Howard Hughes Holdings Inc. (HHH) Earnings Call Transcript & Summary

Good day, and welcome to The Howard Hughes Corporation Virtual Investor Day Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. David O'Reilly, Chief Executive Officer. Please go ahead, sir.

Thank you so much, operator, and thank you, everyone, for joining us today to The Howard Hughes Corporation Investor Day. We're really excited to have the opportunity to present to you today. And hopefully, you'll find it informative have been helpful. I know from a lot of the conversations we have, there are so many investors that are new to the story. And hopefully, this will be a time where we can get everybody up to speed and level the playing field very quickly. As well as so many investors that have followed us for years that I think will find this equally as informative and presented in a way that I think can increase the value under which that you appreciate the story of Howard Hughes. Today, we're going to have a video presentation that will run through some of the progress made over the past year or 1.5 years throughout our communities, as so many of our investors have been unable to travel and see that progress first hand as I know so many people like to do. Then we're going to turn to a more formal presentation, where we're going to walk through some of the achievements of 2020, those things that we've been able to accomplish despite the challenges of the year, a financial review of our balance sheet and liquidity position, talk a little bit about the value of Howard Hughes in terms of a net asset value approach and use it really as an illustration as an approach rather than a definitive view and give our investors new and old alike, the tools to determine what they think the value is of Howard Hughes, quickly, easily in a way that can be updated every quarter just using our supplemental information. And then we're going to talk a lot about how we're going to continue to drive value. And you'll hear me say this again and again, but the story of Howard Hughes isn't just about closing the discount to NAV. The story of Howard Hughes is about our ability, our unique ability to continue to drive increases in net asset value on a per share basis year in and year out and do it entirely self-funded without needing to raise equity and diluting our shareholders. So presenting today with me with myself, Jay Cross, our President; and Drew Davis, our Senior Vice President, Head of Investments. And this team is almost complete, and I couldn't be more excited to the next page and talk to you and introduce you for the first time to our new CFO, Correne Loeffler. Correne comes to us from Whiting Petroleum, and has been involved in so many activities and assisted in the restructuring over $2.4 billion of debt. It's really, I think restructuring is like dog years, and the experience is incredibly hard earned. I hope that we never use that experience at Howard Hughes. But nonetheless, I think Correne brings an incredible amount of talent and expertise to us. And during her time at Whiting, really importantly, she implemented so many innovations that focused on process improvement efficiencies as well as built an incredible deep team of talented professionals. 2 key characteristics that I know that will be instrumental in her continued success as our CFO. So Correne, if you want to just say hi, before we progress?

Sure. Good morning, everyone. I'm excited to get started and join the team. It's amazing to hear all the things the team has done over the last year. So it's an exciting time to come on board.

Thank you so much. Speaking of boards, and as we finalized our management team with the appointment of Correne, I do want to highlight for all of our investors, just the incredible depth, breadth and talent of our Board of Directors. They have been incredible partners in helping drive the strategic vision of the company, driving incredible decision-making, thoughtful approaches and bringing a level of expertise and skill that I am blessed to have at The Howard Hughes Corporation. And I think that it is a Board that is, candidly, unmatched for a company of our size, and we couldn't be more excited to have them on. So with there, I'll pause. We're going to open up and play the video. I encourage you to expand the video on your screen and minimize the presentation so that you can get a good view. And then when that's over, we'll come back and walk through the formal presentation. So thank you all again for joining. And operator, if you'd play the video. Thank you. [Video Presentation]

Well, welcome back. I hope everyone enjoyed the video. And got a little chance to see some of the things that we were able to do during the pandemic. Every time I see that, and I've seen that a lot, I just -- I'm incredibly proud and grateful. And it's -- I'm proud and grateful of all of our employees and what they were able to do in work-from-home pandemic stricken 2020. It validates my view that we absolutely have the world's greatest employees to see everything that we were able to do in such a challenging time. So segue into some of the achievements in 2020. Start briefly with the transformation plan. We're going to talk about the cost-cutting and some of the things I referenced in the video. First, corporate G&A. That was one of the difficult decisions we had to make at the end of '19, and moving into 2020 was to reduce our workforce and to relocate our headquarters from Dallas to Woodlands, say goodbye as so many good friends and employees. But it really positioned us well to help weather this storm. And I'm thrilled to say that as of the end of the fourth quarter, we achieved a $40 million run rate reduction in our G&A, which got us into the range of our goals. And we're optimistic that we'll hopefully see some incremental cost savings throughout the coming year. Noncore asset sales, this is an area that was absolutely impacted by the pandemic, and we had targeted $2 billion of sales with $600 million of net proceeds. We were only able to achieve $214 million, about 36% of that goal across 8 properties. The real benefit for us is through some of the capital raisings that Drew will speak to in a little while, we have the luxury of patience, and we didn't have to force the sales at distressed prices,and we can wait until we achieve the optimum valuation on those sales. The largest remaining contributors of those sales are 110 North Wacker, which is going to market very shortly. The hospitality portfolio, which will take candidly some time to recover before we see that value return, some noncore asset sales in noncore retail sales in the Woodlands and a few noncore land parcels that remain across the portfolio, although the vast majority of those have been sold over the past year. One of the other key aspects of the transformation plan on Page 12 was accelerate growth in core assets. Jay is going to spend a bunch of time going into a little bit more detail on those great deliveries in 2020 as well as the 2 million square feet of new developments in '21. Needless to say, this is just the tip of the iceberg as we have decades remaining of development across all of our MPCS. I want to turn now and talk to some of the silver linings on Page 13 in terms of what we saw in the second half of 2020. And what we're expecting that we see a continuation of into 2021. The first is a strong new home sales activity. In 2020, we saw over 2,700 homes sold in our communities despite the fact that we almost took the second quarter off or pause for a month or so. That's a 10% year-over-year increase, and it was across all of our communities, really incredible results. These strong new home sales led to, on Page 14, incredible appreciation of our land and the price per acre under which we sell our land to homebuilders went up pretty dramatically from '19 to '20, 52% in the Woodland; 17% in Summerlin; 8% in Bridgeland; 12% in the Woodland Hills. Really just such strong results, we couldn't be more proud of. In the operating asset portfolio, we saw resiliency in our collections, both office and multifamily, maintaining numbers in the high 90s. And then the retail portfolio rebounded nicely from 2Q to 4Q from 50% to 73%. Although if you dig a little deeper, the results there were bifurcated, where we saw collections closer to 90% in the fourth quarter in the Woodlands, Columbia, in Downtown Summerlin. But lumber is still hovering added around 60% in Hawaii, where the shutdown of traveling tourism until October 15 and the slow return of the consumer in Hawaii has really impacted collections there. Well, there have been headwinds on the retail side in Hawaii, but we have not seen them at all on the condo sales. And we are now, to update everybody, as of the end of the first quarter, 86% sold at A'ali'i, which delivers at the end of this year; 79% at Koula, which delivers in 2022; and 85% at Victoria Place, which is the fastest-selling tower in the history of Ward, in a tower that won't start construction until this quarter. We sold 302 units that will generate, upon closing, $668 million in sale proceeds. Those contracts all -- similar to all of our contracts in Hawaii, have 20% nonrefundable hard deposits that we can use towards construction, just incredible results. To dig a little deeper in terms of the recent accomplishments in terms of developments delivered and what's in the pipeline, I'm going to turn it over to our President, Jay Cross. Jay?

Thank you, David. Well, despite the headwinds of 2020, it was a busy year for Howard Hughes Corporation. We delivered 6 buildings, 3 of which were multifamilies, 1 in Colombia and 2 in the Woodlands. And along with the Columbia multifamily, we also delivered a small retail project, a regional favorite called Busboys and Poet, which is an indication of the kind of amenities we like to build in to the public space surrounding the multifamily and commercial districts. You might look at the lease-up velocity of the multifamilies have been performing extremely well. If you think of the lanes as being a little bit slower, that's because we didn't really bring that project to market until the second quarter of '20, just as the pandemic hit. So after a slow start, we're now averaging over 20 units a month, and we have every reason to expect that the lanes will be fully leased on proforma between now and the balance of the year. Two Lakes Edge also has done very, very well here in the Woodlands. And then 8770 Trails is an interesting building. We were told by the tenant. It was a build-to-suit for Alight, we had to deliver in 12 months. So we designed and built the building in 12 months, got it in on time and have a happy tenant as a result of it. And I think that's an indication of the kind of projects we'll look to in the future, particularly in the commercial space where we'll tend to do more build-to-suits. So if you add that up, over 900 apartments were delivered. Almost $1.7 million in commercial office space, which was largely 110 North Wacker. And as David mentioned, that's a noncore asset. It's leased very well at 77%, anchored by Bank of America, and we hope to dispose of our interest in 2020 -- '21. It's generating $40 million of NOI and our $338 million investment. And I think that's indicative of what we intend to do every single year. So as we move forward, we've recently announced another 2 million square feet of projects, of which there's 3 more multifamilies. And interestingly, Starlink at Bridgeland, Marlow in Colombia and 10 Draco in downtown Summerlin are all essentially Phase 2 projects of very successful Phase 1 in proven markets. So we're very optimistic that all 1,100 units are going to get snapped up and premium prices. And it's important to note that in general, our projects are always top of the market in terms of rent. As David mentioned, Victoria Place is an outstanding success, being virtually fully sold up before we started construction. And we still have at least another 6 buildings to go in Ward Village. So we're optimistic about Hawaii. And then 1700 Pavilion which is our 3rd office building in Downtown Summerlin. And this is an interesting market for us, Two Summerlin which was completed a year or so ago, was fully leased by the time it was completed. 1700 Summerlin, where we have yet to put the shovel in the ground, although we hope to do so in the next month. We already have 20,000 square feet of lease negotiations underway, another 55,000 square feet in LOI negotiations. And it's -- that market, the West Valley market is the strongest market in Vegas, 7% vacancy. And we believe that we're going to have to start planning our next office building in the not-too-distant future in order to capitalize on the market. Downtown Summerlin as you would expect, continues to get the top rents. We are the only Class A product in the Vegas market today. So we are very optimistic about that future. Moving to our ESG strategy, as David mentioned, we issued our third report last fall and at the same time we have now started to implement new strategies going forward. We are very pleased to hire Gautami Palanki from the Green Building Council Board to be our new Vice President of Sustainability, and we're hopeful that with that expertise on board, we're going to be able to pursue the latest, state-of-the-art sustainable strategies in building, whether it be embedded carbon, new HVAC systems that encourage wellness and energy usage. At the same time, under the social banner, we have formed a DEI council this past year which was a council of volunteers from middle management and across the company who have come up with a number of, I think, very ambitious goals which we intend to start implementing. We were going to -- one of the major goals of this is to increase the attractiveness of our industry so that we can get a more diverse workforce to choose from initially. So it starts in the high schools, and tell you about architecture and construction and engineering, the students encourage them to pursue the expertise. We're going to put in place a very robust intern program at the college level and start to recruit more aggressively at minority-based colleges. All over design initiatives are designed to try and get us to a more diverse workforce, which we're very committed to doing. And with respect to the governance, I think, as David mentioned, we're blessed with a really dynamic and unique Board. And so in addition to our very excellent legal team, the risk committee of the Board makes themselves very available to us. And so senior management has the opportunity to test any kind of initiative concepts in a very informal way so that as we come forward, we realize that to a Board-level decision, we've already got buy in as to where we're going and what the risks are and the rewards to the company going forward that this point. As to where we're going and what the risks are and rewards to the company going forward. I think at this point, it's back to Drew.

Drew, you might be muted.

And sir, this is the operator. If you look up in the upper right-hand corner of your video screen, there's a little audio...

I apologize, all. Let's go to next slide. Yes, I know. Okay. So look, at the onset of the pandemic, we made the decision to take very decisive action to build a fortress balance sheet, so that we could insulate our company from a worst-case impact from the pandemic. We really got to work last March when we issued just over $600 million of equity to bring our total liquidity position to over $1 billion where we've stayed and actually grown since then. Concurrent to the equity raise, we quickly moved to extend all major debt maturities and then also lock-in construction financing for all in process development. So those projects were fully capitalized. These steps immediately put us in a position of strength and set the tone for the balance of the year, and we were able to use that position of strength to negotiate a whole host of things. Later in the year and then more recently this year, we were able to execute two highly attractive bond issuances that greatly improved our financial flexibility. In sum, what really matters, we were able to extend the company's overall weighted average debt maturity by 3 years, while decreasing our cost of debt from 5.1% to 4.2%, which I think is very accretive for the equity. In addition to those benefits, we were able to unencumber operating assets with a book value of $1.5 billion. And when you look at the underlying cash flows of those assets and the future cash flow potential, the market value is meaningfully higher than $1.5 billion. So you layer that on to the other steps we have taken, we started to have immense flexibility moving forward. And then what I'd like to note, in addition to the balance sheet items I just talked about and the G&A savings that David highlighted, clearly, we took meaningful steps to eliminate all nonessential CapEx in spending in 2020 until investment was warranted, and that improved our cash position as well. Let's go to the next slide. And so as a result of these transactions, we're sitting on record liquidity today. We're sitting on around $1.2 billion, which, after accounting for all development activity that we've announced, we have around $750 million of excess liquidity. I think what's very important to note and highlight, a majority of that comes from completely unrestricted cash. And so when you pair that with the HHC platform, that gives us huge amounts of optionality. And as we've already noted, we've termed out all debt maturities over the next couple of years, and we'll continue to opportunistically look to extend term and lower rate where it makes sense for the company. Next slide, please. Okay. And so our financial philosophy, overtime, has been squarely focused on two key areas. One is growing recurring NOI relative to recurring expenses. The second aspect is maintaining excess liquidity, so that we can fully fund all in process development at any given point in time. Further, one of the pillars of our transformation plan was to optimize our cost structure relative to our diversified income streams. And so looking to the left of the page, this year, we anticipate generating nearly $300 million or $286 million of cash flow that we can reinvest across all the opportunities that Jay and the team have highlighted. And then as far as liquidity, I'm kind of just drilling it in and drilling it in just to reinforce how strong our position is. If we did collect a single dollar of rent moving forward, we had no free cash flow, we could fully fund all-in process development through completion, and we would still have $750 million of excess liquidity. I think that's a very powerful spot to be in, and it gives us a lot of options to make investments as we move forward. Next slide. And so going forward, this is what you should expect from us. You should expect us to maintain a fortress balance sheet, both to insulate our company through the cycle, but then also so that we can quickly take advantage of opportunities as they come our way. You should also expect us to remain laser-focused on controlling costs as we drive to increase free cash flow year in and year out. When it comes to capital allocation, despite having an abundance, you should expect us to remain highly disciplined. We have a robust investment approval process that is squarely focused on generating the highest quality returns as we work through monetizing our vast land holdings. And then finally, as far as shareholder returns, you know we're focused on growing NAV. That's much of what we've covered, but we are determined to take care of our shareholders through closing the NAV gap that still persists. How are we going to do that? So we believe a large step towards closing that gap will come from enhanced transparency. And so now we'll walk you through a clear road map for creating a sum of the parts valuation of our business.

Into the details, I just want to preface this next section. This next section is an illustrative sum of the parts valuation for The Howard Hughes Corporation. It's meant to provide a road map for our investors to apply the variables and methodologies that they are best see fit for us. It's not to just take our work for some of these cap rates and discount rates, but to provide a clear methodology. A clear mathematical analysis is sum of the parts that can level the playing field for new and old investors, provide tremendous transparency and continue to allow our investors to track this over time to hold a scorecard to keep us accountable for delivering on that net asset value per share growth that we believe we'll achieve over the next several years, over the next several decades. This sum of the part analysis breaks down the 5 components of Howard Hughes. The first is our operating assets. We're going to walk through a direct cap and a net present value approach that will show in NAV. Our Master Planned Communities, we use a discounted cash flow approach. We use a net present value approach on Ward Village. We're going to show the Seaport District at cost, and we'll talk a little bit about the rationale for that. And then the noncore assets and corporate debt, which doesn't get described to any one -- none of the previous 4 segments. The total of that gives us an illustrative valuation of an NAV of $150 per share. All right, on to the operating assets. On Slide 29, we've segmented the operating assets into 2 buckets: Our stabilized assets and those unstabilized and under construction. First, the stabilized assets. We're showing our Q4 annualized NOI and a cap rate based on third-party market research to show a value. For the unstabilized and under construction, we're taking the projected stabilized NOI, and just to pause for a second, all of this information is published quarterly in our supplemental. And again, provide that transparency for everyone to update their own model and to keep us accountable and to keep score of how we're progressing. But again, we're going to use that projected stabilized NOI. We're going to use a cap rate based on the third party market. We're going to discount it back from its time to stabilize till today and subtract those costs to complete. And that will give a net asset value of the unstabilized and under construction of about $22. The total of those 2 gets to $85 per share, less the debt that's in the segment, it's a $45 per share valuation for the operating assets. The next several slides in this deck and the recording of this presentation will be available on our website immediately after this call, so that everybody has access to this information. Walks through the cap rates. And first on office, which is going to show a range using third-party data across the board, a weighted average of 5.9. Retail, weighted average of 5.3. And finally, multifamily weighted average of 3.9. I'm going to pause there because I want to talk a little bit about cap rates and give you my perspective in terms of why I believe the cap rates that we've used today based on CBRE, Green Street and Colliers, is incredibly conservative. There's a handful of reasons for that. One of those is the age of our portfolio. Our assets are all recently developed, recently built by The Howard Hughes Corporation over the past several years and its average age is very new. Our second is our in-place leases and our very limited lease expiration schedule. We're expiring 2.5% of our office leases this year and less than 10% for the next 6 years, averaging about 7%. And in our retail portfolio, our explorations are even lower, with about 6% each of the next 3 years and 9% in 2024. Finally, and I think really importantly, is the aspect of control that we have on these assets within our Master Planned Communities. We talked a lot about it in the video. We've talked about it in the presentation. You've heard me say probably over and over again. But by having a dominant market share, in these submarkets. We are able to insulate ourselves against downturn and accelerate in the good times. And by having that dominant market share, we believe we should command a premium cap rate and higher valuations because we have that much influence in these submarkets. Enough on cap rates. On the next page, we have hotels. And let me highlight within that valuation, just how conservative our hotel valuation is when we get to the next slide. But looking at the noncore assets or the other assets, if you will, on Page 33, we have the Las Vegas ballpark, the Summerlin Hospital, a number of long-term ground leases, the hockey ground lease, self-storage facilities, all assets that I think would command a premium cap rate given the long-term stable nature of these. We're going on a very conservative basis, using a management assumption of 6%. Next page, just to recap. We're showing this valuation of $64 per share on stabilized, $0.22 on unstabilized and a total net of 45. I want to pause for a second and just talk about some of the conservatism here. Away from cap rates and discount rates. We're using Q4 annualized NOI. And our Q4 annualized NOI for our hospitality portfolio was only $3 million, a far cry from $28 plus million of stabilized NOI. And we see a lot of upside relative to these numbers as our assets return to normalcy post-COVID-19. The same goes for the retail portfolio. And we're going to talk and quantify that in just a little bit. Within our Master Planned Community segment, as I mentioned in the intro, we're going to use a discounted cash flow approach here. And we've segmented the Master Planned Communities between the residential, land value and the commercial land value. First, the residential, and this is land that we sell to homebuilders. And as a result, we make sure that we apply the appropriate margin and tax rate before we determine net asset value. We've shown the remaining acres and the year sell up. And we think the simplest methodology, the best methodology is to just take a linear approach between today and our sell-out on an equal amount of acres per year by our projected price of sale per acre for 2021. Growing that at what our -- we'll show and demonstrate our very conservative growth rates and discounting that from them for each year back to today. And that net present value approach generates a $43 net asset value for our residential land. Very similar methodology for our commercial land. But our commercial land, we're not in the business of selling. Unlike the residential land that we sell to homebuilders, our commercial land we hold. And we use that to create all that value that Jay and the team execute on every day. And we use a very similar methodology, although there is really no margin here because there's no cost to develop it until we actually do develop it, and then in which case, the cost is in the building. And we're not applying a tax rate to it because we're not selling it to anybody. We're holding it for ourselves for development. So based on that, our same approach with the commercial land, we're showing a $34 net asset value in a total segment value of $84. Important to note within our MPC segment is we actually have negative net debt. We have more municipal bonds in terms of SIDs and MUDs receivable to the company that we will be reimbursed for overtime than we have outstanding on our small lines of credit in this buildup -- in this segment. Turning to the next slide. We'll talk a little bit about our growth rates. And in Bridgeland and Summerlin, over the past 10 years, there's been a compounded annual growth rate of price per acre on Bridgeland of 6% and in Summerlin, 9%. And we feel very good relative to their ability to continue to demonstrate this. Now from our modeling perspective, on the previous page, we used 6% for Bridgeland and 6.5% for Summerlin. Again, very conservative assumptions. Especially as we've hit those inflection points where Bridgeland has really turned that corner. And as we continue to monetize and build out downtown Bridgeland, that value per acre of residential land should continue to grow at an outsized rate. That's exactly what we're seeing in Summerlin. As we're monetizing that community with the ballpark, with the multifamily, with the retail, our average compound annual growth rate on price breaker has been 9%. And we don't see that abating, especially as we tried to note in the video that those views and the quality of the land that we have remaining to sell those 3,000 acres are going to continue to get better views and, I believe, higher prices per acre. In the Woodlands, which is our most mature community on the next slide, there's compound annual growth rate of 13%. We don't have much land, residential land remaining in the Woodlands. So there's not a lot there remaining, but we've shown a 7% growth rate in our model compared to a 13% historical rate. In the Woodlands Hills, where we've seen a great demand for new homebuyers. And again, as a result of an increase in price per acre, we've seen that increase go to 11%. And then we're modeling in our illustrative model on the previous page, 4.5%. So again, very conservative, and we believe that the use of rates will continue to grow higher as we further monetize these communities. From a discount rate perspective, we've staggered our discount rates for each of these assets based on their relative maturity and the Woodland Hills in a very early years of selling homes, only about 5 years in, heavy development phase, highest discount rate, all the way down to the right, the Woodlands, which is our most mature community, lowest discount right now. To recap on Page 41, $43 of residential land and NAV, $34 in commercial for a total segment valuation of $84 per share. All right. Turning to Ward Village. On Page 43, we've broken down Ward Village into 3 distinct areas. The existing product that's under construction are already built. Our to-be-built entitlements. And the mark-to-market of our retail portfolio as we demolish older retail and replace that with new retail on the ground floor of these new towers. And have a mark-to-market of that NOI from approximately $20 a foot to $70. But first, the remaining inventory. This is just about the square footage that's outstanding, our expected price per foot, the margins that we expect to receive discounted to today, less the cost to complete and deposits received delivers a net asset value of $2 per share. The second segment is our to-be-built entitlements. And what we've done is similar to the land model, we've straight-lined these from now until 2029, our estimated sell-out date. Our average price per foot of $1,400, which we believe is very conservative based on our recent successes, and we'll walk through that. [ Times ] the 30% margin discounted back to today each year over the next 9 delivers a $21 per share value. Important to note that we do still need to deliver as part of our entitlements, 571,000 square feet of workforce housing that comes at an estimated 0% margin, and that's shown in this model as well to make sure that we're being accurate with our remaining entitlements. The to-be-built retail, again, comes over the next 9 years. We've discounted it back using a cap rate. We've marked that NOI to market less the cost to complete and deliver to $2 of NAV through that mark-to-market on retail. Some of the assumptions on cap rates and discount rates on 44, the cap rates again come from third party. The discount rates we've staggered, starting with the remaining units and completed towers that are already built and have very little risk and using a very low discount rate as a result. We've already sold 99% of those units, and there's only a handful left to continue to get great looks, and we think that will be mostly sold out in the next several months. We've added 300 basis points on the discount rate for those under construction. And still a relatively low discount rate. But we think very much appropriate given the moderated risk of a general -- of a guaranteed maximum price contract of construction financing locked in and those buildings sold at 85%, 79% and 86%, with 20% hard deposits has massively derisked those projects, and we think that lower discount rate is appropriate. And then added 400 basis points to the to-be-built entitlements and retail because the timing -- and obviously, it's unknown, and we don't have deposits or contracts. And as a result, we've widened that discount rate, and we think at an appropriate level. Price per square foot. On the unbuilt inventory, we've modeled 1,400 and a growth rate of 4%. Compare that on the bottom right-hand side of the chart, over the past 20 years of a 6.4% growth rate in Oahu, we think, a very conservative assumption. And $1,400 a foot against what we've sold our towers for, we think, again, very conservative. And our most recent tower under construction of Koula at $1,550, I think, demonstrates just how much we've appreciated in value, overtime, and how that $1,400 can continue to grow at a rapid rate. In terms of sell-out and remaining entitlements, we've shown the total entitlements here. We have a remaining 5.2 million square feet, estimated to deliver $580 per year. It means 9 years to sell-out. Historically speaking, as we've ramped up slowly, we've averaged 385,000 square feet, which isn't at that $580. But over the past several years where we have seen Alila, Victoria Place, and Jay will mention in his coming remarks, the next 2 towers that were in the approval process now. We see that increasing pickup, and that seems very achievable for us relative to what we have planned in the pipeline. So to recap the light, $2 per share of net asset value and what's under construction and remaining inventory, $21 and 2B built entitlements and another $2 in those retail mark-to-market. The fourth segment to talk about is the Seaport. And look, we could spend an entire 45 minutes talking about the variability and the opportunities in the Seaport, the ways to value. It's a dynamic asset between entertainment, restaurants, traditional real estate landlord operations and so much more. But given those complexities and given some of the timing uncertainties driven by the pandemic, what's happened this year, we've taken a highly simplified approach and just looked at our gross book value. And our gross book value of the Seaport at this point is $17 per share. And we think that is a good placeholder in terms of a simplified approach that allows everyone to make their own assumptions as they see fit. Finally, flipping forward to Page 51. We have our noncore real estate assets that we're in the process of disposing of other cash assets and liabilities and net corporate debt, negative $22 per share. Add them all up for the sum of the parts on Page 53, and you can see each component adding up to $150 per share or 57% discount. But any NAV, especially ours today, we need to sensitize. And on the next page, we've shown what happens if you move those cap rates 50, 100 basis points, the discount rates 50, 100 basis points or the growth rates, 50 to 100 basis points. And this is here for everyone's benefit so that they can see. But if I wanted to crystallize the takeaway, I would say that I see much less volatility and a much tighter range here than what otherwise might be expected for a company like Howard Hughes. And I think that speaks to how we derisk the company, how we've eliminated that volatility, how we've limited our leverage to have a smaller impact, such that this is a much less volatile, much safer, less risky opportunity at Howard Hughes. NAV -- especially NAVs using fourth quarter annualized numbers as we sit here in April, are backwards looking. And what if we turn that lens a little bit and didn't look in the rearview mirror, but started to look ahead and how could our NAV be impacted over the next several quarters? Well, Page 55 tries to quantify that. And we start with our base case NAV of $150 per share. And we say, what would be the impact to NAV if our hotels and our retail and all of our assets at ballpark, return to NOI levels pre-COVID. Just back to where they were at the end of '19, in the very beginning January, February of 2020. Well, that would add another $17 per share. And we are seeing that recovery take hold in our retail assets. We're seeing a return in Hawaii. We're seeing, hopefully, which will be at least a partial season of Minor League Baseball, and we're seeing a return of some business and leisure travel in our hotels. And that's $17, we see that coming back. Now what if all those assets didn't just achieve pre-COVID levels but reached their stabilized target. They're fully built out, stabilized target. That's another $11 per share. And these new developments that Jay talked about in -- the 2 million square feet that we announced. Well, 1 million of that is Downtown Columbia, Summerlin and Bridgeland, that will generate roughly $175 million or $3 per share value creation. And that doesn't include Victoria Place moving from to-be-built entitlements to under construction, which obviously, discount rate changes and moves up into a less risky adds value. So this total upside impact of just taking look out just ahead of us, not decades down the road, but just ahead of us. We can drive NAV to $182 per share. Now if you allow yourself to look beyond just the hood of the car, if you will, and down the street to the next several intersections, there's a couple of other great upside opportunities within our company. On the right-hand side, the transfer of the air rights at the Seaport, it was touched on in the video, where within the approval process, we're in the middle of the ULURP, working with landmarks preservation. And given the state of affairs there, there's really not much that we can quantify. But we do believe that there's meaningful upside there. But really importantly, the left-hand side of this page, the embedded value of our commercial land, our ability to convert raw commercial acreage that in that previous NAV, we're showing at $700 million, $800 million an acre into acres that have value of $20 million, $30 million, $40 million by putting income-producing assets at outsized returns on that dirt. That's where that NAV of $150 million going to $180 million, going up much higher comes to fruition. And now to us is just as important. Growing the NAV as closing that gap just as critically important. And the next section of this presentation is really focused on all of that and how we do it. And to walk us through all of those ways that we're going to grow NAV, I'm going to turn it back over to Jay to talk about all those opportunities that we have.

Thanks, David. So as David mentioned, reducing the NAV gap is one important measure of increasing the stock price. And I hope through the next few slides, you illustrate that the $3 that he just showed as what the new developments could potentially add is an extremely conservative assumption. So the value creation model is really the one I'm going to talk a little bit about how do we create value creation. How do we give it -- walk through a test case, how do we make money? How can we make money over and over on a repeatable basis? And how can we potentially accelerate our ability to make money on development opportunities. And I think the essential thing here to think about is because we don't have to go out and buy land. We don't have to compete with those developers for land. We have a huge head start. If we think the market is there, we can immediately put land into production. And our land cost is very low because it's based really on selling lots to homebuilders. And so when you start intensifying the town centers and looking at it as commercial sites, then we have this big advantage online price. And I think the best way to think about that is to walk through a case study of 2 legs edge. So this is a building we just completed in 2020, 386 units, took up roughly 3 acres of land at Hughes landing. So if we think about it in terms of our land acquisition, we produced 386 units. We invest $100 million in the creation of the building. That generates a stabilized NOI of $9 million using the cap rates that we just previously discussed. We create value of over $100 million per project, which is $2 a share, just for this one project. And so this is an indication of how we do it over and over and over again. And if you actually look back 10 years to the beginning of Howard Hughes, you'll see that over the last 10 years, we -- we've developed $670 million worth of development, primarily office, showing a 9.5% return and going back to the earlier slide, these 2020 projects were yielding about 12.5% return. So either way you look at it, we get very, very healthy returns partly because we're able to market time it, and we don't have to compete against overbuilding in many markets, and we don't have to go out and buy land. And in most cases, we don't have to get it entitled. We've already got it entitled. So big, big advantages over other developers who are going out and trying to get into markets and market time those inceptions. Going forward, we naturally see that nationally, the office component might start to decline a little bit. But there, too, we're in very, very healthy markets. So we're in migration markets in Nevada and Texas. And so we'll either build-to-suit for the local commercial office or we are now starting to put a lot of effort. We don't anticipate going out and building so much more retail rather than continuing to upgrade the retail we have. And that primarily comes down into 1 million square feet in Downtown Summerlin, which is doing very well and has done well throughout the pandemic. And the 1 million square feet that [indiscernible] will churn, if you will, in Ward Village because as they have mentioned earlier, we take what were older retail assets. And as we build the new buildings, we build new retail assets, and we're able to, therefore, mark-to-market much more newer retail spaces. And we think also because of the way in which Ward Village is being developed, we're really going to help define what is the new street related retail. So it's nothing in terms of a mall like environment. It's all Street related amenity driven amenities to the residential developments that we're building. So when we think -- like, how are we going to accelerate it? When is our inventory, we look at the -- what we have. We have 6 town centers and so we're very, very lucky here because each one of these town centers is epitomizing the low work play environment. And in every single case, we are executing against that new paradigm, which is so important. Downtown Summerlin, Downtown Columbia and Downtown Woodlands are all pretty mature now. So our ability to do infill retail, build office to suit and build a variety of multifamily is really the game plan going forward for those three. Bridgeland, you might say, it's more like Woodlands 30 years ago. So we're just starting to build the commercial center in Bridgeland. We're starting with a grocery store and a small office building and some retail pads and we see that accelerating as we put more rooftops in Bridgeland. So we see a very long pipeline in terms of the town centers. Ward Village is a different kind of town center because it's predominantly residential, but there, we're building a new part of Honolulu. And I think our ability to really control 60 acres and build best-in-class residential product is going to stand us in very good stead for a long time. And as David said, we've still got -- we've got 2 buildings just going through planning approvals. This is after Victoria Place. We have another one that's going to a concept design, and then we have 4 more sites after that. So there's a lot of runway still at Ward Village. And then finally, the Seaport. When you talk about live, work, play, I think it's interesting to look at Downtown Manhattan as it has changed over the last 20 years to now be a residential neighborhood is more so than a financial neighborhood. And so while the Seaport might not provide the work, live, we are definitely providing the play, for live, work and play in lower Manhattan. And I think with the development of the Tin Building by Jean-Georges coming online, in the first quarter of '22, we're going to find that the Seaport is the food and beverage and retail destination in lower Manhattan, and therefore, it has a long runway as well. And then finally, how do we accelerate this? How do we get more being built faster? I think there, the secret is we have to diversify our product. So typically, we've been building a pretty standard office product, and we've been building multifamily product for young professionals. Going forward, we're going to start to expand those ranges. And I think you'll see us do more medical office perhaps educational campuses. We've done a great job of building public school systems with their Master Planned Communities at the lower school level. And now we want to concentrate on higher education model campuses, community colleges and universities. In addition to more medical research and medical office buildings. And then when we think of the residential side, we're about to debut a single-family for rent product here in Bridgeland. And that will be our first foray into that. So we'll have single-family for sale, single-family for rent, multifamily for rent to professionals. And then I think our next iteration is to go into seniors' housing, retirees' housing, sometimes a condo product, sometimes assisted limiting product, but we now have embedded our communities, what we call the pioneers, those young families moved in the early days that are now retirees and they don't need a house, but they don't want to leave the neighborhood. And so we see intensification in all our town centers at the sort of retirement, senior level, really a very, very strong potential, and we've just started to explore our first condo here in the Woodlands. So that's the way in which we find we can sort of distribute multiple products, and that allows us to put multiple sites into production at the same time. So we're not competing against ourselves. And so that will allow us over and over, year in, year out to constantly intensify our land holdings.

Thank you, Jay. I'm going to wrap up and open up for Q&A, and I can't believe it, but I think we're actually a minute ahead of schedule, which I didn't think was possible. But just to sum up, the year today, where we stand, what we see for the future. I think we had an incredible year despite the headwinds of this pandemic. And we made some difficult decisions, but it really set the path forward in terms of both the reduction of G&A and the equity raise in terms of providing us the ability to execute on a go forward. And when I think about the landscape of real estate companies, I think of the landscape of all companies in terms of who's aligned to benefit from a recovery post-pandemic. I don't know that there's any company more uniquely positioned than Howard Hughes, the land, the capital and the expertise to create incredible developments to execute on this unmatched opportunity to create the city centers of tomorrow to take advantage of these accelerating migratory patterns of people and companies into Master Planned Communities that have walkable, who are amenity-rich city centers, town centers, immediately adjacent to wide open green spaces and an incredible quality of living. So we'll end the prepared remarks there. And hopefully, a lot of you have been submitting questions through the portal. John Saxon is going to read both the questions from the say the technology that were generated ahead of today's call as well as those of you who have submitted questions through the portal during the presentation. And we have some time, so we should be able to get through all of them. So John, if you would fire away with the first question, please?

Yes. Thanks, David. And yes, we're making some pretty good time. So we've got about 30 minutes allotted for this portion of the presentation. So our first question comes from Bill Hammer. He asked with how many -- with many companies looking to move away from high tax states. How can our MPCs win even more of that relocation business and the multiplier effect it brings?

That's a great question, Bill. And it's something that Jay, Drew and our entire team focuses on all the time. How do we continue to recruit, how do we continue to drive and bring more companies into our MPCs, into our cities? And we've been the beneficiary of a number of those. In the Woodlands, we did the 180 square foot build-to-suit for Alight that was shown in the video. We relocated SmartDraw out of San Diego. In Colombia, there were 5 companies that moved into downtown Columbia for their new headquarters. In Summerlin, that new office product, we think, is really well positioned to capitalize on some of those companies that are looking for a new location out of California. But those to us are the leading indicator. And 180,000 square feet here, 200,000 square feet there, I think are the beginning, just scratching the surface of what we can do. And the work that we're trying to put together that Jay referenced a little bit in his prepared remarks, is looking to find not just the next 1,000, but the next 1 million square foot. And to take advantage of these incredible communities that we've had the beneficiary of continuing to curate. And using those as the right landing spot for that next company that's looking to leave a high tax state.

Thanks, David. So our next question comes from Alex Goldfarb at Piper Sandler. So similar on the migration patterns that we're seeing, but more on the residential side. Can you talk about buyer resident and migration from the Coast to Houston, Vegas and Ward Village, quantify the benefit of this coastal exodus?

Well, these are trends that have been going on for a while. And historically speaking, the greatest -- the state that contributed the greatest number of license transfers in Nevada -- in Las Vegas was California at about 20% to 25%. That number has picked up and at times has been as close over the past year to 50%. And I think that's continuing to drive some of those home sales. Again, the home sales of 2020 over 2019, up 10%. We've seen a very similar dynamic in Ward Village, where the local buyer has had a -- perhaps a slightly weaker appetite for new condo as some of the local economy has faced headwinds. But that West Coast buyer, Pacific Northwest, Southern California or all of California has more than made up for. And what used to be a 10% piece of the pie in terms of buyers at Ward Village from Mainland U.S. has really grown to close to 20% or 25%. Really, to me, it's not the quantity, the important question isn't how much of a benefit it's been last year, but what benefit it could provide going forward? Because if we see the return of the local economy. So we've seen these increase of West Coast buyers, Midwest buyers, Northeast buying homes in the Woodlands, buying homes in Summerlin, buying homes in Bridgeland, buying condos in Hawaii. While those local economies have had headwinds, oil and gas have faced its headwinds in 2020 in Houston. Travel and tourism in Las Vegas, travel and tourism in Hawaii. And if we see the return of those local economies and the return of the local buyer to supplement that out-of-state migration, 2021 could be an absolutely incredible year for Howard Hughes. And I think that's what is really hard to quantify. It's hard to calculate today, but it's an incredible opportunity that we are absolutely poised to execute on.

Thanks, David. So we have another question here from Alex. How has the pandemic change your development plans, more housing, bigger apartments, flexible office, more demand for shopping centers/curbside type retail?

Jay, I think this is probably a question really equipped for you.

Sure. Definitely, in terms of unit layout, we are now starting to think of work from home. And so both in Hawaii and in the new projects we're planning for Colombia, we include little sort of office niches or closets that allow people to work from home and get some piece and quite at the same time. We're also, I think, seeing in the young professional category, a tightening of unit size and an upgrade in terms of amenities and quality. And so -- and again, depending on the market, we're tending to go smaller units in other -- where as we look at a more senior market, I think we're obviously looking at the bigger units. But I would say the biggest change is work from home. In terms of retail development plans, as I mentioned, we're pretty much focused on Street related retail everywhere we go. And I think that does speak to the future of retail. The common area charges associated with a mall type environment are just going to become a thing of the past, and we have to sort of partner with our retailers to find more local retailers, which are doing a very good job in Hawaii and bringing that sort of authentic mainstreet field to our projects. So I would say that's accelerated as a result of pandemic.

Thanks, Jay. Our next question comes from Jonathan Petersen from Jefferies. Given the strong demand for single-family homes and lack of supply across the country, is now a good time to plant your flag somewhere else in the country for your next MPC? Are there metro areas that you find particularly attractive to develop a new MPC?

It's a great question, and it's something that we work on all the time. And there are maybe 10 or 12 great MPCs out there. of the size and ilk that we look for. And we look for communities that have the size and density, access to transportation, access to the high-quality lifestyle and have enough size and location that they could have that commercial aspect to them. As a result, the opportunity set is pretty small. It doesn't mean we don't chase it. It doesn't mean we don't look. But when we do find them, it comes down to a capital allocation decision. And as Drew mentioned in his remarks, that is something that is the most important thing that we can do as a management team. And if we're going to allocate capital into buying the next MPC, we have to believe that it's going to generate that same level of value creation. And if we allocate that same capital into our existing MPCs in our existing entitlements in our backyard. That's not to say that it can't happen. And I think that there are a number of other metros that have been beneficiaries of the past year, similar to what we've experienced in Houston and Vegas and Hawaii. Cities like Austin, like Phoenix, like Denver, like Tampa, that we're -- we keep a very close eye on. But to date, we haven't been able to find that opportunity.

Our next question is from Christopher Sakai from Singular Research. He has 2 questions here. How concerned are you on increasing interest rates inflation? Second question is, where is retail collections lagging in the most?

So first question, interest rates and inflation, absolutely something that we keep a very close eye on. We do -- look, I would say this, our strategy in selling land to homebuilders has not changed, and we saw this firsthand over the past year. We prepare land, sell to homebuilders just to keep up with underlying home sales, really, that just-in-time land development model to meet the homebuilders just-in-time home building model. As a result, when the pandemic hit, we thought that there was going to be a meaningful slowdown in home sales and there was for a 30-day period in Houston, 60-day in Vegas, we stocked horizontal development to save that capital. And then when the home demand buying came back, we turned the posit rate backlog. So we're watching that very closely. To date, we have not seen any impact so far in terms of the 2021 home sales that would lead us to believe that interest rates or inflations are having an impact today. Lumber prices are up, interest rates are slightly higher, but they're still at levels that are very sustainable and can drive a great profit margin for our homebuilder partners. As a result, we're able to deliver land at great values per acre, increasing values per acre and great margins, delivering meaningful value accretion to our shareholders.

Thanks, David. Our next question is from Matthew Clarkin, U.S. Bank. Could you please update us on the 110 North Wacker sales process?

Absolutely, I think in our prepared remarks, I said that it was the largest contributor of our remaining noncore asset sale proceeds. And it's an asset that we are ready to launch and will be in the market formally in April, and that process will be underway very shortly within the next week. So we're excited. We think that if there is meaningful appetite, given the quality of the asset, the quality of the air quality, the quality of the safety, health and wellness that was focused on that building throughout its development. The quality of the rent roll, the length of the rent roll over a 13-year weighted average lease term, all of those things lead us to believe that this will be a successful transaction, and there will be meaningful interest in that asset. But that's something that we're looking to launch very, very shortly. How long it will take? And that's a tough guess because we are invested meaningfully in the web presence of that building and the marketing presence of that building such that you can get a great tour virtually, which has been hard to do historically speaking. So I think that will help, but the timing of the process, given that this is a little bit different in post-pandemic world, I'm just -- don't have enough certainty to comment on.

Thanks, David. So we're getting a few questions here about stock buybacks. So one question from Shawn Kimel at K2 asked. If the net asset value is at $150 per share, why not monetize further and buy back more stock?

It comes back to a similar discussion that we had. It comes down to capital allocation. And can we create it more value by buying back our shares at a discount relative to its intrinsic value versus investing in an asset like Two Lakes Edge, where we're going to generate $100 million of value by investing $100 million. And when you have those opportunities to build a multifamily in a 4- or sub-4 cap rate environment that has been front and center. That's not to say that buybacks are off the table. And it's something that we discuss in our boardroom every quarter and something that, given our current liquidity position becomes more and more appropriate to discuss as we emerge from this pandemic. We raised a lot of money in March in 2020 to plan for the worst, as Drew said, and we're very thoughtful about how we use that capital, knowing that we needed that in case there was a very dark day. So we don't want to rush into a buyback or rush into using that liquidity until we are incredibly disciplined in making sure that it's going to the right place. Buybacks are something that we've done in the past and we'll continue to evaluate. And depending on our liquidity situation relative to our other uses of capital and what that allocation generates the highest risk-adjusted return, investment buyback. It's not necessarily all the others, sometimes there's room for both. We'll continue to do that and it's something that is absolutely front and center in terms of the opportunity set for us in the coming year.

Yes. And if I can, I think one additional thing to highlight. Typically, with real estate, right, it's transactional someone. And that's it. Within our MPCs, we have these network effects. So you build a multifamily building there's more demand for your retail. You have new retail, new restaurants. It's easier to lease an office building, you have more office buildings, people want to bring their friends. And so it really compounds. So you have to have a very long-term and holistic view

Thanks, guys. So Bruce Garrison from Children Capital management asked, when do you think the incredible rise in lumber prices will put a crimp on single-family home building sales?

Well, we haven't seen it yet. And I think that the price increases in single-family homes have outpaced what has been a mediocre rise in lumber prices. And lumber is an important cost component of new homes, but it's not the only cost component. To date, homebuilders have been able to maintain a constant or even modestly growing margin despite that cost who knows how long that can continue or if lumber prices will continue with their current trajectory, I can't imagine they would, but perhaps. So far, they've been able to maintain it. And the price increases have been so dramatic that it has not had that meaningful of an impact. Again, our job is to be reactive. Our job is to see those underlying home sales, so just to look at the trends and to be very quick, nimble and reactive to make sure that we're only spending our capital to improve land that keep pace with underlying home sale such that we are just in time. It's an important component of our business, but it's 1 that we're happy to moderate if demand goes away. If we -- we have to remember the land that we own it's a precious commodity that for the last several decades, 100 years, has only appreciated in value. And that commodity is something that the homebuilders need and we have, and if home sales aren't there, that's okay. We don't have to sell it. We can wait because I know when I go to sell it in a year or 2, it will be worth more and will drive greater value for sure. So we just have to be disciplined knowing that we have this precious commodity. We don't have to rush to sell or flood the market because it will create a negative impact, both short-term and long term.

Thank you, David. Our next question comes from Hamed Khorsand from BWS Financial. Can you define an average time frame of when you would reach stabilized NOI?

On average, I don't know off the top of my head, but I would encourage you to go into our supplemental package for each of our assets that are unstabilized and under construction on pages 15, 16, we list the timing for each asset to reach stabilization. The weighted average in there just by eyeballing, looks to be about 2 years-ish it applies for each asset, we draw thattime line. And I'm happy to go through it in more detail, if you like, after the call.

Thank you, David. Our next question is from Shawn Kimel at K2. What's your minimum return on new projects?

That's a great question, and it varies greatly with the risk. And there are times that we can do a development in a mid- to high single-digit return on cost or IRR, unlevered IRR relative to our cost of equity because that asset could be a build-to-suit for an investment grade tenant. And if we're going to do something like 1,700 in Vegas, we might see higher return because that's a speculative office versus a build-to-suit. That goes throughout the portfolio. And what I think you've seen and what we've done is 7s to 8s or 9s in the multifamily and office development. And then in the very limited, but we have done some retail development over the past couple of years, where we've targeted and achieved 11% to 12% returns. I think that tries to highlight the risk premium that we saw in retail development and to make sure that we're getting paid appropriately for taking that risk. Now those assets have done very well, and they continue to remain leased and our collections are strong. Those recent retail developments were small infill within the Woodlands, and they're performing great. So -- but I do think that we're trying to judge those returns against the risk underlying the property. And it's not just about return on cost relative to cap rate. It's also about an unlevered IRR versus our weighted average cost of capital. It's about a return on equity versus our cost of equity on a leverage-neutral basis, and it's about that mark-to-market of land. That example that Jay walked through on Two Lakes Edge, where we took 3 acres or just under 3 acres in the Woodlands valued in our illustrative NAV of about $1 million an acre or $3 million of value and created $100 million of value on those 3 acres. That mark-to-market that's key in our analysis. And that's really important because that's how we increase the net asset value on a per share basis of this company every day.

Thank you, David. Our next question is from Steve Newman at Vision Capital. How is home sale in your communities trended year-to-date? And can you expand on your new single-family for rent community in Bridgeland?

I'll hit the first half. And then Jay, if you want to talk a little bit about the single-family for rent in Bridgeland. So far this year, they've been consistent with how we finished 2020, which, as we noted in this presentation, we're incredibly strong. 2021 in Bridgeland, Woodland Hills and Summerlin has shown that continued strength that we saw in the fourth quarter, and they have not shown any signs of abating as recently as the past couple of weeks, and we track it almost daily. And as a result, we're continuing to invest in the vertical -- the horizontal development of our [indiscernible] to make sure we're preparing enough land to keep up with those home sales. Jay is for single-family for rent in Bridgeland?

So the single-family for rent and Bridgeland, we've now gone west of Grand Parkway, which is the main ring road that splits Bridgeland in an East and West Fashion. And as we do the horizontal development on the West side, we have identified a partial where we think it's the right location to invest in single-family for rent. We've done a fair bit of research in terms of how it's starting to emerge as a new asset class, not so much existing houses being put into a pool, but building a purpose-built community. And at one point, we thought we would partner with somebody. We finally concluded. We can do it our own. We're in the multifamily for rent business now, and we're in the land sales business, and we have great relationships with our builders. So we're hopeful of that, we'll have a project to announce by midyear, but we're still in the early days of scoping out the raw economics.

James Dollinger at Beach Investment Council asked, has the weakness in the Houston metro office market, particularly from the contraction in the energy sector last year, impacted the value and NOI outlook of your office assets in the Woodlands?

No, I don't think so. And I'd like to use, while history is not a perfect indicator of future results, I do think it does help paint or picture and help tell a story. And in 2016 and '17, when there was a similar downturn in oil, we saw the overall Houston office market contract meaningfully. There was negative net absorption of 1.5 million square feet for 2 years in a row. During that same time frame, we had positive absorption in our new Woodlands portfolio of over 100,000 square feet both years. Rents in downtown Houston went down from the low $30s to the almost $20 net. And we saw almost no change in our rents, almost went down about $1 each trough. And that is largely the result of our strategy. And largely the result of having the unique control that we have within our master plan communities. In overall Houston, there are lots of landlords and lots of new developments and lots of buildings competing for that same pool of tenant that creates this competition of people lowering their rates to fight for the tenant to bring in to win, destroying value in the process. In the Woodlands, because we have that dominant market share and that dominant control, we're not in competition with all those other landlords and a race to 0. We're able to hold the line, maintain value, maintain the long-term prognosis for our office buildings. And that's what we're in the business of long-term value creation. We're not going to sign that bad deal next week that could impact value negatively just for the benefit of next quarter's results. We're in the value -- we're in the business of long-term value creation, and we remain deeply committed to that.

So we have a little bit less than 10 minutes left for the Q&A. So if you have any more questions, feel free to pass them along. Our next question is from Stephen Olson. Has the company considered selling more stabilized assets in your core communities to realize and lock-in the NAV development gains?

It's a great question, and it's something that we've debated and discussed. While it could put a signal or show the market the true value creation in our developments, and there's some benefits to that. We think that the drawbacks and considerations completely outweighed that. And if we were to, for example, sell one of our multifamily projects here in the Woodlands, One Lakes Edge, we now be introducing competition into our backyard. We will lose that control dynamic that has generated those outsized returns and results. So while there could be that mark-to-market benefit temporary of a selling an asset to lock-in a gain. If it's the sale of an asset that allows competition into our master-planned communities, its cost is far too great in that short-term benefit of locking in profit. I'd much rather maintain that market-dominant control, that critical mass of office and multifamily across all of our master-planned communities that wake up 2 weeks or 2 months from now with 4 or 5 competitors in our backyard.

Our next question is from Anthony Paolone at JPMorgan. Who do you see as public comps for HHC, and/or are there companies that you see investors giving more credit to with strategies or nuances like yours?

I think the -- 1 of the challenges and 1 of the reasons why we wanted to walk through this NAV, this illustrative NAV in a lot of detail is that we don't have a great public analog. There isn't that company that we can point to -- a public company that has our strategy, our assets, our mix, our business plan. There are some public REITs out there that may look like our office portfolio or our retail portfolio. There's some land development companies that might look like a portion of our residential MPC business. There's a couple of developers that might look like some of our commercial development projects. But there is no one company that represents the combination of all these things, combination of these businesses that drive those great synergies, that allows us to help a self-funding business model, where we can use the profits of residential land sales, rent collections and condo profits to fund over $1 billion of development on a leverage-neutral basis, that has the ability to sell more homes that drives demand for commercial to where we can build the commercial that increases the value of the homes and they increases the value of our remaining land in that virtuous cycle. I don't see another public company that does that. And as a result, I can say that there's another public company out there that has achieved a premium that we're trying to get to. We've studied those that have come before us long and heart. And the Irvine Company has done an incredible job, and we very much want to take our 80,000 acres and turn them into what the Irvine Company, done with their 80,000 acres on the coast to Southern California. But we have a ways to go. They are definitely much more mature than we are. But we're working hard to catch up.

Thomas Yang asked, are all the remaining acres in the MPC segment usable and salable? Do you need to set aside any percentage for infrastructure, common areas, et cetera?

Within our disclosure in the supplemental and in the acreage, we've shown for both residential and commercial, those are net acres. So those are acres after the set of sides for green space, roadways, treatment plants, et cetera. One of the things that happened last quarter that a number of our investors highlighted, and it's important, is our net acres actually grew in Bridgeland. And that's a natural phenomenon. That's part of what happened. When we start out with our first master plan, as you think about those distant areas that you're not going to get to for 10 years, that's the case of Bridgeland. Your initial plan is, for lack of a better term, drawn and crown. And then you get closer to 3 or 4 years out and you go to more of a marker. And then when you get down to that ready to sell lots planning phase, you go to a fine point pencil. And in that transition, it's often that we're able to create more salable acres, less roads, less open space, less lost area, if you will, and increase the net salable acres over time. So we try and start with a pretty conservative view. And over time, hopefully, add to it, it doesn't happen always, it's not a certainty by any stretch. But it was a benefit that we were able to enjoy last quarter. And directly answer your question, those are net acres that we're shown, all salable.

Our next question comes from Jeffrey Olin at Vision Capital. With no assumptions or transparency on any factors driving NOI or cash flow on the Seaport, how does the non insider investor have any capability to assess the book value you are using in the net asset value?

Well, I think that, that is 1 of the major challenges, and it's why we didn't spend a lot of time going in tremendous detail on the potential cash flows, the potential projections, the potential results of the Seaport and apply a wide range of multiples and cap rates to those to come up with a range of values and try to take a very simplistic approach. Again, this is an illustrative methodology. This is not the only methodology or the only numbers, and I don't expect, Jeff, that you or the rest of our investors are going to agree with all my cap rates and discount rates. I'm sure you're going to think they're much too high and use lower numbers, as well as look at the Seaport through your own lens and apply methodology that you think is appropriate. It is a complicated variable asset, with lots of different components, as I talked about, from entertainment to restaurants, traditional landlord operations, food market, food hall. And it's definitely the most complicated asset in the portfolio and, therefore, the hardest to value. So we tried to keep it simple, to keep it directionally appropriate. And in a way that I think folks can feel good about the value.

So we have a couple of minutes left here. So this will be the last question that I'll ask before closing it up. John Conti asked, would you consider a modest dividend to broaden your investor base?

We've been asked that a lot, and it's a thoughtful question because there are some income funds or folks that are restricted to having income before they can invest. And could we balance it between having a modest dividend to qualify, to open our investor universe versus the cost of seeing that capital go up. And the cost of allocating that capital away from projects like Two Lakes Edge, away from projects like single-family for rent, away from Downtown Summerlin, where we're driving greater value. And that dividend, while it's important to show a commitment to our shareholders, and I appreciate how important dividends are, it's not increasing our value. And the cost of that capital allocation decision to date has been to day -- too great relative to where those value creation opportunities are. And John, I know we are running late, and I'm sure a number of investors will need to leave. But let's try to make sure we can get through all of the questions. At least as many as we can. This will be recorded and available, so people have to drop off and they want to hear those questions, they'll have the ability to download it from our website.

Yes, sure, no problem. So next question is from Shawn Kimmel. What other investment strategies or verticals are attractive and being considered?

I'm sorry, John, one of the other verticals that are attractive...

And being considered.

Jay, you talked a little bit about that in your prepared remarks.

Yes. I think -- but I think the main ones are a variety of residential products. On the slide, which I did not mention was big distribution facilities. The challenge for them is they're somewhat incompatible with the master-planned community. So it got to be either on the periphery and they don't necessarily yield kind of land values that we're typically dealing with in the master-planned communities. But they are an interesting product type that is growing. And oftentimes, we are located in the geographic nodes where they want to go. So Bridgeland is a good example, where immediately sell with the Bridgeland, you have some pretty big distribution facilities. It's something we might think about.

So we have a couple more questions about the single-family rental that'll potentially happen in Bridgeland. Are you worried of more homebuilders entering the single-family rental market? Do you have any terms in your sale contracts with homebuilders?

We have a lot of terms in our contracts with homebuilders, price per acre, deposit, take down schedule, residual participation. We did a price participation if the homes sell above their estimated price when we contract, and that's usually between 18% and 20%. So a little bit of a make-whole if the market goes up. But we're also dictating design, we're dictating setbacks, we're dictating landscaping. We're dictating square footage of the homes and price range because we're master planning the whole community, not just that lot and not just that neighborhood. And we're also dictating use restrictions that those are to be sold not for rent. As the declarant, when Jay mentioned in the video of these master-planned communities, we have the ability to sell that land under our terms. And under our terms, if we're selling land to a homebuilder, it's for single-family for sale homes, not for rent.

And we have to be careful, though, to balance out that product can't undermine the single-family for sale product. And that again, is the advantage of us controlling all aspects of the master-planned communities. So we make sure it slots into a market that perhaps is not being served. So similarly, we don't want single-family for rent, competing with our multifamily for rent. So -- but what we're finding in a lot of -- particularly in a project like Bridgeland, as the millennial generation gets older, it's a big bulge in the population, and they're becoming buyers, but they're also renters in the multifamily. And so we think that, that's really fueling some of the single-family for rent. And we do focus, therefore, on a slightly different product to make sure that the product is a little different than the other 2, and that's where we think we can unlock more value.

We love competition on weekends on television in sports, not so much in our master-planned community.

Next question. There's an argument that we are in a residential real estate super cycle, specifically in your MPCs geographies. The lack of supply is historic, why not accelerate land sales?

Again, we are, right, but we're only selling land to keep up a home sale. The risk for us is if we sell too little land price of the homes can get out of whack, affordability can fall and we can shoot ourselves in the foot in terms of that demand cycle. If we sell too much land and we oversupply the builders with land, and the market turns, and it's a cyclical market. There will -- we will have highs and lows. No doubt about it. But if that market turns and they have too much land, those homebuilders can make a really bad decision with that land. A bad decision that can have a negative impact on the thousands of remaining acres that we have. So we need to make sure that we're keeping up with our land sales only that it keeps up with underlying home sales. We don't want to feed them too much. Because we can't take the risk of that bad decision impacting our value negatively.

Our next question comes from Matthew Clarkin at U.S. Bank. In your opening remarks, you mentioned being able to self-fund without raising equity. But a year ago, you raised equity at a discount to NAV. How can you reassure investors that in a similar shock environment, the company won't be forced to issue equity again at these prices?

Yes. No, it was an incredibly difficult decision. And as Drew said, we had to plan for the worst. And as we started to model our downsides 3 last March. And we looked at what could happen. We looked at all those worst-case real estate cycles that have come before us. How did hotels perform after 9/11. What happened in the global financial crisis to office and multi-family. What happened to land sales after Lehman Brothers went down. And we modeled over, 0 land sales, hotels down 20%, office down 10%, multifamily, down 7%. And even in those scenarios, we were fine. Then the pandemic hit and all those downside situations that we thought were worst-case were off the table. We thought the pandemic could have the ability to shut down condo sales and land sales. We thought the pandemic could have the ability to really have a dramatically negative impact on our communities as the pandemic obviously impacted travel and tourism, New York. Las Vegas, Hawaii, it was impacting energy prices, Bridgeland, the Woodlands. It was a perfect storm over the portfolio of the Howard Hughes Corporation, one that, candidly, we had not really contemplated happening. And at the time, we were looking at retail assets that could have been closed indefinitely. Hotels that were closed indefinitely, baseball that was closed indefinitely, would people come back to the office. And as we started to model that new downside, we had to take decisive action to make sure we had the liquidity to survive this storm that's perfectly bad storm over Howard Hughes, no matter how deep and how long it went. And that was at a discount to NAV, and that was 1 of the most challenging decisions we had to make as a company, but 1 that we thought that was critically important to ensure our longevity and success. Hopefully, and obviously, there's no certainties in life, but hopefully, we have applied those lessons learned. And we're sitting here with record liquidity, with low debt maturities, with refinanced debt taking advantage of this market to put ourselves in a position so that, that realistic worst-case scenario that new realistic worst-case scenario is 1 that we can absolutely survive with our current financial structure. And not be in a position to ever have to raise equity again and definitely never have to raise equity at a discount like we had to before. It was a -- it did not come -- the decision that was like not easy, it was 1 that took a lot of thought and 1 that management recommended and our Board supported. And our goal is to never ever have to do that again. And as a meaningful shareholder, or at least personally for me. And that's someone who owns warrants in this company, that wrote a check to buy those, it was not handed to me. I take it incredibly seriously as all of our shareholders should. And it's something that, like I said, I hope we never ever have to do again.

Andy Ramer at Fiduciary Management asked, what are you targeting for annual growth in your net asset value?

As high as possible. That's a horrible nonanswer. But it's a tough question, and it's a great question. It's a great question. But we're committed, as we talked a lot about, about only developing to meet market demand, not developing to -- for developments sake, not building for buildings sake. I'm not saying because we have this much cash flow, we have to invest this much, we have to build this much because we need this much NAV growth. We have to make sure that we're disciplined and only building to meet demand. And in some years, that is going to be NAV growth that will be meaningful into the double digits. And in some years, when there's less demand, that may impact that NAV growth. Now we're targeting trying to get double digits every year, and that's what we'd love to achieve. But we're not going to push to get that growth if it means building for building's sake and taking undue risk and not just building to meet market demand, which is absolutely critical for strategy.

Just going through a few other questions that have been submitted that we haven't already spoken, let's see. So we had another question about leverage. How do you think about leverage? And do you have a target debt level?

So we really focus on leverage by business segment. And try to have an appropriate target leverage by segment. We showed all the business segments that we have in some of the parts. But if you really look at it, we're really targeting our operating assets at a leverage level consistent with our public REIT brethren. And today, we're sitting at roughly 55% of book value, which is a far cry from market value, so a much lower number on a market value basis. Our land portfolio, we believe, entirely unencumbered, except for some small lines of credit that are less than the receivables we have due from the municipal bond issuance is reimbursing us for the infrastructure that we're putting into the ground. And in our development segment, we're targeting 60% to 65% loan-to-cost construction loans that as they mature, get repaid with either bond issuance and left unencumbered, as Drew said, we unencumbered $1.5 billion of book value or refinance with long-term fixed rate debt. So we're really focused on each business segment, making sure each segment has an appropriate leverage level. And that total adds up to where it does overall company leverage.

So we have a question here from William Sue at BlackRock. Can you talk through repurposing plans at the broader Seaport District, including repositioning for 10 Corso Como, potentially for iPic in the various retail and restaurant locations?

Jay, do you want to talk a little bit about some of those?

We have a new concept for 10 Corso Como, which we will probably be opening, I would say, late fall, perhaps, and it's a new retail concept based on kind of long gains, if you will. We have a new restaurant going in on the north side of that same block, which was referenced in the video. And iPic, we expect to reopen. So it was 1 of the best-performing theaters. And so we are -- or have a expectation that as New York opens up, the Seaport role correspondingly open up. And we have new restaurant concepts coming on this summer. So we'll have a series of new restaurants this summer, then the Tin Building will be opening in the spring of '22. So it'll be -- really be the spring of '22 before you see the Seaport in kind of full flower mode. And so some retail tenants will be replaced along the way.

We have another question kind of expanding on the diversification of our product types that Jay you spoke to earlier in the presentation. So someone asked any senior home development opportunities?

We do believe there's senior home development opportunities. We sort of break the senior market into a retiree's condo market, perhaps a larger multifamily for rent and then assisted living. And to the extent that we go into any kind of assisted living, we're looking to partner with the senior operator. We believe that we can design and build them and construct them, but we think we're going to need an operator partner along the way, and that's definitely on the horizon for this year.

So we have more of a broader question here. So what markets are still in distress?

Well, look, I think that I would say that we see the greatest challenges right now in our portfolio, obviously within hospitality. And we've seen some return of leisure travel. We've seen some return of business travel, which we haven't seen a lot of is the conference side of the business. And I think that will be the last to come back. So there's still meaningfully long runway for recovery there, although it does seem to be accelerating, especially in the very most recent months. Our retail within Hawaii is definitely facing its challenges and travel and tourism, especially from Asia, has not rebounded to levels that we saw pre-pandemic yet. And until we do, I think collections are going to continue to remain lower than the rest of the portfolio, albeit catching up every quarter in a meaningful way. But beyond that, we've seen incredible resilience, and it's tough to find a real weak spot in the portfolio outside of that. And even with the challenges in New York City and how hard it was hit by the pandemic to see how well the greens did. And we talked about the video, 20,000 people a day to get up there. And in the winter, those winter cabins, over 4,000 people a day on the daily wait list. It really solidifies, in our view, just how important the peer is and how important Seaport District is, is a great outlet for the incredible population in lower Manhattan and directly across the bridge in Dumbo. And the resilience of the folks there that want that great activation, that great experience and to be that outlet for that activation experience gives us a lot of excitement.

Matthew Clarkin from U.S. Bank. He just asked. Any updates on some of the remaining noncore assets, such as the air rights above the fashion show, Monarch City in Dallas or Landmark Mall in Alexandria, would you look to develop any of these yourselves? Or is the idea to sell each of these as part of the noncore asset sales?

Well, I think with all of our assets, we look to maximize it. And in a lot of cases, relative to the time and commitment and overhead required, complexity of entitlements, the timeline selling those assets has generated the highest value, no doubt. I believe that will be the case with 110 North Wacker. At Landmark, I very much believe that our best opportunity to unlock value and to drive value creation is to pursue the venture that we're currently in discussions with right now. We are working with the Inova Health System, Seritage and Foulger-Pratt to redevelop Landmark into a great mixed-use environment anchored by a regional hospital medical office buildings from Inova Health, and we think that's going to be a great value creation. For Monarch City, I think that we're evaluating whether or not it makes sense to partner under development, potentially sell that asset. We're looking at all the opportunities, and I can't say that there's one right anther sitting here today. The air right above Fashion Show, that's one asset book value. And with all of our noncore assets, we look at them on a book value basis. And hopefully, when we're able to sell those, partner with them or create value, we're going to drive something substantially higher than book value as we have historically done. And someday, when it becomes time to build a casino hotel on top of Fashion Show, we'll be ready to hopefully monetize those air rights in a positive way.

So we have a question on 110 North Wacker. Craig Bibb from Jasper Funds asked. There's more than 5 million square feet of sublease office space available in downtown Chicago. Do you need to fully lease 110 North Wacker before selling it?

I don't think so. I think that despite the challenges of Chicago that you actually highlighted, we have a best-in-class building with best-in-class air quality, transportation, health, safety and wellness, that has demonstrated its ability to lease to where it is today. And we'll continue to attract those best-in-class tenants that want that health and safety for their employees. I don't see us competing with that sublease space because they can't offer the level of amenities and health and wellness that we can tender. And I don't think that, that's necessarily indicative of what we need to do strategically in terms of leasing before we go to market.

And I think we've pretty much hit all of the questions that have been asked. There's one more that we can go on from Alex Goldfarb going off of this 110 North Wacker before we close it out. So he asked cut around sales process for 110 North Wacker. Do you expect to complete the sale by year-end?

I'm hopeful. Look, the sale of our interest in that building comes a little bit of complexity. The sale of the building in a post-COVID world has added complexity. I think if away from those 2 items, it would be pretty easy to say that we can complete a sale this year. But if you're launching in in April with that level of complexity in this kind of new normal, I think there's a little bit of uncertainty there. So while I'm optimistic that we can, I don't think it's a certain outcome.

Great. Well, I think that's about it for our Q&A session. We covered a lot of questions. So hopefully, that was helpful to the audience.

Well, great. Again, this will be available on our website, both the presentation and the audio/video recording. If there's any follow-up at all, we're always here to help. We thank you all so much for joining us today and look forward to seeing you when we report our first quarter earnings in the next couple of weeks. So thank you again, and we appreciate the time.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.