# Howard Hughes Holdings Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Howard Hughes Holdings Inc.](/companies/hhh.md) (CIK 1981792)
- Form: 10-Q
- Filed: 2024-07-26
- Accepted by EDGAR: Jul 26, 2024, 17:12 ET
- Period: 2024-06-30
- Accession: 0001628280-24-033188
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1981792/000162828024033188/hhh-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1981792/000162828024033188/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $317.4m | us-gaap:Revenues |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $488.5m | us-gaap:Revenues |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $64.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $48.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $43.0m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $84.9m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $6.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | −$10.8m | us-gaap:IncomeTaxExpenseBenefit |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.42 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.63 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.42 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.63 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 49,725,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 49,675,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$188.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-06-30 | $436.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-06-30 | $9.90bn | us-gaap:Assets |
| Total liabilities | at 2024-06-30 | $6.87bn | us-gaap:Liabilities |
| Shareholders' equity | at 2024-06-30 | $2.97bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 83,074 characters.

The following discussion and analysis by management should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and Notes included in this quarterly report on Form 10-Q (the Quarterly Report) and in the Howard Hughes Holdings Inc. (HHH or the Company) audited annual report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (SEC) on February 27, 2024 (the Annual Report). All references to numbered Notes are to specific notes to our unaudited Condensed Consolidated Financial Statements included in this Quarterly Report.

| Index | Page |
| --- | ---: |
| Forward-looking Information | 31 |
| Overview | 33 |
| Results of Operations | 36 |
| Operating Assets | 37 |
| Master Planned Communities | 39 |
| Seaport | 44 |
| Strategic Developments | 47 |
| Corporate Income, Expenses, and Other Items | 50 |
| Liquidity and Capital Resources | 51 |

### HHH 2024 FORM 10-Q \| 30

**MANAGEMENT’S DISCUSSION AND ANALYSIS** Table of Contents

### FORWARD-LOOKING INFORMATION

Certain statements contained in or incorporated by reference into this Quarterly Report, including, without limitation, those related to our future operations constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements and may include words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “plan,” “project,” “realize,” “should,” “transform,” “will,” “would,” and other statements of similar expression.

These forward-looking statements involve known and unknown risks, uncertainties, and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this Quarterly Report or in the information incorporated herein by reference.

Forward-looking statements include:

- accelerated growth in our core Master Planned Communities (MPC) assets
- expected performance of our stabilized, income-producing properties and the performance and stabilization timing of properties that we have recently placed into service or are under construction
- forecasts of our future economic performance
- expected capital required for our operations and development opportunities for our properties
- impact of technology on our operations and business
- expected performance of our segments
- expected commencement and completion for property developments and timing of sales or rentals of certain properties
- estimates of our future liquidity, development opportunities, development spending and management plans
- the potential impact of a resurgence of the COVID-19 pandemic on our business, our tenants and the economy in general, and our ability to accurately assess and predict such impacts on the financial condition, results of operations, cash flows, and performance of our Company; and
- descriptions of assumptions underlying or relating to any of the foregoing

Some of the risks, uncertainties, and other important factors that may affect future results or cause actual results to differ materially from those expressed or implied by forward-looking statements include:

- our ability to satisfy the necessary conditions and complete the spinoff on a timely basis (or at all)
- our ability to realize the anticipated benefits of the spinoff
- the effects of the spinoff on our ongoing business
- macroeconomic conditions such as volatility in capital markets, and a prolonged recession in the national economy, including any adverse business or economic conditions in the homebuilding, condominium-development, retail, and office sectors
- general inflation, including core and wage inflation; commodity and energy price and currency volatility; as well as monetary, fiscal, and policy interventions in anticipation of our reaction to such events
- our inability to obtain operating and development capital for our properties, including our inability to obtain or refinance debt capital from lenders and the capital markets
- rising interest rates and inflation
- the availability of debt and equity capital
- our ability to compete effectively, including the potential impact of heightened competition for tenants and potential decreases in occupancy at our properties
- extreme weather conditions or climate change, including natural disasters, that may cause property damage or interrupt business
- the impact of water and electricity shortages
- contamination of our property by hazardous or toxic substances
- terrorist activity, acts of violence, or breaches of our data security
- losses that are not insured or exceed the applicable insurance limits
- our ability to lease new or redeveloped space
- our ability to obtain the necessary governmental permits for the development of our properties and necessary regulatory approvals pursuant to an extensive entitlement process involving multiple and overlapping regulatory jurisdictions, which often require discretionary action by local governments
- increased construction costs exceeding our original estimates, delays or overruns, claims for construction defects, or other factors affecting our ability to develop, redevelop or construct our properties

**MANAGEMENT’S DISCUSSION AND ANALYSIS** Table of Contents

- mismatch of supply and demand, including interruptions of supply lines
- regulation of the portion of our business that is dedicated to the formation and sale of condominiums, including regulatory filings to state agencies, additional entitlement processes, and requirements to transfer control to a condominium association’s board of directors in certain situations
- fluctuations in regional and local economies, the impact of changes in interest rates on residential housing and condominium markets, local real estate conditions, tenant rental rates, and competition from competing retail properties and the internet
- inherent risks related to disruption of information technology networks and related systems, including cyber security attacks
- our ability to attract and retain key personnel
- our ability to collect rent and attract tenants
- our indebtedness, including our $750,000,000 5.375% Senior Notes due 2028, $650,000,000 4.125% Senior Notes due 2029 and $650,000,000 4.375% Senior Notes due 2031, contain restrictions that may limit our ability to operate our business
- our directors’ involvement or interests in other businesses, including real estate activities and investments
- our inability to control certain of our properties due to the joint ownership of such property and our inability to successfully attract desirable strategic partners
- our dependence on the operations and funds of our subsidiaries, including The Howard Hughes Corporation
- catastrophic events or geopolitical conditions, such as international armed conflicts, or a resurgence of the COVID-19 pandemic; and
- other risks and uncertainties described herein, as well as those risks and uncertainties discussed from time to time in our other reports and other public filings with the SEC

Although we presently believe that the plans, expectations, and anticipated results expressed in or suggested by the forward-looking statements contained in or incorporated by reference into this Quarterly Report are reasonable, all forward-looking statements are inherently subjective, uncertain, and subject to change, as they involve substantial risks and uncertainties, including those beyond our control. New factors emerge from time to time, and it is not possible for us to predict the nature, or assess the potential impact, of each new factor on our business. Given these uncertainties, we caution you not to place undue reliance on these forward-looking statements. We undertake no obligation to update or revise any of our forward-looking statements for events or circumstances that arise after the statement is made, except as otherwise may be required by law.

The above list of risks and uncertainties is only a summary of some of the most important factors and is not intended to be exhaustive. Additional information regarding risk factors that may affect us is included in our 2023 Annual Report. The risk factors contained in our 2023 Annual Report are updated by us from time to time in Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings that we make with the SEC.

**MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW** Table of Contents

### OVERVIEW

### Description of Business

Our award-winning assets include one of the nation's largest portfolios of MPCs, spanning approximately 101,000 gross acres, as well as operating properties, strategic developments, and other unique assets across six states from New York to Hawai‘i. We create some of the most sought-after communities in the country by curating an environment tailored to meet the needs of our residents and tenants. Our unique business model allows us to drive outsized risk-adjusted returns while maintaining a sharp focus on sustainability to ensure our communities are equipped with the resources to last several decades.

We operate through four business segments: Operating Assets, MPCs, Strategic Developments, and Seaport. We create a unique and continuous value-creation cycle through operational and financial synergies associated with our three primary business segments of Operating Assets, MPCs, and Strategic Developments. In our MPC segment, we plan, develop, and manage small cities and large-scale, mixed-use communities, in markets with strong long-term growth fundamentals. This business focuses on the horizontal development of residential land. The improved acreage is then sold to homebuilders who build and sell homes to new residents. New homeowners create demand for commercial developments, such as retail, office, and hospitality offerings. We build these commercial properties through Strategic Developments at the appropriate times using the cash flow harvested from the sale of land to homebuilders, which helps mitigate development risk. Once the commercial developments are completed, the assets transition to Operating Assets, which increases recurring Net Operating Income (NOI), further funding our Strategic Developments. New office, retail, and other commercial amenities make our MPC residential land more appealing to buyers and increase the velocity of land sales at premiums that typically exceed the broader market. This increased demand for residential land generates more cash flow from MPCs, thus continuing the value-creation cycle. Our fourth business segment, the Seaport, is one of the few multi-block districts largely under private management by a single owner in New York City. This historic waterfront area is being revitalized and enhanced into a mixed-use neighborhood featuring unique culinary and entertainment offerings.

In addition to the required presentations using accounting principles generally accepted in the United States (GAAP), we use certain non-GAAP performance measures, such as NOI. See the Operating Assets and Seaport sections below for the reconciliation of this GAAP to non-GAAP financial measure and a statement indicating why management believes the non-GAAP financial measure provides useful information for investors. Changes for monetary amounts between periods presented are calculated based on the amounts in thousands of dollars stated in our consolidated financial statements, and then rounded to the nearest million. Therefore, certain changes may not recalculate based on the amounts rounded to the nearest million.

**Seaport Entertainment** On October 5, 2023, Howard Hughes Holdings Inc. (HHH) announced the intent to form a new division, Seaport Entertainment, which includes the Company’s entertainment-related assets in New York and Las Vegas, including the Seaport in Lower Manhattan, the Las Vegas Aviators Triple-A Minor League Baseball team and the Las Vegas Ballpark, as well as the Company’s ownership stake in Jean-Georges Restaurants and other partnerships, and an interest in and to 80% of the air rights above the Fashion Show Mall in Las Vegas.

On July 18, 2024, the HHH Board of Directors authorized and declared a pro rata distribution of 100% of the outstanding shares of common stock of Seaport Entertainment Group, Inc. (SEG) to holders of record of HHH common stock as of the close of business on July 29, 2024 (Record Date). The distribution is expected to be paid after market close on July 31, 2024. As a result, holders of HHH common stock will receive one share of SEG common stock for every nine shares of HHH common stock held as of the close of business on the Record Date. SEG common stock is expected to begin trading on the NYSE American stock exchange on August 1, 2024, under the symbol “SEG”.

The pending separation of SEG from Howard Hughes will refine the identity of HHH as a pure-play real estate company focused solely on its core businesses and development of its master planned communities, and allow the new company, SEG, to operate independently as an entertainment-focused enterprise.

**MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW** Table of Contents

### Second Quarter 2024 Highlights

### Comparison of the three months ended June 30, 2024, to the three months ended June 30, 2023

### Total Company

- Net income attributable to common stockholders increased to a net income of $21.1 million for the current quarter, compared to a net loss of $19.1 million for the prior-year period, primarily attributed to increased MPC residential land sales in the current quarter, and $16.1 million of window remediation expenditures at Waiea in Ward Village in the prior-year period, which were not incurred in the current quarter. These increases were partially offset by $7.9 million of general and administrative expenses related to the pending spinoff of Seaport Entertainment.
- We continue to maintain a strong liquidity position with $436.8 million of cash and cash equivalents, $1.2 billion of undrawn lender commitment available to be drawn for property development, and limited near-term debt maturities.

### Operating Assets

- Operating Assets NOI totaled $65.5 million in the current quarter, a $0.6 million decrease compared to $66.1 million in the prior-year period.
- Other NOI decreased $3.3 million primarily due to reduced attendance and sales revenues at the Las Vegas Ballpark.
- Office NOI decreased $0.4 million primarily due to lower occupancy at 1725 Hughes Landing and office lease termination fees received in the prior-year period. These decreases were offset by strong leasing activity and abatement expirations at various properties in The Woodlands and Summerlin, most notably at 9950 Woodloch Forest and 1700 Pavilion.
- Retail NOI increased $2.3 million primarily due to the collection of previously reserved accounts receivable in Ward Village.
- Multi-family NOI increased $1.1 million primarily due to continued lease-up at our newer properties, Marlow in Downtown Columbia, Starling at Bridgeland, and Tanager Echo in Summerlin.

### MPC

- MPC Earnings Before Tax (EBT) totaled $123.2 million in the current quarter, a $68.3 million increase compared to $54.9 million in the prior-year period.
- The increase in EBT was primarily due to higher residential land sales, net of costs, at Summerlin due to an increase in superpad sales with an average price per acre of $1.5 million.
- The Company achieved a record quarterly average price per acre of $1.0 million for all residential land sold during the second quarter.

### Seaport

- Seaport NOI decreased $6.9 million to a loss of $9.4 million in the current quarter, compared to a loss of $2.4 million in the prior-year period. This change was primarily due to increased overhead costs associated with the stand-up of Seaport Entertainment in anticipation of the pending spinoff, as well as reduced restaurant and concert revenue as poor weather in the current year negatively impacted foot traffic.
- Seaport NOI excludes the impact of the Company’s equity ownership interest in the Tin Building by Jean-Georges managed business. Tin Building by Jean-Georges NOI was a loss of $6.7 million in the current quarter and a loss of $9.6 million in the prior-year period. See Seaport segment discussion for additional detail.

**MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW** Table of Contents

### Strategic Developments

- Strategic Developments EBT increased $12.1 million to a loss of $3.0 million in the current quarter, compared to a loss of $15.1 million in the prior-year period.
- The increase in EBT was primarily attributable to a $16.1 million decrease in remediation costs at Waiea, partially offset by a $1.7 million decrease in profits from condominium sales, with no sales closed during the current quarter, compared to closings of 11 units at ‘A‘ali‘i and 4 units at Kō'ula during the prior-year period. The lower volume of condominium closings is expected as our completed towers are 100.0% sold and the next tower, Victoria Place, is not scheduled for completion until late 2024.
- We contracted 12 units at The Park Ward Village and Kalae during the current quarter. As of June 30, 2024, The Park Ward Village was 95.8% pre-sold and Kalae was 92.1% pre-sold. Construction on Kalae began in the second quarter of 2024.
- Pre-sales for The Launiu, our eleventh condominium project at Ward Village, continued at a strong pace with 66 units contracted in the current quarter. As of June 30, 2024, we have pre-sold 248 units, representing 51.1% of available units.
- We continued pre-sales at The Ritz-Carlton Residences, The Woodlands, with 16 units contracted in the current quarter. As of June 30, 2024, we have pre-sold 72 units, representing 64.9% of available units.
- During the current quarter, we completed construction on 10285 Lakefront Medical Office in Downtown Columbia, and Meridian, an office property in Summerlin. We commenced construction on One Bridgeland Green, an office property in Bridgeland.

### RESULTS OF OPERATIONS

### Comparison of the six months ended June 30, 2024, to the six months ended June 30, 2023

Net income attributable to common stockholders increased $10.5 million to a loss of $31.4 million for the six months ended June 30, 2024, compared to a loss of $41.9 million in the prior-year period.

- MPC EBT increased $30.2 million primarily due to higher residential land sales, net of costs, in Summerlin due to an increase in superpad sales in the current year and higher equity earnings at Teravalis related to the closings of Floreo land sales, partially offset by lower equity earnings at The Summit, lower residential land sales in The Woodlands, and lower commercial land sales in Bridgeland.
- Strategic Developments EBT increased $10.1 million primarily due to a decrease in remediation costs and legal fees related to Waiea, partially offset by a decrease in net condominium sales due to the timing of condominium closings, as all completed condominiums are sold and the next tower, Victoria Place, is not scheduled for completion until late 2024.
- Operating Assets EBT decreased $12.0 million primarily due to an increase in interest expense related to increased borrowings on loans secured by our operating assets, an increase in depreciation expense related to new assets placed in service during 2023, and a decrease in revenue due to office lease termination fees in the prior-year period. These decreases were partially offset by an increase in rental revenues, net of operating costs due to increased leasing activity across our portfolio.
- Seaport EBT decreased $0.5 million, primarily due to reduced restaurant and concert series revenues, increased overhead costs associated with the stand-up of Seaport Entertainment in anticipation of the pending spinoff, and an increase in interest expense due to lower capitalized interest as a result of a pause in development activity at 250 Water Street. These decreases were partially offset by decreased depreciation expense following the impairment of our Seaport assets in the third quarter of 2023, decreased equity losses primarily related to the Tin Building in the current period, and increased rental revenue from the Fulton Market Building which is now 100% leased.
- Corporate income, expenses, and other items included an increase in net expenses of $17.5 million primarily due to increased legal and consulting fees related to the pending spinoff of Seaport Entertainment and a decrease in income tax benefit, partially offset by a decrease in corporate interest expense, net due to the change in value related to derivative instruments and higher interest income.

Refer to the Second Quarter 2024 Highlights section above for information on the variances for the three months ended June 30, 2024.

See segment discussions for more detail about the changes described above.

### Operating Assets

**Segment EBT** Segment EBT for Operating Assets is presented below:

| Operating Assets Segment EBT thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Rental revenue | **$105,373** | $97,596 | $7,777 | **$206,573** | $190,071 | $16,502 |
| Other land, rental, and property revenues | **18,468** | 23,831 | (5,363) | **27,420** | 32,281 | (4,861) |
| **Total revenues** | **123,841** | 121,427 | 2,414 | **233,993** | 222,352 | 11,641 |
| Operating costs | **(43,016)** | (40,155) | (2,861) | **(80,493)** | (75,575) | (4,918) |
| Rental property real estate taxes | **(14,763)** | (14,329) | (434) | **(28,638)** | (28,909) | 271 |
| (Provision for) recovery of doubtful accounts | **(711)** | 32 | (743) | **(754)** | 2,433 | (3,187) |
| **Total operating expenses** | **(58,490)** | (54,452) | (4,038) | **(109,885)** | (102,051) | (7,834) |
| **Segment operating income (loss)** | **65,351** | 66,975 | (1,624) | **124,108** | 120,301 | 3,807 |
| Depreciation and amortization | **(43,920)** | (40,878) | (3,042) | **(88,076)** | (80,510) | (7,566) |
| Interest income (expense), net | **(34,699)** | (30,285) | (4,414) | **(68,175)** | (59,196) | (8,979) |
| Other income (loss), net | **530** | (40) | 570 | **938** | 2,242 | (1,304) |
| Equity in earnings (losses) from unconsolidated ventures | **337** | 2,042 | (1,705) | **6,154** | 3,947 | 2,207 |
| Gain (loss) on sale or disposal of real estate and other assets, net | **—** | (16) | 16 | **4,794** | 4,714 | 80 |
| Gain (loss) on extinguishment of debt | **(198)** | — | (198) | **(198)** | — | (198) |
| **Segment EBT** | **$(12,599)** | $(2,202) | $(10,397) | **$(20,455)** | $(8,502) | $(11,953) |

### For the three months ended June 30, 2024:

Operating Assets segment EBT decreased $10.4 million compared to the prior-year period primarily due to the following:

- Other land, rental, and property revenues decreased $5.4 million primarily due to office lease termination fees in the prior year.
- Interest expense increased $4.4 million primarily due to increased borrowings on construction loans secured by our operating assets.
- Depreciation expense increased $3.0 million primarily related to new assets placed in service during 2023.
- Equity earnings decreased $1.7 million primarily as a result of a decrease related to the change in value of certain derivative instruments associated with Metropolitan Downtown and TEN.m.flats.

These decreases to EBT were partially offset by the following:

- Rental revenues, net of Operating costs increased $4.9 million primarily due to increased leasing activity across our portfolio.

### For the six months ended June 30, 2024:

Operating Assets segment EBT decreased $12.0 million compared to the prior-year period primarily due to the following:

- Interest expense increased $9.0 million primarily due to increased borrowings on construction loans secured by our operating assets.
- Depreciation expense increased $7.6 million primarily related to new assets placed in service during 2023.
- Other land, rental, and property revenues decreased $4.9 million primarily due to office lease termination fees in the prior year.
- Other income decreased $1.3 million primarily due to winter-weather-related insurance recoveries in 2023.

These decreases to EBT were partially offset by the following:

- Rental revenues, net of Operating costs increased $11.6 million primarily due to increased leasing activity across our portfolio.
- Equity earnings increased $2.2 million primarily as a result of increases at Metropolitan Downtown and TEN.m.flats and changes in value of certain derivative instruments.

**Net Operating Income** In addition to the required presentations using GAAP, we use certain non-GAAP performance measures, as we believe these measures improve the understanding of our operational results and make comparisons of operating results among peer companies more meaningful. Management continually evaluates the usefulness, relevance, limitations and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change.

We define NOI as operating revenues (rental income, tenant recoveries, and other revenue) less operating expenses (real estate taxes, repairs and maintenance, marketing, and other property expenses). NOI excludes straight-line rents and amortization of tenant incentives, net; interest expense, net; ground rent amortization; demolition costs; other income (loss); depreciation and amortization; development-related marketing costs; gain on sale or disposal of real estate and other assets, net; loss on extinguishment of debt; provision for impairment; and equity in earnings from unconsolidated ventures.

We believe that NOI is a useful supplemental measure of the performance of our Operating Assets and Seaport segments because it provides a performance measure that reflects the revenues and expenses directly associated with owning and operating real estate properties. We use NOI to evaluate our operating performance on a property-by-property basis because NOI allows us to evaluate the impact that property-specific factors such as rental and occupancy rates, tenant mix, and operating costs have on our operating results, gross margins, and investment returns.

A reconciliation of Operating Assets segment EBT to Operating Assets NOI is presented in the table below. Refer to the Seaport section for a reconciliation of Seaport segment EBT to Seaport NOI.

| Operating Assets NOI thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total Operating Assets segment EBT | **$(12,599)** | $(2,202) | $(10,397) | **$(20,455)** | $(8,502) | $(11,953) |
| Add back: |  |  |  |  |  |  |
| Depreciation and amortization | **43,920** | 40,878 | 3,042 | **88,076** | 80,510 | 7,566 |
| Interest (income) expense, net | **34,699** | 30,285 | 4,414 | **68,175** | 59,196 | 8,979 |
| Equity in (earnings) losses from unconsolidated ventures | **(337)** | (2,042) | 1,705 | **(6,154)** | (3,947) | (2,207) |
| (Gain) loss on sale or disposal of real estate and other assets, net | **—** | 16 | (16) | **(4,794)** | (4,714) | (80) |
| (Gain) loss on extinguishment of debt | **198** | — | 198 | **198** | — | 198 |
| Impact of straight-line rent | **24** | (1,081) | 1,105 | **(823)** | (2,194) | 1,371 |
| Other | **(361)** | 269 | (630) | **(415)** | 84 | (499) |
| **Operating Assets NOI** | **$65,544** | $66,123 | $(579) | **$123,808** | $120,433 | $3,375 |

The table below presents Operating Assets NOI by property type:

| Operating Assets NOI by Property Type thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Office | **$33,221** | $33,590 | $(369) | **$63,819** | $61,375 | $2,444 |
| Retail | **14,895** | 12,549 | 2,346 | **29,462** | 27,167 | 2,295 |
| Multi-family | **14,163** | 13,062 | 1,101 | **27,940** | 25,695 | 2,245 |
| Other | **3,265** | 6,516 | (3,251) | **2,642** | 5,693 | (3,051) |
| Redevelopments (a) | **—** | (36) | 36 | **—** | (46) | 46 |
| Dispositions (a) | **—** | 442 | (442) | **(55)** | 549 | (604) |
| **Operating Assets NOI** | **$65,544** | $66,123 | $(579) | **$123,808** | $120,433 | $3,375 |

(a) Properties that were transferred to our Strategic Developments segment for redevelopment and properties that were sold are shown separately for all periods presented.

### For the three months ended June 30, 2024:

Operating Assets NOI decreased $0.6 million compared to the prior-year period primarily due to the following:

- Other NOI decreased $3.3 million primarily due to reduced attendance and sales revenues at the Las Vegas Ballpark.
- Office NOI decreased $0.4 million primarily due to lower occupancy at 1725 Hughes Landing and office lease termination fees received in the prior-year period. These decreases were offset by strong leasing activity and abatement expirations at various properties in The Woodlands and Summerlin, most notably at 9950 Woodloch Forest and 1700 Pavilion.

The decrease was offset by the following:

- Retail NOI increased $2.3 million primarily due to the collection of previously reserved accounts receivable in Ward Village.
- Multi-family NOI increased $1.1 million primarily due to continued lease-up at our newer properties, Marlow in Downtown Columbia, Starling at Bridgeland, and Tanager Echo in Summerlin.

### For the six months ended June 30, 2024:

Operating Assets NOI increased $3.4 million compared to the prior-year period primarily due to the following:

- Office NOI increased $2.4 million primarily due to strong leasing activity and abatement expirations at various properties in The Woodlands and Summerlin, most notably at 9950 Woodloch Forest and 1700 Pavilion, partially offset by decreases related to lower occupancy at 1725 Hughes Landing and office lease termination fees received in the prior-year period.
- Retail NOI increased $2.3 million primarily due to the collection of previously reserved accounts receivable in Ward Village.
- Multi-family NOI increased $2.2 million primarily due to continued lease-up at our newer properties, Marlow in Downtown Columbia and Starling at Bridgeland, and Tanager Echo in Summerlin, partially offset by winter-weather-related insurance recoveries in 2023.
- These increases were partially offset by a $3.1 million decrease in Other NOI, primarily driven by reduced attendance and sales revenues at the Las Vegas Ballpark.

### Master Planned Communities

**Segment EBT** The following table presents segment EBT for MPC:

| MPC Segment EBT thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Master Planned Community land sales (a) | **$154,790** | $42,306 | $112,484 | **$187,205** | $101,667 | $85,538 |
| Other land, rental, and property revenues | **4,486** | 5,098 | (612) | **8,380** | 8,741 | (361) |
| Builder price participation (b) | **12,905** | 15,907 | (3,002) | **25,471** | 29,916 | (4,445) |
| **Total revenues** | **172,181** | 63,311 | 108,870 | **221,056** | 140,324 | 80,732 |
| Master Planned Communities cost of sales | **(57,768)** | (15,867) | (41,901) | **(70,672)** | (37,870) | (32,802) |
| Operating costs | **(13,115)** | (12,211) | (904) | **(25,260)** | (24,559) | (701) |
| **Total operating expenses** | **(70,883)** | (28,078) | (42,805) | **(95,932)** | (62,429) | (33,503) |
| **Segment operating income (loss)** | **101,298** | 35,233 | 66,065 | **125,124** | 77,895 | 47,229 |
| Depreciation and amortization | **(108)** | (106) | (2) | **(218)** | (213) | (5) |
| Interest income (expense), net | **16,168** | 17,161 | (993) | **31,414** | 32,973 | (1,559) |
| Other income (loss), net | **—** | — | — | **—** | (103) | 103 |
| Equity in earnings (losses) from unconsolidated ventures | **5,883** | 2,638 | 3,245 | **(8,828)** | 6,746 | (15,574) |
| **Segment EBT** | **$123,241** | $54,926 | $68,315 | **$147,492** | $117,298 | $30,194 |

(a) MPC land sales include deferred revenue from land sales closed in a previous period that met criteria for recognition in the current period and excludes amounts deferred from current period land sales that do not yet meet the recognition criteria.

(b) Builder price participation revenue is earned when a developer that acquired land from us develops and sells a home to an end user at a price higher than a predetermined breakpoint. The excess over the breakpoint is shared between us and the developer at the time of closing on the sale of the home based on a previously agreed-upon percentage. This revenue fluctuates based upon the number and the prices of homes closed that qualify for builder price participation payments.

The following table presents MPC segment EBT by MPC:

| MPC Segment EBT by MPC thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Bridgeland | **$25,479** | $23,211 | $2,268 | **$42,726** | $54,315 | $(11,589) |
| Summerlin | **94,267** | 26,554 | 67,713 | **101,576** | 54,944 | 46,632 |
| Teravalis (a) | **192** | (957) | 1,149 | **1,135** | (1,966) | 3,101 |
| The Woodlands | **(2,579)** | 3,063 | (5,642) | **(4,929)** | 5,358 | (10,287) |
| The Woodlands Hills | **5,882** | 3,055 | 2,827 | **6,984** | 4,647 | 2,337 |
| **Segment EBT** | **$123,241** | $54,926 | $68,315 | **$147,492** | $117,298 | $30,194 |
| Floreo (b) | **$1,110** | $(958) | $2,068 | **$3,535** | $(1,910) | $5,445 |

(a) As of June 30, 2024, the Company owns an 88.0% interest and consolidates Teravalis. For additional detail, refer to Note 1 - *Presentation of Financial Statements and Significant Accounting Policies* in the Notes to Condensed Consolidated Financial Statements under Item 1 of this Form 10-Q.

(b) These amounts represent 100% of Floreo EBT. The Company owns a 50% interest in Floreo. Refer to Note 2 - *Investments in Unconsolidated Ventures* in the Notes to Condensed Consolidated Financial Statements under Item 1 of this Form 10-Q for a description of the joint venture and further discussion.

### For the three months ended June 30, 2024:

MPC segment EBT increased $68.3 million compared to the prior-year period primarily due to the following:

Summerlin EBT increased $67.7 million compared to the prior-year period.

- MPC sales, net of MPC cost of sales increased $68.6 million primarily due to the following activity:
- increase in superpad acres sold, with 87.3 acres sold at an average price of $1.5 million per acre in the second quarter of 2024, compared to no acres sold in the prior-year period
- increase due to $7.3 million in Special Improvement District (SID) bond assumptions resulting from the sale of superpads in the second quarter of 2024, compared to no acres sold in the prior-year period
- decrease due to $18.1 million less revenue recognized out of deferred revenue in the second quarter of 2024, compared to the prior-year period

The Woodlands Hills EBT increased $2.8 million compared to the prior-year period.

- MPC sales, net of MPC cost of sales increased $2.5 million primarily due to the following activity:
- increase in residential acres sold, with 17.0 acres sold at an average price of $452,000 per acre in the second quarter of 2024, compared to 10.5 acres sold at an average price of $408,000 per acre in the prior-year period

Bridgeland EBT increased $2.3 million compared to the prior-year period.

- MPC sales, net of MPC cost of sales increased $5.3 million primarily due to the following activity:
- increase in residential acres sold, with 59.4 acres sold at an average price of $588,000 per acre in the second quarter of 2024, compared to 38.8 acres sold at an average price of $552,000 per acre in the prior-year period
- Interest expense increased $2.4 million primarily due to a higher debt balance and higher variable interest rates as a result of a derivative termination in the third quarter of 2023, partially offset by an increase in capitalized interest.

Teravalis EBT increased $1.1 million compared to the prior-year period.

- Equity earnings at Floreo increased $1.0 million primarily related to the closings of Floreo land sales in the second quarter of 2024.

The Woodlands EBT decreased $5.6 million compared to the prior-year period.

- MPC sales, net of MPC cost of sales decreased $5.8 million primarily due to the following activity:
- decrease in residential acres sold, with no acres sold in the second quarter of 2024, compared to 3.7 acres sold at Aria Isle, an exclusive gated community, at an average price of $2.4 million per acre in the prior-year period. The decrease in acres sold is expected as only one custom lot remains at Aria Isle.
- decrease in commercial acres sold with no acres sold in the second quarter of 2024, compared to 2.1 acres sold at an average price of $819,000 per acre in the prior-year period

### For the six months ended June 30, 2024:

MPC segment EBT increased $30.2 million compared to the prior-year period primarily due to the following:

Summerlin EBT increased $46.6 million compared to the prior-year period.

- MPC sales, net of MPC cost of sales increased $69.5 million primarily due to the following activity:
- increase in superpad acres sold, with 87.3 acres sold at an average price of $1.5 million per acre for the six months ended June 30, 2024, compared to no acres sold in the prior-year period
- increase due to $7.3 million in SID bond assumptions resulting from the sale of superpads for the six months ended June 30, 2024, compared to no acres sold in the prior-year period
- decrease due to $15.9 million less revenue recognized out of deferred revenue for the six months ended June 30, 2024, compared to the prior-year period
- decrease in custom lots sold, with no lots sold for the six months ended June 30, 2024, compared to one lot sold at a price of $2.0 million per lot in the prior-year period. The lot sold in the prior-year period was the last custom lot currently available.
- Equity earnings at The Summit decreased $18.3 million as land and clubhouse unit sales decreased for the six months ended June 30, 2024, compared to the prior-year period due to low remaining inventory.
- Builder price participation decreased $5.1 million as fewer homes were closed with sales prices over the predetermined breakpoint necessary for participation revenue in the current period.

Teravalis EBT increased $3.1 million compared to the prior-year period.

- Equity earnings at Floreo increased $2.8 million primarily related to the closings of Floreo land sales for the six months ended June 30, 2024, compared to no land sales in the prior-year period.

The Woodlands Hills EBT increased $2.3 million compared to the prior-year period.

- MPC sales, net of MPC cost of sales increased $1.6 million primarily due to the following activity:
- increase in residential acres sold, with 17.4 acres sold at an average price of $454,000 per acre for the six months ended June 30, 2024, compared to 15.4 acres sold at an average price of $415,000 per acre in the prior-year period

Bridgeland EBT decreased $11.6 million compared to the prior-year period.

- MPC sales, net of MPC cost of sales decreased $7.5 million primarily due to the following activity:
- decrease in commercial acres sold partially offset by an increase in price per acre, with 3.5 acres sold at an average price of $801,000 per acre for the six months ended June 30, 2024, compared to 108.8 acres sold at an average price of $247,000 per acre in the prior-year period
- increase in residential acres sold, with 90.1 acres sold at an average price of $592,000 per acre for the six months ended June 30, 2024, compared to 61.3 acres sold at an average price of $548,000 per acre in the prior-year period
- Interest expense increased $4.3 million primarily due to a higher debt balance and higher variable interest rates as a result of a derivative termination in the third quarter of 2023, partially offset by an increase in capitalized interest.

The Woodlands EBT decreased $10.3 million compared to the prior-year period.

- MPC sales, net of MPC cost of sales decreased $10.9 million primarily due to the following activity:
- decrease in residential acres sold, with no acres sold for the six months ended June 30, 2024, compared to 7.2 acres sold in Aria Isle, an exclusive gated community, at an average price of $2.7 million per acre in the prior-year period. The decrease in acres sold is expected as only one custom lot remains at Aria Isle.

**MPC Net Contribution** MPC Net Contribution is a non-GAAP financial measure derived from EBT, adjusted for certain items as discussed below. Management uses this measure because it captures current period performance through the velocity of sales, as well as current period development expenditures based upon demand at our MPCs, which varies depending upon the stage of the MPCs development lifecycle, and the overall economic environment. MPC Net Contribution is defined as MPC segment EBT, plus MPC cost of sales, Depreciation and amortization, and net collections from Municipal Utility District (MUD) and SID bonds receivables, reduced by MPC development expenditures, land acquisitions, and Equity in earnings from unconsolidated ventures, net of distributions. MPC Net Contribution is not a GAAP-based operational metric and should not be used to measure operating performance of the MPC assets as a substitute for GAAP measures of such performance nor should it be used as a comparison metric with other comparable businesses.

Below is a reconciliation of segment EBT to MPC Net Contribution:

| MPC Net Contribution thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| MPC segment EBT | **$123,241** | $54,926 | $68,315 | **$147,492** | $117,298 | $30,194 |
| Plus: |  |  |  |  |  |  |
| Master Planned Communities cost of sales | **57,768** | 15,867 | 41,901 | **70,672** | 37,870 | 32,802 |
| Depreciation and amortization | **108** | 106 | 2 | **218** | 213 | 5 |
| MUD and SID bonds collections, net (a) | **(5,829)** | 1,984 | (7,813) | **(5,581)** | 3,348 | (8,929) |
| Distributions from unconsolidated ventures | **281** | 9,450 | (9,169) | **281** | 9,450 | (9,169) |
| Less: |  |  |  |  |  |  |
| MPC development expenditures | **(97,764)** | (83,235) | (14,529) | **(174,862)** | (172,580) | (2,282) |
| Equity in (earnings) losses from unconsolidated ventures | **(5,883)** | (2,638) | (3,245) | **8,828** | (6,746) | 15,574 |
| **MPC Net Contribution** | **$71,922** | $(3,540) | $75,462 | **$47,048** | $(11,147) | $58,195 |

(a) SID collections are shown net of SID transfers to buyers in the respective periods.

MPC Net Contribution increased $75.5 million for the three months ended June 30, 2024, and increased $58.2 million for the six months ended June 30, 2024, compared to the same periods in 2023, primarily due to higher MPC land sales, partially offset by an increase in MPC development expenditures, decrease in distributions from unconsolidated ventures, and higher SID transfers to buyers.

**MPC Land Inventory** The following table summarizes MPC land inventory activity for the six months ended June 30, 2024:

| thousands | Bridgeland | Summerlin | Teravalis | The Woodlands | The Woodlands Hills | Total MPC |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| **Balance December 31, 2023** | $533,031 | $1,079,927 | $544,824 | $172,652 | $115,239 | $2,445,673 |
| Development expenditures (a) | 73,535 | 84,000 | 328 | 1,711 | 15,288 | 174,862 |
| MPC Cost of sales | (24,558) | (43,108) | — | (5) | (3,001) | (70,672) |
| MUD reimbursable costs (b) | (54,248) | — | — | (90) | (10,138) | (64,476) |
| Transfer to Strategic Development and Operating Assets Segments | (1,118) | — | — | (4,294) | — | (5,412) |
| Other | 11,297 | (356) | (53) | (221) | (5,162) | 5,505 |
| **Balance June 30, 2024** | $537,939 | $1,120,463 | $545,099 | $169,753 | $112,226 | $2,485,480 |

(a) Development expenditures are inclusive of capitalized interest and property taxes.

(b) MUD reimbursable costs represent land development expenditures transferred to MUD Receivables.

### Seaport

**Seaport Entertainment** On October 5, 2023, HHH announced the intent to form a new division, Seaport Entertainment, that is expected to include the Company’s entertainment-related assets in New York and Las Vegas, including the Seaport in Lower Manhattan, the Las Vegas Aviators Triple-A Minor League Baseball team and the Las Vegas Ballpark, as well as the Company’s ownership stake in Jean-Georges Restaurants and other partnerships, and an interest in and to 80% of the air rights above the Fashion Show Mall in Las Vegas.

On July 18, 2024, the HHH Board of Directors authorized and declared a pro rata distribution of 100% of the outstanding shares of common stock of Seaport Entertainment Group, Inc. (SEG) to holders of record of HHH common stock as of the close of business on July 29, 2024 (Record Date). The distribution is expected to be paid after market close on July 31, 2024. As a result, holders of HHH common stock will receive one share of SEG common stock for every nine shares of HHH common stock held as of the close of business on the Record Date. SEG common stock is expected to begin trading on the NYSE American stock exchange on August 1, 2024, under the symbol “SEG”.

**General** The Seaport is part non-stabilized operating asset, part development project, and part operating business. As such, the Seaport has a greater range of possible outcomes than our other projects. The greater uncertainty is largely the result of: (i) seasonality; (ii) potential sponsorship revenue; (iii) potential event revenue; and (iv) business operating risks from various start-up businesses. We operate and own, either directly, through license agreements, or in joint ventures, many of the tenants in the Seaport. As a result, the revenues and expenses of these businesses, as well as the underlying market conditions affecting these types of businesses, will directly impact the NOI of the Seaport. This is in contrast to our other retail properties where we primarily receive lease payments and are not as directly impacted by the operating performance of the underlying businesses. This causes the financial results of the Seaport to be less predictable than our other operating real estate assets with traditional lease structures.

We primarily categorize the businesses in the Seaport segment into the following groups: Landlord Operations, Managed Businesses, the Tin Building, and Events and Sponsorships.

**Landlord Operations** Landlord Operations represent physical real estate in the Historic District and Pier 17 that we have developed and own, and is inclusive of our office, retail, and multi-family properties.

**Managed Businesses** Managed Businesses represent retail and food and beverage businesses in the Historic District and Pier 17 that the Company owns, either wholly or through partnerships with third parties, and operates, including license and management agreements. These businesses include, among others, The Fulton, Mister Dips, Carne Mare, The Lawn Club, and Malibu Farm. The Fulton and Malibu Farm are managed by Creative Culinary Management Company, LLC (CCMC), a Jean-Georges company, and Mister Dips and Carne Mare are managed by Seaport F&B LLC, an Andrew Carmellini company. These management companies are responsible for employment and supervision of all employees providing services for the food and beverage operations and restaurant as well as day-to-day operations and accounting for food and beverage operations.

The Company owns a 25% interest in Jean-Georges Restaurants, which currently operates over 40 restaurant and hospitality offerings around the world. This ownership interest is reported in accordance with the equity method.

**Tin Building** The Tin Building includes both landlord operations and managed business. The Company owns 100% of the Tin Building, which was completed and placed in service during the third quarter of 2022. The Company leases 100% of the rentable space to the Tin Building by Jean-Georges joint venture, a managed business in which the Company has an equity ownership interest and reports its ownership interest in accordance with the equity method. Based on capital contribution and distribution provisions for the Tin Building by Jean-Georges, the Company currently recognizes all of the economic interest in the venture. The Company recognizes lease payments from the Tin Building by Jean-Georges in Rental revenue and recognizes its share of income or losses from the joint venture in equity earnings. As the Company currently recognizes 100% of operating income or losses from the Tin Building by Jean-Georges, the Tin Building lease has no net impact to Seaport EBT. However, Seaport NOI includes only rental revenue related to the Tin Building lease payments and does not include the rent expense in equity earnings, as equity earnings are excluded from NOI by definition.

The Tin Building by Jean-Georges opened in late September 2022, with an expanded focus on experiences including in-person dining, retail shopping, and delivery, and is managed by CCMC, a Jean-Georges company.

**Events and Sponsorships** Our events and sponsorships businesses include our concert series, event catering, private events, and sponsorships. Food and beverage operations associated with concert concessions and catering are operated under management agreements with CCMC.

The 2024 summer concert series, which began in May 2024 and is expected to run through mid-October 2024, currently includes 59 announced show dates and has sold over 153,000 tickets to date, representing over 76% of available ticket inventory. In the second quarter, we hosted 11 concerts and welcomed approximately 32,500 guests. The 2023 summer concert series ran for the same period, and included a total of 63 shows, with 19 shows held during the second quarter of 2023.

**250 Water Street** In 2021, the Company received the necessary approvals for its 250 Water Street development project, which includes a mixed-use development with affordable and market-rate apartments, community-oriented spaces, and office space. In May 2021, the Company received approval from the New York City Landmarks Preservation Commission (LPC) on its proposed design for the 250 Water Street site. The Company received final approvals in December 2021 through the New York City Uniform Land Use Review Procedure known as ULURP, which allowed the necessary transfer of development rights to the parking lot site.

Also in December 2021, an amendment to the Seaport ground lease was executed giving the Company extension options, at the discretion of the Company, for an additional 48 years from its current expiration in 2072 until 2120. We received a building foundation permit from the New York City Department of Buildings and began initial foundation work and remediation in the second quarter of 2022. Remediation of the site as a volunteer of the New York State Brownfield Cleanup program was completed in December 2023. The Company has prevailed in various lawsuits challenging the governmental approval of our development project. For additional information regarding these lawsuits, see Note 9 - *Commitments and Contingencies* in the Notes to Condensed Consolidated Financial Statements under Item 1 of this Form 10-Q.

**Segment EBT** Segment EBT for Seaport is presented below:

| Seaport Segment EBT thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Rental revenue (a) | **$6,010** | $5,629 | $381 | **$12,392** | $11,018 | $1,374 |
| Other land, rental, and property revenues | **14,850** | 17,175 | (2,325) | **19,970** | 23,683 | (3,713) |
| **Total revenues** | **20,860** | 22,804 | (1,944) | **32,362** | 34,701 | (2,339) |
| Operating costs | **(31,729)** | (26,490) | (5,239) | **(52,247)** | (45,257) | (6,990) |
| Rental property real estate taxes | **(175)** | (169) | (6) | **(351)** | (337) | (14) |
| (Provision for) recovery of doubtful accounts | **(852)** | (6) | (846) | **(1,643)** | 13 | (1,656) |
| **Total operating expenses** | **(32,756)** | (26,665) | (6,091) | **(54,241)** | (45,581) | (8,660) |
| **Segment operating income (loss)** | **(11,896)** | (3,861) | (8,035) | **(21,879)** | (10,880) | (10,999) |
| Depreciation and amortization | **(3,949)** | (10,469) | 6,520 | **(9,706)** | (20,996) | 11,290 |
| Interest income (expense), net | **(2,676)** | 1,311 | (3,987) | **(4,688)** | 2,497 | (7,185) |
| Other income (loss), net | **(87)** | (1,601) | 1,514 | **(87)** | (1,600) | 1,513 |
| Equity in earnings (losses) from unconsolidated ventures (a) | **(6,552)** | (10,896) | 4,344 | **(16,832)** | (21,716) | 4,884 |
| **Segment EBT** | **$(25,160)** | $(25,516) | $356 | **$(53,192)** | $(52,695) | $(497) |

(a) Lease payments for the Tin Building included in Rental revenue and offset in Equity losses were $2.9 million for the three months ended June 30, 2024, $5.7 million for the six months ended June 30, 2024, $2.8 million for the three months ended June 30, 2023, and $5.7 million for the six months ended June 30, 2024. Refer to the Tin Building discussion above for additional detail.

### For the three months ended June 30, 2024:

Seaport segment EBT increased $0.4 million compared to the prior-year period primarily due to the following:

- Depreciation and amortization decreased $6.5 million primarily as a result of the impairment of our Seaport assets in the third quarter of 2023.
- Equity losses decreased $4.3 million primarily due to reduced operating and labor costs at the Tin Building.

These increases to EBT were partially offset by the following:

- Total revenues, net of Operating costs decreased $7.2 million primarily due to increased overhead costs associated with the stand-up of Seaport Entertainment in anticipation of the pending spinoff, and reduced restaurant and concert series revenue at Pier 17, partially offset by improved rental revenue from the Fulton Market Building, which is now 100% occupied.
- Interest expense increased $4.0 million due to lower capitalized interest related to a pause in development activity at 250 Water Street.

### For the six months ended June 30, 2024:

Seaport segment EBT decreased $0.5 million compared to the prior-year period primarily due to the following:

- Total revenues, net of Operating costs decreased $9.3 million primarily due to increased overhead costs associated with the stand-up of Seaport Entertainment in anticipation of the pending spinoff, and reduced restaurant and concert series revenue at Pier 17, partially offset by improved rental revenue from the Fulton Market Building, which is now 100% occupied.
- Interest expense increased $7.2 million due to lower capitalized interest related to a pause in development activity at 250 Water Street.

These decreases to EBT were partially offset by the following:

- Depreciation and amortization decreased $11.3 million primarily as a result of the impairment of our Seaport assets in the third quarter of 2023.
- Equity losses decreased $4.9 million primarily due to reduced operating and labor costs at the Tin Building.

**Net Operating Income** A reconciliation of Seaport segment EBT to Seaport NOI is presented below:

| Seaport NOI thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total Seaport segment EBT | **$(25,160)** | $(25,516) | $356 | **$(53,192)** | $(52,695) | $(497) |
| Add back: |  |  |  |  |  |  |
| Depreciation and amortization | **3,949** | 10,469 | (6,520) | **9,706** | 20,996 | (11,290) |
| Interest (income) expense, net | **2,676** | (1,311) | 3,987 | **4,688** | (2,497) | 7,185 |
| Equity in (earnings) losses from unconsolidated ventures | **6,552** | 10,896 | (4,344) | **16,832** | 21,716 | (4,884) |
| Impact of straight-line rent | **458** | 546 | (88) | **960** | 1,132 | (172) |
| Other (income) loss, net | **2,162** | 2,470 | (308) | **3,038** | 3,317 | (279) |
| **Seaport NOI** | **$(9,363)** | $(2,446) | $(6,917) | **$(17,968)** | $(8,031) | $(9,937) |

The Seaport, including Managed Businesses, Events and Sponsorships, and the Tin Building, is approximately 67% leased. We may continue to incur operating expenses in excess of rental revenues while the remaining available space is in lease-up, as the Seaport continues to move toward its critical mass of offerings.

The table below presents Seaport NOI by category:

| Seaport NOI by Category thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Landlord Operations | **$(7,672)** | $(4,760) | $(2,912) | **$(12,525)** | $(9,050) | $(3,475) |
| Landlord Operations - Multi-family | **37** | 33 | 4 | **95** | 61 | 34 |
| Managed Businesses | **(1,393)** | (50) | (1,343) | **(4,535)** | (2,586) | (1,949) |
| Tin Building | **2,333** | 2,360 | (27) | **4,591** | 4,775 | (184) |
| Events and Sponsorships | **(2,668)** | (29) | (2,639) | **(5,594)** | (1,231) | (4,363) |
| **Seaport NOI** | **$(9,363)** | $(2,446) | $(6,917) | **$(17,968)** | $(8,031) | $(9,937) |

Seaport NOI decreased $6.9 million for the three months ended June 30, 2024, and $9.9 million for the six months ended June 30, 2024, primarily due to increased overhead costs of $5.5 million for three months ended June 30, 2024, and $7.0 million for the six months ended June 30, 2024, associated with the stand-up of Seaport Entertainment in anticipation of the pending spinoff. Additionally, Events and Sponsorships NOI was negatively impacted by lower concert series revenue, and Managed Businesses NOI was negatively impacted by lower revenues across our restaurant portfolio.

Tin Building in the table above represents NOI from our landlord business and, as defined, excludes the impact of the Company’s equity ownership interest in the Tin Building by Jean-Georges managed business which opened in the third quarter of 2022. The table below presents the above NOI related to the Tin Building, which primarily represents lease payments from the Tin Building by Jean-Georges, as well as the Company’s share of NOI related to its investment in the Tin Building by Jean-Georges, which primarily represents the operations of the Tin Building marketplace and includes rent expense paid to the Company.

| thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Tin Building | **$2,333** | $2,360 | $(27) | **$4,591** | $4,775 | $(184) |
| Tin Building by Jean-Georges | **(6,668)** | (9,635) | 2,967 | **(15,414)** | (18,793) | 3,379 |
| **Total** | **$(4,335)** | $(7,275) | $2,940 | **$(10,823)** | $(14,018) | $3,195 |

### Strategic Developments

Our Strategic Developments assets generally require substantial future development to maximize their value. Other than our condominium properties, most of the properties and projects in this segment do not generate revenues. Our expenses relating to these assets are primarily related to costs associated with constructing the assets, selling condominiums, marketing costs associated with our Strategic Developments, carrying costs including, but not limited to, property taxes and insurance, and other ongoing costs relating to maintaining the assets in their current condition. If we decide to redevelop or develop a Strategic Developments asset, we expect that with the exception of the residential portion of our condominium projects, upon completion of development, the asset would likely be reclassified to Operating Assets when the asset is placed in service and NOI would become a meaningful measure of its operating performance. All development costs discussed herein are exclusive of land costs.

**Segment EBT** Segment EBT for Strategic Developments is presented below:

| Strategic Developments Segment EBT thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Condominium rights and unit sales | **$—** | $14,866 | $(14,866) | **$23** | $20,953 | $(20,930) |
| Rental revenue | **107** | 114 | (7) | **276** | 114 | 162 |
| Other land, rental, and property revenues | **402** | 778 | (376) | **803** | 1,131 | (328) |
| **Total revenues** | **509** | 15,758 | (15,249) | **1,102** | 22,198 | (21,096) |
| Condominium rights and unit cost of sales | **—** | (29,317) | 29,317 | **(3,861)** | (33,853) | 29,992 |
| Operating costs | **(3,562)** | (4,944) | 1,382 | **(7,711)** | (10,796) | 3,085 |
| Rental property real estate taxes | **(644)** | (1,080) | 436 | **(1,288)** | (1,751) | 463 |
| **Total operating expenses** | **(4,206)** | (35,341) | 31,135 | **(12,860)** | (46,400) | 33,540 |
| **Segment operating income (loss)** | **(3,697)** | (19,583) | 15,886 | **(11,758)** | (24,202) | 12,444 |
| Depreciation and amortization | **(3,878)** | (943) | (2,935) | **(5,297)** | (1,886) | (3,411) |
| Interest income (expense), net | **4,594** | 5,442 | (848) | **8,618** | 7,505 | 1,113 |
| Other income (loss), net | **(17)** | (17) | — | **(14)** | 77 | (91) |
| Equity in earnings (losses) from unconsolidated ventures | **36** | 30 | 6 | **75** | 35 | 40 |
| **Segment EBT** | **$(2,962)** | $(15,071) | $12,109 | **$(8,376)** | $(18,471) | $10,095 |

### HHH 2024 FORM 10-Q \| 47

### For the three months ended June 30, 2024:

Strategic Developments segment EBT increased $12.1 million compared to the prior-year period primarily due to the following:

- Condominium cost of sales includes a decrease of $16.1 million due to charges related to the defect remediation at Waiea incurred in the second quarter of 2023, that did not reoccur in the current quarter.

This increase to EBT was partially offset by the following:

- Depreciation increased $2.9 million compared to the prior-year period primarily due to accelerated depreciation for the Kalae model unit, which was decommissioned in the second quarter of 2024, to allow for the construction of future tower model units.
- Condominium sales, net of cost of sales decreased $1.7 million, excluding the change in remediation costs of $16.1 million discussed above, due to the timing of condominium closings. We had no condominium closings during the three months ended June 30, 2024, compared to 11 units at ‘A‘ali‘i and 4 units at Kō'ula during the prior-year quarter. The lower volume of condominium closings is expected as our completed towers are now 100.0% sold and the next tower, Victoria Place, is not scheduled for completion until late 2024.

### For the six months ended June 30, 2024:

Strategic Developments segment EBT increased $10.1 million compared to the prior-year period primarily due to the following:

- Condominium cost of sales includes a decrease of $13.1 million due to charges related to the defect remediation at Waiea. We charged $3.0 million in the first quarter of 2024, to fund the final remediation expenditures, compared to $16.1 million of additional costs charged in the prior-year period.
- Operating costs decreased $3.1 million, primarily due to a decrease in legal costs compared to the prior-year period.

These increases to EBT were partially offset by the following:

- Condominium sales, net of cost of sales decreased $4.1 million, excluding the change in remediation costs of $13.1 million discussed above, due to the timing of condominium closings. We had no condominium closings during the six months ended June 30, 2024, compared to 15 units at ‘A‘ali‘i and 5 units at Kō'ula and during the prior-year period.
- Depreciation increased $3.4 million compared to the prior-year period primarily due to accelerated depreciation for the Kalae model unit, which was decommissioned in the second quarter of 2024, to allow for the construction of future tower model units.

**Condominiums** Condominium revenue is recognized when construction of the condominium tower is complete and unit sales close, leading to variability in revenue recognized between periods.

### Completed Condominiums

*Ward Village* As of June 30, 2024, our six completed condominiums in Ward Village, Ae\`o, Ke Kilohana, Anaha, Waiea, ‘A‘ali‘i, and Kō‘ula, are completely sold.

### Condominiums Under Construction

*Ward Village* As of June 30, 2024, 97.4% of the units at our four towers under construction, Victoria Place, The Park Ward Village, Ulana Ward Village, and Kalae are under contract.

We broke ground on Victoria Place in February 2021 and expect to complete construction in the fourth quarter of 2024. Victoria Place, which is 100.0% presold, will consist of 349 one-, two-, and three-bedroom units.

We broke ground on The Park Ward Village in October 2022 and expect to complete construction in 2026. The Park Ward Village will consist of 545 studio, one-, two-, and three-bedroom residences. As of June 30, 2024, we have entered into contracts for 522 units, representing 95.8% of total units.

We broke ground on Ulana Ward Village in January 2023 and expect to complete construction in 2025. Ulana Ward Village, which is 100.0% presold, will consist of 696 studio, one-, two-, and three-bedroom units. All units are designated as workforce housing units and are being offered to local residents who meet certain maximum income and net worth requirements.

We broke ground on Kalae in June 2024, and expect to complete construction in 2027. Kalae will consist of 329 one-, two-, and three-bedroom residences. As of June 30, 2024, we have entered into contracts for 303 units, representing 92.1% of total units.

### Predevelopment Condominiums

*Ward Village* We launched public presales for The Launiu in February 2024. The Launiu will consist of 485 studio, one-, two-, and three-bedroom residences. As of June 30, 2024, we have entered into contracts for 248 units, representing 51.1% of total units.

*The Woodlands* We launched public presales of our first condominium project in The Woodlands in March 2024. The Ritz-Carlton Residences, The Woodlands will consist of 111 one-, two-, three-, and four-bedroom residences. The development sits on the last available large-scale residential site on Lake Woodlands, spanning roughly eight acres across approximately 1,200 feet of premier lakefront shoreline. As of June 30, 2024, we have entered into contracts for 72 units, representing 64.9% of total units.

The following provides further detail for all condominium projects as of June 30, 2024:

| Completed | Location | Units Closed | Units Under Contract | Total Units | Total % of Units Closed or Under Contract | Completion Date |
| --- | --- | ---: | ---: | ---: | ---: | --- |
| Waiea (a) | Honolulu, HI | 177 | — | 177 | 100.0% | Q4 2016 |
| Anaha (a) | Honolulu, HI | 317 | — | 317 | 100.0% | Q4 2017 |
| Ae\`o (a) | Honolulu, HI | 465 | — | 465 | 100.0% | Q4 2018 |
| Ke Kilohana (a) | Honolulu, HI | 423 | — | 423 | 100.0% | Q2 2019 |
| ‘A‘ali‘i (a) | Honolulu, HI | 750 | — | 750 | 100.0% | Q4 2021 |
| Kō'ula (b) | Honolulu, HI | 565 | — | 565 | 100.0% | Q3 2022 |
| **Under construction** |  |  |  |  |  |  |
| Victoria Place | Honolulu, HI | — | 349 | 349 | 100.0% | Q4 2024 |
| The Park Ward Village (c) | Honolulu, HI | — | 522 | 545 | 95.8% | 2026 |
| Ulana Ward Village (d) | Honolulu, HI | — | 696 | 696 | 100.0% | 2025 |
| Kalae (e) | Honolulu, HI | — | 303 | 329 | 92.1% | 2027 |
| **Predevelopment** |  |  |  |  |  |  |
| The Launiu (f) | Honolulu, HI | — | 248 | 485 | 51.1% | 2027 |
| The Ritz-Carlton Residences (g) | The Woodlands, TX | — | 72 | 111 | 64.9% | 2027 |

(a) The retail portions of these projects are 100% leased and have been placed in service.

(b) The retail portion of this project has been placed in service and is 56% leased.

(c) The Park Ward Village will include approximately 26,800 square feet of retail space.

(d) Ulana Ward Village will include approximately 32,100 square feet of retail space.

(e) Kalae will include approximately 2,000 square feet of retail space.

(f) The Launiu will include approximately 10,000 square feet of retail space.

(g) The Ritz-Carlton Residences will include approximately 5,800 square feet of retail space.

### Corporate Income, Expenses, and Other Items

The following table contains certain corporate-related and other items not related to segment activities and that are not otherwise included within the segment analyses. Variances related to income and expenses included in NOI or EBT are explained within the previous segment discussions. Significant variances for consolidated items not included in NOI or EBT are described below:

| thousands | Three Months Ended June 30, 2024 | 2023 | $ Change | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Corporate income | **$18** | $16 | $2 | **$34** | $30 | $4 |
| General and administrative | **(30,235)** | (20,217) | (10,018) | **(61,137)** | (43,770) | (17,367) |
| Corporate interest expense, net | **(20,209)** | (22,584) | 2,375 | **(37,791)** | (46,779) | 8,988 |
| Corporate other income (loss), net | **(35)** | 51 | (86) | **445** | 2,758 | (2,313) |
| Corporate depreciation and amortization | **(774)** | (825) | 51 | **(1,579)** | (1,625) | 46 |
| Other | **(3,868)** | (3,089) | (779) | **(7,686)** | (6,660) | (1,026) |
| Income tax (expense) benefit | **(6,359)** | 15,370 | (21,729) | **10,836** | 16,648 | (5,812) |
| Total Corporate income, expenses, and other items | **$(61,462)** | $(31,278) | $(30,184) | **$(96,878)** | $(79,398) | $(17,480) |

### For the three months ended June 30, 2024:

Corporate income, expenses, and other items was unfavorably impacted compared to the prior-year period by the following:

- Income tax expense increased $21.7 million primarily due to an increase in Income before income taxes. Refer to Note 10 - *Income Taxes* in the Notes to Condensed Consolidated Financial Statements under Item 1 of this Form 10-Q for additional information.
- General and administrative expenses increased $10.0 million primarily attributable to increased legal and consulting fees related to the pending spinoff of Seaport Entertainment and an increase in compensation costs.

Corporate income, expenses, and other items was favorably impacted compared to the prior-year period by the following:

- Corporate interest expense, net decreased $2.4 million primarily due to the change in value related to derivative instruments. Refer to Note 8 - *Derivative Instruments and Hedging Activities* in the Notes to Condensed Consolidated Financial Statements under Item 1 of this Form 10-Q for additional information on derivative instruments.

### For the six months ended June 30, 2024:

Corporate income, expenses, and other items was unfavorably impacted compared to the prior-year period by the following:

- General and administrative expenses increased $17.4 million primarily attributable to increased legal and consulting fees related to the pending spinoff of Seaport Entertainment and an increase in compensation costs.
- Income tax benefit decreased $5.8 million primarily due to an increase in Income before income taxes.
- Corporate other income decreased $2.3 million primarily related to higher insurance proceeds in 2023.

Corporate income, expenses, and other items was favorably impacted compared to the prior-year period by the following:

- Corporate interest expense, net decreased $9.0 million primarily due the change in value related to derivative instruments, and higher interest income driven by higher interest rates and higher average account balances.

|  |  |
| --- | --- |
| **MANAGEMENT’S DISCUSSION AND ANALYSIS** | Table of Contents |
| LIQUIDITY AND CAPITAL RESOURCES |  |

### LIQUIDITY AND CAPITAL RESOURCES

We continue to maintain a strong balance sheet and ensure we maintain the financial flexibility and liquidity necessary to fund future growth. In 2024, we drew $164.5 million on existing mortgages, entered into new borrowings of $45.0 million (excluding undrawn amounts on new construction loans), refinanced $130.0 million, and made repayments on mortgages of $8.0 million. As of June 30, 2024, we have $1.2 billion of undrawn lender commitment available to be drawn for property development, subject to certain restrictions.

### Cash Flows

| thousands | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Cash provided by (used in) operating activities | **$(188,773)** | $(250,358) |
| Cash provided by (used in) investing activities | **(168,190)** | (200,200) |
| Cash provided by (used in) financing activities | **209,672** | 194,773 |

**Operating Activities** Each segment’s relative contribution to our cash flows from operating activities will likely vary significantly from year to year given the changing nature of our development focus. Other than our condominium properties, most of the properties and projects in our Strategic Developments segment do not generate revenues, and the cash flows and earnings may vary. Condominium deposits received from contracted units offset by other various cash uses related to condominium development and sales activities are a substantial portion of our operating activities in 2024. Operating cash continued to be utilized in 2024 to fund ongoing development expenditures in our Strategic Developments and MPC segments, consistent with prior years.

The cash flows and earnings from the MPC business may fluctuate more than from our operating assets because the MPC business generates revenues from land sales rather than recurring contractual revenues from operating leases. MPC land sales are a substantial portion of our cash flows from operating activities and are partially offset by development costs associated with the land sales business and acquisitions of land that is intended to ultimately be developed and sold.

Net cash used in operating activities was $188.8 million for the six months ended June 30, 2024, and $250.4 million for the six months ended June 30, 2023, representing a $61.6 million net increase in cash provided by operating activities. This change was primarily due to a $113.8 million increase in net cash provided by operations across segments, primarily attributable to increased MPC land sales, partially offset by a $35.3 million increase in interest payments and a $16.9 million increase in cash paid for legal and consulting fees related to the pending spinoff of Seaport Entertainment.

**Investing Activities** Net cash used in investing activities was $168.2 million for the six months ended June 30, 2024, and $200.2 million for the six months ended June 30, 2023. The $32.0 million decrease in net cash used in investing activities was primarily due to a $28.8 million decrease in cash used in capital projects, a $12.3 million increase in proceeds from the sale of Creekside Park Medical Plaza, a $7.0 million increase in reimbursements under Tax Increment Financing (TIF) and grants, and a $4.4 million decrease in capital contributions to our investments in unconsolidated ventures, primarily for the Tin Building by Jean-Georges. These decreases were partially offset by a $12.6 million increase in cash used related to the acquisition of Waterway Plaza II in the current period, compared to the acquisition of Grogan’s Mill Village Center in the prior period, and a $7.8 million decrease in distributions from unconsolidated ventures, primarily for The Summit.

**Financing Activities** Net cash provided by financing activities was $209.7 million for the six months ended June 30, 2024, and $194.8 million for the six months ended June 30, 2023. The $14.9 million increase in cash provided by financing activities was primarily due to an increase in proceeds from mortgages, notes, and loans payable of $138.2 million, partially offset by an increase in cash used related to principal payments on mortgages, notes, and loans payable of $121.1 million.

### Short- and Long-Term Liquidity

**Short-Term Liquidity** In the next 12 months, we expect our primary sources of cash to include cash flow from MPC land sales and condominium closings, cash generated from our operating assets, first mortgage financings secured by our assets, and deposits from condominium sales (which are restricted to funding construction of the related developments). We expect our primary uses of cash to include condominium pre-development and development costs, debt principal payments and debt service costs, MPC land development costs, other strategic developments costs, and general operating costs. We believe that our sources of cash, including existing cash on hand, will provide sufficient liquidity to meet our existing obligations and anticipated ordinary course operating expenses for at least the next 12 months.

**Long-Term Liquidity** The development and redevelopment opportunities in Strategic Developments and Operating Assets are capital intensive and will require significant additional funding, if and when pursued. Any additional funding beyond those sources listed above would be raised with a mix of construction, bridge, and long-term financings, by entering into joint venture arrangements, as well as future equity raises.

We cannot provide assurance that financing arrangements for our properties will be on favorable terms or occur at all, which could have a negative impact on our liquidity and capital resources. In addition, we typically must provide completion guarantees to lenders in connection with their financing for our projects.

**Contractual Cash Obligations and Commitments** The following table aggregates our contractual cash obligations and commitments as of June 30, 2024:

| thousands | Remaining in 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Mortgages, notes, and loans payable (a) | $277,839 | $441,191 | $1,021,830 | $350,698 | $835,522 | $2,629,265 | $5,556,345 |
| Interest payments (b) | 165,002 | 282,500 | 224,433 | 169,879 | 140,709 | 272,522 | 1,255,045 |
| Ground lease commitments (c) | 1,305 | 2,937 | 2,992 | 3,049 | 3,108 | 240,242 | 253,633 |
| Total | $444,146 | $726,628 | $1,249,255 | $523,626 | $979,339 | $3,142,029 | $7,065,023 |

(a) We expect $270.7 million due in 2024 to be repaid with Victoria Place condo closings.

(b) Interest is based on the borrowings that are presently outstanding and current floating interest rates.

(c) Ground lease commitments totaling $246.2 million relate to the Seaport ground lease, which has an initial expiration date of December 31, 2072, and is subject to extension options through December 31, 2120. Future cash payments are not inclusive of extension options. The remaining $7.4 million in ground lease commitments relates to Kewalo Basin Harbor.

**Debt** As of June 30, 2024, the Company had $5.5 billion of outstanding debt and $1.2 billion of undrawn lender commitment available to be drawn for property development, subject to certain restrictions. Refer to Note 6 - *Mortgages, Notes, and Loans Payable, Net* in the Notes to Condensed Consolidated Financial Statements under Item 1 of this Form 10-Q for additional detail. Our proportionate share of the debt of our unconsolidated ventures totaled $153.3 million as of June 30, 2024, and is without recourse to the Company, with the exception of the collateral maintenance obligation for Floreo. See Note 9 - *Commitments and Contingencies* in the Notes to Condensed Consolidated Financial Statements under Item 1 of this Form 10-Q for additional information related to the Company’s collateral maintenance obligation.

***Debt Compliance*** As of June 30, 2024, the Company was in compliance with all property-level debt covenants with the exception of six property-level debt instruments. As a result, the excess net cash flow after debt service from the underlying properties became restricted. While the restricted cash could not be used for general corporate purposes, it could be used to fund operations of the underlying assets and did not have a material impact on the Company’s liquidity or its ability to operate these assets.

***Net Debt*** The following table summarizes our net debt on a segment basis as of June 30, 2024. Net debt is defined as Mortgages, notes, and loans payable, net, including our ownership share of debt of our unconsolidated ventures, reduced by liquidity sources to satisfy such obligations such as our ownership share of Cash and cash equivalents and SID, MUD, and TIF receivables. Although net debt is a non-GAAP financial measure, we believe that such information is useful to our investors and other users of our financial statements as net debt and its components are important indicators of our overall liquidity, capital structure, and financial position. However, it should not be used as an alternative to our debt calculated in accordance with GAAP.

| thousands | Operating Assets | Master Planned Communities | Seaport | Strategic Developments | Segment Totals | Non-Segment Amounts | June 30, 2024 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Mortgages, notes, and loans payable, net | $2,362,737 | $528,394 | $113,374 | $475,677 | $3,480,182 | $2,031,803 | $5,511,985 |
| Mortgages, notes, and loans payable of unconsolidated ventures | 90,581 | 62,680 | 60 | — | 153,321 | — | 153,321 |
| Less: |  |  |  |  |  |  |  |
| Cash and cash equivalents | (13,307) | (118,200) | (3,453) | (24,229) | (159,189) | (277,569) | (436,758) |
| Cash and cash equivalents of unconsolidated ventures | (2,944) | (5,974) | (5,522) | (3,580) | (18,020) | — | (18,020) |
| Special Improvement District receivables | — | (75,317) | — | — | (75,317) | — | (75,317) |
| Municipal Utility District receivables, net | — | (627,954) | — | (3,188) | (631,142) | — | (631,142) |
| TIF receivable | — | — | — | (1,677) | (1,677) | — | (1,677) |
| Net Debt | $2,437,067 | $(236,371) | $104,459 | $443,003 | $2,748,158 | $1,754,234 | $4,502,392 |

### HHH 2024 FORM 10-Q \| 53

**MARKET RISK AND CONTROLS AND PROCEDURES** Table of Contents

## Market risk

As filed, 2,020 characters.

We are subject to interest rate risk with respect to our variable-rate financings in that increases in interest rates would cause our payments under such financings to increase. With respect to fixed-rate financings, increases in interest rates could make it more difficult to refinance such debt when it becomes due. As properties are placed into service and become stabilized, we typically refinance the variable-rate debt with long-term fixed-rate debt.

The Company uses derivative instruments to manage its interest rate risk, primarily through the use of interest rate swaps, caps, and collars. The Company had $1.8 billion of variable-rate debt outstanding at June 30, 2024, of which $250.4 million was swapped to a fixed rate through the use of interest rate swaps and $544.8 million had interest rate cap contracts in place. Additionally, the interest rate caps and collars are on construction loans and mortgages with undrawn loan commitment of $59.6 million as of June 30, 2024, which will be covered by the interest rate cap and collar contracts upon drawing. Refer to Note 8 - *Derivative Instruments and Hedging Activities* in the Notes to Condensed Consolidated Financial Statements under Item 1 of this Form 10-Q for additional information.

As of June 30, 2024, annual interest costs would increase approximately $10.4 million for every 1.00% increase in floating interest rates. The Company is focused on prudently limiting exposure to potentially higher interest rates based upon market dynamics and general expected financing activity. Generally, a significant portion of our interest expense is capitalized due to the level of assets we currently have under development; therefore, the impact of a change in our interest rate on our Condensed Consolidated Statements of Operations would be less than the total change in interest costs, but we would incur higher cash payments and the development costs of our assets would be higher, resulting in greater depreciation or cost of sales in later years.

## Controls and procedures

As filed, 1,531 characters.

### DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in our reports to the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by SEC rules, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2024, the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were effective as of June 30, 2024.

### CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes to our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**OTHER INFORMATION** Table of Contents

Filed Jul 26, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-033188. Last ingested by Listed: Oct 24, 2026, 15:16 ET. No prices; not investment advice.