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spk01: Good day and thank you for standing by. Welcome to the Howard Hughes Holding 4Q 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Eric Holcomb, SVP of Investor Relations. Please go ahead.
spk02: Good morning and welcome to Howard Hughes
spk06: Holding 4Q 2023 earnings call. With me today are David O'Reilly, Chief Executive Officer, Jay Cross, President, Carlos Olea, Chief Financial Officer, and Dave Strife, President of Asset Management and Operations. Before we begin, I would like to direct you to our website, howardhughes.com, where you can download both our fourth quarter earnings press release and our supplemental package. The earnings release and supplemental package include reconciliations of non-GAAP financial measures that will be discussed today in relation to their most directly comparable GAAP financial measures. Certain statements made today that are not in the present tense or that discuss the company's expectations are forward-looking statements within the meaning of the federal securities laws. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that these expectations will be achieved. Please see the forward-looking statement disclaimer in our fourth quarter earnings press release and the risk factors in our SEC filings for factors that could cause material differences between forward-looking statements and actual results. We are not under any duty to update forward-looking statements unless required by law. I will now turn the call over to David O'Reilly.
spk10: Thank you, Eric, and good morning, everyone. Welcome to our fourth quarter earnings call. On our call today, I'm gonna begin with a recap of an outstanding year and cover the segment highlights for our master plan communities in the Seaport. Dave Stripe will cover the performance of our operating assets, followed by remarks from Jay Cross to provide updates in our strategic development projects in Moored Village. Finally, Carlos will provide a review of our 2024 guidance and the balance sheet before we open the lines for Q&A. In short, our fourth quarter results met or exceeded our enhanced guidance expectations within each of our core businesses, closing out another exceptional year for Howard Hughes. Highlights of the year included record MPC EBT of $341 million, aided by significant growth in new home sales, strong land sales, and record residential price per acre. Our operating assets delivered record NOI of $244 million, a 4% increase year over year excluding dispositions with solid growth in multifamily and office. In Moored Village, we sold out all remaining units at 'ali'i and Kaula, and ended the year with more than 96% of all condo units that are towers under construction or in pre-sales under contract. Although credit markets were incredibly tight during 2023, we continued to strengthen our balance sheet and commence new developments by successfully executing over $659 million of financing. This included several important refinancings for loans nearing maturity, as well as $498 million of construction loans for new developments. These new financings enabled the start of construction on several key projects in our pipeline, including ULANA, our ninth condo project in Hawaii, One Reba Row, a luxury multifamily development in the Woodlands, and the Whole Foods Anchored Grocery Center in downtown Selma. Now, let's take a little deeper dive on the results of our MPC segment. We delivered an outstanding fourth quarter, capping off a very strong year and setting new quarterly and full year records for both EBT and residential price per acre. For the fourth quarter, MPC EBT was $139 million, representing an 82% increase year over year. This robust growth was primarily driven by exceptional super pad sales in Summerlin, where we sold 130 acres at a 22% increase in the average residential price per acre to over $1 million. The strong results of the quarter contributed to full year record MPC EBT of $341 million, exceeding our most recent guidance and outpacing 2022's strong results by 21%. This growth was largely driven by exceptional residential land sales, totaling more than 375 acres across our MPCs at a record average price of $944,000 per acre for the year. Strong equity earnings from the summit, which were related to phase two lot sales and the closeout of the final clubhouse condominium units also
spk02: contributed.
spk10: During the home sales, which we believe is a leading indicator of future land sale, we had 527 new homes sold across our MPCs in the quarter. For the year, home builders in our MPCs sold nearly 2,300 homes, representing a 45% increase year over year. This sharp increase was primarily attributable to 985 new homes sold in Bridglin, a new all time high for this growing community, as well as a 38% increase in Summerlin to nearly 1,100 homes. These strong results propelled Summerlin and Bridglin into the number four and number five top selling MPCs in the nation for RCLCO's 2023 rankings respectively, further solidifying the appeal of Howard Hughes award winning master plan communities and setting the stage for continued growth in 2024. Looking forward, we expect another strong year for new home construction, with increased starts in sales aided by a significant lack of resale inventory. With the majority of US homeowners locked into an interest rate of 5% or less and mortgage rates expected to ease, but only to levels about 6% for the foreseeable future, we do not anticipate an increase in resale supply. As a result, home buyers will continue to be driven into the new home construction market, which not only offers the opportunity to pick the size, location and style, but also attractive incentives like mortgage rate buy downs offered by many of our home builder partners. With increased expectations for new home construction and a significant under supply of vacant lots in the Las Vegas and Houston markets, we anticipate continued strong home builder demand for new acreage in Summerlin, Bridglin and the Woodland Hills throughout 2024. We also expect to close on the sale of our first lots in Florio, the first village of Terra Valles near Phoenix. During the fourth quarter, we contracted to sell more than 500 lots in this new MPC, and we recently contracted more than an additional 300 lots in January. All of these lots are expected to close in the first half of the year. Overall, we expect another strong year of MPC, EBT in 2024. Carlos will provide more details on our full year guidance in a few moments.
spk02: Turning to the C port,
spk10: operating results remain challenged in the fourth quarter with a modest 3% year of year revenue reduction and a net operating loss of $6.6 million, including equity losses of $11.6 million, primarily from the TIN building. Total C port NOI was a loss of $18.2 million in the quarter. Although improved $2.4 million year over year, primarily due to reduced equity losses at the TIN building, performance from our wholly owned businesses declined as a result of poor weather conditions and lower restaurant revenues. Despite these disappointing results, there were several bright spots during the quarter, including our successful Winterland Venture, which transformed the rooftop into an immersive holiday activation and attracted more than 50,000 guests to the C port. At the TIN building, we successfully launched our e-commerce platform and we closed the year in December with our strongest month of sales since the venue opened in 2022. And finally, at the Fulton Market building, we officially opened the Lawn Club in November and the Alexander Wang lease commenced in mid-December. With that, this building is now 100% occupied and we expect improved profitability going forward. During the quarter, we announced our intent to spin off the C port, including our 25% minority interest in John George restaurants, together with the Las Vegas Aviators, the Las Vegas ballpark, and our 80% ownership of air rights over Fashion Show Mall into its own publicly traded company called C port Entertainment. In January, Anton Nicodemus joined HHH as the CEO of C port Entertainment. And together, we are working hard to complete the spin transaction later this year. We'll have more details to share in the coming months, but we remain positive and confident about the opportunities that the spin-off will create, both for Howard Hughes and C port Entertainment in the years ahead. I'll now turn the call over to Dave Stripe. Dave?
spk08: Thank you, David. In the fourth quarter, our operating assets continued their solid performance, delivering $54 million of NOI, including the contribution from unconsolidated ventures. For the full year, we generated a record NOI of $244 million, which represented a 2% increase relative to 2022. Excluding our divested retail, self-storage, and medical office assets, NOI increased 4% year over year. The most significant increase was seen in our multifamily portfolio, which generated fourth quarter NOI of $13 million and full year NOI of $53 million. For the year, this represented a strong 16% increase, primarily driven by the rapid lease up of new properties in Bridgeland and downtown Columbia, and a very healthy 9% blended in-place rent growth across the portfolio. Our assets continued to command some of the highest rents in their markets, and at year end, our stabilized properties were 95% leased, which is a testament to the quality of our multifamily assets and our teams operating them. With strong demand in our markets, we continued to develop -in-class assets, including Starling at Bridgeland and Marlowe in downtown Columbia. These assets were placed into service late in 2022 and were already 94% and 57% leased as of year end. Similarly, in 2023, we completed and began leasing units at Taninger Echo in Summerlin and Wingspan in Bridgeland, the first single-family -to-rent property in our portfolio, which began welcoming residents in the fourth quarter. With our consistent leasing, strong rent growth, and development of future assets like Wood and Reaver Row in the Woodlands, we expect continued incremental NOI growth in the coming years. In office, we produced fourth quarter NOI of $27 million and full-year NOI of $118 million. NOI was relatively unchanged for the quarter, but increased 6% for the year. The full-year increase was due to strong lease-up activity as well as free rent expirations and one-time lease terminations in the Woodlands. These increases were partially offset by some tenant vacancies at various properties in the Woodlands and downtown Columbia, as well as initial operating losses at 1700 Pavilion in Summerlin. In 2023, the company executed an impressive 581,000 square feet of new or expanded office leases, including 357,000 square feet in the Woodlands, 113,000 square feet in Summerlin, and 111,000 square feet in downtown Columbia, driving home the demand for highly amenitized Class A assets. With our stabilized office portfolio at more than 88% lease, we expect to benefit from this leasing momentum later in 2024 with incremental improvements in 2025. As office build-outs are completed and free rent periods burrow. In retail, NOI was $12 million in the fourth quarter, which reflected an 11% reduction compared to the prior year. This decline was primarily related to lower sales revenue and the impact of two nationwide tenant bankruptcies in downtown Summerlin, as well as increased reserves in Ward Village. Despite these negative impacts to the quarter, we have seen success in releasing the vacated spaces in Summerlin as we have already backfilled one space and are in promising negotiations for the other. At Ward Village, a considerable portion of the reserves taken were subsequently collected earlier this year. Full year retail NOI was $52 million, or flat compared to the prior year. But with our stabilized retail portfolio, 96% lease at quarter end and a number of tenant upgrades in progress, we are excited about the opportunities for 2024. Finally, given some of the challenges that commercial and multifamily real estate have been facing regarding changing user requirements and higher operating costs, we recently performed an in-depth analysis of our stabilized NOI projections, leading to modest changes across the portfolio. In office, our updated stabilized NOI represents a 2% or a $3.7 million decline due to increased levels of vacancy and higher operating costs driven mostly by taxes and insurance. Our projected stabilized NOI for retail declined by $5.9 million, or 9%, driven primarily by reduced expectations at Ward Village associated with the current status of its redevelopment. We expect that our stabilized NOI will increase over time as we add new retail at the base of our new developments. And finally, multifamilies projected stabilized NOI declined $4.3 million, or 5%, due to increased property taxes and operating costs, primarily in our Houston market. Despite a modest 4% reduction to our overall projected stabilized NOI, we remain extremely confident about the long-term success of the Howard Hughes portfolio. With that, I will now turn the call over to our president, Jay Cross.
spk07: Thanks, Dave, and good morning, everyone. In the fourth quarter, we continue to make solid progress in our commercial construction projects, which represent future stabilized NOI of more than $24 million for our operating asset segment. First, in Nevada, we are nearing completion of the South Summerlin office, which was recently named Meridian. This -square-foot, three-story office building in Village 15 is expected to be completed later this quarter. A few miles away, construction of the Summerlin Grocery Anchored Center, a -square-foot retail development, which will be anchored by a new Whole Foods Market, is advancing nicely. We expect this retail, adjacent to our 10-inch and 10-inch echo multi-pound properties in the heart of downtown Summerlin will be completed in the third quarter. In Maryland, we are in the final stages of construction and are now watertight at our -square-foot medical office building in downtown Columbia. This new development, which has achieved a Fitwell one-star rating, has experienced high demand and is now 34% pre-leased, with another 60% in lease negotiation. We expect to complete construction in the second quarter. In Houston, we are nearing completion of Wingspan, our 263-home -for-rent development located in Bridglin. During the fourth quarter, we celebrated this grand opening and began transferring completed units to operating assets. At year-end, 28% of Wingspan's units were completed and a total of 15% released. We anticipate Wingspan will be fully completed in the second quarter. Across town in the Woodlands, construction at One Reba Row, our 268-unit lead silver multi-family tower, is also going very well. This luxury development on the Woodlands waterway is expected to be completed in the second half of 2025 with a strong NOI contribution of nearly $10 million upon stabilization. Looking at our future development pipeline, we have three new Houston projects on the horizon. First, in Bridglin, we recently secured financing for Village Green at Bridglin Central, a new mixed-use development featuring in-line retail, standalone restaurants, and an office building anchored by an HEB grocery store. We are seeing high demand from potential tenants with 86% of the in-line retail space already pre-leased or in advanced negotiations. In the Woodlands, we recently kicked off the redevelopment of the Grogan's Mill Village Center. This property, which was the first retail center in the Woodlands back in the 1970s, was reacquired during 2023. This asset, which is an important part of the Woodlands history, will be completely revitalized with a new community center and public library in addition to redeveloped restaurant and retail space. Just a couple miles away, we are approaching the launch of presales for our first condominium project on the US mainland, the Ritz-Carlton Residences, the Woodlands. This ultra-luxury, 111-unit condo project on the shores of Lake Woodlands will be our first of its kind in this MPC and the first standalone Ritz-Carlton branded residence in the state of Texas. We expect presales to commence in March. Shifting to Ward Village, we continue to see solid demand for our residential condos during the fourth quarter, closing on the sale of the final unit at Kauula and contracting to sell a total of nine units at the Park Ward Village and Kauai. For 2023, we had another successful year, despite a challenging housing backdrop, closing on 47 condo units for a total revenue of $48 million. These units represented all the rainy inventory at 'ali'i and Kauula as we officially closed out these projects. We also contracted to sell 78 condos and presales representing incremental future revenue of $160 million. At the year-end Victoria Place, our next tower expected to deliver in late 2024, and Yulana, our final workforce housing tower, were both 100% pre-sold. The Park Ward Village, also under construction and slated for completion in early 2026, is 94% pre-sold. Subsequently to year-end in January, we broke ground on Kauai, currently 87% pre-sold, and we currently anticipate a completion date in 2027. And finally, earlier in the year, we announced the Lanouz, our 11th condo project in Ward Village. This development will offer sweeping reviews of Diamond Head and includes 485 premium residences. Presales on this new tower commenced earlier this month and is progressing well. I would now like to hand the call over to our CFO, Carlos Saleya, who will review our guidance and the balance sheet.
spk09: Thank you, Jay, and good morning, everyone. With the record-setting 2023 in the history books, we now turn our attention to 2024 and what we expect to be another strong year for Howard Hughes. In our NPC segment, EBC is projected to remain robust during 2024, aided by modest anticipated reductions in mortgage rates and continuous tight supply of existing homes on the market. We expect this will drive strong land sales in Richland and the Woodlands Hills throughout the year. In Summerlin, we anticipate increased super-pat sales, which are expected to primarily occur in the second and third quarters. We also expect to see increased equity earnings from the first lot sales in our Florida joint venture in Tarvales during the first half of the year. This -over-year gains are expected to be more than offset by reduced EBT associated with heightened performance in 2023, which included significant commercial land sales and builder price participation, as well as a near sell-out of custom lots at Aria Isle in the Woodlands and Clubhouse condominiums at the Summit in Summerlin. As a result, we expect NPC EBT will modestly decline 10% to 15% -over-year, but remain at exceptional levels with a midpoint of approximately $300 million. In operating assets, we anticipate increased occupancy in our new multifamily developments and improved retail leasing to drive the office and OI growth going forward. The office portfolio is also expected to benefit from strong leasing momentum experience since mid-2022, but free rent periods on many of the new leases, the impact of Centennial vacancies and new office developments expected to be completed in 2024 will likely result in office and OI being relatively flat -over-year. Overall, 2024 operating asset and OI is expected to be in a range of up 1% to 4%, with a midpoint of approximately $250 million. This includes projected NOI from the Las Vegas Aviators and the Las Vegas Wall Park of $5.4 million, which are expected to be included in the spin-off of Seaport Entertainment. Fond of sales are expected to materially increase next year, with Victoria Place closing late in the fourth quarter of 2024. Victoria Place is 100% pre-sold, and condo sales revenues are projected to range between $675 and $725 million, with strong gross margins between 28% and 30%. This guidance contemplates approximately $75 million of condo sales revenues for Victoria Place being delayed through the first quarter of 2025 due to the timing of condo closings. And finally, in 2024, we expect cash G&A to range between 80 and $90 million, excluding approximately $20 million of cash expenses associated with the spin-off of Seaport Entertainment and $5 million of anticipated non-cash stock compensation. Looking at asset dispositions, during the fourth quarter, we sold the Memorial Hermann Medical Office Building in the Woodlands for $9.6 million, resulting in a gain of $3.2 million. Subsequently, to your end, we also negotiated and closed on the sale of the Creekside Park Medical Plaza for $14 million. The sale of these two medical office buildings resulted in a combined gain of approximately $9 million. For the full year, we recorded gains of $24 million from non-core asset dispositions, including the sale of two land parcels on the building in Ward Village, as well as our two self-storage facilities in the Woodlands. Turning to our balance sheet, we ended the year with $632 million of cash, which leaves us well positioned to deploy capital into our development pipeline. At the end of the fourth quarter, the remaining equity contribution needed to fund our current projects was $240 million. From a debt perspective, we had $5.3 billion outstanding at the end of the year, with only $215 million of maturities in 2024. Approximately $200 million of this are related to the construction loan on Victoria Place, which will be repaid as soon as closed in the fourth quarter, which leaves us with only $14 million of principal amortization payments due in 2024. During the year, we closed from $659 million of financing, including $498 million of construction loans for our latest developments, and $161 million of refinancings for debt maturing in 2023 and 2024. With $85 million of loans closed in the fourth quarter alone, our weighted average debt maturity at DRN was five years,
spk10: with
spk09: 86% maturing in 2026 or later. With that, I would now like to turn the call back over to David for closing remarks.
spk10: Thank you, Carlos. Before we open up the lines for Q&A, I just want to reiterate the exceptional performance of our company in 2023 and commend our employees for their incredible efforts throughout the year. Looking into 2024, we expect another strong year across our core segments, with robust MPC-EBT, continued growth in operating assets in Hawaii, and the delivery of Victoria Place condo project in Hawaii. During the year, we will be intently focused on the successful anticipated spinoff of Seaport Entertainment, which we believe will provide HHH more flexibility to advance our extensive pipeline of development projects and seek new, attractive growth opportunities within our core portfolio of master plan communities. At the same time, Anton and the team at Seaport Entertainment will be better positioned to focus on improving the performance of these unique assets while seeking complimentary expansion opportunities in the entertainment and hospitality industries. Overall, we're excited about the future of Howard Hughes, demand for our award-winning MPCs and world-class portfolio of assets is high, and we are undoubtedly well positioned to grow our net asset value in the years ahead. With that, let's start the Q&A portion of the call. Operator, can you please open the line for the first question?
spk01: Certainly. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for our first question. And our first question will be coming from Alexander Goldfarb of Piper Sandler. Your line is open.
spk04: Hey, morning down there. So, just a few questions. First off, David, on the construction lending front, can you just give us an update on, you know, how banks are looking at construction across the different projects that you have outlined and, you know, how your experience has been, you know, given, you know, relative to a lot of the stories that we read about the challenges in the development market. Just, you know, as we think about this year, you guys are busy, a lot underway, and just trying to understand, you know, to what degree the construction lending market is limiting your ability to put projects into the ground.
spk10: Great question, Alex. Excuse me. And it's something that we're dealing with real time all the time. You know, having, you know, been in, you know, the lending market for a long, long time, I would say that I've never seen a construction loan market like this in my experience. It's almost slipped on its head. You know, right now, the easiest construction loans we can get, Alex, are on the condos in Hawaii. And condo construction loans used to be the hardest ones to get. But construction lenders, and I've spoken to a number of them over the past several quarters, are saying, you know, if I make a construction loan on a multifamily asset or an XYZ asset, I don't know what the value of that asset is at completion, and I don't know what my takeout is. But with a pre-sold condo tower in Hawaii, I know exactly how I'm gonna get repaid. So we've still seen a very constructive market as it relates to financing our condo towers in Hawaii. Flipping the kind of script there is, you know, even on a -the-mill multifamily asset like one Revo Row on the waterway in the woodlands, which is a tremendous project, in a market where we have a dominant market share, that was one of the hardest construction loans I've seen us try to get in my time at Howard Hughes. It's been a shortage of lenders that have decided that, you know, in a challenging market environment like we're in, we're not gonna lend on certain products. We're not lending on office, we're not lending on construction, we're not lending on fill in the blank. So the bids that we used to get, we'd have over 20, you know, we were down to two or three on that project. We still think we got a great execution, and we're still able to secure loans on our projects, given the incredible dynamics and returns that we're seeing on them. But it's definitely much harder today than it has been in almost any other time in my career.
spk04: So do you find, David, do you find that you're, there are more projects that you'd like to do if you could get the lending, or you feel that the lending and your, the projects at PennSol are sort of in equilibrium?
spk10: We're still getting all the projects done that we want to. It's just taking a little bit longer, and it's a lot harder to find that construction financing.
spk04: Okay, second question is, you know, and forgive me, I'm gonna botch the name. I'll say Phoenix, because I, Corvallis, I think is how you say it. You announced that you're gonna do a bunch of initial lot sales this year, first half. You know, previously you had hoped for last year. We all understand, you know, it's a tough, tough endeavor. I guess, how confident are you on the initial sales? Are they all spoken for, and the builders that have, you know, spoken for them have an ability to perform, or is this a project that we should still think of as a moving target, just because of the challenges associated with launching a new MPC?
spk10: Well, look, I think that, you know, as we discussed in the prepared remarks, Alex, we still remain incredibly excited about TerraValus. You know, in the fourth quarter, we contracted over 500 lots, and in January, an additional 300. You know, we gotta close those contracts, and there's always risk associated with that, especially in a new development like TerraValus. But we think we have great momentum, and we're moving forward on that horizontal development, preparing those lots, and look forward to, hopefully, getting these contracts closed, and getting those home builders in there building model homes.
spk04: Okay, and then just finally, Seaport Entertainment Update. Is it still on track for later this fall? You know, where do we stand in the filings that you guys have to do? Just wanna get an update on how that is progressing. And then also, David, and then, Horace, and also, is 250 Water gonna be part of that, or that's still TB Day?
spk10: So, I'll answer your second question first. 250 Water, our expectation is that that would be included as part of Seaport Entertainment in the spin. As far as timing goes, go look, I am optimistic that we can complete this spin in the third quarter of this year. But that optimism is dependent on a number of third parties that are way out of my control. You know, we have a lot of work to do with the SEC. We have a number of consents to get on different loans and different assets to be part of this spin. We have to set up a board. We have to fill out the entire management team for ANTIME. There's an incredible amount of work that needs to get done to get into the spin. Of the things that I can control, I feel very good about them, and I feel like we've made an incredible amount of progress in a short period of time. And it's really just those areas that are out of our control that gives me a hesitancy to promise anything sooner than third quarter of this year. Thank you.
spk01: And one moment for our next question. Our next question will be coming from Anthony Pallone of JPMorgan, your line is open.
spk03: Great, thank you. First question is on the couple of projects that you outlined to start this year, I think the Bridgeland and Woodlands and even the Ritz-Carlton condos, can you talk about expected yields or returns on those?
spk10: I'd say it's a little bit premature, Tony. We tend to make sure that we have that GMP contract in place, get some pre-leasing done, especially on some of those retail projects in Bridgeland, so that we have a good expectation when we put shovel in dirt, we communicate to the world in terms of what those returns are. Today, we feel like those are still gonna drive great risk-adjusted returns and meaningful value creation for our shareholders, but until we're ready to put the shovel in the dirt, I don't wanna get too far over my skis and promise something that I don't know that I can deliver on it, so we finalize the planning, finalize the GMP and get some leasing done.
spk03: Okay, and I mean, I guess just following up on Alex's questions around construction financing and the discussion there, do you think these returns will clear construction loan costs these days, like something in the eight, nine-plus percent range, or will you look at them a bit differently?
spk10: Well, look, each project is gonna be, have its own return dynamics. For a Ritz-Carlton condominium project, it's gonna deliver an exceptional margin, perhaps not as strong as Ward, but close. You know, regardless of the cost of the construction debt, it's positive leverage, right? We're gonna do really well there. There are some other projects where, you know, you're building multifamily, it is still a meaningful premium to underlying cap rates, but that could be at a lower yield than the cost of financing, and, you know, go back to where I was when I started my career, which is in the world of negative leverage, but that still doesn't mean there's not value creation for our shareholders, it's just incrementally reduced by the cost of that financing. But the construction financing as an overall part of your P&L, or an overall part of your budget for building the project is relatively small, given that your equity goes in first, and then you draw down that construction financing over the following 18, 24 months. So if it's a couple of points higher than what I would have liked a couple of years ago, it's still gonna generate a lot of value creation for our shareholders.
spk03: Okay, thanks. And then, just on the super pads, can you maybe walk through a little bit of how those work, how much visibility you have into those deals happening? It sounds like you've got some more teed up for this year, and when those happen, is it just, you're doing your normal lot development, and Builder comes along and says, we'll just take a lot of it, and it becomes a super pad, or do you have to actually plan for it? Just maybe walk us through a little bit more of how that works.
spk10: Yeah, absolutely. So super pads are something that is unique to Summerlin, and I think we've been able to pursue a super pad sales strategy in Summerlin, given our kind of dominant land position there. In Houston, where there's a bit more competition, we're selling finished lots, and we're selling those lots to Builders, so that methodology won't change, but in Summerlin, all of the land, all of the residential land that we sell to home builders for the past six years has been sold in super pads. Sometimes those super pads are a little bit smaller. Sometimes they're $100 million super pads. It depends on the size of the pad, the surrounding infrastructure, and the type of community that's gonna get built by the home builder there. What we're able to do is we bring in all the utilities and finishes right up to the entry monuments of those super pads, sell that land to the home builders, and they're responsible for the improvements inside of the super pad. So while we're generating a lower price per acre in selling super pads, we're selling at a much higher net profitability per acre because of the reduced infrastructure cost that becomes the burden of the home builder.
spk03: Okay, got it. And then my last item is looking at the operating properties NOI into 2024 and maybe even a little bit beyond. Can you talk about any other incremental known move outs, perhaps in the office portfolio that risk being a drag in the next year or two that you could talk to? And then along the same lines on the other side, trying to just understand what the offsets might be because if I look at your multifamily development, NOI is maybe a million bucks I think in the quarter and the stabilized is 20. And so it just seems like that will just lease up and be a pretty strong contributor. So I'm just trying to understand what the offsets are.
spk10: Yeah, no, it's a great question, Tony. I do think we'll see meaningful growth as Carlos talked about in his prepared remarks in the multifamily portfolio. And that can be partially offset by a couple of different things. A little bit of our hesitancy to continue to project meaningful percentage rents from our retailers. We've had the benefit of great sales per foot across our retail portfolio for the past couple of years. And while I'd like to think that that goes back goes on into perpetuity. I don't think it's a great guidance tool to just make that assumption. So there perhaps a little bit of headwind in the retail portfolio. And we do have both the number of leases signed across the office portfolio that will add incremental NOI and a number of tenants that moved out this year or face bankruptcy this year that will have a negative impact next year. So the positive momentum will be obfuscated by those move-outs. One of which was WeWorks bankruptcy, one of which we think will remain in place and continue to pay rent as they've had to date. And one of which they've left and we backfilled it with an alternate user. But that kind of switch over is gonna create some near term headwinds this year.
spk03: Okay, thank you.
spk01: In one moment for our next question. And our next question will be coming from John Kim of BMO Capital Markets. John, your line is open.
spk05: Hey, good morning. It's Eric on for John. Maybe just starting with the spinco. I was just curious if there is any other anticipated real estate assets that you plan to transition to the new Seaport Entertainment outside of the ballpark in the announced 250 Water Street.
spk10: So I'm just wondering if you have any other No, I think all of the assets have been kind of discussed in the past, which would be all the assets in New York, including 250 Water Street, the ballpark, the baseball team and our minority interest in John George restaurants.
spk05: Okay, that's helpful. And then on the development front as it relates to the condos outside of the Ritz-Carlton residence and the condos in Ward Village, is there opportunity for additional condos in other MPCs that you're thinking about?
spk10: Absolutely. We think that there could be the opportunity for incremental condominiums, not just within Ward Village, which we're very much focused on, but beyond the Ritz and the Woodlands, there may be another site or two that could work. And we're working hard. And I think Jay mentioned this at our most recent investor day at a site or two in Summerlin. It's still premature to talk about details and exact locations and economics, but we think we have an incredible machine that our team in Ward Village, led by Doug Johnstone and Fadi Wiedemeyer, have put together. And there's no reason why we can't use that machine and expand its presence to our other MPCs to create value
spk02: for our shareholders.
spk05: Okay, that's helpful. And then the last one for me is just on the office tenant demand and different tenant types. And what are your leasing expectations at 1 Hughes Landing or 1725 Hughes Boulevard?
spk10: Yeah, we have a number of tenants that we're talking to real time, a good pipeline. Now that 9950, which is our headquarter building in the Woodlands is full. We're seeing the demand that did fill that building, at least that building entirely full, almost 600,000 square feet. Given that that building is now full, that tenant demand has been shifted to Hughes Landing. 1 Hughes, 1725, 1735 are all seeing incremental velocity towards an interest. And we feel like we have some great momentum in getting that leased right now.
spk02: All right, thank you very much.
spk01: Again, as a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced.
spk02: For any additional questions, please press star one
spk01: one. I would now like to turn the call back to David O'Reilly for closing remarks.
spk10: Just want to thank everyone again for participating today on our call. Look forward to seeing you at our upcoming investor events, non-deal road shows. And as always, if there's any follow-up or need for information or additional questions, we're always available. Thank you again.
spk01: And this concludes today's conference call. Thank you for participating. You may now disconnect.
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