Q4 2020 Howard Hughes Corp Earnings Call
Good day and welcome to the Howard Hughes Corporation fourth quarter, 'twenty and 'twenty earnings call.
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I would now like to turn the conference over to David Strife. Please go ahead.
Good morning, and welcome to the Howard Hughes corporations fourth quarter 2020 earnings call.
With me today, and David O'reilly, Chief Executive Officer, and interim Chief Financial Officer, Jay Cross President and Peter Riley General Counsel.
Before we begin I would like to address each of our web site Www Dot Howard Hughes Dot Com, where you can download both our fourth quarter of earnings press release, and our supplemental package.
The earnings release and supplemental package include reconciliations of non-GAAP financial measures and will be discussed today in relation to their most directly comparable GAAP financial measures.
Certain statements made today.
Present tense for and then discuss the company's expectations are forward looking statements within the meaning of the federal Securities laws.
Although the company believes 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 fourth quarter earnings press release, and the risk factors and our SEC filings for factors that could cause material differences between forward looking statements and actual results.
We are not under any duty to update forward looking statements unless required by law.
I'll now turn the call over to David already.
Thank you David and thank you for everyone for joining US today welcome to our fourth quarter 2020 earnings call.
Before we begin I'd like to say I'm extremely pleased that GE Ross joined US today for his first earnings call Jay joined US in December as President of the company and among other things will be overseeing the development activity and our communities across the country.
Previously serving as president of that related to Hudson yards J of the vast amount of experience executing on large scale mixed use projects that have transformed the communities and generate urban development.
David industry knowledge and experience of our perfect match for Howard Hughes, and we're thrilled to have him on board.
I also want to quickly touch on the winter storms that occurred last week and Texas due to the heavy amounts of snow and sustained below freezing temperatures millions without power heat and water for extended periods of time.
Some being impacted over several days.
Our regional team was proactive and preparing for the storm nearly a week and advance which resulted in minimal damage to our assets and the Houston region.
In addition, our accounting and financial reporting teams, which are used the base, we're able to file our 10-K on time and assist and the preparation for this earnings call.
So grateful for their efforts.
To assist our employees Nabors and repair crews, we acted quickly to open our hotels and conference facilities to provide of one place to stay along with hot meals.
Continued to keep in close contact with our impacted employees and those and our community and we worked to assist them in the best way possible.
The started the call I want to provide a brief recap of highlights and accomplishments achieved throughout the year and.
And then turn the call over to Jay to discuss our strategic development pipeline and the path forward for our community.
I will then speak to our financial results and expectations for 2021 for.
For concluding by opening up the call for Q&A.
I believe the 'twenty and 'twenty was a year that showcase the strength and resiliency of Howard Hughes as assets people and business model.
We have irreplaceable assets and locations where people increasingly want to live work and shop.
These communities provide safety and security incredible urban amenities and walkability integrating each of wide open spaces.
All of which today is more important than ever.
We are of self funding business model of a strong balance sheet and diversified income stream.
All of these attributes and come together to continue to create strong demand and the ability to accelerate growth with our master planned communities now and for generations to come.
I wanted to take a moment to thank the entire <unk> team, which is displayed and exceptional level of commitment and dedication to the company over the past year and is the driving force behind the results that will be discussed on today's call.
I am grateful to be surrounded by such an outstanding team and appreciate their efforts and their ability to adapt to of mostly of remote working environment over the past several months.
And as always the health and safety of our employees residents and visitors and tenants remain our top priority and we continue to monitor the effects of COVID-19 throughout our communities.
Now onto the highlights the year.
After a lull of the start of the pandemic, we saw a surge in demand and our master plan communities. Following the reopening of most local economies and April and May.
This resulted in strong full year MPC earnings before tax for EBT of $209 million.
As you May recall, we anticipated MPC EBT and the range of $180 million to $200 million at the beginning of 2020 prior to the pandemic.
And we've achieved this level of earnings is remarkable considering the essentially took one quarter off of the year from land sales.
This compares with MPC EBT of 190 million and $209 million and $264 million in 2017, 18 and 19, respectively.
As you May recall 2019 was a record year with a number of super pad sales accelerated into that year to meet homebuilder demand.
New home sales of leading indicator for future land sales increased 10% over 2019 with the total of 2000 and 720 for new homes sold throughout all of our EPS in 2020.
These positive results were largely attributed to people seeking a flight to quality as we saw an influx of homebuyers moving out of densely populated high cost base and into our amenity rich walkable urban communities.
These results were further fueled by broader macro trends such as historically low interest rates and the growing acceptance of working from home, which increased the need for larger living space.
The performance of our operating assets was disrupted early in the year as the effects of the coronavirus negatively impacted our retail hospitality and the ballpark assets.
We experienced the precipitous fall in the NOI beginning in the second quarter as most of our non essential retail tenants and hotel assets were forced the shutter.
In addition, the cancellation of the 2020 minor League baseball season men's and our baseball stadium and downtown Summerlin with non host indie games.
We took proactive actions early on by reducing operating costs, where possible and negotiating rent deferrals with select retail tenants.
Which have had a meaningful impact on their ability to survive.
As the global economy began to reopen the foot traffic increase within our retail locations and our hotels reopen, albeit at much lower occupancy levels.
Office and multifamily of remained strong with collections and the high 90% range, while retail and has seen an improvement of 73% collections versus 66% and the third quarter.
In 2021, we look forward to continuous improvement and our retail and hospitality assets and are hopeful of a return of two of full minor League baseball season, where our minor league team and the Las Vegas aviators can host games and our ballpark.
And ward village, we made strong progress during the year with the construction of our fifth and sixth mixed use projects progressing on time and on budget.
Despite the travel restrictions and condo tours and largely limited to virtual showings and our sales team was able to contract for the sale of 302 homes in 2020.
We saw increasing demand from buyers and California, and other states, who see ward village as the ideal location for a remote working.
Perhaps the most impressive accomplishment at ward village has been the robust sales pace and our latest building Victoria place.
Which launched free sales in December of 2019.
Victoria and places ward village fastest selling condo project to date with 77% of the units already pre sold.
With unobstructed Ocean views on Ward village is front row, Victoria place is a testament to the transformation that has taken place at this vertical MPC.
There really is nothing else like it and the state of Hawaii.
The seaport was presented with many challenges in 2020 as New York City was hit hard by COVID-19 with cases surging early in the year.
During the second quarter construction of the Tin building was shutdown and surrounding restaurants and retailers were forced to suspend operations.
For the middle of the year construction of the Tin building was able to resume.
And select shops, and restaurants, we're able to reopen at of limited capacity.
We took note of the vital role of E. Commerce played during the pandemic and decided to incorporate our strong focus on food delivery and mobile ordering and the tin building, which should be well received by customers post COVID-19.
And the pier 17, and rooftop we had to quickly pivot our summer strategy as our concert series was canceled due to the green box.
We instead and launched a new concept called the Greens, where guests were able to reserve the room socially distance many green line on the rooftop.
This rooftop activation was extremely popular with local new Yorkers and was very well received by our sponsorship partners.
We continued delivering this first class experience through the fourth quarter by transforming these many green launch into winterized cabins and.
And the fourth quarter, we serve nearly 39000 guests and had an average daily waitlist of 4000 people and generated over $1 6 million and revenue.
The Greens clearly displays the appeal from the unique estimates fear of the pier 17 and moved up.
Our team is always searching for innovative ways to meet the seaport of one of the claim destination and the announcement of our latest concept. The long club is a great example of that.
Coming this fall and the one club will convert 20000 square feet of the Fulton market building into the indoor outdoor experience with the unique emphasis on long games.
Like the Green this concept will be of great gathering place for friends and family with access to a variety of non games and the clubhouse volume.
This is an excellent opportunity to drive additional traffic to the seaport as consumers begin seeking of immersive and shared experiences post pandemic.
In addition to this announcement, we've recently entered into a management agreement with the claim shifts wildly differing and Josh Eaton for the.
The former 10, Corso Como cafe space on the ground floor of the Fulton market building.
This concept will include and expansive outdoor cafe, featuring an all day menu and to go selections.
This past October we announced our proposed plan for the one acre parking lot of 250 water Street as we continue to revitalize the seaport district.
Jay will go into more detail on this project and provide updates and a moment.
During 2020, we substantially concluded and executing on our transformation plan. Our decentralization efforts are finished and our corporate G&A reduction goal of 40% to $45 million is by and large completed.
Our fourth quarter annualized G&A, excluding onetime charges March a 31% reduction for a $40 million savings from our full year 2019 run rate G&A of $128 million.
This implies savings puts us in the range of our cost savings goal of originally set up and our announced plan.
Our disposition of non core assets has generated $214 million of net proceeds to date and our strong liquidity position gives us the luxury of patients to ensure we achieve the maximum value for the remaining assets.
Our resources are now squarely focused on accelerating development opportunities within our master plan communities.
And with that I'm going to turn the call over to Jay Cros.
Thanks, David and good morning to everyone on the call, it's a pleasure to be with all of you with one.
And most of the quality of the Howard Hughes Canadians across the country continue the Seaway are mdc's are consistently ranked among the best places to live the disparate reflected and the growth of new home sales and the fast pace of absorption of our new the completed commercial assets.
Just this past month, the Robert Charles Lesser Company released their list of the 50 top selling master plan communities in 2027.
Some of and ranked third on the essence of the top selling NBC and Nevada Regional bank and the wisdom of the highest ranked NBC and Texas. Additionally, during the year niche dot com and recognize the woodlands and Columbia as number two and understand and best cities and wish to live in America, and finally, <unk> was named MVP of the year by the National Homebuilders.
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This type of recognition and seek to the quality of our master planned communities and demand for the excellent homes within the has actually continued to grow additional residence drive demand for initial commercial net lease to meet this ongoing demand we delivered six commercial assets from 2020.
And the woodlands, we completed construction of 80 770, new trails of 180000 square foot and build to suite office building for alight solutions too late the edge of 386 unit apartment complex and Hughes landing and the lean at Huawei and 163 of unit boutique multifamily property and held its grand opening this past December.
And then and then in Colombia, we delivered our first multifamily asset and the Merriweather district with the introduction of Juniper and 382 unit project with 57000 square feet of ground floor retail for you.
And underneath and 11000 square foot stand alone building to house, the regionally populated by voice and Howard restaurants.
And lastly in Chicago, we delivered 110, North Wacker of one 5 million square foot office tower is now 77% leased and anchored by bank of America.
Delivery of these assets are excellent additions to our operating asset portfolio and once stabilized will add $40 million to our annualized NOI.
Since many of these assets online and we've seen and excellent pace of lease up that has led to our recent announcement of another 2 million square feet of strategic development opportunities and Richmond settlement downtown Columbia and Ward village.
Starting with the pendulum starting will become the first multifamily development of envision central of future Town Center that will ultimately comprised of approximately 900 acres since that will be located and 15 acres of commercial and and added 358 units for the community the.
The addition of more units the bridges and build on the strong lease up of Lakeside row, our first multifamily assets and bridge and that was delivered and the fourth quarter of 2019 as of the end of the fourth quarter Lakeside row was 91% leased which gives us confidence that demand for multifamily and originally was strong.
Construction of the signed and commenced in the fourth quarter of 2020, and we expect to be completed and the second quarter of 2022. We're excited for this project and look forward to building out of the town center over the next several years.
And some of them that we recently announced plans to the two new assets.
Echo of 295 unit multifamily property and 1700 per billion of 257000 square foot class a office building and.
The announcement of both properties comes at a time, where we see strong underlying demand for both of these prototypes and the third quarter of 2019 and delivered 257 units at <unk>, which are now 90 and 90% leased similarly, our two office buildings in downtown Summerlin, comprising 350000 square feet of 98% base.
Those tenants Echo and $700 million are expected to begin construction in the second quarter of 2021.
We also just announced the next phase of growth and downtown Columbia, and another multifamily project across the street from Juniper and.
<unk> level feature of 417 units and 32000 square feet of retail and.
Announcement of this development builds and the rapidly up of Juniper, which we delivered and the first quarter of 2020 and is already 62% leased construction of amount of will begin in the first quarter of 2021.
First of all during the call David touched on the same pace of kind of sales at Ward village. This robust activity has led to the announcement of the next development Phase and this award winning community groundbreaking of Detroit place took place. This week and we are in excess of pre development for our next two projects every New project Awards village continues the extraordinary transferred.
<unk> of this destination community, which we are proud to the building.
In addition to these recent development announcements, we will restart proposal for the redevelopment of the surface parking lot at 251 of the street at the Seaport last quarter.
And since then we presented our proposal to New York City's landmarks Preservation Commission the <unk>.
First major stent and the governmental review process.
Our development plan the transfer of rights from the historic Waterfront district to the one acre site, resulting in the building that will provide significant district benefits security of the economic future of the South Street Seaport Museum, and bringing needed mixed income housing and the neighborhood.
We have received landmark Commission's initial feedback and are working with the commission to address the comments, we're confident that the development of 250 water Street will continue to bring to life of cohesive vision for the district and help propel the economic recovery of downtown New York City.
We ended 2020, well positioned for continued growth and then the strategic development opportunities across all of our client communities as always we will be disciplined and strategic only developing new projects when underlying demand dictates hi per.
And I'm looking forward and working with a talented team and Howard Hughes as we continued to execute on our decades long development pipeline.
And now I'll turn the call back to David O'reilly.
Thanks, Jay I am now going to spend a little time going and talking about some more detailed results and each of our operating segments and then discuss our expectations for each of those operating segments for 2021.
I will then turn to our financial results and balance sheet.
As I stated earlier OTC segment performed well during the year with strength and both underlying new home sales and land sales. Despite a pause in activity during the second quarter due to stay at home orders issued across the country 253 more homes were sold in 2020 compared to 2019.
And the fourth quarter alone there was a total of 692, new homes sold throughout our empty seats of <unk>.
15% increase compared to the fourth quarter of 2019.
The land sales were down 34% and 2020% of 377 acres sold versus 571 acres sold in 2019.
Similarly land sales were lower by 32% and the fourth quarter of 2020 compared to the fourth quarter of 2019, this year over year and quarter over quarter decline was largely attributed to an outsized year and 2019 at Summerlin and closed on large super pad sales and the fourth quarter that were not repeated in 2020.
This decrease drove 2020, MPC EBT $54 million lower compared to the full year 2019.
Despite this decline MPC EBT of $209 million exceeded our pre Covid earnings target as we typically expect our mpc's to generate between 180 and $200 million of EBT and of normalized year.
As we highlighted on our last fourth quarter's earnings call and 2019.
Surpassing the target during the worldwide pandemic truly demonstrates the quality and desirability of the communities we are creating.
And Summerlin and new home sales were 8% higher in 2020 versus 2019 and were 21% higher and the fourth quarter of 2020, when compared to the same quarter in 2019.
In addition, the price per acre of some of those residential land grew to $772000 and 2020 and increase of 113017.
17% when compared to 2019.
This activity demonstrates that while land sales was lower year over year. It was not the result of declining homebuyer demand, but merely a timing difference.
We continue to see homebuyers migrate from high cost states, such as California, and the pace of new home sales and the steady increase and price per acre of our land indicates further momentum and 2021.
<unk> had a monumental year and eclipsed all 2019 results in terms of new home sales acres sold and price per acre.
The new home sales and 2020 were 18% higher than 2019 with several record setting months.
<unk> sold of 169 acres of residential land to homebuilders during the year, which represents a 13% increase over 2019.
Moreover, the price per acre bridge loans residential land rose from 408000, 2019% of 439000 in 2020 and 8% increase.
These results speak to the exceptional quality of the community that will only grow more and more attractive over time.
The woodland hills and experienced significant growth during the year as well as new home sales rose, 80% and 2020 compared to 2019 with monthly New home sales Records in July and August.
During the year of the Woodland Hills sold 56 acres, representing a 40% increase from 2019 and the price per acre for residential and increased 12% from 276000 to 310000 2020.
We are very pleased with the performance of our MPC and 2020 and look forward to another strong year in 2021.
Moving onto our operating assets.
During the year of operating asset NOI of $190 million was 11% lower compared to 2019.
This decline was due to the performance of our retail hospitality and ballpark assets that were negatively impacted by the coronavirus.
For the fourth quarter of 2020, our NOI of $47 million was largely unchanged from the same period of 2019.
This was due to increased NOI generated by our office and multifamily assets as the newly completed developments and the acquisition of the wooden towers were brought online during the year.
This was largely offset by a decline and NOI for retail and hospitality.
Our operating asset NOI improved 25% sequentially, which was fueled by a 44% increase and retail NOI.
We've continued to see notable performance improvements following the lull of the second quarter and are hopeful this momentum will carry the 2021.
Office NOI rose, 37% during the year when compared to <unk> 19, and increased 30% during the fourth quarter of 2020 compared to the same period of 2019.
The increase in NOI was in large part due to the acquisition of the woodlands Towers' and December of 2019, which generated $27 million of NOI in 2020, excluding the Poles and towers, our office NOI was still higher by 5% and compared to 2019.
Overall, our portfolio of office assets performed well during the year with strong rent collections of 97% and the fourth quarter is the result of the high credit quality of our tenants.
The NOI from our multifamily properties and 2020 improved modestly by 4% compared to 2019, and rose, 50% and the fourth quarter of 2020 versus the fourth quarter of 2019.
The pace of lease up of our newly developed assets has remained strong and was a meaningful driver of the overall contribution of our multifamily NOI.
This increase was partially offset by increased concessions at select stabilized assets and negative cash burn of two lakes edge.
And the lean and waterway, which are still in the beginning stages of lease up.
Similar to office multifamily collections during the fourth quarter remained very strong at 98%.
We introduced three new multifamily developments in 2020, and the strong lease up of those assets solidified our decision to launch three new multifamily projects and 2021.
Retail NOI declined from $63 million, and 2019% of $40 million and 2020 of 36% drop.
Much of this decline was driven by COVID-19.
While most of our NOI has steadily increased from the lows of the second quarter, our retail and ward village and the outlet collection of Riverwalk and New Orleans and continue to experience low activity at the respective retail locations as both Hawaii and more lengths has seen the steep decline and tourism.
Excluding ward village and the.
The work our NOI only decreased by 19% during the year.
During the second quarter, our retail collections fell to 50% of tenants struggled the pay rent at the onset of the pandemic.
During that time, we worked with our tenants and particularly our small businesses and local tenants who needed assistance the most.
Rent collections and the third quarter improved to 66% and was further and the fourth quarter to 73%.
Once tourism returns the Hawaii, New Orleans, and we expect retail collections the bounce back to the mid 90% range across our portfolio.
We continue to see signs of recovery within our retail portfolio and the sequential NOI increase of 44%.
<unk> for the quality of open air retail settings, which has become increasingly more important to our tenants and customers.
During the year of the NOI from our three hotels and the woodlands fell by $26 million or 90% compared to 2019 and occupancy ratio of drastically due to the virus.
During the second quarter of our hotels were forced to suspend operations for an extended period to comply with state issued stay at home orders, resulting in a significant hit to NOI.
These assets began reopening and eliminate capacity throughout the third quarter, we began to see increased activity from we did vacationers and business travelers.
While it was the challenging year for hospitality, our assets, we're still able to generate a positive NOI of $2 9 million.
Which shows the progress made by our dedicated team over the last few quarters.
Finally, and downtown Summerlin are ballpark reported a net operating loss of $3 $6 million and 2020 versus the positive NOI of $8 1.002 million 19.
As I mentioned earlier in my opening remarks, the ballpark, we shut down during the year as minor League baseball canceled the 2020 due to COVID-19.
This shutdown and also had a negative impact on our retailers and downtown Summerlin and as the <unk>.
And so and attend these games would visit our nearby shops and restaurants on game days.
The minor league baseball returns through a full season. This year, we expect the ballpark to generate north of $8 million and annualized NOI as it did in 2019.
Shifting to our strategic development segment, we continued to see robust demand for our homes at ward village from 302 units sold or under contract in 2020.
Although the travel restrictions were enacted early on across the state of Hawaii. The pace of sales for available condo units remained strong.
As a result of COVID-19, we launched the digital sales platform for virtual convent tours, which greatly improved our sales effort during the year.
We topped off model and we even this past July and expect to deliver the 85% pre sold tower at the end of 2021.
Our other tower under construction cooler as well sold of 78% and is expected to be completed in 2022.
Both towers are on time and on budget with hard the velocity from buyers.
Subsequent to year and we closed on two condo units of wire and one of them with net sales proceeds of approximately $35 million.
With two towers under construction, another and pre sales and two additional towers and pre development our view for the future for Ward village remains very positive.
Please note the year over year condominium revenues are non comparable is took the 2019 revenues included condo tower deliveries from <unk> and IL one.
And we do not have any tower deliveries in 2020.
The seaport reported a net operating loss of $17 million in 2020 of decline of 11% compared to 2019.
The further decline in the NOI was largely attributed to the impacts of COVID-19, as businesses were shut down and events for either canceled and postponed throughout New York City.
And as restrictions ease later in the year and we were able to reopen most of our restaurants and a limited capacity, which included the Fulton Malibu farm income and income.
We took proactive action during the year to adapt to our new environment and launched the Greens and announced two new concepts and the Fulton market building and alternate space of the tin building to incorporate mobile ordering and delivery.
I do want to note the cost to complete the tin building increased by approximately $20 million during the quarter primarily related to additional build out cost that we believe will drive higher returns and increase foot traffic.
The increase and cost is primarily attributed to the development of our E Commerce platform, the drive takeout and delivery demand for.
Programming of the sell the plaza to incorporate and 12 month outdoor venue.
Enhanced security and Covid related construction delays.
While these updates have resulted in higher costs, the increase and offerings and scope and drive significant opportunities to maximize revenue for both customers and sponsors that the tin building.
As Jay mentioned, we are making progress on our proposal for 250 water Street and look forward to bringing economic development to the area.
We continue to keep everyone updated as these plans become a reality this past year presented many obstacles for the seaport, but we were able to thoughtfully pivot and continue to build upon our vision of revitalizing This district.
We believe the positive results displayed and the second half of 2020 is of great proxy of what we expect to occur in 2021.
Our masterplan communities should have another great year in 2021 is the growth of new home sales materializes into land sales over the coming quarters.
We expect this activity as a result of MPC EBT of $180 million to $200 million, which is consistent with our guidance from last year.
We expect our operating assets to recoup most of the NOI and launched this past year due to the pandemic and project of $195 million to $205 million of NOI in 2021.
The lease up of our newly developed and acquired assets will drive NOI higher along with the continuous improvements within our retail and hospitality assets as we anticipate higher rent collections and increased occupancy.
Note that our operating asset NOI projections assume the Las Vegas ballpark will breakeven as we anticipate of minor League baseball season, and 2021, but are not clearance of the number of games or whether there will be stadium capacity restrictions in place.
With the completion of <unk> expected in 2021, we anticipate of $100 million to $125 million net profit at ward village.
This tower is already 85% pre sold and we are confident we will sell the majority of the remaining units by year end.
This projection also includes contribution from the sale of select remaining units and Wyeth phenomenon.
The cost cutting initiatives actions over the last several quarters meaningfully reduced our overhead and of help streamlining of our business.
We've essentially completed the G&A reduction goal of our transformation plan and expect our G&A cost and 2021 to range between 80 and $85 million.
The combination of exceptional business performance and cost savings in 2021, we will have a meaningful impact on our bottom line and will increase the free cash flow available for accelerating further strategic development opportunities within our core and Pcs.
Taking a look at GAAP earnings for the 12 months ended December 31, 2020, and reported a net loss of $26 $2 million of <unk> 50 per diluted share compared to net income of 74 million of $1 71 per diluted share in 2019.
We completed the fourth quarter with the net loss of $6 6 million of <unk> 12 per diluted share compared to a net loss of $1 1 million of our <unk> per diluted share for the same period of 2019.
The year over year and quarter over quarter declines were largely due to the impact of Corona virus head of our various business segments included in our Mpc's operating assets and the seaport.
In addition to significantly lower condo sales revenue recognized as 2019 revenues included the closing of Iowa, and Ku Tijuana, when we did not close on any condo towers in 2020.
This decrease and year over year earnings was partially offset by the one time non cash gain of $267 $5 million related to the deconsolidation of 110 north of anchor and the third quarter of 2020.
Subsequent to the quarter and on February 2nd of 2021, we closed on a two tranche bond offering issuing $650 million of senior notes due 2029 and a rate of 408.
And 650 million of senior notes due 2031, and our read of one <unk>.
The net proceeds of the offering combined with the portion of the cash on hand will be used to redeem our existing $1 billion of senior notes that were due 2025, and our read of five and three eights as well as to repay the $280 million bridge loan for the Wilton towers.
This bond operating increased our unencumbered book value of assets further reduced our cost of debt and extended our maturity profile.
Our nearest debt maturity is not until October 21, which is for only $29 million on a loan and the outlet collection of everyone.
The asset is currently 87% leased and is one of the few remaining non core assets left to sell.
Our liquidity position is incredibly strong as we closed out the year with the $1 billion of cash on hand of $185 million and availability and our lines of credit and only 371 million of net equity requirements for our projects currently under construction.
The proactive actions taken over the last year to strengthen our balance sheet and leaves us with more than enough liquidity to meet all of our current funding requirements.
The results from the quarter and the full year of are a reflection of how our irreplaceable assets and unmatched communities and performed during good and bad economic cycles.
Our company's diversified stream of income strong balance sheet and self funding business model helped us navigate through an unprecedented year.
We ended 2020, well positioned for accelerated growth as the increase and new home sales strong absorption of our newly developed assets and robust condos sales velocity and solidified our decision to launch 2 million square feet of new developments in 2021.
We're looking forward to the year ahead, as we continue to successfully grow our communities and unlock value for our shareholders.
So we're now going to turn the call over to the Q&A section and I will answer. The first few questions that have been generated by state of technology will be read by Dave strength.
David can you read the first question.
Yes.
First question is from supplemental disclosures it looks like <unk> added 722, salable residential acres and the <unk> 2020 versus <unk> 2020.
For a 35% increase what drove this was it organic and can the same inventory addition to be replicated and other mpc's overtime.
It is of Great question and I'm glad you asked it because it is important to note.
It is exactly right that the net salable residential acres did grow this past quarter and over 2020 as we continue to refine our masterplan of British land and when we have of Masterplan Light bridge, Linda and close to 11000 acres.
The initial and Master plan you have as you think about a 30 year sellout often changes morphs and.
Get more refined and detailed overtime and Thats exactly what happened is we put a very fine pencil and pen to some of the new neighborhoods.
Expect to open in 2021, and 2022 and as a result, we were able to increase the net salable acres. This is not uncommon. This happens every couple of years within our master plans I wouldn't expect this to happen and the woodlands, because we're down to very few acres left.
And in Summerlin, and especially as we get into the details of some of and west and as we continue to move forward and bridged Lynn we of the opportunity to increase the saleable acres.
I think 722 of the meaningful adjustment I wouldn't expect that to be replicated, but we are always trying to push to make sure that we're maximizing the value of all of our MPC.
Okay and the next question can you elaborate on what drove the 25% decline and other operating rent collections in Q4 versus Q3, even as retail collections and improve.
Was this mainly attributable to the aviators hospitality or other and do you expect normalization in Q1, 2021 going forward.
Another good question and I'll hit the end of that first which is I, absolutely expect to get back to normalization, because we already have and it was really a timing difference related to the warehouse the woodlands warehouse, where we had not collected and as of December 31, but have collected and subsequent to the ANSI ended the year. So net collection percentage is already back.
Up to where it was in previous quarters, and we expect to maintain that or improve that throughout 2021.
Next question is will you be able to recognize gains from any condo towers and Hawaii This year.
As I mentioned in our prepared remarks, we're expecting between 100 of $125 million of.
The net profitability as we closed all of the it.
At the end of the year and we're also had closed the handful of units and why and on hot which will be thrown flowing through the P&L and <unk>.
Thanks, David next question shares were diluted last year to shore up the balance sheet. As a result of Covid do you of any plans and buying those shares back and continuing the original path for reducing share count and further create shareholder value again.
And again, it's another great question and one that we focused on a lot and it really comes down to a capital allocation decision and this past quarter of the powder.
The month ago, you saw the announcement to launch 2 million square feet of new development, because we thought that that was going to deliver the highest risk adjusted returns for our shareholders.
We have the benefit now of having tremendous liquidity and the optionality of thinking about new developments for thinking about potential share repurchases, which were always evaluating and we will take advantage of if we continue to see dislocation and our share price.
Thank you.
Next question and the development potential and downtown Columbia, Merriweather seems very exciting, but perhaps the least talked about by management and is it because of the size of enormous scale of the other projects.
It's too early and the process of the Columbia developments and really divulge.
I'm almost a little offended because I think I would go out of my way and most of our investor meetings. The highlight Columbia weighted is often overlooked but it is of great question and we're really excited about the progress of downtown Columbia. It has been one of the best performers throughout our portfolio of during the pandemic largely driven by an increase.
Tenant base concentrated and education health care and cyber security.
And I noted in an interview earlier this month and the time it took us to consol.
Consolidate ownership and reached a tentative agreement on the redevelopment of landmark mall, we executed on over $1 billion of.
Of transformation and downtown Columbia, and we're really excited about the momentum we have there and as Jay mentioned, we just launched and other multifamily project and.
We're continuing to see great results and Columbia.
Thanks, David.
Next question is as new Internet technologies, like Spacex Starlink enable high paying jobs of literally be located to the most remote location how urban areas for <unk> focus is to be able to thrive as more and more high paying jobs exit cities, well I would say that we have been a great beneficiary of this trend and and.
As more and more folks are able to work remotely and ads. They are able to make decisions on where they live that allows them to move to great Master planned community like the woodlands like Virgin like Summerlin, where they have and amenity rich environment, but also access to wide open green spaces that has really played in our favor.
And we saw that with the increased and home sales throughout our MPC and 2020 compared to 2019 as well as the rapid lease up of our multifamily assets throughout the year.
So I think that we have been at the center of the Bullseye of this trend and we're hopeful that that will continue throughout 2021.
Similar question, how is Howard Hughes capitalizing on the surge and demand for real estate, specifically in states like Texas, and Florida right now.
And it comes down to the core of our business plan that as we sell more homes, we sell more land to homebuilders those homes get built residents move in and they need more commercial amenities and we build those and outsized risk adjusted returns.
As we did with the 2 million square feet of new properties that will be building this year.
Operator, we can open up to Q&A now.
Thank you as a reminder to ask a question you May Press Star then one on your Touchtone phone.
And if youre using a speakerphone please pick up your handset before pressing lucky.
So let's draw your question. Please press Star then two.
Our first question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.
Hey.
Good morning, good morning, David and the.
And Jay.
And certainly a strong strong land sales quarter, and maybe we'll start there.
David You always mentioned that land sales are lumpy and there is always timing of when the homebuilders take down the land and when the process and then when they come back to the well to buy more.
You did mentioned of the $180 million to $200 million.
But just given what.
And what seems to be incredible pace, but not letting up of homebuilder.
Of the homebuilder.
Activity.
How should we think about 2021 that we don't get detached from what you guys have should we just continue to assume the same 180 200 ratably through the year or are there some super pad sales that youre seeing or whats the better way that we can sort of be born with.
Really means to say you had a great quarter and the fourth quarter does that mean <unk> is going to be light.
The <unk> to be big just sort of looking for color.
It's a good question, Alex and it's really difficult one the answer because.
It requires a lot more clarity and my crystal ball than I have.
I would tell you that we feel good that over the course of the year, we will be able to achieve that of $180 million to $200 million number which is a tremendous number for Howard Hughes.
The timing of that is going to be lumpy.
And as you know, we're driven by maximizing value and not driven by quarterly results. So if it comes time to close and we're going to get an incremental benefit of a couple of dollars by waiting until the end of the quarter or by getting it done earlier in the quarter, we're going to do that to maximize value and not to meet quarterly expectations of resolve.
And so thats really difficult for me to tell you that <unk> will be big or small or <unk> will be bigger small I think in totality on a trailing 12 month basis. I think we will look back a year from now and B and that 180 to 200 range hopefully towards the higher and but the color of quarter to quarter is just too hard to predict.
Okay.
The second question is Hawaii, but the.
Ward village just remains of blowout success for you guys.
But just speaking.
Well.
Yes on the island.
It seems that the housing boom has also arrived and Hawaii. So a lot of locals are buying homes.
And how has this changed.
And basically it doesn't seem like the shift of the locals to go buy homes of credit card. Those has really impacted you guys is that a fair assessment or are there sort of thing to think about or added dynamics that are that are more than offsetting any decline and local activity.
And so I think that we have seen the shift over the course of the year in terms of the makeup of our buyers and if anything we've seen a modest decrease and the local buyers buying condos and ward village now thats been more than offset with increased demand from the mainland from primarily the west coast.
And down from the Southern California area to the Pacific Northwest.
But it's been small ships and it hasn't been meaningful changes I wouldn't say that we've seen an acceleration of local buyers I think the.
Local economy, and Hawaii, which has obviously been incredibly challenged given its reliance on travel and tourism.
And a little bit of headwinds and I think thats why some of those local buyers were a little bit slower in 2020 than in previous years.
Okay do you expect the local buyers to come back for.
Or you expect just continued more demand from the west coast.
I would expect both.
And I'm optimistic for both Alex and I'm optimistic for both not just in ward village, but across our Master plan and.
And we had incredible home sales and the woodlands in Summerlin and Enbridge Lynn.
And with some headwinds and the local economy as Vegas.
Challenge of the strip had bunch left of travelling tourism and Houston, which is typically correlated with the energy had its share of headwinds.
And we've more than offset that with out of state migration patterns coming into these master plans.
And if we're able to continue to see those trends as well as the recovery of those local economies of both here and the mainland as well as an award we could be positioned for an incredible year.
Okay, and then just finally.
Texas and I think Thats may of sort of been following up about one of the electronically submitted questions. You guys have true rather large parcels of land circle T and monarch steady.
And I know David that Youre always you don't want to over promise you want to under promise and over deliver but are you in general seeing more and more rfps for corporate relocations that means that some of these land parcels could come to fruition and the next 12 call. It 12 months 24 months for.
Is the mantra still don't even think about the land and bought anything happening on these parcels for a long time, just trying to gauge just given with all of the corporate relocations. It would seem that those two parcels are increasingly likely to see something something bite.
Look it's always the possibility Alex I wouldn't say that I would look at it as something that we're expecting and the next several quarters. Both of those assets that you mentioned around the non core asset list.
And the.
The always assets that we're evaluating the sale of and.
One of those circle T. We do close on the sale of a recently so the remaining Dallas area of land that we own as monarch City I think it's and the path of growth I. Just don't know if that path is near term enough that I would expect anything in 2021.
Okay. Thank you. Thank you David.
Thanks, Alan I appreciate it.
Our next question comes from how Mccartin with Sidoti.
Gws. Please go ahead.
Hi, good morning, Thanks for taking the question and actually.
I know you had announced you ramped it up.
The development just recently, but I was wondering and in the past like your purchase of the two towers.
What are your plans and why wouldn't it would be your plans to purchase more.
Assets within the Mtc regions of the Q increased control over.
The pricing.
Well I think that we're always evaluating those opportunities when they come up and as you know, we do own a meaningful component of assets within our master planned communities and so therefore those opportunities are limited by definition, but when they do arrive we take a very close look at them often.
And given some of our rights whether the rights of first offer refusal deed restrictions or otherwise.
It can translate into some sense of competitive advantage and when we do have that we'd look to take advantage of it.
But those opportunities historically speaking have been fewer and far between because we do already have a meaningful ownership percentage and the end of the assets within our master plans.
Okay. Thank you for that and then my last question back to the ballpark.
We lost all of last year I don't remember clarification on whether you were able to collect the entire and naming rights fee and those negotiations have progress this year on whether if there is minor.
Minor League baseball season, or if it's a limited number of games of fan attendance. If you would still receive of 100% of Pat.
The sponsorship.
For the naming rights agreement, we very much we did collect our sponsorship payment would specifically to that agreement. This past year and we do expect that we will receive it and the future assuming that there is the season fans are no fans.
And thats not the thank you very much sponsorship agreements. Obviously there are some debt that we don't that aren't.
We are not afforded the luxury of collecting and whether or not we have the season or not and in those situations. We've worked collaboratively as we have with us like our local retail tenants to make sure that we're coming up with the solution that works for both parties.
Okay. Thank you very much.
Thank you.
Our next question comes from Marlene parallel with Bank of America. Please go ahead.
Hi, Thank you for taking my questions sort of just very quick high level question.
One.
And perhaps.
And the business from what's going on in Texas, right now and.
Obviously rates are the topical and the market this week.
Thoughts on that in terms of the impact on non home or land sales.
Absolutely by the great questions and I would say the team did.
And incredible job getting prepared for the winter storms as we did see.
Coming.
And minimize the amount of damage and impact of the size of our assets.
A handful of burst pipes, which have all been remediated and and we're handling with the with our insurance company already so I would say no material impact. Obviously, there was there was a material impact for all of our employees at last the power and water and we did everything we could to help them through that time opening up our hotels, providing meals showers and anything we could.
Health.
In terms of interest rates, absolutely something that we keep a very close eye on and in the fourth quarter of 2019, we also saw and a.
Quick meaningful increase in rates and that had a very temporary short term impact on home sales.
And now our strategy has always been to only sell land to homebuilders to keep up with underlying home sales. So that we keep up with an equilibrium of supply and demand and the market.
If this change and rates impacts home sales, we're going to react quickly and it will impact our land sales, obviously, it's very much real time and less than 24 hours old. So we haven't seen any impact yet, but it's something that we're going to continue to monitor to make sure that we are able to react very quickly. So that we don't fall out of balance between.
Land at the Homebuilder zone, and the home sales that are supporting those that land.
Great. Thank you.
Thank you ma'am.
Our next question comes from Jon Petersen with Jefferies. Please go ahead.
Thanks.
And I'm curious seeing just for two months and the new year. If you can give us any <unk>.
Indications of how hotel revenue and NOI is trending.
And of what your expectations are for the next few quarters and I guess kind of following up on.
The recent called and Texas has that created any incremental hotel demand that might be meaningful to the next quarter's earnings.
All of that.
The answer is a big picture of away from the storm I would expect the next several quarters for our hospitality assets to look like the past couple of quarters.
We're still seeing modestly growing leisure travel and modestly growing business travel.
Some of the the.
And the benefits, we saw in <unk> and <unk> with <unk>.
<unk> and the major League baseball bubble of.
Obviously, we're not going to replicate that in the winter months here.
But we did see a pick up over the past week as our hotels were completely sold out during the winter storms and I think that we'll have.
A very modest impact because that is a two to three day phenomenon over a 90 day quarter.
Got it and then.
Pages 13, and 14, you have kind of your stabilized properties and your current cash NOI and what the stabilized NOI as I just wonder if any of you can give us the kind of a sense of.
And when we go from that and we're at a higher $92 million annualized and the fourth quarter and you guys have stabilized pegged at about $285 million.
And I know you guys aren't really giving guidance right.
And.
If we're looking at a year from now at <unk> 21, do you anticipate will be a lot closer to that stabilized number.
I, absolutely do I think that we work every day to try to close that gap specifically within our stabilized properties on those pages that you mentioned, John and rather than try to give you an indication of where I expect us to be a year from now I may say, if you went back to <unk> last year of <unk>. This year of pre pandemic I think you'd see that day.
The GAAP.
Candidly almost didn't exist and hospitality multifamily office and we had a very small GAAP within retail and so we've shown that we're able to get to that stabilized number and I think as we hopefully recover coming out of the pandemic that GAAP will continue to close back to where it was previously.
Okay, Alright, that's great. Thank you I appreciate the color.
And I appreciate it.
This concludes our question and answer session I would like to turn the conference back over to David O'reilly for any closing remarks.
I appreciate everyone joining us today and I want to thank everyone again for.
For participating in the call we will be sure to keep you posted on the progress on our recently announced the development plans as well as we announced details of and upcoming Investor Day event and the next couple of months. So until then stay safe and well look forward to speaking with you all soon.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.