
FINANCIAL STATEMENTS			Table of Contents

THE HOWARD HUGHES CORPORATION

~~NOTES TO~~

CONDENSED CONSOLIDATED ~~FINANCIAL~~ STATEMENTS

~~UNAUDITED~~

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 December 31, 2023	10	$	—	$	3,374,284	$	(383,012)	$	1,272	—	$	—	$	2,992,544	$	66,053	$	3,058,597
Net income (loss)	—	—		—		(51,915)		—		—	—		(51,915)		10		(51,905)
Interest rate swaps, net of tax expense (benefit) of $775	—	—		—		—		2,625		—	—		2,625		—		2,625




Teravalis noncontrolling interest	—	—		—		—		—		—	—		—		67		67








Capital transactions with HHH	—	—		2,888		(1)		—		—	—		2,887		—		2,887

Balance at March 31, 2024	10	$	—	$	3,377,172	$	(434,928)	$	3,897	—	$	—	$	2,946,141	$	66,130	$	3,012,271

Balance at December 31, 2022	56,226,273	$	564	$	3,972,561	$	168,077	$	10,335	(6,424,276)	$	(611,038)	$	3,540,499	$	65,613	$	3,606,112
Net income (loss)	—	—		—		(22,745)		—		—	—		(22,745)		118		(22,627)
Interest rate swaps, net of tax expense (benefit) of $(1,559)	—	—		—		—		(5,330)		—	—		(5,330)		—		(5,330)

Teravalis noncontrolling interest	—	—		—		—		—		—	—		—		56		56










Stock plan activity	201,655	2		4,953		—		—		(7,166)	(621)		4,334		—		4,334
Other	—	—		—		—		—		—	—		—		(22)		(22)
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

See Notes to Condensed Consolidated Financial Statements.

HHC 2024 FORM 10-Q | 5

~~NOTE 1 BASIS~~


FINANCIAL STATEMENTS			Table of Contents

THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~PRESENTATION AND ORGANIZATION~~

~~The accompanying~~CASH FLOWS(Unaudited)
Three Months Ended March 31,
thousands 2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (51,905) $ (22,627)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation 45,827 46,941
Amortization 5,518 4,148
Amortization of deferred financing costs 3,256 2,937
Amortization of intangibles other than in-place leases 819 819
Straight-line rent amortization (2,231) (1,499)
Deferred income taxes (17,747) (1,885)
Restricted stock and stock option amortization 4,310 4,954
Net gain on sale of properties (4,794) (4,731)
Equity in (earnings) losses from unconsolidated ventures, net of distributions and impairment charges 23,877 7,835
Provision for doubtful accounts 1,644 471
Master Planned Community development expenditures (77,098) (89,345)
Master Planned Community cost of sales 12,904 22,003
Condominium development expenditures (110,095) (124,515)
Condominium rights and units cost of sales 3,861 4,300
Net Changes:
Accounts receivable, net (2,632) (1,836)
Other assets, net (3,260) 18,307
Condominium deposits received, net 49,666 63,494
Deferred expenses, net (7,849) (7,089)
Accounts payable and other liabilities (44,941) (66,952)
Cash provided by (used in) operating activities (170,870) (144,270)
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment expenditures (462) (1,272)
Operating property improvements (10,795) (9,555)
Property development and redevelopment (60,921) (74,584)
Proceeds from sales of properties, net 13,175 905
Reimbursements under tax increment financings and grants 3,567 —
Distributions from unconsolidated ventures — 2,200
Investments in unconsolidated ventures, net (18,200) (11,790)
Cash provided by (used in) investing activities (73,636) (94,096)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgages, notes, and loans payable 89,028 32,072
Principal payments on mortgages, notes, and loans payable (3,703) (3,285)
Special Improvement District bond funds released from (held in) escrow 249 1,364
Deferred financing costs and bond issuance costs, net 3 (82)
Taxes paid on stock options exercised and restricted stock vested (944) (1,524)
Distributions to HHH (1,422) —
Contributions from Teravalis noncontrolling interest owner 67 56
Cash provided by (used in) financing activities 83,278 28,601
Net change in cash, cash equivalents, and restricted cash (161,228) (209,765)
Cash, cash equivalents, and restricted cash at beginning of period 1,053,057 1,098,937
Cash, cash equivalents, and restricted cash at end of period $ 891,829 $ 889,172

HHC 2024 FORM 10-Q | 6


FINANCIAL STATEMENTS			Table of Contents

THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
thousands	2024		2023
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents	$	462,699	$	417,746
Restricted cash	429,130		471,426
Cash, cash equivalents, and restricted cash at end of period	$	891,829	$	889,172

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid, net	$	100,158	$	81,242
Interest capitalized	36,315		24,964


NON-CASH TRANSACTIONS



Accrued property improvements, developments, and redevelopments	$	(4,954)	$	7,115
Non-cash consideration from sale of properties	—		5,250


Capitalized stock compensation	1,476		860
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.

HHC 2024 FORM 10-Q | 7


FINANCIAL STATEMENTS FOOTNOTES			Table of Contents


1. Presentation of Financial Statements and Significant Accounting Policies

GeneralThese unaudited Condensed Consolidated Financial Statements have been prepared by The Howard Hughes Corporation (HHC or the Company) in accordance with accounting principles generally accepted in the United States of America ~~(“GAAP”), with intercompany transactions between~~(GAAP). References to HHC, the Company, we, us, and our refer to The Howard Hughes Corporation and its consolidated subsidiaries ~~eliminated.~~ unless otherwise specifically stated. References to Howard Hughes Holdings Inc. (HHH) refer to the Company’s parent holding company, Howard Hughes Holding Inc., and its consolidated subsidiaries, including the Company, 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”)~~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~~quarterly report on Form 10-Q ~~(“Quarterly Report”)~~(Quarterly Report) should refer to The Howard Hughes ~~Corporation’s (“HHC” or the “Company”)~~Corporation audited Consolidated Financial Statements, which are included in ~~the Company’s Annual Report~~its annual report on Form 10-K for the fiscal year ended December 31, ~~2016 (the “Annual Report”),~~2023, filed with the SEC on February ~~23, 2017 with the SEC. Certain amounts in 2016 have been reclassified to conform to the 2017 presentation.~~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, ~~(loss),~~ cash flows, and equity for the interim periods have been included. The results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024, are not necessarily indicative of the results that may be expected for the year ~~ended~~ending December 31, ~~2017~~2024, and future fiscal years.

Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of The Howard Hughes Corporation and its subsidiaries after elimination of intercompany balances and transactions. The Company also consolidates certain variable interest entities (VIEs) in accordance with Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) 810 Consolidation. The outside equity interests in certain entities controlled by the Company are reflected in the Condensed Consolidated Financial Statements as noncontrolling interests.

Management has evaluated for disclosure or recognition all material events occurring subsequent to the date of the Condensed Consolidated Financial Statements up to the date and time this Quarterly Report was filed.

~~NOTE 2 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~

Seaport Entertainment On October 5, 2023, HHH announced the intent to form a new division, Seaport Entertainment, that is expected to include Howard Hughes Corporation’s entertainment-related assets in New York and Las Vegas, including the Seaport in Lower Manhattan and the Las Vegas Aviators Triple-A Minor League Baseball team, as well as the Company’s ownership stake in Jean-Georges Restaurants and an interest in and to 80% of the air rights above the Fashion Show Mall in Las Vegas.

HHH is establishing Seaport Entertainment with the intention of completing its spinoff as an independent, publicly traded company in 2024, but there can be no assurance regarding the ultimate timing of the spinoff or that the spinoff will ultimately occur. The planned separation of Seaport Entertainment from Howard Hughes will refine the identity of HHH as a pure-play real estate company focused solely on its portfolio of acclaimed master planned communities and allow the new company, Seaport Entertainment, to operate independently as an entertainment-focused enterprise.

Restricted Cash Restricted cash reflects amounts segregated in escrow accounts in the name of the Company, primarily related to escrowed condominium deposits by buyers and other amounts related to taxes, insurance, and legally restricted security deposits and leasing costs.

Accounts Receivable, netAccounts receivable, net includes straight-line rent receivables, tenant receivables, and other receivables. On a quarterly basis, management reviews the lease-related receivables, including straight-line rent receivables and tenant receivables, for collectability. This analysis includes a review of past due accounts and considers factors such as the credit quality of tenants, current economic conditions, and changes in customer payment trends. When full collection of a lease-related receivable or future lease payment is deemed to be not probable, a reserve for the receivable balance is charged against rental revenue and future rental revenue is recognized on a cash basis. The Company also records reserves for estimated losses if the estimated loss amount is probable and can be reasonably estimated.

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.

HHC 2024 FORM 10-Q | 8


FINANCIAL STATEMENTS FOOTNOTES			Table of Contents

The following table represents the components of Accounts receivable, net of amounts considered uncollectible, in the accompanying Condensed Consolidated Balance Sheets:


thousands	March 31, 2024		December 31, 2023
Straight-line rent receivables	$	89,761	$	87,669
Tenant receivables	3,770		4,780
Other receivables	17,586		22,596
Accounts receivable, net (a)	$	111,117	$	115,045

(a)As of March 31, 2024, the total reserve balance for amounts considered uncollectible was $15.7 million, comprised of $14.8 million attributable to lease-related receivables and $0.9 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 $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 March 31,
Income Statement Location		2024		2023
Rental revenue		$	960	$	2,893
Provision for (recovery of) doubtful accounts		834		(2,420)



Total (income) expense impact		$	1,794	$	473

Income Taxes HHC is a ~~summary~~directly owned subsidiary of ~~recently issued~~HHH and ~~other notable accounting pronouncements which relate~~will be included in Howard Hughes Holding Inc. and Subsidiaries’ U.S. Federal income tax return. The Company’s financial statements recognize the current and deferred income tax consequences that result from HHC’s activities during the current period pursuant to ~~our business.~~

~~In August 2017,~~ the ~~Financial Accounting Standards Board’s (“FASB”) issued Accounting Standards Update (“ASU”) 2017-12,~~ ~~Derivatives~~provisions of ASC 740 Income Taxes as if the Company were a separate taxpayer rather than a member of Howard Hughes Holding Inc.’s consolidated income tax return group.

Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and ~~Hedging (Topic 815): Targeted Improvements~~assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The estimates and assumptions include, but are not limited to, ~~Accounting for Hedging Activities~~ ~~to enable entities to better portray~~ the ~~economic results of their risk management activities~~future cash flows used in ~~its financial statements. The ASU expands an entity’s ability to hedge nonfinancial~~impairment analysis and ~~financial risk components and reduce complexity in~~ fair value ~~hedges~~used in impairment calculations, allocation of ~~interest rate risk~~capitalized development costs, provision for income taxes, recoverable amounts of receivables and ~~eases certain documentation~~deferred tax assets, initial valuations of tangible and ~~assessment requirements~~intangible assets acquired, and ~~modifies~~ the ~~accounting for components excluded from the assessment~~related useful lives of ~~hedge effectiveness. The ASU~~assets upon which depreciation and amortization is based. Estimates and assumptions have also ~~eliminates the requirement~~been made with respect to ~~separately measure~~future revenues and ~~report hedge ineffectiveness~~costs, and ~~generally requires the entire change in~~ the fair value of warrants, debt, and options granted. In particular, Master Planned Communities (MPC) cost of sales estimates are highly judgmental as they are sensitive to cost escalation, sales price escalation, and lot absorption, which are subject to judgment and affected by expectations about future market or economic conditions. Actual results could differ from these and other estimates.

Consolidated Variable Interest Entity At March 31, 2024, the Company holds an 88.0% interest in Teravalis, our newest large-scale master planned community in the West Valley of Phoenix, Arizona, and a ~~hedging instrument~~third party holds the remaining 12.0%. Teravalis was determined to be a VIE, and as the Company has the power to direct the activities that most significantly impact its economic performance, the Company is considered the primary beneficiary and consolidates Teravalis.

Under the terms of the LLC agreement, cash distributions and the recognition of income-producing activities will be pro rata based on economic ownership interest. As of March 31, 2024, the Company’s Condensed Consolidated Balance Sheets include $541.7 million of Master Planned Community assets, $0.4 million of Accounts Payable and other liabilities, and $65.0 million of Noncontrolling interest related to Teravalis.

Noncontrolling InterestsAs of March 31, 2024, and December 31, 2023, noncontrolling interests related to the 12.0% noncontrolling interest in Teravalis and the noncontrolling interest in the Ward Village Homeowners’ Associations (HOAs). All revenues and expenses related to the HOAs are attributable to noncontrolling interests and do not impact net income attributable to common stockholders.

HHC 2024 FORM 10-Q | 9


FINANCIAL STATEMENTS FOOTNOTES			Table of Contents

Financing Receivable Credit LossesThe 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 $663.5 million as of March 31, 2024, and $632.8 million as of December 31, 2023. The MUD receivable balance included accrued interest of $43.0 million as of March 31, 2024, and $35.8 million as of December 31, 2023. There has been no material activity in the allowance for credit losses for financing receivables for the three months ended March 31, 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 March 31, 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 reports its interests in accordance with the equity method. As of March 31, 2024, these ventures had debt totaling $291.1 million, with the Company’s proportionate share of this debt totaling $144.2 million. All of this indebtedness is without recourse to the Company, with the exception of the collateral maintenance obligation for Floreo. See Note 9 - Commitments and Contingencies for additional information related to the Company’s collateral maintenance obligation.

Investments in unconsolidated ventures consist of the following:


	Ownership Interest (a)				Carrying Value					Share of Earnings/Dividends
	March 31,		December 31,		March 31,		December 31,		Three Months Ended March 31,
thousands except percentages	2024		2023		2024		2023			2024		2023
Equity Method Investments
Operating Assets:

The Metropolitan (b)	50	%	50	%	$	—	$	—		$	1,078	$	(325)
Stewart Title of Montgomery County, TX	50	%	50	%	3,711		3,785			(75)		(35)
Woodlands Sarofim	20	%	20	%	2,991		2,990			2		13
TEN.m.flats (c)	50	%	50	%	—		—			1,570		(781)
Master Planned Communities:
The Summit (d)	50	%	50	%	43,189		59,112			(15,923)		4,630
Floreo (e)	50	%	50	%	57,092		55,880			1,212		(522)
Seaport:

The Lawn Club (d)	50	%	50	%	3,926		1,266			(453)		—
Ssäm Bar (d)(e)	50	%	50	%	—		—			—		(398)
Tin Building by Jean-Georges (d)(e)	65	%	65	%	13,583		11,658			(9,661)		(10,208)
Jean-Georges Restaurants	25	%	25	%	14,370		14,535			(166)		(214)
Strategic Developments:

HHMK Development	50	%	50	%	10		10			—		—
KR Holdings	50	%	50	%	491		486			5		—

West End Alexandria (d)	58	%	58	%	60,291		56,757			34		5

					199,654		206,479			(22,377)		(7,835)
Other equity investments (f)					13,779		13,779			3,242		3,033
Investments in unconsolidated ventures					$	213,433	$	220,258		$	(19,135)	$	(4,802)

(a)Ownership interests presented reflect the Company’s stated ownership interest or if applicable, the Company’s final profit-sharing interest after receipt of any preferred returns based on the venture’s distribution priorities.

(b)The Metropolitan was in a deficit position of $10.5 million at March 31, 2024, and $10.9 million at December 31, 2023, and presented in Accounts payable and other liabilities in the ~~same~~Condensed Consolidated Balance Sheets.

HHC 2024 FORM 10-Q | 10


FINANCIAL STATEMENTS FOOTNOTES			Table of Contents

(c)TEN.m.flats was in a deficit position of $4.0 million at March 31, 2024, and $4.7 million at December 31, 2023, and presented in Accounts payable and other liabilities in the Condensed Consolidated Balance Sheets.

(d)For these equity method investments, various provisions in the venture operating agreements regarding distributions of cash flow based on capital account balances, allocations of profits and losses, and preferred returns may result in the Company’s economic interest differing from its stated interest or final profit-sharing interest. For these investments, the Company recognizes income ~~statement line~~or loss based on the venture’s distribution priorities, which could fluctuate over time and may be different from its stated ownership or final profit-sharing interest.

(e)Classified as a VIE; however, the hedged item. The effective date of the standard is for fiscal periods, and interim periods within those years, beginning after December 15, 2018. The new standard must be adopted using a modified retrospective approach with early adoption permitted. We are currently evaluating the potential impact of this ASU on our consolidated financial statements.

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting~~ to provide clarity and reduce the diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation–Stock Compensation. Stakeholders observed that the definition of the term “modification” is broad and that its interpretation results in diversity in practice. The ASU states that when an entity concludes that a changeCompany is not ~~substantive, then modification accounting does~~the primary beneficiary and accounts for its investment in accordance with the equity method. Refer to discussion below for additional information.

(f)Other equity investments represent investments not ~~apply.~~accounted for under the equity method. The ~~effective date of~~Company elected the ~~standard is for fiscal periods, and interim periods within those years, beginning after December 15, 2017. The new standard must be adopted prospectively~~measurement alternative as these investments do not have readily determinable fair values. There were no impairments, or upward or downward adjustments to an award modified on or after the adoption date. Early adoption is permitted. Once adopted, HHC will apply this guidance to any modifications made to either the stock option or restricted stock award plans.

~~In February 2017, the FASB issued ASU 2017-05,~~ ~~Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)~~. The standard defines an “in-substance non-financial asset” as a financial asset promised to a counterparty in a contract if substantially all the fair value of the assets is concentrated in nonfinancial assets. The ASU also provides guidance for accounting for partial sales of non-financial assets such as real estate. The effective

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

date of the standard is for fiscal periods, and interim periods within those years, beginning after December 15, 2017. The new standard must be adopted retrospectively with early adoption permitted. We are currently evaluating the potential impact of this ASU on our consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350)~~. This standard is intended to simplify the subsequent measurement of goodwill by eliminating step two from the goodwill impairment test. Instead, an entity will perform only step one of its quantitative goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and then recognizing the impairment charge for the amount by which the carrying ~~amount exceeds~~amounts of these securities either during current year or cumulatively. As of March 31, 2024, Other equity investments primarily includes $10.0 million of warrants, which represents cash paid by the ~~reporting unit's fair value. An entity will still have~~Company for the option to ~~perform~~acquire additional ownership interest in Jean-Georges Restaurants. Refer to discussion below for additional detail.

The Lawn Club In 2021, the Company formed HHC Lawn Games, LLC with The Lawn Club NYC, LLC (Endorphin Ventures), to construct and operate an immersive indoor and outdoor restaurant that includes an extensive area of indoor grass, a ~~qualitative assessment for~~stylish clubhouse bar, and a ~~reporting unit to determine if~~wide variety of lawn games. This concept opened in the ~~quantitative step one impairment test is necessary. The effective date~~fourth quarter of 2023. Under the terms of the ~~standard is~~initial agreement, the Company funded 80% of the cost to construct the restaurant, and Endorphin Ventures contributed the remaining 20%. In October 2023, the members executed an amended LLC agreement, in which the Company will fund 90% of any remaining capital requirements, and Endorphin Ventures will contribute the remaining 10%.

The Company will recognize its share of income or loss based on the joint venture distribution priorities, as amended, which could fluctuate over time. Upon return of each member’s contributed capital and a preferred return to HHC, distributions and recognition of income or loss will be allocated to the Company based on its final profit-sharing interest. The Company also entered into a lease agreement with HHC Lawn Games, LLC to lease 20,000 square feet of the Fulton Market Building for ~~fiscal periods,~~this venture.

Ssäm BarIn 2016, the Company formed Pier 17 Restaurant C101, LLC (Ssäm Bar) with MomoPier, LLC (Momofuku) to construct and ~~interim periods within those years, beginning after December 15,~~operate a restaurant and bar at Pier 17 in the Seaport, which opened in 2019. The ~~new standard must be adopted prospectively~~Company recognized its share of income or loss based on the joint venture’s distribution priorities, which could fluctuate over time. During the third quarter of 2023, the Ssäm Bar restaurant closed, and the Company and Momofuku are in the process of dissolving the venture.

Tin Building by Jean-Georges In 2015, the Company, together with ~~early adoption permitted. We do not expect~~VS-Fulton Seafood Market, LLC (Fulton Partner), formed Fulton Seafood Market, LLC (Tin Building by Jean-Georges) to operate a 53,783 square-foot culinary marketplace in the ~~adoption~~historic Tin Building. The Fulton Partner is a wholly owned subsidiary of Jean-Georges Restaurants. The Company purchased a 25% interest in Jean-George Restaurants in March 2022 as discussed below.

The Company owns 100% of the Tin Building and leased 100% of the space to the Tin Building by Jean-Georges joint venture. Throughout this ~~ASU~~report, references to ~~have a material impact on our consolidated financial statements.~~

~~In January 2017,~~ the ~~FASB formally issued,~~Tin Building relate to the Company’s 100% owned landlord operations and ~~we early adopted ASU 2017-01,~~ ~~Business Combinations (Topic 805), Clarifying~~references to the ~~Definition~~Tin Building by Jean-Georges refer to the managed business in which the Company has an equity ownership interest. The Company, as landlord, funded 100% of ~~a Business,~~ ~~as permitted, on a prospective basis.~~the development and construction of the Tin Building. Under the terms of the Tin Building by Jean-Georges LLC agreement, the Company contributes the cash necessary to fund pre-opening, opening, and operating costs of the Tin Building by Jean-Georges. The ~~standard provides criteria to determine when an integrated set of assets and activities~~Fulton Partner is not ~~a business.~~required to make any capital contributions. The ~~criteria requires that when~~Tin Building was completed and placed in service during the third quarter of 2022 and the Tin Building by Jean-Georges culinary marketplace began operations in the third quarter of 2022. Based on capital contribution and distribution provisions for the Tin Building by Jean-Georges, the Company currently receives substantially all of the ~~fair value~~economic interest in the venture. Upon return of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. However, to be considered a business, the set must include, at a minimum, an inputCompany’s contributed capital and a ~~substantive process that together significantly contribute~~preferred return, distributions and recognition of income or loss will be allocated to the ~~ability to create output. Under~~Company based on its final profit-sharing interest.

As of March 31, 2024, the ~~new guidance,~~Tin Building by Jean-Georges is classified as a VIE because the ~~acquisition~~equity holders, as a group, lack the characteristics of a property with an in-place lease generally will no longer be accounted for as an acquisition of a business, but instead as an asset acquisition, meaning the transaction costs of such an acquisition will now be capitalized instead of expensed. Our adoption didcontrolling financial interest. The Company further concluded that it is not ~~have a material impact on our accounting for acquisitions.~~

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows – Restricted Cash~~, which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The effective date of the standard is for fiscal periods, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period, but any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The new standard must be adopted retrospectively. ASU 2016-18 will impact our presentation of operating, investing and financing activities related to restricted cash on our consolidated statements of cash flows.

~~In October 2016, the FASB issued ASU 2016-17,~~ ~~Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control~~. The standard requires reporting entities to evaluate whether they should consolidate a variable interest entity (“VIE”) in certain situations involving entities under common control. Specifically, the standard changes the evaluation of whether a reporting entity is the primary beneficiary of athe VIE by changing how a reporting entity that is a single decision maker of a VIE treats indirect interests in the entity held through related parties that are under common control with the reporting entity. The new standard was effective January 1, 2017, and must be adopted retrospectively. We currently have no VIEs involving entities under common control, and accordingly, adoption of this ASU had no impact on our consolidated financial statements.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments~~. The standard addresses how certain cash receipts and payments are presented and classified in the statement of cash flows, including debt extinguishment costs, distributions from equity method investees and contingent consideration payments made after a business combination. The effective date of this standard is for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. The new standard must be adopted retrospectively. ASU 2016-15 will impact our presentation of operating, investing and financing activities related to certain cash receipts and payments on our consolidated statements of cash flows.

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments – Credit Losses~~. The standard modifies the impairment model for most financial assets, including trade accounts receivables and loans, and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The effective date of the standard is for fiscal years, and for interim periods within those years, beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the adoption of ASU 2016-13 on our consolidated financial statements but do not anticipate significant impact.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. The standard amends several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements,~~ as ~~well as classification in the statement of cash flows. We adopted the ASU as of January 1, 2017, and~~ it ~~did~~does not have ~~a material~~the power to direct the restaurant-related activities that most significantly impact ~~on our accounting for excess tax benefits and tax deficiencies as our stock compensation plans, which permit net-share settlement, had minimal vesting and exercise activity prior~~its economic performance. As the Company is unable to January 1, 2017. The new guidance requires entities to recognize all income tax effects of awards in the income statement when the awards vest or are settled, in contrast to prior guidance wherein such effects are recorded in additional paid-in capital (“APIC”). The amounts recorded in APIC prior to our adoption remain in APIC per the new standard. The new standard also allows an employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. Our plans allow us, at the employee’s request, to withhold shares with a fair value up toquantify the amount of ~~tax owed using~~additional capital contributions that may be funded in the future associated with this investment, the Company’s maximum ~~statutory tax rate for~~exposure to loss as of March 31, 2024, is equal to the employee’s applicable jurisdiction. We elected to continue to estimate forfeitures as allowed by an election under the new guidance. Our condensed consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 present excess tax benefits as an operating activity and employee taxes paid as a financing activity as required by ASU 2016-09.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~. ASU 2016-02 is codified in Accounting Standards Codification (“ASC”) 842. The standard amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The effective date of this standard is for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application. We are currently evaluating the impact of adopting ASU 2016-02 on our consolidated financial statements. We anticipate a material increase to our assets and liabilities as we will be required to capitalize our ground leases, office leases and certain office equipment where we are the lessee. We will also be considering certain services that are considered non-lease components such as common area maintenance under the new guidance. Upon adoption of ASC 842, these services will be accounted for under ASU 2014-09, ~~Revenues from Contracts with Customers (Topic 606), which is further discussed below.~~

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~ which will require entities to recognize changes in equity investments with readily determinable fair values in net income. For equity investments without readily determinable fair values, the ASU permits the application of a measurement alternative using the cost$13.6 million carrying value of the investment less any impairments, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer. The effective date of the standard is for fiscal periods, and interim periods within those years, beginning after December 15, 2017, and must be adopted via a cumulative-effect adjustment to the balance sheet as of that date. The Company funded capital contributions of $11.6 million for the ~~beginning of~~three months ended March 31, 2024, and $48.1 million for the ~~fiscal~~ year ~~of adoption. We are currently evaluating the potential impact of this ASU on our consolidated financial statements.~~

~~In May 2014, the FASB and International Accounting Standards Board issued ASU 2014-09. The standard’s core principle~~

ended December 31, 2023.

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FINANCIAL STATEMENTS FOOTNOTES			Table of Contents

~~Table~~Jean-Georges Restaurants In March 2022, the Company acquired a 25% interest in JG Restaurant HoldCo LLC (Jean-Georges Restaurants) for $45.0 million from JG TopCo LLC (Jean-Georges). Jean-Georges Restaurants currently has over 40 hospitality offerings and a pipeline of ~~Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange~~new concepts. The Company accounts for those goods or services. The ASU requires companies to identify performance obligations in the contract, estimate the amount of variable consideration to include in the transaction price and allocate the transaction price to each separate performance obligation. The effective date of this standard is for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. We have concluded that after adoption we will not be able to recognize revenue for condominium projects on a percentage of completion basis, and generally revenue will be recognized when the units close and the title has transferred to the buyer. Adoption of the ASU will also impact the timing of recognition and classification of certain real estate selling costs, such as the costs related to our condominium model units. Currently, these selling costs are capitalized as real estate project costs and recognized as costs of sales on a percentage of completion basis in our consolidated financial statements. Under the new guidance, some of these costs may need to be expensed immediately or will be capitalized as property and equipment and depreciated over their estimated useful life. Entities have the option of using either a full retrospective or a modified retrospective approach. We have elected to apply a modified retrospective approach of adoption. We are continuing to evaluate the new guidance to determine all impacts to our consolidated financial statements.

~~NOTE 3 WARRANTS~~

On November 9, 2010, we entered into warrant agreements at an exercise price of $50.00 per share to purchase 1,916,667 shares of our common stock (the “Sponsor Warrants”) to certain funds of Pershing Square Capital Management, L.P. (“Pershing Square”). In November 2010 and February 2011, we entered into certain warrant agreements (the “Management Warrants”) with David R. Weinreb, our Chief Executive Officer, Grant Herlitz, our President, and Andrew C. Richardson, our former Chief Financial Officer, in each case prior to his appointment to such position, to purchase 2,367,985, 315,731 and 178,971 shares, respectively, of our common stock. The Management Warrants were granted at fair value in exchange for a combined total of approximately $19.0 million in cash from such executives at the commencement of their respective employment. Mr. Weinreb and Mr. Herlitz’s warrants became exercisable in November 2016 and had an exercise price of $42.23 per share, and Mr. Richardson’s warrants became exercisable in February 2017 and had an exercise price of $54.50 per share.

~~Pershing Square exercised~~ its ~~Sponsor Warrants on June 30, 2017, resulting in a net issuance of 1,136,517 shares~~ownership interest in accordance with the ~~warrant provisions. Mr. Herlitz exercised his Management Warrants in early January 2017, resulting in~~equity method. Under the ~~net issuance~~terms of ~~198,184 shares in accordance~~the agreement, all cash distributions and the recognition of income-producing activities will be pro rata based on stated ownership interest.

Concurrent with the warrant provisions. Mr. Herlitz also donated 6,850 shares to a charitable trust, which were net share settled for 4,400 shares in accordance with the warrant provisions. In February, March and June 2017, Mr. Richardson exercised his Management Warrants, resulting in the net issuance of 98,549 shares in accordance with the warrant provisions. In June 2017, Mr. Weinreb exercised his Management Warrants, resulting in the net issuance of 1,614,803 shares in accordance with the warrant provisions.

As of September 30, 2017, all Sponsor Warrants and Management Warrants have been exercised. The fair values for the Sponsor Warrants and Management Warrants as of December 31, 2016 were recorded as liabilities because the holders of these warrants could require us to settle such warrants in cash upon a change of control. The estimated fair values for the outstanding Sponsor Warrants and Management Warrants were $123.5 million and $208.7 million, respectively, as of December 31, 2016. The fair values were estimated using an option pricing model and Level 3 inputs due to the unavailability of comparable market data, as further discussed in Note 7 – ~~Fair Value of Financial Instruments~~ ~~in our Condensed Consolidated Financial Statements. Decreases and increases in the fair value~~Company’s acquisition of the ~~Sponsor and Management Warrants were recognized as warrant liability gains or losses~~25% interest in Jean-Georges Restaurants, the ~~Condensed Consolidated Statements of Operations.~~

~~On October 7, 2016, we~~Company entered into a warrant agreement with ~~our new Chief Financial Officer, David R. O’Reilly (the “O’Reilly Warrant”), prior~~Jean-Georges. The Company paid $10.0 million for the option to ~~his appointment~~acquire up to an additional 20% interest in Jean-Georges Restaurants at a fixed exercise price per share subject to certain anti-dilution provisions. Should the ~~position. Upon exercise of~~warrant agreement be exercised by the ~~O’Reilly Warrant, Mr. O’Reilly may~~

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~acquire 50,125 shares of common stock at an~~Company, the $10.0 million will be credited against the aggregate exercise price of ~~$112.08~~the warrants. Per the agreement, the $10.0 million is to be used for working capital of Jean-Georges Restaurants. The warrant became exercisable on March 2, 2022, subject to automatic exercise in the event of dissolution or liquidation, and will expire on March 2, 2026. As of March 31, 2024, this warrant had not been exercised. The Company elected the measurement alternative for this purchase option as the equity security does not have a readily determinable fair value. As such, the investment is measured at cost, less any identified impairment charges.

Creative Culinary Management Company, LLC (CCMC), a wholly owned subsidiary of Jean-Georges Restaurants, provides management services for certain retail and food and beverage businesses that the Company owns, either wholly or through partnerships with third parties. The Company’s businesses managed by CCMC include the Tin Building by Jean-Georges, The Fulton, and Malibu Farm. Additionally, in October 2023, the Lawn Club venture executed a management agreement with CCMC. Pursuant to the various management agreements, CCMC is responsible for employment and supervision of all employees providing services for the food and beverage operations and restaurant as well as the day-to-day operations and accounting for the food and beverage operations.

The Summit In 2015, the Company formed DLV/HHPI Summerlin, LLC (The Summit) with Discovery Land Company (Discovery) to develop a custom home community in Summerlin.

Phase I The Company contributed land with a carrying value of $13.4 million and transferred SID bonds related to such land with a carrying value of $1.3 million to The Summit at the agreed upon capital contribution value of $125.4 million, or $226,000 per ~~share.~~acre, and has no further capital obligations. Discovery is required to fund up to a maximum of $30.0 million of cash as their capital contribution, of which $3.8 million has been contributed. The ~~O’Reilly Warrant was issued~~Company has received its preferred return distributions and recognizes its share of income or loss for Phase I based on its final profit-sharing interest.

Phase II In July 2022, the Company contributed an additional 54 acres to The Summit (Phase II land) with a fair value of $21.5 million. The Company recognized an incremental equity method investment at fair value and recognized a gain of $13.5 million recorded in Equity in earnings (losses) from unconsolidated ventures. This gain is the result of marking the cost basis of the land contributed to its estimated fair value at the time of contribution. The Phase II land is adjacent to the existing Summit development and includes approximately 28 custom home sites. The first lot sales closed in the first quarter of 2023. The Company will receive distributions and recognize its share of income or loss for Phase II based on the joint venture’s distribution priorities in the amended Summit LLC agreement, which could fluctuate over time. Upon receipt of the Company’s preferred returns, distributions and recognition of income or loss will be allocated to the Company based on its final profit-sharing interest.

Floreo In the fourth quarter of 2021, simultaneous with the Teravalis land acquisition, the Company closed on the acquisition of a 50% interest in Trillium Development Holding Company, LLC (Floreo) for $59.0 million and entered into a Limited Liability Company Agreement (LLC Agreement) with JDM Partners and El Dorado Holdings to develop Floreo, the first village within the new Teravalis MPC, on 3,029 acres of land in the greater Phoenix, Arizona area. The first land sales closed in the first quarter of 2024.

In October 2022, Floreo closed on a $165.0 million financing, with outstanding borrowings of $96.1 million as of March 31, 2024. The Company provided a guarantee on this financing in the form of a collateral maintenance obligation and received a guarantee fee of $5.0 million. The financing and related guarantee provided by the Company triggered a reconsideration event and as of December 31, 2022, Floreo was classified as a VIE. Due to rights held by other members, the Company does not have a controlling financial interest in Floreo and is not the primary beneficiary. As of March 31, 2024, the Company’s maximum exposure to loss on this investment is limited to the $57.1 million aggregate carrying value as the Company has not made any other firm commitments to fund amounts on behalf of this VIE, and cash collateral that the Company may be obligated to post related to its collateral maintenance obligation. See Note 9 - Commitments and Contingencies for additional information related to the Company’s collateral maintenance obligation.

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FINANCIAL STATEMENTS FOOTNOTES			Table of Contents

West End Alexandria In the fourth quarter of 2021, the Company entered into an Asset Contribution Agreement with Landmark Land Holdings, LLC (West End Alexandria) to redevelop a 52-acre site previously known as Landmark Mall. Other equity owners include Foulger-Pratt Development, LLC (Foulger-Pratt) and Seritage SRC Finance (Seritage). The Company conveyed its 33-acre Landmark Mall property with an agreed upon fair value of $56.0 million and Seritage conveyed an additional 19 acres of land with an agreed upon fair value of $30.0 million to West End Alexandria in exchange for equity interest. Additionally, Foulger-Pratt agreed to contribute $10.0 million to West End Alexandria. Also in the fourth quarter of 2021, West End Alexandria executed a ~~$1.0~~Purchase and Sale Agreement with the City of Alexandria to sell approximately 11 acres to the City of Alexandria. The City will lease this land to Inova Health Care Services for construction of a new hospital.

Development plans for the remaining 41-acre property include approximately four million ~~payment in cash from Mr. O’Reilly. The O’Reilly Warrant becomes exercisable on April 6, 2022, subject to earlier exercise upon certain change in control, separation~~square feet of residential, retail, commercial, and ~~termination provisions. On June 16, 2017, we also entered~~entertainment offerings integrated into a ~~new warrant agreement (the “Weinreb Warrant”)~~cohesive neighborhood with ~~Mr. Weinreb~~a central plaza, a network of parks and public transportation. Foulger-Pratt will manage construction of the development. Demolition began in the second quarter of 2022 and was completed in 2023, with completion of infrastructure work expected in 2025.

The Company does not have the ability to ~~acquire 1,965,409 shares~~control the activities that most impact the economic performance of ~~common stock~~the venture as Foulger-Pratt is the managing member and manages all development activities. As such, the Company accounts for ~~the purchase price of $50.0 million. On August 29, 2017, Mr. Weinreb paid the $50.0 million purchase price in cash~~its ownership interest in accordance with the ~~terms~~equity method.


3. Acquisitions and Dispositions

AcquisitionsIn May 2023, the Company acquired the Grogan’s Mill Village Center and related anchor site, a retail property in The Woodlands, Texas consisting of ~~the warrant agreement.~~approximately 8.7 acres for $5.9 million in an asset acquisition. The Weinreb Warrant becomes exercisable on June 15, 2022, at an exercise price of $124.64 per share, subject to earlier exercise upon certain change in control, separation and termination provisions. The O’Reilly Warrant and the Weinreb Warrant, which qualify as equity instruments, are included within additional paid-in capitalproperty is being held in the ~~Condensed Consolidated Balance Sheets at September 30, 2017~~Strategic Developments segment.

Dispositions Gains and ~~December 31, 2016. On October 4, 2017, we entered into a new warrant agreement with Mr. Herlitz~~losses on asset dispositions are recorded to ~~acquire 87,951 shares~~Gain (loss) on sale or disposal of common stock for the purchase price of $2.0 million (the “Herlitz Warrant”). The Herlitz Warrant becomes exercisable on October 3, 2022, at an exercise price of $117.01 per share, subject to earlier exercise upon certain change in control, separation and termination provisions.

~~NOTE 4 EARNINGS PER SHARE~~

Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted‑average number of common shares outstanding. Diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all potentially dilutive common shares. The dilutive effect of options and nonvested stock issued under stock‑based compensation plans is computed using the treasury stock method. The dilutive effect of the warrants is computed using the if‑converted method prior to their exercise.

~~Information related to our EPS calculations is summarized as follows:~~

Three Months Ended September 30,

Nine Months Ended September 30,
(In thousands, except per share amounts)

2017

2016

2017

2016
Basic EPS:

Numerator:

Net income

$
10,516

$
7,996

$
19,295

$
158,731
Net income attributable to noncontrolling interests

(12)

(23)

(12)

(23)
Net income attributable to common stockholders

$
10,504

$
7,973

$
19,283

$
158,708

Denominator:

Weighted average basic common shares outstanding

$
42,845

$
39,502

$
40,860

$
39,489

Diluted EPS:

Numerator:

Net income attributable to common stockholders

$
10,504

$
7,973

$
19,283

$
158,708

Denominator:

Weighted average basic common shares outstanding

42,845

39,502

40,860

39,489
Restricted stock and stock options

420

366

455

338
Warrants

2

2,892

1,783

2,892
Weighted average diluted common shares outstanding

43,267

42,760

43,098

42,719

Basic income per share:

$
0.25

$
0.20

$
0.47

$
4.02

Diluted income per share:

$
0.24

$
0.19

$
0.45

$
3.72

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

The diluted EPS computation for the three and nine months ended September 30, 2017 excludes 311,500 and 317,000 stock options, respectively, because their inclusion would have been anti-dilutive. The diluted EPS computation for the three and nine months ended September 30, 2017 excludes 185,573 ~~shares of restricted stock, because market conditions have not been met.~~

The diluted EPS computation for the three and nine months ended September 30, 2016 excludes 343,500 and 404,000 stock options, respectively, because their inclusion would have been anti-dilutive. The diluted EPS computation for the three and nine months ended September 30, 2016 excludes 153,781 shares of restricted stock, respectively, because performance conditions have not been met.

~~NOTE 5 RECENT TRANSACTIONS~~

On May 4, 2017, we announced that Bank of America will serve as the lead anchor tenant to the 51-story, Class A downtown office building at 110 North Wacker Drive in Chicago, Illinois. The lease accounts for more than a third of the Goettsch-designed 1.35 million square-foot high-rise. Construction is scheduled to start in the spring of 2018, with a late 2020 opening expected. In conjunction with this transaction, on April 28, 2017, we exercised our termination option in the current lease with the tenant who occupies the existing 110 North Wacker building. The tenant will continue to occupy the building until January 2018 but will no longer pay the $6.1 million annual rent or any operating expenses which were previously paid 100% by the tenant.

On March 16, 2017, we offered, sold and issued $800.0 million in aggregate principal amount of 5.375% senior notes due March 15, 2025 (the “2025 Notes”) to Qualified Institutional Buyers (as defined in the Securities Act of 1933) in accordance with Rule 144A and non-U.S. persons in accordance with Regulation S and completed a tender offer and consent solicitation for any and all of our $750.0 million existing 6.875% senior notes due October 1, 2021. We used the net proceeds from the sale of our 2025 Notes to redeem all of the 6.875% senior notes and to pay related transaction fees and expenses. On June 12, 2017, we issued an additional $200.0 million of the 2025 Notes at a premium to par of 2.25%. We used a portion of the proceeds to repay construction financings and fund ongoing development projects and general corporate needs. Interest on the 2025 Notes is paid semi-annually, on March 15th and September 15th of each year, beginning on September 15, 2017. At any time prior to March 15, 2020, we may redeem all or a portion of the 2025 Notes at a redemption price equal to 100% of the principal plus a “make-whole” declining call premium. At any time prior to March 15, 2020, we may also redeem up to 35% of the 2025 Notes at a price of 105.375% with net cash proceeds of certain equity offerings, plus accrued and unpaid interest. The 2025 Notes contain customary terms and covenants and have no financial maintenance covenants.

On March 1, 2017 (the “Acquisition Date”), we acquired our joint venture partner’s 50.0% interest in the Las Vegas 51s minor league baseball team for $16.4 million and became the sole owner of this Triple-A baseball team. We recognized a gain of $5.4 million in Gain on acquisition of joint venture partner's interest in conjunction with this acquisition relating to the step-up to fair value of the assets acquired. The estimated fair values of the assets acquired and liabilities assumed disclosed as of March 31, 2017 were provisional as they were pending final determinations of the fair value of the intangible assets existing as of the Acquisition Date. Using the income approach, the final adjustments made as of September 30, 2017 to the allocated fair values included a $0.4 million contingent liability recorded in Accounts payable and accrued expenses per the terms of the purchase agreement relating to a credit for the use of seats in a future stadium for the team, if and when constructed by us, and an adjustment to allocate $7.9 million to finite-lived intangibles, which have a weighted average amortization period of 11 years, and $24.9 million to indefinite-lived intangibles, primarily related to the franchise relationship agreement, all of which is recorded in Prepaid expensesreal estate and other assets, net. Accordingly, the adjusted values of assets acquired and liabilities assumed and consolidated into our financial statements total $36.0 million and $3.2 million, respectively, and are included in our Operating Assets segment. ~~Prior to the acquisition, we~~

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

accounted for our investment in the Las Vegas 51s under the equity method within Investment in Real Estate and Other Affiliates and recognized a loss of $0.2 million in equity in earnings for the nine months ended September 30, 2017. Includednet in the Condensed Consolidated Statements of Operations, ~~from~~unless otherwise noted.

Operating Assets In February 2024, the ~~Acquisition Date through September 30, 2017 are revenues~~Company completed the sale of ~~$6.8~~Creekside Park Medical Plaza, a 32,689 square-foot medical office building in The Woodlands, Texas, for $14.0 million, ~~and pre-tax net income from operations~~resulting in a gain of ~~$0.5~~$4.8 million.

~~NOTE 6 IMPAIRMENT~~

~~We review our real estate~~

In December 2023, the Company completed the sale of Memorial Hermann Medical Office, a 20,000 square-foot medical office building in The Woodlands, Texas, for $9.6 million, resulting in a gain of $3.2 million.

In July 2023, the Company completed the sale of two self-storage facilities with a total of 1,370 storage units in The Woodlands, Texas, for $30.5 million, resulting in a gain of $16.1 million.

In March 2023, the Company completed the sale of two land parcels in Honolulu, Hawai‘i, including an 11,929-square-foot building at the Ward Village Retail property, for total consideration of $6.3 million, resulting in a gain of $4.7 million.

HHC 2024 FORM 10-Q | 13


FINANCIAL STATEMENTS FOOTNOTES			Table of Contents


4. Impairment

The Company reviews its long-lived assets for potential impairment indicators ~~whenever~~when events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment or disposal of long‑lived assets in accordance with ASC 360 requires that if impairment indicators exist and expected undiscounted cash flows generated by the asset over ~~our~~an anticipated holding period are less than its carrying amount, an impairment provision should be recorded to write down the carrying amount of the asset to its fair value. The impairment analysis does not consider the timing of future cash flows and whether the asset is expected to earn an ~~above~~above- or ~~below market~~below-market rate of return.

~~Each~~ No impairment charges were recorded during the three months ended March 31, 2024 and 2023.

The Company periodically evaluates strategic alternatives with respect to each property and may revise the strategy from time to time, including the intent to hold the asset on a long-term basis or the timing of potential asset dispositions. For example, the Company may decide to sell property that is held for use, and the sale price may be less than the carrying amount. As a result, changes in strategy could result in impairment charges in future periods.

The Company evaluates each investment in ~~Real Estate and Other Affiliates as~~an unconsolidated venture discussed in Note ~~8 –~~ ~~Real Estate and Other Affiliates~~ ~~is evaluated~~2 - Investments in Unconsolidated Ventures periodically for recoverability and valuation declines that are other-than-temporary. If the decrease in value of ~~our~~an investment ~~in a Real Estate and Other Affiliate~~ is deemed to be other-than-temporary, ~~our~~the investment ~~in such Real Estate and Other Affiliate~~ is reduced to its estimated fair value.

No impairment charges were recorded during the three ~~and nine~~ months ended March 31, 2024 and 2023.


5. Other Assets and Liabilities

Other Assets, Net The following table summarizes the significant components of Other assets, net:


thousands	March 31, 2024		December 31, 2023
Security, escrow, and other deposits	$	83,708	$	81,891
Special Improvement District receivable, net	75,447		74,899
In-place leases, net	34,447		35,490
Intangibles, net	21,076		21,894
Other	18,034		17,857
Interest rate derivative assets	14,856		10,318
Prepaid expenses	13,789		16,984
Tenant incentives and other receivables, net	11,301		10,840
TIF receivable, net	3,807		6,371
Net investment in lease receivable	2,823		2,883
Notes receivable, net	1,088		1,558
Condominium inventory	562		671








Other assets, net	$	280,938	$	281,656

Accounts Payable and Other LiabilitiesThe following table summarizes the significant components of Accounts payable and other liabilities:


thousands	March 31, 2024		December 31, 2023
Condominium deposit liabilities	$	528,536	$	478,870
Construction payables	297,086		257,227
Deferred income	112,608		118,432
Tenant and other deposits	45,165		29,976
Accounts payable and accrued expenses	35,935		49,337
Accrued interest	30,305		54,301
Accrued real estate taxes	23,477		30,096
Other	19,534		24,461
Accrued payroll and other employee liabilities	13,336		32,046











Accounts payable and other liabilities	$	1,105,982	$	1,074,746

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FINANCIAL STATEMENTS FOOTNOTES			Table of Contents


6. Mortgages, Notes, and Loans Payable, Net

Mortgages, Notes, and Loans Payable, Net Mortgages, notes, and loans payable, net are summarized as follows:


thousands	March 31, 2024		December 31, 2023
Fixed-rate debt
Senior unsecured notes	$	2,050,000	$	2,050,000
Secured mortgages payable	1,482,958		1,485,494
Special Improvement District bonds	64,928		65,627
Variable-rate debt (a)
Secured Bridgeland Notes	475,000		475,000

Secured mortgages payable	1,365,049		1,276,489

Unamortized deferred financing costs (b)	(46,692)		(49,990)
Mortgages, notes, and loans payable, net	$	5,391,243	$	5,302,620

(a)The Company has entered into derivative instruments to manage the variable interest rate exposure. See Note 8 - Derivative Instruments and Hedging Activities for additional information.

(b)Deferred financing costs are amortized to interest expense over the initial contractual term of the respective financing agreements using the effective interest method (or other methods which approximate the effective interest method).

As of March 31, 2024, land, buildings and equipment, developments, and other collateral with a net book value of $4.9 billion have been pledged as collateral for the Company’s mortgages, notes, and loans payable.

Senior Unsecured Notes During 2020 and 2021, the Company issued $2.1 billion of aggregate principal of senior unsecured notes. These notes have fixed rates of interest that are payable semi-annually and are interest only until maturity. These debt obligations are redeemable prior to the maturity date subject to a “make-whole” premium which decreases annually until 2026 at which time the redemption make-whole premium is no longer applicable. The following table summarizes the Company’s senior unsecured notes by issuance date:


$ in thousands	Principal		Maturity Date	Interest Rate
August 2020	$	750,000	August 2028	5.375%
February 2021	650,000		February 2029	4.125%
February 2021	650,000		February 2031	4.375%
Senior unsecured notes	$	2,050,000

Secured Mortgages Payable The Company’s outstanding mortgages are collateralized by certain of the Company’s real estate assets. Certain of the Company’s loans contain provisions that grant the lender a security interest in the operating cash flow of the property that represents the collateral for the loan. Certain mortgage notes may be prepaid subject to a prepayment penalty equal to a yield maintenance premium, defeasance, or a percentage of the loan balance. Construction loans related to the Company’s development properties are generally variable-rate, interest-only, and have maturities of five years or less. Debt obligations related to the Company’s operating properties generally require monthly installments of principal and interest.

The following table summarizes the Company’s Secured mortgages payable:


	March 31, 2024						December 31, 2023
$ in thousands	Principal		Range of Interest Rates	Weighted-average Interest Rate		Weighted-average Years to Maturity	Principal		Range of Interest Rates	Weighted-average Interest Rate		Weighted-average Years to Maturity
Fixed rate (a)	$	1,482,958	3.13% - 8.67%	4.46	%	7.0	$	1,485,494	3.13% - 8.67%	4.46	%	7.2
Variable rate (b)	1,365,049		7.07% - 10.41%	8.75	%	1.9	1,276,489		7.08% - 10.48%	8.73	%	2.2
Secured mortgages payable	$	2,848,007	3.13% - 10.41%	6.52	%	4.5	$	2,761,983	3.13% - 10.48%	6.44	%	4.9

(a)Interest rates presented are based upon the coupon rates of the Company’s fixed-rate debt obligations.

(b)Interest rates presented are based on the applicable reference interest rates as of March 31, 2024, and December 31, 2023, excluding the effects of interest rate derivatives.

HHC 2024 FORM 10-Q | 15


FINANCIAL STATEMENTS FOOTNOTES			Table of Contents

The Company has entered into derivative instruments to manage its variable interest rate exposure. The weighted-average interest rate of the Company’s variable-rate mortgages payable, inclusive of interest rate derivatives, was 8.04% as of March 31, 2024, and 7.98% as of December 31, 2023. See Note 8 - Derivative Instruments and Hedging Activities for additional information.

The Company’s secured mortgages mature over various terms through September ~~30, 2017.~~ 2052. On certain of its debt obligations, the Company has the option to exercise extension options, subject to certain terms, which may include minimum debt service coverage, minimum occupancy levels or condominium sales levels, as applicable, and other performance criteria. In certain cases, due to property performance not meeting identified covenants, the Company may be required to pay down a portion of the loan to exercise the extension option.

During 2024, the Company’s mortgage activity included draws on existing mortgages of $89.0 million and repayments of $3.7 million. 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.

Special Improvement District Bonds The Summerlin MPC uses SID bonds to finance certain common infrastructure improvements. These bonds are issued by the municipalities and are secured by the assessments on the land. The majority of proceeds from each bond issued is held in a construction escrow and disbursed to the Company as infrastructure projects are completed, inspected by the municipalities, and approved for reimbursement. Accordingly, the SID bonds have been classified as debt, and the Summerlin MPC pays the debt service on the bonds semi‑annually. As Summerlin sells land, the buyers assume a proportionate share of the bond obligation at closing, and the residential sales contracts provide for the reimbursement of the principal amounts that the Company previously paid with respect to such proportionate share of the bond. These bonds bear interest at fixed rates ranging from 4.13% to 7.00% with maturities ranging from 2025 to 2053 as of March 31, 2024. During the three months ended March 31, 2024, no obligations were assumed by buyers and no SID bonds were issued.

Secured Bridgeland Notes In September 2021, the Company closed on a $275.0 million financing with maturity in 2026. This financing is secured by MUD receivables and land in Bridgeland. The loan required a $27.5 million fully refundable deposit and has an interest rate of 7.62%. In December 2022, the borrowing capacity of this obligation was expanded from $275.0 million to $475.0 million. An additional $67.0 million was drawn in the second quarter of 2023 and $133.0 million was drawn in the third quarter of ~~2016, we implemented a plan~~2023, bringing outstanding borrowings to ~~sell Park West, a non-core, 249,177 square foot open-air shopping, dining and entertainment destination~~$475.0 million as of March 31, 2024.

Debt Compliance As of March 31, 2024, the Company was in Peoria, Arizona and recognized a $35.7 million impairment charge during the third quarter of 2016 due to our shorter than previously anticipated holding period. The $34.9 million net carrying value of Park West, after the impairment, represented our best estimate of its current fair market value at September 30, 2016. On December 29, 2016, we sold Park West for $32.5 million, recognized a loss of $1.1 million, net of transaction costs, in conjunctioncompliance with all property-level debt covenants with the ~~sale and redeployed~~exception of six property-level debt instruments. As a result, the excess net cash ~~proceeds~~flow after debt service from ~~this unleveraged asset into our existing developments.~~

~~The following table summarizes our provision~~the underlying properties became restricted. While the restricted cash could not be used for ~~impairment:~~

general corporate purposes, it could be used to fund operations of the underlying assets and did not have a material impact on the Company’s liquidity or its ability to operate these assets.

Provision for impairment as of September 30,
Impaired Asset

Location

Method of Determining Fair Value

2017

2016

(In thousands)
Operating Assets:

Park West

Peoria, AZ

Discounted cash flow analysis using capitalization rate of 6.75%

$
—

$
35,734

~~NOTE 7 FAIR VALUE~~

HHC 2024 FORM 10-Q | 16


FINANCIAL STATEMENTS FOOTNOTES			Table of Contents


7. Fair Value

ASC 820, Fair Value Measurement, emphasizes that fair value is a market-based measurement that should be determined using assumptions market participants would use in pricing an asset or liability. The standard establishes a ~~hierarchal~~hierarchical disclosure framework ~~which~~that prioritizes and ranks the level of market price observability used in measuring assets or liabilities at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the asset or liability. Assets or liabilities with readily available active quoted prices, or for which fair value can be measured from actively quoted prices, generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

The following table presents the fair value measurement hierarchy levels required under ASC 820 for ~~each of our~~the Company’s assets ~~and liabilities~~ that are measured at fair value on a recurring ~~basis:~~

September 30, 2017

December 31, 2016

Fair Value Measurements Using

Fair Value Measurements Using
(In thousands)

Total

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Assets:

Cash equivalents

$
50,041

$
50,041

$
—

$
—

$
18

$
18

$
—

$
—
Interest rate swap derivative assets

3,244

—

3,244

—

—

—

—

—
Liabilities:

Interest rate swap derivative liabilities

7,742

—

7,742

—

(149)

—

(149)

—
Warrants

—

—

—

—

332,170

—

—

332,170

~~Cash equivalents consist of registered money market mutual funds which are invested in United States Treasury bills~~basis. The Company does not have any liabilities that are ~~valued~~measured at a fair value on a recurring basis for the ~~net asset value of the underlying shares in the funds as of the close of business at the end of each period.~~

periods presented.


	March 31, 2024											December 31, 2023
	Fair Value Measurements Using											Fair Value Measurements Using
thousands	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Interest rate derivative assets	$	14,856		$	—		$	14,856		$	—	$	10,318		$	—		$	10,318		$	—

The fair values of interest rate ~~swaps~~derivatives are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates derived from observable market interest rate curves.

~~The following table presents a rollforward of the valuation of our Sponsor Warrants and Management Warrants:~~

(In thousands)

2017

2016
Balance as of January 1

$
332,170

$
307,760
Warrant liability loss (a)

43,443

21,630
Exercises of Sponsor and Management Warrants

(375,613)

—
Balance as of September 30

$
—

$
329,390

~~(a)~~

Represents losses recognized during 2017 relating to each warrant prior to the respective exercise date. For 2016, represents unrealized losses recorded for outstanding warrants at the end of the period. Changes in the fair value of the Sponsor Warrants and Management Warrants prior to exercise were recognized in net income as a warrant liability gain or loss.

The valuation of warrants is based on an option pricing valuation model, utilizing inputs which were classified as Level 3 due to the unavailability of comparable market data. The inputs to the valuation model included the fair value of stock related to the warrants, exercise price and term of the warrants, expected volatility, risk-free interest rate and dividend yield. Generally, an increase in expected volatility would increase the fair value of the liability, but the impact of the volatility on fair value diminishes as the market value of the stock increases above the strike price. As the period of restriction lapses, the marketability discount reduces to zero and increases the fair value of the warrants.

All Sponsor and Management Warrants were exercised as of September 30, 2017. The significant unobservable inputs used in the fair value measurement of our warrant liabilities as of December 31, 2016 were as follows:

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~


	~~Unobservable Inputs~~
	Expected Volatility (a)	Marketability Discount (b)
~~September 30, 2017 (c)~~	~~N/A~~	~~N/A~~
~~December 31, 2016~~	~~31.0%~~	~~0.0% - 1.0%~~

~~(a)~~

~~Based on our implied equity volatility.~~

~~(b)~~

~~Represents the discount rate for lack of marketability of the Management Warrants which decreases as the current date approaches the dates of contractual expiration of the marketability restrictions.~~

~~(c)~~

~~See Note 3 –~~ ~~Warrants~~ ~~for additional information.~~

The estimated fair values of ~~our~~the Company’s financial instruments that are not measured at fair value on a recurring basis are as follows:

September 30, 2017

December 31, 2016
(In thousands)

Fair Value
Hierarchy

Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value
Assets:

Cash

Level 1

$
551,893

$
551,893

$
665,492

$
665,492
Accounts receivable, net (a)

Level 3

9,654

9,654

10,038

10,038

Liabilities:

Fixed-rate debt (b)

Level 2

$
1,508,746

$
1,529,282

$
1,184,141

$
1,224,573
Variable-rate debt (b)

Level 2

1,505,534

1,505,534

1,524,319

1,524,319


		March 31, 2024				December 31, 2023
thousands	Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Cash and Restricted cash	Level 1	$	891,830	$	891,830	$	1,053,057	$	1,053,057
Accounts receivable, net (a)	Level 3	111,117		111,117		115,045		115,045
Notes receivable, net (b)	Level 3	1,088		1,088		1,558		1,558

Liabilities:
Fixed-rate debt (c)	Level 2	3,597,886		3,264,288		3,601,121		3,294,431
Variable-rate debt (c)	Level 2	1,840,049		1,840,049		1,751,489		1,751,489

~~(a)~~

~~Accounts receivable, net, is shown net of an allowance of $8.6 million and $7.9 million at September 30, 2017 and December 31, 2016, respectively.~~

(a)Accounts receivable, net is shown net of an allowance of $15.7 million at March 31, 2024, and $15.0 million at December 31, 2023. Refer to Note 1 - Presentation of Financial Statements and Significant Accounting Policies for additional information on the allowance.

~~(b)~~

~~Excludes related unamortized financing costs.~~

(b)Notes receivable, net is shown net of an immaterial allowance at March 31, 2024, and December 31, 2023.

(c)Excludes related unamortized financing costs.

The carrying amounts of Cash and Restricted cash, Accounts receivable, net, and Notes receivable, net approximate fair value because of the short‑term maturity of these instruments.

The fair value of ~~our 2025~~the Company’s Senior Notes, included in fixed-rate debt in the table above, is based upon the trade price closest to the end of the period presented. The fair value of other fixed-rate debt in the table above ~~(please refer to Note 9 –~~ ~~Mortgages, Notes and Loans Payable~~ ~~in our Condensed Consolidated Financial Statements),~~ was estimated based on a discounted future cash payment model, which includes risk premiums and ~~a risk free rate~~risk-free rates derived from the ~~current London Interbank Offered~~Secured Overnight Financing Rate ~~(“LIBOR”)~~(SOFR) or U.S. Treasury obligation interest ~~rates.~~rates as of March 31, 2024. Refer to Note 6 - Mortgages, Notes, and Loans Payable, Net for additional information. The discount rates reflect ~~our~~the Company’s judgment as to what the approximate current lending rates for loans or groups of loans with similar maturities and credit quality would be if credit markets were operating efficiently and assuming that the debt is outstanding through maturity.

HHC 2024 FORM 10-Q | 17


FINANCIAL STATEMENTS FOOTNOTES			Table of Contents

The carrying amounts for ~~our~~the Company’s variable-rate debt approximate fair value given that the interest rates are variable and adjust with current market rates for instruments with similar risks and maturities.

The ~~carrying amounts of cash and cash equivalents and accounts receivable approximate~~below table includes a non-financial asset that was measured at fair value ~~because of the short‑term maturity of these instruments.~~

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~NOTE 8 REAL ESTATE AND OTHER AFFILIATES~~

~~Our investments in Real Estate and Other Affiliates that are reported in accordance with the equity and cost methods are as follows:~~

Share of Earnings/Dividends

Economic/Legal Ownership

Carrying Value

Three Months Ended

Nine Months Ended

September 30,

December 31,

September 30,

December 31,

September 30,

September 30,
($ in thousands)

2017

2016

2017

2016

2017

2016

2017

2016
Equity Method Investments

Master Planned Communities:

The Summit (a)

—
%

—
%

$
54,203

$
32,653

$
6,480

$
13,700

$
21,552

$
22,574
Operating Assets:

Las Vegas 51s, LLC (b)

100.00

50.00

—

11,062

—

2

(152)

297
Constellation (a) (c)

50.00

50.00

2,175

2,730

107

—

(215)

—
The Metropolitan Downtown Columbia (d)

50.00

50.00

—

(1,064)

82

(351)

356

(863)
Millennium Six Pines Apartments (e)

100.00

100.00

—

—

—

9

—

44
Stewart Title of Montgomery County, TX

50.00

50.00

3,834

3,611

113

221

322

477
Woodlands Sarofim #1

20.00

20.00

2,688

2,683

15

26

45

121
Strategic Developments:

Circle T Ranch and Power Center (a)

50.00

50.00

5,106

4,956

650

—

650

10,498
HHMK Development

50.00

50.00

10

10

—

—

—

—
KR Holdings

50.00

50.00

744

707

20

3

36

12
m.flats/TEN.M (a)

50.00

50.00

6,849

6,379

—

—

—

—
33 Peck Slip (a) (f)

35.00

35.00

9,139

8,243

—

(117)

(156)

(76)

84,748

71,970

7,467

13,493

22,438

33,084
Cost method investments

4,407

4,406

—

—

3,383

2,616
Investment in Real Estate and Other Affiliates

$
89,155

$
76,376

$
7,467

$
13,493

$
25,821

$
35,700

~~(a)~~

~~Please refer to the discussion below for a description of the joint venture ownership structure.~~

~~(b)~~

~~On March 1, 2017, we acquired our joint venture partner’s interest and have fully consolidated the assets and liabilities of the entity.~~

~~(c)~~

~~Equity method VIE as of September 30, 2017. Constellation and Las Vegas 51s were also VIEs as of December 31, 2016.~~

~~(d)~~

The Metropolitan Downtown Columbia was in a deficit position of $2.0 million at September 30, 2017 and December 31, 2016 due to distributions from operating cash flows in excess of basis. This deficit balance is presented in Accounts payable and accrued expenses at September 30, 2017.

~~(e)~~

~~On July 20, 2016, we acquired our joint venture partner’s interest in Millennium Six Pines Apartments and fully consolidated the assets and liabilities of the entity.~~

~~(f)~~

The 33 Peck Slip hotel was closed in December 2016 for redevelopment and was transferred to the Strategic Developments segment as of January 1, 2017. The prior year share of earnings for the three and nine months ended September 30, 2016 was recorded in the Operating Assets segment but is reflected here for comparative purposes.

As of September 30, 2017, we are not the primary beneficiary of the Constellation VIE listed above because we do not have the power to direct activities that most significantly impact the economic performance of the joint venture, and therefore, we report our interests in accordance with the equity method. Our maximum exposure to loss ason a result of this investment is limited to the aggregate carrying value of the investment as we have not provided any guarantees or otherwise made firm commitments to fund amounts on behalf of this VIE. The aggregate carrying value of unconsolidated VIEs (inclusive of Las Vegas 51s at December 31, 2016, prior to our acquisition) was $2.2 million and $13.8 million as of September 30, 2017 and December 31, 2016, respectively, and was classified as Investment in Real Estate and Other Affiliatesnon-recurring basis resulting in the ~~Condensed Consolidated Balance Sheets.~~

~~As of September 30, 2017, approximately $190.1 million of indebtedness~~property being impaired:


			Fair Value Measurements Using
thousands	Total Fair Value Measurement (a)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
2023
Seaport Net investment in real estate	$	321,180	$	—	$	—	$	321,180
Seaport Investments in unconsolidated ventures	40,225		—		—		40,225

(a)The fair value was secured by the properties owned by our Real Estate and Other Affiliates of which our share was approximately $88.0 million based upon our economic ownership. All of this indebtedness is without recourse to us.

~~We are the primary beneficiary of one VIE which is consolidated in the financial statements. The creditors of the consolidated VIE do not have recourse to us.~~ As of September 30, 2017, the carrying values of the assets and liabilities associated with the operations of the consolidated VIE were $21.9 million and $1.5 million, respectively. As of December 31, 2016, the carrying values of the assets and liabilities associated with the operations of the consolidated VIE were $21.7

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~million and $1.4 million, respectively. The assets of the VIE are restricted for use only by the particular VIE and are not available for our general operations.~~

~~Activity for our significant investments in Real Estate Affiliates and the related accounting considerations are described below.~~

~~The Summit~~

During the first quarter of 2015, we formed DLV/HHPI Summerlin, LLC (“The Summit”) in a joint venture with Discovery Land Company (“Discovery”), and we contributed land with a book basis of $13.4 million and transferred Special Improvement District (“SID”) bonds related to such land with a carrying value of $1.3 million to the joint venture at the agreed upon capital contribution value of $125.4 million (“Our Capital Contribution”), or $226,000 per acre. Discovery is required to fund up to a maximum of $30.0 million of cash as their capital contribution and we have no further capital obligations. The gains on the contributed land will be recognized in Equity in earnings from Real Estate and Other Affiliates as the joint venture sells lots.

After receipt of Our Capital Contribution and a 5.0% preferred return, Discovery is entitled to cash distributions by the joint venture until it has received two times its equity contribution. Any further cash distributions are shared 50/50. Discovery is the manager on the project, and development began in the second quarter of 2015. Given the nature of the venture’s capital structure and the provisions for the liquidation of assets, our share of the venture’s income-producing activities will be recognized based on the Hypothetical Liquidation Book Value (“HLBV”) method. Under this method, we recognize equity in earnings from the joint venture based on the change in our underlying share of the venture’s net assets on a hypothetical liquidation basismeasured as of the ~~reporting date.~~

~~Relevant financial statement information for The Summit is summarized as follows:~~

September 30,

December 31,
(in thousands)

2017

2016
Total Assets

$
163.6

$
151.3
Total Liabilities

107.3

116.5
Total Equity

56.3

34.8

Three Months Ended September 30,

Nine Months Ended September 30,
(in thousands)

2017

2016

2017

2016
Revenues (a)

$
14.2

$
24.7

$
46.3

$
41.6
Net income

6.5

13.7

21.6

22.6
Gross Margin

7.7

14.6

26.4

25.1

~~(a)~~

~~Revenues related to land sales at the joint venture are recognized on a percentage of completion basis.~~

~~Constellation~~

On January 24, 2014, we entered into a joint venture with a national multi-family real estate developer, The Calida Group, to construct, own and operate a 124-unit gated luxury apartment development in Summerlin. We and our partner each own 50% of the venture, and unanimous consent of the partners is required for all major decisions. This project represents the first residential development in Summerlin’s 400-acre downtown. In the first quarter of 2015, we contributed a 4.5-acre parcel of land with an agreed value of $3.2 million in exchange for a 50% interest in the venture. Our partner contributed $3.2 million of cash for their 50% interest. Additionally, our partner is the development manager, funded all pre-development activities, obtained construction financing in the first quarter of 2015 and provided guarantees required by

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~the lender. The project is financed by a $15.8 million construction loan which is fully drawn as of~~ ~~September 30~~, 2017. The loan is non-recourse to us. In the fourth quarter of 2015, we each contributed an additional $1.0 million to the joint venture to fund development costs. Upon a sale of the property, we are entitled to 50% of the proceeds up to, and 100% of the proceeds in excess of, an amount determined by applying a 7.0% capitalization rate to net operating income. The venture commenced construction in February 2015 and is being completed in phases. New tenants began to take occupancyimpairment date in the third quarter of ~~2016. This venture was moved~~2023 using a discounted cash flow analysis to ~~the Operating Assets segment in the fourth quarter of 2016. As of~~ ~~September 30~~determine fair value, with capitalization rates ranging from 5.5% to 6.75%, ~~2017, the project is 87.9% occupied~~discount rates ranging from 8.5% to 13.3%, and ~~95.2% leased.~~

~~m.flats/TEN.M~~

~~On October 4, 2013, we entered into a joint venture agreement with a local developer, Kettler, Inc. (“Kettler”),~~restaurant multiples ranging from 8.3 to construct an apartment complex with ground floor retail in Downtown Columbia, Maryland. We contributed approximately five acres of land having a book value of $4.0 million to the joint venture and subsequently incurred an additional $3.1 million in capitalized development costs for a total book value contribution of $7.1 million. Our land was valued at $23.4 million, or $53,500 per constructed unit. In January 2016, the venture closed on an $88.0 million construction loan which is non-recourse to us and bears interest at one-month LIBOR plus 2.40% with an initial maturity date of February 2020, with three, one-year extension options. At loan closing, Kettler contributed $16.1 million in cash and $7.3 million was distributed to us, of which we subsequently reinvested $6.3 million in the project in 2016. We accounted for this transaction as a partial sale of the land for which we recognized a net profit of $0.2 million at December 31, 2016.

~~33 Peck Slip~~

In January 2016, we entered into a joint venture to purchase a hotel located at 33 Peck Slip in the Seaport District of New York with a capital contribution of $6.0 million. We advanced a bridge loan of $25.0 million at a 5.0% interest rate to the joint venture at closing to expedite the acquisition, which was repaid in full in June 2016. In the second quarter of 2016, upon completion of a refinancing of the property with a $36.0 million redevelopment loan, we made additional capital contributions of $2.3 million in 2016 and $0.7 million in 2017. The 33 Peck Slip hotel was closed in December 2016 for redevelopment and was transferred to the Strategic Developments segment. Our total investment in the joint venture is $9.1 million as of ~~September 30, 2017.~~

~~Circle T Ranch and Power Center~~

On June 1, 2016, the Westlake Retail Associates venture closed on a 72-acre land sale with an affiliate of Charles Schwab Corporation. The nine months ended September 30, 2016 reflects the recognition of $10.5 million in Equity in earnings from Real Estate and Other Affiliates resulting from the land sale.

11.8.

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~NOTE 9 MORTGAGES, NOTES AND LOANS PAYABLE~~

~~Mortgages, notes and loans payable are summarized as follows:~~

September 30,

December 31,
(In thousands)

2017

2016
Fixed-rate debt:

Collateralized mortgages, notes and loans payable

$
1,476,480

$
1,140,118
Special Improvement District bonds

32,266

44,023
Variable-rate debt:

Collateralized mortgages, notes and loans payable (a)

1,505,534

1,524,319
Unamortized bond issuance costs

(7,089)

(5,779)
Deferred financing costs

(13,743)

(11,934)
Total mortgages, notes and loans payable

$
2,993,448

$
2,690,747

	~~(a)~~
~~As more fully described below, $179.3 million~~8. Derivative Instruments and ~~$182.1 million of variable‑rate debt has been swapped to a fixed-rate for the term of the related debt as of~~ ~~September 30, 2017 and December 31, 2016, respectively.~~

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~The following table presents our mortgages, notes, and loans payable by property, presented within each segment in order of extended maturity date:~~

Maximum

Carrying Value

Initial / Extended

Interest

Facility

September 30,

December 31,
($ in thousands)

Maturity (a)

Rate


Amount

2017

2016
Master Planned Communities

Summerlin South SID Bonds - S124

December 2019

5.95
%

$
104

$
123
Summerlin South SID Bonds - S128

December 2020

7.30
%

390

440
Summerlin South SID Bonds - S132

December 2020

6.00
%

1,082

1,268
The Woodlands Master Credit Facility

April 2020 / April 2021

3.98
%
(b)
$
180,000

150,000

150,000
Bridgeland Credit Facility

November 2020 / November 2022

4.60
%
(b)

65,000

65,000

65,000
Summerlin South SID Bonds - S151

June 2025

6.00
%

3,964

4,159
Summerlin South SID Bonds - S128C

December 2030

6.05
%

4,467

4,600
Summerlin South SID Bonds - S159

June 2035

6.00
%

2,353

2,389
Summerlin West SID Bonds - S812

October 2035

6.00
%

17,019

27,459
        Master Planned Communities Total

244,379

255,438

Operating Assets

1701 Lake Robbins

April 2017

5.81
%

—

4,600
Outlet Collection at Riverwalk

October 2017 / October 2018

3.98
%
(b)

54,325

54,325

55,778
1725-35 Hughes Landing Boulevard

June 2018 / June 2019

2.88
%
(b)

143,000

115,999

105,647
The Westin at The Woodlands (c)

August 2018 / August 2019

3.88
%
(b)

57,946

57,946

58,077
110 North Wacker

October 2019

5.21
%
(e)

19,870

22,704
Three Hughes Landing (c)

December 2017 / December 2019

3.58
%
(b)

65,455

43,661

35,053
Lakeland Village Center at Bridgeland

May 2018 / May 2020

3.58
%
(b)

14,000

11,292

9,979
Embassy Suites at Hughes Landing

October 2018 / October 2020

3.73
%
(b)

37,100

31,245

29,461
The Woodlands Resort & Conference Center

December 2018 / December 2020

4.48
%
(b)

67,000

70,000
One Merriweather

February 2020 / February 2021

3.38
%
(b)

49,900

41,271

23,588
Downtown Summerlin

September 2020 / September 2021

3.38
%
(b) (d)

275,885

275,883

302,981
HHC 242 Self-Storage

October 2019 / October 2021

3.83
%
(b)

6,658

6,137

3,708
HHC 2978 Self-Storage Facility

January 2020 / January 2022

3.83
%
(b)

6,368

5,521

1,715
70 Columbia Corporate Center

May 2020 / May 2022

3.23
%
(b)(f)

20,000

20,000
One Mall North

May 2020 / May 2022

3.48
%
(b)(f)

14,463

—
10-60 Columbia Corporate Centers

May 2020 / May 2022

3.20
%
(b)(f)(g)

80,000

80,000
20/25 Waterway Avenue

May 2022

4.79
%

13,708

13,886
Millennium Waterway Apartments

June 2022

3.75
%

55,344

55,584
Ward Village

September 2021 / September 2023

3.69
%
(b)(h)

238,718

238,718
9303 New Trails

December 2023

4.88
%

12,098

12,378
4 Waterway Square

December 2023

4.88
%

35,431

36,249
3831 Technology Forest Drive

March 2026

4.50
%

22,088

22,383
Kewalo Basin Harbor

September 2027

3.98
%
(b)

11,562

—

—
Millennium Six Pines Apartments

August 2028

3.39
%

42,500

42,500
3 Waterway Square

August 2028

3.94
%

50,647

51,590
One Hughes Landing

December 2029

4.30
%

52,000

52,000
Downtown Summerlin SID Bonds - S128

December 2030

6.05
%

2,887

3,350
Two Hughes Landing

December 2030

4.20
%

48,000

48,000
One Lakes Edge

March 2029 / March 2031

4.50
%

69,440

68,874
Hughes Landing Retail

December 2036

3.50
%

35,000

35,000
Columbia Regional Building

February 2037

4.48
%

25,000

22,188
Other

—

235
Capital lease obligations

Various

3.60
%

—

1
        Operating Assets Total

1,547,474

1,526,227

Strategic Developments

Waiea and Anaha (i)

November 2017 / November 2019

7.98
%
(b)

410,000

195,269

160,847
Ke Kilohana

December 2019 / December 2020

4.48
%
(b)

142,656

—

—
Two Merriweather

October 2020 / October 2021

3.73
%
(b)

33,156

11,932

—
Ae`o

December 2019 / December 2021

5.23
%
(b)

230,000

1

—
100 Fellowship Drive

May 2022

2.73
%
(b)

51,426

1

—
          Strategic Developments Total

207,203

160,847

Other corporate financing arrangements

July 2018

3.00
%

15,224

15,948
Senior Notes

October 2021

6.88
%

—

750,000
Senior Notes

March 2025

5.38
%

1,000,000

—
Unamortized bond issuance costs

(7,089)

(5,779)
Deferred financing costs

(13,743)

(11,934)
Total mortgages, notes, and loans payable

$
2,993,448

$
2,690,747

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~(a)~~

Maturity dates presented include initial maturity date as well as the extended or final maturity date as contractually stated. Extension periods generally can be exercised at our option at the initial maturity date, subject to customary extension terms that are based on property performance at the initial maturity date. Such extension terms may include, but are not limited to, minimum debt service coverage, minimum occupancy levels or condominium sales levels, as applicable and other performance criteria. In certain cases due to property performance not meeting covenants, we may have to pay down a portion of the loan in order to obtain the extension.

Hedging Activities

~~(b)~~

~~The interest rate presented~~

The Company is ~~based on the one month LIBOR rate, which was 1.23% at September 30, 2017.~~

~~(c)~~

~~Based on current performance of Three Hughes Landing and The Westin at The Woodlands, a paydown may be required in order to exercise the extension options.~~

~~(d)~~

On July 14, 2017, the Downtown Summerlin loan’s original maturity date of July 2017 was modified to be September 13, 2020, at which time we made a $30.0 million paydown on the facility and further extended the new maturity date and extension date. Additionally, the interest rate was reduced from LIBOR plus 2.25% to LIBOR plus 2.15%.

~~(e)~~

~~The $19.9 million outstanding principal balance is swapped to a 5.21% fixed-rate through maturity.~~

~~(f)~~

~~These three notes are part of one master facility, with all three respective properties collateralizing the total $114.5 million indebtedness.~~

~~(g)~~

~~$40.0 million of the outstanding principal balance is swapped to a 3.41% fixed-rate through maturity.~~

~~(h)~~

~~$119.4 million of the outstanding principal balance is swapped to a 3.64% fixed-rate through maturity.~~

~~(i)~~

~~The Waiea and Anaha facility was repaid in full on October 27, 2017.~~

~~The weighted average interest rate on our mortgages, notes and loans payable, excluding interest rate hedges, was 4.64% and 4.71% as of September 30, 2017 and December 31, 2016, respectively.~~

~~Except for the items listed below, all of the mortgage debt is secured by the individual properties listed in the table above and is non-recourse to HHC:~~

~~(i)~~

~~$1.0 billion of Senior Notes;~~

~~(ii)~~

$275.9 million financing for the Downtown Summerlin development which has maximum recourse of 35% of the outstanding balance, which will reduce to 15.0% upon achievement of a 1.15:1.0 debt service coverage ratio. The recourse further reduces to 10% upon achievement of a 1.25:1.0 debt service coverage ratio, a 90% occupancy level, and average tenant sales of at least $500.00 per net rentable square foot. As of ~~September 30, 2017, 35% of the outstanding loan balance remains recourse to HHC;~~

~~(iii)~~

~~$27.2 million, or 50% of the Outlet Collection at Riverwalk outstanding loan balance is recourse to HHC;~~

~~(iv)~~

~~$15.2 million of Other Corporate Financing Arrangements; and~~

~~(v)~~

~~$19.9 million of the 110 North Wacker mortgage.~~

Certain of our loans contain provisions which grant the lender a security interest in the operating cash flow of the property that represents the collateral for the loan. Certain mortgage notes may be prepaid subject to a prepayment penalty equal to a yield maintenance premium, defeasance, or a percentage of the loan balance. As of September 30, 2017, land, buildings and equipment and developments with a net book value basis of $3.5 billion have been pledged as collateral for our mortgages, notes and loans payable.

~~As of September 30, 2017, we were in compliance with all financial covenants included in the debt agreements governing our indebtedness.~~

~~Master Planned Communities~~

The Woodlands Master Credit Facility was amended and restated on July 31, 2015 to a $200.0 million maximum facility amount consisting of a $100.0 million term loan and a $100.0 million revolver (together, the “TWL Facility”). The TWL Facility bears interest at one-month LIBOR plus 2.75% and had an August 2016 initial maturity date with two, one–year extension options. In July 2016, we exercised our first one-year extension option, which reduced the total commitment to $175.0 million. Semi-annual principal payments of $25.0 million began on December 31, 2016 and continue through the second, optional one-year extension period. The TWL Facility and The Woodlands Resort & Conference Center loans are

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

recourse to the entities that directly own The Woodlands operations. The TWL Facility also contains certain covenants that, among other things, require the maintenance of specified financial ratios, limit the incurrence of additional recourse indebtedness at The Woodlands, and limit distributions from The Woodlands to us based on a loan‑to‑value test. The amendment also modified certain covenants to allow for more construction loan guarantees by the entities that directly own The Woodlands than would otherwise have been permitted by the prior facility. On April 27, 2017, TWL Facility was refinanced to increase the facility by $30.0 million for a total of $180.0 million, providing the ability to fund the development of Creekside Park Apartments or for other corporate purposes. The new facility bears interest at one-month LIBOR plus 2.75% with an initial maturity date of April 27, 2020 and a one-year extension option.

The Summerlin MPC uses SID bonds to finance certain common infrastructure improvements. These bonds are issued by the municipalities and are secured by the assessments on the land. The majority of proceeds from each bond issued is held in a construction escrow and disbursed to us as infrastructure projects are completed, inspected by the municipalities and approved for reimbursement. Accordingly, the SID bonds have been classified as debt, and the Summerlin MPC pays the debt service on the bonds semi‑annually. As Summerlin sells land, the buyers assume a proportionate share of the bond obligation at closing, and the residential sales contracts provide for the reimbursement of the principal amounts that we previously paid with respect to such proportionate share of the bond. In the nine months ended September 30, 2017, no new SID bonds were issued and $9.9 million in obligations were assumed by buyers.

~~Operating Assets~~

~~On October 24, 2017, we exercised our one-year extension option on our $54.3 million Outlet Collection at Riverwalk facility which extended the maturity date to October 24, 2018.~~

~~On September 13, 2017, we modified and extended our $311.8 million Downtown Summerlin facility with a $30.0 million paydown.~~ ~~The modified loan has a maximum facility of $275.9 million and bears interest at one-month LIBOR plus 2.15% with a maturity of September 13, 2020, with one, one-year extension option.~~

On August 11, 2017, we closed on a construction loan totaling $11.6 million for Kewalo Harbor, located in Honolulu, Hawai‘i, to be used for improvements benefitting our Ward Village development. The loan bears interest at one-month LIBOR plus 2.75% with a maturity of September 1, 2027. As of September 30, 2017, we had not drawn any proceeds under this loan.

On June 27, 2017, we modified our $94.5 million non-recourse mortgage financing for the 10-60 Columbia Corporate Center and One Mall North office buildings with a $114.5 million loan. This amendment added 70 Columbia Corporate Center, a 170,741 square foot office building in Columbia, Maryland, to the collateral pool and allowed us to draw $20.0 million and fully repay the outstanding balance of the existing indebtedness on the 70 Columbia Corporate Center note.

~~On April 6, 2017, we paid off a $4.6 million maturing mortgage loan that we assumed as part of the acquisition of 1701 Lake Robbins in July 2014.~~

On January 19, 2017, we closed on a non-recourse financing totaling $25.0 million replacing the $23.0 million construction loan on the Columbia Regional Building, a retail building located in Columbia, Maryland. The loan, which matures on February 11, 2037, bears interest at 4.48% and is interest only for two years, then begins amortizing on a 30-year basis.

On November 25, 2016, we amended and extended our $73.5 million construction loan for One Lakes Edge with a $71.9 million mortgage. Contemporaneously with this amendment, we made a $3.0 million principal reduction payment as required by the loan agreement. The loan bears interest at one-month LIBOR plus 3.50%. On February 23, 2017, we refinanced the One Lakes Edge construction loan with a $69.4 million Fannie Mae loan with an initial maturity of March

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~2029 and two, one year-extensions. The new loan has a fixed rate of 4.50% and is interest only for four years, then begins amortizing on a 30-year basis.~~

~~Strategic Developments~~

~~As of October 27, 2017, we repaid the $195.3 million outstanding on our construction loan relating to Waiea and Anaha in conjunction with closing on the sales of units at Anaha.~~

~~On October 19, 2017, we closed on a construction loan totaling $64.6 million to be used for Aristocrat and~~ ~~Two Summerlin. The loan bears interest at Wall Street Journal Prime plus 0.40% with a maturity of October 19, 2022.~~

On May 31, 2017, we closed on a $51.4 million construction loan for 100 Fellowship Drive, located in The Woodlands. The loan bears interest at one-month LIBOR plus 1.50% with a maturity of May 31, 2022.

~~NOTE 10 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES~~

~~We are~~ exposed to interest rate risk related to ~~our~~its variable interest rate debt, and ~~we manage~~it manages this risk by utilizing interest rate derivatives. ToThe Company uses interest rate swaps, collars, and caps to add stability to interest costs by reducing ~~our~~the Company’s exposure to interest rate ~~movements, we use interest rate swaps, forward-starting swaps, and caps as part of our interest rate risk management strategy.~~movements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for ~~our~~the Company’s fixed‑rate payments over the life of the agreements without exchange of the underlying notional amount. ~~Forward-starting interest~~Interest rate ~~swaps were~~collars designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above an established ceiling rate and payment of variable amounts to a counterparty if interest rates fall below an established floor rate, in exchange for an upfront premium. No payments or receipts are exchanged on interest rate collar contracts unless interest rates rise above or fall below the ~~variability of anticipated future fixed-rate debt issuance for long-term financing needs at our Downtown Summerlin property.~~established ceiling and floor rates. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an ~~up‑front~~upfront premium. ~~Our~~Certain of the Company’s interest rate caps are not currently designated as hedges, and therefore, any ~~gain~~gains or ~~loss is~~losses are recognized in ~~current period earnings.~~current-period earnings within Interest expense on the Condensed Consolidated Statements of Operations. These derivatives are recorded on a gross basis at fair ~~value.~~

value on the balance sheet.

Assessments of hedge effectiveness are performed quarterly using regression analysis. The ~~effective portion of changes~~change in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in Accumulated ~~Other Comprehensive Income (“AOCI”)~~other comprehensive income (loss) (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects ~~earnings.~~ earnings within the same income statement line item being hedged. Derivatives accounted for as cash flow hedges are classified in the same category in the Condensed Consolidated Statements of Cash Flows as the items being hedged. Gains and losses from derivative financial instruments are reported in Cash provided by (used in) operating activities within the Condensed Consolidated Statements of Cash Flows.

The ~~ineffective portion of the change in fair value of the derivatives~~Company is ~~recognized directly in earnings. During the three and nine months ended~~ ~~September 30, 2017 and 2016 the ineffective portion recorded was insignificant.~~

~~Assessments of hedge effectiveness are performed quarterly using regression analysis and the measurement of hedge ineffectiveness is based on the hypothetical derivative method. We are~~ exposed to credit risk in the event of non-performance by ~~our~~its derivative counterparties. ~~We evaluate counterparty credit risk through monitoring the creditworthiness of counterparties, which includes review of debt ratings and financial performance.~~ To mitigate its credit risk, ~~we enter~~the Company reviews the creditworthiness of counterparties and enters into agreements with ~~counterparties we consider~~those that are considered credit-worthy, such as large financial institutions with favorable credit ratings. ~~As of September 30, 2017 and 2016, there~~There were no ~~termination events~~derivative counterparty defaults as of March 31, 2024, or ~~events~~as of ~~default related to the interest rate swaps.~~

December 31, 2023.

If the derivative contracts are terminated prior to their maturity, the amounts previously recorded in AOCI are recognized ~~into~~in earnings over the period that the hedged transaction impacts earnings. ~~If the hedging relationship is discontinued because it is probable that the forecasted transaction will not occur according~~The Company recorded an immaterial reduction in interest expense in 2023 and 2024 related to the ~~original strategy, any related amounts previously recorded~~amortization of terminated swaps.

Amounts reported in AOCI related to derivatives will be reclassified to Interest expense as interest payments are ~~recognized in earnings immediately.~~

made on the Company’s variable‑rate debt. Over the next 12 months, the Company estimates that $4.3 million of net gain will be reclassified to Interest expense including amounts related to the amortization of terminated swaps.

HHC 2024 FORM 10-Q | 18


FINANCIAL STATEMENTS FOOTNOTES			Table of Contents

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

The following table summarizes ~~details~~certain terms of the Company’s derivative contracts. The Company reports derivative assets in Other assets, net and derivative liabilities in Accounts payable and other liabilities.


						Fair Value Asset (Liability)
thousands	Notional Amount	Fixed Interest Rate (a)		Effective Date	Maturity Date	March 31, 2024		December 31, 2023
Derivative instruments not designated as hedging instruments: (b)
Interest rate cap	75,000	2.50	%	10/12/2021	9/29/2025	$	2,404	$	2,274
Interest rate cap	59,500	2.50	%	10/12/2021	9/29/2025	1,907		1,804
Interest rate collar	55,615	2.00% - 4.50%		6/1/2023	6/1/2025	770		417
Interest rate collar	63,031	2.00% - 4.50%		6/1/2023	6/1/2025	903		440

Derivative instruments designated as hedging instruments:
Interest rate swap (c)	175,000	3.69	%	1/3/2023	1/1/2027	2,500		117
Interest rate cap	127,000	5.50	%	11/10/2022	11/7/2024	14		28
Interest rate cap	73,900	5.00	%	12/22/2022	12/21/2025	242		223
Interest rate swap	40,800	1.68	%	3/1/2022	2/18/2027	2,878		2,496
Interest rate swap	34,744	4.89	%	11/1/2019	1/1/2032	3,238		2,519

Total fair value derivative assets						$	14,856	$	10,318

(a)These rates represent the swap rate and cap strike rate on the Company’s interest rate swaps, caps, and collars.

(b)Interest income related to ~~our derivative contracts:~~

Fixed

Fair Value Asset (Liability)

Notional

Interest

Effective

Maturity

September 30,

December 31,
(In thousands)

Balance Sheet Location

Amount

Rate

Date

Date

2017

2016
Currently-paying contracts:

Interest Rate Swap
(a)

Accounts payable and accrued expenses

$
19,870

2.96
%

5/10/2011

10/31/2019

$
(427)

$
(740)
Interest Rate Swap
(a)

Prepaid expenses and other assets, net

40,000

1.66

5/6/2015

5/1/2020

30

(143)
Interest Rate Swap
(a)

Prepaid expenses and other assets, net

119,359

1.14

10/3/2016

9/12/2021

3,069

3,368
Interest Rate Cap
(b)

Accounts payable and accrued expenses

  75,000

5.00

9/1/2017

8/31/2019

—

—
Interest Rate Cap
(c)

Prepaid expenses and other assets, net

230,000

2.50

12/22/2016

12/23/2019

145

768
Forward-starting contracts:

Interest Rate Swap
(a)

Accounts payable and accrued expenses

50,000

2.65

12/31/2017

12/31/2027

(1,452)

(610)
Interest Rate Swap
(a)

Accounts payable and accrued expenses

100,000

2.68

12/31/2017

12/31/2027

(3,165)

(1,479)
Interest Rate Swap
(a)

Accounts payable and accrued expenses

100,000

2.62

12/31/2017

12/31/2027

(2,698)

(1,015)
Total fair value derivative assets

$
3,244

$
4,136
Total fair value derivative liabilities

$
(7,742)

$
(3,987)
these contracts was $2.2 million for the three months ended March 31, 2024, and $4.2 million for the three months ended March 31, 2023.

(c)In the first quarter of 2024, the Company terminated a portion of this swap, reducing the notional amount from $200.0 million to $175.0 million.

~~(a)~~

~~Denotes derivatives designated as hedging instruments.~~

~~(b)~~

As of December 31, 2016, our $100.0 million interest rate cap with a 5.00% interest rate and an August 31, 2017 maturity date was in place and matured as scheduled. A new interest rate cap was entered into as detailed above and is not currently designated as a hedging instrument. Interest (income) expense included in the condensed consolidated statement of operations for the three months ended September 30, 2017 related to this contract is not material.

~~(c)~~

Denotes derivative contract that could not be designated as a hedging instrument as of September 30, 2017 as this cap hedges debt that is not yet drawn. Interest (income) expense of $(0.1) million is included in the condensed consolidated statement of operations for the three months ended September 30, 2017, related to this contract. Interest (income) expense of $(0.6) million is included in the condensed consolidated statement of operations for the nine months ended September 30, 2017, related to this contract.

The tables below present the effect of ~~our~~the Company’s derivative financial ~~instrument~~instruments on the Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016:~~

2023:

Amount of Loss Recognized

Amount of Loss Recognized

in AOCI on Derivative

in AOCI on Derivative

(Effective Portion)

(Effective Portion)

Three Months Ended September 30,

Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships

2017

2016

2017

2016
Interest rate swaps

$
(7)

$
(203)

$
(272)

$
(1,409)
Forward-Starting Swaps

—

344

(2,316)

(14,566)

$
(7)

$
141

$
(2,588)

$
(15,975)


	Amount of Gain (Loss) Recognized in AOCI on Derivatives
Derivatives in Cash Flow Hedging Relationships	Three Months Ended March 31,
thousands	2024		2023
Interest rate derivatives	$	3,830	$	(2,651)

Amount of Loss Reclassified from

Amount of Loss Reclassified from

AOCI into Operations

AOCI into Operations

(Effective Portion)

(Effective Portion)

Three Months Ended September 30,

Nine Months Ended September 30,
Location of Loss Reclassified from AOCI into Operations

2017

2016

2017

2016
Interest expense

$
(68)

$
(356)

$
(399)

$
(1,099)

~~NOTE 11 INCOME TAXES~~

~~We have significant permanent differences, primarily from warrant liability gains and losses, stock compensation deductions and changes in valuation allowances~~


Location of Gain (Loss) Reclassified from AOCI into Statements of Operations	Amount of Gain (Loss) Reclassified from AOCI into Statements of Operations
	Three Months Ended March 31,
thousands	2024		2023
Interest expense	$	1,205	$	2,679

Credit-risk-related Contingent Features The Company has agreements at the property level with certain derivative counterparties that ~~cause our effective tax rate to deviate from statutory rates. The effective tax rates, based upon actual operating results, were 35.8% and 62.3% for~~contain a provision where if the ~~three and nine months ended September 30, 2017, respectively, compared to 56.0% and 39.1% for~~Company defaults on the ~~three and nine months ended September 30, 2016, respectively. The changes in the tax rates were primarily attributable to~~ ~~changes in the warrant liability, valuation allowance~~ related ~~to our deferred tax assets, stock compensation deduction and other items which are permanent differences for tax purposes.~~

~~The increase in deferred tax liabilities between December 31, 2016 and September 30, 2017 is due primarily to the~~

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~utilization of federal tax assets to offset income before taxes exclusive~~property level indebtedness, including default where repayment of the ~~warrant liability loss.~~

~~NOTE 12 STOCK BASED PLANS~~

~~Our stock based plans are described and informational disclosures are provided in the Notes to the Consolidated Financial Statements included in our Annual Report.~~

~~Stock Options~~

~~The following table summarizes our stock option plan activity for the nine months ended September 30, 2017:~~

Stock
Options

Weighted
Average
Exercise Price
Stock Options outstanding at December 31, 2016

1,176,640

$
78.87
Granted

54,000

119.18
Exercised

(357,247)

58.45
Forfeited

(47,000)

104.82
Expired

(1,000)

57.77
Stock Options outstanding at September 30, 2017

825,393

88.89

Compensation costs related to stock options were $0.6 million and $1.6 million for the three and nine months ended September 30, 2017, respectively, of which $0.2 million and $0.4 million of costs were capitalized to development projects during the same periods. Compensation costs related to stock options were $1.2 million and $3.5 million for the three and nine months ended September 30, 2016, respectively, of which $0.3 million and $1.1 million were capitalized to development projects during the same periods.

~~Restricted Stock~~

~~The following table summarizes restricted stock activity for the nine months ended September 30, 2017:~~

Restricted
Stock

Weighted
Average Grant
Date Fair Value
Restricted stock outstanding at December 31, 2016

289,112

$
88.88
Granted

124,621

87.11
Vested

(23,629)

84.20
Forfeited

(31,370)

85.56
Restricted stock outstanding at September 30, 2017

358,734

88.86

Compensation expense related to restricted stock awards were $1.2 million and $4.1 million for the three and nine months ended September 30, 2017, respectively, of which $(0.3) million related to forfeitures and $0.2 million were capitalized to development projects during the same periods. Compensation costs related to restricted stock awards was $1.2 million and $4.4 million for the three and nine months ended September 30, 2016, respectively, of which $0.3 million and $0.9 million were capitalized to development projects during the same periods.

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~NOTE 13 OTHER ASSETS AND LIABILITIES~~

~~Prepaid Expenses and Other Assets~~

~~The following table summarizes the significant components of Prepaid expenses and other assets:~~

September 30,

December 31,
(In thousands)

2017

2016
Condominium deposits

$
320,097

$
193,197
Condominium receivables (a)

213,158

210,219
Special Improvement District receivable

55,841

61,603
Straight-line rent

36,365

31,518
In-place leases

11,209

16,015
Below-market ground leases

18,732

18,986
Above-market tenant leases

1,786

2,457
Equipment, net of accumulated depreciation of $6.5 million and $4.9 million, respectively

17,364

17,556
Security and escrow deposits

48,277

61,304
Tenant incentives and other receivables

8,976

8,773
Prepaid expenses

13,197

11,177
Federal income tax receivable

8,513

15,763
Intangibles

35,368

4,046
Interest rate swap derivative assets

3,244

—
Other

3,892

13,902

$
796,019

$
666,516

~~(a)~~

We expect $140.5 million of the Condominium receivables outstanding at September 30, 2017 to be collected in 2017 upon closing Anaha and the remaining contracted units at Waiea. Of the remaining, $71.4 million related to ~~Ae`o will be collected in 2018, and $1.3 million relating to Ke Kilohana will be collected in 2019.~~

The $129.5 million net increase primarily relates to the following increases: a $126.9 million increase in condominium deposits recorded with respect to sales at Anaha, Ae`o and Ke Kilohana; a $31.3 million increase in intangibles primarily due to our acquisition of our partner’s 50.0% interest in the Las Vegas 51s; $4.8 million increase in straight-line rent due to additional Operating Assets placed in service during the year; $3.2 million increase in derivative asset; a $2.9 million increase in condominium receivables recorded with respect to sales recognized on a percentage of completion basis and $2.4 million in other increases related to prepaid expenses and tenant incentives and other receivables due to various tenant activities.

~~These increases were partially offset~~indebtedness has not been accelerated by the ~~following decreases:~~lender, then the Company could also be declared in default on its related derivative obligations. The Company also has agreements at the property level with certain derivative counterparties that contain a ~~$13.0 million decrease~~provision where the Company could be declared in ~~security and escrow deposits due primarily to~~default on its derivative obligations if repayment of the utilization of escrowed sales proceeds to fund remaining construction costs at Waiea; a $10.0 million decrease in Other assets primarily relating to third party reimbursements received for improvements made onunderlying indebtedness is accelerated by the ~~Merriweather Post Pavilion in 2016; a $7.3 million decrease in federal income tax receivable~~lender due to the receipt of an IRS tax refund; a $5.8 million decrease in Special Improvement District receivables due to reimbursements received related to our Summerlin MPC; a $4.8 million decrease in in-place leases and $1.1 million in other decreases related to Below-market ground leases, Above-market tenant leases and Equipment, net.

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~

~~Accounts Payable and Accrued Expenses~~

~~The following table summarizes~~Company’s default on the ~~significant components of Accounts payable and accrued expenses:~~

September 30,

December 31,
(In thousands)

2017

2016
Construction payables

$
183,585

$
207,917
Condominium deposit liabilities

64,457

117,015
Deferred income

49,053

85,158
Accounts payable and accrued expenses

33,466

33,050
Tenant and other deposits

19,506

28,559
Accrued interest

8,256

16,897
Accrued payroll and other employee liabilities

26,685

36,937
Accrued real estate taxes

21,525

16,726
Interest rate swaps

7,742

(149)
Straight-line ground rent liability

14,493

13,126
Above-market ground leases

587

1,762
Other

33,498

15,012

$
462,853

$
572,010

The $109.2 million net decrease in total accounts payable and accrued expenses primarily relates to the following decreases: $52.6 million in condominium deposit liabilities for the towers under construction at Ward Village as the projects move toward completion; $36.1 million in deferred income recognized in conjunction with revenue previously deferred at our Summerlin and Bridgeland MPCs; $24.3 million in construction payables; $10.3 million in accrued payroll and other employee liabilities due to payment in both the first quarters of annual incentive bonuses for 2016 and 2015, respectively; $9.1 million in tenant and other deposits due primarily to amortization of a tenant’s prepaid rent; $8.6 million in accrued interest due to lower interest accrual activity relating to ~~the issuance of~~ ~~the 2025 Notes at a lower rate than the~~ ~~6.875% senior notes~~ ~~and $1.2 million in other decreases related to above-market ground leases.~~

~~These decreases are partially offset by an increase of $18.5 million in other liabilities; an increase of $7.9 million in interest rate swaps liability primarily due to a decrease in fair value~~indebtedness. None of the ~~forward-starting swaps;~~Company’s derivatives which contain credit-risk-related features were in a ~~$4.8 million increase in accrued real estate taxes due to timing~~net liability position as of ~~payments; and $1.8 million in other increases related to accounts payable and accrued expenses and straight-line ground rent liability.~~

March 31, 2024.

HHC 2024 FORM 10-Q | 19

~~Table of Contents~~

~~THE HOWARD HUGHES CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~UNAUDITED~~


FINANCIAL STATEMENTS FOOTNOTES			Table of Contents

~~NOTE 14 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (“AOCI”)~~

~~The following tables summarizechanges in Accumulated Other Comprehensive Income (Loss) by component, all of which are presented net of tax:~~


9. Commitments and Contingencies

For the Three Months Ended September 30,
(In thousands)

2017

2016
Balance as of June 30

$
(9,157)

$
(24,152)
Other comprehensive income (loss) before reclassifications

72

(22)
Loss reclassified from accumulated other comprehensive loss to net income (loss)

68

356
Net current-period other comprehensive income (loss)

140

334
Balance as of September 30

$
(9,017)

$
(23,818)

For the Nine Months Ended September 30,
(In thousands)

2017

2016
Balance as of January 1

$
(6,786)

$
(7,889)
Other comprehensive loss before reclassifications

(2,630)

(17,028)
Loss reclassified from accumulated other comprehensive loss to net income (loss)

399

1,099
Net current-period other comprehensive loss

(2,231)

(15,929)
Balance as of September 30

$
(9,017)

$
(23,818)

~~The following tables summarize the amounts reclassified out of AOCI:~~

Amounts reclassified from Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) Components

Affected line items in the

For the Three Months Ended
(In thousands)

Statements of Operations

September 30, 2017

September 30, 2016
Losses on cash flow hedges

Interest expense

$
108

$
558
Interest rate swap contracts

Provision for income taxes

(40)

(202)
Total reclassifications of loss (income) for the period

Net of tax

$
68

$
356

Amounts reclassified from Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) Components

Affected line items in the

For the Nine Months Ended
(In thousands)

Statements of Operations

September 30, 2017

September 30, 2016
Losses on cash flow hedges

Interest expense

$
636

$
1,752
Interest rate swap contracts

Provision for income taxes

(237)

(653)
Total reclassifications for the period

Net of tax

$
399

$
1,099

~~NOTE 15 COMMITMENTS AND CONTINGENCIES~~

LitigationIn the normal course of business, from time to time, ~~we are~~the Company is involved in legal proceedings relating to the ownership and operations of ~~our~~its properties. In management’s opinion, the liabilities, if any, that may ultimately result from ~~such~~normal course of business legal actions are not expected to have a material effect on ~~our~~the Company’s consolidated financial position, results of operations, or liquidity.

ColumbiaThe Company is currently developing certain property it owns in the Lakefront neighborhood of Downtown Columbia, which is subject to certain recorded documents, covenants, and restrictions (Covenants). Under the Covenants, HHH is the master developer of the Lakefront neighborhood. In 2017, IMH Columbia, LLC (IMH) purchased the site of a former Sheraton Hotel (Hotel Lot) subject to the Covenants. IMH has made demands that HHH accede to IMH’s development plans for the Hotel Lot and HHH has exercised its right under the Covenants to object to IMH’s plans for the Hotel Lot. IMH filed a complaint seeking (1) a declaration that the Covenants’ limitations on changes in use and onsite parking were consented to by HHH, or are otherwise obsolete and unenforceable, (2) damages reimbursing the costs and expenses IMH claims to have incurred in reliance on HHH's alleged consent to IMH’s proposed development, (3) damages related to the expectation of lost profits, which IMH alleged were caused by HHH breaching the Covenants by prohibiting IMH from proceeding with their proposed development, and (4) declarations finding that HHH had breached the shared parking related Covenants relating to HHH’s own property. The jury trial concluded in April 2024, and the jury found partially in favor of IMH and awarded damages of $17.0 million. HHH plans to file a notice of appeal and motion to reduce the damage award. The Company will continue to vigorously defend the matter as it believes that these claims are without merit and that it has substantial legal and factual defenses to the claims and allegations contained in the complaint.

Timarron Park On June 14, 2018, the Company was served with a petition involving approximately 500 individuals or entities who claim that their properties, located in the Timarron Park neighborhood of The Woodlands, were damaged by flood waters that resulted from the unprecedented rainfall that occurred throughout Harris County and surrounding areas during Hurricane Harvey in August 2017. The complaint was filed in State Court in Harris County of the State of Texas. In general, the plaintiffs allege negligence in the development of Timarron Park and violations of Texas’ Deceptive Trade Practices Act and name as defendants The Howard Hughes Corporation, The Woodlands Land Development Company, and two unaffiliated parties involved in the planning and engineering of Timarron Park. The plaintiffs are seeking restitution for damages to their property and diminution of their property values. On August 9, 2022, the Court granted the Company’s summary judgment motions and dismissed the plaintiffs’ claims. On September 8, 2022, the plaintiffs filed a motion for a new trial. On October 21, 2022, the Court denied the motion for a new trial. On November 7, 2022, the Plaintiffs filed their notice of appeal. The Company will continue to vigorously defend the matter as it believes that these claims are without merit and that it has substantial legal and factual defenses to the claims and allegations contained in the complaint. Based upon the present status of this matter, the Company does not believe it is probable that a loss will be incurred. Accordingly, the Company has not recorded a charge as a result of this action.

Waiea The Company entered into a settlement agreement with the Waiea homeowners association related to certain construction defects at the condominium tower. Pursuant to the settlement agreement, the Company will pay for the repair of the defects. The Company believes that the general contractor is ultimately responsible for the defects and as such the Company should be entitled to recover all the repair costs from the general contractor, other responsible parties, and insurance proceeds; however, the Company can provide no assurances that all or any portion of the costs will be recovered. Total estimated cost related to the remediation is $158.4 million, inclusive of $3.0 million of additional costs recognized in the first quarter of 2024. The sixth and final amendment of resolution of disputes and release agreement was executed during the first quarter of 2024, thereby releasing the Company from any further claims or demands from the Waiea homeowners association arising from or relating to the construction or repair of the condominium project. As of March 31, 2024, $2.6 million remains in Construction payables for the estimated repair costs related to this matter, which is included in Accounts payable and other liabilities in the accompanying Condensed Consolidated Balance Sheets.

250 Water Street In 2021, the Company received the necessary approvals for its 250 Water Street development project, which includes a mixed-use development with affordable and market-rate apartments, community-oriented spaces, and office space. In May 2021, the Company received approval from the New York City Landmarks Preservation Commission (LPC) on its proposed design for the 250 Water Street site. The Company received final approvals in December 2021 through the New York City Uniform Land Use Review Procedure known as ULURP, which allowed the necessary transfer of development rights to the parking lot site. The Company began initial foundation and voluntary site remediation work in the second quarter of 2022 and completed remediation work in December 2023.

HHC 2024 FORM 10-Q | 20


MANAGEMENT’S NARRATIVE ANALYSIS RESULTS OF OPERATIONS			Table of Contents


RESULTS OF OPERATIONS


Operating Assets

Segment EBT ~~in our MPC and~~Segment EBT for Operating Assets ~~segments.~~

~~Please refer to the individual segment operations sections that follow for explanations of the results of each of our segments for the three and nine months ended September 30, 2017 and 2016.~~

is presented below:


Operating Assets Segment EBT	Three Months Ended March 31,
thousands		2024		2023		$ Change
Rental revenue		$	101,200	$	92,475	$	8,725
Other land, rental, and property revenues		8,952		8,450		502
Total revenues		110,152		100,925		9,227

Operating costs		(37,477)		(35,420)		(2,057)
Rental property real estate taxes		(13,875)		(14,580)		705
(Provision for) recovery of doubtful accounts		(43)		2,401		(2,444)
Total operating expenses		(51,395)		(47,599)		(3,796)
Segment operating income (loss)		58,757		53,326		5,431
Depreciation and amortization		(44,156)		(39,632)		(4,524)
Interest income (expense), net		(33,476)		(28,911)		(4,565)
Other income (loss), net		408		2,282		(1,874)
Equity in earnings (losses) from unconsolidated ventures		5,817		1,905		3,912
Gain (loss) on sale or disposal of real estate and other assets, net		4,794		4,730		64




Segment EBT		$	(7,856)	$	(6,300)	$	(1,556)

~~Table of Contents~~

~~Master Planned Communities~~

~~Master Planned Communities Revenues and Expenses (*)~~

For the three months ended ~~September 30, 2017~~March 31, 2024:

Operating Assets segment EBT decreased $1.6 million compared to the prior-year period primarily due to the following:

–Interest expense increased $4.6 million primarily due to increased borrowings on construction loans secured by our operating assets.

–Depreciation expense increased $4.5 million primarily related to new assets placed in service during 2023.

–Other income decreased $1.9 million primarily due to winter-weather-related insurance recoveries in 2023.

These decreases to EBT were partially offset by the following:

–Equity earnings increased $3.9 million primarily as a result of a $2.4 million increase related to the change in value of certain derivative instruments.

–Total revenues, net of Total operating expenses increased $5.4 million primarily due to increased leasing activity across our portfolio, primarily related to 9950 Woodloch Forest and ~~2016~~

Bridgeland

Maryland Communities

Summerlin

The Woodlands

The Woodlands Hills

Total MPC
($ in thousands)

2017

2016

2017


2016

2017

2016

2017

2016

2017

2016

2017

2016
Land sales (a)

$
8,692

$
7,209

$
—

$
—

$
38,721

$
26,337

$
7,493

$
10,582

$
—

$
—

$
54,906

$
44,128
Builder price participation (b)

49

160

—

—

5,298

4,221

125

102

—

—

5,472

4,483
Minimum rents

—

—

—

—

—

95

—

—

—

—

—

95
Other land revenues

162

97

413

413

2,231

1,973

1,738

1,554

7

6

4,551

4,043
Other rental and property revenue

—

—

—

—

—

17

—

—

—

(4)

—

13
Total revenues

8,903

7,466

413

413

46,250

32,643

9,356

12,238

7

2

64,929

52,762

Cost of sales - land

2,834

2,255

—

—

22,487

13,558

3,722

5,619

—

—

29,043

21,432
Land sales operations

1,785

1,784

703

643

570

2,742

4,859

5,395

263

110

8,180

10,674
Provision for doubtful accounts

—

—

—

—

—

—

—

—

—

—

—

—
Depreciation and amortization

19

23

1

3

26

16

30

30

—

—

76

72
Total expenses

4,638

4,062

704

646

23,083

16,316

8,611

11,044

263

110

37,299

32,178

Operating income

4,265

3,404

(291)

(233)

23,167

16,327

745

1,194

(256)

(108)

27,630

20,584
Interest (income) expense, net (c)

(2,698)

(2,367)

—

2

(4,616)

(3,981)

1,092

1,241

(133)

(148)

(6,355)

(5,253)
Equity in (earnings) loss in Real Estate and Other Affiliates (d)

—

—

—

—

(6,480)

(13,700)

—

—

—

—

(6,480)

(13,700)
MPC segment EBT*

$
6,963

$
5,771

$
(291)
(e)

$
(235)
(e)

$
34,263

$
34,008

$
(347)

$
(47)

$
(123)

$
40

$
40,465

$
39,537

(GAAP Basis) Residential Gross Margin %

66.1%

67.5%

NM

NM

41.9%

48.5%

50.3%

46.9%

NM

NM

46.1%

50.2%
(GAAP Basis) Commercial Gross Margin %

71.0%

71.0%

NM

NM

43.2%

55.5%

NM

NM

NM

NM

68.8%

70.1%
our newly completed multi-family properties.

Net Operating Income In addition to the required presentations using GAAP, we use certain non-GAAP performance measures, as we believe these measures improve the understanding of our operational results and make comparisons of operating results among peer companies more meaningful. Management continually evaluates 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.

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). NOI excludes straight-line rents and amortization of tenant incentives, net; interest expense, net; ground rent amortization; demolition costs; other income (loss); depreciation and amortization; development-related marketing costs; gain on sale or disposal of real estate and other assets, net; loss on extinguishment of debt; provision for impairment; and equity in earnings from unconsolidated ventures.

HHC 2024 FORM 10-Q | 33


MANAGEMENT’S NARRATIVE ANALYSIS RESULTS OF OPERATIONS			Table of Contents

~~(*) For~~

We believe that NOI is a useful supplemental measure of the performance of our Operating Assets and Seaport segments because it provides a performance measure that reflects the revenues and expenses directly associated with owning and operating real estate 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 rental and occupancy rates, tenant mix, and operating costs have on our operating results, gross margins, and investment returns.

A reconciliation of Operating Assets segment EBT to Operating Assets NOI is presented in the table below. Refer to the Seaport section for a reconciliation of ~~MPC~~Seaport segment EBT to ~~consolidated income before taxes, refer~~Seaport NOI.


Operating Assets NOI	Three Months Ended March 31,
thousands		2024		2023		$ Change
Total Operating Assets segment EBT		$	(7,856)	$	(6,300)	$	(1,556)
Add back:
Depreciation and amortization		44,156		39,632		4,524
Interest (income) expense, net		33,476		28,911		4,565
Equity in (earnings) losses from unconsolidated ventures		(5,817)		(1,905)		(3,912)
(Gain) loss on sale or disposal of real estate and other assets, net		(4,794)		(4,730)		(64)



Impact of straight-line rent		(847)		(1,113)		266
Other		(54)		(185)		131
Operating Assets NOI		$	58,264	$	54,310	$	3,954

The table below presents Operating Assets NOI by property type:


Operating Assets NOI by Property Type	Three Months Ended March 31,
thousands		2024		2023		$ Change
Office		$	30,598	$	27,785	$	2,813
Retail		14,567		14,618		(51)
Multi-family		13,777		12,633		1,144
Other		(623)		(823)		200
Redevelopments (a)		—		(10)		10
Dispositions (a)		(55)		107		(162)
Operating Assets NOI		$	58,264	$	54,310	$	3,954

(a)Properties that were transferred to ~~Note 16~~ our Strategic Developments segment for redevelopment and properties that were sold are shown separately for all periods presented.

For the three months ended March 31, 2024:

Operating Assets NOI increased $4.0 million compared to the prior-year period primarily due to the following:

–~~Segments~~ Office NOI increased $2.8 million primarily due to strong leasing activity and abatement expirations at various properties in The Woodlands and Summerlin, most notably at 9950 Woodloch Forest and 1700 Pavilion, partially offset by decreases related to lower occupancy and a tenant bankruptcy at 1725 Hughes Landing.

–Multi-family NOI increased $1.1 million primarily due to continued lease-up at our ~~Condensed Consolidated Financial Statements.~~

newer properties, Marlow in Downtown Columbia and Starling at Bridgeland, partially offset by winter-weather-related insurance recoveries in 2023.

–These increases were partially offset by a $0.2 million decrease primarily related to the disposition of two self-storage properties in The Woodlands in 2023.

HHC 2024 FORM 10-Q | 34


MANAGEMENT’S NARRATIVE ANALYSIS RESULTS OF OPERATIONS			Table of Contents


Master Planned Communities

Segment EBT The following table presents segment EBT for MPC:


MPC Segment EBT	Three Months Ended March 31,
thousands		2024		2023		$ Change
Master Planned Community land sales (a)		$	32,415	$	59,361	$	(26,946)
Other land, rental, and property revenues		3,894		3,643		251
Builder price participation (b)		12,566		14,009		(1,443)
Total revenues		48,875		77,013		(28,138)

Master Planned Communities cost of sales		(12,904)		(22,003)		9,099
Operating costs		(12,145)		(12,348)		203

Total operating expenses		(25,049)		(34,351)		9,302
Segment operating income (loss)		23,826		42,662		(18,836)
Depreciation and amortization		(110)		(107)		(3)
Interest income (expense), net		15,246		15,812		(566)
Other income (loss), net		—		(103)		103
Equity in earnings (losses) from unconsolidated ventures		(14,711)		4,108		(18,819)





Segment EBT		$	24,251	$	62,372	$	(38,121)

(a) ~~Land~~MPC land sales ~~includes~~include deferred revenue from land sales closed in a previous period ~~which~~that met criteria for recognition in the current ~~period.~~

period and excludes amounts deferred from current period land sales that do not yet meet the recognition criteria.

(b)Builder price participation revenue is earned when a developer that acquired land from us develops and sells a home to an end user at a price higher than a predetermined breakpoint. The excess over the breakpoint is shared between us and the developer at the time of closing on the sale of the home based on ana previously agreed-upon ~~percentage of the sales price of homes closed relative to the base lot price which was paid by the homebuilders to us.~~percentage. This revenue fluctuates based upon the number and the prices of homes closed that qualify for builder price participation payments.

~~(c)~~ ~~Interest expense, net reflects the amount of interest that is capitalized at the project level.~~ ~~Negative interest expense amounts relate to interest capitalized relating to debt assigned to our Operating Assets segment and corporate debt.~~

~~(d) Equity in earnings in Real Estate and Other Affiliates is our share of earnings in~~

The ~~Summit joint venture which commenced lot sales in the second quarter of 2016.~~

~~(e) The negative~~following table presents MPC segment EBT ~~in Maryland is due to our continuing to incur certain costs such as real estate taxes~~by MPC:


MPC Segment EBT by MPC	Three Months Ended March 31,
thousands		2024		2023		$ Change
Bridgeland		$	17,247	$	31,104	$	(13,857)
Summerlin		7,309		28,390		(21,081)
Teravalis (a)		943		(1,009)		1,952
The Woodlands		(2,350)		2,295		(4,645)
The Woodlands Hills		1,102		1,592		(490)
Segment EBT		$	24,251	$	62,372	$	(38,121)

Floreo (b)		$	2,425	$	(952)	$	3,377

(a)As of March 31, 2024, the Company owns an 88.0% interest and ~~administrative expenses even though we have not had any land sales in the three months ended September 2017 or 2016.~~

~~NM – Not Meaningful~~

~~Table of Contents~~

~~Master Planned Communities Revenues and Expenses (*)~~

consolidates Teravalis. For ~~the nine months ended September 30, 2017 and 2016~~

Bridgeland

Maryland Communities

Summerlin

The Woodlands

The Woodlands Hills

Total MPC
($ in thousands, except %)

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016
Land sales (a)

$
30,444

$
15,991

$
500

$
—

$
119,334

$
106,341

$
27,253

$
24,836

$
—

$
—

$
177,531

$
147,168
Builder price participation (b)

296

595

—

—

13,660

13,535

657

1,501

—

—

14,613

15,631
Minimum rents

—

—

—

—

(8)

376

—

—

—

—

(8)

376
Other land revenues

6,840

206

445

416

6,969

7,396

5,299

4,166

22

11

19,575

12,195
Other rental and property revenue (c)

—

—

—

—

—

33

—

—

—

—

—

33
Total revenues

37,580

16,792

945

416

139,955

127,681

33,209

30,503

22

11

211,711

175,403

Cost of sales - land

9,797

5,234

219

—

65,517

49,603

12,755

11,291

—

—

88,288

66,128
Land sales operations

5,152

4,533

1,287

1,086

6,580

8,216

11,286

16,364

576

255

24,881

30,454
Provision for doubtful accounts

—

—

—

—

2

—

—

—

—

—

2

—
Depreciation and amortization

79

70

6

13

72

63

90

90

—

—

247

236
Total expenses

15,028

9,837

1,512

1,099

72,171

57,882

24,131

27,745

576

255

113,418

96,818

Operating income

22,552

6,955

(567)

(683)

67,784

69,799

9,078

2,758

(554)

(244)

98,293

78,585
Interest (income) expense, net (d)

(7,670)

(7,053)

3

(5)

(12,863)

(12,437)

3,044

4,307

(416)

(429)

(17,902)

(15,617)
Equity in (earnings) loss in Real Estate and Other Affiliates (e)

—

—

—

—

(21,552)

(22,574)

—

—

—

—

(21,552)

(22,574)
MPC segment EBT*

$
30,222

$
14,008

$
(570)
(f)

$
(678)
(f)

$
102,199

$
104,810

$
6,034

$
(1,549)

$
(138)

$
185

$
137,747

$
116,776

(GAAP Basis) Residential Gross Margin %

66.8%

66.6%

NM

NM

45.1%

53.3%

49.5%

50.5%

NM

NM

48.7%

54.3%
(GAAP Basis) Commercial Gross Margin %

71.1%

71.0%

56.2%

NM

44.9%

58.1%

76.3%

60.2%

NM

NM

71.4%

61.8%

~~(*) For a reconciliation of MPC segment EBT to consolidated income before taxes,~~additional detail, refer to Note ~~16 –~~ ~~Segments~~ 1 - Presentation of Financial Statements and Significant Accounting Policiesin ~~our~~the Notes to Condensed Consolidated Financial ~~Statements.~~

~~(a) Land sales includes deferred revenue from land sales closed~~Statements under Item 1 of this Form 10-Q.

(b)These amounts represent 100% of Floreo EBT. The Company owns a 50% interest in ~~a previous period which met criteria for recognition~~ Floreo. Refer to Note 2 - Investments in Unconsolidated Ventures in the ~~current period.~~

~~(b)~~ ~~Builder price participation revenue is based on an agreed-upon percentage of the sales price of homes closed relative~~Notes to ~~the base lot price which was paid by the homebuilders to us. This revenue fluctuates based upon the number of homes closed that qualify for builder price participation payments~~

(c) For the nine months ended September 30, 2017, Other land sales revenues includes the sale of a utility easement at our Bridgeland community recorded in the first quarter of 2017 for $10.1 million less related costs of $3.7 million.

~~(d)~~ ~~Interest expense, net reflects the amount of interest that is capitalized at the project level.~~ ~~Negative interest expense amounts relate to interest capitalized relating to debt assigned to our Operating Assets segment and corporate debt.~~

~~(e) Equity in earnings in Real Estate and Other Affiliates is our share of earnings in The Summit joint venture which commenced lot sales in the second quarter of 2016.~~

(f) The negative MPC segment EBT in Maryland is due to our continuing to incur certain costs such as real estate taxes and administrative expenses even though we have had only minimal land sales in the nine months ended September 2017 and zero in 2016.

~~NM – Not Meaningful~~

MPC revenues vary between periods based on economic conditions and several factors primarily, but not limited to, location, availability of land for sale, development density and residential or commercial use. Gross margin for each MPC may vary from period to period based on the locations of the land sold and the related costs associated with developing the land sold. Reported results may differ significantly from actual cash flows generated principally because cost of sales for GAAP purposes is derived from margins calculated using carrying values, projected future improvements and other capitalized project costs in relation to projected future land sale revenues. Carrying values, generally, represent acquisition and development costs reduced by any previous impairment charges. Development expenditures are capitalized and generally not reflected in the Condensed Statements of Operations in the current period. Accordingly, Cost of sales – land includes both actual and estimated future costs allocated based upon relative sales value to the lots or land parcels in each of the villages and neighborhoods in our MPCs.

~~Although our business does not involve the sale or resale of homes, we believe that net new home sales are an important indicator of future demand for our superpad~~

~~Table of Contents~~

sites and finished lots. Therefore, we use this statistic where relevant in our presentation of our MPC operating results throughout this Quarterly Report on the following pages. Net new home sales reflect home sales made by homebuilders, less cancellations. Cancellations generally occur when a home buyer signs a contract to purchase a home, but later fails to qualify for a home mortgage or is unable to provide an adequate down payment to complete the home sale.

Summary of Residential MPC Land Sales Closed for the Three Months Ended September 30,

Land Sales

Acres Sold

Number of Lots/Units

Price per acre

Price per lot
($ in thousands)

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016
Bridgeland

Single family - detached

$
6,458

$
4,687

17.5

12.2

80

69

$
369

$
384

$
81

$
68
$ Change

1,771

5.3

11

(15)

13

% Change

37.8%

43.4%

15.9%

(3.9%)

19.1%

Maryland Communities

No residential land sales

—

—

—

—

—

—

—

—

—

—

Summerlin

Residential

Superpad sites

29,945

15,000

56.8

30.9

321

75

527

485

93

200
Custom lots

1,570

1,525

0.9

0.8

2

2

1,744

1,906

785

763
Total

31,515

16,525

57.7

31.7

323

77

546

521

98

215
$ Change

14,990

26.0

246

25

(117)

% Change

90.7%

82.0%

319.5%

4.8%

(54.4%)

The Woodlands

Residential

Single family - detached

5,124

10,581

10.7

19.9

40

79

479

532

128

134
Single family - attached

2,370

—

0.4

—

8

—

5,925

—

296

—
Total

7,494

10,581

11.1

19.9

48

79

675

532

156

134
$ Change

(3,087)

(8.8)

(31)

143

22

% Change

(29.2%)

(44.2%)

(39.2%)

26.9%

16.4%

Total residential land sales closed in period (a)

$
45,467

$
31,793

86.3

63.8

451

225

~~(a)~~

Excludes revenues closed and deferred for recognition in a previous period that met criteria for recognition in the current period. Please see the Reconciliation of MPC Land Sales Closed to GAAP Land Sales Revenue table below which reconciles Total residential and commercial land sales closed to Total land sales revenue for the three months ended September 30, 2017 and 2016.

~~Table of Contents~~

Summary of Commercial MPC Land Sales Closed for the Three Months Ended September 30,

Land Sales

Acres Sold

Price per acre
($ in thousands)

2017

2016

2017

2016

2017

2016
Bridgeland

No commercial land sales

$
—

$
—

—

—

$
—

$
—

Maryland Communities

Commercial

Medical

—

—

—

—

—

—
$ Change

—

—

—

% Change

NM

NM

NM

Summerlin

Commercial

Not-for-profit

—

—

—

—

—

—
$ Change

—

—

—

% Change

NM

NM

NM

The Woodlands

No commercial land sales

—

—

—

—

—

—

Total commercial land sales closed in period (a)

$
—

$
—

—

—

~~(a)~~

~~Table of Contents~~

Summary of Residential MPC Land Sales Closed for the Nine Months Ended September 30,

Land Sales
Acres Sold

Number of Lots/Units

Price per acre

Price per lot
($ in thousands)

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016
Bridgeland

Single family - detached

$
23,089

$
13,557

60.4

36.2

299

201

$
382

$
375

$
77

$
67
$ Change

9,532

24.2

98

7

10

% Change

70.3%

66.9%

48.8%

1.9%

14.9%

Maryland Communities

No residential land sales

—

—

—

—

—

—

—

—

—

—

Summerlin

Residential

Superpad sites

80,770

81,987

144.6

201.1

815

943

559

408

99

87
Custom lots

5,945

4,170

2.5

2.4

7

7

2,378

1,738

849

596
Total

86,715

86,157

147.1

203.5

822

950

589

423

105

91
$ Change

558

(56.4)

(128)

166

14

% Change

0.6%

(27.7%)

(13.5%)

39.2%

15.4%

The Woodlands

Residential

Single family - detached

18,267

14,431

38.7

26.3

160

105

472

549

114

137
Single family - detached

5,187

—

0.8

—

18

—

6,484

—

288

—
Total

23,454

14,431

39.5

26.3

178

105

594

549

132

137
$ Change

9,023

13.2

73

45

(5)

% Change

62.5%

50.2%

69.5%

8.2%

(3.6%)

Total residential land sales closed in period (a)

$
133,258

$
114,145

247.0

266.0

1,299

1,256

~~(a)~~

~~Table of Contents~~

Summary of Commercial MPC Land Sales Closed for the Nine Months Ended September 30,

Land Sales
Acres Sold

Price per acre
($ in thousands)

2017

2016

2017

2016

2017

2016
Bridgeland

No commercial land sales

$
—

$
—

—

—

$
—

$
—

Maryland Communities

Commercial

Medical

500

—

1.0

—

500

—
$ Change

500

1.0

500

% Change

NM

NM

NM

Summerlin

Commercial

Not-for-profit

—

348

—

10.0

—

35
$ Change

(348)

(10.0)

(35)

% Change

NM

NM

NM

The Woodlands

Commercial

Medical

—

10,405

—

4.3

—

2,420
Office and other

1,441

—

1.3

—

1,108

—
Retail

2,358

—

9.1

—

259

—
Total

3,799

10,405

10.4

4.3

365

2,420
$ Change

(6,606)

6.1

(2,055)

% Change

(63.5%)

141.9%

(84.9%)

Total commercial land sales closed in period (a)

$
4,299

$
10,753

11.4

14.3

~~(a)~~

~~Table of Contents~~

~~Reconciliation of MPC Land Sales Closed to GAAP Land Sales Revenue~~

The following table reconciles Total residential and commercial land sales closed in the three and nine months ended September 30, 2017 and 2016 to Total land sales revenue for the MPC segment for the three and nine months ended September 30, 2017 and 2016, respectively. Total net recognized (deferred) revenue includes revenues recognized in the current periods which related to sales closed in prior periods, offset by revenues deferred on sales closed in the current periods.

Three Months Ended September 30,

Nine Months Ended September 30,
(In thousands)

2017

2016

2017

2016
Total residential land sales closed in period

$
45,467

$
31,793

$
133,258

$
114,145
Total commercial land sales closed in period

—

—

4,299

10,753
Net recognized (deferred) revenue:

  Bridgeland

2,234

2,523

7,356

2,435
  Summerlin

3,166

7,649

22,333

13,941
Total net recognized (deferred) revenue

5,400

10,172

29,689

16,376
Special Improvement District revenue

4,039

2,163

10,285

5,894
Total land sales revenue

$
54,906

$
44,128

$
177,531

$
147,168

~~Houston~~

In August 2017, over 100,000 Houston-area homes were damaged or destroyed by Hurricane Harvey. With the exception of approximately 500 homes in The Woodlands, our Houston area MPCs generally escaped the flooding that impacted other Houston-area communities. We do not expect any negative impact on our ability to meet land development timelines or to adequately supply lots to meet demand at our communities in the near term as a result of Hurricane Harvey. We expect demand to increase due to the continued increases in home sales and construction starts in the greater Houston market, continued increase in manufacturing and service jobs and population growth. In addition, a large employer recently announced plans to relocate approximately 1,600 jobs to Spring, Texas, just south of The Woodlands, beginning in 2018. While reconstruction efforts in the region may increase construction costs in the near term, we do not anticipate an adverse impact on future home sales in the long term.

Our Houston area MPCs have proven to be resilient to the slowdown in the energy sector. Our strategy of expanding the offerings of lots priced for homes under $500,000 has resulted in an increase in the number of new home sales in The Woodlands and Bridgeland by 46.4% and 30.0%, respectively, for the nine months ended September 30, 2017 compared to the same period in 2016. The increased home sales have been a primary factor in driving continued homebuilder demand for lots in these Houston area communities.

~~Bridgeland~~

Land sales revenues totaled $8.7 million and $30.4 million for the three and nine months ended September 30, 2017, respectively, which was $1.5 million and $14.5 million, or 20.6% and 90.4% higher than the same periods in 2016 as a result of higher residential land sales and the recognition of revenues deferred in previous periods.

Residential land sales for the three and nine months ended September 30, 2017 were higher compared to the same period in 2016 due to increased demand from homebuilders. The Bridgeland submarket, in the mid-range of the residential market, continues to show improvement. For the three and nine months ended September 30, 2017, ~~Bridgeland sold 17.5 and 60.4 residential acres, respectively, compared to~~ ~~12.2 and 36.2 residential~~ ~~acres for the same periods in 2016. The average price per residential acre for single-family – detached product decreased for the three months ended September 30, 2017 compared to 2016 by~~ 3.9%, and for the nine months ended September 30, 2017, the average price per acre sold increased 1.9% compared to the same period in 2016 as a result of the mix of lots sold in the respective periods.

There were 92 and 316 new home sales at Bridgeland for the three and nine months ended September 30, 2017, representing a 24.3% and 30.0% increase, respectively, compared to 74 and 243 new home sales for the same periods in 2016. For the three months ended September 30, 2017, the median price of new homes sold in Bridgeland increased 20.1% to $370,000 compared to $308,000 for the same period in 2016. The higher pricing is primarily due to the mix of homes

~~Table of Contents~~

sold. For the nine months ended September 30, 2017, the median price of new homes sold increased 5.9% to $343,000 compared to $324,000 for the same period in 2016. Residential land and home absorption rates at Bridgeland in 2017 have benefited from the offering of a wide variety of products at competitive prices. In addition, the Grand Parkway toll road, which opened in February 2016, provides greater connectivity between Bridgeland and major employment centers in Houston.

~~There were no commercial land sales in Bridgeland for the three and nine months ended September 30, 2017 or 2016.~~

~~As of September 30, 2017, Bridgeland had 294 residential lots under contract, of which 89 lots totaling 19.9 acres are scheduled to close in the fourth quarter of 2017 for $7.4 million.~~

~~The Woodlands~~

Land sales revenues totaled $7.5 million for the three months ended September 30, 2017, which was $3.1 million, or 29.2% lower than the same period in 2016 primarily as a result of the timing of land sales. Land sales revenues totaled $27.3 million for the nine months ended September 30, 2017, which was $2.4 million, or 9.7% higher than the same period in 2016 primarily as a result of a $9.0 million increase in residential land sales, offset by a $6.6 million decrease in commercial land sales.

For the three and nine months ended September 30, 2017, The Woodlands sold 11.1 and 39.5 residential acres, respectively, compared to 19.9 and 26.3 residential acres for the same periods in 2016, a decrease of 44.2% and an increase of 50.2%, respectively. The average price per residential acre increased to $675,000 and $594,000 compared to the three and nine month period average in 2016 of $532,000 and $549,000, or an increase of 26.9% and 8.2%, respectively, due primarily to the sale of single family-attached lots in the premium East Shore neighborhood. There were no commercial sales for the three months ended September 30, 2017 or 2016. The Woodlands sold 10.4 acres of commercial land at $365,000 per acre during the nine months ended September 30, 2017 compared to 4.3 acres at $2.4 million per acre for the same period in 2016. The commercial land sales for the nine months ended September 30, 2017 included a 9.1-acre site with a less desirable location, an irregular shape with no freeway frontage and limited access, resulting in a lower price per acre, in contrast to the commercial sales for the nine months ended September 30, 2016 which included a 3.1-acre site with freeway frontage that generated $2.7 million in revenue per acre.

There were 88 and 262 new home sales for the three and nine months ended September 30, 2017, respectively, representing a 41.9% and 46.4% increase compared to 62 and 179 new home sales for the same periods in 2016. The median new home price in The Woodlands was $450,000 and $552,000 for the three and nine months ended September 30, 2017, respectively, compared to a median new home price of $578,000 and $559,000 for the same periods in 2016. The decrease in median home prices reflects the absorption of homes priced in the mid-range of the residential market.

~~As of September 30, 2017, there were 307 residential lots under contract in The Woodlands, of which 71 lots totaling 16.9 acres are scheduled to close in the fourth quarter of 2017 for $11.6 million.~~

~~The Woodlands Hills~~

The City of Conroe approved our development plans for The Woodlands Hills in 2016, and land development is progressing in the first phase which will consist of 192 single-family detached lots of various sizes including a model home complex and a 17.5-acre amenity center/community park. We are negotiating lot sale contracts with homebuilders for lots in the first phase, with lot closings to commence in the fourth quarter of 2017. Benefiting from The Woodlands brand reputation and with moderately-priced homes, we believe The Woodlands Hills is well-positioned for home sales which will start in 2018.

~~Maryland~~

Our Columbia, Gateway, Emerson and Fairwood communities contain approximately 107 commercial acres remaining to be developed. Commercial land sales for the three and nine months ended September 30, 2017, related to one acre sold for

~~Table of Contents~~

$500,000 for a proposed medical office building site. There were no commercial land sales for the three and nine months ended September 30, 2016. All of the residential inventory was sold out in prior years.

~~Summerlin~~

Land sales revenues totaled $38.7 million for the three months ended September 30, 2017, which was $12.4 million, or 47.0% higher than the same period in 2016. The land sales revenues for the three months ended September 30, 2017 included $3.2 million of land sales closed and deferred in previous periods which met criteria for recognition in the current period, as compared to a net $7.6 million of deferred land sales recognized in the same period in 2016. Land sales revenues totaled $119.3 million for the nine months ended September 30, 2017, which was $13.0 million, or 12.2% higher than the same period in 2016 as a result of a higher average price per acre and the recognition of $22.3 million in revenues deferred in previous periods that were recognized in the current period as compared to $13.9 million of previously deferred revenue recognized for the nine months ended 2016.

Summerlin’s residential land sales for the three months ended September 30, 2017 totaled 57.7 acres at an average price of $546,000 per acre compared to 31.7 acres at an average price of $521,000 per acre for the same period in 2016. The increase in price per acre on land sales closed in 2017 as compared to the same period in 2016 was primarily due to the mix of superpads sold.

Summerlin’s residential land sales for the nine months ended September 30, 2017 totaled 147.1 acres compared to 203.5 acres for the same period in 2016. The average price per superpad acre for the nine months ended September 30, 2017 of $559,000 is not comparable to the average price per superpad acre of $408,000 for the same period in 2016 due to the significant differences between the parcels sold. For the nine months ended September 30, 2016, we closed on a $40 million bulk sale of a large 116.8-acre tract of land to a homebuilder. As is typical with bulk sales, this sale was at a lower price per acre due to the size and lack of infrastructure developed on this site compared to the sale of a more typical parcel; however, we incurred substantially lower development costs, resulting in a significant increase in our residential gross margin. In comparison, for the nine months ended September 30, 2017, we closed on the sale of a more typical sized parcel that was previously graded to the finished lot level and had significant infrastructure installed. Thus, the parcel had significantly more value than our customary superpad and was sold at a higher price per acre in contrast to the comparative period’s bulk sale discussed above. Our residential gross margin for the three and nine months ended September 30, 2017 is lower than the same periods in 2016 as our 2017 land sales consist of more steeply graded parcels which are more costly to develop.

Based on recent home sales, we believe the Summerlin market remains strong. Summerlin had 266 and 717 new home sales for the three and nine months ended September 30, 2017, respectively, representing a 36.4% and 31.6% increase compared to 195 and 545 new home sales for the same periods in 2016. The median new home price in Summerlin increased 5.2% and 4.5% to $548,000 and $562,000 for the three and nine months ended September 30, 2017, respectively, compared to a median new home price of $521,000 and $538,000 for the same periods in 2016.

~~As of September 30, 2017, there were two superpad sites totaling 56.9 acres and two custom lots under contract which are scheduled to close in the fourth quarter of 2017 for a total of $31.3 million.~~

~~The Summit~~

Land development began at The Summit, our joint venture with Discovery Land, in the second quarter of 2015 and continues to progress. Custom lot closings began in the second quarter of 2016, and a total of 71 lots have closed for $220 million through September 30, 2017. For the three and nine months ended September 30, 2017, two and 11 custom residential lots closed for $6.5 million and $34.9 million, respectively, compared to 21 lots and 38 lots for $71.7 million and $119.8 million for the same periods in 2016. The significant number of lot closings in 2016 resulted from a backlog of sales contracts executed between the second quarter of 2015 and the second quarter of 2016 when lots were not yet available for sale.

The revenue generated at The Summit as development progresses is being recognized under the percentage of completion method of accounting. We recorded $6.5 million and $21.6 million as our share of Equity in earnings in Real Estate and

~~Table of Contents~~

Other Affiliates from this joint venture for the three and nine months ended September 30, 2017, respectively. We recorded $13.7 million and $22.6 million as our share of Equity in earnings in Real Estate and Other Affiliates from this joint venture for the three and nine months ended September 30, 2016, respectively. As of September 30, 2017, an additional 14 lots are under contract for $50.9 million. Please refer to Note 8 – ~~Real Estate and Other Affiliates~~ ~~in our~~ Condensed Consolidated Financial Statements under Item 1 of this Form 10-Q for a description of the joint venture and further discussion.

HHC 2024 FORM 10-Q | 35


MANAGEMENT’S NARRATIVE ANALYSIS RESULTS OF OPERATIONS			Table of Contents

For the three months ended March 31, 2024:

MPC Segment EBT decreased $38.1 million compared to the prior-year period primarily due to the following:

Summerlin EBT decreased $21.1 million compared to the prior-year period.

–Equity earnings at The Summit decreased $20.6 million. Land and clubhouse unit sales decreased in the first quarter of 2024, compared to the prior-year period due to low remaining inventory.

–Builder price participation decreased $2.4 million as fewer homes were closed with sales prices over the predetermined breakpoint necessary for participation revenue in the current period.

–MPC sales, net of MPC cost of sales increased $0.9 million primarily due to the following activity:

–increase due to $3.3 million more revenue recognized out of deferred revenue in the first quarter of 2024, compared to the prior-year period

–decrease in custom lots sold, with no lots sold in the first quarter of 2024, compared to one lot sold at a price of $2.0 million per lot in the prior-year period. The lot sold in the prior-year period was the last custom lot currently available.

Bridgeland EBT decreased $13.9 million compared to the prior-year period.

–MPC sales, net of MPC cost of sales decreased $12.7 million primarily due to the following activity:

–decrease in commercial acres sold partially offset by an increase in price per acre, with 3.5 acres sold at an average price of $801,000 per acre in the first quarter of 2024, compared to 108.8 acres sold at an average price of $247,000 in the prior-year period

–increase in residential acres sold, with 30.7 acres sold at an average price of $601,000 per acre in the first quarter of 2024, compared to 22.5 acres sold at an average price of $542,000 per acre in the prior-year period

The Woodlands EBT decreased $4.6 million compared to the prior-year period.

–MPC sales, net of MPC cost of sales decreased $5.0 million primarily due to the following activity:

–decrease in residential acres sold, with no acres sold in the first quarter of 2024, compared to 3.5 acres sold in Aria Isle, an exclusive gated community, at an average price of $2.9 million per acre in the prior-year period. The decrease in acres sold is expected as only one custom lot remains at Aria Isle.

The Woodlands HillsEBT decreased $0.5 million compared to the prior-year period.

–MPC sales, net of MPC cost of sales decreased $1.0 million primarily due to the following activity:

–decrease in residential acres sold partially offset by an increase in price per acre, with 0.4 acres sold at an average price of $538,000 per acre in the first quarter of 2024, compared to 4.9 acres sold at an average price of $431,000 per acre in the prior-year period

Teravalis EBT increased $2.0 million compared to the prior-year period.

–Equity earnings at Floreo increased $1.7 million primarily related to the closings of the first Floreo land sales in the first quarter of 2024.

HHC 2024 FORM 10-Q | 36


MANAGEMENT’S NARRATIVE ANALYSIS RESULTS OF OPERATIONS			Table of Contents

MPC Net Contribution

~~In addition to segment EBT,~~ MPC Net Contribution is a non-GAAP financial measure derived from EBT, adjusted for certain items as discussed below. Management uses this measure because it captures current period performance through the velocity of sales, as well as current period development expenditures based upon demand at our MPCs, which varies depending upon the stage of the MPCs development lifecycle, and the overall economic environment.

~~As reconciled below for each of the respective periods, we calculate~~ MPC Net Contribution is defined as MPC segment EBT, ~~adjusted to exclude timing differences related to~~plus MPC cost of sales, ~~and non-cash depreciation~~Depreciation and amortization, and net collections from Special Improvement District (SID) bonds and Municipal Utility District (MUD) receivables, reduced by ~~the current period~~MPC development expenditures, land acquisitions, and ~~land acquisition expenditures (net of municipality reimbursements) which relate to the ordinary course of our long-term master planned community development business, further adjusted for distributed~~Equity in earnings from unconsolidated ~~development ventures.~~

~~Although~~ventures, net of distributions. MPC Net Contribution ~~can be computed from GAAP elements of income, it~~ is not a GAAP-based operational metric and should not be ~~evaluated in addition~~used to ~~and not considered~~measure operating performance of the MPC assets as a substitute for ~~or superior to any~~ GAAP measures of ~~operating performance. Furthermore,~~such performance nor should it be used as a comparison metric with other ~~companies may calculate Net Contribution in~~comparable businesses.

Below is a ~~different manner, which may hinder comparability. A~~ reconciliation of segment EBT to ~~consolidated~~MPC Net Contribution:


MPC Net Contribution	Three Months Ended March 31,
thousands		2024		2023		$ Change
MPC segment EBT		$	24,251	$	62,372	$	(38,121)
Plus:
Master Planned Communities cost of sales		12,904		22,003		(9,099)
Depreciation and amortization		110		107		3
MUD and SID bonds collections, net (a)		248		1,364		(1,116)

Less:
MPC development expenditures		(77,098)		(89,345)		12,247

Equity in (earnings) losses from unconsolidated ventures		14,711		(4,108)		18,819
MPC Net Contribution		$	(24,874)	$	(7,607)	$	(17,267)

(a)SID collections are shown net ~~income (loss) as computed~~of SID transfers to buyers in ~~accordance with GAAP is presented in Note 16 -~~ ~~Segments~~.

~~The following table sets forth~~ the respective periods.

MPC Net Contribution ~~for the three and nine months ended September 30, 2017 and 2016 as reconciled to MPC segment EBT:~~

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2017

2016

Change

2017

2016

Change
MPC segment EBT (a)

$
40,465

$
39,537

$
928

$
137,747

$
116,776

$
20,971
Plus:

Cost of sales - land

29,043

21,432

7,611

88,288

66,128

22,160
Depreciation and amortization

76

72

4

247

236

11
MUD and SID bonds collections, net (b)

1,643

6,544

(4,901)

1,961

3,485

(1,524)
Less:

MPC development expenditures

(45,772)

(35,823)

(9,949)

(136,745)

(106,501)

(30,244)
MPC land acquisitions

—

—

—

(1,415)

(69)

(1,346)
Equity in (earnings) loss in Real Estate and Other Affiliates

(6,480)

(13,700)

7,220

(21,552)

(22,574)

1,022
MPC Net Contribution

$
18,975

$
18,062

$
913

$
68,531

$
57,481

$
11,050

~~(a)~~

~~For a detailed breakdown of our MPC segment EBT, refer to Note 16 –~~ ~~Segments~~ ~~in our Condensed Consolidated Financial Statements.~~

~~(b)~~

~~SID collections are shown net of SID transfers to buyers in the respective periods.~~

~~MPC Net Contribution~~ ~~increased~~ decreased $17.3 million for the three months ended ~~September 30, 2017~~March 31, 2024, compared to the ~~same periods in 2016~~prior-year period, primarily due to ~~increases in~~lower MPC ~~segment EBT~~land sales and ~~Cost of sales - land, offset by increased MPC development expenditures and lower collections from~~ MUD and SID ~~bonds in 2017. MPC Net Contribution~~ ~~increased~~ ~~for the nine months ended September 30, 2017 compared to the same periods in 2016 primarily due to increases~~bond collections, net, partially offset by a decrease in MPC ~~segment EBT and Cost of sales - land, offset by increased~~ development expenditures.

MPC ~~development expenditures in 2017.~~

~~Table of Contents~~

Land Inventory The following table ~~sets forth~~summarizes MPC land inventory activity for the ~~nine~~three months ended ~~September 30, 2017:~~

(In thousands)

Bridgeland

Maryland

Summerlin

The Woodlands

The Woodlands Hills

Total MPC
Balance December 31, 2016

$
441,598

$
22,428

$
882,543

$
219,970

$
103,022

$
1,669,561
Acquisitions

—

—

—

1,415

—

1,415
Development expenditures (a)

53,688

29

66,033

12,271

4,724

136,745
MPC Cost of sales

(9,797)

(219)

(65,517)

(12,755)

—

(88,288)
MUD reimbursable costs (b)

(38,527)

—

—

(3,280)

(2,131)

(43,938)
Transfer to Strategic Developments

—

—

—

(8,151)

—

(8,151)
Other

1,846

5

(2,390)

(1,387)

2,078

152
Balance September 30, 2017

$
448,808

$
22,243

$
880,669

$
208,083

$
107,693

$
1,667,496
March 31, 2024:


thousands	Bridgeland		Summerlin		Teravalis		The Woodlands		The Woodlands Hills		Total MPC
Balance December 31, 2023	$	533,031	$	1,079,927	$	544,824	$	172,652	$	115,239	$	2,445,673

Development expenditures (a)	27,777		39,849		235		871		8,366		77,098
MPC Cost of sales	(9,392)		(3,427)		—		(2)		(83)		(12,904)
MUD reimbursable costs (b)	(19,323)		—		—		(80)		(6,723)		(26,126)
Transfer to Strategic Development and Operating Assets Segments	—		—		—		(4,294)		—		(4,294)
Other	9,870		(3,297)		(53)		—		(4,429)		2,091
Balance March 31, 2024	$	541,963	$	1,113,052	$	545,006	$	169,147	$	112,370	$	2,481,538

(a)Development expenditures are inclusive of capitalized interest and property taxes.

(b)MUD reimbursable costs represent land development expenditures transferred to MUD Receivables.

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MANAGEMENT’S NARRATIVE ANALYSIS RESULTS OF OPERATIONS			Table of Contents

	~~(a)~~
~~Development expenditures are inclusive of capitalized interest and property taxes.~~ Seaport

~~(b)~~

~~MUD reimbursable costs represent land development expenditures transferred to MUD Receivables.~~

~~Operating Assets~~

~~Operating~~

Seaport Entertainment On October 5, 2023, HHH announced the intent to form a new division, Seaport Entertainment, that is expected to include the Company’s entertainment-related assets ~~typically generate rental~~in New York and Las Vegas, including the Seaport in Lower Manhattan and the Las Vegas Aviators Triple-A Minor League Baseball team, as well as the Company’s ownership stake in Jean-Georges Restaurants and an interest in and to 80% of the air rights above the Fashion Show Mall in Las Vegas. HHH is establishing Seaport Entertainment with the intention of completing its spinoff as an independent, publicly traded company in 2024, but there can be no assurance regarding the ultimate timing of the spinoff or that the spinoff will ultimately occur.

General The Seaport is part non-stabilized operating asset, part development project, and part operating business. As such, the Seaport has a greater range of possible outcomes than our other projects. The greater uncertainty is largely the result of: (i) seasonality; (ii) potential sponsorship revenue; (iii) potential event revenue; and (iv) business operating risks from various start-up businesses. We operate and own, either directly, through license agreements, or in joint ventures, many of the tenants in the Seaport. As a result, the revenues ~~sufficient~~and expenses of these businesses, as well as the underlying market conditions affecting these types of businesses, will directly impact the NOI of the Seaport. This is in contrast to ~~cover their~~our other retail properties where we primarily receive lease payments and are not as directly impacted by the operating ~~costs except when~~performance of the underlying businesses. This causes the financial results and eventual stabilized yield of the Seaport to be less predictable than our other operating real estate assets with traditional lease structures. Further, as we open new operating businesses, either owned entirely or in partnership with third parties, we expect to incur pre-opening expenses and operating losses until those businesses stabilize, which likely will not happen until the Seaport reaches its critical mass of offerings. Given the factors and uncertainties listed above, we do not currently provide guidance on our expected NOI yield or stabilization date for the Seaport.

We primarily categorize the businesses in the Seaport segment into the following groups: Landlord Operations, Managed Businesses, the Tin Building, and Events and Sponsorships.

Landlord Operations Landlord Operations represent physical real estate in the Historic District and Pier 17 that we have developed and own, and is inclusive of our office, retail, and multi-family properties.

Managed Businesses Managed Businesses represent retail and food and beverage businesses in the Historic District and Pier 17 that the Company owns, either wholly or through partnerships with third parties, and operates, including license and management agreements. These businesses include, among others, The Fulton, Mister Dips, Carne Mare, The Lawn Club, and Malibu Farm. The Fulton and Malibu Farm are managed by Creative Culinary Management Company, LLC (CCMC), a ~~substantial portion, or~~Jean-Georges company, and Mister Dips and Carne Mare are managed by Seaport F&B LLC, an Andrew Carmellini company. These management companies are responsible for employment and supervision of all employees providing services for the food and beverage operations and restaurant as well as day-to-day operations and accounting for food and beverage operations.

The Company owns a 25% interest in Jean-Georges Restaurants, which currently operates over 40 restaurant and hospitality offerings around the world. This ownership interest is reported in accordance with the equity method.

Tin Building The Tin Building includes both landlord operations and managed business. The Company owns 100% of the Tin Building, which was completed and placed in service during the third quarter of 2022. The Company leases 100% of the rentable space to the Tin Building by Jean-Georges joint venture, a managed business in which the Company has an equity ownership interest and reports its ownership interest in accordance with the equity method. Based on capital contribution and distribution provisions for the Tin Building by Jean-Georges, the Company currently recognizes all of the ~~property~~economic interest in the venture. The Company recognizes lease payments from the Tin Building by Jean-Georges in Rental revenue and recognizes its share of income or losses from the joint venture in equity earnings. As the Company currently recognizes 100% of operating income or losses from the Tin Building by Jean-Georges, the Tin Building lease has no net impact to Seaport EBT. However, Seaport NOI includes only rental revenue related to the Tin Building lease payments and does not include the rent expense in equity earnings, as equity earnings are excluded from NOI by definition.

The Tin Building by Jean-Georges opened in late September 2022, with an expanded focus on experiences including in-person dining, retail shopping, and delivery and is ~~being redeveloped, vacated~~managed by CCMC, a Jean-Georges company.

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MANAGEMENT’S NARRATIVE ANALYSIS RESULTS OF OPERATIONS			Table of Contents

Events and Sponsorships Our events and sponsorships businesses include our concert series, event catering, private events, and sponsorships. Food and beverage operations associated with concert concessions and catering are operated under management agreements with CCMC.

250 Water Street In 2021, the Company received the necessary approvals for its 250 Water Street development ~~or in~~project, which includes a mixed-use development with affordable and market-rate apartments, community-oriented spaces, and office space. In May 2021, the Company received approval from the New York City Landmarks Preservation Commission (LPC) on its ~~initial lease-up phase.~~

~~Total revenues and expenses~~proposed design for the ~~Operating Assets segment are summarized~~250 Water Street site. The Company received final approvals in December 2021 through the New York City Uniform Land Use Review Procedure known as ~~follows:~~

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2017

2016

Change

2017

2016

Change
Minimum rents

$
44,579

$
44,736

$
(157)

$
135,564

$
127,663

$
7,901
Tenant recoveries

11,491

11,652

(161)

34,257

33,089

1,168
Hospitality revenues

17,776

14,088

3,688

57,190

46,126

11,064
Other rental and property revenues

5,687

3,471

2,216

16,487

10,974

5,513
Total revenues

79,533

73,947

5,586

243,498

217,852

25,646

Other property operating costs

17,473

15,611

1,862

51,041

43,524

7,517
Rental property real estate taxes

7,098

6,406

692

19,975

19,257

718
Rental property maintenance costs

3,288

3,247

41

9,601

8,893

708
Hospitality operating costs

13,525

12,662

863

41,534

37,379

4,155
Provision for doubtful accounts

453

1,940

(1,487)

1,728

4,566

(2,838)
Other income, net

249

(11)

260

265

(3,126)

3,391
Depreciation and amortization

33,885

20,732

13,153

88,918

64,546

24,372
Provision for impairment

—

35,734

(35,734)

—

35,734

(35,734)
Interest income

3

(3)

6

—

(19)

19
Interest expense

15,937

12,905

3,032

46,004

36,987

9,017
Equity in (earnings) loss from Real Estate and Other Affiliates

(317)

210

(527)

(3,739)

(2,616)

(1,123)
Total operating expenses

91,594

109,433

(17,839)

255,327

245,125

10,202
Income (loss) before development expenses

(12,061)

(35,486)

23,425

(11,829)

(27,273)

15,444
Demolition costs

34

—

34

162

—

162
Development-related marketing costs

1,067

457

610

2,317

902

1,415
Total development expenses

1,101

457

644

2,479

902

1,577
Operating Assets segment EBT*

$
(13,162)

$
(35,943)

$
22,781

$
(14,308)

$
(28,175)

$
13,867
ULURP, which allowed the necessary transfer of development rights to the parking lot site.

~~(*)~~

Also in December 2021, an amendment to the Seaport ground lease was executed giving the Company extension options, at the discretion of the Company, for an additional 48 years from its current expiration in 2072 until 2120. We received a building foundation permit from the New York City Department of Buildings and began initial foundation work and remediation in the second quarter of 2022. Remediation of the site as a volunteer of the New York State Brownfield Cleanup program was completed in December 2023. Various lawsuits have been filed challenging the governmental approval of our development project. For ~~a reconciliation of Operating Assets EBT~~additional information regarding these lawsuits, see Note 9 - Commitments and Contingencies in the Notes to ~~consolidated income before taxes, refer to Note 16 –~~ ~~Segments~~ ~~in our~~ Condensed Consolidated Financial ~~Statements.~~

~~Minimum rents~~Statements under Item 1 of this Form 10-Q.

Segment EBT Segment EBT for Seaport is presented below:


Seaport Segment EBT	Three Months Ended March 31,
thousands		2024		2023		$ Change
Rental revenue (a)		$	6,382	$	5,389	$	993
Other land, rental, and property revenues		5,120		6,508		(1,388)
Total revenues		11,502		11,897		(395)

Operating costs		(20,518)		(18,767)		(1,751)
Rental property real estate taxes		(176)		(168)		(8)
(Provision for) recovery of doubtful accounts		(791)		19		(810)
Total operating expenses		(21,485)		(18,916)		(2,569)
Segment operating income (loss)		(9,983)		(7,019)		(2,964)
Depreciation and amortization		(5,757)		(10,527)		4,770
Interest income (expense), net		(2,012)		1,186		(3,198)
Other income (loss), net		—		1		(1)
Equity in earnings (losses) from unconsolidated ventures (a)		(10,280)		(10,820)		540





Segment EBT		$	(28,032)	$	(27,179)	$	(853)

(a) Lease payments for the Tin Building included in Rental revenue and ~~tenant recoveries decreased~~offset in Equity losses were $2.9 million for the three months ended ~~September 30, 2017 as~~March 31, 2024, and $2.8 million for the three months ended March 31, 2023. Refer to the Tin Building discussion above for additional detail.

For the three months ended March 31, 2024:

Seaport segment EBT decreased $0.9 million compared to the ~~same~~prior-year periods in 2016 due primarily to the sale of Park West in December 2016 and the transfer of Landmark to our Strategic Developments segment. Minimum rents and tenant recoveries increased for the nine months ended September 30, 2017 as compared to the same periods in 2016 primarily ~~due to increases of $12.5~~ million at our office and multi-family properties. The increase in our office properties was primarily due to One Merriweather being placed in service, the acquisition of One Mall North in Columbia and the continued stabilization of ONE Summerlin and Three Hughes Landing, offset by a decrease for 110 North Wacker in Chicago related to the future redevelopment of the property. The increase in our multi-

~~Table of Contents~~

~~family properties was~~ primarily due to the ~~purchase~~following:

–Total revenues, net of ~~our partner’s 18.57% interest in Millennium Six Pines Apartments in July 2016 and ongoing lease-up of One Lakes Edge.~~

~~Hospitality revenues increased for the three and nine months ended September 30, 2017 as compared to the same periods in 2016~~Operating costs decreased $2.1 million primarily due to reduced restaurant revenue at Pier 17, lower sponsorship revenue, and increased costs associated with the ~~opening~~planned spinoff of ~~the Embassy Suites at Hughes Landing and the on-going stabilization~~ ~~of The Westin at The Woodlands, placed in service in December 2015 and March 2016, respectively.~~

~~Other~~Seaport Entertainment, partially offset by improved rental ~~and property revenues increased for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 due to baseball~~ revenue ~~which is consolidated since our March 1, 2017 purchase of our partner’s 50.0% interest in the Las Vegas 51s baseball team.~~

Other property operating costs increased for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 due primarily to the purchase of our partner’s 50.0% interest in the Las Vegas 51s baseball team, an increase at the Seaport District forfrom the Fulton Market Building, which ~~was partially placed in service in~~is now 100% occupied.

–As a result of the ~~fourth quarter of 2016, expenses related to the summer marketing events at Seaport and the acquisition~~impairment of our ~~partner’s 18.57% interest in the Millennium Six Pines Apartments, offset by the impact of the sale of Park West and the transfer of Landmark Mall to our Strategic Developments segment.~~

~~Hospitality operating costs increased for the three and nine months ended September 30, 2017 as compared to the same periods in 2016, relative to the increase in hospitality revenues discussed above~~.

The provision for doubtful accounts decreased for the three and nine months ended September 30, 2017 as compared to the same periods in 2016, respectively, due to the reserve for a termination fee for a tenant at Two Hughes LandingSeaport assets in the third quarter of ~~2016 (which was later reduced in the fourth quarter~~2023, current period EBT includes a net increase of ~~2016 as a result of a partial collection)~~$1.6 million due to lower depreciation and ~~a delinquent tenant in 2016 at Downtown Summerlin.~~

~~The increases in~~amortization expense, offset by increased interest expense ~~during the three and nine months ended September 30, 2017 are primarily~~ due to ~~higher loan balances on additional properties acquired or placed~~lower capitalized interest.

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MANAGEMENT’S NARRATIVE ANALYSIS RESULTS OF OPERATIONS			Table of Contents

Net Operating Income A reconciliation of Seaport segment EBT to Seaport NOI is presented below:


Seaport NOI	Three Months Ended March 31,
thousands		2024		2023		$ Change
Total Seaport segment EBT		$	(28,032)	$	(27,179)	$	(853)
Add back:
Depreciation and amortization		5,757		10,527		(4,770)
Interest (income) expense, net		2,012		(1,186)		3,198
Equity in (earnings) losses from unconsolidated ventures		10,280		10,820		(540)


Impact of straight-line rent		502		586		(84)
Other (income) loss, net		876		847		29

Seaport NOI		$	(8,605)	$	(5,585)	$	(3,020)

The Seaport, including Managed Businesses, Events and Sponsorships, and the Tin Building, is approximately 68% leased. We may continue to incur operating expenses in ~~service during 2017 and late 2016~~excess of rental revenues while the remaining available space is in lease-up, as ~~well as increases in the one month LIBOR rate throughout the second and third quarters of 2017.~~

~~Depreciation and amortization~~ ~~increased for the~~ ~~three and nine months ended September 30, 2017, respectively, as~~ compared to the same periods in 2016 primarily due to the acceleration of depreciation reflecting shorter remaining useful lives for two office and two retail buildings pending redevelopment, depreciation on assets newly placed in service at the Seaport ~~District, depreciation on Millennium Six Pines as a result~~continues to move toward its critical mass of the property’s consolidation following the buyout of our partner’s interest, and amortization of intangibles for the Las Vegas 51s as a result of the purchase of our partner’s interest in March 2017.

~~Equity in earnings from Real Estate and Other Affiliates increased~~offerings.

The table below presents Seaport NOI by category:


Seaport NOI by Category	Three Months Ended March 31,
thousands		2024		2023		$ Change
Landlord Operations		$	(4,853)	$	(4,290)	$	(563)
Landlord Operations - Multi-family		58		28		30

Managed Businesses		(3,142)		(2,536)		(606)
Tin Building		2,258		2,415		(157)
Events and Sponsorships		(2,926)		(1,202)		(1,724)
Seaport NOI		$	(8,605)	$	(5,585)	$	(3,020)

Seaport NOI decreased $3.0 million for the three months ended September 30, 2017 compared to the same period in 2016 due to higher earnings at The Metropolitan Downtown Columbia and due to placing Constellation in service in the fourth quarter of 2016. Equity in earnings from Real Estate and Other Affiliates increased for the nine months ended September 30, 2017 compared to the same period in 2016 dueMarch 31, 2024, primarily ~~to a $3.4 million distribution from our Summerlin Hospital investment as compared to $2.6 million for the same period in 2016 and~~ due to increased ~~earnings at The Metropolitan Downtown Columbia as discussed above, offset by a~~costs associated with the planned spinoff of Seaport Entertainment. Additionally, the decrease in Events and Sponsorships NOI was impacted by lower sponsorship revenue, and the ~~Las Vegas 51s which is now a consolidated asset as a result of the purchase of~~decrease in Managed Businesses NOI was impacted by lower revenues across our ~~partner’s interest.~~

~~Demolition costs for the three and nine months ended September 30, 2017 relate primarily~~restaurant portfolio related to ~~demolition of a small portion of Ward Village Retail. There were no demolition costs relating to assets~~poor weather conditions in the ~~Operating Assets segment~~current year.

Tin Building in the ~~same periods ended September 30, 2016.~~

~~Development-related marketing costs increased for the three~~table above represents NOI from our landlord business and, ~~nine months ended September 30, 2017~~ as ~~compared to the same periods in 2016 due to an increase related to our marketing costs at Seaport.~~

~~Table of Contents~~

~~Adjusted Operating Assets EBT~~

When a development property is placed in service, depreciation is calculated for the property ratably over the estimated useful lives of each of its components; however, most of our recently developed properties do not reach stabilization for 12 to 36 months after being placed in service due to the timing of tenants taking occupancy and subsequent ongoing leasing of the unoccupied space during that period. As a result, operating income, EBT and net income will not reflect the ongoing earnings potential of newly placed in service operating assets during this transition period to stabilization. Accordingly, we calculate Adjusted Operating Assets EBT, a non-GAAP performance measure for our operating properties whichdefined, excludes ~~non-cash depreciation and amortization, development-related demolition and marketing costs, and provision for impairment.~~

~~The following table reconciles Operating Assets EBT to Adjusted Operating Assets EBT:~~

Reconciliation of Adjusted Operating Assets EBT to

Three Months Ended September 30,

Nine Months Ended September 30,

Operating Assets EBT (in thousands)

2017

2016

Change

2017

2016

Change
Operating Assets segment EBT

$
(13,162)

$
(35,943)

$
22,781

$
(14,308)

$
(28,175)

$
13,867
Add back:

Depreciation and amortization

33,885

20,732

13,153

88,918

64,546

24,372
Demolition costs

34

—

34

162

—

162
Development-related marketing costs

1,067

457

610

2,317

902

1,415
Provision for impairment

—

35,734

(35,734)

—

35,734

(35,734)
Adjusted Operating Assets segment EBT

$
21,824

$
20,980

$
844

$
77,089

$
73,007

$
4,082

For the three months ended September 30, 2017, Adjusted Operating Assets EBT increased $0.8 million, or 4.0% to $21.8 million, compared to $21.0 million for the same period in 2016, primarily due to the growth in Operating Assets NOI related to our office and retail properties, offset by higher interest expense as more properties are placed in service. For the nine months ended September 30, 2017, Adjusted Operating Assets EBT increased $4.1 million, or 5.6% to $77.1 million, compared to $73.0 million for the same period in 2016, primarily due to a $20.8 million increase in consolidated Operating Assets NOI related to our office and hospitality properties compared to 2016 as more properties are placed in service, offset by higher interest expense.

~~Operating Assets Net Operating Income~~

We believe that NOI is a useful supplemental measure of the performance of our Operating Assets 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). NOI excludes straight-line rents and amortization of tenant incentives, net interest expense, ground rent amortization, demolition costs, amortization, depreciation, development-related marketing costs and Equity in earnings from Real Estate and Other Affiliates. We use NOI to evaluate our operating performance on a property-by-property basis because NOI allows us to evaluate the impact of ~~these factors which vary by property such as lease structure, lease rates and tenant base have on our operating results, gross margins and investment returns.~~

~~Although we believe that NOI provides useful information to investors about~~ the performance of our Operating Assets, due to the exclusions noted above, NOI should only be used as an additional measure of the financial performance of such assets and not as an alternative to GAAP net income. A reconciliation of Operating Assets NOI to Operating Assets EBT has been presentedCompany’s equity ownership interest in the table below to provide the most comparable GAAP measure. Variances between years in NOI typically result from changes in rental rates, occupancy, tenant mix and operating expenses. Please refer to our Operating Assets NOITin Building by ~~property and Operating Assets EBT in the tables below for the three and nine months ended September 30, 2017 and 2016.~~

~~Table of Contents~~

~~Operating Assets NOI and EBT~~

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2017

2016

Change

2017

2016

Change
Retail

The Woodlands

Creekside Village Green (a)

$
462

$
398

$
64

$
1,540

$
1,219

$
321
Hughes Landing Retail (a)

1,026

869

157

2,904

2,465

439
1701 Lake Robbins (b)

66

95

(29)

204

287

(83)
20/25 Waterway Avenue (a)

472

462

10

1,488

1,341

147
Waterway Garage Retail (a)

190

191

(1)

564

502

62
Columbia

Columbia Regional

360

437

(77)

1,126

1,069

57
South Street Seaport

Historic Area / Uplands (c)

196

186

10

(1,492)

(589)

(903)
Summerlin

Downtown Summerlin (a)

4,349

4,020

329

13,559

12,261

1,298
Ward Village

Ward Village Retail (d)

4,846

5,149

(303)

15,947

17,039

(1,092)
Other

Cottonwood Square

165

170

(5)

500

530

(30)
Lakeland Village Center at Bridgeland (c)

153

—

153

517

56

461
Outlet Collection at Riverwalk (a)

1,465

1,424

41

4,535

3,656

879
Total Retail NOI

13,750

13,401

349

41,392

39,836

1,556

Office

The Woodlands

One Hughes Landing

1,560

1,522

38

4,617

4,659

(42)
Two Hughes Landing (e)

1,405

382

1,023

4,330

3,157

1,173
Three Hughes Landing (c)

(131)

(251)

120

(515)

(409)

(106)
1725 Hughes Landing Boulevard (a)

936

852

84

2,703

(286)

2,989
1735 Hughes Landing Boulevard (a)

1,924

1,607

317

5,676

1,064

4,612
2201 Lake Woodlands Drive (a)

1

(41)

42

(9)

(108)

99
9303 New Trails (f)

211

422

(211)

875

1,318

(443)
3831 Technology Forest Drive

562

622

(60)

1,701

1,577

124
3 Waterway Square

1,725

1,619

106

5,017

5,162

(145)
4 Waterway Square

1,715

1,555

160

5,052

4,999

53
1400 Woodloch Forest

473

389

84

1,362

1,358

4
Columbia

10-70 Columbia Corporate Center (g)

2,676

2,772

(96)

8,414

9,144

(730)
Columbia Office Properties (h)

201

8

193

797

(61)

858
One Mall North (c)

465

—

465

1,439

—

1,439
One Merriweather (c)

283

—

283

1,114

—

1,114
Summerlin

ONE Summerlin (a)

869

691

178

2,641

1,529

1,112
Other

110 North Wacker (i)

(333)

1,525

(1,858)

1,473

4,576

(3,103)
Total Office NOI

14,542

13,674

868

46,687

37,679

9,008

Multi-family

The Woodlands

Millennium Six Pines Apartments

815

513

302

2,606

513

2,093
Millennium Waterway Apartments (j)

662

704

(42)

2,176

2,327

(151)
One Lakes Edge (a)

1,405

973

432

3,722

2,639

1,083
South Street Seaport

85 South Street (k)

105

141

(36)

65

391

(326)
Total Multi-family NOI

2,987

2,331

656

8,569

5,870

2,699

Hospitality

The Woodlands

Embassy Suites at Hughes Landing (l)

1,063

929

134

3,872

2,498

1,374
The Westin at The Woodlands (l)

1,359

(24)

1,383

4,946

585

4,361
The Woodlands Resort & Conference Center (l)

1,828

520

1,308

6,921

5,663

1,258
Total Hospitality NOI

4,250

1,425

2,825

15,739

8,746

6,993
Total Retail, Office, Multi-family, and Hospitality NOI

35,529

30,831

4,698

112,387

92,131

20,256

Other

The Woodlands

The Woodlands Ground leases

409

391

18

1,205

1,078

127
The Woodlands Parking Garages

(54)

(122)

68

(142)

(297)

155
Other

Other Properties (m) (c)

440

222

218

1,115

834

281
Total Other NOI

795

491

304

2,178

1,615

563
Operating Assets NOI excluding properties sold or in redevelopment

$
36,324

$
31,322

$
5,002

$
114,565

$
93,746

$
20,819

~~Table of Contents~~

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2017

2016

Change

2017

2016

Change
Redevelopments

Landmark Mall (n)

$
—

$
(202)

$
202

$
—

$
(526)

$
526
Total Operating Asset Redevelopments NOI

—

(202)

202

—

(526)

526

Dispositions

Other

Park West (o)

(8)

411

(419)

(61)

1,346

(1,407)
Total Operating Asset Dispositions NOI

(8)

411

(419)

(61)

1,346

(1,407)
Total Operating Assets NOI - Consolidated

$
36,316

$
31,531

$
4,785

$
114,504

$
94,566

$
19,938

Straight-line lease amortization (p)

1,421

2,551

(1,130)

5,198

9,632

(4,434)
Demolition costs (q)

(34)

—

(34)

(162)

—

(162)
Development-related marketing costs

(1,067)

(457)

(610)

(2,317)

(902)

(1,415)
Provision for impairment (o)

—

(35,734)

35,734

—

(35,734)

35,734
Depreciation and Amortization (r)

(33,885)

(20,732)

(13,153)

(88,918)

(64,546)

(24,372)
Write-off of lease intangibles and other

(41)

—

(41)

(83)

35

(118)
Other income, net (s)

(249)

11

(260)

(265)

3,126

(3,391)
Equity in earnings (loss) from Real Estate Affiliates

317

(210)

527

3,739

2,616

1,123
Interest, net

(15,940)

(12,903)

(3,037)

(46,004)

(36,968)

(9,036)
Total Operating Assets segment EBT (t)

$
(13,162)

$
(35,943)

$
22,781

$
(14,308)

$
(28,175)

$
13,867

Operating Assets NOI - Equity and Cost Method Investments

The Woodlands

Millennium Six Pines Apartments (u)

$
—

$
(83)

$
83

$
—

$
1,537

$
(1,537)
Stewart Title of Montgomery County, TX

354

891

(537)

1,127

1,411

(284)
Woodlands Sarofim # 1

214

278

(64)

662

1,070

(408)
Columbia

The Metropolitan Downtown Columbia

1,436

(174)

1,610

4,522

2,759

1,763
Summerlin

Constellation

496

—

496

1,012

—

1,012
Las Vegas 51s (u)

—

28

(28)

(296)

628

(924)
South Street Seaport

33 Peck Slip (v)

—

590

(590)

—

899

(899)
Total NOI - equity investees

2,500

1,530

970

7,027

8,304

(1,277)

Adjustments to NOI (w)

(1,823)

(1,978)

155

(6,180)

(8,040)

1,860
Equity Method Investments EBT

677

(448)

1,125

847

264

583
Less: Joint Venture Partner's Share of EBT

(360)

238

(598)

(491)

(264)

(227)
Equity in earnings (loss) from Real Estate Affiliates

317

(210)

527

356

—

356

Distributions from Summerlin Hospital Investment (x)

—

—

—

3,383

2,616

767
Segment equity in earnings from Real Estate and Other Affiliates

$
317

$
(210)

$
527

$
3,739

$
2,616

$
1,123

Company's Share of Equity Method Investments NOI

The Woodlands

Millennium Six Pines Apartments (u)

$
—

$
(67)

$
67

$
—

$
1,252

$
(1,252)
Stewart Title of Montgomery County, TX

177

446

(269)

564

706

(142)
Woodlands Sarofim # 1

43

56

(13)

132

214

(82)
Columbia

The Metropolitan Downtown Columbia

718

(87)

805

2,261

1,380

881
Summerlin

Constellation

248

—

248

506

—

506
Las Vegas 51s (u)

—

14

(14)

(148)

314

(462)
South Street Seaport

33 Peck Slip (v)

—

207

(207)

—

315

(315)
Company's share NOI - equity investees

$
1,186

$
569

$
617

$
3,315

$
4,181

$
(866)

Economic

September 30, 2017
(In thousands)

Ownership

Total Debt

Total Cash
The Woodlands

Stewart Title of Montgomery County, TX

50.00
%

$
—

$
20
Woodlands Sarofim # 1

20.00

5,370

599
Columbia

The Metropolitan Downtown Columbia

50.00

70,000

307
Summerlin

Constellation

50.00

15,848

101

~~(a)~~

NOI increase for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 relates to an increase in occupancy and/or effective rent, or relates to properties recently placed in service.

~~(b)~~

The decrease in NOI for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 is due to the expiration of a lease in October 2016. As of September 30, 2017, the building is 100% leased.

~~(c)~~

~~Please refer to discussion in the following sections regarding this property.~~

~~Table of Contents~~

~~(d)~~

The decrease in NOI at Ward Village for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 is generally due to the transfer of buildings from Operating Assets to Strategic Developments in anticipation of redevelopment.

~~(e)~~

The increase in NOI for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 is due to bad debt expense of $1.0 million for a tenant in September 2016. The bad debt was partially recovered in the fourth quarter of 2016.

~~(f)~~

The decrease in NOI for the three and nine months ended September 30, 2017 compared to the same periods in 2016 is generally due to a decrease in occupancy from 83% at September 30, 2016 to 58% as of September 30, 2017 due to a tenant relocating to our 1725 Hughes Landing property.

~~(g)~~

The decrease in NOI for the three months ended September 30, 2017 as compared to the same periods in 2016 is generally due to an increase in repairs and maintenance. The decrease in NOI for the nine months ended September 30, 2017 as compared to the same periods in 2016 is generally due to a termination fee received in April 2016.

~~(h)~~

The NOI increase for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 is primarily due to increased occupancy at Columbia Association and an overall decrease in operating expenses.

~~(i)~~

~~The decrease in NOI is due to our termination of the lease at this building and tenant rent abatement through the January 2018 termination date. The lease was terminated to facilitate redevelopment.~~

~~(j)~~

~~NOI decrease for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 is generally due to an increase in concessions to increase occupancy.~~

~~(k)~~

~~The decrease in NOI for the nine months ended September 30, 2017 compared to the same periods in 2016 is due to the buyout of a tenant in a rent controlled unit.~~

~~(l)~~

~~NOI increase for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 is due to improved occupancy and an increase in revenue per available room.~~

~~(m)~~

NOI increase for the nine months ended September 30, 2017 as compared to the same period in 2016 in Other Properties is due to the consolidation of the Las Vegas 51s as a result of the buyout of our partner’s 50% interest on March 1, 2017, offset by a decrease related to final participation payments received for TPC Las Vegas and TPC Summerlin in July 2016 of $2.75 million.

~~(n)~~

~~Landmark Mall was closed for redevelopment and moved to our Strategic Developments segment as of January 2017.~~

~~(o)~~

Park West was impaired in the third quarter of 2016 prior to its sale in December 2016, and 2017 activity relates to the nine month true-up period for expenses per the terms of the sales agreement. Please see further discussion in our Annual Report.

~~(p)~~

Amortization of straight-line rent decrease for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 is primarily due to the write-off of straight-line rent at Ward Village associated with a bankrupt tenant in 2016.

~~(q)~~

~~The demolition costs for the three and nine months ended September 30, 2017 relate to a small demolition project at Ward Village.~~

~~(r)~~

Increased depreciation and amortization in 2017, relates to an increase in the number of operating properties in service as well as accelerated depreciation of $10.1 million for the three months ended September 30, 2017 and $18.5 million for the nine months ended September 30, 2017 reflecting the shorter remaining useful lives for properties pending redevelopment.

~~(s)~~

The decrease in other income, net for the nine months ended September 30, 2017 compared to the same period in 2016 is due to the final participation payments received for TPC Las Vegas and TPC Summerlin in July 2016.

~~(t)~~

~~For a detailed breakdown of our Operating Assets segment EBT, please refer to Note 16 –~~ ~~Segments~~ ~~in the consolidated financial statements.~~

~~(u)~~

NOI decrease in Millennium Six Pines and Las Vegas 51s for the nine months ended September 30, 2017, respectively, as compared to the same periods in 2016 is due to the consolidation of the asset as a result of the buyout of our partners’ interests.

~~(v)~~

~~The 33 Peck Slip hotel was closed for redevelopment at the end of December 2016. Please see further discussion in the Strategic Developments discussion of the Seaport District.~~

~~(w)~~

~~Adjustments to NOI include straight line-rent and market lease amortization, demolition costs, depreciation and amortization and interest expense, net at our joint venture properties.~~

~~(x)~~

~~Distributions from the Summerlin Hospital cost basis investment are typically made in the first quarter of each year.~~

~~Reconciliation of Operating Assets Segment Equity in Earnings~~

Three Months Ended September 30,

Nine Months Ended September 30,
(In thousands)

2017

2016

2017

2016
Equity Method investments

$
317

$
(210)

$
356

$
—
Cost basis investment

—

—

3,383

2,616
Operating Assets segment Equity in earnings (loss)

317

(210)

3,739

2,616
MPC segment Equity in earnings (a)

6,480

13,700

21,552

22,574
Strategic Developments segment Equity in earnings (b)

670

3

530

10,510
Equity in earnings from Real Estate and Other Affiliates

$
7,467

$
13,493

$
25,821

$
35,700

~~(a)~~

~~The MPC Equity in earnings is related to The Summit joint venture. Please refer to Note 8 –~~ ~~Real Estate and Other Affiliates~~ ~~in our Condensed Consolidated Financial Statements for further description of this joint venture.~~

~~(b)~~

~~The Strategic Developments segment Equity in earnings is primarily related to the Circle T Ranch and Power Center joint venture. Please refer to Note 8 –~~ ~~Real Estate and Other Affiliates~~ ~~in our Condensed Consolidated Financial Statements for further description of this joint venture.~~

~~Retail Properties~~

~~Some of the leases related to our retail properties are triple net leases,~~Jean-Georges managed business which generally require tenants to pay their pro-rata share of property operating costs, such as real estate taxes, utilities and insurance, and the direct costs of their leased space. We also enter into certain leases which require tenants to pay a fixed-rate per square foot reimbursement for

~~Table of Contents~~

~~common area costs which is increased annually according to the terms of the lease.~~ Given the unique nature of many of our retail properties, the mix of tenant lease agreements and related lease terms executed during the three months ended September 30, 2017 may differ significantly from those entered into in the nine months ended September 30, 2017.

~~The following table summarizes the leases we executed at our retail properties during the three months ended September 30, 2017:~~

Square Feet

Per Square Foot per Annum
Retail Properties (a)

Total Executed

Avg. Lease Term (Months)

Total Leased

Associated with Tenant Improvements

Associated with Leasing Commissions

Avg. Starting Rents

Total Tenant Improvements

Total Leasing Commissions
Pre-leased (b)

7

130

90,808

65,808

82,908

$
24.73

$
5.65

$
0.62
Comparable - Renewal (c)

3

52

9,739

—

—

27.25

—

—
Comparable - New (d)

4

77

11,225

9,475

1,750

33.98

4.18

2.68
Non-comparable (e)

12

98

88,191

79,847

81,067

18.07

7.27

0.55
Total

199,963

155,130

165,725

~~(a)~~

~~Excludes executed leases with a term of 12 months or less.~~

~~(b)~~

~~Pre-leased information is associated with projects under development at September 30, 2017.~~

~~(c)~~

Comparable - Renewal information is associated with stabilized assets for which the space was occupied by the same tenant within 12 months prior to the executed agreement. These leases represent an increase in cash rents from $26.39 per square foot to $27.25 per square foot, or 3.3% over previous rents.

~~(d)~~

Comparable - New information is associated with stabilized assets for which the space was occupied by a different tenant within 12 months prior to the executed agreement. These leases represent an increase in cash rents from $30.52 per square foot to $33.98 per square foot, or 11.3% over previous rents.

~~(e)~~

~~Non-comparable information is associated with space that was previously vacant for more than 12 months or has never been occupied.~~

~~The following table summarizes the leases we entered into at our retail properties during the nine months ended September 30, 2017:~~

Square Feet

Per Square Foot per Annum
Retail Properties (a)

Total Executed

Avg. Lease Term (Months)

Total Leased

Associated with Tenant Improvements

Associated with Leasing Commissions

Avg. Starting Rents

Total Tenant Improvements

Total Leasing Commissions
Pre-leased (b)

16

120

109,732

84,732

97,165

$
29.86

$
6.98

$
0.88
Comparable - Renewal (c)

7

43

21,956

1,454

—

33.83

3.33

—
Comparable - New (d)

10

80

25,232

20,245

15,125

37.79

4.13

2.16
Non-comparable (e)

26

90

125,479

114,822

110,649

23.04

7.12

0.94
Total

282,399

221,253

222,939

~~(a)~~

~~Excludes executed leases with a term of 12 months or less.~~

~~(b)~~

~~Pre-leased information is associated with projects under development at September 30, 2017.~~

~~(c)~~

Comparable - Renewal information is associated with stabilized assets for which the space was occupied by the same tenant within 12 months prior to the executed agreement. These leases represent an increase in cash rents from $32.27 per square foot to $33.83 per square foot, or 4.8% over previous rents.

~~(d)~~

Comparable - New information is associated with stabilized assets for which the space was occupied by a different tenant within 12 months prior to the executed agreement. These leases represent an increase in cash rents from $34.60 per square foot to $37.79 per square foot, or 9.2% over previous rents.

~~(e)~~

~~Non-comparable information is associated with space that was previously vacant for more than 12 months or has never been occupied.~~

~~The following discussion summarizes our recently completed retail~~ ~~properties:~~

~~Bridgeland~~

~~Lakeland Village Center at Bridgeland~~

~~In the second quarter of 2015, we began construction of Lakeland Village Center at Bridgeland, a CVS-anchored neighborhood retail center. The CVS~~ opened ~~in March 2016, and the remaining space in the project was placed in service~~ in the third quarter of ~~2016.~~2022. The ~~total development costs are expected to be approximately $16 million. We expect to reach stabilized annual~~table below presents the above NOI ~~of approximately $1.7 million in 2018. As of September 30, 2017, the project is 71.7% leased.~~

~~Table of Contents~~

~~Seaport District~~

~~Historic Area/Uplands~~

~~The decrease in NOI for the nine months ended September 30, 2017 as compared~~related to the ~~same period ended September 30, 2016~~Tin Building, which primarily represents lease payments from the Tin Building by Jean-Georges, as well as the Company’s share of NOI related to its investment in the ~~Historic Area/Uplands (a portion of our larger Seaport District redevelopment project, as discussed further herein)~~Tin Building by Jean-Georges, which primarily relates to an increase in expenses, including operating expenses for Fulton Market Building and for summer marketing events, partially offset by rent from iPic Theater, which occupies approximately 46,000 square feet inrepresents the newly renovated building. In 2014, we entered into a 20-year lease with iPic Theaters as a first major anchor in the revitalized Seaport District. Ongoing leasing and redevelopment activities are expected to substantially reposition the approximately 180,000 square feet of retail space in the Uplands by mid-2018.

~~Office Properties~~

~~All~~operations of the ~~office properties listed in~~Tin Building marketplace and includes rent expense paid to the ~~chart in Note 16 -~~ ~~Segments~~ ~~in our Condensed Consolidated Financial Statements,~~ except for 110 North Wacker and ONE Summerlin, are located in Columbia, Maryland and in The Woodlands, Texas. Leases related to our office properties in The Woodlands and 110 North Wacker are generally triple net leases. Leases at properties located in Columbia, Maryland, and ONE Summerlin are generally gross leases.

~~The following table summarizes our executed office property leases during the three months ended September 30, 2017:~~

Square Feet

Per Square Foot per Annum

Avg.

Associated

Associated

Avg.

Total

Total

Total

Lease Term

Total

with Tenant

with Leasing

Starting

Tenant

Leasing
Office Properties (a)

Executed

(Months)

Leased

Improvements

Commissions

Rents (f)

Improvements


Commissions
Pre-leased (b)

—

—

—

—

—

$
—

$
—

$
—
Comparable - Renewal (c)

1

98

3,907

3,907

—

29.50

—

—
Comparable - New (d)

6

38

37,521

30,738

34,859

37.93

3.84

2.45
Non-comparable (e)

19

73

108,624

86,393

93,170

29.42

7.01

1.77
Total

150,052

121,038

128,029

Company.


	Three Months Ended March 31,
thousands		2024		2023		$ Change
Tin Building		$	2,258	$	2,415	$	(157)
Tin Building by Jean-Georges		(8,746)		(9,158)		412

Total		$	(6,488)	$	(6,743)	$	255

HHC 2024 FORM 10-Q | 40


MANAGEMENT’S NARRATIVE ANALYSIS RESULTS OF OPERATIONS			Table of Contents

	~~(a)~~
~~Excludes executed leases with a term of 12 months or less.~~ Strategic Developments

~~(b)~~

~~Pre-leased information is associated with projects under development at September 30, 2017.~~

~~(c)~~

Comparable - Renewal information is associated with stabilized assets for which the space was occupied by the same tenant within 12 months prior to the executed agreement. These leases represent a decrease in cash rents from $30.12 per square foot to $29.50 per square foot, or (2.1%) under previous rents.

~~(d)~~

Comparable - New information is associated with stabilized assets for which the space was occupied by a different tenant within 12 months prior to the executed agreement. These leases represent a decrease in cash rents from $39.99 per square foot to $37.93 per square foot, or (5.2%) under previous rents.

~~(e)~~

~~Non-comparable information is associated with space that was previously vacant for more than 12 months or has never been occupied.~~

~~(f)~~

~~Avg. Starting Rents is based on the gross lease value, including recoveries.~~

~~The following table summarizes our executed office property leases during the nine months ended September 30, 2017:~~

Square Feet

Per Square Foot per Annum

Avg.

Associated

Associated

Avg.

Total

Total

Total

Lease Term

Total

with Tenant

with Leasing

Starting

Tenant

Leasing
Office Properties (a)

Executed

(Months)

Leased

Improvements

Commissions

Rents (f)

Improvements


Commissions
Pre-leased (b)

1

180

494,472

494,472

494,472

$
—

$
—

$
—
Comparable - Renewal (c)

11

59

37,068

32,045

25,336

26.35

2.33

1.28
Comparable - New (d)

7

44

39,613

32,830

36,951

37.28

4.09

2.34
Non-comparable (e)

43

71

227,098

193,956

205,010

30.32

8.73

1.65
Total

798,251

753,303

761,769

~~(a)~~

~~Excludes executed leases with a term of 12 months or less.~~

~~(b)~~

~~Pre-leased information is associated with projects under development at September 30, 2017. Average starting rent is not disclosed for competitive reasons.~~

~~(c)~~

Comparable - Renewal information is associated with stabilized assets for which the space was occupied by the same tenant within 12 months prior to the executed agreement. These leases represent a decrease in cash rents from $29.93 per square foot to $26.35 per square foot, or (12.0%) under previous rents.

~~(d)~~

Comparable - New information is associated with stabilized assets for which the space was occupied by a different tenant within 12 months prior to the executed agreement. These leases represents an decrease in cash rents from $39.21 per square foot to $37.28 per square foot, or (4.9%) under previous rents.

~~(e)~~

~~Non-comparable information is associated with space that was previously vacant for more than 12 months or has never been occupied.~~

~~(f)~~

~~Avg. Starting Rents is based on the gross lease value, including recoveries.~~

~~Table of Contents~~

The following discussions summarize our recently completed or acquired office, hospitality and other properties which were acquired or placed in service within the last 12 months ended September 30, 2017:

~~The Woodlands~~

~~Three Hughes Landing~~

This Class A office building was placed in service on August 1, 2016. The total estimated development costs of approximately $90 million includes $22.3 million related to estimated leasing and tenant build-out costs which have yet to be incurred. As of September 30, 2017, the project is 43.8% leased. Leasing activity has been slower than One Hughes Landing and Two Hughes Landing properties primarily due to the economic slowdown in the energy sector. We believe that its lakefront location within the highly desirable Hughes Landing development and its related amenities will benefit this building as compared to competing office products in the north Houston region. Projected annual stabilized NOI of $7.6 million is expected by 2020 but will depend greatly on the stabilization of the Houston economy.

~~Columbia~~

~~One Mall North~~

This 97,671 square foot, four-story office building in Columbia, Maryland was purchased December 19, 2016 for $22.2 million. The acquisition was financed by $14.5 million received through the January 2017 credit facility amendment and refinance whereby our $80.0 million non-recourse mortgage for the 10-60 Columbia Corporate Center office buildings was replaced with a $94.5 million loan and modified to include One Mall North. The building is located at a gateway entry to Downtown Columbia at the northwest corner of Little Patuxent Parkway and Governor Warfield Parkway. The office building parcel and surface parking total 5.37 acres, and the property is suitable for redevelopment in the future, when warranted to maximize density. The building is 100% leased as of September 30, 2017.

~~One Merriweather~~

Located in the Merriweather District, this 207,254 square foot, eight-story multi-tenant Class A office building includes 12,500 leasable square feet of retail and restaurant space, is situated on 1.3 acres of land and was placed in service in the current year. Adjacent to the building on 1.6 acres is a nine-story parking garage which will contain approximately 1,129 spaces. ~~The garage provides parking for One and Two Merriweather. T~~he total development costs are approximately $78 million, inclusive of $15 million in costs for the parking garage. We expect to reach stabilized annual NOI of approximately $5.1 million in 2020. As of September 30, 2017, the building is 62.8% leased.

~~Other~~

The properties that are included in our Other Properties description in our Operating Assets NOI and EBT table include the Kewalo Basin Harbor, Merriweather Post Pavilion (until its transfer to the Downtown Columbia Arts and Culture Commission in November 2016), HHC 242 Self-Storage and HHC 2978 Self-Storage for the three month period ended September 30, 2017, consolidation of the Las Vegas 51s since the purchase of our partner’s interest March 1, 2017, and a participation interest in the golf courses at TPC Summerlin and TPC Las Vegas until June 2016 when we received $2.8 milli~~on as final payment for our participation interest in these golf courses which was recorded in Other income.~~

~~HHC 242 Self-Storage~~

Located in Alden Bridge, a neighborhood within The Woodlands, this facility is located on 4.0 acres and comprises 654 units aggregating approximately 82,000 square feet. Total development costs are expected to be approximately $9 million. We expect to reach stabilized annual NOI of approximately $0.8 million in 2020. The facility opened in the first quarter of 2017, and as of September 30, 2017, the project is 26.1% leased, and lease-up is ongoing.

~~Table of Contents~~

~~HHC 2978 Self-Storage~~

Also in Alden Bridge, this facility is located on 3.1 acres and comprises 784 units aggregating approximately 79,000 square feet. Total development costs are expected to be approximately $9 million. We expect to reach stabilized annual NOI of approximately $0.8 million in 2020. The facility opened in the second quarter of 2017, and was placed in service at that date. As of September 30, 2017, the project is 20.9% leased, and lease-up is ongoing.

~~Strategic Developments~~

Our Strategic Developments assets generally require substantial future development to maximize their ~~use. Most~~value. Other than our condominium properties, most of the properties and projects in this segment do not generate ~~no revenues, the exception being our condominium projects for which we currently use percentage of completion accounting to recognize revenues during the construction phase. Please see Note 1 -~~ ~~Summary of Significant Accounting Policies~~ ~~in our Consolidated Financial Statements for a discussion of anticipated changes on adoption of the new revenue recognition accounting standard on January 1, 2018.~~revenues. Our expenses relating to these assets are primarily related to costs associated with constructing the assets, selling condominiums, marketing costs associated with our ~~strategic developments, operational costs associated with the IBM building that serves as a world class information center and sales gallery for the entire Ward Village Master Plan development,~~Strategic Developments, carrying costs ~~(such as~~including, but not limited to, property taxes and ~~insurance),~~insurance, and other ongoing costs relating to maintaining the assets in their current condition. If we decide to redevelop or develop a Strategic Developments asset, we ~~would~~ expect that with the exception of the residential portion of our condominium projects, upon completion of development, the asset would likely be reclassified to ~~the~~ Operating Assets ~~segment~~ when the asset is placed in service and NOI would become a meaningful measure of its operating performance. All development costs discussed herein are exclusive of land costs.

~~Total revenues and expenses~~

Segment EBT Segment EBT for ~~the~~ Strategic Developments ~~segment are summarized as follows:~~

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2017

2016

Change

2017

2016

Change
Minimum rents

$
75

$
79

$
(4)

$
497

$
216

$
281
Condominium rights and unit sales

113,852

115,407

(1,555)

342,208

362,613

(20,405)
Other land, rental and property revenues

347

69

278

1,223

377

846
Total revenues

114,274

115,555

(1,281)

343,928

363,206

(19,278)

Condominium rights and unit cost of sales

86,531

83,218

3,313

253,209

237,759

15,450
Other property operating costs

3,881

924

2,957

9,112

3,989

5,123
Real estate taxes

580

627

(47)

1,790

1,853

(63)
Rental property maintenance costs

92

85

7

415

324

91
Provision for doubtful accounts

(5)

—

(5)

(2)

63

(65)
Demolition costs

141

256

(115)

141

1,218

(1,077)
Development-related marketing costs

4,799

4,259

540

12,470

14,684

(2,214)
Depreciation and amortization

18

659

(641)

1,177

1,978

(801)
Other income

(122)

(298)

176

(137)

(542)

405
Gains on sales of properties

(237)

(70)

(167)

(32,452)

(140,549)

108,097
Interest expense (income), net (a)

(6,983)

(5,006)

(1,977)

(18,321)

(12,981)

(5,340)
Equity in earnings in Real Estate and Other Affiliates

(670)

(3)

(667)

(530)

(10,510)

9,980
Total expenses, net of other income

88,025

84,651

3,374

226,872

97,286

129,586
Strategic Developments segment EBT*

$
26,249

$
30,904

$
(4,655)

$
117,056

$
265,920

$
(148,864)
is presented below:


Strategic Developments Segment EBT	Three Months Ended March 31,
thousands		2024		2023		$ Change
Condominium rights and unit sales		$	23	$	6,087	$	(6,064)
Rental revenue		169		—		169
Other land, rental, and property revenues		401		353		48
Total revenues		593		6,440		(5,847)

Condominium rights and unit cost of sales		(3,861)		(4,536)		675
Operating costs		(4,149)		(5,852)		1,703
Rental property real estate taxes		(644)		(671)		27

Total operating expenses		(8,654)		(11,059)		2,405
Segment operating income (loss)		(8,061)		(4,619)		(3,442)
Depreciation and amortization		(1,419)		(943)		(476)
Interest income (expense), net		4,024		2,063		1,961
Other income (loss), net		3		94		(91)
Equity in earnings (losses) from unconsolidated ventures		39		5		34





Segment EBT		$	(5,414)	$	(3,400)	$	(2,014)

~~(*)~~

For ~~a reconciliation of Strategic Developments EBT to consolidated income before taxes, please refer to Note 16 –~~ ~~Segments~~ ~~in ourCondensed Consolidated Financial Statements.~~

~~(a)~~

~~Negative interest expense amounts are due to interest capitalized in our Strategic Developments segment related to Operating Assets segment debt and the Senior Notes.~~

~~Strategic Developments segment revenue decreased for~~ the three months ended ~~September 30, 2017~~ March 31, 2024:

Strategic Developments segment EBT decreased $2.0 million compared to the prior-year period primarily due to the following:

–Condominium sales, net of cost of sales decreased $2.4 million, excluding the change in remediation costs of $3.0 million discussed below, due to the timing of condominium closings. We had no condominium closings during the three months ended March 31, 2024, compared to one unit at Kō'ula and four units at ‘A‘ali‘i during the prior-year period. The lower volume of condominium closings is expected as our completed towers are now 100.0% sold and the next tower, Victoria Place, is not scheduled for completion until late 2024.

–Condominium cost of sales includes an increase of $3.0 million due to charges related to the defect remediation at Waiea. We charged $3.0 million in the first quarter of 2024, to fund the final remediation expenditures, compared to no additional costs charged in the prior-year period.

–Operating costs decreased $1.7 million, primarily due to a ~~decline~~decrease in ~~revenues~~legal costs compared to the prior-year period.

Condominiums Condominium revenue is recognized when construction of the condominium tower is complete and unit sales close, leading to variability in revenue recognized between periods.

Completed Condominiums As of March 31, 2024, our six completed condominiums in Ward Village, Ae`o, Ke Kilohana, Anaha, Waiea, ‘A‘ali‘i, and Kō‘ula, are completely sold.

HHC 2024 FORM 10-Q | 41


MANAGEMENT’S NARRATIVE ANALYSIS RESULTS OF OPERATIONS			Table of Contents

Condominiums Under Construction

Ward Village As of March 31, 2024, 98.2% of the units at ~~Waiea, which closed~~our three towers under construction, Victoria Place, The Park Ward Village, and Ulana Ward Village, are under contract. We broke ground on ~~the sale of most of its units~~Victoria Place in February 2021, and expect to complete construction in the fourth quarter of ~~2016, and a decline in revenues recorded on a percentage of completion basis at Anaha,~~2024. Victoria Place, which is ~~nearing completion and began closing on the sales of units, offset by increased~~ ~~revenue recognized on a percentage of completion basis~~ ~~at our newer Ae`o and Ke Kilohana condominium projects.~~ ~~Strategic Developments segment revenue decreased for the nine months ended September 30, 2017~~

~~Table of Contents~~

~~as compared to the nine month period in 2016 primarily due to decreased revenue at Waiea, offset by increased revenue at Anaha, Ae`o and Ke Kilohana.~~

Condominium rights and unit cost of sales represent allocated development and construction costs relating to the revenues recognized on a percentage of completion basis at Waiea, Anaha, Ke Kilohana and Ae`o in the three and nine months ended September 30, 2017 and 2016. Gross margins vary from tower to tower. For the three months ended September 30, 2017, condominium rights and unit cost of sales are relatively consistent with the three months ended September 30, 2016 and are comprised of more activity at Anaha, ~~Ae`o and Ke Kilohana in the three months ended September 30, 2017 as compared to the same period in 2016.~~ ~~For the nine months ended September 30, 2017~~ ~~as compared to the same period in 2016, the decline in the blended gross margin for condominium rights and unit sales is due to less revenues and cost increases at our Waiea tower and more revenues from Anaha and our~~ ~~Ae`o and Ke Kilohana towers.~~

Other property operating costs for the three and nine months ended September 30, 2017 increased as compared to the same periods in 2016 and relate primarily to opening and carrying costs associated with unsold inventory at Waiea and pre-opening costs at Anaha condominium projects, as well as costs associated with events in the Seaport District related to various projects under development.

Depreciation and amortization decreased for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 due to fewer assets being depreciated. The IBM building was transferred to our Operating Assets segment in the second quarter of 2017.

Development-related marketing costs are primarily incurred to enhance our brand, generate demand for our development and redevelopment projects and sustain consumer and industry relationships. For the three months ended September 30, 2017, development-related marketing costs increased slightly as compared to the same periods in 2016 primarily due to increased costs incurred at Seaport and Columbia, offset by decreases at Ward Village as compared to the three month period ended September 30, 2016. For the nine months ended September 30, 2017, development-related marketing costs decreased as compared to the same periods in 2016 primarily due to decreased costs incurred at Seaport Pier 17 and Ward Village projects, offset by an increase at Columbia as compared to the nine month period ended September 30, 2016.

For the three months ended September 30, 2017, we sold a parcel of land (“Volo Land”) for cash proceeds of $0.6 million and a gain of $0.2 million, which is included in Gains on sales of properties for the three months ended September 30, 2017. For the nine months ended September 30, 2017, Gains on sales of properties reflect the sale of the Volo Land and the sale of 36 acres of undeveloped land at The Elk Grove Collection (formerly known as The Outlet Collection at Elk Grove). The gross sales price was $36.0 million and resulted in a pre-tax gain of $32.2 million. The Gains on sales of properties in the nine months ended September 30, 2016 is due to selling 80 South Street Assemblage for net cash proceeds of $378.3 million, resulting in a pre-tax gain of $140.5 million. The 80 South Street Assemblage was a 42,694 square foot lot with 817,784 square feet of available development rights in the Seaport District. There were no sales of properties in the three months ended September 30, 2016.

Interest income, net increased for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 as we had more projects under construction as compared to the period ended September 30, 2016 and therefore capitalized more of our interest incurred.

~~The following describes the status of our active Strategic Developments projects as of September 30, 2017.~~ For projects that have been under construction for a substantial period and are nearing completion, please refer to the Projects under Construction table below for an update on the project’s individual metrics and associated timeline for completion. For information on the construction financings for these and other projects, please refer to Note 9 – ~~Mortgages, Notes and Loans Payable~~ ~~in our~~ ~~Condensed~~ ~~Consolidated Financial Statements.~~

~~Downtown Columbia Redevelopment District~~

In 2017, we completed construction of TEN.M and residents began taking occupancy. We also continued construction on m.flats, Merriweather District infrastructure improvements, Two Merriweather and completed development and placed in service One Merriweather. We are continuing predevelopment activities on our third neighborhood within the Downtown Columbia Redevelopment District, the Lakefront District and expect approval on a final Development Plan for that area

~~Table of Contents~~

~~in the first half of 2018.~~

~~Tax increment financing (“TIF”) bonds~~

In November 2016, the Howard County Council authorized the issuance of up to $90.0 million of TIF bonds for the Downtown Columbia Redevelopment District’s master plan. The Preliminary Limited Offering Memorandum (“PLOM”) for the first tranche relates to the Merriweather District, and closing on the $48.2 million of Series 2017 A Special Obligation Bonds (“Phase One Bonds”) occurred in October 2017. As part of the legislation approved concurrently with TIF legislation last year, an additional 744 residential units may be constructed for the local community to provide for affordable housing needs, which would, if built, increase the previous density to over 6,200 residential units. The TIF will provide capital for the development of key roads and infrastructure supporting our local office buildings and other commercial development within the Merriweather District. The Phase One Bonds are secured by incremental property taxes from the anticipated increased assessed values of specified properties in the Downtown Columbia Development District, and “Special Taxes” which may be levied if necessary to fund the debt service and other costs of the bonds in the event there is a shortfall in the projected property tax increment. We, through our wholly-owned subsidiaries, currently own the majority of the acreage in the Development District, and all of the developable land within the “Special Taxing District.” In the Funding Agreement for the TIF, one of our wholly owned subsidiaries, The Howard Research And Development Corporation, has agreed to complete certain defined public improvements and to indemnify Howard County, and we have guaranteed these obligations, with a limit of $1.0 million, expiring 36 months after bond issuance.

~~m.flats/TEN.M~~

We are a 50% partner with Kettler, Inc. (“Kettler”) to construct a 437-unit, Class A multi-family project with 29,000 square feet of ground floor retail, which is adjacent to The Metropolitan Downtown Columbia in Columbia, Maryland. Construction on the project, which began in the first quarter of 2016, includes two separate buildings, m.flats and TEN.M. Kettler provides construction and property management services for the development. In September 2017, we completed construction of TEN.M and residents began taking occupancy, and we anticipate completion of m.flats in the fourth quarter of 2017. We expect the property to reach projected annual stabilized NOI of approximately $8.1 million in 2019, of which our share would be $4.1 million. Total development costs are expected to be approximately $109 million, and costs incurred through September 30, 2017 were approximately $90.0 million. The project is financed with an $88.0 million construction loan, which is non-recourse to us.

~~Merriweather District~~

~~We continue to proceed with the approved development plan which allows for development density for up to 4.9 million square feet of office, residential and retail space in the Merriweather District.~~

~~Two Merriweather –~~ ~~We began~~ ~~construction of Two Merriweather, a Class A mixed-use office building, in the third quarter of 2016 and expect completion of the project in the fourth quarter of 2017. Two Merriweather~~100.0% presold, will consist of ~~approximately 100,000 square feet of office~~349 one-, two- and ~~approximately 30,000 square feet of retail space. Total development costs are expected to be approximately $41 million, of which $21.1 million has been incurred through September 30, 2017.~~ three-bedroom units.

We broke ground on The Park Ward Village, in October 2022, and expect to ~~reach projected annual stabilized NOI of approximately $3.6 million~~complete construction in ~~2020.~~ ~~As of September 30, 2017, 58.1% of the total project is pre-leased.~~

~~Three Merriweather and shared parking garage –~~ ~~We expect to begin~~ ~~construction on Three Merriweather, a 12-story, Class A mixed-use office building, in the first quarter of 2018, with planned completion of the project in the third quarter of 2019. Three Merriweather~~2026. The Park Ward Village will consist of ~~approximately 307,000 rentable square feet of office~~545 studio, one-, two-, and 13,000 square feet of retail space. Building amenities will include a rooftop terrace with conference / meeting space that overlooks the Merriweather Post Pavilion concert venue and a fitness center at the ground level with direct access to the 100-mile running and biking pathway network throughout Columbia. A 9‐level parking garage that will provide parking for the office tower, Merriweather Post Pavilion concert venue and the retail, restaurant and entertainment uses will be constructed as part of the project. The garage will be built in two phases, with approximately 1,300 spaces in Phase I and 700 spaces in Phase II for a total of approximately 2,000 spaces at completion. Total development costs of approximately $138 million

~~Table of Contents~~

for the joint office building and parking garage are being finalized. We expect to reach projected stabilized NOI of approximately $9.2 million in 2023. We recently pre-leased 50% of the building to a major corporate tenant.

~~The Woodlands~~

~~100 Fellowship Drive~~

In November 2016, we entered into a build-to-suit arrangement to develop a three-story, 203,000 rentable square foot medical building with approximately 850 surface parking spaces. The building is located at 100 Fellowship Drive and is 100% pre-leased as of September 30, 2017. Total development costs are expected to be approximately $63 million. We began construction in the second quarter of 2017 and anticipate project completion in the first quarter of 2019. We expect to reach projected annual stabilized NOI of $5.1 million in 2019. The project is financed with a $51.4 million construction loan, which is non-recourse to us.

~~Creekside Park Apartments~~

In March 2017, we commenced construction of Creekside Park Apartments, a 292-unit apartment complex offering the first rental product in Creekside Park Village Center. Construction completion and grand opening is expected in the third quarter of 2018. Total development costs are expected to be approximately $42 million and were funded with a $30.0 million increase to The Woodlands Master Credit Facility completed in April 2017 (described in Note 9 – ~~Mortgages, Notes and Loan Payable). We expect to reach projected annual stabilized NOI of $3.5 million in 2019.~~

~~Lake Woodlands Crossing Retail Center~~

Construction of Lake Woodlands Crossing Retail Center was approved during the third quarter of 2017. The Center will be approximately 60,300 rentable retail square feet consisting of 25,000 square feet of anchor space, 10,000 square feet of junior anchor space and 25,300 square feet of inline and restaurant space. The project is situated on 7.7 acres and is in close proximity to Market Street and The Woodlands Mall within The Woodlands Town Center. Construction is expected to begin in the fourth quarter of 2017 with completion expected in the fourth quarter of 2018. ~~Total development costs are expected to be approximately $15 million. We expect to reach projected annual stabilized NOI of approximately $1.7 million in the fourth quarter of 2020.~~ three-bedroom residences. As of ~~September 30, 2017, the project is 58.0% pre-leased, and we are currently seeking financing for this project.~~

~~The Seaport District~~

The revitalization of Lower Manhattan into a media and entertainment hub continues in our Seaport District, which encompasses seven buildings spanning several city blocks along the East River waterfront comprising (i) the Uplands, which is west of the FDR Drive and consists of approximately 180,000 square feet of retail space, including the 100,000 square foot Fulton Market Building placed in service in the fourth quarter of 2016 (see discussion in the Operating Assets segment), and (ii) approximately 212,000 square feet of experiential retail, studio and creative office space at Pier 17, with an additional approximate 50,000 square feet at the Tin Building located east of the FDR Drive, all of which is under development and discussed further below.

~~Pier 17 and Tin Building~~– Construction on Pier 17 continues, and the openings of various phases of the Pier are expected throughout 2018. On October 9, 2017, we announced that ESPN will occupy 19,000 square feet of rentable space on the third floor of Pier 17 through a long-term lease that was executed with ESPN’s studio provider NEP Imaging Group, LLC. ESPN will join the culinary experiences of Jean-Georges Vongerichten and the Momofuku Group led by David Chang. Pier 17 will feature dynamic food offerings and retail on the first two levels, office, studio, and event space on levels three and four, and a 1.5-acre rooftop featuring an outdoor event and entertainment venue for a summer concert series, private events, community open space and a vibrant winter village.

In January 2017, we executed the ground lease amendment with the City of New York, incorporating the Tin Building into our leased premises and modifying other related provisions. As part of the Tin Building redevelopment, important historical elements will be catalogued during the building’s deconstruction, followed by demolition and reconstruction of

~~Table of Contents~~

the platform pier where the Tin Building currently sits and restoration of the Tin Building. The total cost estimate for the Tin Building redevelopment is approximately $162 million, including turn-key, interior fit out for the Food Hall, which will feature fresh specialty foods and goods, seafood, beverages and other products.

~~33 Peck Slip~~

In January 2016, we entered into a joint venture with Grandview SHG, LLC to purchase an operating hotel comprised of 66 rooms and totaling 43,889 square feet located at 33 Peck Slip in the Seaport District of New York. We advanced a bridge loan of $25.0 million at a 5.0% interest rate to the joint venture at closing to expedite the acquisition, which was repaid in full in June 2016 upon completion of a refinancing of the property with a $36.0 million redevelopment loan. Our total investment in the joint venture is $9.1 million as of September 30, 2017, which represents our 35% ownership share of the $25.5 million total equity in the project. Under the terms of the LLC Agreement, cash will be distributed to the members as follows: (1) each member will be paid a 6.5% preferred return on their original capital and will be repaid their original capital; and (2) all remaining cash will be distributed 50% to us and 50% to the other members. The 33 Peck Slip hotel was closed at the end of December 2016 for redevelopment and construction began in January 2017. We anticipate completion in the first of quarter 2018 and expect the hotel to be an added amenity to the Seaport District experience. Total costs of the project are expected to be approximately $67 million, and as of September 30, 2017, $18.5 million of redevelopment, interest and carrying costs have been incurred. We expect stabilized NOI to be $3.4 million, of which $1.2 million is our share.

~~Summerlin (Las Vegas, Nevada)~~

~~Aristocrat~~

~~In the second quarter of 2017, we entered into a build-to-suit arrangement with Aristocrat Technologies, a global leader in gaming solutions, and commenced construction of~~a corporate campus located less than four miles from Downtown Summerlin. The campus will be situated on approximately 12 acres, will include two office buildings of approximately 90,000 square feet each ~~and is 100% pre-leased. Construction began in June 2017 with core and shell completion anticipated in the second quarter of 2018.~~ Total development costs are expected to be approximately $47 million, and subsequent to September 30, 2017, we closed on a $64.5 million financing for this project in conjunction with the financing of Two Summerlin, discussed below. We expect to reach projected annual stabilized NOI of $4.1 million in the first quarter of 2019.

~~Downtown Summerlin Area~~

Summerlin’s developing urban core is comprised of nearly 400 acres and is centrally located within Summerlin with easy access to the Las Vegas Valley’s 215 Beltway. It is currently home to our Downtown Summerlin retail asset, an approximate 106-acre fashion, dining and entertainment venue, and the new City National Arena, home to the Las Vegas Golden Knights National Hockey League team’s practice facility. There are approximately 170 acres of land available for development.

~~Las Vegas Ballpark –~~ In October 2017, we announced the development of a new ballpark for our wholly owned Las Vegas 51s Triple-A professional baseball team and signed a 20-year, $80.0 million naming rights agreement for the future stadium with the Las Vegas Convention and Visitor’s Authority. The 10,000-fan capacity ballpark will be located in the Downtown Summerlin area and serve as another amenity for the rapidly growing retail and entertainment destination in the heart of Summerlin’s urban core.

~~Two Summerlin –~~ During the second quarter of 2017, we commenced construction of our second office building in Downtown Summerlin and expect completion by the end of the third quarter of 2018. The building will be an approximate 145,000 square foot Class A office building with an adjacent 424-space parking structure, situated on approximately four acres. It will be located in the northwest corner of east Downtown Summerlin, which is in close proximity to our Downtown Summerlin retail venue. This office building will be the first office project developed within our 200-acre master parcel across from Downtown Summerlin and will launch development of our planned 1.2 million square feet of office, 77,000 square feet of neighborhood retail and 4,000 residential units. Total development costs for Two Summerlin are expected

~~Table of Contents~~

~~to be approximately $49 million. Subsequent to September 30, 2017, we closed on a $64.5 million financing for this project in conjunction with the financing of Aristocrat, discussed above.~~ ~~We expect to reach projected annual stabilized NOI of approximately $3.5 million in 2020, and the building is 11% pre-leased as of October 25, 2017.~~

~~Downtown Summerlin Apartments –~~ ~~We expect to commence construction on Downtown Summerlin~~Apartments in the fourth quarter of 2017. The project will be a 267-unit, multifamily development in Downtown Summerlin, situated on approximately 9.0 acres, is in close proximity to our Downtown Summerlin retail venue. The project is comprised of three garden–style, walk–up residential buildings with elevators, surface parking, 22 tuck under garages, a clubhouse with an attached pool and an amenity area. Construction is expected to begin in the fourth quarter of 2017 with completion expected in the second quarter of 2019. Total development costs are expected to be approximately $59 million, and we are currently seeking financing for this project. We expect to reach projected annual stabilized NOI of approximately $4.4 million in the third quarter of 2020.

~~Ward Village~~

We continue to transform Ward Village into a vibrant neighborhood offering unique retail experiences, dining and entertainment, along with exceptional residences and workforce housing set among open public spaces and pedestrian-friendly streets. In 2014, we completed the renovation of the IBM Building, which is held in our Operating Assets segment, and started construction on both Anaha and Waiea. In July 2015, we began public pre-sales for Ae`o and the first Gateway Tower, and in March 2016, we began public pre-sales for Ke Kilohana. The ongoing construction at these mixed-use projects includes the construction of approximately 114,500 square feet of new retail. This retail will serve our new residents and the community at large. In addition, during this quarter, we have removed 115,191 square feet of old retail space from service as we prepare for redevelopment. Many of the tenants occupying the closed space have been relocated within Ward Village. As we move forward with the execution of our master plan which ultimately contemplates a total of approximately one million square feet of retail at completion, we will periodically redevelop the older existing retail and replace it as part of new mixed-use projects.

Sales contracts for condominium units are subject to a 30-day rescission period, and the buyers are typically required to make an initial deposit at signing and an additional deposit 30 days later at which point their total deposit becomes non-refundable. Buyers are typically then required to make a final deposit within approximately 90 days of our receipt of their second deposit. Certain buyers are required to deposit the remainder of the sales price on a predetermined pre-closing date, which is specified in the sales contracts for each condominium project.

~~Waiea~~ ~~–As of September 30, 2017,~~31, 2024, we have entered into contracts for ~~165~~517 units, representing 94.9% of ~~the 174 units~~total units.

We broke ground on Ulana Ward Village, in January 2023 and ~~closed on 158~~expect to complete construction in 2025. Ulana Ward Village, which is 100.0% presold, will consist of ~~those~~696 studio, one-, two-, and three-bedroom units. All units ~~under contract represent 94.8% of total units and 89.9% of the total residential square feet available for sale.~~Total development costs are expected to be approximately $417 million, which includes $12.6 million of development-related marketing costs that were expensed as incurred. We have recognized 100% of the revenue and costs accounted for on units that have either closed or are under qualifying contracts under the percentage-of-completion method. Remaining costs to complete primarily relate to the finish out of the remaining unsold units and an additional five units are scheduled to close by December 31, 2017.

~~Anaha~~ – In 2014, we began construction of Anaha, and we expect to complete the condominium tower during the fourth quarter of 2017, with the initial residents taking occupancy at that time. As of September 30, 2017, 307 of the 317 total units were under contract. These contracted sales represent 96.8% of total units and 93.3% of the total residential square feet available for sale. Total development costs are expected to be approximately $401 million, which includes $8.6 million of development-related marketing costs that are being expensed as incurred. During 2015, we met all the necessary requirements to begin recognizing revenue on the percentage of completion basis. As of September 30, 2017, the project was approximately 96.5% complete. As of September 30, 2017, 58.5% of the retail space at Anaha is pre-leased. We began closing on the sales of condominiums at Anaha in September, with 307 homes scheduled to close on or before December 31, 2017.

~~Ae`o –~~ In February 2016, we began construction of the 389,000 square foot Ae`o tower and the 57,000 square foot Whole Foods Market, located on the same block. We expect to complete development of the entire project by the end of 2018. Total development costs are expected to be approximately $429 million. As of September 30, 2017, 367 of the 466 total

~~Table of Contents~~

units were under contract, representing 78.8% of total units and 74.8% of the total residential square feet available for sale. During the second quarter of 2017, we satisfied all requirements to begin recognizing revenue on the percentage of completion basis. As of September 30, 2017, the project was approximately 47.5% complete.

~~Ke Kilohana –~~ ~~In October 2016, we began construction of Ke Kilohana and anticipate completion in 2019. The tower will consist of 424 residences, 375 of which~~ are designated as workforce housing units and are being offered to local residents ~~of Hawai~~‘i who meet certain maximum income and net worth requirements. ~~Total~~

Predevelopment Condominiums

Ward Village We launched public presales of Kalae in September 2022, and expect to begin construction in the second quarter of 2024. Kalae will consist of 329 one-, two-, and three-bedroom residences. As of March 31, 2024, we have entered into contracts for 296 units, representing 90.0% of total units.

We launched public presales for The Launiu in February 2024. The Launiu will consist of 485 studio, one-, two-, and three-bedroom residences. As of March 31, 2024, we have entered into contracts for 182 units, representing 37.5% of total units.

The Woodlands We launched public presales of our first condominium project in The Woodlands, The Ritz-Carlton Residences, in March 2024. The Ritz-Carlton Residences will consist of 111 one-, two-, three-, and four-bedroom residences. The development ~~costs are expected to be approximately $219 million. Public pre-sales~~sits on the ~~workforce units began in the first quarter~~last available large-scale residential site on Lake Woodlands, spanning roughly eight acres across approximately 1,200 feet of ~~2016, and 100% of those units were under contract by the end of July 2016. The market rate units began public pre-sales in July 2016.~~premier lakefront shoreline. As of September 30, 2017, we sold 13 of the 49 market units, and we expect to sell the remainder over the next two years. All units under contract represent 91.5% of the total units and 87.6% of the total residential square feet available for sale. As previously announced,March 31, 2024, we have ~~pre-leased approximately 22,000 square feet, 100%~~entered into contracts for 56 units, representing 50.5% of the available retail space, to CVS/Longs Drugs on the ground floor of Ke Kilohana. During the first quarter of 2017, we met all the necessary requirements to begin recognizing revenue on the percentage of completion basis. As of September 30, 2017, the project was approximately 27.1% complete.

~~Other~~

During the three and nine months ended September 30, 2017, we sold a 40-acre vacant land parcel in Lakemoor, Illinois, located on Route 12, 50 miles north of Chicago in a growing suburb. Volo Land has no utilities in place and is currently designated as farmland. The parcel was sold on August 15, 2017 for cash proceeds of $0.6 million and a gain of $0.2 million, included in Gains on sales of properties for the three months ended September 30, 2017.

~~Projects Under Construction~~

total units.

The following ~~table summarizes our~~provides further detail for all condominium projects ~~under construction and related debt held in Operating Assets and Strategic Developments~~ as of ~~September 30, 2017. Projects that~~March 31, 2024:


	Location	Units Closed	Units Under Contract	Total Units	Total % of Units Closed or Under Contract		Completion Date
Completed
Waiea (a)	Honolulu, HI	177	—	177	100.0	%	Q4 2016
Anaha (a)	Honolulu, HI	317	—	317	100.0	%	Q4 2017
Ae`o (a)	Honolulu, HI	465	—	465	100.0	%	Q4 2018
Ke Kilohana (a)	Honolulu, HI	423	—	423	100.0	%	Q2 2019
‘A‘ali‘i (a)	Honolulu, HI	750	—	750	100.0	%	Q4 2021
Kō'ula (b)	Honolulu, HI	565	—	565	100.0	%	Q3 2022
Under construction
Victoria Place	Honolulu, HI	—	349	349	100.0	%	Q4 2024
The Park Ward Village (c)	Honolulu, HI	—	517	545	94.9	%	2026
Ulana Ward Village (d)	Honolulu, HI	—	696	696	100.0	%	2025
Predevelopment
Kalae (e)	Honolulu, HI	—	296	329	90.0	%	2027
The Launiu (f)	Honolulu, HI	—	182	485	37.5	%	2027
The Ritz-Carlton Residences (g)	The Woodlands, TX	—	56	111	50.5	%	2027

(a)The retail portions of these projects are ~~substantially complete,~~100% leased and ~~therefore,~~ have been placed in

service.

(b)The retail portion of this project has been placed in service and is 56% leased.

(c)The Park Ward Village will include approximately 26,800 square feet of retail space.

(d)Ulana Ward Village will include approximately 32,100 square feet of retail space.

(e)Kalae will include approximately 2,000 square feet of retail space.

(f)The Launiu will include approximately 10,000 square feet of retail space.

(g)The Ritz-Carlton Residences will include approximately 5,800 square feet of retail space.

HHC 2024 FORM 10-Q | 42


MANAGEMENT’S NARRATIVE ANALYSIS RESULTS OF OPERATIONS			Table of Contents

~~Table of Contents~~

~~service in the Operating Assets segment may still require some capital for remaining tenant build-out. This table does not include projects for which construction has not yet started.~~

($ in thousands)

Total
Estimated
Costs (a)

Costs Paid Through September 30, 2017 (b)

Estimated
Remaining
to be Spent

Remaining Buyer
Deposits/Holdback to be Drawn


Debt
to be Drawn (c)

Costs
Remaining to be Paid, Net of Debt and Buyer Deposits/Holdbacks to be Drawn (c)

Estimated
Completion
Date
Operating Assets

(A)

(B)

(A) - (B) = (C)

(D)

(E)

(C) - (D) - (E) = (F)

Columbia

One Merriweather

$
78,187

$
66,339

$
11,848

$
-

$
8,658

$
3,190
(d) (e)

Complete
The Woodlands

1725-35 Hughes Landing Boulevard

218,367

188,834

29,533

-

27,001

2,532
(d) (e)

Complete
Three Hughes Landing

90,162

64,792

25,370

-

21,794

3,576
(d) (e)

Complete
HHC 2978 Self-Storage

8,476

7,688

788

-

847

(59)
(f)

Complete
Other

Lakeland Village Center at Bridgeland

16,274

13,278

2,996

-

2,708

288
(d) (e)

Complete
Total Operating Assets

411,466

340,931

70,535

-

61,008

9,527

Strategic Developments

Columbia

Two Merriweather

40,941

21,105

19,836

-

21,224

(1,388)
(f)

Q4 2017
The Woodlands

Creekside Park Apartments

42,111

10,785

31,326

-

30,000

1,326
(g) (h)

Q3 2018
100 Fellowship Drive

63,278

7,279

55,999

-

51,425

4,574
(g) (i)

2019
Seaport District

South Street Seaport - Pier 17 and Historic Area / Uplands

622,883

415,400

207,483

-

-

207,483
(g) (j)

Q3 2018
Summerlin

Aristocrat

46,661

3,575

43,086

-

-

43,086
(g) (k)

Q2 2018
Two Summerlin

49,320

4,010

45,310

-

-

45,310
(g) (l)

Q3 2018
Ward Village

Ae`o

428,508

167,623

260,885

19,382

213,759

27,744
(g)

Q4 2018
Anaha

401,314

364,256

37,058

-

37,058

-
(m)

Q4 2017
Ke Kilohana

218,898

48,708

170,190

6,941

141,386

21,863
(g)

2019
Waiea

417,307

396,676

20,631

19,349

-

1,282
(d) (m)

Opened
Total Strategic Developments

2,331,221

1,439,417

891,804

45,672

494,852

351,280

Combined Total at September 30, 2017

$
2,742,687

$
1,780,348

$
962,339

$
45,672

$
555,860

$
360,807

Aristocrat estimated financing

(31,118)
(k)

Two Summerlin estimated financing

(33,432)
(l)

Estimated costs to be funded net of financing, assuming closing on estimated financing

$
296,257

	~~(a)~~
Total Estimated Costs represent all costs to be incurred on the project which include construction costs, demolition costs, marketing costs, capitalized leasing, payroll or project development fees, deferred financing costsCorporate Income, Expenses, and ~~advances for certain accrued costs from lenders and excludes land costs and capitalized corporate interest allocated to the project. Waiea, Anaha,~~ ~~Ae`o, Ke Kilohana,~~ ~~One Merriweather and Two Merriweather exclude Master Plan infrastructure and amenity costs at Ward Village and the Merriweather District.~~ Other Items

~~(b)~~

~~Costs included in (a) above which have been paid through September 30, 2017.~~

~~(c)~~

~~Remaining debt to be drawn with respect to our condominium projects reduced by deposits utilized for construction.~~

~~(d)~~

~~These positive balances represent cash drawn in advance of costs paid.~~

~~(e)~~

~~Final completion is dependent on lease-up and tenant build-out.~~

~~(f)~~

Negative balances represent cash to be received in excess of Estimated Remaining to be Spent. These items are primarily related to September 2017 costs that were paid by us but not yet reimbursed by the lender. We expect to receive funds from our lenders for these costs in the future.

~~(g)~~

~~These positive balances represent cash equity to be invested.~~

~~(h)~~

~~Creekside Apartments was approved in December 2016. We closed on the additional $30.0 million of financing through our Woodlands Credit Facility in April 2017.~~

~~(i)~~

~~In the fourth quarter of 2016, 100 Fellowship was approved to begin construction. We closed on a $51.4 million construction loan in May 2017.~~

~~(j)~~

South Street Seaport - Pier 17 and Historic Area / Uplands Total Estimated Costs and Costs Paid Through September 30, 2017 include costs required for the Pier 17 and Historical Area/Uplands and are gross of insurance proceeds received to date. We are currently seeking financing for this project.

~~(k)~~

~~In the second quarter of 2017, Aristocrat was approved to begin construction. Total development costs are expected to be $46.6 million.~~ ~~Subsequent to September 30, 2017, we closed on a $64 million financing for this project in conjunction with the financing of Two Summerlin.~~

~~(l)~~

~~In the second quarter of 2017, Two Summerlin was approved to begin construction. Total development costs are expected to be $49.3 million.~~ ~~Subsequent to September 30, 2017, we closed on~~ ~~a $64 million financing for this project in conjunction with our Aristocrat project.~~

~~(m)~~

The Waiea and Anaha facility was repaid on October 27, 2017 in conjunction with the closing of a substantial portion of Anaha and Waiea. Approximately 97% of the units in these towers will be sold and closed by December 31, 2017.

~~Table of Contents~~

~~Corporate and other items~~

The following table contains certain ~~corporate related~~corporate-related and other items not related to segment activities and that are not otherwise included within the segment analyses. Variances related to income and expenses included in NOI or EBT are explained within the previous segment discussions. Significant variances for consolidated items not included in NOI or EBT are described ~~below.~~

below:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2017

2016

Change

2017

2016

Change
General and administrative

$
22,362

$
21,128

$
1,234

$
63,423

$
61,505

$
1,918
Corporate interest expense, net

12,875

13,263

(388)

36,595

39,358

(2,763)
Loss on redemption of senior notes due 2021

—

—

—

46,410

—

46,410
Warrant liability loss

—

7,300

(7,300)

43,443

21,630

21,813
Gain on acquisition of joint venture partner's interest

—

(27,087)

27,087

(5,490)

(27,087)

21,597
Corporate other expense (income), net

33

(123)

156

(878)

(6,190)

5,312
Corporate depreciation and amortization

1,920

1,859

61

5,851

4,486

1,365
Total Corporate and other items

$
37,190

$
16,340

$
20,850

$
189,354

$
93,702

$
95,652


	Three Months Ended March 31,
thousands		2024		2023		$ Change
Corporate income		$	16	$	14	$	2
General and administrative		(30,174)		(23,553)		(6,621)
Corporate interest expense, net		(17,582)		(24,195)		6,613


Corporate other income (loss), net		480		2,707		(2,227)


Corporate depreciation and amortization		(805)		(800)		(5)


Other		(3,818)		(3,571)		(247)
Income tax (expense) benefit		17,029		1,278		15,751
Total Corporate income, expenses, and other items		$	(34,854)	$	(48,120)	$	13,266

For the three months ended March 31, 2024:

Corporate income, expenses, and other items was favorably impacted compared to the prior-year period by the following:

–Income tax benefit increased $15.8 million primarily due to a decrease in Income before income taxes. Refer to Note 10 - Income Taxes in the Notes to Condensed Consolidated Financial Statements under Item 1 of this Form 10-Q for additional information.

–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. Refer to Note 8 - Derivative Instruments and Hedging Activities in the Notes to Condensed Consolidated Financial Statements under Item 1 of this Form 10-Q for additional information on derivative instruments.

Corporate income, expenses, and other items was unfavorably impacted compared to the prior-year period by the following:

–General and administrative expenses increased ~~for the three~~$6.6 million primarily attributable to an increased legal and ~~nine months ended September 30, 2017 as compared~~consulting fees related to the ~~same periods in 2016 primarily due to increased labor costs as well as fewer~~planned spinoff of ~~those costs being capitalized into current development projects for the three months ended September 30, 2017, partially offset by decreased stock compensation expense due to stock option forfeitures.~~

~~Corporate interest expense, net decreased for the three and nine months ended~~ September 30, 2017 as compared to the same periods in 2016 primarily due to the issuance of the 2025 Notes at a lower rate of 5.375% than the 6.875% senior notes redeemed in March 2017 as well as increased interest income due to increases in market interest rates and investing excess cash on hand in competitive investments yielding higher interest rates. See ~~further discussion in Note 5~~ Seaport Entertainment.

–~~Recent Transactions~~ ~~in our Condensed Consolidated Financial Statements.~~

~~Loss on redemption of senior notes due 2021 for the nine months ended September 30, 2017 is due to the redemption in the first quarter of 2017 of our $750.0 million 6.875% senior notes~~ ~~due 2021.~~ ~~See further discussion in Note 9 –~~ ~~Mortgages, Notes and Loans Payablein our Condensed Consolidated Financial Statements.~~

Warrant liability loss decreased and increased for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016 as all warrants which qualified for liability accounting treatment and were marked-to-market periodically have now been exercised and settled. See further discussion in Note 3 - ~~Warrantsin our Condensed Consolidated Financial Statements.~~

Gain on acquisition of joint venture partner’s interest decreased for the nine months ended September 30, 2017 compared to the same period in 2016 due to the $27.1 million gain on acquisition of Millennium Six Pines Apartments in the third quarter of 2016, compared to the $5.5 million gain on acquisition of Las Vegas 51s in 2017. There was no gain on acquisition of joint venture partner’s interest for the three months ended September 30, 2017.

Corporate other income ~~net for the nine months ended September 30, 2017~~ decreased ~~as compared~~$2.2 million primarily related to ~~the same period in 2016 primarily due to South Street Seaport~~higher insurance proceeds ~~received~~ in ~~the nine months ended September 30, 2016 which did not recur in 2017.~~

2023.

HHC 2024 FORM 10-Q | 43

Table of Contents

~~Capitalized internal costs~~

~~The following tables represent our capitalized internal costs by segment for the three~~Item 4. Controls and ~~nine months ended September 30, 2017 and 2016:~~

Capitalized Internal Costs

Capitalized Internal Costs Related to
Compensation Costs

Three Months Ended September 30,

Three Months Ended September 30,
(In millions)

2017

2016

2017

2016
MPC segment

$
2.2

$
2.6

$
1.7

$
1.9
Operating Assets segment

0.3

1.0

0.3

0.8
Strategic Developments segment

5.2

6.3

4.5

4.7
Total

$
7.7

$
9.9

$
6.5

$
7.4

Capitalized Internal Costs

Capitalized Internal Costs Related to
Compensation Costs

Nine Months Ended September 30,

Nine Months Ended September 30,
(In millions)

2017

2016

2017

2016
MPC segment

$
7.3

$
7.2

$
5.9

$
5.7
Operating Assets segment

2.2

3.4

1.8

2.6
Strategic Developments segment

18.3

19.0

15.3

14.3
Total

$
27.8

$
29.6

$
23.0

$
22.6

For the three and nine months ended September 30, 2017, capitalized internal costs (which include compensation costs) decreased as compared to the same periods in 2016 primarily due to fewer projects under development in the current periods for the Operating Assets and Strategic Developments segments. At the MPC segment, capitalized internal costs decreased for the three months ended September 30, 2017 but slightly increased for the nine months ended September 30, 2017 due to fluctuations in the level of development activity at our newer MPCs. As projects continue to begin construction, internal costs will continue to be capitalized within these segments.

~~Liquidity and Capital Resources~~

Our primary sources of cash include cash flow from land sales in our MPC segment, cash generated from our operating assets and sales of properties, condominium closings, deposits from condominium sales (which are restricted to funding construction of the related developments), first mortgage financings secured by our assets and the corporate bond markets. Additionally, strategic sales of certain assets may provide additional cash proceeds to our operating or investing activities. Our primary uses of cash include working capital, overhead, debt service, property improvements, acquisitions and development costs. We believe that our sources of cash, including existing cash on hand will provide sufficient liquidity to meet our existing non-discretionary obligations and anticipated ordinary course operating expenses for at least the next twelve months. The development and redevelopment opportunities in our Operating Assets and Strategic Developments segments are capital intensive and will require significant additional funding, if and when pursued. Any additional funding would be raised with a mix of construction, bridge and long-term financings, by entering into joint venture arrangements and the sale of non-core assets at the appropriate time. We cannot provide assurance that financing arrangements for our properties will be on favorable terms or occur at all, which could have a negative impact on our liquidity and capital resources. In addition, we typically must provide completion guarantees to lenders in connection with their providing financing for our projects. We also provided a completion guarantee to the City of New York for the Pier 17 Renovation Project.

~~Total outstanding debt was $3.0 billion as of September 30, 2017. Please refer to Note 9 –~~ ~~Mortgages, Notes and Loans Payable~~ in our Condensed Consolidated Financial Statements for a table showing our debt maturity dates. Certain mortgages may require paydowns in order to exercise contractual extension terms. Our proportionate share of the debt of our Real Estate Affiliates, which is non-recourse to us, totaled ~~$88.0~~ ~~million as of September 30, 2017.~~

Procedures

~~Table of Contents~~

The following table summarizes our net debt on a segment basis as of September 30, 2017. Net debt is defined as mortgages, notes and loans payable, including our ownership share of debt of our Real Estate and Other Affiliates, reduced by liquidity sources to satisfy such obligations such as our ownership share of cash and cash equivalents and SID and MUD receivables. Although net debt is not a recognized GAAP financial measure, it is readily computable from existing GAAP information and we believe, as with our other non-GAAP measures, that such information is useful to our investors and other users of our financial statements. However, it should not be used as an alternative to our debt calculated in accordance with GAAP.

(In thousands)
Segment Basis (a)

Master
Planned
Communities

Operating
Assets

Strategic
Developments

Segment
Totals

Non-
Segment
Amounts

Total
September 30, 2017
Mortgages, notes and loans payable

$
244,379

$
1,591,472
(c)

$
251,225
(d)

$
2,087,076

$
987,303

$
3,074,379
Less: cash and cash equivalents

(105,552)
(b)

(63,231)
(e)

(23,505)
(f)

(192,288)

(450,144)

(642,432)
Special Improvement District receivables

(55,841)

—

—

(55,841)

—

(55,841)
Municipal Utility District receivables

(193,100)

—

—

(193,100)

—

(193,100)
Net Debt

$
(110,114)

$
1,528,241

$
227,720

$
1,645,847

$
537,159

$
2,183,006

	~~(a)~~
~~Please refer to Note 16 –~~ ~~Segments~~ ~~in our Condensed Consolidated Financial Statements.~~ DISCLOSURE CONTROLS AND PROCEDURES

~~(b)~~

~~Includes MPC cash and cash equivalents, including $37.2million of cash related to The Summit joint venture.~~

~~(c)~~

~~Includes our $44.0million share of debt of our Real Estate and Other Affiliates in Operating Assets segment (Woodlands Sarofim #1, The Metropolitan Downtown Columbia and Constellation).~~

~~(d)~~

~~Includes our $44.0million share of debt of our Real Estate and Other Affiliates in Strategic Developments segment (33 Peck Slip and m.flats/TEN.M).~~

~~(e)~~

Includes our $0.3 million share of cash and cash equivalents of our Real Estate and Other Affiliates in Operating Assets segment (Woodlands Sarofim #1, The Metropolitan Downtown Columbia, Stewart Title of Montgomery County, TX and Constellation).

~~(f)~~

~~Includes our $3.0~~million share of cash and cash equivalent of our Real Estate and Other Affiliates in Strategic Developments segment (KR Holdings, LLC, HHMK Development, LLC, Circle T Ranch and Power Center, 33 Peck Slip and m.flats/TEN.M).

~~Cash Flows~~

~~Operating Activities~~

The cash flows and earnings generated from each business segment’s activities will likely vary significantly from year to year given the changing nature of our development focus. Condominium deposits received from contracted units offset by other various cash uses related to condominium development and sales activities are a substantial portion of our operating activities in 2017. Operating cash continued to be utilized in 2017 to fund ongoing development expenditures in our Strategic Developments and MPC segments, consistent with prior years.

The cash flows and earnings from the MPC business may fluctuate more than from our operating assets because the MPC business generates revenues from land sales rather than recurring contractual revenues from operating leases. MPC land sales are a substantial portion of our cash flows from operating activities and are partially offset by development costs associated with the land sales business and acquisitions of land that is intended to ultimately be developed and sold.

Net cash used in operating activities was $127.5 million for the nine months ended September 30, 2017 compared to net cash used in operating activities of $218.3 million for the nine months ended September 30, 2016.

~~The $90.8 million net increase in cash from operating activities in the nine months ended September 30, 2017 compared to the same period in 2016 was primarily related to the following:~~

~~Increases in operating cash flow:~~

~~Release of condominium buyer deposits from escrow in 2017 of $170.0 million;~~

~~NOI contribution of $20.2 million from property openings and acquisitions over the last year;~~

~~Income tax refund in 2017 of $18.7 million, net of taxes paid;~~

~~Increase in land sales of $12.7 million as compared to 2016;~~

~~Bridgeland easement sale totaling $10.1 million in 2017;~~

~~Insurance reimbursement for legal expenses totaling $3.5 million in 2017;~~

~~Increase in MUD reimbursement receipts of $3.2 million in 2017;~~

~~Table of Contents~~

~~Increase of $2.8 million in interest income as compared to 2016.~~

~~Decreases in operating cash flow:~~

~~Increase in condominium expenditures of $47.6 million as compared to 2016;~~

~~Increase in MPC expenditures and land acquisitions of $31.6 million as compared to 2016;~~

~~Increase in interest payments of $21.8 million due to higher debt balance as compared to 2016;~~

~~Leasing commissions of $9.2 million paid primarily for 110 North Wacker and Hughes Landing office buildings in 2017;~~

~~Decrease in dividends of $8.9 million from equity method investments (primarily Circle T) as compared to 2016;~~

~~Increase in condominium operating cost and sales commissions of $8.0 million paid as compared to 2016;~~

~~Deposit for Langham Creek MUD project of $6.6 million in 2017;~~

~~Cash deposited into escrow of $3.9 million in 2017;~~

~~Insurance proceeds of $3.1 million received in 2016 related to SuperStorm Sandy;~~

~~ExxonMobil reimbursement in 2016 of $3.0 million;~~

~~Final receipt of $2.8 million in 2016 for our participation interest in TPC Summerlin and TPC Las Vegas golf courses;~~

~~Decrease in MPC builder price participation receipts of $1.0 million;~~

~~Decrease due to lease modification payment to a tenant totaling $1.0 million;~~

~~Repayment of Emerson HOA note receivable in 2016 of $0.9 million; and~~

~~Other insignificant net decreases totaling $0.9 million.~~

~~Investing Activities~~

Net cash used in investing activities was $252.5 million for the nine months ended September 30, 2017 as compared to cash provided by investing activities of $65.9 million for the nine months ended September 30, 2016. The decrease in cash flow is due primarily to the receipt of $378.3 million in net proceeds from the sale of the 80 South Street Assemblage in 2016. Cash used for property developments expenditures and operating property improvements was $271.4 million and $314.0 million for the nine months ended September 30, 2017 and 2016, respectively. The decreased development expenditures in 2017 compared to 2016 relate to lower spending as compared to the prior year on construction of The Seaport District, placing in service in 2016 of One Merriweather, Three Hughes Landing, The Westin at the Woodlands, Hughes Landing Retail and the opening of Waiea, offset by increased development expenditures for Landmark Mall, Ae`o, Two Merriweather, 100 Fellowship Drive and Creekside Apartments.

~~Financing Activities~~

Net cash provided by financing activities was $316.4 million and $360.1 million for the nine months ended September 30, 2017 and 2016, respectively. The proceeds from new loan borrowings and refinancing activities net of principal payments on mortgages, notes and loans payable were used to partially fund development activity at our condominium and other development projects. In 2017, cash provided by financing activities included loan proceeds of $1.4 billion which reflected our $800.0 million bond offering in March 2017 and $200.0 million additional bond offering in June 2017 offset by repayments of $1.13 billion which includes the initial repurchase and subsequent redemption of $750.0 million senior notes, and a $40.0 million premium to repurchase and redeem the bonds.

Additional sources of cash from financing activities in 2017 relate to borrowings or refinancings of existing debt primarily for The Woodlands Master Credit Facility, One Lakes Edge, Waiea and Anaha, 70 Columbia Corporate Center, One Mall North and One and Two Merriweather offset by repayments on Waiea and Anaha, and The Woodlands Resort & Conference Center. Additional sources of cash from financing activities in 2016 relate to borrowings or refinancings of existing debt primarily for Waiea and Anaha, Millennium Six Pines, the Bridgeland master credit facility, One Merriweather, 1725/1735 Hughes Landing and Embassy Suites at Hughes Landing.

~~Contractual Cash Obligations and Commitments~~

~~The following table includes significant updates to our contractual obligations and commitments since December 31, 2016.~~

~~Table of Contents~~

Additional information regarding our contractual obligations and commitments as well as items not included below can be found under the heading “Contractual Cash Obligations and Commitments” in our Annual Report.

~~The following table summarizes our contractual obligations as of September 30, 2017:~~

(In thousands)

Less than 1 year

1-3 years

3-5 years

5 years and thereafter

Total
Mortgages, notes and loans payable (a)

$
29,752

$
824,684

$
544,861

$
1,614,983

$
3,014,280
Interest Payments (b)

139,073

353,065

164,611

204,420

861,169
Ground lease and other leasing commitments

9,885

14,504

11,830

293,377

329,596
Total

$
178,710

$
1,192,253

$
721,302

$
2,112,780

$
4,205,045

~~(a)~~

~~Based on final maturity, inclusive of extension options.~~

~~(b)~~

~~Interest is based on the borrowings that are presently outstanding and current floating interest rates.~~

~~Off-Balance Sheet Financing Arrangements~~

We do not have any material off-balance sheet financing arrangements. Although we have interests in certain property owning non-consolidated ventures which have mortgage financing, the financings are non-recourse to us and totaled $190.1 million as of September 30, 2017.

~~Seasonality~~

Generally, revenues from our MPC, Operating Assets, and Strategic Developments segments are not subject to seasonal variations, except for hospitality assets; however, minimum rental revenues for certain retail tenants are subject to overage rent terms, which are based on tenant sales. These retail tenants are generally subject to seasonal variations, with a significant portion of their sales and earnings occurring during the last two months of the year. As such, our rental income is typically higher in the fourth quarter of each year. Hospitality revenues are subject to seasonal fluctuations in business travel for some of our hotel properties and seasonal fluctuations in resort and corporate business for our conference center and resort property.

~~Critical Accounting Policies~~

Critical accounting policies are those that are both significant to the overall presentation of our financial condition and results of operations and require management to make difficult, complex or subjective judgments. See Note 1 – ~~Summary of Significant Accounting Policies~~ ~~in our Annual Report. There have been no changes to our critical accounting policies.~~

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

We are subject to interest rate risk with respect to our variable rate financings in that increases in interest rates will increase our payments under these variable rates. We manage a portion of our variable interest rate exposure by using interest rate swaps and caps. With respect to fixed-rate financings, increases in interest rates could make it more difficult to refinance such debt when due. As of September 30, 2017, we had $1.5~~billion of variable rate debt outstanding of which $179.3million has been swapped to a fixed-rate. We also have $230.0~~million in gross notional amounts of forward-starting interest rate swaps that become effective December 31, 2017 and interest rate cap contracts on our Ae`o and The Woodlands Master Credit Facility financings to mitigate our exposure to rising interest rates. We have not hedged certain facilities where the loan is structured to permit partial repayments to release collateral for redevelopment. Due to the uncertain timing of such partial repayments, hedging these balances is inefficient. $207.2million of variable rate debt relates to our projects under construction and $61.0 million relates to properties placed in service over the last year. As the properties are placed in service and become stabilized, the variable rate debt is generally refinanced with long-term fixed-rate debt.

As of September 30, 2017, annual interest costs would increase approximately $13.3 million for every 1.00% increase in floating interest rates. A portion of our interest expense is capitalized due to the level of assets we currently have under development; therefore, the current impact of a change in our interest rate on our Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income (loss) would be less than the total change,

~~Table of Contents~~

but we would incur higher cash payments and the development costs of our assets would be higher. For additional information concerning our debt and management’s estimation process to arrive at a fair value of our debt as required by GAAP, please refer to the Liquidity and Capital Resources section of “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations”, Note 8 – ~~Mortgages, Notes and Loans Payable~~ ~~and Note 13 –~~ ~~Derivative Instruments and Hedging Activities~~ ~~in our Annual Report.~~

~~ITEM 4. CONTROLS AND PROCEDURES~~

~~Disclosure Controls and Procedures~~

We maintain disclosure controls and procedures (as defined in Rule ~~13(a)-15(e)~~13a-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in our reports to the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by SEC rules, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~September 30, 2017,~~March 31, 2024, the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were effective as of ~~September 30, 2017.~~

~~Internal Control over Financial Reporting~~

March 31, 2024.


CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There ~~have been~~were no changes into our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~PART II OTHER INFORMATION~~

~~ITEM~~

HHC 2024 FORM 10-Q | 44


OTHER INFORMATION			Table of Contents


PART II

Item 1. ~~LEGAL PROCEEDINGS~~

InLegal Proceedings

Please refer to Note 9 - Commitments and Contingencies in the ~~ordinary course~~Notes to Condensed Consolidated Financial Statements under Item 1 of our business, we are from time to time involved in legal proceedings related to the ownership and operations of our properties. Neither we nor any of our real estate affiliates are currently involved in any legal or administrative proceedings that we believe is likely to have a materially adverse effect on our business, results of operations or financial condition.

~~ITEM~~this Form 10-Q.

Item 1A. ~~RISK FACTORS~~

Risk Factors

There are no material changes to the risk factors previously disclosed in our 2023 Annual Report.

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~(c)~~

As previously disclosed in our Current Report on Form 8-K dated June 20, 2017, we granted a warrant to David R. Weinreb, Chief Executive Officer of the Company (the “New CEO Warrant”) pursuant to a warrant grant agreement by and between the Company and Mr. Weinreb (the “New CEO Warrant Agreement”), exercisable to acquire 1,965,409 shares of Company common stock, par value $0.01 per share (including any additional shares of Company common stock issuable as a result of the anti-dilution provisions of the New CEO Warrant, the “New CEO Warrant Shares”). The New CEO Warrant was granted to Mr. Weinreb in exchange for a fair market value purchase price of $50.0 million (the “Purchase Price”). The Purchase Price of the New CEO Warrant and the number of the New CEO Warrant Shares was determined by the Company’s Board of Directors based upon the advice of Houlihan Lokey, an independent third party valuation adviser. The exercise price of the New CEO Warrant Shares is $124.64, which was the closing trading price of the Company’s common shares on the New York Stock Exchange on June 15, 2017.

~~Table of Contents~~

Item 6. Exhibits

~~ITEM 3. DEFAULT UPON SENIOR SECURITIES~~

~~None.~~

~~ITEM 4. MINE SAFETY DISCLOSURES~~

~~Not applicable.~~

~~ITEM 5. OTHER INFORMATION~~

~~None.~~

~~ITEM 6. EXHIBITS~~

The following Exhibit Index ~~following the signature page~~ to this Quarterly Report lists the exhibits furnished as required by Item 601 of Regulation S-K and is incorporated by reference.

~~Table of Contents~~

~~EXHIBIT INDEX~~


Exhibit Number		Description
~~10.1~~		Warrant Grant Agreement, dated October 4, 2017, between The Howard Hughes Corporation and Grant Herlitz (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2017)
31.1+
~~10.2~~	Employment Agreement, dated October 2, 2017, between The Howard Hughes Corporation and Grant Herlitz (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2017)

~~10.3~~	Restricted Stock Agreement, dated October 2, 2017, between The Howard Hughes Corporation and Grant Herlitz (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2017)

~~10.4~~	Employment Agreement, dated August 29, 2017, between The Howard Hughes Corporation and David R. Weinreb (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 5, 2017)

~~10.5~~	Restricted Stock Agreement, dated August 29, 2017, between The Howard Hughes Corporation and David R. Weinreb (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 5, 2017)

~~31.1+~~	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2+		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1+ +		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS+~~ 101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH+		Inline XBRL Taxonomy Extension Schema Document

101.CAL+		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB+		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE+		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF+		Inline XBRL Taxonomy Extension Definition Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

+ Filed herewith

++ Furnished herewith

Attached as Exhibit 101 to this report are the following documents formatted in ~~XBRL (Extensible~~iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, (ii) Condensed Consolidated Statements of Comprehensive Income ~~(loss)~~(Loss) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, (iii) the Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, (iv) Condensed Consolidated Statements of Equity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016, and~~2023, (v) the Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016.~~

2023, and (vi) the Notes to Condensed Consolidated Financial Statements.

HHC 2024 FORM 10-Q | 45

Table of Contents

~~SIGNATURE~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	The Howard Hughes Corporation

	By:	/s/ ~~David R. O’Reilly~~ Carlos A. Olea
		~~David R. O’Reilly~~ Carlos A. Olea
		Chief Financial Officer
		~~November 6, 2017~~
May 8, 2024

HHC 2024 FORM 10-Q | 46


Delaware		36-4673192
~~Delaware~~		~~36-4673192~~
(State or other jurisdiction of	~~(I.R.S. employer~~
incorporation or organization)	(I.R.S. employer identification number)


TABLE OF CONTENTS									Page
								~~PAGE~~ ~~NUMBER~~

PART I ~~FINANCIAL INFORMATION~~
Item 1.			Financial Statements
			~~Item 1~~:			Condensed Consolidated Financial Statements (Unaudited)	2

		Condensed Consolidated Balance Sheets ~~as of September 30, 2017 and December 31, 2016~~	2 3

		Condensed Consolidated Statements of Operations ~~for the three and nine months ended September 30, 2017 and 2016~~	3 4

		Condensed Consolidated Statements of Comprehensive Income ~~for the three and nine months ended September 30, 2017 and 2016~~ (Loss)	4 5

		Condensed Consolidated Statements of Equity ~~for the nine months ended September 30, 2017 and 2016~~	5 6

		Condensed Consolidated Statements of Cash Flows ~~for the nine months ended September 30, 2017 and 2016~~	6 7

		Notes to Condensed Consolidated Financial Statements	8 9
			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 1 0 . Income Taxes			22
			Note 1 1 . Accumulated Other Comprehensive Income (Loss)			22
			Note 12. Revenues			23
			Note 13. Leases			24
			Note 14. Segments			26
Item 22.:			Management’s ~~Discussion and~~Narrative Analysis of ~~Financial Condition and~~ Results of Operations			28 35
			Forward-Looking Information						29
			~~Item 3~~Overview:			~~Quantitative and Qualitative Disclosures about Market Risk~~	31 70
			Results of Operations						33
			Item 44.:	Controls and Procedures			44 71
PART II
~~PART II OTHER INFORMATION~~Item 1.			71

	~~Item 1~~:	Legal Proceedings	45 71

	Item 1A1A.:	Risk Factors			45 71

	Item 26.:	~~Unregistered Sales of Equity Securities And Use Of Proceeds~~	Exhibits 71

	~~Item 3~~:	~~Default Upon Senior Securities~~	45 72

	~~Item 4~~:	~~Mine Safety Disclosures~~	72

	~~Item 5~~:	~~Other Information~~	72

	~~Item 6~~:	~~Exhibits~~	72

	~~EXHIBIT INDEX~~		73

	~~SIGNATURE~~		74


thousands except par values and share amounts	March 31, 2024		December 31, 2023
ASSETS
Master Planned Communities assets	$	2,481,538	$	2,445,673
Buildings and equipment	4,207,900		4,177,677
Less: accumulated depreciation	(1,071,110)		(1,032,226)
Land	303,380		303,685
Developments	1,438,924		1,272,445
Net investment in real estate	7,360,632		7,167,254
Investments in unconsolidated ventures	213,433		220,258
Cash and cash equivalents	462,699		631,548
Restricted cash	429,130		421,509
Accounts receivable, net	111,117		115,045
Municipal Utility District receivables, net	584,222		550,884
Deferred expenses, net	145,833		142,561
Operating lease right-of-use assets	45,649		44,897
Other assets, net	280,938		281,656

Total assets	$	9,633,653	$	9,575,612

LIABILITIES
Mortgages, notes, and loans payable, net	$	5,391,243	$	5,302,620

Operating lease obligations	53,065		51,584
Deferred tax liabilities, net	71,092		88,065

Accounts payable and other liabilities	1,105,982		1,074,746
Total liabilities	6,621,382		6,517,015

Commitments and Contingencies (see Note 9)


EQUITY
Common stock: 10 shares authorized, issued, and outstanding as of March 31, 2024 and December 31, 2023	—		—
Additional paid-in capital	3,377,172		3,374,284
Retained earnings (accumulated deficit) attributable to Howard Hughes Holdings Inc.	(434,928)		(383,012)
Accumulated other comprehensive income (loss)	3,897		1,272
Total equity attributable to Howard Hughes Holdings Inc.	2,946,141		2,992,544
Noncontrolling interests	66,130		66,053
Total equity	3,012,271		3,058,597
Total liabilities and equity	$	9,633,653	$	9,575,612


	September 30,		December 31,
(In thousands, except share amounts)	2017		2016
Assets:
Investment in real estate:
Master Planned Community assets	$	1,667,496	$	1,669,561
Buildings and equipment		2,155,071		2,027,363
Less: accumulated depreciation		(303,887)		(245,814)
Land		314,383		320,936
Developments		1,124,079		961,980
Net property and equipment		4,957,142		4,734,026
Investment in Real Estate and Other Affiliates		89,155		76,376
Net investment in real estate		5,046,297		4,810,402
Cash and cash equivalents		601,934		665,510
Accounts receivable, net		9,654		10,038
Municipal Utility District receivables, net		193,100		150,385
Deferred expenses, net		76,692		64,531
Prepaid expenses and other assets, net		796,019		666,516
Total assets	$	6,723,696	$	6,367,382

Liabilities:
Mortgages, notes and loans payable	$	2,993,448	$	2,690,747
Deferred tax liabilities		237,013		200,945
Warrant liabilities		—		332,170
Accounts payable and accrued expenses		462,853		572,010
Total liabilities		3,693,314		3,795,872

Commitments and Contingencies (see Note 15)

Equity:
Preferred stock: $.01 par value; 50,000,000 shares authorized, none issued		—		—
Common stock: $.01 par value; 150,000,000 shares authorized, 43,222,932 shares issued and 43,206,550 outstanding as of September 30, 2017 and 39,802,064 shares issued and 39,790,003 outstanding as of December 31, 2016		433		398
Additional paid-in capital		3,295,586		2,853,269
Accumulated deficit		(258,629)		(277,912)
Accumulated other comprehensive loss		(9,017)		(6,786)
Treasury stock, at cost, 16,382 shares as of September 30, 2017 and 12,061 shares as of December 31, 2016, respectively		(1,763)		(1,231)
Total stockholders' equity		3,026,610		2,567,738
Noncontrolling interests		3,772		3,772
Total equity		3,030,382		2,571,510
Total liabilities and equity	$	6,723,696	$	6,367,382


								Accumulated
				Additional				Other
	Common Stock			Paid-In		Accumulated		Comprehensive		Treasury Stock			Noncontrolling		Total
(In thousands, except shares)	Shares	Amount		Capital		Deficit		(Loss)		Shares	Amount		Interests		Equity
Balance December 31, 2015	39,714,838	$	398	$	2,847,823	$	(480,215)	$	(7,889)	-	$	-	$	3,772	$	2,363,889
Net income	-		-		-		158,708		-	-		-		23		158,731
Preferred dividend payment on behalf of subsidiary	-		-		-		-		-	-		-		(23)		(23)
Interest rate swaps, net of tax $8,120	-		-		-		-		(14,876)	-		-		-		(14,876)
Pension adjustment, net of tax of $543	-		-		-		-		(890)	-		-		-		(890)
Capitalized swap interest, net of tax $88	-		-		-		-		(163)	-		-		-		(163)
Stock plan activity	136,198		-		8,512		-		-	-		-		-		8,512
Treasury stock activity	-		-		-		-		-	(12,061)		(1,295)		-		(1,295)
Balance, September 30, 2016	39,851,036		398		2,856,335		(321,507)		(23,818)	(12,061)		(1,295)		3,772		2,513,885

Balance December 31, 2016	39,802,064		398		2,853,269		(277,912)		(6,786)	(12,061)		(1,231)		3,772		2,571,510
Net income	-		-		-		19,283		-	-		-		12		19,295
Preferred dividend payment on behalf of subsidiary	-		-		-		-		-	-		-		(12)		(12)
Interest rate swaps, net of tax of $1,409	-		-		-		-		(2,070)	-		-		-		(2,070)
Capitalized swap interest, net of tax of $86	-		-		-		-		(161)	-		-		-		(161)
Stock plan activity	368,415		4		16,735		-		-	(4,321)		(532)		-		16,207
Exercise of warrants	3,052,453		31		375,582		-		-	-		-		-		375,613
Issuance of management warrants	-		-		50,000		-		-	-		-		-		50,000
Balance, September 30, 2017	43,222,932	$	433	$	3,295,586	$	(258,629)	$	(9,017)	(16,382)	$	(1,763)	$	3,772	$	3,030,382


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share amounts)	2017		2016		2017		2016
Revenues:
Condominium rights and unit sales	$	113,852	$	115,407	$	342,208	$	362,613
Master Planned Community land sales		54,906		44,128		177,531		147,168
Minimum rents		44,654		44,910		136,053		128,255
Tenant recoveries		11,586		11,657		34,627		33,108
Hospitality revenues		17,776		14,088		57,190		46,126
Builder price participation		5,472		4,483		14,613		15,631
Other land revenues		4,561		4,053		19,606		12,225
Other rental and property revenues		5,929		3,538		17,309		11,335
Total revenues		258,736		242,264		799,137		756,461

Expenses:
Condominium rights and unit cost of sales		86,531		83,218		253,209		237,759
Master Planned Community cost of sales		29,043		21,432		88,288		66,128
Master Planned Community operations		8,180		10,674		24,881		30,454
Other property operating costs		21,354		16,535		60,153		47,513
Rental property real estate taxes		7,678		7,033		21,765		21,110
Rental property maintenance costs		3,380		3,332		10,016		9,217
Hospitality operating costs		13,525		12,662		41,534		37,379
Provision for doubtful accounts		448		1,940		1,728		4,629
Demolition costs		175		256		303		1,218
Development-related marketing costs		5,866		4,716		14,787		15,586
General and administrative		22,362		21,128		63,423		61,505
Depreciation and amortization		35,899		23,322		96,193		71,246
Total expenses		234,441		206,248		676,280		603,744

Operating income before other items		24,295		36,016		122,857		152,717

Other:
Provision for impairment		—		(35,734)		—		(35,734)
Gains on sales of properties		237		70		32,452		140,549
Other (loss) income, net		(160)		432		750		9,858
Total other		77		(35,232)		33,202		114,673

Operating income		24,372		784		156,059		267,390

Interest income		1,764		196		3,171		900
Interest expense		(17,241)		(16,102)		(49,547)		(48,628)
Loss on redemption of senior notes due 2021		—		—		(46,410)		—
Warrant liability loss		—		(7,300)		(43,443)		(21,630)
Gain on acquisition of joint venture partner's interest		—		27,087		5,490		27,087
Equity in earnings from Real Estate and Other Affiliates		7,467		13,493		25,821		35,700
Income before taxes		16,362		18,158		51,141		260,819
Provision for income taxes		5,846		10,162		31,846		102,088
Net income		10,516		7,996		19,295		158,731
Net income attributable to noncontrolling interests		(12)		(23)		(12)		(23)
Net income attributable to common stockholders	$	10,504	$	7,973	$	19,283	$	158,708

Basic income per share:	$	0.25	$	0.20	$	0.47	$	4.02

Diluted income per share:	$	0.24	$	0.19	$	0.45	$	3.72


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2017		2016		2017		2016
Net income	$	10,516	$	7,996	$	19,295	$	158,731
Other comprehensive income (loss):
Interest rate swaps (a)		180		497		(2,070)		(14,876)
Capitalized swap interest expense (b)		(40)		154		(161)		(163)
Pension adjustment (c)		—		(317)		—		(890)
Other comprehensive income (loss)		140		334		(2,231)		(15,929)
Comprehensive income		10,656		8,330		17,064		142,802
Comprehensive income attributable to noncontrolling interests		(12)		(23)		(12)		(23)
Comprehensive income attributable to common stockholders	$	10,644	$	8,307	$	17,052	$	142,779


			Provision for impairment as of September 30,
Impaired Asset	Location	Method of Determining Fair Value	2017		2016
			(In thousands)
Operating Assets:
Park West	Peoria, AZ	Discounted cash flow analysis using capitalization rate of 6.75%	$	—	$	35,734


	September 30, 2017								December 31, 2016
	Fair Value Measurements Using								Fair Value Measurements Using
(In thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	50,041	$	50,041	$	—	$	—	$	18	$	18	$	—	$	—
Interest rate swap derivative assets		3,244		—		3,244		—		—		—		—		—
Liabilities:
Interest rate swap derivative liabilities		7,742		—		7,742		—		(149)		—		(149)		—
Warrants		—		—		—		—		332,170		—		—		332,170


									Share of Earnings/Dividends
	Economic/Legal Ownership				Carrying Value				Three Months Ended				Nine Months Ended
	September 30,		December 31,		September 30,		December 31,		September 30,				September 30,
($ in thousands)	2017		2016		2017		2016		2017		2016		2017		2016
Equity Method Investments
Master Planned Communities:
The Summit (a)	—	%	—	%	$	54,203	$	32,653	$	6,480	$	13,700	$	21,552	$	22,574
Operating Assets:
Las Vegas 51s, LLC (b)	100.00		50.00			—		11,062		—		2		(152)		297
Constellation (a) (c)	50.00		50.00			2,175		2,730		107		—		(215)		—
The Metropolitan Downtown Columbia (d)	50.00		50.00			—		(1,064)		82		(351)		356		(863)
Millennium Six Pines Apartments (e)	100.00		100.00			—		—		—		9		—		44
Stewart Title of Montgomery County, TX	50.00		50.00			3,834		3,611		113		221		322		477
Woodlands Sarofim #1	20.00		20.00			2,688		2,683		15		26		45		121
Strategic Developments:
Circle T Ranch and Power Center (a)	50.00		50.00			5,106		4,956		650		—		650		10,498
HHMK Development	50.00		50.00			10		10		—		—		—		—
KR Holdings	50.00		50.00			744		707		20		3		36		12
m.flats/TEN.M (a)	50.00		50.00			6,849		6,379		—		—		—		—
33 Peck Slip (a) (f)	35.00		35.00			9,139		8,243		—		(117)		(156)		(76)
						84,748		71,970		7,467		13,493		22,438		33,084
Cost method investments						4,407		4,406		—		—		3,383		2,616
Investment in Real Estate and Other Affiliates					$	89,155	$	76,376	$	7,467	$	13,493	$	25,821	$	35,700


					Maximum		Carrying Value
	Initial / Extended	Interest			Facility		September 30,		December 31,
($ in thousands)	Maturity (a)	Rate			Amount		2017		2016
Master Planned Communities
Summerlin South SID Bonds - S124	December 2019	5.95	%				$	104	$	123
Summerlin South SID Bonds - S128	December 2020	7.30	%					390		440
Summerlin South SID Bonds - S132	December 2020	6.00	%					1,082		1,268
The Woodlands Master Credit Facility	April 2020 / April 2021	3.98	%	(b)	$	180,000		150,000		150,000
Bridgeland Credit Facility	November 2020 / November 2022	4.60	%	(b)		65,000		65,000		65,000
Summerlin South SID Bonds - S151	June 2025	6.00	%					3,964		4,159
Summerlin South SID Bonds - S128C	December 2030	6.05	%					4,467		4,600
Summerlin South SID Bonds - S159	June 2035	6.00	%					2,353		2,389
Summerlin West SID Bonds - S812	October 2035	6.00	%					17,019		27,459
Master Planned Communities Total								244,379		255,438

Operating Assets
1701 Lake Robbins	April 2017	5.81	%					—		4,600
Outlet Collection at Riverwalk	October 2017 / October 2018	3.98	%	(b)		54,325		54,325		55,778
1725-35 Hughes Landing Boulevard	June 2018 / June 2019	2.88	%	(b)		143,000		115,999		105,647
The Westin at The Woodlands (c)	August 2018 / August 2019	3.88	%	(b)		57,946		57,946		58,077
110 North Wacker	October 2019	5.21	%	(e)				19,870		22,704
Three Hughes Landing (c)	December 2017 / December 2019	3.58	%	(b)		65,455		43,661		35,053
Lakeland Village Center at Bridgeland	May 2018 / May 2020	3.58	%	(b)		14,000		11,292		9,979
Embassy Suites at Hughes Landing	October 2018 / October 2020	3.73	%	(b)		37,100		31,245		29,461
The Woodlands Resort & Conference Center	December 2018 / December 2020	4.48	%	(b)				67,000		70,000
One Merriweather	February 2020 / February 2021	3.38	%	(b)		49,900		41,271		23,588
Downtown Summerlin	September 2020 / September 2021	3.38	%	(b) (d)		275,885		275,883		302,981
HHC 242 Self-Storage	October 2019 / October 2021	3.83	%	(b)		6,658		6,137		3,708
HHC 2978 Self-Storage Facility	January 2020 / January 2022	3.83	%	(b)		6,368		5,521		1,715
70 Columbia Corporate Center	May 2020 / May 2022	3.23	%	(b)(f)				20,000		20,000
One Mall North	May 2020 / May 2022	3.48	%	(b)(f)				14,463		—
10-60 Columbia Corporate Centers	May 2020 / May 2022	3.20	%	(b)(f)(g)				80,000		80,000
20/25 Waterway Avenue	May 2022	4.79	%					13,708		13,886
Millennium Waterway Apartments	June 2022	3.75	%					55,344		55,584
Ward Village	September 2021 / September 2023	3.69	%	(b)(h)				238,718		238,718
9303 New Trails	December 2023	4.88	%					12,098		12,378
4 Waterway Square	December 2023	4.88	%					35,431		36,249
3831 Technology Forest Drive	March 2026	4.50	%					22,088		22,383
Kewalo Basin Harbor	September 2027	3.98	%	(b)		11,562		—		—
Millennium Six Pines Apartments	August 2028	3.39	%					42,500		42,500
3 Waterway Square	August 2028	3.94	%					50,647		51,590
One Hughes Landing	December 2029	4.30	%					52,000		52,000
Downtown Summerlin SID Bonds - S128	December 2030	6.05	%					2,887		3,350
Two Hughes Landing	December 2030	4.20	%					48,000		48,000
One Lakes Edge	March 2029 / March 2031	4.50	%					69,440		68,874
Hughes Landing Retail	December 2036	3.50	%					35,000		35,000
Columbia Regional Building	February 2037	4.48	%					25,000		22,188
Other								—		235
Capital lease obligations	Various	3.60	%					—		1
Operating Assets Total								1,547,474		1,526,227

Strategic Developments
Waiea and Anaha (i)	November 2017 / November 2019	7.98	%	(b)		410,000		195,269		160,847
Ke Kilohana	December 2019 / December 2020	4.48	%	(b)		142,656		—		—
Two Merriweather	October 2020 / October 2021	3.73	%	(b)		33,156		11,932		—
Ae`o	December 2019 / December 2021	5.23	%	(b)		230,000		1		—
100 Fellowship Drive	May 2022	2.73	%	(b)		51,426		1		—
Strategic Developments Total								207,203		160,847

Other corporate financing arrangements	July 2018	3.00	%					15,224		15,948
Senior Notes	October 2021	6.88	%					—		750,000
Senior Notes	March 2025	5.38	%					1,000,000		—
Unamortized bond issuance costs								(7,089)		(5,779)
Deferred financing costs								(13,743)		(11,934)
Total mortgages, notes, and loans payable							$	2,993,448	$	2,690,747


					Fixed				Fair Value Asset (Liability)
			Notional		Interest		Effective	Maturity	September 30,		December 31,
(In thousands)		Balance Sheet Location	Amount		Rate		Date	Date	2017		2016
Currently-paying contracts:
Interest Rate Swap	(a)	Accounts payable and accrued expenses	$	19,870	2.96	%	5/10/2011	10/31/2019	$	(427)	$	(740)
Interest Rate Swap	(a)	Prepaid expenses and other assets, net		40,000	1.66		5/6/2015	5/1/2020		30		(143)
Interest Rate Swap	(a)	Prepaid expenses and other assets, net		119,359	1.14		10/3/2016	9/12/2021		3,069		3,368
Interest Rate Cap	(b)	Accounts payable and accrued expenses		75,000	5.00		9/1/2017	8/31/2019		—		—
Interest Rate Cap	(c)	Prepaid expenses and other assets, net		230,000	2.50		12/22/2016	12/23/2019		145		768
Forward-starting contracts:
Interest Rate Swap	(a)	Accounts payable and accrued expenses		50,000	2.65		12/31/2017	12/31/2027		(1,452)		(610)
Interest Rate Swap	(a)	Accounts payable and accrued expenses		100,000	2.68		12/31/2017	12/31/2027		(3,165)		(1,479)
Interest Rate Swap	(a)	Accounts payable and accrued expenses		100,000	2.62		12/31/2017	12/31/2027		(2,698)		(1,015)
Total fair value derivative assets									$	3,244	$	4,136
Total fair value derivative liabilities									$	(7,742)	$	(3,987)


	Amount of Loss Recognized				Amount of Loss Recognized
	in AOCI on Derivative				in AOCI on Derivative
	(Effective Portion)				(Effective Portion)
	Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships	2017		2016		2017		2016
Interest rate swaps	$	(7)	$	(203)	$	(272)	$	(1,409)
Forward-Starting Swaps		—		344		(2,316)		(14,566)
	$	(7)	$	141	$	(2,588)	$	(15,975)


	Amount of Loss Reclassified from				Amount of Loss Reclassified from
	AOCI into Operations				AOCI into Operations
	(Effective Portion)				(Effective Portion)
	Three Months Ended September 30,				Nine Months Ended September 30,
Location of Loss Reclassified from AOCI into Operations	2017		2016		2017		2016
Interest expense	$	(68)	$	(356)	$	(399)	$	(1,099)


	Stock Options	Weighted Average Exercise Price
Stock Options outstanding at December 31, 2016	1,176,640	$	78.87
Granted	54,000		119.18
Exercised	(357,247)		58.45
Forfeited	(47,000)		104.82
Expired	(1,000)		57.77
Stock Options outstanding at September 30, 2017	825,393		88.89


	Restricted Stock	Weighted Average Grant Date Fair Value
Restricted stock outstanding at December 31, 2016	289,112	$	88.88
Granted	124,621		87.11
Vested	(23,629)		84.20
Forfeited	(31,370)		85.56
Restricted stock outstanding at September 30, 2017	358,734		88.86


	For the Nine Months Ended September 30,
(In thousands)	2017		2016
Balance as of January 1	$	(6,786)	$	(7,889)
Other comprehensive loss before reclassifications		(2,630)		(17,028)
Loss reclassified from accumulated other comprehensive loss to net income (loss)		399		1,099
Net current-period other comprehensive loss		(2,231)		(15,929)
Balance as of September 30	$	(9,017)	$	(23,818)


		Amounts reclassified from Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) Components	Affected line items in the	For the Three Months Ended
(In thousands)	Statements of Operations	September 30, 2017		September 30, 2016
Losses on cash flow hedges	Interest expense	$	108	$	558
Interest rate swap contracts	Provision for income taxes		(40)		(202)
Total reclassifications of loss (income) for the period	Net of tax	$	68	$	356


thousands	Contract Liabilities
Balance at December 31, 2023	$	579,328
Consideration earned during the period	(16,762)
Consideration received during the period	74,674
Balance at March 31, 2024	$	637,240

Balance at December 31, 2022	$	457,831
Consideration earned during the period	(16,919)
Consideration received during the period	78,366
Balance at March 31, 2023	$	519,278


thousands	Less than 1 year			1-2 years		3 years and thereafter
Total remaining unsatisfied performance obligations		$	1,060,125	$	1,087,244		$	1,316,260


thousands	Operating Leases
Remainder of 2024	$	3,575
2025	5,117
2026	4,093
2027	3,360
2028	3,424
Thereafter	240,646
Total lease payments	260,215
Less: imputed interest	(207,150)
Present value of lease liabilities	$	53,065


Supplemental Condensed Consolidated Statements of Cash Flows Information	Three Months Ended March 31,
thousands	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	1,482	$	1,097


Other Information	March 31, 2024		March 31, 2023
Weighted-average remaining lease term (years)
Operating leases	42.8		43.9
Weighted-average discount rate
Operating leases	7.7	%	7.8	%


thousands	Total Minimum Rent
Remainder of 2024	$	191,134
2025	247,340
2026	233,614
2027	222,423
2028	200,565
Thereafter	848,934
Total	$	1,944,010


FINANCIAL STATEMENTS FOOTNOTES			·				~~Master Planned Communities (“MPCs”) – includes the development and sale~~ Table of ~~land, in large‑scale, long‑term community development projects in and around Las Vegas, Nevada; Houston, Texas; and Columbia, Maryland.~~ Contents


~~Master Planned~~			~~Strategic~~
~~Communities~~	~~Operating Assets~~		~~Developments~~

	~~Retail~~	~~Office~~	~~Under Construction~~
~~• Bridgeland~~	~~▪ Columbia Regional Building~~	~~▪ 10-70 Columbia Corporate Center~~	~~▪ Ae`o~~
~~• Maryland~~	~~▪ Cottonwood Square~~	~~▪ Columbia Office Properties~~	~~▪ Anaha~~
~~• Summerlin~~	~~▪ Creekside Village Green~~	~~▪ One Hughes Landing~~	~~▪ Aristocrat~~
~~• The Woodlands~~	~~▪ Downtown Summerlin~~	~~▪ Two Hughes Landing~~	~~▪ Creekside Park Apartments~~
~~• The Woodlands Hills~~	~~▪ Hughes Landing Retail~~	~~▪ Three Hughes Landing (b)~~	~~▪ 100 Fellowship Drive~~
	~~▪ 1701 Lake Robbins~~	~~▪ 1725-35 Hughes Landing Boulevard~~	~~▪ Ke Kilohana~~
~~Other~~	~~▪ Lakeland Village Center at Bridgeland (b)~~	~~▪ 2201 Lake Woodlands Drive~~	~~▪ Two Merriweather~~
~~• The Summit (a)~~	~~▪ Outlet Collection at Riverwalk~~	~~▪ One Mall North~~	~~▪ Two Summerlin~~
	~~▪ South Street Seaport - Historic District / Uplands~~	~~▪ One Merriweather (d)~~	~~▪ m.flats/TEN.M (a)~~
	~~▪ Ward Village Retail~~	~~▪ 110 North Wacker~~	~~▪ 33 Peck Slip (a) (f)~~
	~~▪ 20/25 Waterway Avenue~~	~~▪ 9303 New Trails~~	~~▪ South Street Seaport - Pier 17 (f)~~
	~~▪ Waterway Garage Retail~~	~~▪ ONE Summerlin~~	~~▪ Waiea~~
		~~▪ 3831 Technology Forest Drive~~
	~~Multi-family~~	~~▪ 3 Waterway Square~~	~~Other~~
	~~▪ Constellation (a) (b)~~	~~▪ 4 Waterway Square~~	~~▪ AllenTowne~~
	~~▪ Millennium Waterway Apartments~~	~~▪ 1400 Woodloch Forest~~	~~▪ American City Building~~
	~~▪ Millennium Six Pines Apartments (c)~~		~~▪ Bridges at Mint Hill~~
	~~▪ One Lakes Edge~~	~~Other~~	~~▪ Century Plaza Mall~~
	~~▪ 85 South Street~~	~~▪ HHC 242 Self-Storage (d)~~	~~▪ Circle T Ranch and Power Center (a)~~
	~~▪ The Metropolitan Downtown~~	~~▪ HHC 2978 Self-Storage (d)~~	~~▪ Cottonwood Mall~~
	~~Columbia (a)~~	~~▪ Las Vegas 51s (e)~~	~~▪ Downtown Summerlin Apartments~~
		~~▪ Kewalo Basin Harbor~~	~~▪ The Elk Grove Collection (g)~~
	~~Hospitality~~	~~▪ Stewart Title of Montgomery~~	~~▪ 80% Interest in Fashion~~
	~~▪ Embassy Suites at Hughes Landing~~	~~County, TX (a)~~	~~Show Air Rights~~
	~~▪ The Westin at The Woodlands (b)~~	~~▪ Summerlin Hospital Medical~~	~~▪ Kendall Town Center~~
	~~▪ The Woodlands Resort &~~	~~Center (a)~~	~~▪ Lake Woodlands Crossing Retail Center~~
	~~Conference Center~~	~~▪ The Woodlands Parking Garages~~	~~▪ Landmark Mall (f)~~
		~~▪ 2000 Woodlands Parkway~~	~~▪ Maui Ranch Land~~
		~~▪ Woodlands Sarofim #1 (a)~~	~~▪ Merriweather Apartments~~
			~~▪ South Street Seaport - Tin Building~~
			~~▪ Three Merriweather~~
			~~▪ West Windsor~~


thousands	Operating Assets Segment		MPC Segment		Seaport Segment		Strategic Developments Segment		Total
Three Months Ended March 31, 2024
Total revenues	$	110,152	$	48,875	$	11,502	$	593	$	171,122
Total operating expenses	(51,395)		(25,049)		(21,485)		(8,654)		(106,583)
Segment operating income (loss)	58,757		23,826		(9,983)		(8,061)		64,539
Depreciation and amortization	(44,156)		(110)		(5,757)		(1,419)		(51,442)
Interest income (expense), net	(33,476)		15,246		(2,012)		4,024		(16,218)
Other income (loss), net	408		—		—		3		411
Equity in earnings (losses) from unconsolidated ventures	5,817		(14,711)		(10,280)		39		(19,135)
Gain (loss) on sale or disposal of real estate and other assets, net	4,794		—		—		—		4,794



Segment EBT	$	(7,856)	$	24,251	$	(28,032)	$	(5,414)	$	(17,051)
Corporate income, expenses, and other items									(34,854)
Net income (loss)									(51,905)
Net (income) loss attributable to noncontrolling interests									(10)
Net income (loss) attributable to HHH									$	(51,915)

Three Months Ended March 31, 2023
Total revenues	$	100,925	$	77,013	$	11,897	$	6,440	$	196,275
Total operating expenses	(47,599)		(34,351)		(18,916)		(11,059)		(111,925)
Segment operating income (loss)	53,326		42,662		(7,019)		(4,619)		84,350
Depreciation and amortization	(39,632)		(107)		(10,527)		(943)		(51,209)
Interest income (expense), net	(28,911)		15,812		1,186		2,063		(9,850)
Other income (loss), net	2,282		(103)		1		94		2,274
Equity in earnings (losses) from unconsolidated ventures	1,905		4,108		(10,820)		5		(4,802)
Gain (loss) on sale or disposal of real estate and other assets, net	4,730		—		—		—		4,730



Segment EBT	$	(6,300)	$	62,372	$	(27,179)	$	(3,400)	$	25,493
Corporate income, expenses, and other items									(48,120)
Net income (loss)									(22,627)
Net (income) loss attributable to noncontrolling interests									(118)
Net income (loss) attributable to HHH									$	(22,745)


Reconciliation of EBT to income before taxes	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2017		2016		2017		2016
MPC segment EBT	$	40,465	$	39,537	$	137,747	$	116,776
Operating Assets segment EBT		(13,162)		(35,943)		(14,308)		(28,175)
Strategic Developments segment EBT		26,249		30,904		117,056		265,920
Total consolidated segment EBT		53,552		34,498		240,495		354,521
Corporate and other items:
General and administrative		(22,362)		(21,128)		(63,423)		(61,505)
Corporate interest expense, net		(12,875)		(13,263)		(36,595)		(39,358)
Warrant liability loss		—		(7,300)		(43,443)		(21,630)
Gain on acquisition of joint venture partner's interest		—		27,087		5,490		27,087
Loss on redemption of senior notes due 2021		—		—		(46,410)		—
Corporate other (expense) income, net		(33)		123		878		6,190
Corporate depreciation and amortization		(1,920)		(1,859)		(5,851)		(4,486)
Total Corporate and other items		(37,190)		(16,340)		(189,354)		(93,702)
Income before taxes	$	16,362	$	18,158	$	51,141	$	260,819


Reconciliation of Segment Basis Revenues to Revenues	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2017		2016		2017		2016
Master Planned Communities	$	64,929	$	52,762	$	211,711	$	175,403
Operating Assets		79,533		73,947		243,498		217,852
Strategic Developments		114,274		115,555		343,928		363,206
Total revenues	$	258,736	$	242,264	$	799,137	$	756,461


Index			Page
Forward-looking Information			29
Overview			31
Results of Operations			33
Operating Assets			33
Master Planned Communities			35
Seaport			38
Strategic Developments			41
Corporate Income, Expenses, and Other Items			43


MANAGEMENT’S NARRATIVE ANALYSIS OVERVIEW			· Table of Contents

	~~cash expenditures, or future requirements for capital expenditures or contractual commitments;~~
OVERVIEW

	·
~~corporate general and administrative expenses;~~ Description of Business


	Bridgeland				Maryland Communities						Summerlin				The Woodlands				The Woodlands Hills				Total MPC
($ in thousands)	2017		2016		2017			2016			2017		2016		2017		2016		2017		2016		2017		2016
Land sales (a)	$	8,692	$	7,209	$	—		$	—		$	38,721	$	26,337	$	7,493	$	10,582	$	—	$	—	$	54,906	$	44,128
Builder price participation (b)		49		160		—			—			5,298		4,221		125		102		—		—		5,472		4,483
Minimum rents		—		—		—			—			—		95		—		—		—		—		—		95
Other land revenues		162		97		413			413			2,231		1,973		1,738		1,554		7		6		4,551		4,043
Other rental and property revenue		—		—		—			—			—		17		—		—		—		(4)		—		13
Total revenues		8,903		7,466		413			413			46,250		32,643		9,356		12,238		7		2		64,929		52,762

Cost of sales - land		2,834		2,255		—			—			22,487		13,558		3,722		5,619		—		—		29,043		21,432
Land sales operations		1,785		1,784		703			643			570		2,742		4,859		5,395		263		110		8,180		10,674
Provision for doubtful accounts		—		—		—			—			—		—		—		—		—		—		—		—
Depreciation and amortization		19		23		1			3			26		16		30		30		—		—		76		72
Total expenses		4,638		4,062		704			646			23,083		16,316		8,611		11,044		263		110		37,299		32,178

Operating income		4,265		3,404		(291)			(233)			23,167		16,327		745		1,194		(256)		(108)		27,630		20,584
Interest (income) expense, net (c)		(2,698)		(2,367)		—			2			(4,616)		(3,981)		1,092		1,241		(133)		(148)		(6,355)		(5,253)
Equity in (earnings) loss in Real Estate and Other Affiliates (d)		—		—		—			—			(6,480)		(13,700)		—		—		—		—		(6,480)		(13,700)
MPC segment EBT*	$	6,963	$	5,771	$	(291)	(e)	$	(235)	(e)	$	34,263	$	34,008	$	(347)	$	(47)	$	(123)	$	40	$	40,465	$	39,537

(GAAP Basis) Residential Gross Margin %		66.1%		67.5%		NM			NM			41.9%		48.5%		50.3%		46.9%		NM		NM		46.1%		50.2%
(GAAP Basis) Commercial Gross Margin %		71.0%		71.0%		NM			NM			43.2%		55.5%		NM		NM		NM		NM		68.8%		70.1%


Summary of Residential MPC Land Sales Closed for the Three Months Ended September 30,

	Land Sales				Acres Sold			Number of Lots/Units			Price per acre				Price per lot
($ in thousands)	2017		2016		2017	2016	2017		2016		2017		2016		2017		2016
Bridgeland
Single family - detached	$	6,458	$	4,687	17.5	12.2		80		69	$	369	$	384	$	81	$	68
$ Change		1,771			5.3			11				(15)				13
% Change		37.8%			43.4%			15.9%				(3.9%)				19.1%

Maryland Communities
No residential land sales		—		—	—	—		—		—		—		—		—		—

Summerlin
Residential
Superpad sites		29,945		15,000	56.8	30.9		321		75		527		485		93		200
Custom lots		1,570		1,525	0.9	0.8		2		2		1,744		1,906		785		763
Total		31,515		16,525	57.7	31.7		323		77		546		521		98		215
$ Change		14,990			26.0			246				25				(117)
% Change		90.7%			82.0%			319.5%				4.8%				(54.4%)

The Woodlands
Residential
Single family - detached		5,124		10,581	10.7	19.9		40		79		479		532		128		134
Single family - attached		2,370		—	0.4	—		8		—		5,925		—		296		—
Total		7,494		10,581	11.1	19.9		48		79		675		532		156		134
$ Change		(3,087)			(8.8)			(31)				143				22
% Change		(29.2%)			(44.2%)			(39.2%)				26.9%				16.4%

Total residential land sales closed in period (a)	$	45,467	$	31,793	86.3	63.8		451		225