Q2 2020 Howard Hughes Corp Earnings Call

[music].

Good morning, welcome to the Howard Hughes Corporation second quarter 2020 earnings Conference call. All participants will be in I'll listen only mode. So do you need assistance. Please signal corporate specialists by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions. Please note that this call is being.

Recorded when I like to turn the conference over to David Strike. Please go ahead Sir.

Good morning, welcome to the Howard Hughes Corporation second quarter 2020 earnings call.

With me today, Apollo late Chief Executive Officer, David O'reilly, President and Chief Financial Officer, Peter Riley General Counsel.

Before we begin I would like direct you to our website Www Dot Howard Hughes Dotcom, where do you can download both our second quarter earnings press release and or supplemental package.

The earnings release and supplemental package include reconciliations of non-GAAP financial measures that will be discussed today in relation to the most directly comparable GAAP financial measures.

Certain statements made today that are not in the present touch.

Let's discuss the company's expectations are forward looking statements and the meaning of the federal Securities laws.

Although the company believes the expectations reflected 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 second quarter earnings press release, and the risk factored in our S. E filing for factors that could cause material differences between forward looking statements and actual results.

We're not under any duty to update forward looking statements unless required by law.

I will now turn the call over towards CEO, calling.

Thank you, Dave and thank you all for joining us today.

Welcome to our second quarter 2020 earnings call.

We hope you and your families staying safe and healthy during this time.

Before we discuss the quarter's results.

I would first like to highlight a very important positive change in our management structure.

On June 25th I announced that our Chief Financial Officer, David O'reilly would expand his duties and become president as well as CFO with the company.

Joining us in 2016.

David It's been an exceptional leader and mentor across the company and it's been instrumental in unlocking value and driving results throughout our portfolio.

I very much look forward to our continued partnership David once again congratulations.

I also want to thank our team members across the country for their dedication during these difficult circumstances over the past several months.

They have all risen to meet the challenges of the situation both in their personal lives and at work.

I am truly grateful to all of them.

As always.

I checked to see remains unwavering commitment to their safety and to the safety of all our stakeholders.

I would like to say a few words about race multiculturalism and diversity that the Howard Hughes Corporation.

As you know we have always had zero tolerance policy towards any form of discrimination.

We have always strive to be an inclusive workplace, but we do realize that there was much more that we can and will do.

Companies can play a significant role in driving change and we want to be the type of employer that is inclusive in every way.

We have the opportunity to shift beliefs that influenced the complex social dynamics of race relations in the workplace with respect to diversity equity and inclusion.

We are beginning a process of reevaluating certain aspects of our internal culture and intend to report back to you on a regular basis, how we're doing in this regard.

To begin this process, we have hired a d. I consulted who is leading training sessions and workshops dealing with rice and racism.

To develop awareness and make improvements for all of our employees and stakeholders.

I have joined approximately 8000, other Ceos and signing the CEO action for diversity and inclusion pledge, which is the largest CEO driven business commitment to advance diversity and inclusion within the workplace.

This group recognizes that organizational change begins at the executive level and I'm proud to be part of this incredible group of leaders.

Now, let's turn to the company's performance during the second quarter.

We saw the strength of our Master plan communities come shining through with strong residential land and new home sales. We also saw continued strength in condo sales at ward village.

These areas of strength are very encouraging and are a testament to the quality of our communities and to our company's diversified businesses.

As expected we experienced negative headwinds brought on by the pandemic in our operating assets segment, specifically in retail hospitality and in the ballpark in downtown Summerlin, along the closure of the Seaport District in New York.

Despite these headwinds we saw positive signs in retail and hospitality as the quarter progressed, we saw many of our retailers resuming operations and a corresponding increase in collections from April through Jane.

Additionally, our hotels reopened.

We're very close to breaking even in June and will likely turn a small profit in July.

And our MPC segment, new home sales, which are a leading indicator of land sales slowed in April due to the pandemic, but increased dramatically in may and continued this trend in June and July.

For the first half of the year, new home sales across or Mpcs told with 1248.

Only three less than the same period in 2019.

We believe most of the increased activity experienced during May June and July is a testament to the exceptional quality of life that residents are seeking in a post co good world, including walkable communities in beautiful natural settings with urban conveniences outstanding.

Entities and expansive open green spaces.

Speaking of quality, our Mpcs continued to be recognized some of the best places to live in the country.

During the quarter Nice Dot Com released a list of the best places to live in America with Woodlands, taking second place in Colombia falling closely behind as the seventh best City to live in America.

Additionally, the Robert Charles Lesser company and National Real estate consultant recognize Summerlin bridge loan on their top 10 list a best selling master planned communities through the first half of 2020.

Summerlin was ranked fourth on the list and with the highest ranked MPC in the bottom.

Richland was ranked 10th on the list and was the highest ranked MPC and all of Texas.

The second quarter of 2020 was actually the best quarter for home sales and Bridgelux history.

Selling 232 homes.

Summerland, while home sales were down slightly for the first half we have seen excellent activity during June and July and believe this is the beginning of a positive trend.

During the quarter, our operating asset segment performance was bifurcated between the continued strength of our office and multifamily assets and the cobot related disruption seen within hospitality retail and the ballpark that I just mentioned.

Despite a 32.4% decline the operating asset in a while compared to the second quarter 2019, we remain optimistic about the segments recovery potential.

Selections for multifamily office remained steady during the quarter and the high 90% range and maintain this range through the end of July.

Retail collections were 49.7% during the quarter.

For the month of June collections were 59.5%, which while substantially lower than historic levels came in higher than 44% same for the month April with almost all retailers workflows.

Retail collections during July were approximately 64%.

When stay at home restrictions were lifted in May we began reopening our hotels starting with the woodlands resort conferencing, followed by the embassy suites in June and lastly, the west in early July.

In our strategic development segment.

Presale activity Tory plays our latest project at word village continued to progress and we are approximately 69% pre sold as of July 28.

Since beginning a web only based marketing plan in mid March we have sold 21 homes word village totaling $35.1 million through July 28.

This I believe is a testament to our resourceful and talented sales staff and marketing teams. They do an incredible job in the neighborhood we have created there.

The two projects that are currently under construction are expected to be completed in late 2021 at 2022 and are well sold at 84%, 76% respectively as of June.

Please note that year over year revenues are not comparable in our strategic development segment as we had condo tower deliveries in early 2019 and have not delivered any new condo towers in 2020.

Phase one of reopening in New York City was implemented on June eight, allowing construction to resume at the Seaport District.

Assets in the seaport remain close, but we anticipate a gradual reopening of abuse select businesses, including.

The peer 17 rooftop over the course of the next several weeks.

Despite these unprecedented circumstances, we continue to aggressively pursue potential tenants for our vacant space and remain focused on the long term vision at the seaport.

Moving onto an update of our transformation plan, which as you may recall was officially announced this past October.

We've made substantial progress with the first pillar, reducing annualized DNA expenses by 45 to 50 million with the remainder of savings to be realized once we transition or corporate office from Dallas to the woodlands later this year.

Second pillar with committing to selling approximately 2 billion gross of noncore assets generating approximately 600 million of that proceeds so.

So far we get realized the sale six noncore assets generating approximately 132 million net proceeds.

Good day. This represents 22% of our original goal announced in the transformation plan.

Given the state of the current market environment. The timing has been delayed, but we remain vigilant and finding the right buyers and maximizing the proceeds from these assets.

The final pillar was to decentralized operating model, allowing us to concentrate growth and value creation within our core assets.

Although we do not expect any new construction starts within our communities in the next quarter or too.

We have restarted modest investments in Predevelopment work. So that we are ready to move forward the minute that the demand returns.

As you can see there has been significant progress made on our transformation plan since it was announced in October and we believe that it has strengthened our defensive financial profile given our many stakeholders additional confidence in us and help insulate ourselves from the markets fluctuate.

Actions.

And with that.

We'd like to now turn the call over to our President and CFO David O'reilly.

Thank you Paul Good morning, everyone I'm going to start with a review of each of our operating segments performance during the quarter, and then turn to our financial results and balance sheet.

Quarterly NOI $40.8 million, our operating assets decreased 32.4% when compared to the second quarter, 2019, and 36.1% compared to the first quarter 2020.

As Paul mentioned, the decrease in NOI, which largely driven by hospitality retail and the Las Vegas ballpark as a result, the pandemic.

Hospitality in a wide dropped by $11.4 million or 119% compared the same quarter and 29 key as all three hotels in the woodlands were forced to shutter for all or part of the quarter.

We were able to begin to slowly reopened starting with the woodlands resort in conference Center in May.

As of the end of June we were able to bring 54% of our rooms back into service.

We then open the embassy suites in June were 100% of our rooms, where available at the ended the quarter.

In early July we reopened the Weston.

Given the increased activity seen within our hotels, we were very close to breakeven in June from an NOI perspective.

And expect attorney small profit in July which shows the progress made by our dedicated hospitality team over the last few months.

Retail in a wide decreased 16.1 million and the second quarter 2019 to 8.6 million in the second quarter 2020, a 46% drop.

Many of our retail tenants began to open MC increased activity in the back half of the quarter, which translated into a collection rate at 59.5% for the month of June.

Noticeably higher than the 44% collection rates seen for the month of April.

While many of our retail tenants were able to seek help through the government ERP program.

It is still been very challenging time for them as we said last quarter. We have actively engaged with all of our tenants in particularly with our small business local tenants who need assistance the most.

Where our health in the form of rent deferrals can make a real difference and their ability to survive.

We are cautiously optimistic that we will see increase collections similar to that of June as the economy continues to reopen in most states.

Multifamily NOI was down $1 million, a 21% when compared to the second quarter 2009 T. R.

Our multifamily assets continue to see stable collections of 97% due to the high quality profile of the tenants who are drawn to our well located newly constructed exceptional assets.

The reduction in NOI was partially due to real estate tax increases on our newly constructed assets, which we're appealing.

And then increasing concessions in the Houston market.

During the quarter one of our newly completed assets to lakes edge in the Woodlands was moved from the strategic development segment into operating assets, where we expect to generate approximately $8.5 million a stabilized NOI, representing an 8% yield on costs.

This is a prime example of how continuous reinvestment in our Mpcs will drive outsize growth and create value for years to come.

Lastly, our second quarter, 2020 office, NOI increased by $7.6 million or 38% over the same period in 2019.

This was in large part due to the acquisition of the Woodlands towers. This past December.

Excluding the within towers are office NOI was still higher by 7% when compared to the same period last year.

Similar to multifamily collections from our office tenants remain in the mid to upper Ninetys as a result of the high credit quality of our tenants.

[noise] two operating assets to note would be to Las Vegas ballpark in downtown Summerlin outlet collection that riverwalk and warrants.

On June Thirtyth Minor League baseball officially announced that there will be no season for 2025.

The cancellation of the season, we'll obviously have a material impact in the ballpark, which generates roughly $8 million in annualized NOI.

With the cancellation of the season, we now expect the ballpark to reflect a loss of roughly $1.5 million in Hawaii, excluding refunds for the remaining six months to the year.

It may also have a negative impact on the retail in downtown several on the fans who were attending these games shopping or retail stores and eat at our restaurants on game days.

Additionally, the outlet collection a river walks in Hawaii was lower by 87% compared to the same period in 2019.

It continues to be impacted by the Corona virus as a majority of the foot traffic is driven by the tourism industry.

Due to its location Riverwalk is mostly visited by shoppers from the cruise ship port.

Since the cruise industry was abruptly stopped to the pandemic activity has declined accordingly.

In light of these events you may recall that we took a 48.7 million dollar impairment charge last quarter.

The CDC is just extended the band on cruise ships sailing through the U.S. through September Thirtyth.

But the property is reopened with approximately 86% of our tenants open for business.

Moving onto the MPC segment.

Land sales were down a better than expected, 19% during the second quarter were 91 residential acres selling during the period compared to 112 acres in the second quarter 2019.

However sequentially land sales increased by almost 60% from the first quarter were 56.5 acres for soul.

As Paul mentioned in his opening remarks, new home sales, a leading indicator of land sales dropped considerably in April as a result of the state homeowners.

But experienced a large uptick in May June and July as local economies began to reopen.

Originally continues to outperform even in the midst of a pandemic setting an all time high of 112, new homes sold in May.

78% increase compared to May of 2019.

As we've mentioned this is an excellent indicator of future demand for our land.

For the quarter, New home sales totaled 232 compared to 215th the second quarter 2019, an 8% increase.

For the first six months of the year. There were 425, new home sales compared to 351 for the same period of 29 key a 21% increase.

Landfills or bridge Lin totaled 38.4 acres for the quarter compared to 40.7 acres in the second quarter 2090.

Price per acre increase from $404000 in the second quarter of 90 to 429000 in the second quarter 2020.

We're pleased with Bourbons performance.

Due to lower Superpad sales Summerlin reported a small decrease in land revenue from $29.7 million in the second quarter 2019 to 26.3 million this quarter.

[noise] new home sales for the quarter were down from 365 in Q2 2019 to 233 this quarter.

Year to date, New home sales are only down 7.5% and we've seen excellent activity through June and July which is very encouraging.

When we look at the totality of new home sales throughout our regions. We had total volume of 1248 homes sold during the first half of the year only three less than the first half of last year at 1251 homes.

As we said in the past, we are price make or Mpcs and only sell land to meet current demand based on underlying home sales, which appears to be increasing.

Demand continues to be stronger than expected for new home sales and we attribute a great deal. This the unique nature of our communities their incredible amenities and wide open spaces.

Which is more important to buyers than ever at this point in time.

He b T was down 6.5 million or 13% for the quarter compared to the same period in 2019.

Partly due to a 3 million dollar loss from equity in earnings at the summit.

The quarterly loss at the summit was primarily attributed to lower custom lot sales higher unit completion costs and lower land sales revenue all of which were impacted by covert 19.

Sequentially E. B T was down 4% compared to the first quarter 2020. This was largely due to the state homeowners enacted by local governments in April.

Turning to our strategic development segment, we continue to make progress on our two buildings under construction in ward village, Oh, we eat and cool.

Which are expected to be completed in late 2021 in 2022.

These projects are on time and on budget and are well sold 84% and 76% respectively as of June Thirtyth.

These sales all have hard deposits grew buyers.

Our latest project to begin sales Victoria place is progressing well with 69% of units pre sold as of July 28.

Excluding Victoria place as of June Thirtyth, we're 90.3% either closed or under contract on the other sticks projects.

Either under construction are completed.

And the neighborhood that we have created is unlike anything else in the islands.

I would like to note that we reduced the sales prices on certain remaining larger condo units over $4 million at weighing on how to better align with current market values and recent sales. This resulted in a 5.1 million dollar loss reflected in condo rights in unit cost of sales.

Finally, let's take a look at the seaboard.

The Seaport district was significantly impacted by Kogan 19, as New York City was one of the hardest hit areas in the country.

This resulted in an abrupt stop to construction at the 10 building caused our attendance in JV on businesses to close their stores.

Construction was able to resume recently, but our assets at the sea port remain closed.

We do however, anticipate a reopening for select number of businesses in the district over the next several weeks.

Further we had to postpone or summer concert series on the rooftop appear 17 until 2021.

The revenue and sponsorship of this series has been a meaningful contributor to our revenue.

The shutdown during the quarter was reflected in our quarterly revenue of only $2.7 million down from 11.4 million in the second quarter 2090.

Operating expenses, followed suit declining from 14.3 million in Q2, 2090 to 6.1 million this quarter, bringing our and allied to a loss of $3.7 million for the quarter compared to 2.9 million loss for the same period of 29 team.

In July the seaport entered into management agreements with the creative coronary management company to managing operating the food and beverage operations at the Fulton, Our 70, Cobbling coat and Malibu farm.

By bringing on creative coronary these industry experts will ensure that our restaurants are running efficiently.

On July 16th we sold our 35% equity stake Mr see seaport for $750000.

And recorded an impairment charge of $6 million.

This 66 room boutique hotel located in close proximity to the seaport was severely impacted by the Corona virus as occupancy levels plummeted.

The sales inline with our stated plan to sell noncore assets.

As construction on the team building has resumed and we anticipate the reopening of select businesses in the area.

Our long term vision for the seaport has not changed and we believe that once complete the seaport will be one of the premier districts in Manhattan.

I would also like to note that on June 29th we entered into a termination of a participation agreement regarding the previous sale of a property in west wins or New Jersey.

We originally sold the property for $40 million plus a future profit participation.

The participation was making it difficult for the buyer to raise equity so they bought us out early <unk>.

The 8 million dollar payment reflects the projected value of that profit participation.

Taking a look at GAAP earnings we completed the second quarter with a net loss of 34.1 billion EUR 61 cents per diluted share compared to earnings of 13.5 million or 31 cents per diluted share for the same period last year.

The large reduction earnings between quarters is based on both the impact the Corona virus pandemic has had on our operating assets.

MPC and Seaport district segments.

And the fact that we closed on a portion of the Io condo tower and 29 Tee.

And if not delivered any mixed use projects this year and our strategic development cycle.

They read defined FFO was 22 cents per diluted share for the quarter as compared to $1.19th. The second quarter 2019.

I would now like to take a look at the liability side of the balance sheet to provide some detail around our debt.

As of the ended the quarter, we had approximately $4.4 billion and total debt.

Of which approximately 2.5 billion is floating rate.

Oh that amount 705 million has been swapped to fixed.

And an additional 271 million is subject to an interest rate color.

That leaves approximately $1.6 billion on hedged.

Most of this debt is associated with our woodlands towers bridge facility construction loans, including 110, North Wacker and our downtown Summerlin mortgage loan.

In terms of maturity profile, we have approximately 61 million of debt maturing in 2020 on our three years landing office building.

Which is approximately 89% leased and which we are working currently on the refinancing.

Maturing 2021 of four loans totaling just under $341 million.

The largest component is 12 on one lake Robins, which is fully leased to Occidental petroleum.

Moving on to financing activity during the quarter on June 22nd we modified the existing downtown Summerlin long.

Extending the financing by three years to June 2023 at LIBOR plus 2.15%.

In exchange for pay down of 33.8 million to a total commitment of $221.5 million.

On May Twentyth, we extended the remaining 280.3 million dollar bridge loan for the wasn't towers and the woodlands warehouse.

For six months at LIBOR plus 2.35%.

With an option for an additional six month extension at LIBOR plus 2.9%.

Extending the final maturity to June 2021.

As of the ended the second quarter, our total consolidated debt to total assets was approximately 48% and our net debt to enterprise value was 48.4% at the ended the quarter.

From a liquidity perspective, we finished the quarter were $931 million of cash on hand.

As you can see from the projects under construction in the table provided under the results of operation and our 10-Q.

We have a net equity requirement $315 million.

Giving us more than enough liquidity to meet all of our current funding commitments.

I'll now turn the call back over to Paul for some closing remarks.

Thank you David.

While the company has clearly been affected by the pandemic I am confident in our incredible assets and our businesses and our people.

While there is still uncertainty in the economy, we are in extremely fortunate position at Howard Hughes.

We have irreplaceable assets in locations, where people want to live work and shop.

These communities provide safety security incredible amenities and wide open spaces.

We have a self funding business model that is unique in our public markets and a diversified income stream with a solid balance sheet.

And as we've said more than 930 million of cash on hand.

During the year, we've prepared for this set of circumstances in a very prudent manner.

We have raised equity.

We have substantially cut overhead and streamlined our business.

All of these things have help prepare us for this moment.

And they have ensured that we will have the ability to harvest the value embedded in our core assets over the long term.

We will now turn to the QNX section of the call.

The first few questions. We will answer had been generated by say technology and will be read by Dave strike.

Dave can you. Please read the first question.

Yes, Paul.

The first question is do you have plans to expand the master plan communities to other states.

Thanks, Dave Yeah, we're always looking for opportunities that generate the best risk.

Adjusted returns for our shareholders.

But it is very difficult spine land and the size range that we want with the close proximity to large cities and major infrastructure.

We we really believe the best opportunities to deploy capital at the highest risk adjusted returns.

Reside within our existing core assets, our master plan communities as we have stated in our transformation plan, which we rolled out last October.

Thanks, Paul.

Next question is is there a plan to convert to a rate.

Or will you return retain the current structure.

Dave I'm happy to take that one enough Bobby appreciate the question and participating in say technologies.

So today as of today, we have no claims to convert and that is candidly a result of a cost benefit analysis of a reconversion.

The potential benefit would be that we can save taxes on just the operating assets segment of our company is that's those are the assets that are read eligible.

With a meaningful tax shield in the form of our net operating losses that should last that's at least until 2022 that benefit is largely muted.

And as a consideration, we really value our ability to self fund our development pipeline using the free cash flow of our operating assets MPC land sales in condominium profits.

And then reconversion would force us to dividend out a meaningful portion of that free cash flow limiting our ability to self fund our development pipeline. So I think today and this is something that we will continue to evaluate over the coming years into the future as the makeup of our portfolio shifts and our net operating losses become exhausted, but as of two.

Today, there is no plans to convert.

Thanks, David.

The next question also comes from Bobby.

Have you thought about converting your condo buildings into apartment buildings.

Yes. Thank you for the question.

We've looked at the rental concept of many times in Honolulu, but the math really doesn't work for us we we'd be competing with the individuals who buy our condos and put them into the rental pool.

At little or no return you know condos by far and away are the best return on our capital in Honolulu.

Thanks, Paul.

Hi next one is from airline that Dan capital any chance share repurchase can get approved an accelerated well stock prices are at current levels.

[noise] another great question Aaron I appreciate it you know in March when we raised equity we raised it.

Planning for the worst and hoping for the best and I think as we talked about in the prepared remarks earlier, we're far from the worst and we saw some great spots in the portfolio in terms of continued strength of land sales office performance multifamily performance Ward village et cetera.

I would say that I'm not convinced entirely given where this country is in light of to cope with 19 that we are entirely out of the woods.

And I don't feel such certainty that our excess liquidity right now should be used for share repurchases. Today again, we're always going to evaluate the best capital allocation decisions for the company and whether that share buybacks, new investments potential new developments or just maintaining excess liquidity to make sure that we can make it through.

This pandemic so all that's always on the table, but as we sit here today I take a lot of comfort and having the liquidity that we have the knowing that we will absolutely be able to get to the other side of this pandemic and hopefully the strength that we saw in Twoq continues in Threeq and for two and we don't have to worry about a second wave.

Dave or any sort of reversion in the financial results, but until we know that for sure I can't imagine using up too much of our excess liquidity for share repurchases.

Thanks, David.

Next question comes from Bill Hammer and walk through what are the greatest reinvestment opportunities over the next two to three years.

Thanks, Bill it's a great question.

As I mentioned before we believe redeploying capital back into our core assets provide the greatest risk adjusted returns for our shareholders. We had laid this out in our transformation plan and we feel very strongly about this.

We are aggressively looking.

In our Mpcs for new medical development similar to what we did in the woodlands for MD Anderson.

And other build to suit office opportunities.

Looking hard in our recruitment efforts for all types of users to Mpcs, which.

Our nbcs provide outstanding wide open spaces, as well as amenity rich walkable urban cores.

As as David stated.

In our prepared remarks, a prime example of reinventing our core asset is to likes edge.

One of our newly completed multifamily assets in the womens total investment of approximately 108 million. We expect this asset to generate 8.5 million annualized NOI over the next few years, representing 8% return on an asset that should be valued and 4.5% cap rate range.

Thanks, Paul or another question from Bill Hammer, what is the status of selling your interest in 110 North Wacker.

You know, we're so pleased with 110 North Wacker. It is a opening in October and coming in.

On time and on budget.

The building is currently 74% pre leased to credit tenants.

We firmly believe that once complete this building should sell for premium.

Thank you.

All right next question, how do you plan on making the company easier to understand and therefore value overtime and how do we get more analysts to cover H.C.

No. This is something that we talk about all the time, Dave Im happy to handle. This question do you look obviously Howard uses a unique company without any direct to peers are comps and there's always going to be some inherent challenges in trying to simplify a more complicated company.

But at the end of the day, we think that when you do still the pieces of what we do which is using our free cash flow to self fund outsized risk adjusted return development opportunities in our core Mpcs, where we have meaningful competitive advantages.

It's it's not as complicated as a can seem at first.

We've worked hard to make things more simplified and provided our detailed supplemental package that really provides a road map to calculating any via the company and aside from just providing discount rates and cap rates everything is there to value. This company.

And in terms of increasing the number of analysts you know, we're working hard to increase the number of analysts and we believed that the recent equity offering that we didn't March should lead to some increased coverage.

Well hopefully pickup by the end of this year.

Thanks, David.

One last question from say.

At what capacity would it make sense for restaurants at the seaport to reopen.

Oh, you know as we discussed in his prepared remarks, we're going to have some limited openings that have really started already and will continue to roll out over the coming weeks and months, but there is no single answer since our restaurants, all vary in size and dining spaces outdoor seating capacity pricing and so forth.

We're going to continue to evaluate on a case by case basis when.

Reopening venues makes sense based on market demand.

You know candidly as we continue to reopen we're so excited about the new relationship with creative coronary they're going to lend their market expertise. During this reopening processing. This new management structure is not only going to elevate the customer experience, but it's also going to put our restaurants in the best positioned for success coming out of this pandemic.

Creative culinary, it's going to be responsible for employment supervision of all employees day to day operations accounting food and beverage operation setting menus, all those critical items, where they really hold the expertise and we're so excited about this new relationship.

To ask a question.

Please press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.

And our first question will come from Hamid course, and with VW as financial Please go ahead.

It's actually about here.

Quick question. Thank you for taking my question. This morning, I have three questions probably all three quick first starting in summerlin.

I think it's.

Turning out better than you guys it expected.

From Q1, but Oh I was wondering these landfills you're getting now is that something where they are in smaller lot orders meeting or are they are putting in orders for a smaller size of acreage than before is there any hesitation in any homebuilders and taking on <unk>.

The same <unk> acreage as before.

Yes. Thank you for the question. This is Paul line the.

The tracks of land or Super pads, and Summerland that are selling.

Our.

Generally the same pads that had been plan to sell as part of the Master plan.

David anything to add there.

Yeah, I would say you know obviously, we're excited about the number of underlying home sales and that Homesale demand and transaction volume continues to keep our homebuilding partners very interested in the same tracts of land that we had anticipated selling we're not shrinking superpad, we're not going back to selling lots were really progressing along.

The same business plan and we see that demand from our homebuilding partners and we're excited that we believe we're going to continue to be able to execute it really strong levels in both number of acres and price per acre through the remaining six months Didier.

Thank you and then.

<unk> sorry go ahead.

Sorry, just a follow up on that I mean, you know the when you look at Summerland downtown Summerlin and how it has affected the demand for home sales, it's it's very exciting.

You know the ballpark the hockey practice facility.

You know the retail you know, we announced Monday that 11, new retailers coming into downtown Summerlin totaling 35000 feet, including Anthropologie.

So the amenity base continues to expand driving home sales, which drives the direct corollary to superpad sales.

Thank you.

And then just jumping over to two ward village just a real quick question I know you said Victoria placed the 69 for Sentry sold.

I didn't see construction date, when do you anticipate breaking ground on that.

Sure Great question, we depending on construction financing availability, we plan to break ground early next year.

You know in addition to that being a that property being very well pre sold.

[music].

Seven all seven of our board village towers are 88% of the units are sold.

Pretty phenomenal.

Okay, and if you allow me one one more question.

On seaport I know in the past, we've talked about it being mostly on the restaurants and entertainment venues being operated by by yourself.

Given the current covert environment. It is there an opportunity to Oh, you imagining that it's gonna be more Howard Hughes owned and operated entertainment restaurant news or where is the retail and entertainment segment. There still is it strong enough to allow outside.

Operators to kind of.

You know, let me start and I'll turn it over to David We we believe that.

And we have some things in the works that we're excited about that would be outside operators that would sign leases. We also in addition to retail we have some of the best.

Office space with incredible views available that CB areas marketing for us and we are as as we come out of this pandemic. We are optimistic about the leasing of that to office space as well David.

No I think that the view before and after pandemic hasn't shifted much and that we are very much focused on bringing in the best in class operators of restaurants across the board and to be able to execute on transactions. The John George David Chang Injure Carmilani Atlanta Anderson.

And has been tremendous and we're just really looking forward to the day when we get all those venues opening operating at capacity.

On the other side of this pandemic that can really demonstrate how strong that seaport will be.

Thank you very much.

Thank you.

Our next question will come from Alex Barron with housing Research Center. Please go ahead.

Yeah. Thank you guys.

Sounds like things are making some progress.

I wanted to ask about downtown Summerlin seems like you know I took a bit of a step back.

Was there anything of a onetime in nature, there or is that kind of the run rate, we should expect going forward.

Well the NOI downtown Summerlin, Alex yes, it really impacted by the retail tenancy.

And when we had stay at home orders in March and April most of those retail tenants had to close and they weren't able to operate only a handful were actually to continue able to continue doing business, whether they were grocers like our trader Joe's we're doing takeout curbside pickup for some of our restaurants.

As a result, a lot of our smaller local tenants there needed some help to make sure that they can survive. This endemic we worked with all of them really focused on doing rent deferrals.

In some instances we were we did abate a modest amounts of rent.

But as a result of all those closures in our collections falling to 44% as we noted in our prepared remarks that in Hawaii was obviously impacted now.

As as we did note our collections in retail did increase from April to June and then even more from June to July that should chan translate into a recovery in that and Hawaii overtime.

Not to say that we're going to go back to for Q2 thousand 19 run rate in NOI.

Next quarter, but I think you should expect over the next several quarters a gradual growth in that in a wide to get back towards the stabilized level.

As Paul noted answering a previous question, we signed a tremendous number of we just brought in some new great retailers.

And those as those spaces get build out and tenants move in that should also contribute to that growing in Hawaii getting us back to a run rate level more consistent with the stabilize target.

So that's good.

Yeah go ahead, sorry, just a follow up so summerlin retail collections in July has increased as David referenced up to 66%.

The lowest and was in April was into Twentys. So we've had a.

Strong increase in collections, we have a very you know as a company.

During the pandemic, we have focused on collections and driving new business and velocity of tours in our apartments et cetera. You know you know gone back to the basics and our our team collecting rents and and.

Making the solid relationships and building trust with our tenants.

From Hawaii to New York has has really been strong really proud of them and I think it shows in the percentages of collections just like in several.

Yeah, just wanted to add a quick follow up on the same topic I feel still allow me another question.

So how does the rent deferral work I mean, it's not a rent forgiveness is that it is it just that may when they get back up under feed a year from now whatever they'll tell you well the pay you back what they didn't pay now is that how it works.

You know, we we tried to treat every single one of our tenants you know someone has over 120 retailers.

But we have over 700 retailers across the country, we tried to treat each of them. Its individually as this as a special understanding as possible and build that trust with our retailers generally speaking.

Are we.

We have done.

You know modest deferments.

Of.

A month or two where they would pay back the deferred rent.

Over it depends on the tenant, but you know generally you're right over a year or so and.

That combined with.

Most of our tenants taking advantage of the PPP plan. It has helped a you know going to about a four month you know.

Assistance.

Okay great.

And then I wanted to switch to the MPC land sales.

I heard you guys give us the home sales.

Or colom I'm, sorry for bridge land, but I was wondering if you had what those numbers where for the other three mpcs and also a weather.

You would consider disclosing the actual either acres sold.

Or dollars made you know in each of the Mpcs I think from a modeling perspective, it would be very helpful.

[noise], David you want to take that.

Yeah sure and the.

The acres sold in the price per acres sold in each community is highlighted on page 22 of our supplemental.

So that information hopefully you can have you can download that supplemental off the investor relations tab on our website and you'll be able to see exactly what sold from both the residential and commercial acre price per acre.

Et cetera.

From underlying home sales perspective, obviously bridge lunch wasn't shining star, but we also talked about the other most material aspect of our.

Home sales, which isn't summerlin, which you know and year to date. We you know as we said in the prepared remarks were down only 7.5% and we've seen a pickup in summerlin in June and July which is really encouraging. So we're hopeful that will be the eagle to even further close that gap as the year progresses.

Okay I do see the the detailed in the supplemental I had missed that so sorry about that thank you.

Okay, Alright, Thank you Alex always great talking to you.

And our next question will come from Jon Petersen with Jefferies. Please go ahead.

Great. Thanks.

A couple of questions here, one maybe you guys have already addressed that's but in terms of the retail yeah. I'm curious if you guys have a breakout of national chains versus small business mom and Pops like what you know what percent of your retail portfolio made up of each tied to tenant.

Yeah, David do you have that handy.

You know, we don't disclose that information I would say that had various meaningfully across our properties and our three major retail properties or downtown Summerlin, where we have a very good mix between national tenancy and local tenancy closer to 50 50.

Ward village, where we have more local tenants than national tenants and then on Isnt that much smaller scale as they all the collection at Riverwalk, where we are predominantly national tenants.

But you know the exact details in the exact percentages, we haven't disclosed that we don't have that level of detailed within the retail portfolio within the supplemental.

Okay.

Right, Thanks and.

Maybe just more of a higher level strategy question for you guys did the equity offering you're sitting on a lot of cash right now.

Interestingly this recession seems like one where home sales might remain actually pretty strong which is the exact opposite of what we saw the global financial crisis. However.

You mentioned in your earnings release that you're not starting any new development, which also make sense could you probably wouldn't want to be developing multifamily or office right now in this environment. So we kind of fast forward a few quarters there a year plus it seems like we could be in a scenario, where you've done a lot of went homeland cells generate a lot of cash, but don't really have development.

For that cash into.

So I get first of all of that kind of inline with how you're thinking so far understanding that we are very early on this recession.

And what do you do in terms of a corporate strategy when you're sitting on you know so much cash and maybe lack a young near term investment opportunities.

Yeah, let me start with that I'll turn it over to David but you know what what we did say just to qualify on development or there are pockets of opportunity that we see you know not starting.

Next quarter or maybe even not the quarter after but in locations like Colombia, and Bridger Lund for multifamily and multifamily in Colombia, and possibly even in some of them multifamily.

We see a solid leasing and.

The rents have been.

The last two months 45 days have had been.

Uprising lease strong I think the flight to quality.

In those locations for you know.

Couple a quality multifamily.

Ah may prove out that the potential for development.

Could be there.

So I mean, there's certain pockets that we're very excited about a in addition to our home sales that are nbcs David over to you.

Look we should be so blessed with the problem, having too much free cash flow and not enough places use in terms of.

New developments, John and then we can really focus on other capital allocation decisions, whether its external growth dividends share buybacks et cetera, all of those areas of cap allocation that we think will generate the highest returns for our shareholders, that's where that capital will go a we are as Paul said optimistic that I don't think we'll be in Spain.

Well there won't be any new developments I think we see some very limited pockets, where there is demand we're seeing that demand increasing as long as that continues over the next several quarters, there will be a need.

For incremental opportunities within our Mpcs.

Got it yeah, I understand it's a high class problem to have.

But you know I guess, especially after March [laughter], Yeah, exactly know I I certainly I certainly appreciate that.

I guess, if the investment I I appreciate that but I guess, if the investment opportunities are there in your existing Mpcs I mean, it isn't an opportunity to you know you know making investment in a new market.

Or is that capital better suited held onto before your 15, Mpcs or maybe I know you just issued equity but at some point do you consider share buybacks.

Yes, you know look at me as I mentioned.

Sorry, David as I mentioned earlier I mean, we always are looking at opportunities I'm not only within our Mpcs, which we truly are focused on but you know we see deals all the time.

They're just really hard to make any sense and so our true focus is in our mpcs, but you know like the woodlands for instance, when you have 28000 acres of potential or someone that 22000 acres and theres all different types of products that are available.

We we are looking at lots of different opportunities as I mentioned earlier, you know we're focused on medical right now as well as office build to suits the the idea.

That we're seeing across the country of what America wants is wide open spaces in a walkable urban.

But in a.

Non super dense location.

I think it's only logical that office.

Companies will follow and want their employees to live in our type of Masterplan communities.

And I'm, you know, where we're trying to find companies that want to move to our master plan communities.

Like we've done our build to suits and woodlands and Summerland, we can build quickly and a great prices.

Great I appreciate the color thanks, guys.

This concludes our question and answer session I will like to turn the conference back over to Pauline for any closing remarks. Please go ahead.

Thank you very much and I'd like to thank everyone for joining us today.

Be safe.

Where are your mass.

And we appreciate you being here take care.

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