Howard Hughes Corp. releases Q1 results

THE WOODLANDS, Texas –– The Howard Hughes Corporation (HHC -1.06 percent) today announced its results for the first quarter 2012.

First quarter 2012 net income was $9.6 million, excluding the $121.9 million non-cash warrant loss, compared to first quarter 2011 net income of $11.5 million, excluding the $126.0 million non-cash warrant loss. First quarter 2012 net loss was $112.3 million inclusive of the non-cash warrant expense compared to first quarter 2011 net loss of $114.5 million.

--Master Planned Community land sales were $35.4 million for first quarter 2012, compared to $43.8 million for first quarter 2011.

--Net operating income for our income-producing Operating Assets was $14.9 million for first quarter 2012, compared to $12.8 million for first quarter 2011.

--Completed a $43.3 million non-recourse financing for, and began construction on 3 Waterway Square, a 232,774 square foot office building in The Woodlands, which is 74 percent pre-leased.

--Howard Hughes announced Paul Layne has joined the company as Executive Vice President, Master Planned Communities.

For the three months ended March 31, 2012, net loss attributable to common stockholders was $112.3 million, or $2.96 per share, compared with $114.5 million, or $3.02 per share, for the three months ended March 31, 2011. Excluding the $121.9 million warrant loss, net income attributable to common stockholders for the three months ended March 31, 2012 was $9.6 million, or $0.25 per diluted common share. For the three months ended March 31, 2011, net income attributable to common stockholders, excluding a $126.0 million warrant loss, was $11.5 million, or $0.30 per diluted common share.

As more fully described in Note 3 to our condensed consolidated financial statements included in our Form 10-Q for the three months ended March 31, 2012, beginning on July 1, 2011 with the acquisition of our former partner's 47.5 percent interest in The Woodlands, we consolidated the financial results of The Woodlands. Prior to the acquisition, we accounted for our interest in The Woodlands using the equity method. Consequently, our financial statements as of and for the three months ended March 31, 2012 are not comparable to the same period in 2011 due to the consolidation of The Woodlands.

If The Woodlands acquisition would have occurred on January 1, 2011, total revenues and net loss for the three months ended March 31, 2011 would have been approximately $90.3 million and $110.6 million, respectively, on a pro forma basis, compared to $79.8 million of total revenues and $112.3 million net loss for the three months ended March 31, 2012. The primary reasons for the $10.5 million decrease in revenues, on a pro forma basis, are due to $7.1 million of lower commercial land sales for the first quarter 2012 compared to first quarter 2011 (described below), and $3.6 million of lower condominium unit sales at our Nouvelle at Natick property due to the sellout in 2011 of all but two units. One of the two remaining units was sold during the first quarter 2012, and the final remaining unit was sold in April 2012. For a more complete comparison of operating results between periods, please refer to Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-Q for the three months ended March 31, 2012.

For comparative purposes, Master Planned Communities (MPC) land sales and Operating Assets net operating income ("NOI") relating to The Woodlands are presented in our Supplemental Information and discussion of results as if we owned 100% of The Woodlands during the three months ended March 31, 2011. We have also included the commercial real estate assets of The Woodlands in the Operating Assets segment. These properties in the prior year first quarter had been included in the MPC segment. For a reconciliation of Operating Assets NOI to Operating Assets earnings before taxes (EBT), Operating Assets EBT to GAAP-basis loss from continuing operations, and segment-basis MPC land sales revenue to GAAP-basis land sales revenue, please refer to the Supplemental Information contained in this earnings release.

Land sales in our MPC segment, excluding deferred land sales and other revenue, decreased $8.4 million for the first quarter 2012. About $7.1 million of such decrease was due to no commercial land sales during the three months ended March 31, 2012, compared to $7.1 million, including a $3.6 million sale for a school at Summerlin, for the three months ended March 31, 2011. For the three months ended March 31, 2012, we sold 104 residential acres as compared to 102 acres for the three months ended March 31, 2011. Our Bridgeland and The Woodlands MPCs continued to benefit from the strong Houston, TX market. The Woodlands residential lands sales increased by $3.1 million from the first quarter 2011 to $21.0 million for the first quarter 2012. Bridgeland residential land sales increased by $1.6 million to $5.3 million during the same periods. The Woodlands first quarter 2012 land sales compared to first quarter 2011 benefited from an increase in mix to larger average lot sizes, which generally are sold at a premium to smaller lot sizes. Bridgeland's mix shifted to smaller average lot sizes in the first quarter 2012 compared to first quarter 2011, but the lower average price per lot was more than offset by increased volume over the same periods.

Summerlin's residential land sales revenue decreased to $7.0 million for the first quarter 2012 from $14.1 million for the first quarter 2011. Summerlin sold 111 residential lots during the three months ended March 31, 2012 compared to 196 lots during the three months ended March 31, 2011. At March 31, 2012, Summerlin had under contract 223 residential lots representing approximately $16.1 million of sales, of which $14.9 million are scheduled to close in 2012, if all sales are completed.