Howard Hughes (HHH) Nareit REIT Week: 2024 Investor Conference summary

Strategic initiatives and project updates

• Final stages of spinning off Seaport Entertainment Group, which will include New York assets and a Triple-A baseball stadium in Summerlin, with public filings recently made.

• Focus remains on enhancing master-planned communities with amenities like Whole Foods and sports facilities to drive demand and land sales.

• Launched first condominium project in The Woodlands, achieving over 50% pre-sales in one week, leveraging experience from successful Hawaii projects.

• Communities consistently outperform surrounding markets in rents and occupancy due to comprehensive amenities and lifestyle offerings.

• Ongoing planning and execution across regions to match product timing with resident lifecycle needs.

Market dynamics and operational performance

• Pandemic validated the thesis that demand for high-amenity, low-commute communities is strong, attracting migration from major urban centers.

• Land and home sales accelerated during and after the pandemic, driven by word-of-mouth and lifestyle advantages.

• Homebuilders offer mortgage rate buydowns to around 5%, and new homes are designed to be smaller and more efficient, maintaining healthy profit margins despite high interest rates.

• Condominium construction loans are easier to secure due to high pre-sale rates and favorable escrow terms, especially in Texas and Hawaii.

• Funding model relies on self-generated cash from land and condo sales, supplemented by construction loans, enabling continued development even as lending standards tighten.

Capital allocation and shareholder value

• Stock buybacks are a regular consideration, with renewed focus now that Seaport filings are public and shares trade at a significant discount to NAV.

• Capital allocation decisions weigh risk-adjusted returns, with recent preference for condo development over buybacks.

• Long-term plan centers on building NOI pipeline to support sustainable buybacks or potential dividends, with recent milestones including NOI covering G&A and debt service.

• Strong deed restrictions on asset sales ensure long-term control and alignment with community needs, even when ownership is relinquished.

• Management emphasizes patience as the development flywheel matures, with more details to be shared at upcoming Investor Day.