Ended June 30, thousands except per share amounts 2024 2023 2024 2023 REVENUES Condominium rights and unit sales $ — $ 14,866 $ 23 $ 20,953 Master Planned Communities land sales 154,790 42,306 187,205 101,667 Rental revenue 111,490 103,339 219,241 201,203 Other land, rental, and property revenues 38,224 46,898 56,607 65,866 Builder price participation 12,905 15,907 25,471 29,916 Total revenues 317,409 223,316 488,547 419,605 EXPENSES Condominium rights and unit cost of sales — 29,317 3,861 33,853 Master Planned Communities cost of sales 57,768 15,867 70,672 37,870 Operating costs 91,422 83,800 165,711 156,187 Rental property real estate taxes 15,582 15,578 30,277 30,997 Provision for (recovery of) doubtful accounts 1,563 ( 26 ) 2,397 ( 2,446 ) General and administrative 30,235 20,217 61,137 43,770 Depreciation and amortization 52,629 53,221 104,876 105,230 Other 3,868 3,089 7,686 6,660 Total expenses 253,067 221,063 446,617 412,121 OTHER Gain (loss) on sale or disposal of real estate and other assets, net — ( 16 ) 4,794 4,714 Other income (loss), net 391 ( 1,607 ) 1,282 3,374 Total other 391 ( 1,623 ) 6,076 8,088 Operating income (loss) 64,733 630 48,006 15,572 Interest income 6,185 4,992 14,303 9,084 Interest expense ( 43,007 ) ( 33,947 ) ( 84,925 ) ( 72,084 ) Gain (loss) on extinguishment of debt ( 198 ) — ( 198 ) — Equity in earnings (losses) from unconsolidated ventures ( 296 ) ( 6,186 ) ( 19,431 ) ( 10,988 ) Income (loss) before income taxes 27,417 ( 34,511 ) ( 42,245 ) ( 58,416 ) Income tax expense (benefit) 6,359 ( 15,370 ) ( 10,836 ) ( 16,648 ) Net income (loss) 21,058 ( 19,141 ) ( 31,409 ) ( 41,768 ) Net (income) loss attributable to noncontrolling interests 34 ( 2 ) 24 ( 120 ) Net income (loss) attributable to common stockholders $ 21,092 $ ( 19,14

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents HOWARD HUGHES HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, thousands 2024 2023 2024 2023 Net income (loss) $ 21,058 $ ( 19,141 ) $ ( 31,409 ) $ ( 41,768 ) Other comprehensive income (loss): Interest rate caps and swaps (a) 38 2,748 2,663 ( 2,582 ) Other comprehensive income (loss) 38 2,748 2,663 ( 2,582 ) Comprehensive income (loss) 21,096 ( 16,393 ) ( 28,746 ) ( 44,350 ) Comprehensive (income) loss attributable to noncontrolling interests 34 ( 2 ) 24 ( 120 ) Comprehensive income (loss) attributable to common stockholders $ 21,130 $ ( 16,395 ) $ ( 28,722 ) $ ( 44,470 ) (a) Amounts are shown net of tax expense of $ 10.0 thousand for the three months ended June 30, 2024, tax expense of $ 0.8 million for the six months ended June 30, 2024, tax expense of $ 0.8 million for the three months ended June 30, 2023, and tax benefit of $ 0.8 million for the six months ended June 30, 2023. See Notes to Condensed Consolidated Financial Statements. HHH 2024 FORM 10-Q | 4

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents HOWARD HUGHES HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity Noncontrolling Interests Total Equity Common Stock Treasury Stock thousands except shares Shares Amount Shares Amount Balance at March 31, 2024 56,714,750 $ 567 $ 3,993,152 $ ( 436,173 ) $ 3,897 ( 6,471,011 ) $ ( 614,818 ) $ 2,946,625 $ 66,130 $ 3,012,755 Net income (loss) — — — 21,092 — — — 21,092 ( 34 ) 21,058 Interest rate swaps, net of tax expense (benefit) of $ 10 — — — — 38 — — 38 — 38 Teravalis noncontrolling interest — — — — — — — — 50 50 Stock plan activity ( 5,090 ) — 2,974 — — ( 2,227 ) ( 156 ) 2,818 — 2,818 Balance at June 30, 2024 56,709,660 $ 567 $ 3,996,126 $ ( 415,081 ) $ 3,935 ( 6,473,238 ) $ ( 614,974 ) $ 2,970,573 $ 66,146 $ 3,036,719 Balance at March 31, 2023 56,427,928 $ 566 $ 3,977,514 $ 145,332 $ 5,005 ( 6,431,442 ) $ ( 611,659 ) $ 3,516,758 $ 65,765 $ 3,582,523 Net income (loss) — — — ( 19,143 ) — — — ( 19,143 ) 2 ( 19,141 ) Interest rate swaps, net of tax expense (benefit) of $ 801 — — — — 2,748 — — 2,748 — 2,748 Teravalis noncontrolling interest — — — — — — — — 61 61 Stock plan activity 105,102 — 3,266 — — ( 13,306 ) ( 1,004 ) 2,262 — 2,262 Balance at June 30, 2023 56,533,030 $ 566 $ 3,980,780 $ 126,189 $ 7,753 ( 6,444,748 ) $ ( 612,663 ) $ 3,502,625 $ 65,828 $ 3,568,453 Balance at December 31, 2023 56,495,791 $ 565 $ 3,988,496 $ ( 383,696 ) $ 1,272 ( 6,457,777 ) $ ( 613,766 ) $ 2,992,871 $ 66,053 $ 3,058,924 Net income (loss) — — — ( 31,385 ) — — — ( 31,385 ) ( 24 ) ( 31,409 ) Interest rate swaps, net of tax expense (benefit) of $ 785 — — — — 2,663 — — 2,663 — 2,663 Teravalis noncontrolling interest — — — — — — — — 117 117 Stock plan activity 213,869 2 7,630 — — ( 15,461 ) ( 1,208 ) 6,424 — 6,424 Balance at June 30, 2024 56,709,660 $ 5

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents HOWARD HUGHES HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, thousands 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ ( 31,409 ) $ ( 41,768 ) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation 93,258 95,105 Amortization 9,823 8,287 Amortization of deferred financing costs 6,441 5,933 Amortization of intangibles other than in-place leases 1,638 1,638 Straight-line rent amortization ( 3,558 ) ( 3,297 ) Deferred income taxes ( 12,215 ) ( 17,793 ) Restricted stock and stock option amortization 7,633 8,220 Net gain on sale of properties ( 4,794 ) ( 4,714 ) (Gain) loss on extinguishment of debt 198 — Equity in (earnings) losses from unconsolidated ventures, net of distributions and impairment charges 24,620 17,438 Provision for doubtful accounts 1,930 2,078 Master Planned Community development expenditures ( 174,862 ) ( 172,580 ) Master Planned Community cost of sales 63,374 37,870 Condominium development expenditures ( 254,899 ) ( 242,724 ) Condominium rights and units cost of sales 3,861 32,943 Net Changes: Accounts receivable, net ( 8,164 ) ( 4,747 ) Other assets, net ( 15,200 ) ( 4,402 ) Condominium deposits received, net 118,018 80,725 Deferred expenses, net ( 18,114 ) ( 16,296 ) Accounts payable and other liabilities 3,648 ( 32,274 ) Cash provided by (used in) operating activities ( 188,773 ) ( 250,358 ) CASH FLOWS FROM INVESTING ACTIVITIES Property and equipment expenditures ( 638 ) ( 3,642 ) Operating property improvements ( 18,397 ) ( 27,834 ) Property development and redevelopment ( 131,807 ) ( 148,130 ) Acquisition of assets ( 18,456 ) ( 5,898 ) Proceeds from sales of properties, net 13,175 905 Reimbursements under tax increment financings and grants 7,016 — Distributions from unconsolidated ventures 684 8,532 Investments in unconsolidated vent

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents HOWARD HUGHES HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, thousands 2024 2023 RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH Cash and cash equivalents $ 436,758 $ 389,405 Restricted cash 469,008 453,747 Cash, cash equivalents, and restricted cash at end of period $ 905,766 $ 843,152 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid, net $ 155,204 $ 119,900 Interest capitalized 74,754 52,285 Income taxes paid (refunded), net 3,858 4,270 NON-CASH TRANSACTIONS Accrued property improvements, developments, and redevelopments $ ( 13,255 ) $ ( 1,899 ) Non-cash consideration from sale of properties — 5,250 Special Improvement District bond transfers associated with land sales 7,299 — Capitalized stock compensation 2,296 1,812 Reassessment of operating lease right-of-use asset, net 1,454 — Reassessment of operating lease obligation 1,952 — See Notes to Condensed Consolidated Financial Statements. HHH 2024 FORM 10-Q | 7

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS FOOTNOTES Table of Contents 1. Presentation of Financial Statements and Significant Accounting Policies General These unaudited Condensed Consolidated Financial Statements have been prepared by Howard Hughes Holdings Inc. (HHH or the Company) in accordance with accounting principles generally accepted in the United States of America (GAAP). References to HHH, the Company, we, us, and our refer to Howard Hughes Holdings Inc. and its consolidated subsidiaries, which includes The Howard Hughes Corporation (HHC), unless otherwise specifically stated. References to HHC refer to The Howard Hughes Corporation and its consolidated subsidiaries unless otherwise specifically stated. In accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as issued by the Securities and Exchange Commission (the SEC), these Condensed Consolidated Financial Statements do not include all of the information and disclosures required by GAAP for complete financial statements. Readers of this quarterly report on Form 10-Q (Quarterly Report) should refer to the Howard Hughes Holdings Inc. audited Consolidated Financial Statements, which are included in its annual report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 27, 2024 (the Annual Report). In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the financial position, results of operations, comprehensive income, cash flows, and equity for the interim periods have been included. The results for the three and six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024, and future fiscal years. Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of Howard Hughes Holdings Inc. and its subsidiaries after elimination of intercompany balances and transactions. The Company also

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS FOOTNOTES Table of Contents Other receivables are primarily related to short-term trade receivables. The Company is exposed to credit losses through the sale of goods and services to customers and assesses its exposure to credit loss related to these receivables on a quarterly basis based on historical collection experience and future expectations by portfolio. The Company records an allowance for credit losses if the estimated loss amount is probable. The following table represents the components of Accounts receivable, net of amounts considered uncollectible, in the accompanying Condensed Consolidated Balance Sheets: thousands June 30, 2024 December 31, 2023 Straight-line rent receivables $ 90,582 $ 87,669 Tenant receivables 5,754 4,780 Other receivables 13,346 22,596 Accounts receivable, net (a) $ 109,682 $ 115,045 (a) As of June 30, 2024, the total reserve balance for amounts considered uncollectible was $ 10.5 million, comprised of $ 9.2 million attributable to lease-related receivables and $ 1.3 million attributable to the allowance for credit losses related to other accounts receivables. As of December 31, 2023, the total reserve balance was $ 15.0 million, comprised of $ 14.8 million attributable to lease-related receivables and $ 0.2 million attributable to the allowance for credit losses related to other accounts receivables. The following table summarizes the impacts of the collectability reserves in the accompanying Condensed Consolidated Statements of Operations: thousands Three Months Ended June 30, Six Months Ended June 30, Income Statement Location 2024 2023 2024 2023 Rental revenue $ ( 1,277 ) $ 1,644 $ ( 317 ) $ 4,537 Provision for (recovery of) doubtful accounts 1,563 ( 26 ) 2,397 ( 2,446 ) Total (income) expense impact $ 286 $ 1,618 $ 2,080 $ 2,091 Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates an

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS FOOTNOTES Table of Contents Financing Receivable Credit Losses The Company is exposed to credit losses through the sale of goods and services to the Company's customers. Receivables held by the Company primarily relate to short-term trade receivables, discussed above, and financing receivables, which include Municipal Utility District (MUD) receivables, Special Improvement District (SID) bonds, Tax Increment Financing (TIF) receivables, net investments in lease receivables, and notes receivable. The Company assesses its exposure to credit loss based on historical collection experience and future expectations by portfolio segment. Historical collection experience is evaluated on a quarterly basis by the Company. The amortized cost basis of financing receivables, consisting primarily of MUD receivables, totaled $ 711.9 million as of June 30, 2024, and $ 632.8 million as of December 31, 2023. The MUD receivable balance included accrued interest of $ 51.4 million as of June 30, 2024, and $ 35.8 million as of December 31, 2023. There was no material activity in the allowance for credit losses for financing receivables for the three and six months ended June 30, 2024 and 2023. Financing receivables are considered to be past due once they are 30 days contractually past due under the terms of the agreement. The Company does not have significant receivables that are past due or on nonaccrual status. There have been no significant write-offs or recoveries of amounts previously written off during the current period for financing receivables. 2. Investments in Unconsolidated Ventures In the ordinary course of business, the Company enters into partnerships and ventures with an emphasis on investments associated with the development and operation of real estate assets. As of June 30, 2024, the Company does not consolidate the investments below as it does not have a controlling financial interest in these investments. As such, the Company primarily

View Full Filing

View this 10-Q filing on SEC EDGAR