The Howard Hughes Corporation (HHC) Q3 2021 Earnings Call Transcript

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The Howard Hughes Corporation (HHH -0.20%)
Q3 2021 Earnings Call
Nov 5, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Howard Hughes Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to John Saxon Investor Relations. Please go ahead.

John Saxon -- Investor Relations Associate

Good morning and welcome to the Howard Hughes Corporation's Third Quarter 2021 Earnings Call. With me today are David O'Reilly Chief Executive Officer; Jay Cross President; Correne Loeffler Chief Financial Officer; Dave Striph Head of Operations; 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 statement 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 our CEO David O'Reilly.

David R. O'Reilly -- Chief Executive Officer

Thank you John and thank you all for joining us today. Welcome to our Third Quarter 2021 Earnings Call. To start the call I'd like to provide a brief recap of our quarterly performance and cover the highlights of both our MPC segment and the Seaport. Our Head of Operations Dave Striph will cover the results of our operating assets segment; followed by our President Jay Cross who will provide details on our development activity and speak to the results at Ward Village. And finally our CFO Correne Loeffler will conclude the call with a review of our financial results before we open the lines for Q&A. Before we dive into the results of the quarter I would first like to highlight the release of Howard Hughes 2020 annual ESG report which was published just a few days ago and can be found on the Sustainability portion of our website.

This report displays the impactful ESG results we have produced so far and reflects our commitment to environmental and social best practices which are integrated throughout our communities across the country. Now on to the highlights of the quarter. We closed out the third quarter of 2021 with strong results across all segments as Howard Hughes continues to capitalize on the high levels of demand that exist throughout our various mixed-use communities. To put our performance in perspective most of HHC's year-to-date results in 2021 have surpassed the year-to-date pre-COVID activity of 2019. MPC EBT is up 29%. Operating asset NOI is higher by 1% even with lingering impacts from the pandemic. And Ward Village condo sales were just shy of 2019 levels despite having limited available inventory. And this was all accomplished while reducing our G&A cost by 30%.

During the third quarter we saw healthy land sales driven by superpad sales in Summerlin. Our operating asset NOI grew for the fourth consecutive quarter. Condo sales in Ward Village accelerated despite a shrinking supply of available units under construction and the Seaport saw steady improvements from the return of the concert series at Pier 17 and the growing popularity of our unique restaurants. We expect these results to grow stronger especially with the recent addition of Douglas Ranch our latest MPC spanning 37000 acres in Phoenix West Valley. In October we announced our $600 million all-cash acquisition of this fully entitled shovel-ready MPC which further adds to our depth of opportunities.

By strategically redeploying the net proceeds from our noncore asset dispositions we now have the ability to transform this blank canvas into a leading community focused on sustainability and technology a community that is entitled for 100000 homes 300000 residents and 55 million square feet of commercial development. Following this transaction we are still left with a healthy cash position to continue executing on our existing development pipeline to meet the growing demand within our MPCs. While we have already had approximately two million square feet of development underway we're pleased to announce new commercial projects in the medical office and single-family for rent sectors which Jay will touch on in a moment.

But we're not stopping there. We've long believed that Howard Hughes trades at a steep discount relative to its net asset value. As such we are pleased to announce our recent Board-approved share buyback program amounting to $250 million. We believe there is great value that is yet to be reflected in our stock price and view this buyback initiative as an excellent use of capital that when coupled with our development projects will help deliver meaningful value. All of these recent announcements put a significant amount of capital to work to unlock tremendous value for our dedicated shareholders.

Now let's turn to the performance of our master planned communities. Our MPCs had another great quarter despite encountering headwinds including supply constraints the Delta variant and weather delays particularly in Houston. Housing supply still remains low throughout Houston and Las Vegas while demand continues to persist at elevated levels which leaves us well positioned to deliver residential land at appreciating prices. Homebuilders are currently sitting on record low inventory and they will need to replenish their depleted landholdings in order to meet its outsized demand.

During the third quarter our MPCs recorded earnings before taxes of $54.1 million a 48% increase compared to last year largely driven by the robust superpad sales activity in Summerlin as well as the strong performance of our Summit joint venture. In addition to these impressive results we continue to see a steady pace of new home sales. Proving the strength of our communities remains clearly intact. So far in 2021 there have been 2163 new homes sold in our MPCs a 6% increase over last year indicating further demand lies ahead.

Overall we're seeing a lot of positive momentum when it comes to land sales. And looking ahead we expect our fourth quarter to be the strongest quarter yet. As such we are raising our full year 2021 MPC EBT guidance by $60 million at the midpoint to a range of $275 million to $285 million primarily due to stronger-than-expected superpad sales in Summerlin. This is our second time raising MPC guidance in 2021 as this segment continues to exceed our expectations. Speaking of Summerlin this MPC drove a substantial portion of the positive results for the quarter selling 47 acres mostly made up of superpads.

This MPC generated $45.6 million in EBT a staggering 130% increase compared to the prior year period. Additionally year-to-date new home sales have eclipsed over 1200 units and are 20% higher over the same period in 2020 which if you recall was one of the strongest years in Summerlin's history. Another significant driver to Summerlin's results has been our joint venture at the Summit our exclusive 550-acre community in Summerlin. The total earnings from our share of equity during the quarter totaled $8.3 million driving year-to-date earnings to $54.6 million versus only $4.4 million during the first nine months of 2020. The activity at the Summit over the last year has been tremendous and these positive results have been primarily attributed to an influx of California buyers purchasing these custom lots and built product.

Turning over to Houston. Our Bridgeland MPC experienced a decline in land sales as supply constraints continues to have an impact. As we highlighted last quarter a majority of the homebuilders have extended their lead times for home deliveries due to ongoing supply disruptions that have resulted in higher material costs and delayed delivery times. We've started to see some of these bottlenecks subside and expect a more normalized environment heading into next year. This quarter's land sales were also impacted by inclement weather as significant rainfall in the Houston area delayed horizontal development resulting in slower lot deliveries to homebuilders. Despite these factors demand in the area remains incredibly strong. We view the significant imbalance between undersupply and robust demand as a strong catalyst for elevated activity as we move into 2022.

Lastly in the Woodlands Hills despite lower quarterly land sales due to the similar impacts experienced in Bridgeland the residential price per acre grew 18% over the prior year period to $353000 while new home sales were up 15% which points to future growth ahead as we accelerate activity across this MPC. Moving over to the Seaport. We saw heightened activity throughout the quarter as events and concerts at Pier 17 helped draw in spectators.

During the quarter NOI improved 43% compared to the same period in 2020 indicating the return to normalcy is near. In July we launched our 11-week summer concert series on the Pier 17 rooftop. Of the 30 concerts hosted 20 were fully sold out. The turnout for these contracts proved to be very strong with approximately 74000 guests in attendance representing 90% of our available ticket inventory. We were glad to welcome back this series after canceling last year's lineup due to the pandemic and we look forward to building on this momentum for next year. In addition to concerts we hosted several other major events including the SPs in July and the world tour for the Fujis who debuted at Pier 17 for their first show together in 15 years. It's these type of special events that continue to set the Seaport apart from other destinations in Manhattan.

All of these events help drive substantial traffic to our restaurants. We saw an uptick in activity as more and more locals and tourists experience our variety of cuisines from acclaimed New York City chefs. As a result our restaurant saw their average monthly sales increased 65% versus last quarter. While labor constraints have marginally improved we continue to see improvements in this space quarter after quarter. Many of our restaurants are now closely approaching their stabilization targets as higher volume has contributed meaningfully to the growth of our bottom line. Overall we see the Seaport heading in the right direction and the upcoming completion of the Tin Building followed by its grand opening in the first half of 2022 will help bring the Seaport closer to stabilization.

With that I'm going to stop and hand the call over to Dave Striph. Dave?

David M. Striph -- Executive Vice President & Head of Operations & Investor Relations

Thank you David. Our operating assets had a standout quarter as our portfolio delivered strong sequential and year-over-year NOI growth. For the third quarter we reported $60.6 million of NOI. When you layer in the activity from our three hotels that were sold in September this segment generated $62.9 million. This marks the fourth consecutive increase in quarterly NOI as our portfolio of income-producing assets continues to expand. As the economy continues to reopen and activity within our regions improves we have seen a corresponding increase in our retail NOI. These assets generated $16.1 million of NOI during the third quarter the highest level since the first quarter of 2019. This is in large part due to a stronger tenant base coming out of the pandemic in addition to consistent increases in collections.

For the third quarter we collected 83% of our retail rents with Summerlin leading the charge for the highest collections in our portfolio. As we have highlighted previously our retail at Ward Village has been materially impacted over the last several quarters due to sharp declines in tourism as a result of the pandemic. However as travel restrictions to Oahu have been recently eased we've seen a corresponding improvement in our retail performance. In fact Ward was the largest contributor to the sequential increase in retail NOI partly as a result of a onetime payment of deferred rent of approximately $1.4 million. We expect our retail portfolio to continue on this path of growth as collections work back to pre-pandemic levels coupled with the continuous lease-up of our remaining space to creditworthy tenants. At the Las Vegas Ballpark we were able to host the remainder of the aviator season at 100% capacity.

This resulted in $5.4 million of NOI a 74% increase over the last quarter where the beginning of the season was limited to 50% capacity to comply with COVID-19 protocols. This is a stark comparison to the same period in 2020 where the ballpark lost nearly $1 million as the season was canceled entirely due to the pandemic. So needless to say we were glad to welcome back fans into our stadium and look forward to another strong season next year. Our multifamily assets produced $9.2 million of NOI during the third quarter a 24% sequential increase almost exclusively attributable to strong leasing momentum at our most recent developments. In 2020 we completed construction on three multifamily projects between the Woodlands and Columbia. And during the third quarter these new developments made up 2/3 of the increase in sequential NOI growth.

In addition to this robust leasing velocity we've been able to push rents higher and are currently commanding some of the highest rents compared to our surrounding metro areas. In addition to our existing product we have three more multifamily developments underway in Downtown Columbia Bridgeland and Summerlin to meet this ongoing demand which will drive our NOI even higher. Our office assets have experienced steady increases in NOI over the past few quarters despite a sluggish recovery in the return to office environment. For the third quarter we generated $27.8 million in NOI a 6% increase sequentially and a 17% increase compared to the same period last year. The bulk of this increase was driven by the roll-off of free rent at select assets including 6100 Merriweather our latest office building in Downtown Columbia.

Overall we are seeing a noticeable increase in leasing activity and expect our pipeline of opportunities to accelerate into 2022 as tenants look for additional space and folks continue to return to an office setting.

And now with that I'll turn the call over to our President Jay Cross.

L. Jay Cross -- President

Thanks Dave and good morning everyone. To build on the momentum we are seeing within our operating asset portfolio we are pleased to announce some new product types in addition to our traditional mix. Recently we have expanded into the medical office space to continue to provide residents with the highest quality convenient medical care. We have noticed a growing need for this type of asset as the volume of residents in our communities continues to grow. With that we are pleased to announce the launch of two medical facilities spanning 106000 square feet throughout Downtown Columbia and the Woodlands.

In Downtown Columbia we will launch our first medical office building on the shoreline of Lake Kittamaqundi. This new development will sit adjacent to our successful Whole Foods in the former Rouse headquarters building helping to establish Downtown Columbia as a prominent health and wellness destination. Encompassing approximately 86000 square feet we have already secured an anchor tenant for roughly 20% of the entire space. We expect to break ground on this project during the first half of 2022 and this will kick start our major development pipeline in the Lakefront District.

In The Woodlands we will launch development on a 20000 square foot build-to-suit medical office building for Memorial Hermann. This project will serve as a primary local facility to cater to the medical needs of nearby residents and is expected to break ground by the end of this year. Lastly in Bridgeland we will be constructing our first single-family for rent community which will commence in the first half of 2022. These 263 homes will span a combined 328000 square feet and offer a unique hybrid between single-family homes for sale and multifamily for rent adding yet another new product to our operating asset portfolio. Given this is an extension of multifamily we plan to leverage the expertise of the property managers who oversee our existing portfolio in Houston to assist in managing this build-to-rent community.

In total these three projects represent over 430000 square feet and $114 million of development as we continue to put our capital to work and enhance our stream of recurring income. We have already had a number of developments under construction in Summerlin Columbia and Bridgeland so the announcement of these additional developments demonstrates the immense demand we are seeing throughout all our regions. Moving to the Seaport. Construction of the Tin Building is now in the final stages and will be substantially complete by the end of the year. The launch of the Tin Building has been highly anticipated and our team has been working in close partnership with the Jean Georges team to prepare for the grand opening of this 53000 square foot food hall in the first half of 2022.

Lastly we continue to make great strides through New York City's ULURP process to obtain the necessary approvals for the development of a 26-story mixed-use building at 250 Water Street. In October the City Planning Commission granted us approval for this project another hurdle passed through this rigorous land use process. We are nearing the end of our review which we expect to conclude before the end of the year at the New York City Council. The prospective development would replace the one acre parking lot with market rate and affordable residences commercial and community space further enhancing the character and vibrancy of this neighborhood.

We look forward to updating you on our continued progress as we continue to close in on the final stages of this process. At Ward Village the pace of condo sales continues to exceed all expectations. Despite having less inventory under construction the number of condos contracted during the quarter has only grown. Across our three recent towers 'A'ali'i Koula and Victoria Place we were 90% presold as of the end of the quarter with Koula and Victoria Place still under construction. This robust velocity has led to the presales launch of our eighth tower The Park. Presales activity at The Park began in July. And as of the end of October we have already contracted 64% of the total units.

The sales activity across these four towers just in the third quarter translates to 316 contracted units secured by hard deposits during a period of time when travel to the island of Oahu was discouraged surrounding Delta variant concerns. The pace of these sales is truly remarkable. We've been able to establish a mark on this community where residents want to live and our historical sales pace has reflected increasingly faster sellouts with the launch of each new tower. Subsequent to the end of the quarter we completed construction on 'A'ali'i and began welcoming residents to their new homes in October. As of November two we closed on 495 units totaling $332 million in net revenue revenue that will be recognized on our fourth quarter income statement and will contribute meaningly to our bottom line.

With that I'd like to now hand the call over to our CFO Correne Loeffler who will review our third quarter financial performance.

Correne S. Loeffler -- Chief Financial Officer

Thank you Jay. The results of the third quarter clearly demonstrates the strength of our business as we continue to benefit from the strong demand throughout our communities across the country. In summary our MPCs produced $54.1 million of earnings before tax or EBT during the third quarter a 22% decrease compared to the last quarter and a 48% increase compared to the prior year period. It's important to note that while EBT decreased from the last quarter it was largely attributed to nonrecurring costs such as the early extinguishment of debt upon the retirement of our Woodlands and Bridgeland credit facility.

In addition the top line only declined slightly due to the lack of commercial land sales in Summerlin compared to the last quarter. Our operating assets recorded a $62.9 million of NOI when including the contribution from the three Woodlands-based hotels which represented a 9% increase compared to the last quarter and a 65% increase compared to the prior year period. As Dave touched on earlier the strong performance was due to a continued improvement across our retail portfolio a strong Minor League season at our ballpark robust lease-up activity at our multifamily assets and the roll-off of free rent at select office assets. At Ward Village we contracted 316 condo units which were made up of 61 units from our three towers under construction and 255 units at the park which launched presales during the quarter. Combined sales at 'A'ali'i Koula and Victoria Place were up 36% compared to the prior quarter and increased 154% compared to the prior year period.

Finally at the Seaport we recorded a $3.6 million loss in NOI resulting in a 19% improvement over the last quarter and a 43% improvement compared to the prior year period. Taking a look at GAAP earnings for the third quarter. We reported net income of $4.1 million or $0.07 per diluted share compared to net income of $139.7 million or $2.51 per diluted share in the prior year period. The decrease in net income from the prior year was attributed to a onetime noncash gain of $267.5 million for the third quarter of 2020 which was related to the deconsolidation of our 110 North Wacker office tower in Chicago. If we remove this onetime gain our quarterly earnings were substantially higher than our prior year period due to strong activity to play throughout the entire business.

With only one quarter remaining to finish out the full year we remain on track to meet or exceed all previously disclosed guidance targets for 2021. As David mentioned earlier our MPC segment has done particularly well which has led us to raise our EBT target for the second time this year. Our previous guidance range for 2021 was $210 million to $230 million. We are now raising our guidance by $60 million at the midpoint thus revising our range to $275 million to $285 million as we are expecting a strong end to the year. Given the recovery we are experiencing in our operating assets we are raising our full year NOI guidance by $5 million to a range of $200 million to $210 million.

We are raising this segment's guidance despite the fact that we will not receive any hospitality-related NOI during the fourth quarter as we just sold our Woodlands hotels in September for $252 million. The sale of these assets generated $120 million of net proceeds and brings our total net proceeds from noncore asset sales to $376 million since the announcement of our strategic transformation plan in late 2019. We are also revising our full year condo profit guidance at Ward Village by $7.5 million at the midpoint. Our previous guidance range for 2021 was $100 million to $125 million. With elevated condo sales following the completion of 'A'ali'i in October we are expecting condo profits to range between $115 million to $125 million.

Please note that this target excludes the $20 million repair cost incurred at Waiea during the first quarter which we fully expect to be reimbursed for. Lastly we remain on track to meet our previously disclosed G&A guidance of $80 million to $85 million for 2021. Now let's take a look at our balance sheet for the quarter. We ended the third quarter with $1 billion of cash on hand leaving us plenty of runway to execute on the recent capital initiatives we discussed earlier. Additionally we closed on several financings at attractive rates while at the same time extending our maturity profile. A couple of our recent financings include two construction loans for our latest project in Downtown Summerlin a $75 million loan for our 1700 Pavilion office development and a $59.5 million loan for our Tanager Echo multifamily development.

In addition we refinanced The Woodlands and Bridgeland credit facility into a new $275 million loan secured by Bridgeland notes receivables and land to support future horizontal development. Lastly subsequent to quarter end we closed on a $250 million loan for 1201 Lake Robbins resulting in net proceeds of $248 million which helps elevate our overall cash position. Additional activity following the close of the quarter include the repayment of 'A'ali'i construction loan upon the completion of the project.

As Jay mentioned earlier we welcomed residents in October and paid off the $230 million outstanding on this loan using proceeds from the closing of the towers. We continue to push out our near-term maturities and remain focused on executing new financings to support our latest development projects as well as securing long-term funding for our stabilized assets. Please refer to our third quarter 10-Q and supplemental package for additional details on this activity.

Now I'd like to turn the call back over to David for some closing remarks.

David R. O'Reilly -- Chief Executive Officer

Thank you Correne. We're going to open up the lines for Q&A. But before we do I just want to hit on a few key points.

First we remain committed to driving our net asset value higher on a per share basis and are laser-focused on closing the gap between our stock price and the true inherent value of Howard Hughes. And the actions taken over the last quarter to deploy capital into projects that we believe will achieve outsized risk-adjusted returns reflects that strategy. We acquired a new fully entitled shovel-ready MPC. We announced the launch of three new development projects and we announced the $250 million share buyback. All of these initiatives will unlock tremendous value for our shareholders in the near medium and long term.

Second our balance sheet remains strong even after allocating capital to the various projects I just mentioned. Our disciplined capital allocation approach has allowed us to conserve capital and leaves us with sufficient excess liquidity to evaluate additional opportunities to further expedite growth. In addition the cash flow generated by future land sales condo sales and recurring NOI combined with the proceeds from our remaining noncore asset sales will only drive our cash position higher.

Third our financial results through 2021 represents the strength of our business as we are now exceeding pre-COVID levels and the guidance targets we have established for the full year points to an even stronger fourth quarter ahead. With that we'd now like to begin the Q&A section of the call. We will answer the first few questions that have been generated by Say Technology and will be read by John Saxon.

John can you please read the first question?

Questions and Answers:

John Saxon -- Investor Relations Associate

Sure David. Our first question asked what potential material effects are expected if the Woodlands township voting causes it to incorporate into a city?

David R. O'Reilly -- Chief Executive Officer

Thanks John and appreciate the question that came in from our shareholder here. The biggest impacts potential impacts of incorporation in the Woodlands were really safety and cost. And according to multiple law enforcement experts and financial experts that if this city were to incorporate we would have compromised the security and low tax rate that has helped make the Woodlands the number one place to live. And that vote for incorporation was held this past Tuesday on the second and I'm thrilled to announce that almost 70% of the residents voted against incorporation. And they saw that we don't need to fix what wasn't broke and kind of stood side-by-side with us as fellow residents and as the developer to maintain the Woodlands as according to niche.com the number one place to live.

John Saxon -- Investor Relations Associate

Thanks, David. Our next question as management wants to be more focused on MPCs to accelerate developments there what activity have been done in the past and what can be done in the future in order to reach the endpoint faster?

L. Jay Cross -- President

Thanks, John for this one. We only just reached our 11th anniversary as a company. And I think as we look back I would say the results produced over that last decade have indicated a constant focus on executing quickly to meet as much market demand as possible. If one looks at our operating asset portfolio we've increased NOI from $46 million in 2011 to $240 million of annualized NOI today. By monetizing our raw land we developed commercial assets. We now own and operate several million square feet of diversified real estate in office retail and multifamily. And so we're constantly focused on accelerating these development pipelines through the introduction of new product types such as medical office and single-family to rent as we mentioned on today's call and we'll continue to look to see how we can expand our portfolio within our MPCs.

John Saxon -- Investor Relations Associate

Thanks, Jay. For our next question how do you think about the $2 billion in nonsegment debt? And does it make sense to pay down to further protect yourselves from the eventual recession?

Correne S. Loeffler -- Chief Financial Officer

I appreciate the question. Just to be clear the nonsegment debt is made up of our three tranches of unsecured senior notes that we actually went out and issued last September as well as earlier this year. We did that by taking advantage of the capital market's opportunities to jump in there and really be able to secure this long-term debt at some attractive rates that allowed us to take out shorter-term maturities that are at higher rates. So net-net it actually was an improvement to our overall balance sheet. So we feel very comfortable with where we are today in our debt maturities and the overall levels of debt.

John Saxon -- Investor Relations Associate

Thank you, Correne. Now we have a couple of questions related to Douglas Ranch. The first one do you still anticipate JDM and El Dorado coming back into Douglas Ranch? How will personnel costs be split if HHC employees are doing most of the work? Anything to help understand the relationship with JDM and El Dorado when it comes to costs and earnings is appreciated.

David R. O'Reilly -- Chief Executive Officer

Sure. It's a good question. And as we announce next quarter we'll get into more details as this is a transaction that closed after the end of the quarter. But big picture JDM not El Dorado but JDM only has the option to reacquire 50%. And they put in $34 million for their deposit to reacquire that 50% stake. While I very much expect that JDM will come back in as our partner we view either scenario as favorable for HHC. When it comes to personnel costs yes HHC is a managing member and will be the boots-on-the-ground team executing there and we'll be paid to cover that overhead. So it should not be a cost center for us in any way. And assuming that JDM does come back in our partnership will be a 50-50 split. So we'll receive 50% of the earnings 50% of the cost and the same holds true for Trillium the first village of Douglas Ranch.

John Saxon -- Investor Relations Associate

Thanks, David. And then continuing on with Douglas Ranch can you discuss the challenges that water scarcity presents in Phoenix? And what if anything the company has done to secure water for this MPC?

David R. O'Reilly -- Chief Executive Officer

It's a great question and we thoroughly investigated Douglas Ranch access to water leading up to this acquisition and announcement. It was one of the main points in our diligence over the past six months. There is an aquifer directly under Douglas Ranch that we can tap into and we have water rights for Trillium along with a meaningful portion of Douglas Ranch already in hand. And our master plan at Douglas Ranch is going to integrate the best in water conservation and sustainability. It will be woven throughout the design and into the community from the very early stages as this is just a blank canvas under which we can put in the best processes at day one.

And we have experienced developing large-scale master plan communities in desert environments like Summerlin. And those state-of-the-art technologies will be replicated at Douglas Ranch. Summerlin was Nevada's first community to implement Water Smart conservation guidelines and it was the earliest adopter of desert landscaping. We've gone beyond the imposed restrictions for new construction improving low water use techniques that save millions of gallons of water each year. On top of that Heath Melton who will be the President in Phoenix and run Douglas Ranch has led the development of Bridgeland and they've won multiple awards for integrating local ecology and low-impact sustainable design. And we're going to continue to work with industry experts to make sure that we are at the leading edge of sustainability and conserving all of our natural resources.

John Saxon -- Investor Relations Associate

Thanks, David. This is going to be our last question that was pre-submitted through Say. How is the outlook for 2021 through 2022?

David R. O'Reilly -- Chief Executive Officer

Well we're not providing guidance today for 2021 to '22. But as we announced during the call we have raised guidance across our MPCs operating assets and condos for the remainder of this year. And as a result I think it's clear that we very much expect to close out 2021 with a very strong fourth quarter. And I believe that this momentum will carry us into 2022. In 2022 we will begin lot sales at Douglas Ranch. We'll continue to execute on our incredible development pipeline that Jay is growing every day. We're going to complete construction at Koula and Ward Village and we will have the grand opening of the Tin Building at the Seaport. Sitting here today on this call I have no reason to believe that 2022 will be nothing short of another excellent year for Howard Hughes in all of our segments.

John Saxon -- Investor Relations Associate

Thanks, David. All right. Operator we can open up the lines for those with questions on the call.

Operator

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

Daniel Santos -- Piper Sandler -- Analyst

Hey, good morning, everyone. Thank you for taking my question. My first one is on 110 North Wacker and apologies if you covered this during your prepared remarks but can you walk us through what the rest of the lease-up for that asset looks like and when do you expect the asset to stabilize?

David R. O'Reilly -- Chief Executive Officer

Sure. So we're approximately 80% leased at 110 North Wacker. And as you know it's anchored by Bank of America. And the vast majority of the building is on long-term leases. So we have a weighted average lease term there of over 12 years which is we think tremendous. The majority of the remaining lease-up space is in smaller chunks and some option space that our larger tenants have. So we only have the option to build these to lease those for some shorter durations. I think that given that the leasing pipeline has started to rebuild post-pandemic in Chicago I'm hopeful that we can get some more leases done over the next quarter or two.

But as you know Dan we're in the market with that asset and we talked about this last quarter. We're hopeful to get some potential bidders on that over the next several months and be able to execute on a sale of that noncore asset as quickly as we can at the right outcome for the company. And as Correne highlighted with our liquidity position we're not in a rush. We're going to wait for the right price not the first price.

Daniel Santos -- Piper Sandler -- Analyst

Got it. I appreciate that. I was wondering if you could give some more color on the large pads out at Summerlin. There seems it's like a $13 million apartment deposit it would seem like a pretty significant sale. So just any color on that would be helpful.

David R. O'Reilly -- Chief Executive Officer

I think the best color I can give you Dan is back to the remarks we made regarding the increased guidance in our MPC EBT for the remainder of the year. And obviously by taking that guidance up as much as we did at the midpoint we feel very confident that there is great demand for builders for our land both in Summerlin and Houston. And that increased guidance reflects that deposit and as well as other transactions that we believe will come in during the fourth quarter.

Daniel Santos -- Piper Sandler -- Analyst

Thank you. Just one last one if I may. Over at Ward Village would you consider accelerating the development to maybe two towers a year just given the strong demand? Or do you still feel pretty comfortable with that one tower a year kind of pace?

David R. O'Reilly -- Chief Executive Officer

Well look our job is to build as quickly as we can to meet market demand. And I think that while we launched one tower already this year we have the opportunity to launch a second that would not be competitive. And that may be more of a workforce housing tower. And then hopefully toward the early to middle of next year launch our next tower. But we're thrilled with the progress. I can't believe that I'm sitting here only three months later after our launch in July at the percent presold that we are it's really a testament to the team.

And that has been with three price increases over this three-month period. And despite those increases demand continues to remain strong. So we feel great sitting where we are. We're always trying to accelerate to meet market demand. If we could launch two at the exact same moment I think that may be a little bit too much. But if we can get them every six to nine months instead of every 12 to 15 months that might be a way to better tap into that demand.

Daniel Santos -- Piper Sandler -- Analyst

Appreciate the comments. Thank you [Indecipherable].

Operator

The next question is from Peter Abramowitz with Jefferies. Please go ahead.

L. Jay Cross -- President

Hey, Peter.

Peter Abramowitz -- Jefferies -- Analyst

Hi. Thank you. Good morning. How is it going?

L. Jay Cross -- President

Good.

Peter Abramowitz -- Jefferies -- Analyst

Good. Good. I just want to ask at the Seaport could you give an update just on leasing prospects for some of the retail vacancies there as well as some of the office space that you have left?

L. Jay Cross -- President

Thanks, Peter. I appreciate the question. Clearly retail in New York City coming out of the pandemic has been impacted. And we've been impacted like so many of those other areas in the city. We've been able to backfill a lot of the vacancies the bankruptcies and those tenants that haven't survived like 10 Corso Como with some great new concepts like the Long Club and a restaurant by Wylie Dufresne and that's been great. And those spaces are getting built out now and we're hopeful that we'll be able to open those in the next several months.

And then some of the other smaller spaces in the historic district we've been able to bring in some great shorter-term tenants some activations that have helped keep it alive and drive some revenue for us which has been great as we continue to look for the right long-term users in that space. From an office leasing perspective on the Pier we are continuing to market that space. And at this point we're waiting for the right tenant that's going to appreciate that space the way that we do and someone like Nike and ESPN that sees the value of having water views on three sides. And we do think that as the Tin Building opens next spring and the construction fence comes down and we really open up the Pier to the world we're going to see that demand grow.

Peter Abramowitz -- Jefferies -- Analyst

Okay. Got it. That's helpful. And then in your office portfolio in your core MPCs what's utilization physical utilization looking like currently? And kind of how is the return to work that's slowly happening? How is that impacting some of the vacancies that you're looking to lease up in your office portfolio?

L. Jay Cross -- President

Sure. So we're like most markets we're seeing utilization rates picking up every week every day. And sitting here in Houston I can tell you that there are more and more cars in the parking lots here on a daily basis and that's great. And the leasing velocity here in Houston has continued to grow as well. And probably three quarters ago Peter I would have told you that we were talking to tenants that were 5000 to 10000 square feet. And a quarter or two ago we started working on some full-floor deals here which are the 20000 to 30000 square feet. And now the tenants that are touring are even larger in size. So we see that momentum continuing to grow here in Houston.

In Vegas it really never stopped because our two office buildings there are entirely full in addition to the two buildings that are 100% leased to Aristocrat. And our new construction 1700 has over 50% of the building under LOI already. So that pipeline has been great. And in Columbia a very similar story in that 10 through 70 continues to perform very very well one and two Merriweather are basically entirely full. And we're working on a deal as we speak that hopefully will take the balance of 6100. So we're feeling very good on the office leasing front as that momentum continues to gain steam coming out of the pandemic and folks get back to the office.

Peter Abramowitz -- Jefferies -- Analyst

Got it. And are you able to quantify kind of what physical utilization is? Is that something like 40%? Or is it closer to 60% or 80%?

L. Jay Cross -- President

I would say it's between 50% and 60% but it depends on the building. It depends on the market. If we have a building that has a tenant for 50% and they're not back to the office yet clearly that building is not in that same range. But in general across our portfolio I'd say it's in the 50% to 60%.

Peter Abramowitz -- Jefferies -- Analyst

Okay. Got it. That's helpful. And then final one for me. Could you just are you able to quantify kind of the yields that you're underwriting to on the single-family for rent and the medical office product? And then for the medical office building is that something you view as a long-term hold or is that something you could develop and then look to take advantage of the depth of private market demand?

L. Jay Cross -- President

I'd say well as we start construction on those projects and they get into the supplemental the yields and stabilization dates and expected timing will all be thoroughly disclosed. I think it's safe to say that with any new development that we're doing we're trying to achieve those outsized risk-adjusted returns and develop a yield well in excess of underlying cap rates. And for these projects you should expect nothing different than what we've done in the past for the past 11 years. In terms of medical office as a core hold I think for those buildings that are the multi-tenant users that are synergistic with having a dominant market share that's something that we want to continue to hold. I think the unique situations where we have a build-to-suit for M.D. Anderson for a very unique use like a cancer treatment center versus a traditional medical office that presents a different opportunity for us to create value.

Peter Abramowitz -- Jefferies -- Analyst

Got it. That i s all for me. Thank you.

L. Jay Cross -- President

Thanks.

Operator

The next question is from Vahid Khors and with BWS Financial. Please go ahead.

Vahid Khorsand -- BWS Financial -- Analyst

Hi. Good morning. Thanks for taking my question. First question David you were talking about in Texas the properties there the MPC that the homebuilder sentiment not necessarily sentiment I guess but their supply issues and their build-out issues whereas in Summerlin there seems to be a difference. Could you just talk a little bit about why Summerlin is seeing a different homebuilding era right now versus Woodlands and Bridgeland?

David R. O'Reilly -- Chief Executive Officer

So I would say that Woodlands and Bridgeland compared to Summerlin has some similarities and those supply constraints that they're seeing and whether it's front doors or windows or appliances have been very consistent. There have been also some meaningful differences as well in that one in Summerlin we're selling superpads; whereas in Bridgeland Woodland Hills and Woodlands we sell lots. So therefore the lead time for a builder is much longer when they buy a superpad and therefore they're buying their superpads today for those home sales out into the future versus buying a lot today to sell that home tomorrow. So their appetite remains strong because they're buying a little bit further into the future.

The other big difference in the two has been just the weather and that it has been so wet this summer in Houston that it has slowed down our ability to deliver lots to builders by about three months. And the approval and permitting process has been backlogged because there is a rush to supply lots. We're at an all-time low in terms of developed lots on the ground for builders. And we're in a sub eight-month supply across the region. And in the far Northwest where Bridgeland sits that supply is below six months. So we're working hard and trying to get caught up but the weather has put us behind some of the approvals have put us behind. And there is a tremendous demand from the builders. We just have to expedite our delivery to meet that demand.

Vahid Khorsand -- BWS Financial -- Analyst

So in the same vein I think I brought this up when you first brought up the idea of single-family rental homes in Bridgeland. Has there been any pushback from the homebuilders or is there so much demand that just 200 something I think it was 200 something homes doesn't really make that much of an impact.

David R. O'Reilly -- Chief Executive Officer

No there's been no pushback from the builders. And I think that if you look at some of the public builders they're actually either working directly or in venture to get into this business because they see what we see which is the home renter is not the same person as the home buyer. And it's not necessarily directly competitive. It's meeting a segment of the market that is not necessarily a home buyer because it's a nearby issue or it's a temporary job or someone who doesn't have a deposit. But there is a meaningful component of the population out there that is looking for a single family for rent option that is not necessarily looking at it instead of a home purchase.

Vahid Khorsand -- BWS Financial -- Analyst

Okay. And then my last question it's about Ward Village. And I think the part I don't see an income type of building category like I know in Victoria Place's ultra-luxury and Koula is upscale. But as you're now seeing this extra demand that you're seeing is coming in and prices going higher do you are you entitled or is there any limitations on maybe the next one being workforce versus ultra-luxury or do you have the freedom to just go ultra-luxury if that's where the market is?

David R. O'Reilly -- Chief Executive Officer

So other we have a limitation that 20% of the units need to be workforce. And the first portion of that was met with Ke Kilohana. And we expect our next tower that we're working on right now to meet the remaining requirement for all workforce housing. Other than that our ability to build is up to us and we can do ultra luxury upscale moderate wherever we see the deepest pockets of market demand. And for us if we're able to have a balance in the type of product we're delivering between the first second and third row we can hit the widest potential pocket of demand the most potential buyers that are out there in the market and accelerate the value creation as fast as we can.

Vahid Khorsand -- BWS Financial -- Analyst

Got it. Thank you very much.

David R. O'Reilly -- Chief Executive Officer

Good.

Operator

The next question is from Alex Barron with Housing Research Center. Please go ahead.

Alex Barron -- Housing Research Center -- Analyst

Thank you and good morning. Great job on the quarter.

David R. O'Reilly -- Chief Executive Officer

[Indecipherable].

Alex Barron -- Housing Research Center -- Analyst

I wanted to ask a question on the new Phoenix MPC. I think you indicated you could sell about 1000 lots in the first year. Wondering if you could give more specifics on what quarter do you think those first sales would happen. And is there any guidance you can offer as far as approximate price of those lots? Is it in the $75000 or $100000? What's the approximate range?

David R. O'Reilly -- Chief Executive Officer

So when we announced the transaction Alex we said that we expected to transact on at least 1000 lots in the first half of next year. And that's probably about as granular as I can get at this point in time. But I feel very good that we're going to be able to get that done in the first half. And we had talked on our announcement the Douglas Ranch call at about that $70000 to $75000 range per lot but that will depend on lot size and density etc. depending on which neighborhood. Again we really focus on price per acre. We think that's kind of a great equalizer in terms of the variability in terms of lot size and density.

Alex Barron -- Housing Research Center -- Analyst

Okay. And when you say that 1000 in the first half is that meant to imply that in the second half there could be nothing or you just don't have enough visibility? In other words I'm trying to get a sense of is it going to be consistent sales every quarter pretty much? Or is it going to be more spotty kind of like the way Summerlin works where you sell a big pad of land and then maybe nothing for a few quarters?

David R. O'Reilly -- Chief Executive Officer

Yes I think that you could expect it to be a little bit more lumpy. I think all of our land sale business is lumpy. But I would expect that we would work hard in Phoenix and at Douglas Ranch to use the same methodology that we use in Summerlin which we think creates the most value for the company. And that does create a little bit more lumpiness in the results but it drives much better cash flow to Howard Hughes. So I would expect that if we're able to transact at those 1000 lots in the first half of next year we might not sell much more for the remainder of the year. And 1000 lots is a meaningful amount of supply for a new community just getting started. And if you think of Summerlin selling 1400 homes last year or Bridgeland selling about 900 homes last year to be in a position where we could do 1000 a year as our first year as a new community is exciting but that's a lot. So to think that we could do 1000 lots every six months I think is a little bit aggressive for community's first year in existence.

Alex Barron -- Housing Research Center -- Analyst

Right. Well the good news is that market is pretty land constrained. So I think you'll find plenty of demand from builders.

David R. O'Reilly -- Chief Executive Officer

We agree with you wholeheartedly Alex.

Alex Barron -- Housing Research Center -- Analyst

Yes you guys got a good deal there. Second question is on the Hawaii condos. So congratulations on the first closings on time in 'A'ali'i. Can you give us a sense on Koula and on Victoria Place and on this new part Ward Village what are the expected closing dates on those three towers?

David R. O'Reilly -- Chief Executive Officer

So we expect to close Koula at the end of next year. And then Victoria Place should be about a year after that.

Alex Barron -- Housing Research Center -- Analyst

Okay.

David R. O'Reilly -- Chief Executive Officer

Now the park which we just started presales on in July we haven't started construction yet. So until we have a construction start date it's tough for me to pin down a closing date or completion date because again we don't start construction until we're 50% presold which we're almost there basically there. And so we have a construction loan in process which we don't have yet for the park and a GMP from our contractor which we don't have yet.

Every time we start a new tower there's a great internal race between our construction team and the sales team in terms of who can get done first 50% presold or GMP contract. And our sales team has won I think for the last four towers in a row which is great news for us. We love that. But we do want to make sure that we are prudent and thoughtful before we start construction that we have our costs completely buttoned down and we have financing in place so that we can deliver that project with the appropriate amount of equity.

Alex Barron -- Housing Research Center -- Analyst

Makes sense. And on this Park Ward Village can you give us a sense of where the price is some type of price range for that condo tower?

David R. O'Reilly -- Chief Executive Officer

So the Park Ward Village is directly across from the Victoria Ward Park from Koula. So it is a second row tower with great sweeping views right behind Victoria Place. And I think that you should expect pricing there to be a little bit higher than Koula but perhaps not as high as Victoria Place in the front row. And the passage of time and appreciation that we've seen in Ward Village has allowed us to make sure every time we sell that next front row project or that next second row project we've been able to achieve a meaningful premium from the last one.

Alex Barron -- Housing Research Center -- Analyst

Okay. Thanks a lot and best of luck.

David R. O'Reilly -- Chief Executive Officer

Thank you. I appreciate it.

Operator

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

David R. O'Reilly -- Chief Executive Officer

Thank you again for joining us today. Hopefully we'll see a lot of you at our upcoming conference schedule and roadshow. And if there's any questions between now and then we're always available to help. Thank you again. Talk soon.

Operator

[Operator Closing Remarks].

Duration: 58 minutes

Call participants:

John Saxon -- Investor Relations Associate

David R. O'Reilly -- Chief Executive Officer

David M. Striph -- Executive Vice President & Head of Operations & Investor Relations

L. Jay Cross -- President

Correne S. Loeffler -- Chief Financial Officer

Daniel Santos -- Piper Sandler -- Analyst

Peter Abramowitz -- Jefferies -- Analyst

Vahid Khorsand -- BWS Financial -- Analyst

Alex Barron -- Housing Research Center -- Analyst

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