Q3 2020 Howard Hughes Corp Earnings Call
[music].
Good morning, everyone and welcome to the Howard Hughes Corporation third quarter 2020 earnings Conference call.
All participants will be in a listen only mode should you need assistance. Please you know conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May press Star and then one day.
All your questions you May press star into.
Please also note todays event is being recorded.
At this time I'd like to turn the conference call over to David Trice Executive Vice President Sir. Please go ahead.
Good morning, and welcome to the Howard Hughes corporations third quarter 2020 earnings call.
With me today are David O'reilly interim Chief Executive Officer, and Peter Reilly General Counsel.
Before we begin I would like to direct you to our website Www Dot Howard Hughes Dot Com, where you can download both <unk> 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 companys 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 and 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're not under any duty to update forward looking statements unless required by law.
I will now turn the call over to David O'reilly.
Thank you Dave and thank you all for joining US today welcome to our third quarter 2020 earnings call.
Before discussing the quarter's financial results I'd like to discuss the departure of our former CEO Paul Lang.
September 20, Onest, the company announced that Paul had stepped down from his role as CEO.
Hi, along with the entire HCT, we'd like to thank Paul for his dedication to the company.
And his hard work and leadership as Chief Executive.
We wish Paul and his family all the best for the future.
The board is conducting a search for a permanent CEO is considering both internal and external candidates.
During this time or Howard Hughes team has continued to demonstrate an exceptional level of commitment and dedication to the success of the company.
I could not be more appreciative of their talents and their efforts and feel fortunate to be part of such an outstanding team.
And most importantly during this time, we continue to monitor the effects of COVID-19 throughout our communities as always the health and safety of our employees residence visitors and tenants remain our top priority.
Shifting to the company's results for the quarter, we experienced notable performance improvements and significant sales momentum throughout the portfolio.
We saw continued strength throughout her master planned communities with robust new home sales and the woodland Hills Ridgeland in Summerlin.
Our operating asset collection rates improved across the board with retail being the most notable progress.
Stronger occupancy levels in our hotels from the second quarter resulted in positive quarterly NOI, which exceeded our expectations.
Condos in ward village continue to sell with the help of our innovative digital sales platform and the future revenue associated with all of her contracted units now stands at $1.5 billion.
At the Seaport, which was largely shut down in the second quarter, we were able to resume construction at the 10 building and we've reopened most of the restaurants.
We successfully launched our new concept the Greens on the rooftop appears 17.
Our guests reserved their own socially distance mini launch space overlooking the Brooklyn bridge into lower Manhattan waterfront.
Serving over 42000 guests the Greens was sold out each day. This summer had a 20000 person waitlist and generated $1 million in revenue.
This positive momentum we are seeing across our portfolio is a testament to the quality location and desirability of our core assets.
It's been about a year since we announced our transformation plan and we are very pleased with the progress we've made to date.
As you May recall the plan was based on three pillars first the streamlining and decentralization of our operating model and a reduction of $45 million to $50 million of overhead.
Second the sale of non core assets, resulting in net proceeds of approximately $600 million.
And third accelerated growth in our core MPC business, where we have a decades long pipeline of development opportunity ahead of us.
I'd like to start out by saying that the change in leadership during the quarter has not impacted the strategic vision of the company and we remain focused on the execution of this plan.
Our corporate overhead cost reduction initiatives are substantially complete.
Excluding one time charges, our Q3 annualized DNA totaled approximately $85 million.
Which represents a 30% cost reduction when compared to our 2019 run rate of $122 million.
Were approximately 93% of the way towards meeting our goal of an $80 million run rate.
We continue to pursue the sale of our non core assets to date, we have sold six of these assets generating approximately 132 million in net proceeds which represents 22% of our goal.
As we mentioned last quarter the timing of achieving this goal has been delayed given the current market environment.
We want to ensure that we obtained the maximum value for these dispositions and we have the luxury of patients given our current liquidity position.
We remain optimistic that the sales. The recently completed 110, North Wacker office building could be effectuated during the first half of 2021.
This sale will generate the largest component of the estimated $600 million. The net proceeds from the disposition of non core assets.
While we're on the subject of 110, North Wacker, we recently celebrated its grand opening.
It was four years ago. This month that I started at Howard Hughes and at that time 110, North Wacker was a dream sketch on a white board of what could be.
We'd be talking about the opening of such remarkable building speaks volumes about the collaboration and hard work that has to find this project team from the very beginning.
A few highlights.
110, North Wacker is the tallest office building to be deliberate in three decades in Chicago a.
Building that was delivered on time and on budget during a pandemic.
A building that is 77% leased with a weighted average lease term of over 14 years and includes high quality credit tenants such as bank of America.
A building truly focused it being market leading from a tenant experience point of view with an unmatched amenity package, including our own 110 custom house.
And most importantly, a building that is best in class and is committed to delivering the absolute pinnacle of health and wellness.
In connection with the deconsolidation of this asset upon completion of construction.
We reported a gain of $267.5 million, which reflects our proportionate share of this investment.
Fair market value.
I will talk in more detail on this accounting impact in a minute.
Well the recognition of the gain shown for the quarter will not be reflected in our cash balance until the ultimate sale.
We do believe that this I'm out accurately reflects the inherent value created through the development of this project.
And value that will be ultimately realized by H.C. shareholders.
The final pillar of our transformation plan was to focus growth and value creation within our core assets.
Our portfolio of extraordinary Masterplan communities.
The regional leaders of our Mpcs continue to monitor demand for particular asset types, where we can deploy capital to achieve the highest risk adjusted returns for our shareholders.
We have commenced modest investments in Predevelopment work, so we will be ready to move forward as market demand returns.
In our MPC segment, new home sales, which are a leading indicator of land sales continued to accelerate with a total of 800 into new homes sold during the quarter.
Up 30% when compared to the third quarter of 2019.
2020 year to date, new home sales of 2038 were 9% higher compared to the same period in 2019.
These results reflect our view that buyers are seeking exceptional walkable communities with expansive open spaces and amenity rich urban cores and low cost states.
If the continuation of strong new home sales persist it should further development opportunities. In addition to our land sales.
Land sales for the quarter were down 53% compared to the third quarter of 2019 with 70 acres sold compared to 147 acres in the third quarter 2019.
This decline is largely due to a decrease in summerlin.
It's a volatile quarter to quarter and we encourage you to look to full year results for comparison purposes.
Several of these new home sales during the quarter were 27% higher when compared to the third quarter of 2019 and were 4% higher on a year to date basis.
As you may recall in the second quarter of 2020 year to date, new home sales and similarly, we're down 7.5%, which demonstrates the strength of our third quarter results.
We're continuing to see out of state migration from higher cost states, such as California and are confident that the continued momentum in someone's new home sales will translate to land sales in the coming quarters.
Ridgeland had a tremendous quarter with 250, new home sales nearly 32% higher versus the third quarter of 2019 and the community set monthly New home sales Records for May June July and August.
In addition to positive new home sales results bridging was able to raise its residential price per acre from 411000 in the third quarter of 90 to 445000 in the third quarter 2020, and 8% increase.
Our youngest community the woodland Hills had significant growth both in new home sales and in land sales, albeit from a low stuff.
Versus last year and the price per acre rose nearly 10% from 272000.
Sales in Q3 of 19 to 298000 this past quarter.
Turning to our operating assets, we continue to see improvement in sectors that were most impacted by the corona virus with retail and hospitality showing promising signs of recovery.
Our office and multifamily assets performed in line with expectations as collections remained in the high 90% range.
During the quarter, our operating asset and Hawaii $38 million was 31% lower compared to the third quarter 2019, and was 6% lower sequentially from the second quarter of 2020.
Office, NOI rose, 4% when compared to Q3 of 2019, but fell 14% versus the second quarter 2020 collections remained strong at 97% and certain non stabilized office buildings are seeing strong leasing results.
The sequential decline in office NOI was partly driven by 90 950 would workforce tower as Occidental Petroleum short term lease back of five floors of temporary space expired in the second quarter.
One of our newer office buildings 6100, Mary where they're located in Columbia is now leased to 63% in.
And the team has leased over 50000 square feet of this building in 2020.
Multifamily on a wide decreased 1.4 million or 26% versus the same quarter in 2019 as a result of increased concessions and negative cash burn a newly opened multifamily assets now in operations.
Multifamily did however increased 3% sequentially from the second quarter of 2020.
Similar to office multifamily collections remained strong collecting 99% of our reps and our Unstabilized assets are leasing up ahead of projections.
Our newest multifamily asset to lakes edge in the woodlands, completing construction last quarter and is already nearly 30% leased.
Juniper, our latest multifamily asset in Colombia completed construction in the first quarter of 2021 is 46% leased.
This leasing velocity, we are seeing gives us confidence that demand is present in our MPC is the type of indicator, we look for when judging the level of demand for future development opportunities.
The golden related impacts experienced by our retail assets resulted in a 56% decrease in NOI compared to the third quarter of 2019.
Retail in Hawaii was down 19% on a sequential basis, which was primarily driven by ward village retail as Hawaii enacted a second round of stay at home orders during the quarter due to increased COVID-19 cases across the state.
The state eased restrictions on October 15th and we expect the region to start to recover similar to the recovery we experienced in summerlin in the third quarter.
Excluding ward village retail are in Hawaii from retail increased 14% sequentially.
These results speak volumes to the increased leasing activity that we've seen throughout our communities.
So far in 2020, our agency retail leasing team has signed 45, new leases for 148000 square feet with another 10 leases currently in negotiation.
In addition to these new leases, we have signed lease renewals for 50 existing tenants representing 143000 square feet.
Occupancy remains above 90% for most of our stabilized retail assets and we continue to see robust demand from our retail space in areas such as Downtown's terminal.
We attribute this to the quality location and the strong demographics and make our community. So desirable an incredible effort of our leasing team to execute.
Retail collections improved to 66% compared to 49.7% last quarter.
Excluding ward village retail collections improved further to 71%.
We continue to actively engage with all of our tenants, particularly with our small business in local tenants who need assistance. The most during this time.
We had help these tenants in various ways, including with rent deferrals, which can dramatically impact their ability to survive.
Our hotel assets in the woodlands were heavily impacted by the current a virus in the second quarter 2020, as all three hotels were forced to shutter for most of the quarter.
Towards the end of the second quarter, our hotels were able to resume operations and we saw positive results in the third quarter.
Although hospitality and why was substantially lower in the third quarter 2020 versus the third quarter 90, our hotels posted positive quarterly NOI of 626000 versus.
Versus a $1.8 million or loss in the second quarter.
During the third quarter, we saw increased activity from weekend vacationers business travellers majorly baseball teams and evacuees from Louisiana to the unfortunate impact of Hurricane Laura.
The ballpark in downtown Summerlin remains essentially closed due to the cancellation of the minor league baseball season, which negatively impacted our operating asset and Hawaii on both a year over year and sequential comparison.
If minor league baseball returns to a full season next year, we expect the ballpark to generate north of $8 million in annualized NOI.
A return of baseball will also have a positive impact on or adjacent retail as fans who attends. These games also enjoyed downtown summerlin shops and restaurants.
Shifting to our strategic developments like.
Ward village saw strong condo sales activity with 24 homes pre sold during the quarter.
The primary driver of these pre sales with Victoria place our latest mixed use project with 13 contracted units this quarter.
We are so pleased with the rapid sales momentum at this project, which is now 71% pre sold as of September Thirtyth.
And is the fastest selling tower ward village to date.
Our two buildings currently under construction Ali and Kula sold five and six units, respectively, and our 85% in 77% pre sold respectively.
We expect a lead to be completed in late 2021, followed by cooler in 2022.
Old buildings remain on time and on budget with hard deposits from buyers.
As a result of COVID-19 be lots of digital sales platform with virtual condo tours and Threed models of interactive floor plans and live chat capabilities.
Which has proven to be very effective in this environment.
It is important to note that due to timing of deliveries year over year condominium revenue is not comparable.
2019 revenues included condo tower deliveries from Kcl, Ana and Io.
While we have not had any unit deliveries in 2020.
The seaport, which was significantly impacted by COVID-19 reported a quarterly in a wide loss of $6.2 million compared to a loss of $3 million in the third quarter of 2019.
The decline was primarily due to a decrease in our event sponsorships catering and manage businesses due to the closures.
And event cancellations related to the pandemic.
We were however, able to reopen the majority of the restaurant this quarter, including the Fulton Malibu farm in Cobbling call.
As outdoor seating and limited indoor seating is now allowed in New York City, and we look forward to more restaurants opening in the spring.
With the summer concert series canceled as a result of the pandemic, we launched a new concept called the Greens on the rooftop appear 17.
We're groups of up to eight people could reserve their own socially distance 14 foot by 14 foot mini launch space.
This was an incredible win for our support team.
In the face of this pandemic and potentially losing our sponsorship revenue for the year our team improvised than reacting quickly delivering a first class experience that achieve success beyond our expectations.
We served over 42000 guests at an average wait list of over 20000 people and generated a million dollars in revenue.
Further it meaningfully increase the seaport district exposure across social media and media platforms.
With an increase of 253% in new social followers and over 378 million media impressions earned.
Perhaps most importantly, it allowed H.C. to deliver an experienced an activation for new Yorkers and our sponsorship partners strong.
Strongly demonstrating the appeal for this unique atmosphere on the rooftop appear 17.
And allowed us to maintain a significant portion of our sponsorship revenue pick.
It could have been negatively impacted by the loss of our summer concert season.
Construction at the 10 building for the John George Food Hall has resumed since being shut down the second quarter.
With the exterior of the building now substantially completed in the interior underway.
One silver lining related to the pandemic is that it has let us to refocus and enhance our efforts on our ecommerce platform into 10 built.
With E commerce and delivery, playing such an important role in todays world. The current circumstances have given us a chance to ensure do we have the best consumer focused experience both from a restaurant and from a grocery point of view.
As we proceed forward at the Seaport, we're keeping every option open to determine how to best maximize the value inherent in this project.
To that end a few weeks ago, we announced our proposed plan for our continued transformation of the Seaport District in New York.
Our team in New York has created a plan that in addition to bringing a cohesive vision to the district to life allows us to address several critical needs currently facing the city.
The proposed plan will provide mixed income housing and provide new yorkers with a chance to live in an area. That's currently out of reach for so many.
It will help save the Seaport Museum, a treasured neighborhood institution that is really the anchor of the historic district.
And it will propelled New York city's economic recovery with an economic impact of more than 1.4 billion for the city and state.
And the creation of nearly 2500 permanent jobs and roughly 2000 construction jobs.
We are thrilled to be proposing what we see as a major improvement to the long underutilized surface parking lot at 250 water Street, which is a full city block over an acre in size and a gateway to the neighborhood.
The result will be the first truly viable plan that will round out the revitalization of the seaport district and help provide a secure future for the Seaport Museum.
As we move toward the formal governmental review process, which will involve many public hearings.
We remain committed to continuing to listen to all seaports stakeholders over the coming months.
And we look forward to keeping everyone updated as these plans become a reality.
Shifting to earnings.
Taking a look at GAAP earnings we completed the third quarter with earnings of $139.7 million or $2 or 51 cents per diluted share compared to earnings of $29.8 million or 69 cents per share.
For the same period last year.
The increase in earnings is attributed to a onetime noncash gain of 267.5 billion related to the deconsolidation of onetime north Wacker in Chicago.
Also as a result of the deconsolidation, we recognized an additional $15.4 million of income attributable to the recognition of previously eliminated development management fees.
In accordance with GAAP. The company has consolidated 110, North Wacker, while it was under construction.
Upon the towers completion in September 2020, the building was transition from construction to operations.
And we determined that our partner was able to exercise substantive operational approval rights.
And that the asset should no longer be consolidated.
As such we do recognize all assets and liabilities associated with this venture as well as the non controlling interest.
As part of the deconsolidation. We also recorded our retained equity investment as the current estimated fair market value.
This triggered the recognition of a 267.5 million dollar gain.
I encourage you to reference our third quarter 10-Q filings for more detailed information.
Excluding the deconsolidation of 110, North Wagar earnings during the quarter decreased by 90.5 million compared to the third quarter of 2019 attributed to a decrease in Summerlin MPC earnings lower.
Lower operating asset in Hawaii, and the early extinguishment of debt.
It is also important to highlight that in the third quarter of 19, we sold the Cottonwood mall, a noncore asset in Utah for a pre tax gain of $24 million that increased prior year earnings.
Turning to the balance sheet I'd like to highlight a few key items related to our debt.
As of the ended the quarter, we had approximately 4.2 billion and total debt of which approximately 1.9 billion is floating rate.
Of that floating rate amount 645 million or has been swapped to fixed.
That leaves approximately $1.25 billion unhedged.
Most of this that is associated with our woodlands towers bridge facility construction loans for our two ward village towers under construction and our 250 water Street loan at the Seaport.
In August we closed on a $750 million bond offering issuing senior notes due August 2028 at a rate of five and three ish percent.
We used the net proceeds of the offering combined with cash on hand to pay down 808 million of debt, which increased our unencumbered book value of assets by over $1 billion and extended our overall maturity profile.
The bond offering further diversified our funding sources, increasing our unsecured debt balance from 22.5% in the second quarter to 41.5% in the third quarter of this year.
And reduced our non hedged floating rate interest exposure to 30% of our total debt balance.
Our nearest debt maturity is not until June of 2021, which is for 12 on one Lake Robbins and the woodlands warehouse.
For a combined total $280 million.
Both of these assets are fully leased the Occidental petroleum for 13 years, and we're working hard on a long term financing solution.
Taking a look at liquidity, we finished the quarter with $857 million of cash on hand, and only 311 million of net equity requirements for our projects currently under construction.
We obviously have more than enough liquidity to meet all of our current funding commitments.
While the company continues to feel the impact brought on by COVID-19, we're very pleased with the results of the quarter and are encouraged by the robust home sales across the portfolio and the resiliency of our operating assets and the Seaport District.
We have irreplaceable assets and incredible locations a strong balance sheet.
Amazing team of employees and we have maximized, our free cash flow through Rightsizing, our DNA in capital spend.
Given all of this we're excited as we move forward.
In unlocking value for our shareholders.
So with that I'd now like to turn the call to QNX and will answer. The first few questions that have been generated by state technology and will be read by Dave strike.
Dave can you. Please read the first question.
Sure.
The first question is what type of economic return do you expect the recently announced seaport tower deal or is it more about supporting the overall seaport district ecosystem as a whole.
Yeah, It's a great question and one that I would tell you that it's just we're just a bit too early in the process to answer that question with any type of detail.
As we mentioned were about a year away from gaining formal approval and at that point, assuming that we get the approvals that we expect we would be able to publish a total construction cost as well as you expected yields on the project and it's fair to say that given the size of the project and the potential capital allocation. It's a project that's returns need to.
Stand on its own.
While we do think it's synergistic and we do think it will continue to drive outsized performance at the seaport and contribute to the overall ecosystem again as with any capital allocation decision it needs to stand on its own and generate an appropriate risk adjusted return when we have the details on the total cost the details on the potential returns and the details of the under.
On capital structure associated with that asset, which we won't know until we get much further along in the process will absolutely shared with all of our investors.
Great. Thank you Didnt.
Next question.
Last year noncore assets were identified to be solved with proceeds being used to buy back shares.
The stock is down almost 50%.
The value the value of these assets has likely declined by a smaller percentage why not sell these or other unlevered assets and buyback stock today.
Yeah, It's a great question, but first I want to go back and clarify a little bit because in the question that was asked.
It was stated that we were selling our non core assets solely for the purpose of buying back shares.
And in the transformation plan. If you recall, we were going to sell our noncore assets and use those net proceeds to accelerate the development opportunities with other core nbcs or potentially buy back shares and at with every time, we're making a decision to either start a new development accelerate the process within our core assets, we're buying back shares where many.
Taking a call at that point in time based on where we see the greatest potential to create value for our shareholders and not underlying that against the risk associated with each.
I would say that as we sit here today with rising cases, and a us remaining economic uncertainty driven by both the virus and the political landscape.
We're not quite out of the woods to a point, where I feel comfortable using our excess liquidity that we work so hard to put on our balance sheet into a large share buyback or into a large new development.
Kickstart, starting a new project right now so.
So I think as hopefully these cloud start to clear and we create a little bit more economic certainty into the future you would expect us to put this liquidity and capital that we have on our balance sheet to work and when we do we'll make sure that we clearly communicated with everyone.
Thanks, David Okay. The last question from let's say technology platform is please comment on the investment returns.
The value of downtown Summerlin budget.
The recently with a 34 million dollar pay down when the loan was extended to alone is about $221 million, which is only about 50% of the cost of the project.
Yeah happy to clarify that and look we're thrilled with the with the returns that we have driven historically in downtown Summerlin and you know to be clear our recent bond issuance for 750 million that we just completed part of the proceeds of that was used to repay the loan at downtown Summerlin in full.
In downtown Summerlin as an incredible asset that continues to mature over time recall summerlin itself has 100000 residents today.
And into community that will mature to over 200000.
Once we fully build out the residential aspects so someone and that can increase density is going to continue to benefit downtown summerlin.
As has the development of the ballpark the hockey practice facility, the new multifamily assets and the extra office building that we built two summerlin right across the street all of those have contributed to increased sales increased NOI at this asset and in January and February of this year pre pandemic, we had a.
Record sales per foot and they.
Across our retail downtown Summerland, and we feel great about the investment we made there and we feel great about the contributions made to the community. How it's helped drive incremental residential sales and increased our price per acre and it's all part of that great environment that we're creating in downtown Summerlin.
So the loan has been paid off and we feel great about the returns that weve achieved in downtown Summerlin, and we feel on a risk adjusted basis, they've exceeded our expectations.
Ladies and gentlemen at this time, we'll begin the audio question answer session.
I would like to ask a question. Please press star and then one to withdraw your question you May Press Star and two if you are using a speakerphone. We do ask you. Please pick up the handset before pressing the keys to ensure the best sound quality.
Once again that is star and then one to ask a question.
Our first question today comes from Daniel Santos from Piper Sandler. Please go ahead with your question.
Hey, good morning, and thanks for taking my questions. My first question is on land and I think it's fair Hey, Hey on land sales I think it's fair to say that land sales came in you know a bit lighter than expected given given strong home sales David I know you've talked extensively about how volatile that businesses and I think you know were sympathetic to that somewhat.
Wondering if you could give us some more color on the relationship between home sales than land sales and also if you could comment maybe on your sense of how homebuilders are situated with land or is it your sense that there are stocked up where are they low on inventory and therefore, we might see some more volume in the near term.
Yes, it's a great question, Dan and obviously, we were expressing our excitement in this quarter in terms of how strong our underlying home sales were and as we've said those home sales are typically leading indicators for underlying land sales and we have seen those land sales continue to be strong in bridge Lynn and woodland Hills.
And the lag between home sales and land sales in those two mpcs is shorter if.
If you recall in our Houston based Mpcs resell individual lots to homebuilders.
And as such the lag between home sales and then their desire to buy new lots is a tire timeframe.
In Summerlin, where we're selling super pads or sub divisions to homebuilders that lag is a little bit longer and it's not that inconsistent with what we saw just over a year ago. Dan. If you recall the fourth quarter of 18, there was a spike in interest rates and home sales slowed substantially they rebounded pretty.
Quickly into the early part of 2019 in the first and second quarter and if you go back and look at our 2019 land sales you will see that that first quarter strength of home sales really translate it to third quarter and fourth quarter sales of land in summerlin.
So that lag is always been there and super pads I don't think it's any different. This time, we are very optimistic and feel strong that we're going to have a great fourth quarter of land sales.
And that these underlying home sales are building quickly homebuilders need inventory they need that precious resource of land that we have in our communities. They continue to be incredibly desirable and that would translate into strong land sales in the coming quarters.
Got it that's that's a very helpful. So my second question is on the CEO search and David I. Appreciate your comments at the top of the call. What's your sense on timing for the surgeon, maybe when we might see a more complete bench at the top of the company.
[noise] well look personally I would love to see it sooner you know I think I have enough titles now that if you call the company regardless of the time today ill probably answer the phone.
But again I don't want to speak for our board you know they need to do a thorough and thoughtful process and turn over all the stones to make sure. They find the absolute best outcome at Howard Hughes and the best person to be CEO of this company for the long term and I'm supporting them in that process, 100% and I know they want to move quickly as well, but they also need to make sure that they do.
[music], a thoughtful and thorough job.
And that's that's really the most color I can give you Dan because it's a process that they're running and I'm a participant in but not on the <unk> not on the decision making side.
Got it I appreciate the position you're in so thank you for the comments.
And our next question comes from my head.
Core sand from BW S. financial. Please go ahead with your question.
Good morning, Thanks for taking my call David I know, it's a lot of talking but congrats on taking on the interim CEO role hopefully that becomes something permanent I wanted to follow back up on.
Development and the Mpcs I wanted to get a sense of where you are on that building out more multifamily if there's anything you're thinking about in the pipeline.
And coupled with that if you could answer is what are the competition dynamics between Howard Hughes building a multifamily alongside some of these new home sales.
Excellent question and something that we talk about in debate all the time.
In terms of new multifamily development projects.
So we are watching the underlying statistics in our existing portfolio within our mbcs very closely because when you when you own the vast majority of a product in a certain sub market you have incredible intelligence in terms of where consumer demand is and great intelligence in terms of where rental rates are going and retention et cetera.
So we're tracking those very closely and in my prepared remarks, we talked about how our new multifamily projects and bridge Lynn in the woodlands.
And in Colombia have been absorbing candidly despite the pandemic better than we had expected when we underwrote those assets and that's a great indicator.
But we've also seen some weakening renewal rates in the legacy assets in the woodlands.
Largely as a result of the increase on buying and that has benefited us on the home sales and land sales side. So we're balancing all of those factors and were looking to see when we see a kind of a return of strength in the legacy assets.
As well as continued absorption of those new product and when we hit that tipping point, where we see that demand growth.
Grow in excess of supply that's when we'd put the shovels and grounded started those new projects I.
I think in the most likely scenario for us given the strength that we've seen in Colombia in leasing and given the strength that we've seen in Bridgend in leasing those projects would probably be the first couple that we would look forward with moving because the underlying dynamics there are strongest.
And then I'm going to ask my second question as a joint question and some of its construction timeline. One is one is the timeline to break ground inventory in place and then the second part is I know you were talking about the new Sea Port development thoughts about a year and getting through all the meetings, but what would what do you envision the time.
Mine of the construction timeline being once you break ground.
Oh sure Great question, So Victoria place, we're hopeful that we'll be able to break ground in the next couple of quarters, Oh look and I would love to try and do it sooner given the strength of the sales and how quickly we're moving but you know as we've said in the past we don't want to start construction and break ground until we hit an appropriate level of pre sales.
Which we absolutely have at Victoria place as well as get a GMP contract from a contractor in a construction loan right we need to take as much risk off the table as we can before we put shovel in the ground and commit ourselves to spending 500 plus million in development.
So we're working hard on GMP, and we're getting very close on a construction loan and I would tell you that we've been I'm very pleased with the receptivity of lenders to do condo construction loans in Hawaii, Despite the pandemic and conditions. We're in we've been thrilled with the quotes we've gotten and we look forward to talking about the loans.
That we're working on will be eventually close it.
In terms of a construction timeline, we are usually about 30 months from start to finish in Hawaii and its a timeframe that we've tried to incrementally speed up over time, as we've gotten better and it becomes a more repeatable process, but each one of these towers is unique they have incredible design characteristics and we need to make sure that we execute flawlessly.
Okay. So that we're delivering a first class product to our consumers and condo residents. So that means that we're still taking 30 months, we'll absolutely do that.
In terms of New York I'll be honest, we don't have a great estimate right now we're so focused on that approval process in getting through there and then what we know exactly what.
Exactly what we are building other than just renderings and went through some more detail. Construction plans, then we'll be able to put pen to paper and give you a much more detailed type construction timeline on that project.
Okay. Thank you very much.
Thank you.
Our next question comes from Jon Petersen from Jefferies. Please go ahead with your question a little bit about.
Oh, great. Thanks, Good morning, guys.
Good morning on a in the M.P. season, some of your some of your retail properties I was hoping you could maybe talk about some of the largest kinda retail or restaurant vacancies that have you know they've opened up during this kobe period in you know, whether its Houston or summer line or other mpcs that that you're working on backfilling in any anymore color on.
Prospects, there and timing of Backfilling that but.
You know what I, we don't have a large meaningful vacancy that you know we're sweating over in downtown Summerlin or ward village you know.
We've seen some fallouts of our tenants with national bankruptcies, and local followed with local bankruptcies of tenants as everybody has who's who's who owns retail.
We were not amused by any stretch, but what we have seen is a lot of strength in our leasing in our ability to backfill those spaces very very quickly and in our prepared remarks, I mentioned that we had signed 148000 square feet of new leases, we have 10, new leases already in negotiation now and that's addition to 104.
83000 square feet of renewals that we've executed with a very limited exploration schedule in retail.
So there isn't a big box or an anchor right now that sticks out like a sore thumb that we're worried about its kind of blocking and tackling and taking care of.
Tenants as we learned about potential bankruptcies and stress and continuing to work with our local retailers to make sure that we're structuring a long term solution to their business that helps them survive through this downturn.
Got it and that's helpful and then.
On condo sales at Ward village I mean can you give us any sense of you know leading indicators that you're looking at right now and you closed on 24 in the quarter, which is still an okay pace I'm relative to your construction schedule. Just curious you know as we think over the next couple of few quarters. Do you think you can keep that pace up or maybe accelerate it.
Well look I mean, I think that I would share your sentiment that it was an okay pace.
In in a in Japan and in a normal time, and then doing something entirely digitally entirely virtually I were couldn't be more thrilled with the pace.
And just see that continued absorption knowing that were not delivering a tower. Our next hour I'll lead. So you know a year.
Over a year from now we feel great because that continues absorption is going to get us close closer and closer to 100% sold out will be complete which is the goal right were always trying to get that first 50 or 60% done very very quickly. So that we can launch construction and build and then pace our absorption for the second half of the building driving prices higher increase.
Our margins wherever we can and pushing price on those most desirable stacks. So look we're thrilled with the velocity that we've seen.
The reception to that Victoria place has gotten has helped inform our decisions as we design our next several towers and we do.
I have a couple more that are very close and we're getting ready to launch and if this sales momentum continues I think that we'll be talking about them. The next tower after Victoria place.
In early or at least the first half of 2021.
Okay, Alright, great and just one more on you know at the Seaport you know what the restaurants you guys did a good job of opening up the Greens and you got more outdoor seating going I think endorsing and New York is a 25% right now I believe but I mean, if if we move backwards on you know, allowing indoor seating here in New York.
I I guess I guess, what plans do you have in place to keep anything going through the winter. If you can at all just trying to think about the cadence of end of why we should expect from the restaurant business. There like are we going to take another step back in terms of the next quarter before we can really kind of move forward.
Oh, how they'll look at everything I mean, the direction yeah, the direction of the NOI <unk> and historically speaking the seaport is always a seasonal asset and we've seen stronger performance in the summer months and weaker performance as it gets colder and we lose the benefit of that outdoor space.
The team is working on some great solutions for the rooftop over the winter that would allow us to activate that can generate revenue in a socially distant appropriate way and we will you know we look forward to speaking about that on our next call.
But look it depending on which way. This goes if we are limited to 25% indoor seating if we continue to see numbers rise and potential steps.
Stepson back in restrictions in New York, That's obviously going to have a negative impact. So it's really tough for me to say, which way. The NOI is going to go next quarter without knowing how this is going to play out if numbers go down and we are able to get better inside seating sure. We'll see an improvement in NOI, but I think it's going to be highly correlated with how the city reacts to the changing.
Numbers related to go but.
Got it that's there alright, thank you for the color I appreciate it.
No problem. Thank you.
Our next question comes from Jared Broadfin from.
They go in General. Please go ahead with your question.
Hi, guys. Thanks for taking the time I was wondering if you might be able to provide a little bit more color on rent deferrals for some of what you noted your smaller and more local retail tenants. What maybe if you can disclose the timing of those deferrals and the cadence for per paid back any of the terms that you.
<unk> provide and then if you could just remind us.
Kind of the mix of your kind of larger versus smaller more local tenant base that'd be helpful. Thanks.
No problem and you know what it's honestly, it's not an easy question to answer because.
I don't want to imply that there is a one size fits all.
And we have.
You know a different approach with each of our tenants.
And we try to as best we can.
Taylor our solution, whether that's a rent deferral hopefully not in the basement, but it happens occasionally or restructure in terms of moving to a percent of sales for a period of time before it all of those are very tenant dependent and what we're trying to do is find the best solution that helps the tenants survived for the long term and remain a great tenant in the portfolio.
And also protects our contractual income.
In General I would say and this is not to say that everything looks like this is that if we're doing a three month deferral, we're adding.
That is a payback period over the term of the lease or within the next year or adding not only the payback of that but extending the lease in terms of the lease extension.
Or you know, there's sometimes or other terms in a lease that we think are important like a co tenancy clauses that we try to remove if we're going to give somebody a rent deferral to make sure that we're.
Getting some incremental rights or benefits, it's a two way street and we appreciate that these tenants need something to survive and we try to get a little something back on the other side to make sure that were protecting our interest as well.
In terms of a mix.
Between our retail tenants.
Oh, Yeah, I mean look it is.
Very much all over the board we have some large national tenants like we do in Hawaii with Nordstrom rack.
We have two large movie theaters one in Hawaii.
And one in downtown Summerlin, but the overwhelming majority of our tenants, especially specifically through downtown Summerlin in Hawaii are the smaller local more boutique tenants.
Restaurants, food and beverage offerings, how pharmacies in grocery anchors, whether it's a trader Joe's in downtown summerlin or whole foods.
In Houston in Colombia.
Or Hawaii, we have three so it's a pretty diverse mix and there's no no great way to painted and in general terms across the board. It's much more focus on smaller local tenants and large national anchors.
Okay. Thank you for that and you know just thinking about Hawaii I was wondering if you might be able to tell us a little bit more and more about what you are hearing down there and expecting can after the you know the reopening our permission for for travelers to come back and then finally, what what you're you're thinking about.
The the tempo of lease up for multifamily you know what the timing on that is to reach kind of a stabilized level that'll be it for me. Thank you.
Okay, Yes, no problem all great questions and.
You know obviously there with the second round of stay at home orders in Hawaii. It has been a challenging market for our retailers there and we've had to do a little bit more than that we have in other areas to help protect the long term nature of the income that we want to see those tenants survive and do well as of October 15, two in domestic travel restarted we've seen an increase.
In travel, it's not close to the levels. It was pre but at least there is more activity more folks around and there's foot traffic that's driving sales.
Foreign travel and largely the Asian travelers have started coming back at the very end of October and that's been an incremental benefit as well.
I'm hopeful that is as this continues to happen in that Hawaii is able to maintain.
Access to both domestic and foreign travel without seeing a spike in cases as they did the last time and we're able to control. This in a better way, we will continue to see a recovery over the next two quarters. The way we saw the last quarter in downtown Summerlin.
And if we're able to get there we're going to feel great. Because you know that that type of strength and recovery and resiliency of leasing and tendency has been tremendous for us in downtown Summerlin.
In terms of the timeline for stabilization of our multifamily within our assets that are non stabilized or under construction in our supplemental which we show.
This quarter on pages.
15, and 16, we show a date, where we expect stabilization to occur.
For all of our multifamily Indian Juniper is 2023, Lakeside Rose 2021, and its all really 18 to 24 months. After the conclusion of construction completion, which is depending on the size of the units and the number of units we have to absorb that's where the variation falls.
Oh again as we stated earlier in their prepared remarks, we're thrilled with the absorption we've seen to date and to be a quarter in our new project in the woodlands, and 30% leased and so on and so on we're exceeding our projections and we're outperforming and I think it speaks to the desirability of the assets in the markets and the Mpcs where we're in.
To be able to outperform like that.
Great. Thank you very much your term.
Thank you.
And ladies and gentlemen, our final question comes from Kansas Carlisle from Costar, New. Please go ahead with your question.
Thank you so much David you mentioned, the 110th the black or building in Chicago to sell in the first half of 2021 does that mean it properties currently being marketed by Howard Hughes <unk> development partner and if so how does that make impacted at your projected pricing.
It's great question, Candace, but we're not actively in the market right now we're doing all the work behind the scenes to prepare everything we need to to be in a position to go when we think the market conditions are optimal.
And I would say that the pandemic more than impacting valuation has.
Impacted the timing of when we would go to market.
And before we go to market. It is really hard for me to tell you. How this pandemic is going to impact valuation you know, we're still a ways away from you know selling and closing it and being able to record a price.
To be able to quantify that.
No look I think that we have the benefit and Wacker as we talked about earlier with incredible Preleasing and incredible weighted average lease term of over 14 years.
And one of the safest most tenant focus buildings, that's ever been built and I would argue the nicest building in Chicago.
And as a result, I think that we still have a great opportunity to command premium pricing and one that would reflect a value with or without a pandemic.
Gotcha and if this building sales at some point in the future where would that leave Howard Hughes in terms of selling non core assets.
You know in terms of the net proceeds you know would probably be half fish or a little bit more and we had targeted about a year ago 600 million of total net proceeds.
The list of non core assets that we disclosed in our presentation over a year ago, which show that the next largest contributors to those noncore asset sales would be the non core retail in the woodlands as well as the three hospitality assets in the woodlands obviously.
Obviously, the pandemic is impacted the sales of those assets in a meaningful way and given our liquidity position and the incredible work. The team has done in terms of the equity and bond raise we have the luxury of patients and we don't need to rush to sell those at distressed pricing. So we can wait as long as it takes to make sure we maximize value.
Great. Thank you so much and I appreciate it.
No problem Candice thank you.
And ladies and gentlemen, with that we'll end today's question and answer session I'd like to turn the conference call back over to management for any closing remarks.
We just want to thank everyone again for joining US today, we look forward to connecting with you by Xoom or video it to answer any follow up questions. You may have and see you all at the upcoming conferences and if not we'll see you on the next conference call. Thank you again for your participation.
We we appreciate it have a great day.
And ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for joining you may now disconnect your line.
[noise].