Q1 2021 Howard Hughes Corp Earnings Call
Good morning, and welcome to the Howard Hughes corporations first quarter 2021 earnings call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
<unk> on your telephone keypad.
After todays presentation, there will be and opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded.
I would now like to turn the conference over to David Streit Executive Vice President head of operations and Investor Relations. Please go ahead.
Good morning, and welcome to the Howard Hughes corporations first quarter 2021 earnings call.
With me today are David O'reilly, Chief Executive Officer, Jay Cross President Correne, Loeffler, Chief Financial Officer, and Peter Riley General Counsel.
Before we begin I'd like to direct you to our website Www Dot Howard Hughes Dot Com, where you can download both our first 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 and the present tense, but 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 statements disclaimer and our first quarter earnings press release, and the risk factors in our SEC filings for factors that could cause material differences between forward looking statements and actual results.
We are not under any duty to update forward looking statements unless required by law.
And now I will turn the call over to David O'reilly.
Thank you David.
Thank you all for joining us today welcome to our first quarter 2021 earnings call.
Before we dive into the results of the quarter I wanted to make a couple of quick announcements.
If you have not done so already I would encourage you to read our letter to shareholders that was released a couple of weeks ago.
The letter, which is included on our 2020 annual report can be found on the Investor Relations section of our website.
It provides a good overview of our business and highlights the many accomplishments we've been able to achieve over the past year.
Second I'd like to welcome Correne Loeffler, who is joining us today on our first H H D earnings call.
Green joined Us as Chief Financial Officer, and April and brings a wealth of knowledge and financial expertise to the company.
She comes to us from Whiting Petroleum, having served as Chief financial Officer.
There's no doubt Corinne will play a vital role in driving the company forward as we look to continue the acceleration of the development across our portfolio.
I'm going to open the call today with remarks on the performance of our various business segments before handing it over to Jay Cross, who will provide updates on the seaport and our strategic development pipeline.
Marine will then speak to our financial results before concluding and opening up the call for Q&A.
And we've highlighted over the last several quarters, our mpc's are positioned and low cost low tax states and offer best in class amenities that are attractive to both residents and tenants.
These amenity rich communities fully integrated with expansive open space and provide exceptional quality of life, where individuals can live work and play on.
All in one highly desirable setting.
And these characteristics are becoming more and more sought after in todays environment, which has allowed us to produce outsized results. Despite unforeseen circumstances brought on by COVID-19.
Consider for a moment the woodlands.
In March and each dot com ranked the woodlands is the number one best city to live and America.
And today, all homes that are even close to move and ready our selling and off the market within three to five days.
This incredible achievement is a culmination of all the hard work and dedication and that's been put into this community by the woodlands team over the last few decades.
In Summerlin and bridge loan and the woodland Hills, the pace of new home sales and appreciation of our residential land have been incredible and are only accelerating further since the start of 2021.
This resiliency is a reflection of the demand that continues to strengthen and within our community and is a testament to the quality of the M. P. C's we are creating.
Even in ward village, where we sell premium condominiums to residents. The pace of sales has remained strong despite selling most of these units sight unseen due to the travel restrictions brought on by the pandemic.
These are just some recent examples of the great momentum and the positive growth Howard Hughes is experiencing throughout its communities.
Now onto the results for the quarter.
We kick started the year with a strong first quarter across all aspects of the business day.
Acceleration, new home sales and condo sales displayed and the second half of 2020 carried into the new year.
We also saw improvements within our operating assets that were impacted by COVID-19, which is very encouraging as we continue to see signs of recovery across our retail and hospitality portfolio.
During the quarter, we took steps to fortify our balance sheet and proactively issued $1 $3 billion of senior notes and an effort to further diversify our funding sources.
Termed out our debt maturities and lower our overall cost of debt.
The combination of these events has allowed us to accelerate 2 million square feet of development and our core Mpc's and we continue to look for additional opportunities ahead.
Within our MPC segment, new home sales, a leading indicator for future land sales increased a staggering, 35% selling 929, new homes 241 homes above the same period last year.
MPC earnings before tax or EBT increased 44% to $63 million and Q1 of 2021 compared to Q1 of 2020.
Largely driven by higher custom lot sales and summerlin and an increase and the number of units closed at the summit, our joint venture with discovery land company.
It is also important to highlight these results were achieved without closing a single super pads sale and summerlin during the quarter.
These figures showcase the volume of residents flocking to our communities. Despite economic headwinds that have negatively impacted the U S economy for over a year.
We believe the robust demand and our Mpc's will continue for at least the remainder of the year, which gives us the confidence to raise our full year MPC EBT guidance.
On our fourth quarter earnings call, we provided MPC EBT guidance for 2021, and a range of $180 million to $200 million.
Following the results of the first quarter, we are now targeting a range of $210 million to $230 million.
Marine will provide additional details on our MPC segment, a bit later as the increases and acres sold and price per acre provided the support to adjust our guidance.
Our operating assets performed well during the quarter with a 10% sequential increase in NOI across the portfolio.
One of the leading drivers of this increase was retail which improved by 20% compared to the fourth quarter of 2020.
The largest factors contributing to this increase were driven by our two largest retail footprints ward village and downtown Summerlin with NOI, rising, 55% and 44% respectively.
We have seen foot traffic steadily returned to a retail locations, which has resulted in a corresponding increase and collections.
During the first quarter collections improved to 78% the highest retail collection rate since the onset of the pandemic.
These results are encouraging and demonstrate that we are well on our way to recovery as we move closer to pre COVID-19 levels.
Perhaps the hardest hit area of our operating asset portfolio over the past year with our hospitality assets and the woodlands.
During the quarter, we nearly broke even and has recorded a net operating loss of $147000 compared to a net operating loss of 236000 and last quarter.
While our three hotels continue to make steady improvements.
And leisure travel still remain at significantly lower levels relative to what they were a year ago.
We've seen a slight increase in occupancy and our hotels over the last quarter and we are hopeful this will continue throughout the year.
Last week on May six our minor league team the Las Vegas aviators was fortunate enough to hosted its first gained back and the Las Vegas ballpark Stadium.
This is a great step and the right direction and while circumstances are always subject to change and we're hopeful we'll be able to host the remaining games on our schedule, which would have a meaningful impact on the overall contribution to our NOI.
If you recall on our last earnings call. The NOI guidance, we provided for 2021 assumed the ballpark with breakeven given the uncertainty surrounding COVID-19.
Hosting all of our schedules games. This season would certainly have a positive impact on our NOI, which would be concentrated in the second and third quarter of this year.
In addition to these positive improvements we received the annual distribution from our 5% ownership stake and the Summerlin hospital totaling $3 $8 million, which further fueled the sequential rise.
These strong results were partially offset by sequential declines largely concentrated in our office and multifamily assets.
Office, NOI declined 8% compared to the fourth quarter of 2020, largely attributed to space reductions by select tenants and the woodlands and Columbia.
In total our stabilized office occupancy dropped 3% since the fourth quarter.
Our leasing teams are proactively pursuing tenants across the country to fill these spaces with a strong focus on corporate relocations.
The NOI generated by our multifamily assets declined 12% sequentially largely due to favorable property tax true ups realized during the fourth quarter of 2020 that were not repeated this quarter.
We view this as a one off event and do not expect this will be a common occurrence moving forward.
Despite the sequential decline our latest multifamily developments and the woodlands, Ridgeland summerlin and downtown Columbia.
Many of the lease up ahead of projections.
The progression and NOI, we're seeing across the portfolio plays a crucial part and our recovery from the pandemic.
And this NOI draws closer to pre COVID-19 levels. It will drive the net asset value of the company higher unlocking meaningful value for our shareholders.
Our stabilized operating asset NOI target increased to $379 million from the first quarter and increase of $17 million compared to the first quarter of 2020.
This increase exhibits the progress we've made over the last year with the construction commencement of several new assets ranging from multifamily to office and retail.
As we develop more projects and bring additional assets online and we.
Look forward to increasing this target year in and year out as we strive to unlock the great value inherent in our commercial land.
Shifting over to ward village and the pace of condo sales continues to show no signs of abating.
And we contracted 46 units during the quarter, marking a sequential increase of 64%.
Within our completed towers, we closed on a total of five homes at Wyeth and on a hot.
<unk> now has only three remaining units to be sold.
Aloha only had one unit remaining at the end of the quarter, which subsequently closed in April.
On a hot is now completely sold out.
We commenced construction during the quarter on our seventh tower, Victoria place and closed on a $368 million construction loans and the development.
The pace of pre sales for this project is the fastest ward village has ever seen with 85% of the tower and already pre sold.
Said differently, we have only 15% of the tower and left to sell between now and the time of completion, which is expected to be in 2024.
This dramatically decreases the overall risk of the project and gives us the ability to command premium prices and the remaining units that are in high demand.
Turning to and Seaport, we concluded the winter season of the Greens and March.
This concept, which we only launched during this past summer demonstrated strong results and have greatly benefited our sponsors.
During the first quarter, we served over 38000 guests and had an average daily waitlist and 3000 people, while generating over $2 million and revenue.
The response to this concept has been incredible and we are thrilled that last week. We welcome back the summer version of the Greens to the rooftop and pier 17 for its second year.
During the first quarter, we made great progress preparing our latest concepts for their debut at the seaport.
And Pier 17, we rebranded <unk> and JV owned restaurant with David Chang, which opened a sandbar last month.
And we're close to opening our two new concepts by Andrew car Malini <unk>.
Mister dips and Carnival.
And the Fulton market building, we're preparing the former 10 Corso Como space for two new concepts announced last quarter.
Non club and a restaurant for acclaimed chefs widely to frame and Josh Eaton.
All of these efforts will be fully maximized with the launch of the Tin building, which remains on track to be completed by the end of the year and we anticipate a grand opening in early 2022.
Finally last week, we passed a significant hurdle and the land use approval process for 250 water Street that Jay will describe in more detail. In addition to providing updates on our strategic development segment.
Over to you.
Thank you David and good morning, everyone. As David mentioned, we are seeing strong signs of demand within our communities evidenced by the pace of new home sales condo sales and lease up of our latest multifamily developments from it.
Belmont perspective, our strategy is only to build to meet underlying demand and to never over saturate our markets the core.
These results demonstrate the strong desire to live and our N B CS and the projects we have underway will allow us to capture this inflow of demand.
As at the end of April we have commenced construction on the 2 million square feet of development that was announced in February and so far secured $494 million and construction loans to finance these projects and ward village, we broke ground on Victoria place and expect to deliver this tower in 2020 for this premium 349.
Home development is on Ward village is front row unobstructed Ocean views.
85% of the tower already pre sold we could not be more pleased with the results of our local Hawaiian team.
And now in the pre development phase for our next two towers and hope to announce the launch of our next pre sales campaign shortly.
Construction from Arlo is now under way and downtown Columbia. This next tube product will comprise 472 apartment units and 32000 square feet of ground floor retail.
And this location is directly adjacent to our latest multifamily asset and in the area of Juniper and <unk>.
<unk> was delivered back and the first quarter of 2020 years already 80% lease which has exceeded our projections Howard County has restricted multifamily supply due to school capacity that we are exempt from which gives us the confidence that the leasing momentum at juniper will yield similar results and Marlow. Another example of how our development inventory allows us to respond.
Nimbly to market demand and our regions.
Moving over to bridges, and we began construction last quarter on our 358 unit project Starlink and secured financing for the project in April this.
This is the only our second multifamily project in Brisbane, and like Marleau, and Colombia follows on the success of Lakeside row, which opened during the fourth quarter of 2019 and is already 94% leased only after one year and operations.
And is the first project launched and what will be our new town Center, Bristol and Central where we plan to accelerate development over the next few years.
And finally in Summerlin, and we've already announced two new projects, which commenced construction on in April our multifamily project tonnage of Echo and our mixed office building 1700 pavilion we.
And we look forward to bringing these assets online quickly as their predecessor projects Tanger and two similar and office going are both 100% leased.
At the Seaport as David mentioned, we received approval last week from the New York City Landmarks Preservation Commission on our proposed design for a building on the side of the surface parking lot of 250 water Street.
This favorable ruling confirms that the proposed architectures appropriate seaports Historic district and allows US to proceed with the formal New York City uniform land use review procedure known as <unk>.
Through this process approval from the New York City Planning Commission and there'll be required to allow us to complete the necessary transfer of development rights to the parking lot site.
His project presents a unique opportunity at the seaport to transform this last available development site into a vibrant mixed use asset.
Plan and proposed will provide long term viability to the South Street Seaport Museum and deliver much needed affordable housing and economic stimulus to the area. We will continue working with the city and advances process over the coming calendar year with the goal of bringing these additional benefits to this one of a kind of neighborhood.
During the quarter the seaport reported net operating loss of $4 $4 million, which was largely unchanged from the same quarter last year.
While NOI was largely the same year over year, the revenue and corresponding expenses. During the first quarter of 2021 were comparative lower this was due of course to the impacts of COVID-19, and that's still exist and New York City.
And the restrictions have limited the amount of C D and our restaurants foot traffic has declined within our retail locations and social distancing requirements and limited our ability to maximize the entire space of the pier 17 rooftop.
Despite these challenges, we still and a good quarter with continued success at the Greens and making further progress and the construction of the Tin building.
As New York City begins to slowly reopen we are and a strong position to capitalize on the city's post COVID-19 returned to normalcy, we have several new concepts gearing up to launch soon and pier 17, and the Fulton market building and in 2022, we plan to have a grand opening for the Tin building, which will bring increased foot traffic to the area. We believe the combination of project.
Completions and the reopening of the Manhattan economy will make the seaport and one of the Premier Entertainment and food and beverage destinations and all of Manhattan.
With 2 million square feet of new development underway, we are actively seeking out future opportunities, where we can put our capital to work as I mentioned during our Investor day presentation last month, we are squarely focused on accelerating development within our core MPC town centers one of the ways to do this is by introducing new product types, which will further diversify our portfolio over the.
Next few quarters, we hope to announce new projects throughout our master planned communities and categories such as single family for rent Medical office, New timber office buildings senior housing residential condos and cultural amenities. This type of development and will enhance our communities increased our stream of recurring income and ensure that we're putting forth maximum effort.
Deliver outsized returns for our shareholders.
And now I'll turn the call over to our CFO Correne Loeffler.
Thank you Cheng I'm happy to be joining all day today on my first H H Z earnings call and look forward to meeting most of you over the next several months or upcoming conferences Roadshows and meeting.
And I'm going to start with a review of our MPC and strategic development performance, then, we'll try and show our financial results and balance sheet with.
And with the start of the year, our MPC across the country continue to explore on tremendous growth, we achieved year over year growth and new home sales price per acre of residential landfall and MPC EBT compared to the first quarter of 2020 new home sales accelerate.
Quickly during the first quarter with 929, new homes sold and our community, 35% more compared to the first quarter of 2020, and 34% higher than the fourth quarter of 2020. This is an incredible pain Doctor said, it's on for a while or half of <unk>.
2020, and we see this trend continuing.
Land sales, however were down 5% and the first quarter with 54 acre sold versus 57 and crystals in the first quarter of last year. This is attributed to fewer mothballed and bridge Lynn and no super pads, So in Summerlin, which as we've always said on very lumpy quarter.
And to quarter and should be evaluated on an annual basis the.
And the fact that landfills were only down 5% without closing on a single Super pad highlights the strength on the quarter for MPC.
MPC EBT, which is a metric of profitability, we look out for the segment increased 44% compared to the same period last year debt.
Take and earnings was mostly the result of higher cost and what sales and increased closing at the floor.
At this on that.
555 acre members, all my career and Summerlin.
During the quarter that's on.
On that closed on 19, and you're that person 60, and it closed during first quarter of 2020, a substantial increase that helped drive quarterly MPC EBT to 63 million on.
David mentioned in his opening remarks the results on the quarter were so strong that we have decided to update our MPC EBT guidance to a range of $210 million to $230 million for 2020 one.
Mylan had a breakout quarter with new home sales higher by 41% and the first quarter of 2021 person at the same period and 2020.
In addition price per acre and summerlin and residential land green and 13% on.
<unk> hundred 99000 to 1.7 million per acre for the first quarter of 'twenty to 'twenty one.
Compared to the first quarter on spring 'twenty.
This also compares very favorably with the 762000 per acre achieved last quarter.
This increase is attributed to selling only touched on loss as opposed to a typical quarter, where the majority of our sales are generated through the sale of super pads.
Summerlin husband, and a huge beneficiary of the recent migratory patterns of homebuyers, leaving high cost high tax states like California, We see no indication of this trend slowing anytime soon.
Further we believe the growth demonstrated with and summerlin and sustainable as it rather well.
And again, the economy and credit.
Originally and continues to demonstrate excellent results from the first quarter, New home sales grew 33% when compared to the same quarter last year on price.
And for acreage.
Residential land.
And cranes from.
439000, and the first quarter of 'twenty, and 'twenty, two and 400 and.
9002, 5% and create.
And it's a lot of homebuyers to fragile and had been impressive.
We have reason to believe that's something that from a continuum.
Similar to what we have seen in summerlin and the surrounding Houston economy has improved and was below the last year and oil prices and the.
Overall energy markets have improved.
We view this as a strong catalyst for cash.
Can you price on home sales.
While land sales were below the first quarter of 2020 amendments and new home sales confronts demand is still robust and.
Expect strong results through the balance of the year.
And wed love to tell you.
<unk> sales more than doubled from 41 homes and the first quarter of 2020 84 homes this quarter.
Similarly, the woodlands helpful 16 acres on plan.
During the quarter and representing 92% increase when compared to the same period last year and.
In addition, we continued to see steady increase and the price per acre of our residential landfill to homebuilders.
Price per acre of residential land increased from 303000 and on the first quarter of 2020 to 307000 and this quarter.
Although these numbers on from a lower starting basis. Given this is our least mature community. The results are encouraging sign of future expansion ahead as we've only just scratched the surface on terms of residential land sales.
And our strategic development segment, and the demand for our homes and ward village remains robust.
We contract and 46 units during the quarter of which 30 and that were filing Victoria place.
Sales pace at this tower has been incredible.
85% and again pre salt and we are only just starting construction.
During the quarter, we closed on a $368 million construction loan for this project at LIBOR, plus 500 basis point with an initial maturity date September 'twenty 'twenty, four and two one year extension option.
And it's 85% pre sold tower has hard deposits from buyers and that can be used to buy on construction.
Our other two towers under construction.
And cause Lula are making strong progress and are 86% and 79% pre salt with estimated completion expected at the end of 2020, one and 2020 two respectively.
During the quarter, we closed on five units between them.
Uh-huh generating 35 million and south subsequent to the quarter and we closed on the last remaining yet and Aloha, which is now completely solved.
Making this ward villages third sold out and tower only three and that's for name Hawaii.
It is important to net that 20 million charge during the quarter related to additional anticipated cost to repair.
Construction defects previously identified Hawaii.
And as comparison to the 98 million charge and the first quarter of 2020 for the SMA the repair costs related to this matter as we previously stated on last year's earnings call, We believed and general contractor and ultimately responsible for the feedback and we expect to recover all the repair costs.
From the responsible parties.
Taking a look at GAAP earnings for the first three months and.
And then March 31, 2021, they reported a net loss of 67 million or $1 20 per diluted share and.
Parents, and net loss of $125 million or $2.88 per diluted share during the first quarter of 2020.
And year over year improvement.
Two a stronger result, and our Mtc and strategic development segment, and addition to no impairment charges during the quarter compared to a $49 million impairment charge against the outlet collection at Riverwalk during the same period last year.
This was partially offset by a loss on the early extinguishment of debt due to the repurchase of the company's $1 billion senior notes due 2025, and the repayment of loans for 12 O one like Robin and the woodlands warehouse and February following our $1 three.
Billion dollar bond offering.
We also reported lower NOI from our operating assets largely related to the exploration on the short term lease at the woodlands power that ended in June of 2020.
As well and lower operating performance from our COVID-19 COVID-19 impacted assets within retail and hospitality.
Excluding our loss on the early extinguishment of debt and non recurring item H H C would have reported a net loss of $31 million or 56 cents per diluted share during the first quarter of 2020 one.
The bond offering on bench and are just one example of Howard Hughes and Opportunistically approaching the high yield market at the right time.
This successful issuance allowed the company to reduce its annual interest expense by 11 million, but the refinancing and if its 2025 net and extended our maturity on it.
<unk> two years.
Further the issuance was offered across two separate tranches, which allows us to manage our future refinancing.
The offering and included a $650 million eight year issue and is 20.
And 2029 on a rate of four and one 8%.
And a $650 million 10 year issuance day 2031 at a rate of four and three 8%.
This bond offering increased our unencumbered and book value of assets by over 300 million.
Further reduced our cost of debt and extended our maturity profile.
Our nearest debt maturity is not due until October of 2021, which is R $28 million loan on the outlet collection at Riverwalk.
Oh and the ended the quarter, we closed on several construction loans and Orange and ensure that we are well positioned for the strategic development Kennedy Jay discussed earlier.
This included a construction loans on a multifamily project.
And bridge loans and downtown Columbia.
And April we secured a 43 million dollar construction loans for Sterling.
And which bears interest at LIBOR, plus 275 basis points and matures in may of 2020 with an option of a one year extension.
We also closed on and 83 million dollar construction and land from Marlow, which bears an interest of LIBOR, plus 295 basis points and matures in April of 2020 five with an option of a one year extension.
And Summerlin, we also closed on a $59 million alone, which replaces the existing construction loans from Canada.
And it was closed in April and bears interest at 3.13% and matures in May of 'twenty 31.
Finally, and close out the quarter with over a $1 billion on liquidity, which included 976 million and cash on hand, and 185 million of availability under our lines of credit.
Our net equity requirement for projects under construction totaled $504 million at the end of the first quarter.
And when you account for the construction loans and they closed in April this equity commitment drops further to $379 million.
The strength of our liquidity position, we have more than enough capital to meet all of our friend and funding requirement and our.
And well positioned to capitalize on additional opportunities that lie ahead.
I would now like to turn the call back over to David for some closing remarks.
Thank you Corinne.
<unk> delivered during the quarter speak to the demand we are seeing with our communities across the country.
Significant increases and new home sales and condo sales point to the desire residents have to live and are highly monetized award winning Masterplan communities.
The performance of our retail and hospitality assets and the form higher collections and increased occupancy proves that road to recovery is rapidly improving.
We have opportunities and place to capture the growing demand we are seeing across the portfolio and our strong liquidity position will allow us to further accelerate this momentum as we continue to unlock value for our shareholders.
We look forward to updating you on our progress throughout the remainder of the year as we continued to deliver unmatched results and successfully grow our communities.
We will now turn to the Q&A section of the call. We will answer the first few questions that have been generated by state technology and will be read by David Streit.
Can you read the first question.
Sure.
We have a question that just came in actually while your rent collections have improved and remain a bit behind industry average is could you. Please talk about that.
Thanks, David and I appreciate the question.
I think that the question really drives down to the heart of what we're seeing across our portfolio and different communities and it did.
On its face does not.
Really the real strength that we've seen across the portfolio.
Within our smaller retail holdings, and Houston, and Columbia, We've seen collection rates, and 84, and 88% respectively and <unk>.
Las Vegas, which is one of our largest retail holdings. Our collections. This past quarter was at 94% incredibly strong and it would help drive the sequential rise and our downtown central and NOI of 44%.
But where we haven't seen the same level of strength and where it's created a weighted average and the portfolio of only 78% has been and those retail holdings. We have that are largely dependent on travel and tourism, namely Ward village and Hawaii, and the outlet collection and Riverwalk and New Orleans, which is right on the cruise port and obviously cruise ships are not going.
Yes.
And the collections there at Ward village were 64% this quarter and a new Orleans were 58%, which is a lot of room to run and as travelling tourism comes back. We believe those collection rates will come back up and line consistent with what we saw on downtown Summerlin and at 94%, which candidly hasn't missed a beat over the past several quarters.
Operator, that's the last of the questions. If you could open up the line for live questions. Please.
Yes, Sir we will now begin the audio question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
And if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.
Good morning.
And welcome on Board Corinne.
Have you and.
Brad on.
And getting a handle on a pretty tough tough business.
So.
First first question is just going out toward village.
And the curtain wall I mean, you guys have been speaking about this for several years I think and total that's up to $120 million or so.
What gives you guys the confidence that the GC has the liquidity to actually pay you guys back for this cost.
It's a good question, Alex but first let me start by just saying there is we I don't think we have a tough business I think we have some tough analysts, but our businesses and that's up I think that they were able to create a lot of value and and do so and pretty simple food waste.
But to your question look we see plenty of sources of liquidity and it gives us good certainty that there will be the ability to repay these damages and whether that the surety bonds and the insurance.
And that's in place the G six insurance policy or the G. C itself, we feel very good that there is enough liquidity out there to make sure that they can stand behind the construction defects and live up to what they said they would do when they built this building and the first time.
Okay. So collectively if I understand you correctly, there are liability insurance their bank accounts like everything about them. Your your side your lawyers and feel confident that day that the 120 plus million will be paid back to you and and pull or as close to full as possible.
<unk>.
Yes throughout the range of different ways that we could recoup those costs. We do remain confident that we will recoup those costs.
But just based on the fact that this is litigation.
Or are we should just expect that this thing will continue on for a few more years of that is that a fair way to think about it.
Unfortunately, Alex one of the side effects of the pandemic has been the massive backlog and the court system and then Hawaii more so than most places given how long the island was shut down.
And those cases that have the most critical nature have been moved up and are getting done in this case. Unfortunately is not falling under that critical area. So I do expect that this could take a couple of years to resolve.
Okay, Okay, and then second.
Obviously, the land sales strength is good the home sales.
Condos out and Hawaii.
You mentioned Super pads, none this time, but it sounds like maybe and the increased guidance that could be and there, but really to the point given the accelerated reopening really down the sunbelt market.
You know you guys spoke about hospitality there'd be $8 million from the aviators.
Before we analysts as you say, we give you guys a hard time get too carried away what are some of the real incremental changes and you mentioned the land sales picked up from last quarter, what are some of the incremental NOI.
And the items that have dramatically improved from fourth quarter call to now and maybe a way to quantify that we can appreciate how much benefit youre portfolio has had.
With the with the way the reopening and the Sunbelt economy have gone.
Well look I think at the end of the day, Alex We always look forward and we look through to those metrics and we think drive increases in net asset value on a per share basis and to your point those metrics or how many condos were selling at what price how many acres of land, we're selling at what price per acre MPC EBT and then net operating income from our.
Our operating assets and we saw a very very modest sequential increase and our hospitality portfolio, but we do see a lot of momentum over the next several quarters as we're seeing the pre bookings up some group business return.
We saw a great sequential growth.
Across the entire operating portfolio of 10% that was really driven by retail with a 20% increase quarter over quarter, a 55% increase and ward village and a 44% increase and downtown Summerlin.
All areas that drive higher net asset value on a per share basis across our portfolio.
So really it sounds like David and some on the land sales that were obviously up this year, but the weighted from a modeling and thinking about your business the hospitality and the aviators and all these and and and the remaining retail that should sort of grow this year, but we really should think about next year. These items being back to sort of full force and this.
Year is still going to be a slow return to normal is that a fair way to think about it for those for those.
Items.
I think theres going to be a combination so I think I pointed as accurate, Alex but I'll add to that and say that we should see a meaningful return of the NOI of those assets and have suffered the most is results depend emmick throughout 2021, and we're going to add to that the new developments and have come online are leasing up and stabilizing as we speak.
And as well as more projects and we're going to announce every quarter.
And while we have already announced 2 million square feet last quarter that the Jay spoke about we don't have anything this quarter, we got a lot and the pipeline for the remainder of the year that we're very excited about where we're going to take advantage of the increased demand that we're seeing and our master planned communities. As a result of this pandemic and as a result of the reopening of those local economies to build.
Great new amenities at outsized risk adjusted returns.
Okay Awesome. Thank you David.
Thanks, Alex.
Okay.
The next question comes from Jon Petersen with Jefferies. Please go ahead great.
Great. Thanks, and how can we can dig in a little bit on the retail rent collections you guys were on kind of the high <unk>.
This quarter I think if you look at most of the other shopping center Reits I think that they were anywhere from kind of a low to mid 90% on rent collection I imagine that Hawaii is what's dragging that number down. So I'm wondering if you can parse out maybe your different mpc's and what retail rent collection looks like and then any indication of what <unk>.
And was like in April and expectations over the next couple of months.
Sure. So so big picture, our three largest drivers of retail our Las Vegas Ward village and New Orleans.
Las Vegas led the way with a 94% collection rate incredible performance.
Those assets like Hawaii, and New Orleans that are impacted the most by travel and tourism had lower collection rates and Hawaii was at 64% and New Orleans, which is largely driven by the cruise ship industry is it's an outlet center immediately on the cruise port.
Was behind the portfolio and 58%.
Those collections have steadily increased over the past quarter and I expect they will continue to do so over the next several months and several quarters as reopening takes hold and as we start to see a return to whatever the new normal is.
Yes, maybe and order of recovery fair to say that Hawaii, probably expect to recover quicker than New Orleans cruise ships, probably are slower to come back.
No.
And my only hesitation and agreeing with you Jon as the dependence on international tourism on Oahu, which may come back and the pace at the same or slower than cruise ships.
Tough to predict.
Okay, and then I guess, if we think over the next year or so do you expect to collect the rent eventually there was there was uncollected.
Over the last year or should we just kind of write it off.
Look we're pushing to collect every dollar that is due to us and that has not been paid and a lot of those rents have been.
Not collected but deferred and will be paid back over the next several quarters next several years.
That's assuming that those tenants make it and.
It's very tough for me to predict which tenants will make it and won't we think that they have great businesses and we wouldn't have signed leases with them if we didn't.
And just a matter of whether or not they can survive until we get to the other side and they're back into a more profitable time able to pay their rent and the deferred rent that they still owe us.
Okay got it and then.
Good to see the aviators play their first game and a long time.
Can you remind us what the NOI upside there is.
For a full return of the minor league baseball season.
So and their first season in and existence and 2019, we did about $8 5 million of NOI our guidance this year assume that they broke even.
And while we opened and so far we've been able to host all of our games. We have done so with limited capacity and about 50%. We're hopeful that over the next several months and the next several homestand, we're able to increase that capacity and get closer to 75 or even full capacity with the amount of safety precautions that are in place okay.
And then just one last question.
On the Seaport to 50 water Street you guys are approved to kind of move forward. There can you and maybe talk about the development yields you guys are are our underwriting towards and when you expect to be stabilized on that building.
Well look we're while we may have received the approval from the landmarks Commission. We have just started the official ULA process and that's a process that will probably take us through to the end of this year.
So for me to comment on a potential development yield potential profitability and sales per foot on potential condos or rent per foot on space Thats being leased before we even have full approval I think would be premature.
As we've done with all of our projects. We've made sure that we're allocating capital to generate the highest risk adjusted returns and you shouldn't expect us to do any different on this project and 250 water Street.
Sounds good I'll save that question for a future quarter alright, thanks, guys.
Well, everyone may ask it every quarter from now until then but its alright.
Good.
Thanks, John.
The next question comes from Harvard Core songs with Dws financial Please go ahead.
Hi, good morning.
First question I had was what are the safeguards for the sold contracts and Victoria place, where the buyer and you know does not walk away and three years.
Sure. So we have we take a hard deposits of 20% of the purchase price and that deposit can be used towards construction.
So we feel very good and if you go back historically speaking over the past 30 years.
We've seen very little volatility and the underlying values of condos in fact during the global financial crime.
Crisis.
<unk> of condominiums on Oahu dropped only by about 10% so relative to a 20% deposits that feels really good.
The other the other nuance here and Thats really important to note is that wireless and 20% deposits and 20% of the value was coming in terms of our cash deposits.
Often and has always been the case and our towers to date knock on wood the buyers equity is actually greater than 20%.
Because all along the sales process as we've seen this great momentum Victoria place is a perfect example is selling 85% and.
And just starting construction this past March we've been increasing prices every step of the way.
Those valuable stacks and those highly desirable units and we've seen the greatest sales velocity and we're moving prices up so while it's a 20% cash equity deposits that book equity debt paper equity is actually higher for those buyers and that actually further helps them and give them the confidence to move forward towards closing.
Okay and my other question was.
What is currently missing from the seaport. The Tin building opening is such a big deal and your comments today.
Look I think that the seaport has a handful of things that we're working very hard to make sure that we're doing to stabilize that asset that's including finishing the tin building that includes finishing the leasing of the fourth floor of the peer space and back filling some of those retailers and unfortunately did not survive.
And Denmark and the historic District.
All of those things are critically important to our long term success and where.
Optimistic about the opportunity to do that and our optimism is increased by the success, we experienced last summer with a summer Greens. This past winter with the Wintergreen and just this past month reopening this summer Greens again, and hopefully having a concert series and 2021. So there's a lot of work to do but the momentum is behind us the reopening.
<unk> of the city has shown that there is incredible demand for great F&B for great experiential opportunities on the water and lower Manhattan, and we're thrilled to be and the middle of that strike zone to meet that demand.
Okay alright, thank you.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to David O'reilly for any closing remarks.
Once again, we appreciate everyone joining us today and thank you so much for following the company and for investing with US and we look forward to speaking with you on upcoming conference calls conferences and future non deal roadshows. Thanks, so much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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