Howard Hughes' (NYSE:HHC) quarterly financial results continue to swing wildly due to the timing of its property sales. This time, the culprits were lower land sales in its master planned communities (MPCs), and a decline in revenue recognized from condo sales in Hawaii, which combined to push key metrics lower compared to the year-ago period.

Howard Hughes results: The raw numbers


Q1 2018

Q1 2017

Year-Over-Year Change

NOI from operating assets

$46.8 million

$44.5 million


Adjusted FFO

$39.4 million

$66.0 million


Adjusted FFO per share




Data source: Howard Hughes Corp. NOI: net operating income. FFO: funds from operations.

Two people in suits shaking hands in front of a building.

Image source: Getty Images.

What happened this quarter? 

Land sales for the real estate development and management company continued to fluctuate:

  • As they did last quarter, earnings from Howard Hughes' strategic development segment declined versus the year-ago period due mainly to the timing of when it can recognize revenue from the sale of condo rights at its development in Hawaii. Overall, those units continued selling briskly as the company put another 222 under contract during the quarter. This number included 183 at its newest building, 'A'ali'I, which it just opened to public sales in January. The company has pre-sold 39% of the units at that building along with 95% of the residences at its four other buildings that are either delivered or under construction.
  • Earnings from MPCs declined 16.6% year over year, due to timing, as well as the fact that it recorded a large institutional land sale in the year-ago quarter; no similar sales occurred in Q1 2018.
  • On a more positive note, NOI from Howard Hughes' operating assets improved 5% due to higher event and banquet revenues at The Woodlands Resort and Conference Center, as well as strong occupancy at its hospitality assets overall. Partially offsetting those gains was the loss of income from 110 North Wacker and Ward Warehouse, which are undergoing redevelopment. Factoring out that lost revenue, NOI would have been up 11.7% year over year.

What management had to say 

CEO David Weinreb had this to say about the company's results and strategic initiatives:

Our first quarter results showed continued momentum across our three business segments. We are particularly pleased with our Strategic Developments Segment in the first quarter as we increased our projected stabilized NOI target by $35.9 million to $291.0 million, announced an agreement with Malibu Farm at the Seaport and delivered strong sales at Ward Village. In our Operating Asset Segment, we saw first quarter NOI grow sequentially by $10.5 million to $46.8 million with particularly impressive results in our hospitality segment. In our MPC Segment, we saw average price per acre increase sequentially by $39,000 to $592,000. While our first quarter MPC earnings before taxes were lower than past quarters, we believe that this quarter's results do not reflect the continued broad based underlying demand for product in both Summerlin and our Houston MPC's.

As a real estate development company, Howard Hughes' quarterly financial results tend to ebb and flow with project completions and property sales. The lull it's currently experiencing in recognizing revenue from its work masked its progress during the quarter. As noted, condos in its fifth tower at Ward Village in Hawaii are selling at a brisk pace, though it won't begin recognizing that revenue until the building is farther along in the construction process. That suggests earnings should pick back up again in future quarters.

Looking forward 

Howard Hughes has several other projects under development. Two noteworthy ones are its new baseball park in Las Vegas and the redevelopment of 110 North Wacker in Chicago. The company has already started building the park that will hold its wholly owned minor league baseball team, the Las Vegas 51's. It expects this $114.7 million project to add $7 million in NOI once complete. Meanwhile, the company has completed demolition of 110 North Wacker and started construction on a new office building with 1.4 million square feet of space. That project should provide Howard Hughes with $19.7 million of NOI for its share in the partnership. The stable income from these two sources will help offset some of the lumpiness of its business model.

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