Howard Hughes Corp. (HHC) Misses Q1 EPS by 63c, Revenues Beat

Howard Hughes Corp. (NYSE: HHC) reported Q1 EPS of ($1.20), $0.63 worse than the analyst estimate of ($0.57). Revenue for the quarter came in at $190.58 million versus the consensus estimate of $107.75 million.

First Quarter 2021 Highlights

Total Company

• Net income attributable to common stockholders increased to a loss of $66.6 million, or $(1.20) per diluted share, for the three months ended March 31, 2021, compared to a loss of $125.1 million, or $(2.88) per diluted share, for the three months ended March 31, 2020.
• We continue to maintain a strong liquidity position with $1.0 billion of cash and cash equivalents and available capacity of $185.0 million on the revolver portion of our credit facilities as of March 31, 2021.
• In February 2021, we issued $1.3 billion in Senior Notes due 2029 and 2031 and used the proceeds to repurchase our $1 billion Senior Notes due 2025, resulting in a $35.1 million loss on extinguishment of debt, and to repay all of the approximately $280 million outstanding under our loans for 1201 Lake Robbins and The Woodlands Warehouse maturing June 2021, resulting in a $10.0 million loss on the settlement of the rate-lock agreement associated with these loans.
• In March 2021, we closed on a $368.2 million construction loan for the development of Victoria Place in Ward Village.

"The results of the first quarter highlight the strength of Howard Hughes' portfolio of irreplaceable communities. Our development of mixed-use, walkable urban centers integrated into natural open settings continues to capture the attention of homebuyers and companies seeking an exceptional amenity-rich quality of life—features that are today more important than ever in a post-COVID world. The majority of our MPCs are situated in tax-advantaged states, which is helping to drive the continued growth we are seeing broadly across all our markets. With the start of the year, we have seen an acceleration in the pace of new home sales, condominium sales and increasing retail net operating income (NOI)(1) as positive momentum has continued throughout our communities," said David R. O'Reilly, Chief Executive Officer. "Furthermore, we enhanced the strength of our balance sheet through the issuance of $1.3 billion senior notes that allowed the Company to reduce its interest expense and extend out its maturities. In addition, we maintained over $1 billion of liquidity, which leaves us well-positioned to capitalize on the additional opportunities that lie ahead.

"Our MPC segment saw new home sales—a leading indicator of our future land sales—jump to 929 homes, a 35% increase over the same period last year and a 34% increase over the fourth quarter of 2020. The continuing trend of out-of-state migration and improving local economies in Houston and Las Vegas have helped propel new home sales over the last several quarters. We do not expect to see these trends abate anytime soon. MPC earnings before taxes (EBT)(1) of $63 million was up 44% compared to the first quarter of 2020, driven by increased earnings from our Summit joint venture in Summerlin®.

"The NOI generated from our Operating Assets increased 10% sequentially with meaningful improvements from assets that were most impacted by COVID-19. Retail, in particular, experienced the most notable improvement with NOI increasing 20% sequentially during the quarter—a positive sign as collections of 78% continue to make their way back to pre-pandemic levels. In addition, the Las Vegas Ballpark—which was completely shut down in 2020 due to the pandemic—hosted its first minor league baseball game on May 6 and we are hopeful for a full season ahead.

"Condominium sales at Ward Village® have been extremely strong despite the pandemic and related travel restrictions. During the first quarter, we contracted to sell 46 homes, a 64% sequential increase from the fourth quarter of 2020. This fast-paced tempo is a testament to the quality of Ward Village, which has received critical acclaim and gained global attention as a thriving walkable urban community in the heart of Honolulu. In February we began construction on our latest tower, Victoria Place—Ward Village's fastest-selling tower to date—which is already 85% presold.

"At the end of March, we wrapped up our winter season of The Greens—our latest concept comprised of socially distanced winter cabins on The Rooftop at Pier 17® at the Seaport. Given the tremendous response to this attraction over the last year, we look forward to bringing it back this summer to complement the rooftop's summer concert series. During the quarter, we rebranded Bar Wayō, which reopened as Ssäm Bar, and prepared our latest concepts for their upcoming debuts at Pier 17 and the Fulton Market Building. With New York recently announcing a significant easing of COVID-19 restrictions, we anticipate these openings will generate immense interest from both locals and tourists and meet the high levels of pent-up demand in New York City.

"On the development front at the Seaport, we continue to make great progress at the Tin Building with the integration of omnichannel e-commerce capabilities to ensure a best-in-class digital customer experience, and with construction that is expected to be complete in the fourth quarter of 2021. We also received approval from the New York City Landmarks Preservation Commission on our proposed design for a building at the site of the surface parking lot at 250 Water Street—a favorable ruling that allows us to proceed with the formal New York City Uniform Land Use Review Procedure to authorize the necessary transfer of development rights to the parking lot site. The plan as proposed will provide long-term viability to the South Street Seaport Museum and deliver much-needed affordable housing and economic stimulus to the area. We will continue working with the City to advance this process over the coming calendar year with the goal of bringing these benefits to this one-of-a-kind neighborhood.

"In February, we issued $1.3 billion senior notes in a two-tranche offering and used the proceeds to redeem $1 billion of outstanding Senior Notes due 2025 in addition to repaying the $280 million bridge loan due June 2021 for 1201 Lake Robbins and The Woodlands Warehouse. This offering further strengthened our balance sheet, which included unlocking $300 million of unencumbered assets."

For earnings history and earnings-related data on Howard Hughes Corp. (HHC) click here.

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