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The Howard Hughes Corp (NYSE:HHC)
Q1 2020 Earnings Call
May 12, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the First Quarter 2020 Earnings Call. [Operator Instructions] Please note this event is being recorded.

I'd now like to turn the conference over to David Striph. Please go ahead.

David Striph -- Executive Vice President, Investor Relations

Good morning and welcome to the Howard Hughes Corporation's first quarter 2020 earnings call. With me today are Paul Layne, Chief Executive Officer; David O'Reilly, Chief Financial Officer; and Peter Riley, General Counsel.

Before we begin, I would like to direct you to our website www.howardhughes.com where you can download both our first quarter earnings press release and our supplemental package. The earnings release and supplemental package include reconciliations of non-GAAP financial measures that will be discussed today in relation to their most directly comparable GAAP financial measures. Certain statements made today that are not in the present tense or that discuss the company's expectations are forward-looking statements within the meaning of the federal securities laws.

Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that these expectations will be achieved. Please see the forward-looking statement disclaimer in our first quarter earnings press release and the risk factors in our SEC filings for factors that could cause material differences between forward-looking statements and actual results. We are not under any duty to update forward-looking statements unless required by law.

I will now turn the call over to our CEO, Paul Layne.

Paul H. Layne -- Chief Executive Officer and Director

Thank you, Dave, and thank you all for joining us today. Welcome to our first quarter 2020 earnings call. These are unprecedented times and it is safe to say that we've all been affected in some significant way by the COVID-19 pandemic, and none of us have ever experienced anything like this before. I want to begin by extending my sincere sympathy to all who've lost a family member or loved ones during this pandemic, and express all of our gratitude to the front-line workers who are risking their own health and safety on a daily basis. As I have an extended family member who is an ER physician, I know the stress on the family but also the extreme pride of service.

At The Howard Hughes Corporation, our team members across the country have risen to meet the challenge of this crisis both in their personal lives and on behalf of the company. I'm grateful to each of them for their dedication. The health, safety and well-being of our employees, tenants, and customers has always been our top priority. As the pandemic unfolded, we promptly instituted a work-from-home policy for our employees and put our executive crisis team into immediate action. This team connects daily to stay abreast of the rapidly evolving issues to ensure a strategic and consistent response throughout all the regions of our company.

We also assembled our HHC task force consisting of experts in various disciplines to prepare and implement best practices and guidelines in alignment with the CDC and protocols set by state and local governments, and to help ensure that we have a safe and healthy environment for our employees, tenants and customers to return to when they reoccupy our properties at the appropriate time. We are implementing actions such as requiring office tenants to wear face masks in the common areas of our office buildings and requiring all of our employees to wear face mask upon returning to the office. We are also working on creating what is known as the six-foot office, which helps people with physical distancing, among other safety measures.

During the crisis, our team members across the portfolio have been rolling up their sleeves to support local first responders, front-line workers and those in need. As an example, in the Woodlands, we repurposed our valley line at the Westin Hotel and used it as a drive-thru pick up line for food prepared by our hospitality team for first responders and for those temporarily laid-off employees.

In Summerlin, New York and Colombia, employees have all delivered food to first responders and medical workers. In Hawaii, HHC employees went to work running a farmer's market booth for a local resident to support her during the pandemic. In New York, our HHC team members stepped in to help operate a Seaport store for the owners who are in the at-risk category. We have partnered with local community philanthropic organizations in the Woodlands and at the Seaport to help our fellow HHC hospitality team members across the country who were facing a financial strain due to the COVID-19 pandemic, which has had a devastating impact on the hospitality industry, and this caused countless layoffs nationwide.

I'm proud of how our company has responded to the challenges of this crisis. Although we have physically separated, we've remained united in our commitment and collaborative in our efforts to continue to serve our communities in any way we can. Anyone who would like to know more, I encourage you to take a look at the many inspiring images across our social media channels.

Now, let's take a look at how our businesses performed, and some of the actions we have taken. When we look at our first quarter numbers, they will obviously show the immediate effect that the crisis has had on our results. But they also tell a larger story of a successful company that acted quickly to proactively protect its employees, communities and businesses while positioning itself for an expedited recovery and a quick return to its business of development and growth.

The results from the four quarter of 2019 were among the strongest in our company's history, and our momentum continued through much of the first quarter of 2020. We were well on our way to eclipsing our Q4 results when the coronavirus pandemic shutdown the country. Operating asset NOI was up 35% sequentially when compared to the fourth quarter of 2019. This performance is due to The Woodlands Towers at The Waterway acquisition and the continued stabilization of our assets. Including this recent acquisition, the sequential increase was 10.4%.

In our MPC segment, we saw a strong 5.7% growth in our price per residential acre sold during the quarter across our portfolio. Net new home sales increased 24% during the first quarter of 2020 compared to the first quarter of 2019, led by a 41% increase at Bridgeland and a 27% increase at Summerlin, a great leading indicator for future land sales.

In our Strategic Developments segment, we successfully launched public pre-sales of our newest project at Ward Village, Victoria Place, where we sold 225 homes during the quarter, bringing the project to 64.5% pre-sold as of March 31st. We sold five additional homes in April, although some of the April sales are still in the rescission period. We did however have to take a charge of $98 million at Waiea for our general contractors' construction defects. We do expect to recover this amount, however, but it may take some time. All-in-all, our company's performance in quarter one indicates that despite the challenges facing our country, our core business is solid and well positioned to move forward on our path to success.

Much of our momentum can be attributed to the implementation of our Transformation Plan, which we announced back in October. Plan, as you recall, is built upon three strategic pillars. First, we set and have already significantly executed on our goal to reduce our overhead expenses by $45 million to $50 million. We will start to see these reductions materialize in the coming quarters, especially following our corporate move to the Woodlands, which is planned for later this year and will result in our company's 40% reduction of our office space.

Second, we committed to selling approximately $2 billion gross of non-core assets, generating approximately $600 million of net proceeds. In the fourth quarter of last year, we announced that we had closed on the sales of three non-core assets for a total of $95.5 million and recorded a net gain associated with the sales of $27.3 million. This quarter, continuing our dispositions, we closed on the sale of 100 Fellowship Drive, the build-to-suit cancer care facility, was sold for $115 million, which resulted in net cash proceeds of $64.2 million and a total profit of $51.7 million.

We also paid-off the $50 million loan associated with this project. Note that the cash received on the sale was being held in escrow at quarter end as it was part of a reverse 1031 exchange and therefore was not in our cash balances as of March 31st. It has since been released to HHC and now sits on our balance sheet. Obviously, the timing of the dispositions of the remaining non-core assets has been slowed by the pandemic, especially with regard to our hospitality properties and the Outlet Collection at Riverwalk in New Orleans, given the closure of non-essential retail there, but we continue to press on with this initiative.

Third, we moved to a decentralized operating model to allow us to accelerate growth in our core MPC business, which will drive value creation in our decades-long development pipeline. The increased autonomy of our regions and impairment of our Regional Presidents allow our leadership across the country to react more nimbly and efficiently, a model that was instituted pre-COVID and has been especially beneficial as we navigate forward through this constantly changing and rapidly unfolding time. Bi-weekly calls with our five Regional Presidents, as well as the ongoing support provided by our streamlined corporate team ensures that our company remains unified and guided by a clear, strong and strategic vision. Overall, the Transformation Plan has been quickly implemented and has already served us well in strengthening our company's defensive financial profile and helping insulate ourselves from market variances.

Now turning to our recent acquisition of The Woodlands Towers at Waterway. First-off, we are thrilled to be able to announce that we executed a new lease for 134,000 square feet at 9950 Woodloch Forest in The Woodlands. With this signing, the building is now 35% leased. As you can imagine, given the recent volatility in oil prices, we are keeping a close eye on all of our energy-related tenants in Houston.

Obviously, Occidental Petroleum, which is our largest tenant, representing approximately $27 million of annualized NOI, is one of those tenants. Since the pandemic and oil fluctuations, Occi has taken meaningful steps to increase their credit profile that we view as positive. In short, Occi has reduced operating and corporate costs by $1.2 billion, reduced their 2020 capital budget by over $2.4 billion, paid their April 2020 Berkshire Hathaway preferred dividend in common stock. And today, they have a $5 billion credit facility available, in addition to $1 billion in cash and no remaining debt maturities in 2020. However, on the heels of a great quarter, we experienced the confluence of the COVID pandemic and a global oil price war, which has created a situation that no one could have predicted. Concerns regarding the unfolding crisis were discussed at length as early as mid-February among our Board of Directors. The strategy, as always, was to be prepared for the worst and positioned for the best.

Early on, we saw that the storm seem to be uniquely positioned over the regions where we operate and would affect many of the sectors that have been meaningful drivers of our financial results. For example, in retail, which accounted for approximately 28% of our Q4 2019 annualized NOI, we only collected 44% of our billings in April. And although the data is not in yet, we appear to be on a similar pace for this month.

In addition, our Hospitality business was completely closed, although we are currently looking at a slow reopening. In light of these challenges, we immediately reviewed our spending across the Board to eliminate or reduce any expenditures that were not absolutely necessary. And as David will explain, we went to work on extending any short-term debt maturities. The Board also determined that our company would undergo an equity raise to ensure our ability to prevail and solidify our position moving forward. The equity raise provided meaningful benefits across the company. Of course, the most critical benefit of raising $600 million or $594 million net in equity is that we now have the capital to weather any storm that this crisis presents.

In addition, equity raise gives us the ability to execute on great value-creating projects such as Victoria Place, the fastest-selling tower in the history of Ward Village. This is a project which we can now advance even in this potentially more challenging lending environment and even if it requires more equity than we've traditionally invested. Note that we have many months before we have completed our engineering and architectural design, including adding post-COVID modifications to the building. In fact, given our liquidity from the equity raise, we are continuing to judiciously invest in key areas of our business. Specifically, we are spending limited pre-development dollars into three multi-family developments in our MPCs. So when demand presents itself, development can commence immediately.

Personally, I believe that our recent success in Ward Village can be partially attributed to our strong balance sheet as our buyers know that their counterparty is a well-capitalized public company has the financial wherewithal to deliver on its commitment. David will detail a bit later the incredible volume of financings we executed during the quarter and subsequent to the crisis, causing a broad market disruption. Our equity raise provides both a certainty of execution and allows us execute on meaningfully better terms.

Tenants want to know that their landlord will be there for the full-term of their lease. A great case study of this was our recent lease to Western Midstream in The Woodlands Towers at The Waterway, where equity raise helped us execute on our leasing strategy. It's obvious that this pandemic has already impacted much of our business in the short-term. However, there are also some potential silver linings. We are just now starting to see states lift the stay-at-home restrictions and resume operations such as in Texas and Nevada, two of our largest markets. While there are still many uncertainties on the road ahead, our company is extremely well positioned and we believe there are reasons to be optimistic.

We have great assets in excellent locations, the majority of which are in low-cost, low tax states. As state taxes increase and more people want to get out of the larger denser cities, our properties offer a very attractive option. And in the case of Hawaii, an Island lifestyle that is increasingly compelling for many following this pandemic. In addition to low taxes, we see Texas and Nevada among the first states to resume operations and allow our customers to reopen their various businesses.

I'm not sure if you've heard, but a few days ago, Tesla announced that they would be moving their headquarters from California to either Texas or Nevada. Well, you'll unmask if you're listening, we have some great real estate options for you. I believe there is a flight to quality during times of crisis, a trend that has always helped Howard Hughes during market downturns. I strongly believe that we will see this anticipated flight to quality in our multi-family, office space and MPC home and condo purchases moving forward.

We've also been pleased to see some pockets of Brazilians. In home sales in Bridgeland and Summerlin, where our builders sold 38 and 30 net homes respectively in April, also in our leasing velocity at our multi-family units across the country, where we leased 92 apartments in April. We believe it's possible that these home sales during stay-at-home periods could be indicative of a larger trend that could emerge from the pandemic. And those who have previously delayed home purchases will now seek the freedom and extra indoor and outdoor living space that comes with homeownership. If this proves to be the case, our master-planned communities in Bridgeland, The Woodlands, Woodlands Hills and Summerlin are incredibly well positioned to be beneficiaries of this potential trend.

I'm happy to report that despite the challenges of the pandemic, our rent collections of April for multi-family and office have performed exceeding well, both in excess of 94%. At the Seaport, we are taking advantage of this opportunity to make changes that will better serve our goals as we look to reopen and begin our next chapter with a new tenant mix. We made the difficult decision to close 10 Corso Como, New York, and look forward to sharing news as it comes available. All-in-all, we have reason to believe that we will come out of this crisis better positioned for the future. We have faced crisis and tenuous situation before, albeit never one this severe. And we have seen our business endure and continue to thrive.

For example, when oil last dropped to the mid-$20s per barrel, The Woodlands office portfolio enjoyed tremendous outperformance. In 2016 and '17, when the overall Houston Class A office market had negative absorption of 1.4 million and 1.5 million square feet respectively, rental rates collapsed and vacancy, excluding sublease space, approached 20%. However, in our Woodland's office portfolio, we enjoyed positive absorption of 325,000 square feet and 144,000 square feet respectively, and only a modest temporary decline in rental rates, and we finished the year 2017 at only 10% vacancy.

And now, I'm going to turn the call over to our CFO, David O'Reilly.

David R. O'Reilly -- Chief Financial Officer

Thank you, Paul, and good morning, everyone. Let me start with each of our segment's performance during the quarter and then discuss how the pandemic has impacted each segment's performance for April and May, before I turn to our recent equity raise, balance sheet, upcoming maturities and liquidity.

First, starting with our Operating Asset segment, our total NOI for the quarter increased by 24% compared to the same quarter of 2019. In addition, sequentially it increased 35% compared to the fourth quarter of 2019. This of course is largely due to The Woodlands Towers at The waterway acquisition. Excluding this acquisition, our NOI increased 1.2% year-over-year and 10.4% sequentially.

In our MPC segment, new home sales during the first quarter were 688 compared to 557 in the first quarter of 2019, a 24% increase. This was led by a 41% increase of Bridgeland and a 27% increase at Summerlin. We saw strong growth in the price per residential acre sold during the quarter across our portfolio. Bridgeland's average price per acre increased by $58,000 or 15% to $439,000. In Summerlin, we saw the average price per custom lot increase 23% to $925,000. And at The Woodlands Hills, the price per acre increased 8.2% to $303,000. These strong results demonstrate the demand for best-in-class MPCs and bodes well for when home sales normalize.

Moving to Hawaii, and our strategic development segment, during the first quarter, we sold 239 homes at Ward Village. Our latest project that began sales in December 2019, Victoria Place, was 64.5% pre-sold as of March 31st, 2020, and there continues to be an enormous housing shortage on Oahu. The projects that are under construction or completed are well sold at approximately 90%. We have 20% hard deposits from our buyers, and we don't have any building delivering until late 2021 or 2022. We really couldn't be in a better position, given the current circumstances.

Turning to Hawaii, during the quarter, we recorded a $98 million charge associated with our general contractors' alleged construction defects at Waiea. The majority of this is for window wall issues that create popping noise that we previously disclosed and took a charge for it. We expect to reach a settlement with the building's homeowners association, under which we will agree to fund the expected cost of certain alleged defects related to the construction of the project. We expect to fully recover these costs from the general contractor or the other responsible parties.

So, all-in-all, as Paul noted, it was a tremendous first quarter for Howard Hughes. And while we are feeling the impacts of the pandemic, we believe that our best-in-class assets in irreplaceable communities has potentially provided a bit of installation from the impact on the broader market. To that end, in our Operating Asset segment, our office portfolio, which accounted for approximately 39% of our Q4 '19 NOI, is performing well and our collections for April have been strong collecting approximately 95%. Month-to-date in May, we are in a similar track to April. We're monitoring our tenants on a daily basis, but do believe that there is generally a flight to quality during difficult times, which would benefit us in all of our office markets, and we remain optimistic about the continued performance in our office segment.

Multi-family had a similarly strong performance in April and so far in May. Multi-family, which represented approximately 13% of our fourth quarter '19 NOI, has been excellent in course of historical norms. In April, we collected 95% of our billings and, so far in May, we're an a similar trajectory. While there is potential for softening in the coming months as unemployment grows, our portfolio of newly constructed, highly amenitized assets are among the highest quality in the respective markets, which we expect will benefit from the traditional flight to quality in challenging times.

Our retail NOI, which accounts for approximately 28% of our Q4 '19 NOI, has experienced a more dramatic drop in collections as the number of our tenants are closed. We've actively engaged with all of our tenants, but particularly with our small businesses, our local tenants, who need assistance the most and where our health in the form of rent deferrals can make a real difference in their ability to survive. For the month of April, we have collected approximately 44% of the amounts billed so far. In May, our collections are similar to where we were at the same point in April.

With the banning of most travel and business conferences across the country, our hospitality portfolio was our hardest hit asset class. Almost overnight our occupancies were reduced to a point where it did not make sense to keep our properties open. Consequently, we closed all three hotels and have temporarily laid-off the majority of our staff there. We've retained key personnel who will be required to efficiently start-up operations when the timing is right. NOI will drop from the Q4 '19 run rate of approximately $28.8 million on an annual basis, or 13% of the total, to an estimated negative $3 million in the second quarter if we remain closed. Obviously, we're working to keep that number as low as possible.

On a positive note, we are already actively engaged with our team detailing plans for reopening our hotels following state and local guidelines, along with hotel flag recommendations, which include enhanced cleaning and safety protocols. We are looking at opening a limited number of rooms at The Woodlands Resort & Conference Center, along with our Pool and Lazy River [Phonetic] on May 20th, and possibly reopening the Embassy Suites on June 1st. We will keep you posted on our progress. We of course will take all the necessary precautions to protect our employees and guests.

Our ballpark in Downtown Summerlin, which accounted for $8 million, or 4% of our Q4 2019 annualized NOI, will also be impacted by the pandemic. We are uncertain if and when Major League Baseball will resume a Minor League season, and what the eventual impact could be for the year. I want to note that we own a minor league baseball franchise that plays at our stadium there, so we have no control over the season and we'll follow whatever the league decides as best. So while we saw a meaningful drop in retail, hospitality and at the Los Vegas ballpark, we are really pleased with how we have performed in April and so far in May, specifically in office and multi-family.

Turning to our MPC segment, during the last six weeks, we've seen a slowdown in both the sale of new homes and correspondingly our builders appetite to take down land. As we've always said, we continually endeavor to limit the amount of land that is in our builders hands at any one time, only allowing enough land to be sold on current home sales. We are a price maker, not a price taker, of our continually appreciating residential land. And as Paul noted, we remain optimistic about the prognosis for recovery in future home sales as many apartment dwellers are feeling that having more space is more important than ever. In April, we saw new home sales across our communities drop sequentially 47.5% from 158 homes sold in March to 83 in April. Year-over-year, we saw 218 homes in April 2019 as compared to the above-noted 83 homes this April.

Turning to Hawaii, post pandemic, I want to commend our team on the ground there, not just on the amazing efforts with the successful launch of Victoria Place, but also for the continued ingenuity and immediately creating a virtual sales experience that has led to new sales in April.

Now, I want to turn to the Seaport District. As you all know, New York has been among the hardest hit areas of our country, and we've had to close down the Seaport. At this time, we do not know how long it will remain closed. Timing will depend both on the government lifting restrictions and the demand for travel, dining, shopping and entertainment that ensues following this pandemic. After careful study, and as part of our review of the project as a whole, we did make the difficult decision to permanently close down the 10 Corso Como retail and restaurant operation, which resulted in a $78.4 million charge. Construction has been stopped by the City of New York, and we do not know when the ban will be lifted. But the team at the Seaport is continuing to work hard to move things forward and control costs wherever they can.

Now, I'd like to detail our equity raise that provided the meaningful liquidity that will allow us to continue to execute on our business plan. At our last full Board meeting in the middle of February, we became very cautious on the potential economic impact that COVID-19 could have on our business. We plan for the worst but hope for the best. As it became clear that our concerns were unfortunately materializing, we immediately moved to action. We've built multiple stress, downside cash flow models with conservative assumptions to try to gauge how much additional capital we would need if the conditions persisted.

Our stock traded down in the mid $120 range at the beginning of the quarter to a low in the mid-$30s, likely the result of market participants questioning our long-term financial viability. After consulting with our investment bankers, it was clear that the high yield debt market was closed. And then our only option for capital will be equity. With limited visibility into the depth or the length of the current economic crisis, the numerous downside cash flow scenarios, a lack of alternatives in the capital markets, a delay in the sale of non-core assets and given our upcoming short-term debt maturities, the independent directors of our Board decided that an equity raise was a prudent action to ensure that we would always be in the position to make the best long-term decisions for our shareholders.

Therefore, on March 27th, we completed an offering of 2 million shares at $50 per share, plus an additional 270,900 shares as part of the underwriters' green shoot. In addition, we entered into a simultaneous purchase agreement with Pershing Square Capital Management for 10 million shares of common stock, also at $50 per share. We received net proceeds of approximately $593.7 million from these transactions. It was clear and confirmed by our investment bankers that the equity raise would not have been possible at the size or price where we executed without the support of Pershing Square.

Also, I'd like to note that Pershing Square was only willing to do this if we resolve the maturity issues for both the Occi bridge loan and the Downtown Summerlin financing, which I'll touch on in a minute. Now with this incremental liquidity, HHC has positioned to weather the storm even in a draconian scenario. Even in a situation where we do not sell any residential land or condos, keep our hotels closed and had no retail or ballpark revenues. We have enough liquidity to be comfortably refinanced through the end of 2022.

I'm going to pause there and spend a minute and talk about the right hand side of our balance sheet in a little more detail. As of the end of the quarter, we had approximately $4.3 billion in total debt, of which approximately $2.4 billion is floating rate. Of that amount, $706 million has been swapped to fixed, and additional $230 million is subject to an interest rate call. That leaves approximately $1.5 billion unhedged. The vast majority of this debt is associated with our Woodlands Towers bridge facility, construction loans, including 110 North Wacker and our Downtown Summerlin mortgage loan. In terms of maturity profile, we have approximately $627 million of debt maturing in 2020 and $163 million maturing in 2021. As part of the modeling and liquidity analysis that I mentioned earlier, we of course reviewed all of our short-term debt maturities and it immediately worked to execute extension discussions with many of our lenders.

As of today, we're working on the following. We're documenting a three-year extension for the loan facility for Downtown Summerlin in the attached One Summerlin office building, which represents $257 million of our $627 million maturing in 2020. The existing loan, which matures in September has a built-in one-year extension option through September 2021. However, it contains tests that would likely require a significant paydown, especially in light of the pandemic. The new extension provides three additional years of term and a meaningfully smaller pay-down of approximately $35.7 million.

We're also finalizing documentation on an extension to the corporate bridge facility with Bank of America that was used to purchase the Occi buildings in The Woodlands last December. The original loan was reduced by $63.5 million to $280.3 million in March when we refinanced the 596,000 square foot 9950 Woodloch Forest office building. The loan expansion includes two six-month extensions for the remaining balance and are priced at LIBOR plus 235 and 290 basis points respectively.

The final maturity will be June 2021. The only other loans that mature in 2020 are Two Merriweather in Three Hughes Landing. Two Merriweather has a one-year extension in the loan, which we see qualify for with little to no pay down. With regard to Three Hughes Landing, which now matures in September of this year, we've started extension discussions with existing lender and do not anticipate any issues, getting that accomplished.

As for our 2021 maturities of $163 million, we have extension options for $133 million of those loans. We do not anticipate any issues refinancing or extending these property level loans. From a liquidity perspective, we finished the fourth quarter with approximately $972 million of cash on hand and $64 million in escrow from the sale of MD Anderson, which has since been released to HHC.

As you can see from the projects under construction table on Page 48 of the 10-Q, with a net equity requirement of $248 million. Approximately $159 million of that $248 million of net equity requirements are for the Seaport District, where construction has stopped due to state ordered restrictions. This leaves a net equity requirement of $89 million. With our increased liquidity from the equity raise in the sale of MD Anderson, we have enough cash on hand to meet all of our current funding commitments.

And with that, I'm going to turn the call back over to Paul for some closing remarks.

Paul H. Layne -- Chief Executive Officer and Director

Thank you, David. I remain optimistic that we are quickly coming out of this period of great uncertainty. A lot depends upon the timing of potential vaccine and advances and successful treatments for the virus. While no one knows what exactly recovery will look like, being well capitalized will surely put HHC in a strong position to take advantage of whatever recovery will look like. As we emerge from this pandemic, people may choose to stay home more and travel less. They will want larger, nicer homes with more amenities.

We know that millennials are looking for walkable suburban communities with all the urban conveniences. After sheltering-in-place, many people are seeking wide open spaces with walking trails in green space and a high quality of life and are prepared to pay for it, I believe we have the ideal solution. For the Howard Hughes Corporation or MPCs, at the core of our business have always been extremely desirable place to live and are perfectly suited to meet this growing demand. Our communities offer some of the best healthcare systems in the country. We provide safe, walkable environments with extensive amenities. Our communities are in beautiful natural settings with expansive open green space.

The Woodlands, for example is 28,000 acre forested community with over 130 parks, more than 200 miles of hike-and-bike trails. And with nearly 8,000 acres, that's 28% of remaining dedicated open space. For those of you who have not had the opportunity to visit The Woodlands, or any of our other communities, I invite you to visit our website to view photographs and to get a better visual sense of what our communities offer and what makes us so successful in attracting and retaining today's top employees, tenants and business.

If not for the unforeseen pandemic, we would be talking this morning about our two recent consecutive quarters with the most successful results in our history. While we cannot ignore the realities of today, we are doing the right things. We're keeping our employees, our tenants, customers and others safe, helping those less fortunate in our communities, and reinforcing the trust and goodwill of our stakeholders. In addition, I've created our future studies think-tank to ensure that our company is at the forefront of our industry as we explore and evaluate best practices with regard to design, architecture and construction, and how they will continue to evolve in the post COVID world. And we have the capital, approximately $1 billion in cash to position us to thrive for the future.

We are in the strong position now for two primary reasons. One, we've always dedicated ourselves to acting as the stewards of our communities, not just a developer. Our commitment to all of our stakeholders has established a long-standing legacy of trust. Two, our financial discipline and prudent actions have established our company as being on solid footing and here for the long-term. In subsequent quarters, I believe that we will look back and see that the steps we are taking will have served us well in our ongoing pursuit of the long-term growth of the Howard Hughes Corporation.

We will now turn to Q&A. Before we open up the lines to those who have called in, the first few questions have been generated by our investors over the past week through our newly implemented Say technology application and will be read by Dave Striph.

Dave, can you read the first question?

Questions and Answers:

David Striph -- Executive Vice President, Investor Relations

Sure, Paul. It appears that we have answered most of the Say-generated questions in our prepared remarks. So I'm only going to read a few of the ones that we haven't touched upon.

The first question is burn rate, current estimated NOI and expense run rate.

Paul H. Layne -- Chief Executive Officer and Director

Thank you, Dave. Why don't we let our CFO, David O'Reilly, take this one? Thanks, Dave.

David R. O'Reilly -- Chief Financial Officer

Happy to take it, Paul, and thanks for the question, and it's a great question. It's one that's front and center on a lot of investors' minds. And candidly, at this point, given that we're only 5.5 weeks into the second quarter, it's very difficult to say what we think that rate will be. In fact, it's even too early to say whether or not it will be a burn or a surplus. Like we mentioned in the prepared remarks, we're really excited about their collections in office and multi-family. And while retail has lagged, we're hopeful that as these stay-at-home orders are lifted in Nevada and Texas, we're able to start receiving more and more retail rents. But again, it's a little bit too early to talk about where that burn rate will be for 2Q.

I do think it's really important though, and one item that's worth highlighting again is that given the fact that we were able to raise the equity that we did and raised just under $600 million in net proceeds, even if the storm clouds of economic uncertainty created by COVID-19 persist, in a long consistent manner in a very draconian scenario where there's no land sales, no condo sales or hotels are closed and the retail and ballparks really have no revenue, we have more than enough liquidity to be comfortably financed at the end of 2022.

Dave, back to you.

David Striph -- Executive Vice President, Investor Relations

Okay. Next question. Are you considering using 110 North Wacker-type deal structures to generate better risk-adjusted returns in the future? That seems like a home loan deal in terms of high returns and minimum capital?

Paul H. Layne -- Chief Executive Officer and Director

Thank you, Dave and thank you for the question. That particular deal was a great structure for one-off deal outside of our core assets. We're unlikely to do this again, given that we're selling non-core assets and we've not entertained a JV-type structure in our MPCs other than possibly for a non-core asset type like hospitality or possibly senior living. For example, a JV on an office building in one of our MPCs would introduce competition into the market that would create issues, for example, if we want to move tenants between our buildings, which we have done in the past.

Dave, the next question?

David Striph -- Executive Vice President, Investor Relations

Thanks, Paul. Could you please provide an update on asset sales? What's on ice? Hotels? What may still happen, Wacker?

Paul H. Layne -- Chief Executive Officer and Director

Thank you. Another great question. Hospitality obviously is closed and unlikely to sell in the near future since we closed the hotels with the safety of our employees, tenants, customers and communities. I think 110 North Wacker could definitely sell, given the quality -- extreme high quality of the building, strength of the tenants and the fantastic location in Chicago. Some of the land deals like Monarch City could potentially sell, but I think we are looking at a general slowdown than what we anticipated last year.

Dave, the next question?

David Striph -- Executive Vice President, Investor Relations

Could you please provide a revised guestimate for timing of Seaport completion?

Paul H. Layne -- Chief Executive Officer and Director

Thank you. We are not sure of the timing, given that we were ordered by the City of New York to shut down all construction. We are not sure when this will be lifted and even after it is lifted, how easy it will be to obtain labor and materials. Given likely slowdown in construction, we may be able to obtain better pricing, clearly a positive. This is the asset most affected by the current crisis. It is completely closed. It's entertainment-focused with retail outdoor bars and, as you know, the concert venue. Good news is that this gives us a chance to look at how to position the asset for the future. Most significant action was making the hard decision to close 10 Corso Como.

Dave, I think now we'll open it up to question and answers, correct?

David Striph -- Executive Vice President, Investor Relations

Yes. Operator, we're ready to open the lines please. Thank you.

Operator

All right. [Operator Instructions] Our first question comes from Alexander Goldfarb of Piper Sandler. Alexander, please proceed.

Alexander Goldfarb -- Piper Sandler -- Analyst

Thank you, and good morning down there. The first question is, David, as you've had discussions with your lenders and various capital providers and for the refinancing this year and into next, has there been any indication from them that the refinancings would be less than the current levels, meaning you guys would have to contribute more capital, or there would be change in the metrics, covenants, etc?

David R. O'Reilly -- Chief Financial Officer

Good question, Alex. And I'd tell you that there isn't kind of a one-size-fits-all as it relates to that question. With Downtown Summerlin, for example, when you have a one-year extension option, but it's subject to the in-place NOI at that moment in time and when you're at that moment in time, it happens to coalesce with the stay-at-home order when a lot of our tenants are closed, obviously there is meaningful paydowns and something that was very challenging to work through. We're thrilled that we're able to get a three-year extension there with a relatively modest paydown of just over $35 million.

For other assets like a Three Hughes Landing or Two Merriweather office buildings with a great rent roll and solid cash flows, we don't expect any sort of meaningful changes in getting extensions there. Alex, I think the short answer to your question is largely dependent on the asset performance, the asset type and the geography where it's located. And there's -- like I said -- not a one-size-fits-all approach. It's unique case-by-case basis. But we're thrilled that we were able to execute an incredible number of financings that we did and get the number done that we did post really the prices taking hold. So, I think it was a great success for the team and I'm really proud of the capital markets group for being able to execute as well as they have.

Alexander Goldfarb -- Piper Sandler -- Analyst

Okay. And then, as far as Ward Village grows, Waiea, the windows that you guys are taking care of obviously good that you guys are stepping in and remedying that. But as far as the contractor goes, how confident are you guys that the contractor has basically $110 million of capital or insurance for that amount to pay you back versus that this may be a permanent capital charge that you guys take?

Paul H. Layne -- Chief Executive Officer and Director

Dave, do you want to continue with that?

David R. O'Reilly -- Chief Financial Officer

Sure thing, Paul. No, look, I think it's the right question, Alex. And we do feel good that the financial viability of our counterparty there, the general contractor Nordic PCL, has the financial wherewithal to stand up and do the right thing and fix their defects. We don't feel like that's a high-risk item at all at this point. And it's a good question, Alex, because it really talks about what we're doing and our commitment to our projects. And from our view, Waiea is one of the most desirable residents and an incredible Ward Village community. And we are incredibly committed to Waiea and the Ward Village community overall. And we do believe that it is a premier place to live in all of Hawaii.

And I think, the evidence of our commitment that we're agreeing to fund the cost of these repairs to correct certain construction defects despite the fact that we're not the responsible party and we have no legal obligation to do this really cements our commitment. We're also agreeing to work with the Waiea homeowners association to jointly pursue Nordic to recover these costs and all of the repair and construction defects that they are legally liable for. Look, I think, this level of commitment shown by being in Ward Village is unprecedented for a developer. And it's another example of how important our homeowners are to us and how dedicated Howard Hughes is to the health, welfare and success of our community and all of our customers.

Alexander Goldfarb -- Piper Sandler -- Analyst

Okay. But David, just for those of us who aren't familiar with Nordic, are they like a Tishman like they are a large multinational or extremely well-capitalized entity, or are they just an entity on the island?

David R. O'Reilly -- Chief Financial Officer

I would say that they are a -- I'll go back to my earlier answer, Alex, and say that we believe that they are well capitalized enough that they can do the right thing here, correct their defects and execute the way they were supposed to do when they were originally hired to do the job.

Alexander Goldfarb -- Piper Sandler -- Analyst

Thank you, David.

David R. O'Reilly -- Chief Financial Officer

Appreciate it, Alex.

Operator

And our next question comes from Vahid Khorsand of BWS [Phonetic]. Vahid, please proceed

Vahid Khorsand -- BWS Financial -- Analyst

Hi, good morning. Thanks for taking the question. First question, on concessions, I know you have comparatively on the long-term spectrum roughly about $13 million of renewals for rents this year. Are you in communications in terms of concessions of any kind? And similarly, on your unstabilized properties in lease-up mode, are you having conversations with potential tenants on concessions?

Paul H. Layne -- Chief Executive Officer and Director

Yes. This is Paul Layne. I appreciate your question. It's a good one. With specific to office renewals, we have found that if you look back, as I mentioned in some of my prepared remarks, the last oil downturn, The Woodlands was substantially stronger both from absorption and our strong occupancy numbers. And this flowed through to maintaining a higher net effective rent or face rate and fewer concessions than Houston, for instance. We are tracking all of our renewals on the office side and retail, of course, but on the office side very closely. And I'm expecting slight increases in concessions but not substantial if it's anything compared to all the other ups and downs in our market.

Vahid Khorsand -- BWS Financial -- Analyst

Great. I have two more questions. And one's going to be about the Ballpark and the other one's about Seaport. On the Ballpark, I know you have the sponsorship agreement with the convention center authority. Is that something that still continues to get paid even if the Ballpark is closed?

Paul H. Layne -- Chief Executive Officer and Director

Yeah. Thank you for that question. They are contractually obligated to continue to pay the naming rights sponsorship.

Vahid Khorsand -- BWS Financial -- Analyst

And then, in Seaport, have you approached the Port Authority? I believe that's who owns the land who you're leasing it from, but if not please correct me. But have you approached them about concessions in terms of lease payments or extensions since it's a mandated closure and you can't do any work on the site?

Paul H. Layne -- Chief Executive Officer and Director

Yeah. Thank you for that. David, do you want to take this one?

David R. O'Reilly -- Chief Financial Officer

Sure. I would tell you that it's a good question and it's part of an overall dialogue that we're having with all of the officials in New York City. And it's not just around the ground lease payments that we have, but we're also in discussions as you are aware around the air rights, around some of the uses that we have and other items that we're trying to change around the Seaport.

Again, it's on the table. It's very early in any sort of dialogue, and I wouldn't want to comment one way or the other on whether we think we'll get any sort of benefit whatsoever there. I think, as you know from the detail in the back of our supplemental, our ground lease payments as it relates to the Seaport are not of order of magnitude that creates a tremendous amount of financial strain for us. And, obviously, we're going to continue to make those payments, because that's our obligation. But having the dialogue to see if there are other ways of finding concessions is something that we're always in the market to try to do.

Vahid Khorsand -- BWS Financial -- Analyst

Thank you.

Operator

Our next question comes from Alex Barron of Housing Research Center. Alex, please proceed.

Alex Barron -- Housing Research Center -- Analyst

Yeah. Thank you. Hope you guys are all well.

Paul H. Layne -- Chief Executive Officer and Director

Thank you, Alex.

Alex Barron -- Housing Research Center -- Analyst

I wanted to ask about -- sorry if I missed this in your prepared comments, because I got disconnected, but I wanted to address, I guess, the subject about land, purchases by the builders. I know most of the builders have indicated they were going to talk to the land sellers about postponing takedowns and stuff like that. So, I was curious whether -- what's happening on that front, whether builders are asking for lower prices or they're just asking to postpone dates? And whether you're starting to see signs that they're reengaging to start buying again or whether maybe they never stopped?

Paul H. Layne -- Chief Executive Officer and Director

Thank you, Alex. Always good to get your questions. Let me start, and then I'll turn it over to David. We have been surprised the last few weeks, and so pleasantly surprised in the sales, for instance, at Bridgeland in Houston, the last two weeks. There has been 14 to 16 net sales, home sales. And obviously the home sales directly will tie to the willingness of the takedowns. We believe that the strength of our master-planned communities such as Bridgeland, The Woodlands, Woodlands Hills, Summerlin, the builders want to be there. They want to have an appropriate number of lots or super pads to build on. And so, as home sales increase, we think we're very, very well positioned.

The other thing I'd like to say, Alex, is that, coming out of this quarantine slowly and safely, I believe that we're going to see more demand for people coming out of apartments, people coming out of smaller homes, people coming out of non-master-planned communities and wanting to take advantage of that flight to quality that we've seen in other downturns, the flight to quality to master-planned communities like ours frankly. They have that open space, the green space, the walking trails, some of the best hospital systems in the country. So, I think that we are very well positioned to get this uptick in new demand as a silver lining from the COVID-19 pandemic.

David, do you want to add comments?

David R. O'Reilly -- Chief Financial Officer

No. Paul, I think that was really well said. The only thing I'll tell you in terms of the discussions with builders, look, we are -- as we said repeatedly, we're a price maker, not a price taker. And if a builder who has a contract with us, thinks that they have a right to come back and modify the price and we'll accept that, absolutely not. We have an incredible amount of belief in our land. We know that it continually appreciates. And if they're not willing to pay the appropriate price today, we're not willing to sell it. Again, we're only going to continue to sell land to homebuilders to keep up with underlying home sales, so that we'll limit the amount of land that's in the builders' hands at any one time.

With that said, if there are certain situations where home sales are flowing, as we've seen here recently, although, you know what, candidly it's refreshing to see 38 net home sales in April in Bridgeland during the stay-at-home period; 30 home sales in Summerlin in April during the stay-at-home period, albeit that's well off of their pace of April last year but enough home sales that indicates that we should be selling some land to builders and making sure we're getting a full price for that land that we do sell.

Alex Barron -- Housing Research Center -- Analyst

Okay. That's helpful. And then, on your comments about selling land to Tesla, have you guys, I guess, given some thought where they would be potentially best positioned? I'm guessing it would be maybe headquarters in Woodlands and the actual land in the Bridgeland. But I don't know, I'd love to hear your thoughts on that.

Paul H. Layne -- Chief Executive Officer and Director

Alex, thank you so much for that softball. That's -- and if Tesla is listening, we'd love to connect with you directly and show you all of our outstanding sites that we have as potential. Alex, as you know, we have not only The Woodlands, we also have Bridgeland in Houston. We have in Dallas, Monarch City, which is in excess of 200 acres in Allen Texas. We have Circle T Ranch as a potential headquarters that we sold land to Charles Schwab, and they've expanded their campus there. And then, of course, Summerlin has a number of options for headquarters.

So we think we have a full array of opportunities, but not only for Tesla. This is for any company that wants to move to a low tax environment like Texas and Nevada for a master-planned community like Columbia. So, we're excited about what the future could bring, again, looking for the silver linings. Thank you for your questions.

Alex Barron -- Housing Research Center -- Analyst

Yeah. Thanks. Well, you guys are definitely well-positioned to offer many of those options. So congrats on that. Thanks.

Operator

Our next question comes from Marlane Pereiro, BoA Securities. Marlane, please proceed. Apologies. Our next question comes from Jon Peterson of Jefferies. Jon, please proceed.

Jon Peterson -- Jefferies -- Analyst

Great. Thank you. First of all, I'll say as someone who's been hold up with my family in a small New York City apartment for two months, I definitely agree with your sentiment that people are considering moving to houses for the first time. Yeah. I guess, I'm curious on...

Paul H. Layne -- Chief Executive Officer and Director

I just saying, we can help you out there.

Jon Peterson -- Jefferies -- Analyst

I don't know if I'm going to move to Houston, but I am curious about -- just the Houston market, you guys are in that market. We're all in different parts of the country. I'm curious just what you're seeing and hearing on the ground there. I guess, what's kind of the whisper or the talk of where oil prices need to go for everything to bounce right back and how do you kind of feel like The Woodlands community fits into the whole oil price, I guess, problems that we're having right now irrespective of the COVID-19 environment?

Paul H. Layne -- Chief Executive Officer and Director

Sure. I appreciate it. It was that double black swan event as some people are calling it. Houston is resilient. We've been through downturns before, never one this severe. Luckily, we have a detailed Occi as the largest oil and gas energy tenant. I detailed that what they're doing. The next largest tenant at approximately 500,000 feet is Exxon, which we're certainly comfortable with their credit, and they're a fantastic customer. We are watching and have built very strong relationships with our tenant customers. They trust us as a landlord and we work closely with them.

It will be a challenging time depending on where oil prices go. I recently was studying the history of oil prices. And in 2016 the low was in the mid-$20s, but the average for the year was I think $43. So, it certainly has bounced around a lot over the last 10 years. But I believe, Houston is in The Woodlands especially, is well-positioned. I'm not saying we have a moat around The Woodlands, but we definitely are better positioned than anywhere else in Houston in my opinion for the continuance of strong energy companies that can rebound in our office space.

David, do you want to add anything?

David R. O'Reilly -- Chief Financial Officer

Yeah. No, look, I would say that having been through this and not just with Howard Hughes, but with Parkway before, look, I'm finally attuned to what goes on in the Houston office market and the Houston multi-family market as it relates to oil. And I think the difference this time than the last time is a couple of things. And one the last time oil went down to 20s in 2016 it was coming off of a high north of $100. And I don't think the companies were equipped or prepared for this type of downturn.

And while we may not have predicted this downturn either, we're not that far from the move from the last one so that these companies are not at the same staffing level overhead and capex spend that they were at over $100 barrel oil. So I think that their memories are long enough that they remember that last downturn. They remember the moves that they need to do to stay profitable, to stay positive cash flow. And most, if not all, have reacted very quickly to do that.

I do think there will probably be some fallout some M&A, but we spend a lot of time underwriting credit in our portfolio. I'm happy to say that during the last downturn in '16 and '17, we had zero defaults. I think part of that is good underwriting and part of that is just luck. And we're hopeful that we'll come out of this one around the same place that we did the last time.

Paul H. Layne -- Chief Executive Officer and Director

If I could just add one other comment. Thank you, David. With 35-plus years of running large regions all around the country with -- this is my third publicly traded real estate company. Our company is extremely positioned to collect rent. We do it well. We have built trust with our customers that pay us rent not only office, but multifamily retail etc.

And the fact that as David mentioned in his prepared remarks, the approximately 95% recovery of rents last month in both office and multi-family, I think, is representative of that. So -- and that's nationwide, but the numbers for Houston in both categories that I mentioned have been very strong. So we watch it every day. We monitor it every day. And probably -- I mean, I don't know if you could ever be too excessive in these difficult times to monitor your customers and your rent collections, but we've got a great team around the country that does that and we are absolutely on top of it.

Jon Peterson -- Jefferies -- Analyst

Great. Appreciate all that color. There's been a lot of talk about the capital raising. You guys mentioned the high yield market was closed and that's why you had to do the equity raise. I'm just curious, I know you're not in a position today but if we think multiple years in the future, is there a goal to get toward an investment-grade rating? So the next time we have a downturn, you have that source of capital open to you? And kind of what does it take to get there?

Paul H. Layne -- Chief Executive Officer and Director

It's a great question. I'm going to let David take that one.

David R. O'Reilly -- Chief Financial Officer

Look, I think that it behooves us. And no better market than a market right now to demonstrate the power of having a better credit rating and what the impact of a better credit rating has to your overall weighted average cost of capital, because your cost of debt is dramatically different when markets are dislocated from B to double-B to triple-B.

I can't comment on how long I think or what the track will be for the rating agencies to think about upgrading us. Hopefully the moves that we've done over the past several months with raising equity solidifying our balance sheet, making absolutely the right thing to do to preserve the long-term value creation for our shareholders in this company, help demonstrate our commitment to maintaining a great credit profile and it can be incrementally helpful. But I do think that to the root of your question, we would like a better credit rating. We know that better credit rating translates into a better cost of debt, which is a better cost of capital and that's important to us. It increases our accessibility to capital markets and that's important to us. But I don't have a good road map, because as you know we're a public Tier 1 and there's not a lot of other public companies I can point to that are like the Howard Hughes Corporation that have an investment-grade rating. So I know what I need to do from here to there.

So, we keep continuing to hopefully improve our credit profile every quarter, every year over time and improve our operating results by increasing our recurring cash flow by driving NOI, higher and higher every quarter. And for us I think that's the best method that we can do to try to improve that credit quality.

Jon Peterson -- Jefferies -- Analyst

Got it. All right. Thank you very much. Appreciate it.

David R. O'Reilly -- Chief Financial Officer

Thank you.

Operator

And or last question comes from Marlane Pereiro of BoA. Marlane, please proceed.

Marlane Pereiro -- Bank of America Merrill Lynch -- Analyst

Thank you. I apologize if I missed this. I've been having a little bit of technical difficulty. But just to clarify, of the $627 million of debt that you had maturing this year, the $257 million you originally had a one-year extension? And just to be clear, you said you actually got a three-year extension and were only required to pay down $36 million. Is that correct?

David R. O'Reilly -- Chief Financial Officer

So, I mean, what I'll do is -- yeah, let me back up and kind of take it at a pretty high level, because I think we might be crossing lines in terms of what the loans have been credited, and which ones haven't. So, we have $627 million of the debt maturing in 2020. One of those was a $257 million loan for Downtown Summerlin. That $257 million had a one-year extension, but we are finalizing our negotiation and documentation to get a three-year extension on that with a $35 million paydown.

Marlane Pereiro -- Bank of America Merrill Lynch -- Analyst

Got it. Yeah. And then, the...

David R. O'Reilly -- Chief Financial Officer

The next largest piece is the $280 million bridge loan that was associated with the Occi acquisition. And concurrent with our equity offering, we were able to negotiate a one-year extension on that to get us to June 2021.

Marlane Pereiro -- Bank of America Merrill Lynch -- Analyst

Great. And you had mentioned that was actually there were two six-month pieces to that one-year extension. Did I hear that correctly?

David R. O'Reilly -- Chief Financial Officer

Exactly. That is correct, two six-month extensions.

Marlane Pereiro -- Bank of America Merrill Lynch -- Analyst

Okay. And are there any conditions around getting those extensions that could be an issue, or in general what are the conditions to going from one of the six-month period to the next?

David R. O'Reilly -- Chief Financial Officer

Paying the fee and increasing the spread.

Marlane Pereiro -- Bank of America Merrill Lynch -- Analyst

Got it. Great. Thank you so much for clarifying.

David R. O'Reilly -- Chief Financial Officer

No problem. Thanks for your question, Marlane.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back over for any closing remarks.

Paul H. Layne -- Chief Executive Officer and Director

Thank you very much. I just want to say on behalf of our company and our entire Howard Hughes team, thank you for your support. We are here to build a legacy of trust with you and we want you to be safe and be well. Thank you for joining our call today.

Operator

[Operator Closing Remarks]

Duration: 77 minutes

Call participants:

David Striph -- Executive Vice President, Investor Relations

Paul H. Layne -- Chief Executive Officer and Director

David R. O'Reilly -- Chief Financial Officer

Alexander Goldfarb -- Piper Sandler -- Analyst

Vahid Khorsand -- BWS Financial -- Analyst

Alex Barron -- Housing Research Center -- Analyst

Jon Peterson -- Jefferies -- Analyst

Marlane Pereiro -- Bank of America Merrill Lynch -- Analyst

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