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The Howard Hughes Corp (NYSE:HHC)
Q3 2020 Earnings Call
Nov 6, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to The Howard Hughes Corporation Third Quarter 2020 Earnings Conference Call. [Operator Instructions]

At this time, I'd like to turn the conference call over to David Striph, Executive Vice President. Sir, please go ahead.

David Striph -- Executive Vice President

Good morning, and welcome to The Howard Hughes Corporation's Third Quarter 2020 Earnings Call. With me today are David O'Reilly, Interim Chief Executive 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 third 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 statements disclaimer in our third 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 David O'Reilly.

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Thank you, Dave, and thank you all for joining us today. Welcome to our third quarter 2020 earnings call. Before discussing the quarter's financial results, I'd like to discuss the departure of our former CEO, Paul Layne. On September 21, the company announced that Paul had stepped down from his role as CEO. I, along with the entire HHC team would like to thank Paul for his dedication to the company and his hard work and leadership as Chief Executive. We wish Paul and his family all the best for the future. The board is conducting a search for a permanent CEO and is considering both internal and external candidates. During this time, our Howard Hughes team has continued to demonstrate an exceptional level of commitment and dedication to the success of the company. I could not be more appreciative of their talents and their efforts and feel fortunate to be part of such an outstanding team. And most importantly, during this time, we continue to monitor the effects of COVID-19 throughout our communities. As always, the health and safety of our employees, residents, visitors and tenants remain our top priority. Shifting to the company's results for the quarter, we experienced notable performance improvements and significant sales momentum throughout the portfolio. We saw continued strength throughout our master-planned communities with robust new home sales in the Woodland Hills, Bridgeland and Summerlin.

Our operating asset collection rates improved across the board, with retail seeing the most notable progress. Stronger occupancy levels in our hotels from the second quarter resulted in positive quarterly NOI, which exceeded our expectations. Condos in Ward Village continued to sell with the help of our innovative digital sales platform. And the future revenue associated with all of our contracted unit now stands at $1.5 billion. At the Seaport, which was largely shut down in the second quarter, we were able to resume construction at the Tin Building, and we've reopened most of the restaurants. We successfully launched our new concept, The Greens on the rooftop of Pier 17, where guests reserve their own socially distanced mini lawn space overlooking the Brooklyn bridge in the lower Manhattan waterfront, serving over 42,000 guests, The Greens was sold out each day this summer, had a 20,000-person waitlist and generated $1 million in revenue. This positive momentum we are seeing across our portfolio is a testament to the quality, location and desirability of our core assets. It's been about a year since we announced our transformation plan, and we are very pleased with the progress we've made to date. As you may recall, the plan was based on three pillars: first, the streamlining and decentralization of our operating model and a reduction of $45 million to $50 million of overhead.

Second, the sale of noncore assets, resulting in net proceeds of approximately $600 million; and third, accelerated growth in our core MPC business, where we have a decades-long pipeline of development opportunity ahead of us. I'd like to start out by saying that the change in leadership during the quarter has not impacted the strategic vision of the company, and we remain focused on the execution of this plan. Our corporate overhead cost reduction initiatives are substantially complete. Excluding onetime charges, our Q3 annualized G&A totaled approximately $85 million, which represents a 30% cost reduction when compared to our 2019 run rate of $122 million. We're approximately 93% of the way toward meeting our goal of an $80 million run rate. We continue to pursue the sale of our noncore assets. To date, we have sold six of these assets generating approximately $132 million in net proceeds, which represents 22% of our goal. As we mentioned last quarter, the timing of achieving this goal has been delayed given the current market environment. We want to ensure that we obtain the maximum value for these dispositions, and we have the luxury of patience given our current liquidity position. We remain optimistic that the sale of the recently completed 110 North Wacker office building could be effectuated during the first half of 2021. This sale would generate the largest component of the estimated $600 million in net proceeds from the disposition of noncore assets. While we're on the subject of 110 North Wacker, we recently celebrated its grand opening. It was four years ago this month that I started at Howard Hughes. And at that time, 110 North Wacker was a dream, a sketch on a whiteboard of what could be.

To be talking about the opening of such a remarkable building speaks volumes about the collaboration and hard work that has defined this project team from the very beginning. A few highlights. 110 North Wacker is the tallest office building to be delivered in three decades in Chicago, a building that was delivered on time and on budget during a pandemic, a building that is 77% leased with a weighted average lease term of over 14 years and includes high-quality credit tenants such as Bank of America, a building truly focused at being market leading from a tenant experience point of view, with an unmatched amenity package, including our own 110 custom app. And most importantly, a building that is best-in-class and is committed to delivering the absolute pinnacle of health and wellness. In connection with the deconsolidation of this asset upon completion of construction, we reported a gain of $267.5 million, which reflects our proportionate share of this investment at fair market value. I'll talk in more detail on this accounting impact in a minute. While the recognition of the gain shown for the quarter will not be reflected in our cash balance until the ultimate sale, we do believe that this amount accurately reflects the inherent value created through the development of this project and value that will be ultimately realized by HHC's shareholders. The final pillar of our transformation plan was to focus growth and value creation within our core assets.

Our portfolio of extraordinary master-planned communities. The regional leaders of our MPCs continue to monitor demand for particular asset types, where we can deploy capital to achieve the highest risk-adjusted returns for our shareholders. We have commenced modest investments in pre-development work, so we will be ready to move forward as market demand returns. In our MPC segment, new home sales, which are a leading indicator of land sales, continued to accelerate with a total of 802 new homes sold during the quarter, up 30% when compared to the third quarter of 2019. 2020 year-to-date new home sales of 2,038 were 9% higher compared to the same period in 2019. These results reflect our view that buyers are seeking exceptional walkable communities with expansive open spaces and amenity-rich urban cores in low-cost states. If the continuation of strong new home sales persist, it should further development opportunities in addition to our land sales. Land sales for the quarter were down 53% compared to the third quarter of 2019 with 70 acres sold compared to 147 acres in the third quarter of 2019. This decline is largely due to a decrease in Summerlin, which is the result of timing associated with super pad sales. In the third quarter of 2019, Summerlin had a large super pad sale that was not repeated this quarter. This, along with fewer lot sales at the Summit, drove MPC EBT lower by $25 million compared to the third quarter of 2019. As we've stated in the past, land sales are volatile quarter-to-quarter, and we encourage you to look to full year results for comparison purposes. Summerlin's new home sales during the quarter were 27% higher when compared to the third quarter of 2019 and were 4% higher on a year-to-date basis. As you may recall, in the second quarter of 2020, year-to-date new home sales in Summerlin were down 7.5%, which demonstrates the strength of our third quarter results.

We are continuing to see out-of-state migration from higher cost states such as California and are confident that the continued momentum in Summerlin's new home sales will translate to land sales in the coming quarters. Bridgeland had a tremendous quarter with 250 new home sales, nearly 32% higher versus the third quarter of 2019. And the community set monthly new home sales records for May, June, July and August. In addition to positive new home sales results, Bridgeland was able to raise its residential price per acre from $411,000 in the third quarter of '19 to $445,000 in the third quarter of 2020, an 8% increase. Our youngest community, The Woodland Hills had significant growth both in new home sales and in land sales, albeit from a low starting basis. New home sales were up 185% during the quarter versus the third quarter of '19, with July and August setting monthly new home sales records for the community. Land sales in the third quarter of 2020 were up 104% versus last year and the price per acre rose nearly 10% from $272,000 in Q3 of '19 to $298,000 this past quarter. Turning to our operating assets, we continue to see improvement in sectors that were most impacted by the coronavirus, with retail and hospitality showing promising signs of recovery. Our office and multifamily assets performed in line with expectations as collections remained in the high 90% range. During the quarter, our operating asset NOI of $38 million was 31% lower compared to the third quarter of 2019 and was 6% lower sequentially from the second quarter of 2020. Office NOI rose 4% when compared to Q3 of 2019, but fell 14% versus the second quarter of 2020. Collections remained strong at 97% and certain unstabilized office buildings are seeing strong leasing results. The sequential decline in office NOI was partly driven by 9950 Woodloch Forest tower as Occidental Petroleum short-term leaseback of five floors of temporary space expired in the second quarter. One of our newer office buildings, 6100 Merriweather located in Columbia is now leased at 63%, and the team has leased over 50,000 square feet of this building in 2020. Multifamily NOI decreased $1.4 million or 26% versus the same quarter in 2019 as a result of increased concessions and negative cash burn on newly opened multifamily assets now in operations. Multifamily did, however, increase 3% sequentially from the second quarter of 2020. Similar to office, multifamily collections remained strong, collecting 99% of our rents.

And our unstabilized assets are leasing up ahead of projections. Our newest multifamily asset, Two Lakes Edge in the Woodlands, completed construction last quarter and is already nearly 30% leased. Juniper, our latest multifamily asset in Columbia, completed construction in the first quarter of 2020 and is 46% leased. This leasing velocity we are seeing gives us confidence that demand is present in our MPCs and is the type of indicator we look for when judging the level of demand for future development opportunities. The COVID-related impacts experienced by our retail assets resulted in a 56% decrease in NOI compared to the third quarter of 2019. Retail NOI was down 19% on a sequential basis, which was primarily driven by Ward Village retail, as Hawaii enacted a second round of stay-at-home orders during the quarter due to increased COVID-19 cases across the state. The state eased restrictions on October 15th, and we expect the region to start to recover, similar to the recovery we experienced in Summerlin in the third quarter. Excluding Ward Village retail, our NOI from retail increased 14% sequentially. These results speak volumes to the increased leasing activity that we have seen throughout our communities. So far in 2020, our HHC retail leasing team has signed 45 new leases for 148,000 square feet, with another 10 leases currently in negotiation. In addition to these new leases, we have signed lease renewals for 50 existing tenants, representing 143,000 square feet. Occupancy remains above 90% for most of our stabilized retail assets, and we continue to see robust demand from our retail space in areas such as Downtown Summerlin. We attribute this to the quality, location and the strong demographics that make our communities so desirable and the incredible effort of our leasing team to execute. Retail collections improved to 66% compared to 49.7% last quarter. Excluding Ward Village, retail collections improved further to 71%. We continue to actively engage with all of our tenants, particularly with our small business and local tenants who need assistance the most during this time. We've helped these tenants in various ways, including with rent deferrals, which can dramatically impact their ability to survive.

Our hotel assets in the Woodlands were heavily impacted by the coronavirus in the second quarter of 2020 as all three hotels were forced to shutter for most of the quarter. Towards the end of the second quarter, our hotels were able to resume operations, and we saw positive results in the third quarter. Although hospitality NOI was substantially lower in the third quarter of 2020 versus the third quarter of '19, our hotels posted positive quarterly NOI of $626,000 versus a $1.8 million loss in the second quarter. During the third quarter, we saw increased activity from weekend vacationers, business travelers, Major League Baseball teams and evacuees from Louisiana due to the unfortunate impact of Hurricane Laura. The ballpark in Downtown Summerlin remains essentially closed due to the cancellation of the Minor League Baseball season, which negatively impacted our operating asset NOI on both a year-over-year and sequential comparison. If Minor League Baseball returns to a full season next year, we expect the ballpark to generate north of $8 million in annualized NOI. A return of baseball will also have a positive impact on our adjacent retail, as fans who attends these games also enjoy Downtown Summerlin shops and restaurants. Shifting to our strategic development segment, Ward Village saw strong condo sales activity, with 24 homes pre-sold during the quarter. The primary driver of these presales was Victoria Place, our latest mixed-use project, with 13 contracted units this quarter. We are so pleased with the rapid sales momentum at this project, which is now 71% presold as of September 30th, and is the fastest selling tower at Ward Village to date. Our two buildings currently under construction, Aalii and Koula, sold five and six units, respectively, and are 85% and 77% presold, respectively. We expect Aalii to be completed in late 2021, followed by Koula in 2022. Both buildings remain on time and on budget with hard deposits from buyers.

As a result of COVID-19, we launched a digital sales platform with virtual condo tours and 3D models of interactive floor plans and live chat capabilities, which has proven to be very effective in this environment. It is important to note that due to timing of deliveries, year-over-year condominium revenue is not comparable. 2019 revenues included condo tower deliveries from Ke Kilohana and Aeo, where we have not had any unit deliveries in 2020. The Seaport, which was significantly impacted by COVID-19, reported a quarterly NOI loss of $6.2 million, compared to a loss of $3 million in the third quarter of 2019. The decline was primarily due to a decrease in our events, sponsorships, catering and managed businesses due to the closures and event cancellations related to the pandemic. We were, however, able to reopen the majority of the restaurants this quarter, including The Fulton, Malibu Farm and as outdoor seating and limited indoor seating is now allowed in New York City, and we look forward to more restaurants opening in the spring. With the summer concert series canceled as a result of the pandemic, we launched a new concept called The Greens on the rooftop at Pier 17, where groups of up to eight people could reserve their own socially distanced 14-foot by 14-foot mini-lawn space. This was an incredible win for our Seaport team. In the face of this pandemic and potentially losing our sponsorship revenue for the year, our team improvised and reacted quickly, delivering a first-class experience that achieved success beyond our expectations. We served over 42,000 guests, had an average waitlist of over 20,000 people and generated $1 million in revenue. Further, it meaningfully increased the Seaport District's exposure across social media and media platforms, with an increase of 253% in new social followers and over 378 million media impressions earned.

Perhaps most importantly, it allowed HHC to deliver an experience and activation for New Yorkers and our sponsorship partners, strongly demonstrating the appeal for this unique atmosphere on the rooftop of Pier 17, and allowed us to maintain a significant portion of our sponsorship revenue that could have been negatively impacted by the loss of our summer concert season. Construction at the Tin Building for the Jean-Georges Food Hall has resumed since being shut down in the second quarter, with the exterior of the building now substantially completed and the interior under way. One silver lining related to the pandemic is that it has led us to refocus and enhance our efforts on our e-commerce platform in the Tin building. With e-commerce and delivery playing such an important role in today's world, the current circumstances have given us the chance to ensure that we have the best consumer-focused experience, both from a restaurant and from a grocery point of view. As we proceed forward at The Seaport, we're keeping every option open to determine how to best maximize the value inherent in this project. To that end, a few weeks ago, we announced our proposed plan for our continued transformation of the Seaport District in New York. Our team in New York has created a plan that in addition to bringing a cohesive vision to the district to life, allows us to address several critical needs currently facing the city. The proposed plan will provide mixed income housing and provide New Yorkers with a chance to live in an area that's currently out of reach for so many. It will help to save the Seaport Museum, a treasured neighborhood institution that is really the anchor of the historic district. And it will propel New York City's economic recovery with an economic impact of more than $1.4 billion for the city and state and the creation of nearly 2,500 permanent jobs and roughly 2,000 construction jobs.

We are thrilled to be proposing what we see as a major improvement to the long underutilized surface parking lot at 250 Water Street, which is a full city block, over an acre in size and a gateway to the neighborhood. The result will be their first truly viable plan that will round out the revitalization of the Seaport District and help provide a secure future for the Seaport Museum. As we move toward the formal governmental review process, which will involve many public hearings, we remain committed to continuing to listen to all Seaport stakeholders over the coming months and we look forward to keeping everyone updated as these plans become a reality. Shifting to earnings. Taking a look at GAAP earnings, we completed the third quarter with earnings of $139.7 million or $2.51 per diluted share compared to earnings of $29.8 million or $0.69 per share for the same period last year. The increase in earnings is attributed to a onetime noncash gain of $267.5 million related to the deconsolidation of 110 North Wacker in Chicago. Also as a result of the deconsolidation, we recognized an additional $15.4 million of income attributable to the recognition of previously eliminated development management fees. In accordance with GAAP, the company has consolidated 110 North Wacker while it was under construction. Upon the tower's completion in September of 2020, the building was transitioned from construction to operations, and we determined that our partner was able to exercise substantive operational approval rights and that the asset should no longer be consolidated.

As such, we de-recognized all assets and liabilities associated with this venture as well as the noncontrolling interest. As part of the deconsolidation, we also recorded our retained equity investment as a current estimated fair market value. This triggered the recognition of a $267.5 million gain. I encourage you to reference our third quarter 10-Q filing for more detailed information. Excluding the deconsolidation of 110 North Wacker, earnings during the quarter decreased by $90.5 million compared to the third quarter of 2019, attributed to a decrease in Summerlin MPC earnings, lower operating asset NOI and the early extinguishment of debt. It is also important to highlight that in the third quarter of '19, we sold the Cottonwood Mall, a noncore asset in Utah for a pre-tax gain of $24 million that increased prior year earnings. Turning to the balance sheet. I'd like to highlight a few key items related to our debt. As of the end of the quarter, we had approximately $4.2 billion in total debt, of which approximately $1.9 billion is floating rate. Of that floating rate amount, $645 million has been swapped to fixed. That leaves approximately $1.25 billion unhedged. Most of this debt is associated with our Woodlands Towers bridge facility, construction loans for our two Ward Village towers under construction and our 250 Water Street loan at The Seaport. In August, we closed on a $750 million bond offering, issuing senior notes due August 2028 at a rate at 5.375%. We use the net proceeds of the offering, combined with cash on hand to pay down $808 million of debt, which increased our unencumbered book value of assets by over $1 billion and extended our overall maturity profile. The bond offering further diversified our funding sources, increasing our unsecured debt balance from 22.5% in the second quarter to 41.5% in the third quarter of this year and reduced our non hedged floating rate interest exposure to 30% of our total debt balance. Our nearest debt maturity is not until June of 2021, which is for 1201 Lake Robbins and The Woodlands Warehouse for a combined total of $280 million. Both of these assets are fully leased to Occidental Petroleum for 13 years, and we are working hard on a long-term financing solution.

Taking a look at liquidity, we finished the quarter with $857 million of cash on hand and only $311 million of net equity requirements for our projects currently under construction. We obviously have more than enough liquidity to meet all of our current funding commitments. While the company continues to feel the impact brought on by COVID-19, we are very pleased with the results of the quarter and are encouraged by the robust home sales across the portfolio and the resiliency of our operating assets and the Seaport District. We have irreplaceable assets in incredible locations, a strong balance sheet, an amazing team of employees, and we have maximized our free cash flow through rightsizing our G&A and capital spend. Given all of this, we are excited as we move forward in unlocking value for our shareholders.

So with that, I'd now like to turn the call to Q&A. And we'll answer the first few questions that have been generated by Say technology and will be read by Dave Striph. Dave, can you please read the first question?

Questions and Answers:

David Striph -- Executive Vice President

Sure. The first question is, what type of economic return do you expect the recently announced Seaport Tower deal or is it more about supporting the overall Seaport District ecosystem as a whole?

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

It's a great question and one that I would tell you that we're just a bit too early in the process to answer that question with any type of detail. As we mentioned, we're about a year away from gaining formal approval. And at that point, assuming that we get the approvals that we expect, we would be able to publish a total construction cost as well as the expected yields on the project. It is fair to say that given the size of the project and the potential capital allocation, it's a project that returns need to stand on its own. While we do think it's synergistic and we do think it will continue to drive outsized performance at the Seaport and contribute to the overall ecosystem. Again, as with any capital allocation decision, it needs to stand on its own and generate an appropriate risk-adjusted return. When we have the details on the total cost, the details on the potential returns and the details of the underlying capital structure associated with that asset, which we won't know until we get much further along in the process, we'll absolutely share it with all of our investors.

David Striph -- Executive Vice President

Next question. Last year, noncore assets were identified to be sold with proceeds being used to buy back shares. The stock is down almost 50%. The value of these assets has likely declined, but by a smaller percentage. Why not sell these or other unlevered assets and buy back stock today?

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

It's a great question. But first, I want to go back and clarify a little bit because in the question that was asked, it was stated that we were selling our noncore assets solely for the purpose of buying back shares. And in the transformation plan, if you recall, we were going to sell our noncore assets and use those net proceeds to accelerate the development opportunities with our core MPCs or potentially buy back shares. And every time we're making a decision to either start a new development, accelerate the process within our core assets or buy back shares, we're making a call at that point in time based on where we see the greatest potential to create value for our shareholders and underlying that against the risk associated with each. I would say that as we sit here today with rising cases and remaining economic uncertainty driven by both the virus and the political landscape, we're not quite out of the woods to a point where I feel comfortable using our excess liquidity that we work so hard to put on our balance sheet into a large share buyback or into a large new development kick-starting a new project right now. So I think as hopefully, these clouds start to clear and we create a little bit more economic certainty into the future, you would expect us to put this liquidity and capital we have on our balance sheet to work. And when we do, we'll make sure that we clearly communicate it with everyone.

David Striph -- Executive Vice President

Okay, the last question from the Say technology platform is please comment on the investment returns, asset value of Downtown Summerlin project. There recently was a $34 million paydown when the loan was extended. Current loan is about $221 million, which is only about 50% of the cost of the project.

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Happy to clarify that. And look, we are thrilled with the returns that we have driven historically in Downtown Summerlin. And to be clear, our recent bond issuance for $750 million that we just completed, part of the proceeds of that was used to repay the loan at Downtown Summerlin in full. And Downtown Summerlin is an incredible asset that continues to mature over time. Recall, Summerlin itself has 100,000 residents today. And it's a community that will mature to over 200,000 once we fully build out the residential aspects of Summerlin. And that increased density is going to continue to benefit Downtown Summerlin, as has the development of the ballpark, the hockey practice facility, the new multifamily assets and the extra office building, that we built Two Summerlin right across the street. All of those have contributed to increased sales, increased NOI at this asset and in January and February of this year, pre-pandemic, we had record sales per foot across our retail Downtown Summerlin. And we feel great about the investment we made there. And we feel great about the contributions made to the community, how it's helped drive incremental residential sales and increased our price per acre, and it's all part of that great environment that we're creating in Downtown Summerlin. So the loan has been paid off, and we feel great about the returns that we've achieved in Downtown Summerlin, and we feel on a risk-adjusted basis, they've exceeded our expectations.

Operator

[Operator Instructions] Our first question today comes from Daniel Santos from Piper Sandler. Please go ahead with your question.

Daniel Santos -- Piper Sandler -- Analyst

Hey, good morning. And thanks for taking my questions. My first question is...

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Good morning, Dave.

Daniel Santos -- Piper Sandler -- Analyst

Hey, hey. On land sales, I think it's fair to say that land sales came in a bit lighter than expected given strong home sales. David, I know you've talked extensively about how volatile that business is, and I think we're sympathetic to that. So I'm wondering if you could give us some more color on the relationship between home sales and land sales. And also, if you could comment maybe on your sense of how homebuilders are situated with land. Is it your sense that they're stocked up or are they low in inventory, and therefore, we might see some more volume in the near term?

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

It's a great question, Dan. And obviously, we were expressing our excitement in this quarter in terms of how strong our underlying home sales were. And as we've said, those home sales are typically leading indicators for underlying land sales. And we have seen those land sales continue to be strong in Bridgeland and Woodland Hills. And the lag between home sales and land sales in those two MPCs is shorter. If you recall, in our Houston-based MPCs, we sell individual lots to homebuilders. And as such, the lag between home sales and then their desire to buy new lots is a tighter time frame. In Summerlin, where we're selling super pads or subdivisions to homebuilders, that lag is a little bit longer. And it's not that inconsistent with what we saw just over a year ago. Dan, if you recall, the fourth quarter of '18, there was a spike in interest rates and home sales slowed substantially.

They rebounded pretty quickly into the early part of 2019 in the first and second quarter. And if you go back and look at our 2019 land sales, you'll see that that first quarter strength of home sales really translated to third quarter and fourth quarter sales of land in Summerlin. So that lag has always been there in super pads. I don't think it's any different this time. We are very optimistic and feel strong that we're gonna have a great fourth quarter of land sales, and that these underlying home sales are building quickly. Homebuilders need inventory, they need that precious resource of land that we have in our communities and continue to be incredibly desirable, and that will translate into strong land sales in the coming quarters.

Daniel Santos -- Piper Sandler -- Analyst

Got it. That's very helpful. So my second question is on the CEO search. And David, I appreciate your comments at the top of the call. What's your sense on timing for the search, and maybe when we might see a more complete bench at the top of the company?

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Well, look, personally, I would love to see it sooner. I think I have enough titles now that if you call the company, regardless of the time of day, I'll probably answer the phone. But again, I don't want to speak for our Board. They need to do a thorough and thoughtful process, and turn over all the stones to make sure they find the absolute best outcome at Howard Hughes, and the best person to be CEO of this company for the long term. And I'm supporting them in that process 100%. And I know they wanna move quickly as well, but they also need to make sure that they do a thoughtful and thorough job. And that's really the most color I can give you, Dan, because it's a process that they're running and I'm a participant in, but not on the decision-making side.

Daniel Santos -- Piper Sandler -- Analyst

Got it. I appreciate the position you're in, so thank you for the comments.

Operator

And our next question comes from Vahid Khorsand from BWS Financial. Please go ahead with your question.

Vahid Khorsand -- BWS Financial -- Analyst

Good morning. Thanks for taking my call. David, I know it's a lot of talking, but congrats on taking on the interim CEO role. Hopefully, that becomes something permanent.

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Thank you.

Vahid Khorsand -- BWS Financial -- Analyst

I wanted to follow back up on development in the MPCs. I wanted to get a sense of where you are on building out more multifamilies, if there's anything you're thinking about in the pipeline. And coupled with that, if you could answer if, what are the competition dynamics between Howard Hughes building a multifamily alongside some of these new home sales?

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Excellent question, and something that we talk about and debate all the time. In terms of new multifamily development projects, so we're watching the underlying statistics in our existing portfolio within our MPCs very closely because when you own the vast majority of a product in a certain submarket, you have incredible intelligence in terms of where consumer demand is. And great intelligence in terms of where rental rates are going, and retention, etc. So we're tracking those very closely. And in my prepared remarks, we talked about how our new multifamily projects in Bridgeland, in The Woodlands, and in Columbia have been absorbing, candidly, despite the pandemic, better than we had expected when we underwrote those assets. And that's a great indicator. But we've also seen some weakening renewal rates in the legacy assets in The Woodlands, largely as a result of the increased home buying. And that has benefited us on the home sales and land sales side.

So we're balancing all those factors, and we're looking to see when we see kind of a return of strength in the legacy assets, as well as continued absorption of those new products. And when we hit that tipping point where we see that demand grow in excess of supply, that's when we put the shovels in ground to start those new projects. I think, in the most likely scenario for us, given the strength that we've seen in Columbia in leasing, and given the strength that we've seen in Bridgeland in leasing, those projects would probably be the first couple that we would look forward with moving because the underlying dynamics there are strongest.

Vahid Khorsand -- BWS Financial -- Analyst

And then I'm gonna ask my second question as a joint question. It's on construction timeline. One is, when is the timeline to break ground in Victoria Place? And then the second part is, I know you were talking about the new Seaport development about a year in getting through all the meetings. But what do you envision the timeline of -- the construction timeline being once you break ground?

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Sure. Great question. So Victoria Place, we're hopeful that we'll be able to break ground in the next couple of quarters. Look, I would love to try and do it sooner, given the strength of the sales and how quickly we're moving. But as we've said in the past, we don't wanna start construction and break ground until we hit an appropriate level of presales, which we absolutely have at Victoria Place, as well as get a GMP contract from a contractor, and a construction loan, right?. We need to take as much risk off the table as we can before we put shovel in the ground and commit ourselves to spending $500-plus million in development. So we're working hard on GMP, and we're getting very close on a construction loan. And I would tell you that we've been very pleased with the receptivity of lenders to do condo construction loans in Hawaii despite the pandemic and the conditions we're in. We've been thrilled with the quotes we've gotten, and we look forward to talking about the loans that we're working on when we eventually close it. In terms of a construction timeline, we're usually about 30 months from start to finish in Hawaii.

And it's a time frame that we've tried to incrementally speed up over time as we've gotten better, and it becomes a more repeatable process. But each one of these towers is unique. They have incredible design characteristics, and we need to make sure that we execute flawlessly so that we're delivering a first-class product to our consumers and condo residents. So if it means that we're still taking 30 months, we'll absolutely do that. In terms of New York, I'll be honest, we don't have a great estimate right now. We are so focused on that approval process and getting through there. And that when we know exactly what we're building other than just renderings, and we're through some more detailed construction plans, then we'll be able to put pen to paper and give you a much more detailed construction timeline on that project.

Vahid Khorsand -- BWS Financial -- Analyst

Okay. Thank you very much.

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Thank you.

Operator

Our next question comes from Jon Petersen from Jefferies. Please go ahead with your question.

Jon Petersen -- Jefferies -- Analyst

Oh, great. Thanks. Good morning, guys.

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Good morning.

Jon Petersen -- Jefferies -- Analyst

Hey. In the MPCs and some of your retail properties, I was hoping you could maybe talk about some of the largest kinda retail or restaurant vacancies that have opened up during this COVID period, whether it's Houston or Summerlin or other MPCs that you're working on backfilling? And any more color on some prospects there and timing of backfilling that space?

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

You know what, we don't have a large meaningful vacancy that we're sweating over in Downtown Summerlin or Ward Village. We've seen some follow-ups of our tenants with national bankruptcies and local -- with local bankruptcies of tenants, as everybody has who owns retail. We're not immune by any stretch. But what we have seen is a lot of strength in our leasing, and our ability to backfill those spaces very, very quickly. And in our prepared remarks, I had mentioned that we had signed 148,000 square feet of new leases, and we have 10 new leases already in negotiation now, and that's addition to 143,000 square feet of renewals that we've executed with a very limited expiration schedule in retail. So there isn't a big box or an anchor right now that sticks out like a sore thumb that we're worried about. It's kind of blocking and tackling and taking care of tenants as we learn about potential bankruptcies and stress, and continuing to work with our local retailers to make sure that we're structuring a long-term solution to their business that helps them survive through this downturn.

Jon Petersen -- Jefferies -- Analyst

Got it. That's helpful. And then on condo sales at Ward Village, I mean, can you give us any sense of leading indicators that you're looking at right now, and you closed on 24 in the quarter, which is still an OK pace relative to your construction schedule. Just curious, as we think over the next couple of few quarters, do you think you can keep that pace up or maybe accelerate it?

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Well, look, I think that I would share your sentiment that it was an OK pace in a normal time. And then doing something entirely digitally, entirely virtually, we couldn't be more thrilled with the pace. And to see that continued absorption, knowing that we're not delivering a tower, our next tower Aalii until -- over a year from now, we feel great because that continued absorption is gonna get us closer and closer to 100% sold out when we complete, which is the goal, right? We're always trying to get that first 50% or 60% done very, very quickly so that we can launch construction and build. And then pace our absorption for the second half of the building, driving prices higher, increasing our margins wherever we can, and pushing price on those most desirable stacks. So look, we're thrilled with the velocity that we've seen. The reception that Victoria Place has gotten has helped inform our decisions as we design our next several towers, and we do have a couple more that are very close and getting ready to launch. And if this sales momentum continues, I think that we'll be talking about the next tower after Victoria Place in early -- or at least the first half of 2021.

Jon Petersen -- Jefferies -- Analyst

Okay. All right, great. Maybe just one more on -- at the Seaport, with the restaurants, you guys did a good job of opening up The Greens, and you got more outdoor seating going. I think indoor seating in New York is at 25% right now, I believe. But, I mean, if we move backwards on allowing indoor seating here in New York, I guess what plans do you have in place to keep anything going through the winter, if you can at all? Just trying to think about the cadence of NOI we should expect from the restaurant business there. Are we gonna take another step back in terms of the next quarter before we can really kinda move forward? [Speech overlap]

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Yeah, the direction of the NOI. And historically speaking, the Seaport is always a seasonal asset. And we've seen stronger performance in the summer months and weaker performance as it gets colder, and we lose the benefit of that outdoor space. The team is working on some great solutions for the rooftop over the winter that would allow us to activate that and generate revenue in a socially distant, appropriate way. And we look forward to speaking about that on our next call. But look, depending on which way this goes, if we are limited to 25% indoor seating, if we continue to see numbers rise and potential steps back in restrictions in New York, that's obviously gonna have a negative impact. So it's really tough for me to say which way the NOI is going to go next quarter without knowing how this is gonna play out. If numbers go down and we are able to get better inside seating, sure, we'll see an improvement in NOI. But I think it's gonna be highly correlated with how the city reacts to the changing numbers related to COVID.

Jon Petersen -- Jefferies -- Analyst

Got it. That's fair. All right, thank you for the color. Appreciate it.

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

No problem. Thank you.

Operator

Our next question comes from Jarrett Brotzman from Legal & General. Please go ahead with your question.

Jarrett Brotzman -- Legal & General -- Analyst

Hi, guys. Thanks for taking the time. I was wondering, if you might be able to provide a little bit more color on rent deferrals for some of, what you noted, your smaller, more local retail tenants. What, maybe, if you could disclose the timing of those deferrals and the cadence for payback any of the terms that you might be able to provide. And then if you could just remind us of kinda the mix of your kinda larger versus small and more local tenant base, that would be helpful. Thanks.

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

No problem. And you know what, it's -- honestly, it's not an easy question to answer because I don't want to imply that there's a one size fits all. And we have a different approach with each of our tenants. And we try to, as best we can, tailor our solution, whether that's a rent deferral, hopefully not an abatement, but it happens occasionally, or the restructure in terms of moving to a percent of sales for a period of time before it. All of those are very tenant dependent. And what we're trying to do is find the best solution that helps the tenant survive for the long term and remain a great tenant in the portfolio, and also protects our contractual income. In general, I would say, and this is not to say that everything looks like this, is that if we're doing a three-month deferral, we're adding that as a payback period over the term of the lease, or within the next year, or adding not only the payback of that, but extending the lease in terms of the lease extension. Or sometimes, there are other terms in a lease that we think are important, like a co-tenancy clause that we try to remove if we're gonna give somebody a rent deferral to make sure that we're getting some incremental rights or benefits.

It's a two-way street, and we appreciate that these tenants need something to survive, and we try to get a little something back on the other side to make sure that we're protecting our interest as well. In terms of a mix between our retail tenants, I mean, look, it is very much all over the Board. We have some large national tenants like we do in Hawaii with Nordstrom Rack. We have two large movie theaters, one in Hawaii and one in Downtown Summerlin. But the overwhelming majority of our tenants, specifically through Downtown Summerlin and Hawaii, are the smaller, local, more boutique tenants. Restaurants, food and beverage offerings, pharmacies, and grocery anchors, whether it's Trader Joe's in Downtown Summerlin or Whole Foods in Houston, in Columbia, or Hawaii, we have three. So it's a pretty diverse mix, and there's no great way to paint it in general terms across the board. It's much more focused on smaller, local tenants, and large national anchors.

Jarrett Brotzman -- Legal & General -- Analyst

Okay. Thank you for that. And just thinking about Hawaii, I was wondering if you might be able to tell us a little bit more about what you're hearing down there and expecting kinda after the reopening or permission for travelers to come back. And then finally, what you're thinking about on the tempo of lease-up for multifamily, what the timing on that is to reach kind of a stabilized level. That'll be it for me. Thank you.

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Okay. Yeah, no problem. All great questions. And obviously, with the second round of stay-at-home orders in Hawaii, it has been a challenging market for our retailers there, and we've had to do a little bit more there than we have in other areas to help protect the long-term nature of the income that we want to see those tenants survive and do well. As of October 15, when domestic travel restarted, we've seen an increase in travel. It's not close to the levels it was pre, but at least there's more activity, more folks around, and there's foot traffic that's driving sales. Foreign travel, and largely, the Asian travelers, have started coming back at the very end of October, and that's been an incremental benefit as well. I'm hopeful that as this continues to happen, and that Hawaii is able to maintain access to both domestic and foreign travel without seeing a spike in cases as they did the last time, and we're able to control this in a better way, we'll continue to see a recovery over the next two quarters, the way we saw the last quarter in Downtown Summerlin.

And if we're able to get there, we're gonna feel great because that type of strength and recovery and resiliency of leasing and tenancy has been tremendous for us in Downtown Summerlin. In terms of the timeline for stabilization of our multifamily, within our assets that are non-stabilized or under construction in our supplemental, which we show this quarter on pages 15 and 16, we show a date where we expect stabilization to occur for all of our multifamily and Juniper is 2023, Lakeside Row is 2021. And it's all really 18 to 24 months after the construction completion, which is, depending on the size of the units and the number of units we have to absorb, that's where the variation falls. Again, as we stated earlier in our prepared remarks, we're thrilled with the absorption we've seen to date. And to be a quarter in in our new project in The Woodlands, and 30% leased, and so on, and so on, we're exceeding our projections, and we're outperforming, and I think it speaks to the desirability of the assets and the markets and the MPCs where we're in to be able to outperform like that.

Jarrett Brotzman -- Legal & General -- Analyst

Great. Thank you very much for your time.

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Thank you.

Operator

And ladies and gentlemen, our final question comes from Candace Carlisle from CoStar News. Please go ahead with your question.

Candace Carlisle -- CoStar News -- Analyst

Thank you so much. David, you had mentioned the 110 Wacker building in Chicago could sell in the first half of 2021. Does that mean this property is currently being marketed by Howard Hughes and its development partner? And if so, how has the pandemic impacted your projected pricing?

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

It's a great question, Candace. But we're not actively in the market right now. We're doing all the work behind the scenes to prepare everything we need to to be in a position to go when we think the market conditions are optimal. And I would say that the pandemic, more than impacting valuation, has impacted the timing of when we would go to market. And before we go to market, it is really hard for me to tell you how this pandemic is gonna impact valuation. We're still ways away from selling it and closing it, and being able to record a price to be able to quantify that. Look, I think that we have the benefit at Wacker, as we talked about earlier, with incredible pre-leasing, and incredible weighted average lease term of over 14 years. And one of the safest, most tenant-focused buildings that's ever been built, and I would argue, the nicest building in Chicago. And as a result, I think that we still have a great opportunity to command premium pricing, and one that would reflect a value with or without a pandemic.

Candace Carlisle -- CoStar News -- Analyst

Got you. And if this building sells at some point in the future, where will that leave Howard Hughes in terms of selling its non-core assets?

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

In terms of the net proceeds, we'll probably be half-ish or a little bit more, and we had targeted about a year ago, $600 million of total net proceeds. The list of non-core assets that we disclosed in that presentation over a year ago would show that the next largest contributors to those non-core asset sales would be the non-core retail in The Woodlands, as well as the three hospitality assets in The Woodlands. Obviously, the pandemic has impacted the sales of those assets in a meaningful way. And given our liquidity position and the incredible work the team has done in terms of the equity and bond raise, we have the luxury of patience, and we don't need to rush to sell those at distressed pricing. So we can wait as long as it takes to make sure we maximize value.

Candace Carlisle -- CoStar News -- Analyst

Great. Thank you so much, David. I appreciate it.

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

No problem, Candace. Thank you.

Operator

And ladies and gentlemen, with that, we'll end today's question-and-answer session. I'd like to turn the conference call back over to management for any closing remarks.

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

We just wanna thank everyone, again, for joining us today. We look forward to connecting with you by Zoom or video to answer any follow-up questions you may have, and see you all at the upcoming conferences. And if not, we'll see you on the next conference call. Thank you again for your participation. We appreciate it. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

David Striph -- Executive Vice President

David O'Reilly -- Interim Chief Executive Officer; President and Chief Financial Officer

Daniel Santos -- Piper Sandler -- Analyst

Vahid Khorsand -- BWS Financial -- Analyst

Jon Petersen -- Jefferies -- Analyst

Jarrett Brotzman -- Legal & General -- Analyst

Candace Carlisle -- CoStar News -- Analyst

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