Howard Hughes Holdings Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are primarily with fiscal 2022. This is an annual report, not a standalone fourth-quarter report. HHH became the public holding company successor to The Howard Hughes Corporation on August 11, 2023. Its businesses span master planned communities (MPCs), income-producing properties, strategic developments, and Seaport-related assets.
Financial results and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $1.024 billion | $1.608 billion |
| Operating income (loss) | $(528.2) million | $369.1 million |
| Net income (loss) attributable to common stockholders | $(551.8) million | $184.5 million |
| Basic and diluted EPS | $(11.13) | $3.65 |
| Cash from (used in) operating activities | $(258.5) million | $325.3 million |
| Cash from (used in) investing activities | $(336.1) million | $(220.7) million |
| Cash from (used in) financing activities | $548.7 million | $(222.3) million |
The 2023 net loss includes a $709.5 million pre-tax Seaport impairment ($672.5 million recorded against real estate and $37.0 million against unconsolidated venture investments), with a reported after-tax impact of $548.5 million. Revenue and earnings also reflected the timing of condominium closings: condominium revenue was $47.7 million versus $677.1 million in 2022, when Kō‘ula deliveries occurred. The 2023 tax benefit was $163.7 million, versus tax expense of $60.5 million in 2022.
- Operating Assets: NOI, a non-GAAP measure, increased 3.5% to $233.6 million from $225.8 million. Segment EBT was a loss of $36.0 million, versus income of $41.2 million, reflecting higher interest expense and lower equity earnings, among other items.
- MPCs: Segment EBT increased 20.6% to $341.4 million from $283.0 million, driven particularly by Summerlin land sales and Summit joint-venture earnings. Closed residential land sales were $354.3 million versus $247.9 million; commercial land sales fell to $36.0 million from $75.4 million.
- Seaport: Segment EBT was a loss of $811.5 million, including the impairment, compared with a loss of $84.4 million. Seaport NOI was a loss of $15.5 million versus a loss of $9.8 million; the Tin Building by Jean-Georges venture reported a $38.8 million NOI loss.
- Strategic Developments: Segment EBT was a loss of $17.3 million versus income of $190.2 million, principally reflecting fewer condominium closings. 2023 included closings on 31 ‘A‘ali‘i units and 16 Kō‘ula units, compared with 607 total unit closings across three projects in 2022.
At year-end, cash and cash equivalents were $631.5 million, with a further $421.5 million of restricted cash. Total assets were $9.58 billion and total equity was $3.06 billion. Debt was $5.30 billion net of deferred financing costs ($5.35 billion of principal); HHH also reported $134.9 million as its share of unconsolidated venture debt. Approximately $2.1 billion of consolidated debt was recourse. The company reported $1.0 billion of undrawn lender commitments available for property development, subject to restrictions. Operating cash flow was negative largely due to condominium development spending and the timing of project closings. HHH reported five property-level debt instruments out of covenant compliance at year-end; excess property cash flow was restricted, but management said this did not materially affect liquidity or operations.
The filing does not present a single consolidated operating-margin measure as a key performance metric. It reports segment EBT and, for property operations, non-GAAP NOI.
Material changes and developments
- Total revenue declined 36% year over year, driven mainly by the timing of condominium deliveries; the Seaport impairment drove the swing to a net loss.
- Operating Assets NOI reached a record, according to management, supported by multifamily lease-up, rent growth, and office leasing. Stabilized office assets were 88% leased at year-end.
- New-home sales in HHH’s communities rose 45% to 2,289. Ward Village’s six completed towers were sold out; the three towers under construction were 97.9% contracted at year-end.
- HHH announced plans to spin off Seaport Entertainment as an independent public company in 2024. The proposed division is expected to include Seaport assets and specified Las Vegas entertainment interests; completion and timing are not assured.
- Outstanding debt rose from $4.75 billion at the end of 2022 to $5.30 billion at the end of 2023. Cash from operating activities moved from positive $325.3 million to negative $258.5 million.
Outlook, risks, and unusual items
For 2024, management projected MPC EBT to decline 10%–15% year over year, citing the comparison with 2023 commercial land sales and builder price participation, partly offset by expected homebuilder demand and initial Floreo sales. Operating Assets NOI was projected to increase 1%–4%; office NOI was expected to be relatively flat. Condominium revenue was projected at $675–$725 million, with gross margins of 28%–30%, principally from Victoria Place closings; some revenue may fall in early 2025. These are forward-looking estimates, not guarantees.
- Development and market exposure: Results depend on homebuilder demand, home and condominium affordability, tenant occupancy and leasing, construction costs, access to financing, interest rates, and local economic conditions. Water availability, severe weather, climate-related requirements, and lengthy permitting processes may affect projects and costs.
- Interest rates and leverage: HHH had $1.8 billion of variable-rate debt; management estimated annual interest costs would rise about $10.8 million for each 1 percentage-point increase in floating rates. Refinancing access, debt covenants, and collateral restrictions are material considerations.
- Seaport: Management cited slower-than-expected stabilization and profitability, operating-cost pressure, weaker office demand, and lower valuation assumptions in recording the impairment. The segment’s results are volatile, and the company does not provide Seaport NOI yield or stabilization-date guidance.
- Waiea remediation: Estimated construction-defect remediation costs total $155.4 million, including $16.1 million of additional anticipated costs recognized in 2023. HHH has agreed to fund repairs and intends to seek recovery from contractors and insurers, but recovery is not assured.
- Legal and transaction matters: Litigation continues over approvals for the 250 Water Street development; HHH reported that the pending matter seeks to prevent the project, not monetary damages, and that no reserve was recorded. The Seaport spin-off is subject to conditions and tax qualification; failure to qualify for intended tax treatment could have adverse tax consequences.
- Other exposures: Risks include tenant or condominium purchaser defaults, joint-venture partner performance, cyber incidents, uninsured losses, and concentration in several regional markets. Pershing Square beneficially owned approximately 37.7% of outstanding shares at year-end and may influence company decisions.
HHH said it met or exceeded its 2023 guidance expectations in its core businesses. No dividends were declared or paid in 2023 or 2022. The financial statements received an unqualified audit opinion, and management and the auditor concluded internal control over financial reporting was effective as of year-end.
Important facts for investors to verify
- Whether Seaport Entertainment’s proposed 2024 spin-off proceeds, what assets and liabilities transfer, and whether the distribution qualifies for intended tax treatment.
- Seaport’s post-impairment operating performance, occupancy, cost trajectory, and the assumptions supporting its recorded fair value.
- Actual 2024 MPC EBT, Operating Assets NOI, condominium closings, and gross margins versus management’s stated outlook.
- Debt maturities, variable-rate exposure, the five covenant exceptions and related cash restrictions, and availability of undrawn development commitments.
- Final Waiea repair costs and recoveries, and the outcome of the 250 Water Street litigation and other material contingencies.