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

Good afternoon, everyone, and welcome to Howard Hughes 2024 Investor Day. My name is Eric Holcomb, SVP of Investor Relations. We're happy that you guys could join us today here in Summerlin, our award-winning master-planned community in Las Vegas, Nevada. Before we begin today's presentation, I would like to remind you, before we begin today's presentation, I would like to direct you to our website howardhughes.com where you can download the Investor Day presentation that will be presented today as well as our supplemental financial package, which includes reconciliations of non-GAAP financial measures that will be discussed today in relation to their most directly comparable GAAP financial measures. Certain statements that are made today that are not in the present tense or that discuss the company's expectations are forward-looking statements within the meaning of the federal securities laws. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurances that these expectations will be achieved. Today's presentation will be led by our CEO, David O'Reilly; President, Jay Cross; and CFO, Carlos Olea. We have quite a bit of material to cover with you guys today, including detailed reviews of our segments and concluding with our corporate balance sheet and NAV update. But before we begin the presentation, we're going to start with a new video that we put together that gives a detailed overview of Howard Hughes, what makes us unique and how we intend to unlock value in the years ahead. Hope you enjoy it. Welcome. [Presentation]

Well, thank you, and welcome, everyone, again, to our Howard Hughes Investor Day in 2024. Before we get into the formal presentation, where I'll talk a little bit about where our business is a little bit more in depth on our MPC segment, operating segment. I do need to read one quick thing. As we previously announced, the company's Board of Directors has formed a special committee comprised of independent directors in light of Pershing Square's Schedule 13D filing. The Board and special committee are committed to acting in the best interest of the company and its stockholders. The special committee will provide an update to our stockholders as and when appropriate. As such, we will not be taking any questions regarding that matter today. Despite that, I'm sure someone will ask, and I won't answer. You're doing your job and I'm doing mine, so there's no hard feelings. All right. Let's talk about the state of the business for Howard Hughes and what's happened over the past 15 months since our last Investor Day. And then over the past 3 years, take a little bit of a deep dive in terms of how this business has performed despite what have been a lot of negative headlines and what you could perceive as negative headwinds towards our business. What we've seen is $1 billion of MPC EBT, over 1,100 residential acres sold and a growth in presidential price per acre of 72%. And that growth hasn't been concentrated in any one MPC. Some have been better than others, but they've been up and meaningfully over 3 years in each one of our MPCs. Within our operating asset portfolio, and we'll peel the onion on this a little bit later and get into more depth. We've seen a 17% growth in our NOI really driven by the stabilization of the new developments in multifamily, which have increased 71%. And despite the national headlines, our office portfolio continues to grow at a 12% NOI growth rate. A lot of that growth has come from just operating and blocking and tackling and leasing better but a lot of that growth has come from our development pipeline with over 4.5 million square feet, $3.6 billion invested into the ground, improving our communities, improving the quality of life for our residents, driving those residential land acre higher and higher in terms of value and increasing our stabilized NOI target from new developments by $60 million. Our new developments have also delivered $3.2 billion of revenue, either closed or under contract from condo sales over the past 3 years, really just tremendous results. And Carlos is going to spend a lot of time about talking about this. He's not going to give himself a pat on the back, so I will. I think the way that we've managed our balance sheet, extended our maturities, reduced our interest rates has been nothing short of remarkable. In a capital market that has been characterized by challenges and headwinds, we've seen over $3 billion of financing that have secured the company's future, solidified our balance sheet. And like I said, extended our maturities at a lower interest rate. And not to be missed over this past year, we also completed the spin-off of Seaport Entertainment. And I've seen that they've done tremendous so far. I'm excited for Anton and the team, but it really positions Howard Hughes as the kind of one and only public pure play residential and commercial master plan developer out there. And it allows us to really focus on what we do well, which is creating world-class communities where people live, work, play, learn, discover pray like here in Summerlin. And we're excited to get you out there toward this in just a little while. As mentioned in the video, and I think it bears a little bit of reiteration, we think that we have some meaningful competitive advantages that separate us from a lot of our other public real estate brethren. First is within these communities, and you'll see it in Summerlin, we are the dominant owner of Class A office space, the dominant owner of Class A multi family space and the dominant owner of undeveloped land, which allows us to develop these products to meet demand, not develop for development's sake. But when we do develop them, we've developed them with a little or no competition, especially not within these master plan communities. It allows us to enjoy better results during times that are good that require development but also better results when there are challenging times, and there should not be any new development. We don't have to worry about anybody else rushing out to build when we shouldn't be. We can just harvest our own assets. We have this incredible self-funding business model. And as you've probably noticed in our guidance, our recurring NOI is more than our interest expense and G&A. And that covers basically all the overhead that allows us to keep going, which means that the free cash flow generated from land sales in our MPC segment and from condo sales funds all of our future growth. It allows us to reinvest into improving these communities with new development or allows us to reinvest into our own balance sheet and buying our own shares or allows us to take that capital and delever as we see fit, depending on market cycle and where we see capital allocation going. Finally, we have this perpetual cycle of value creation. The more we improve the communities, the more people want to live here, the more their homes are worth, the more the value of our remaining land and we see that over and over again. And I've said that -- I've been at Howard Hughes now 8 years. And for the first, I don't know, 6 years that I said that I really, really believed it, but I hoped it would be true. And now after being here for 8 years, we can actually go back in time and take a look. And in 2017, we thought that the gross asset value, the net value of our land on a discounted cash flow basis of our Master Planned Communities was $3.7 billion, split between all of our MPCs. And here we are 7 years later, we've sold 3,800 acres of land at over $640,000 per acre generating $2.4 billion of revenue. And today, the value of our remaining land is $3.9 billion. Now I'm not including Teravalis, so I didn't doctor the chart by buying assets. I'm just using the same 4 communities. The reason for that is that value creation and our land and how much the value per acre has accelerated over the past 6 years. It's a good segue to take a little bit deeper dive into our Master Planned Communities. And that value appreciation on a per acre basis, clearly, nothing short of incredible. And I think a lot of that has to do with the fact that we are short millions of homes between 4 and 5, depending on which pundit you believe, across this country. But I think a lot of that has to do with how we have developed these communities, how we've improved these communities. How we've added new amenities driving the quality of life for all of our residents. The trends are -- have been incredibly strong. And going back to 2015, we've seen strong growth in new home sale activity, which, as we've always said, is a leading indicator for land sale activity, and we see that on the bottom half of this slide. I do think it's important to note that we see this home sale remain resilient despite higher interest rates. And I'm going to take a minute or 2, just talk about the market backdrop and how we see that playing out for the next several years for Howard Hughes. Again, I can't say it enough. As we improve our communities, the value on a per acre basis accelerates dramatically. And there's no better example than what we have here in Summerlin. In Teravalis, we couldn't be more pleased with how we've come out of the gate here within our first couple of years of ownership, already contracting 595 watts, working on our next 3 parcels that will take that number, hopefully, north of 800. And we're doing it at a price per acre at $781,000 for the first land sold in our Master Planned Community before there's a single resident there. I think those are tremendous results. We couldn't be more pleased with how this is going, and we're doing it with great partners across 7 different homebuilders right now and hopefully expanding that over the next several years. We used to say 8 years ago, when I came here, $180 million to $200 million of MPC EBT was a great year for Howard Hughes. You should expect us to do that. I think that's no longer holding true, because of the past 3 years, that number seems to be circling around $300 million. And I don't think it's because we're selling that much more land. I think it's that the value of that land is worth that much more. And I think we'll continue to see that, and we're resetting the bar of expectations in terms of our land sale profitability every single year. All right, turning to the housing market. And why is this important? Well, new home sales drive land sales and land sales are a meaningful part of our business. So I just want to talk a little bit about what it means in the residential market and how kind of the current shifts in the economy are impacting it. First, clearly, mortgage rates are higher. They haven't come down as much as people thought. They remain at 6.7%. That has caused the lock-in effect, which is strangled the market really of inventory of resales. As a result, new homes have taken a greater percentage of homes sold and new homes are really important because that's where our land goes to. So seeing the strength in new home sales has been nothing short of incredible for our business. Also important, we've seen what has been a historical premium for a new home being more expensive than a resale. And seeing that gap close over the past several years to almost parity today. And from my perspective, if I have the opportunity of buying a new home or an existing home, I'll buy the new home, and we'll talk a little bit about that. And as a result, new home starts are up. But despite the fact that new home starts are up, builders don't have that necessary precious resource they need to build those homes, and that's the finished lot, that's the dirt that we sell them. First, mortgage rates are higher, clearly 6.7%. I think really importantly here, if you look at the number of homeowners across the country today that have rates below 5%, 3/4, over half below 4%. That lock-in effect is real, and we don't see the resale inventory coming back onto the market any time in the near future, especially as rates remain high on the mortgage side, which does mean that the real opportunity here is in existing homes. The existing homes low inventory has driven new home and the new home sales as a percent of inventory continue to go higher. Today at about 25% that's been needed to fill the gap because of the 66% reduction in existing inventory and new home sales up 12%. So we're going to see strength in new home sales and I think that's going to continue in the near future. Again, historically speaking, new home sales have been a middle single digit of overall sales. But now it's more than doubled since 2010. And we see that share up to 16%. That strength, I think, will continue over the next several years. We talked about this earlier, the parity that has come from existing and resale inventory in terms of the price of the home. And if I can buy a new home for the same price and I can get builder incentives that will reduce my mortgage rate, if I can customize that home and get it just the way I want. If I can have lower maintenance costs because of the energy-efficient technology that's going in and the fact that it's new, I'll choose that new home, and that's what we're seeing consumers do over and over again, especially within our communities. And as those new home starts continue and since 2010, up 101%. Builders have not filled on land. They still have been pursuing our asset-light strategy. They are still dependent on land developers like Howard Hughes, community builders like Howard Hughes to give them the raw inventory they need to produce the product to sell to the consumer. In the inventory of vacant developed lots that they hold today in our communities are meaningfully below equilibrium. And I argue 20-month supply is equilibrium because that's about how long it takes to build a model home, take an order, build a home and close it to your consumer. That's still product life cycle. So if you don't have 20 months of land supply, you're undersupplied. And right now, our builders only have 11 and 12 months, respectively, within our communities. And that's a dynamic we like. Because that supply-demand imbalance where there's more demand than supply because we're selling them just a little bit less dirt has allowed us to drive pricing higher. And I think that's something that we're going to continue to see. As mortgage rates remain high as we still have a massive shortage of homes in this country. And as we see that lock-in effect fail to dissipate because mortgage rates remain high. Turning to our operating assets. We are driving record highs almost every quarter at this company, and that's as we fill our vacant space and we stabilize our new constructions that are under development with a 7% total NOI increase year-over-year. We've done that not just in multifamily, but in office as well, where we all know that there are headwinds out there. But we have seen, and I think we're not the only ones that have seen the best-in-class assets, the most highly amnestied assets, those that are walkable and offer short commutes delivered great results. And in the 3 assets on the right-hand side of this slide, those are the 3 newest assets in each one of our Master Planned Communities in place leases signed with cash starting equates to about $88 million of value or $1.78 per share. Can we just close the blinds here? I think the sun's starting to bind a few people. And in those 3 assets, I mean, the first of which Carlos will remind me we closed on the last day of the year of 2019 from an accounting perspective, those are very important. We brought in entirely empty, 0%. And here we are today, 99% leased. 6100 Merriweather, new construction that completed in the third quarter of '19, again, high 90s percent leased. And then 1700 Pavilion, which we'll see later today as we drive. We finished that building in the fourth quarter of '22, and today, we're 92% leased with great prospects for the remaining space. As we've seen the cores of our markets lease from an office perspective, specifically, in the Woodlands, you see the waterway and the Town Center assets almost entirely fall, 94% leased today. The next wave is filling the next submarket and that next submarket for us in the Woodlands is used landing, where we're 83% leased. And we've seen some tenants either file for bankruptcy downsize or work from home permanently. And now we're starting to see that absorption turn positive because the rest of the space is filled, these are the next best office A-class assets in the market, and we're seeing them fill and we're excited about the prognosis for the next 18 months. Similar dynamic in Colombia were our 3 most recent assets and almost entirely full with stabilized NOI of about $18 million, 96% leased. Now that they're full, those next assets, the Merriweather Row assets are seeing positive momentum, positive absorption in stark contrast to what we experienced 2 years ago coming out of the pandemic. So again, we're filling up our vacant space. We're driving towards stabilized NOI, we're creating value for our shareholders. We're also doing that with potential redevelopment opportunities. This is an asset that was foreclosed on not -- we didn't own it, somebody else got foreclosed out, to be clear. We bought the note out of bankruptcy for $22 million, about 5 acres of land, $4 million per acre, and it was leased to a host of tenants through about 3/4 of the building. We are slowly but surely relocating those tenants out of this building into the rest of our portfolio so that we can take advantage of this prime development site on 5 acres of land right on the northern end of Downtown Columbia for a redevelopment opportunity. And we think that could create a lot of value for our shareholders in the year to come and increase the occupancy of our existing assets as we relocate those tenants. And the Las Vegas office market, our assets continually outperform, both from an occupancy perspective and that boxed area is when we opened 1700 Pavilion, we opened it entirely empty. It was a spec office development right before the pandemic, I know, brilliant. But it's filled now, and it's creating a lot of value. But it's not just from an occupancy perspective that we've outperformed. It's also from a rate perspective. We're meaningfully higher than the rest of the Las Vegas Valley and growing at a much faster rate than the rest of the Las Vegas Valley because we offer the amenities that companies want. Employers want their employees to have walkability, access to great amenities. And that's what we have here. We have it in so much more density in depth than anywhere else in the Las Vegas Valley. Our multifamily assets have been the star child of the portfolio. Not only have we increased our NOI from our multifamily assets at a 28% compound annual growth rate. While we've done it, we've also delivered exceptional same-store results. And that goes back to that competitive advantage that I talked about. When you're the dominant owner and the dominant land owner and the only person developing, you can maintain high rates, high occupancy and deliver great same-store results and bring new product to your market because you are essentially controlling that new supply. A couple of quick case studies. Here, Marlow, this is Downtown Columbia, an asset that we built for about $121 million. We built it to a 7.7% yield on cost and what Green Street would say, a 5.6% cap rate environment generates or just under $1 per share of NAV. Here, Tanager Echo, we'll drive by it, slightly lower yield on cost at 6.8%. And as Green Street would say, a 5.3% cap rate, creates just under $0.50 a share of NAV accretion. In our retail assets, about 400,000 square feet of dispositions and a sale of $6 million NOI. But despite that, retail NOI continues to grow. And it's grown across all of our portfolio, the Woodlands here in Downtown Summerlin and Ward Village. Here, in downtown Summerlin, we're coming up on the 10-year anniversary of this just under 1 million square foot shopping center. It allows us to take a proactive approach to these expirations. You signed generally 10-year leases on your new development, and we have 25% of the square footage expiring over the next 2 years. For us, we couldn't be more excited because it allows us to take advantage of that expiration to backfill weaker performing tenants with stronger tenants like we have this past year with Lucky brand going to LEGO, Brooks Brothers going to Alter State, Barbell to Chanel, driving sales per foot higher, driving rent per square foot higher, increasing the NOI. The road map to stabilization. This is a slide that we spend a lot of time talking to investors on and I'll going to take it asset class by asset class within our existing assets with an office we see a high concentration within the Houston portfolio that is largely on the signed but uncommenced leases at 9950 and used landing, 2 areas that we are intently focused on knocking out over the next 18 months. In Colombia, it's on Merriweather Row as well as the signed but uncommenced leases at 6,100 Merriweather. In Summerlin, that's almost entirely sitting on the side, but on commenced leases at 1700. Within our retail portfolio, this is downtown Summerlin, the turnover of expiring tenants and backfilling with new and it's a timing issue that will create a little bit of headwinds on the stabilization of retail for a year until those expirations get through the system. And in Ward Village, as we knock down a block of retail to build a new tower of condominiums with new retail on the ground floor, there's a couple of year timing difference between when we knock it down and when we actually occupy the new tenants. and that's a roll up in rent when we do it. So it's very accretive, but it just does take time. Within multifamily, the entirety of the $6 million -- $16 million, 85% of it is in 3 assets that are in lease-up right now. It's just a matter of time before they're filled and delivering that NOI to the bottom line. And then we have a number of construction projects, on multifamily, 1 office and some small retail, some of which are at the ground floor of the condo towers and Ward Village that rather than me go through in detail going to turn this presentation over to Jay, who's going to walk you through our Strategic Development segment and be able to highlight each one of these projects, the timing and why we believe so strongly in their NOI.

Thanks, David. Good afternoon, everybody. As David said, I'll walk through our strategic projects. I was reminded when I came in a couple of years ago, I showed a long list of projects that are on the horizon. Today, we're just but the projects that are actually underway. And we've seen a lot of them were on the horizon 2 years ago. But it's worth noting here that since the beginning of the company, $3 billion has been deployed into strategic operating assets with really good returns. But today, we're seeing reduced activity. So whereas in third quarter '22, we had 6 assets under construction for almost $500 million. Now today, we only have 500 and our smaller assets at $285 million. And that's a result of the pressures we're seeing in the development scenarios. Construction costs always seem to increase, almost no matter what the general state of inflation is, they just grind up all the time. We also now have to deal with rising cap rates, rising interest rates, and that puts a lot of pressure on our spreads. However, we're not disparate about that because we've still got a long pipeline, and we'll be spending '25 really focusing on getting niche products ready to go when there's unique returns. We're seeing strong demand for our condo product, not only in Hawaii but across the portfolio, and we continue to focus on multifamily. So there's a lot on deck still to come. So we'll quickly go through the regions. In Texas, we have 3 projects, 3 communities, as you're aware. The big one right now is Riva Row, 268 units. It will be topped off and the first occupants, shall be moving in this fall with construction completion next spring. It's our most Class A property that we've done in The Woodlands in the multifamily sense. It has townhouses facing the street along with townhouses spacing the waterway and mid-rise tower. This is the rendering of the lobby. And you can see a construction photo here that it's well along. And you can understand why we have townhouses fronting the garage, which is facing all these existing houses. So we're trying to be neighborly and then we think these down ounces facing the waterway will be very popular as well. Moving to the Ritz-Carlton. We unveiled this project in the spring and immediately sold 70% of the units and it's interesting to note that we basically sold all of these units to existing Woodlands homeowners. So that we tapped into a very real demand of people who have been living in The Woodlands and raise their family and had made significant investments in the community but were now ready for a more lock and leave lifestyle because oftentimes, they have multiple homes in multiple locations. What we think made it so successful is we introduced Robert Stern Architects and we took the best site on the lake. This project is now under construction, and it's aiming for '27 completion. This gives you an indication of the quality that we brought to this project. It's unlike any other condominium in Houston. And this is the front door. This is the infinity edge pool facing the lake and the Rolling Club. The main lobby. And here, we are under construction. And you can see the location of it is adjacent Hughes Landing. And so the office buildings that we're figuring on leasing up now are up here. And with the Ritz down here in the foreground, Hughes Landing will now become an even bigger sense of commercial activity in Woodlands. Switching over to Grogan's Mill. This is a unique opportunity, one of those niche plays. Grogan's Mill is one of the very first villages developed in The Woodlands 50 years ago. And the retail there was our first strip retail. And as you can imagine, over time, it's become very tired. And similarly, the county had a community center and a library that has got tired over time as well in a different location. So we proposed a transaction with them whereby we would build them a new community center and library here at Grogan's Mill, and we would redo all the retail. And we paid for the library and the community center as well as we're doing all the retail. This is now under construction. Then as a result, we took over the old library and community site, which is really a strategic development site for us sitting in between the Ritz Carlton. It's on the Waterway and Riva Row adjacent to Markets Street. So it's a 5-acre piece goes. We think this is an excellent location for future development. And then this shows the Randalls big box store being converted now into the brand-new Woodlands library community center. Moving over to Bridgeland. We're now beginning to see Bridgeland as a commercial center for Northwest Houston, much in the way the Woodlands over time emerged as the major commercial North Houston. We opened the HEB just a few weeks ago. It's our first supermarket in Bridgeland. And along with the HEB, we're developing 28,000 square feet of retail and that retail is in a combination of in-line strip retail and a restaurant grove, 3 restaurants around the court yard. So the idea here is to create something that's more like really destination neighborhood retail, using kind of Prairie modern Prairie architectural style. Adjacent to the retail, we're now building on Bridgeland Green, our very first office building in Bridgeland. And in case of both the retail and 1 Bridgeland Green, we're managing to get rents far in excess of rents that exist in Northwest Houston, which is therefore allowing Bridgeland to emerge as the commercial center for the Northwest quarter, which the quarter that leads to Austin. And as a result of that, as was mentioned in the video, we have 900 acres in Bridgeland and Central, and we're starting now to get real inquiries for significant users, and we think we're starting to set the market with this new office building. It will be the first timber office building in all of Houston. And we felt that it was necessary to kind of a set a mark that we are building something different and new in Bridgeland. And so far, it's almost fully leased, and it's going up very, very quickly. So it's going to be, I think, a really significant building to the Bridgeland guideline. As we move to Nevada, we leave Prairie style architecture to Vegas style architecture. This is our new 67,000 square foot grocery-anchored center here in Downtown Summerlin. This is the Whole Foods in the foreground. And what's great about this Whole Foods, that now completes the picture. We now have Whole Foods in Colombia, Woodland, here in Summerlin, and Ward Village. Every one of our communities, there's a whole food. And this is the newest one adjacent to strip retail, which is up in the corner and a brand-new standalone Starbucks that's under construction right know. And as you can see, as we fill in down in this corner adjacent to Tanager Echo and with the success we've enjoyed in 1,700, these 6 blocks become our focus going forward between Pavilion and Spruce Goose. And then you might have heard about the movie studios. It's another example of us trying to unlock value. For years, we wondered, why is the movie business, at least California goes to Georgia or goes up to Canada in Vancouver. Generally speaking, it comes down to what is the film tax credit for the jurisdiction. And so joining with Sony, but wearing the Howard Hughes hat, which enables us to go to the legislatures and say, as you know, we're here for long term. How can we bring the film industry to Nevada. And that's really, really driven by the fact that we started to see a lot of our migration on the home sale side is coming from California. So -- and it was really an opportunity to try and take advantage of that migration and start to bring the business with it. We got a County entitlements done last spring. We're now in front of the state legislature with the hope that this will get enacted in February of next year. Once that clicks in, we have a deal with Sony that will produce 400,000 square feet of studios. Sony will be both a partner and our major tenant, but not the only tenant, the studios will be available for other users as well. And if it gets as successful as we think it will be, we anticipate that we'll be able to grow the studio complex, and there's a lot of room for growth here in Village 15. Village 15 is in the southern part of Summerlin, 2 miles away from downtown where we are. It's also the site of our latest office project, One Meridian, which is in lease-up; and Aristocrat, which was a build-to-suit from a few years ago. Also that in this neighborhood is Rosemont University which is traditionally a nursing and dental school, which is now expanding into a full medical university on land they acquired from us. So this start of this range of Village 14 and 15 will start to become a big commercial center. And with that, we think there's another retail opportunity. This is a vision of how the studios would look. And then adjacent to the studios, we would build walkable neighborhood retail, a little bit like you see in Culver City outside the Sony studios or Sportsman's lodge in L.A. Okay. As we move to Hawaii. This story is extraordinary. We've completed 7 towers in Hawaii, and we're on track to produce $6 billion of revenue, 5,000 units. And we've got 3 under construction and 2 in planning. I'm going to go through a little bit. These are the 7 that we've already built. And you can see, they come along kind of kachunk, kachunk, 16, `7, 18, 19, 1 a year. They just keep on coming, and it seems to be defy gravity in terms of the market demand. And then this is what we have under development. Victoria Place just opened. We'll show you such images of that. Ulana, the park and Kalae are all under construction, Launiu is in presales. So if we look at where they are in the master plan, typically, what we did in the early days of Ward Village, we really focused on the center here. So all of the beige or flesh color buildings are complete. And then the green ones are still to come. Blue is under construction. And you can see most of our construction is over here, completing the western side of the development with Launiu, which will follow shortly after these 3. And then we've got 2 advanced planning. Mahana, which is at the top of the park. So technically, what we call third row but in a unique location by virtue of being in line with park. And then Melia and Ilima, which would be the crowning touch of the development of Ward Village. So Victoria Place was our fastest selling condo to date, and you can see why. It's a fantastic location right on the water. And it opened just a couple of weeks ago. This is the receptor area. This is an open air reception, the first time we've done that. And here we are in the pool deck. And I have to point out, these are not renderings. These are real photographs of the completed product. And they look remarkably like our renderings because we have to ensure that the renderings are deadly accurate when we go into sales mode. And this is another photo, real life photo, of the completed product on the water. As we move to the park, the park is under construction, 540 units pretty much 100% sold. It's estimated to complete in 2026. And this is the rendering of the park on the park, and that's hence its name. The pool deck, the amenity level on the pool deck. And here we are in construction. And so you can see this building is moving along pretty nicely. And then Ulana. Ulana, interestingly is a reserve housing building. So that's to say this is a breakeven proposition for Howard Hughes. You have to qualify to buy in these units. So reserve housing in Hawaii is the equivalent to what you might call affordable housing in some other jurisdictions. But unlike normal affordable housing, which is a for-rent product, this is a for-sale product, but you still have to qualify for it. And we had to build 1,200 reserve units in Ward Village as part of the care plan. Ulana is our second building. And with these 700 units complete all of our reserve housing requirements. It's a rendering of the front door. Landscape space, amenity space. So you can see, it's not so bad to qualify for reserve housing in Hawaii. And here we are, it's a little bit ahead of the park. It will be topped off and finished and come to market and close in '25. Kalae is under construction. Kalae is sort of the twin sister to Victoria Place. It's a front row building, right on the water, on the other side of the park. This is the affinity edge pool. It too sold incredibly quickly. And these are renderings of the lobby, the amenity deck. And then Launiu. Launiu has only been in sales mode for about 6 months. We're over half sold already. So we're quite happy with the pace which it's being sold. It won't start construction in all likelihood until mid '25 with a completion in '28 after Kalae, and a view of the amenity deck there, amenity party space. And then the final 2 projects that are in planning and soon to go into sales mode. As we mentioned earlier, Molina and Ilima are 2 really -- they're going to be the best products in Ward Village highly anticipated, and Mahana will be at the top of the park. Between the 3 of them, 800 units, another $2.5 billion of revenue. Focusing on the Melia and Ilima. It was as mentioned, Ilima is a joint venture with Discovery Land. And so you can see in terms of the products, it's roughly the same-size building, but almost far fewer units because they're much, much bigger units, bigger than what we would typically do. So we're planning on the Discovery special sauce to sell those units, and that includes a Discovery Club in the base of the building. Both buildings are completely separate, even though they sit on a shared podium and share the same architecture. We put together what we consider to be a real dream team for this product. So Bob Stern of New York, once again, is the architect with this classical style. Champalimaud is an interior design and we have not worked with, but Discovery has considerably in the past. They've done a lot of resorts around the world, and the combination of Champalimaud and Ramsa have really been a strong one. And we paired both of them with Dan Vida, has done all the landscaping at Ward Village today. And so this is a view of the Discovery land deck. You can see the pool, multiple level pools. This is the gym with the exercise lawn in front. That's the view. It will have the best views of Diamond Head. And then this is the Champalimaud Interior of Discovery Club space down on the pool deck. And moving to Mahana, something might think, poor Mahana is at the back, but we've actually put a lot of time and attention into this building. We think it's going to be very efficient. It's going to have great views. It's really got some striking architecture embedded in it. And its site is right here. So you can see, it's still got a good compute passage. And so in the end, there'll be 14 condo towers, almost 6,000 units in Ward Village, an extraordinary success of $9 billion of revenue. With that, I'm going to move on to our communities. Communities for us is our placeholder, if you will, for our ESG program. And a big part of our ESG is really the environmental aspect of it. And we look at it in the sort of 4 cycles. Master Planned Communities, we really focus on the open space. And we historically have always had at least 20% of our total acreage dedicated to open space and this predates rates any ESG conversations at large. It's what we do to make our communities better and stronger. And then now more recently, we've been focused on working with homebuilders to really make sure that all the homes the smart technology features as we move into a much more water-sensitive and energy-sensitive environment. Within our own strategic developments, we now have a benchmark of at least lead silver for each one of our new projects, and we require lots of green requirements in terms of our energy conservation and putting a lot of attention into commissioning and making sure that what we buy is actually working in accordance with the specs, and we're getting all those energy savings, which is helping drive our NOI. And as we move into our operating assets, some are old and some are new. But in both cases, it's a question of maximizing NOI. And so we spent a lot of time adding additional monitors to existing buildings to really optimize building management systems and to reduce energy usage in particular. We've also managed to get ENERGY STAR certifications on most of our assets, which means we've gone through in an upgrading. And then at the corporate level, we've been working hard to get our own carbon goals in place by 2030. And so speaking of that, we've got -- we are the leading in our sector in GRESB, which is the real estate group we're in, we consistently rank #1. We've done 83 certifications across our portfolio and continuing to work on more. Most importantly, our communities, LEED now as a community certification, which it didn't have when first got we've managed to get all of our communities through the LEED community certification process, which actually positions us as the leader in the industry when it comes to LEED communities. And then our goals for 2030. Rather than just say [ GLIBLY ], we will be carbon neutral by certain we've decided to really dig and deep take into account all of our existing portfolio and all of the strategic development assets that are in the pipeline between now 2030 and ask ourselves how much can we really meaningfully reduce our absolute carbon emission, and that's the 46% scope, which we're committed to and was adopted by the Science-Based Target Institute in Paris. And that's our goal for 2030. And then we move to a topic that's always topical here in Summerlin and in Phoenix, water conservation. And as David mentioned, what we've done in Summerlin is an extraordinary poster child for what we can do elsewhere. 7,500 homes, 500,000 feet of office and a ballpark, and we use exactly the same amount of water as we did before we started. And that really is leading to this goal of 86 gallons per person per day. If we get to that, that will be exceptional. And we do it through a lot of smart water management, and that is in turn like we don't allow leaky pipes. We're constantly monitoring the valves. And water's been shifted where. We have obviously focused a lot on reducing traditional landscape with desert landscaping. We have pool covers. We have -- we'll -- as we move into Teravalis, we'll start to think more in terms of a white roof certification. How can we use absorption chilling in the evening to generate potable water for the day. And the important thing to note about Teravalis is that it falls into 2 categories. There's 3,400 acres, which is the broader Teravalis,and there's 3,000 acres, which is our Phase I project called Florio. In Florio, we have 100-year water certificate. That means we've got certified water for 100 years, which will get us through the first 7,000 homes. So we've only sold about 800 homes thus far. So we've got a lot of runway here. But the other important point to note about Teravalis is it sits on a major aquifer. So it's never a question of whether or not there's enough water there for Teravalis, it really comes down to water management policy in the state of Arizona. And we're working very hard with the Arizona Department of Water to try and set goals and standards that will allow us to maximize that existing water. And so we are aiming for 95 gallons per person per day, which based on what we're enjoying here in Summerlin, we know is easily achievable. And that's our goal going forward. And then finally, within the communities. As was mentioned earlier, we live in our own communities. And therefore, we spend a lot of time giving back to our communities. The more we give back to our communities, the better it is for our own employees' families. And so we spend a lot of time on volunteer hours throughout each community and the charities that we enable. And with that, I'm going to turn it over to Carlos on the corporate balance sheet.

Thank you, Jay. Well, today is my 7-year anniversary with Howard Hughes and what a better way to spend it with all of you here. Thank you. I know that's why you came, right? Thank you. Thank you for that. And thank you for the opportunity to talk about this company that we love so much. . I'm going to take you over debt, then we're going to move to talk about G&A. After that, we're going to talk a new metric that we plan on presenting and giving guidance starting in Q1 of next year when we provide the first full year guidance. And then we're going to move to NAV. So our debt maturities are in front of you, 2 things that I want to point out here. One is that -- well, 3, you don't see anything in 2024. It's not just because it's November and the year is almost done. But it's because with the closing of Victoria Place, we paid off the maturity that we have in 2024. As you know, one of the great things about condos is that with the closings, we immediately pay off the debt and then we move on. So we don't have anything there. In 2025, we have some of the assets that were mentioned before, like Marlow, Tanager 6100 Merriweather that will be maturing in 2025. And all of those are already in different stages of negotiation for refinancing. Last point that I want to make, if you've been following, as you saw in our last earnings release that we talked about the sale of MAT receivables in Bridgeland. It was the first time we've done a sale of MAT receivables. And that allowed us to do multiple things. First, we paid down the facility on Bridgeland from $475 million that we had outstanding to $283 million. That was going to mature in 2026. You don't see it here because as part of that, we were able to extend that all the way to 2029. In addition to doing that, we were able to upsize the facility from $475 million to $600 million. So there's many positives of being able to create this liquidity avenue for amount of receivables. And you can expect to see us take advantage of that in the future if it makes sense, if the market is there, and if it is the right thing to do at the time. Spend a little bit on operating asset. I won't spend much. Everything -- the numbers are in front of you, but what we're trying to -- what we're highlighting here is the strength of NOI to service its own debt. This is important for us because, again, condos pace for theirselves at closing. MPC segment has very little leverage. So what is important here is that we show you that our long-term revenue, the segment that has our long-term revenue, our NOI is producing sufficient NOI to pay for its own debt. And as I'll show you later, it does that in much more. Moving on to G&A. Well, Back in 2019, we were at $137 million when we decided to focus on our core, close our [ dos ] corporate, move to The Woodlands, and essentially focus on what we do best, which is create this amazing communities like the one that you'll see later today. Since then, we perhaps arguably, maybe we went down a little bit too far during the days of COVID. We've been stabilizing in the 80s. And so what I want you to take from this is that this is an area of focus for many of us as much as it is driving price per acre and leasing because, as we decrease G&A, we increase the value of the company. And so the focus is there, and we are going to continue to stay on top of G&A to rightsize it to our portfolio. Moving on to a new metric. For now we're calling it adjusted operating cash flows. What is going to be in this metric? Well, you see 5 components there. We're going to have operating assets, MPC EBT and condo profits. Those are all the sources. Less cash G&A and interest expense. Why did I leave interest expense to the end? This is the only component that we currently don't give guidance on. We're hoping that by adding it and turning it into one metric that replaces FFO in a way that it is much more applicable to our business, we're hoping it gives you better insight into our cash flow generation capabilities. Let me show you what it would have looked like. We had started giving this guidance in 2024. Well, in 2024, we would have guided you to $541 million that comes from condo closings, MPC EBT and NOI. And this is where I can go back to the point that I was making in NOI that it covers its own debt and more. Here, as you can see, our NOI is in 2024, sufficient to cover all of the interest expense and to cover all the company's G&A with $2 million to spare. For us, this is very important because if NOI takes care of the overhead, everything else can fund future capital allocation decisions. So you can expect to start seeing this metric reported and with guidance starting on Q1 of 2025 at the time where we normally provide guidance for the full year. In between now and then, well, what can you expect? Giving you a little bit of a glimpse into '25 and 2026. Well, everything that David mentioned before about the strength of our communities is not abating. So you can see that MPC EBT, we expect that is going still to be very, very, very strong in 2025. Same with NOI. So we continue to stay focused and drive to those NOI targets that we set for ourselves. Jay talked about the condo gross profit, the condos. And you can see the gross profit, we expect it to be important, not in 2025 because we only have the closing of the breakeven property. But in 2026 and in 2027, as you can see, we expect a significant profits from condos that are going to be derived by this contracted revenues. Important as well to note that 2027 is where we will have the closings on the first condominium outside of Ward Village, the Ritz Carlton, and The Woodlands. Let me move on to NAV. We follow the same method that you've seen from us now for a few years. We did the sum of the parts. And so where did we end up? Well, in 2024, we have an NAV $118 which, looking at our share price as of this past Friday, reflects a discount of 48%. $118 is a little bit hard to analyze that context. So where were we last year? Well, we were at $106, excluding the Seaport. And where did that 12 come from? You can see it's in corporate, MPC, operating assets were flat, and there's a little bit of a 1 -- decrease of $1 in condominium. So I'll walk you through each one of them. But stay in corporate briefly, just to say that this 7, it's a little leading to say the condominiums is minus 1 because the reason why corporate grows is because it harvests with cash from sales of condominiums. Every dollar that we make around the region comes all to central treasury and is reflected in corporate. So that's really where this is coming from. So the strength of the content is reflected here once it becomes cash from closings. So operating assets NAV. Again, David covered that we had this position of noncore assets, and we had a little bit of increase in construction financing, but the new developments are offsetting all of that, which bodes well for the fact that they're brand new, and they're already offsetting the loss of recurring NOI. So it bodes well for the future of additional assets that we're going to put into operations going forward. MPC, and this is impressive that the increases in price per acre is driving $12 of NAV. Again, the fundamentals were explained by David. You can see it here reflecting in our estimation of what NAV needs to be. And it is more than offsetting even the loss of inventory in land sales, which also plays well what we've seen before during the presentation. In condominiums, we have -- as we refine the model, the model and timing of the different units and the construction timing of the units, we had adjustments that are giving us $2 in the negative. A little bit of net debt, but exciting to see that the Ritz Carlton in The Woodlands is going to start to contribute. And again, let's keep in mind that there are $7 that came out of this segment and went to corporate. So it's a very, very, very strong performance for on as well. And with that, I'm going to turn back the conversation to David for closing remarks and move into Q&A.

Thank you, Carlos. I'll be brief. Look, just to wrap this up before I open it up for Q&A. With this year's spinoff of the Seaport Entertainment, it leaves us as an incredible pure-play company focused on creating the best Master Planned Communities in the best places to live, work and play in the country. We've achieved record results across almost every single segment in our portfolio despite headwinds and market turbulence, higher interest rates. We are in a strong inflection point that Carlos just covered, where in the next several years ahead, we're going to see our cash flow generation grow in meaningful leaps and bounds. As our operating asset NOI covers the interest in overhead, we have condo closings coming in and land sales continue to accelerate at ever higher prices per acre across each one of our communities. And our ability to self-fund all of our own developments or self-fund share buybacks without ever diluting our shareholders by raising capital, separates us and provides a meaningful competitive advantage that most others don't enjoy. So I'll stop there, and we'll open it up for Q&A. Just wait for a mic, if you don't mind, so those online, we'll be able to hear your question.

Alex Goldfarb, Piper Sandler. I won't comment on your still incredible pace on condos and Ward Village, but you guys do make it look easy. Turning to the studios in Summerlin. Clearly, in REIT-land studios have had -- a number of years ago, everyone loved them. Right now, it's giving challenges to a company that focuses on them. Given what's going on in the slow pace of studio recovery in L.A. and increased competition from other states with tax, what gives you guys the confidence to go forward on this? And has anything changed between when you originally proposed this idea to how the studio business is today?

No, it's an excellent question. And I am very much aware of the national headwinds in the studio space, driven by what I think has been a lot of new supply in areas like Georgia, New York, New Jersey that has been largely developed to build on the film tax credits that have been enacted there. I do believe, and my friends at Sony share this belief that Las Vegas holds a unique competitive advantage from anywhere else to film that is not Los Angeles. And that's, a, it's proximity to L.A., that gives the movie stars, producers and directors the ability to get home on weekends to see their family that they otherwise couldn't if they were in Australia, Canada, New Orleans, Atanta. And it relies on an existing workforce here in Las Vegas. The foundation of the existing workforce in Las Vegas is highly synergistic and highly transferable to working in a studio. So you have physical a year for 10 years or $1 billion of filming here. I have other movie studios that are dying to come into the market. I have an existing workforce that's highly transferable and can work in this studio overnight. I think that these studios will have a meaningful competitive advantage over any other location out there for all of those reasons. Not to mention those workers that come here with an average wage of about $115,000 will enjoy Nevada state income tax rather than California. Other questions? It's usually the first one that's the hardest not the second.

Could you talk a little bit about your view on if you do end up having a stronger U.S. dollar next year, what that could potentially mean for the large amount of Japanese buyers of -- in The Wood Village?

It's a great question. And as you saw in Jay's slides, we've been building almost one tower a year for the past 10 years. and we haven't seen a slowdown in sales throughout any of those years despite meaningful changes in interest rates, despite pandemics, despite even more meaningful changes in exchange rates. The mix of Asian buyers, predominantly from Tokyo and Japan have remained largely consistent between 25% and 35% of each tower. And despite the weaker yen, those buyers seem to be continuing to buy our condos. I think the reason for that, and I've spent some time recently in Tokyo meeting with a lot of our buyers and our brokers there, is because the nature of the Japanese buyer that's buying a condo in Oahu at Ward Village, it may not necessarily be their first purchase of U.S. real estate or they have sufficient U.S. assets, such that they're just using their existing U.S.-denominated assets to acquire these condominium units. I would hope that as -- if the exchange rate shift and if the yen becomes stronger, we'll see. We could unlock additional buyers. But right now, we still see incredible demand. And right now, the demand that we're feeling for future towers that will hopefully launch sales of next year in 2025, Melia and Ilima, we'll continue to enjoy strong demand from our Japanese buyers.

Just to piggyback on the studio question. It sounds like the development would start only if the tax credit is passed. Is that right? Or would you proceed anyway?

No, this entire development of Village 15 that we'll drive by in our tour today in the studio -- production studios and partnership with Sony, are entirely dependent on a film tax credit bill being passed by the Nevada legislature. And they come back into session in February, so that could be the earliest it could be done. Session is generally February to June. So we're hopeful to get there. We're hopefully to get it done early. We've spent a lot of time educating legislature, educating local residents on the benefits of this. And the benefits of this are long -- are much broader than just a real estate development deal that's going to create value for our shareholders on that one postage stamp of dirt. The value proposition for Howard Hughes is that this development creates 19,000 jobs during construction, 15,000 permanent jobs that have the average wage almost double with the average wage in the existing Las Vegas Valley. Those are people and workers that need homes, that need places to shop, that need places to -- for their spouses to go to work. And those are all the things that we do. We're going to grow Summerlin fastest. We're going to grow Summerlin best by bringing in new industries and new jobs here. Same as The Woodlands, bringing in new companies to occupy those office towers. That synergy trickles down throughout everything that we do in building communities and creating value. And this opportunity to unlock value by bringing a studio and bringing in these thousands of well-paying jobs will transfer to future home sales, future value in the land per acre that we sell to our homebuilder partners and future commercial developments that will be ancillary and supportive to those new people that move into Summerlin.

[ Ray Zong ] here from JPMorgan. Another question on Studio. I think you guys quoted the square footage there. Any sense on the dollar amount, the yield? Is it competitive versus the other projects you guys have will be higher than that? Any color? I know probably it's early to ask those questions, but any directional color would be appreciated. And then another question associated with that is on capital allocation. You guys pointed out $500-plus million this year, and you pointed to 3 buckets, development being one. And then you have share buyback, and also debt pay down. I guess, on the other 2 buckets, how do we think about leverage? And if you do one or the other or do both at the same time, how should we think about, I guess? It's a two part question?

Okay. There's a lot there. I'll try and take it one at a time, but hold me -- I'm not skipping. I just forgot. So let me know if I don't answer something, and I'll let Carlos talk a little bit about the capital allocation. On the studio, it's too early to tell you how much it's going to cost. It's too early to tell you what the yield will be we have a rough estimation, and I think it's fair to say that we will be developing this at a sufficient premium to underlying studio cap rates, and I understand cap rates have moved in studios. That will create value for our shareholders. I think if we are able to get to bill passed, we'll have shovels ready. And at that point, once we announce construction, we will be sharing within our supplemental, the exact cost and the exact yield that we expect to achieve. I think it is telling that Sony is not only a tenant, but a partner as a landlord in owning the studios to understand that this is a desirable asset, not just for us because of the tangential benefits across all of Summerlin, but for someone who's just going to own that one small piece of dirt in terms of making their investment. From a capital allocation perspective, Carlos, if you want to jump in and talk about where we see that going.

Sure. Thanks for the question. We have a very structured capital allocation process every project has to come to committee. And so it's hard to give you a one-size-fits-all answer because it's really on a project-by-project basis. We're going to analyze every project to see what has the highest risk-adjusted return whenever we had a capital to spend. And it could be a condo. Condos tend to have the best economics. It could be a multifamily. It's probably not going to be spec office, but who knows, right? We might get a corporate relocating, and that's not spec, I know, but you might see us build office that way. Or we might decide to pay debt and share buybacks. I mean, I know that I'm not giving you a specific answer that you want because it's just not possible at this time. Those are the options, and we're going to evaluate every single one of them and decide what has the highest risk-adjusted return and creates more value.

I think circling back to kind of the last piece of your question was from a leverage perspective. We feel like that we're in an appropriate leverage level. And I think if anything, you may expect to see us trend a little bit lower over time than higher. I think that right now, we feel like we're about a spot that's very comfortable. We have great coverage across the board. Our rating feels very strong. But over time, I think you could see us drift a little bit lower.

Another question on the movie business. Would you envision the business being more long-term leases with the studios? Or would you have a mix where they kind of a shorter, you just kind of rent it as you kind of want to produce a movie or whatever? And do you also envision getting involved in the more volatile services component of the movies business?

We have a great partner in -- so I'm going to go in reverse order. We have a great partner in Sony that is super familiar and runs a services business right now and they're Culver City studios. We're going to rely on the experts to do that. I don't need to get into any new businesses that we're not very comfortable with. In terms of the lease structure I expect we'll have both I don't think we're going to be a master lease to any one company. Sony is going to do $100 million a year, but we have the ability with what we believe is our build to do a lot more than that. And I think we will have some studios that will want longer-term leases and some that will fill them on an as-needed basis. I think that the opportunity here to diversify the economy and to create outsized risk-adjusted returns are really unmatched in terms of development opportunities. So I think that this is something that we're working very hard on. Everyone wants to talk movies. Real estate is not sexy enough? Come on.

No, no more movies. In terms of your MPCs, so the resi land value and the future land seems -- is more manageable in terms of the future growth. In terms of the commercial land remaining and is the asset mix you envision, property-type mix, office, retail, schools, how do you think about that mix? How often does it change? You guys get together every quarter we think. What should be the ideal? Who are you selling to, et cetera?

Yes. I would say that we have for the next 8 to 10 sites in any one Master Planned Community, we have a rough idea of what will go there, maybe a condominium, maybe office site, maybe multifamily. But in general, taking a step back, looking at the commercial acres, there isn't a pie chart that's driving a decision-making that this is the perfect mix because I think every day, as consumers move in and as consumer demand shifts, that perfect mix shifts. Our job isn't to build to fill the pie chart. Our job is to build to meet demand. So as we see assets fill and incremental demand, multifamily is a perfect example, 9% same-store growth last year and this year, we need to build more product to meet that demand. And that's what you'll see us do. We won't invest to fill the pie chart. We'll invest to fill our buildings.

David, a question on condo sales and it's a 2-parter. First is what comes next after you completed this section of Ward Village? And the second is, could you see more of those condo opportunities in the Woodlands or other MPCs? And are there any restrictions in terms of residential versus commercial zoning there?

Great question. Look, I think that we have at Ward Village, and it's often occasionally joked about by some in the room, I think, among the best teams and machines that have ever been built to build, design, and sell condominiums. And I think part of the job of the 3 of us on the stage are to figure out how to make that go longest and furthest. So within Ward Village and within the islands of Hawaii, we're always looking for opportunities to use that team to find other places where we can put that machine to work and create value for our shareholders. You've seen us do it most recently in the Woodlands with the Ritz Carlton, and I think that's kind of the first step outside of Hawaii because I think we have the opportunity to do additional sites in The Woodlands as well as multiple sites here in Colombia, where we even -- Summerlin, thank you, foot in mouth. In Summerlin, to take advantage of the team and take advantage of what I think is great demand here to build the lock and leave product, a luxury lock-and-leave product for existing residents as they age in place. So I'm pretty excited about the opportunity to do condos throughout the portfolio and to expand what we've been doing in Hawaii as well.

So if you believe the kind of NAV number that you guys put up there, it's hard to imagine that any marginal new development project is going to have a better return than buying back your own stock at those prices. So given the amount of cash you expect to come in at the end of this year and going forward, why not more aggressively repurchase stock? Is there anything preventing you from doing that? Does the [ Ackman ] -- his 13D filing prevent you at all?

It's a great question. It's something that we debate all the time. And I think that there is a higher and higher likelihood that you'll see us allocate a towards share buybacks in the very near term. I think it's easy to say that a 40-ish-plus percent discount to NAV where we trade automatically creates more value than any development. But if you think about Victoria Place that just closed, it's generating north of $200 million of profit in an asset that we had once upon a time peak equity of about $40 million and almost 0 when we closed. Less than $5 million of equity in. And if you're going to put $5 million of equity to generate $200 million of profit, that's a deal you should do in lieu of a buyback. But again, your point is well taken and that the opportunity for buybacks to create more value for our shareholders is absolutely at the top of the list.

David, just going to the homes. It almost seems like higher mortgage rates are almost good for you guys and forces more -- forces more people the new home market. And if you're going to pay up, you want the amenity base that you guys have. On the other hand, you talk about the homebuilder incentives. What percent of new home sales in your communities have builder incentives versus new residents who are paying full freight, meaning whatever the market rate is for a mortgage?

It's a difficult question to answer because I think what you're saying is when you say builder incentives, you're talking about mortgage rate buy-downs.

Yes.

But I think builder incentives come in a lot of different flavors.

Well, whatever it is. I'm just curious how many people are coming into your communities just paying full freight, no benefits of anything. They're just ponying up and paying today's higher cost versus how many of the people coming in are getting some sort of economic incentives, buy them, build whatever it is that helps them make the math work?

So I think what we showed earlier is that the number of new home sales relative to total home sells doubled, and it was closer to 16% than historical norms of 8%. I would say the percentage of new home sales in Summerlin and Bridgeland is much higher than that. So I would say that the incremental person coming into Summerlin for the first time buying a new home versus an existing home is probably closer to 30% or 40% than the national average of 16%. And I would say that almost every buyer of a new home is getting some form of incentive. It may not be mortgage rate buydown because they may be an all-cash buyer, but they might be getting an upgrade or a view premium or something else that is a builder incentive that has given them a reason to buy that home. And look, I think that there's incentive enough in buying new homes, as we talked about. You're getting to customize it the way you want. You're getting something that less close to being obsolete than some of the home that's 30 or 40 years old. You have lower maintenance costs and lower operating costs. So I think there's a lot of reasons why new home construction is a favored product compared to a resale, but builder incentive is absolutely one of those.

Just following up on Alex's question. It seems like a few years where builders were all about NOI, NOI margin, NOI margin. And like in the past 2, 3 years, that kind of got out the door and just going after volume. Are you seeing them changing strategy at this point in a world where rates just kind of remain high? Or is it just going to still be -- give us many incentives, just kind of close, close, close?

I don't know if there's a one-size-fits-all answer to that question. I think it's highly builder dependent. What I see from several years go until now is very similar and that we are having our builder partners pay the maximum value they possibly can for our land, and that's what I'm focused on. I want them selling homes. I want them welcoming them in new residents, and they're incentivized to do that, whether that's at a higher margin or a higher volume. That's their business, not mine. What I need to do is sell them the land to keep up with underlying home sales and an ever higher value per acre every quarter, and that's what we've continued to do. And we've also continued to do it with builder price participation, which has locked in our value even when home prices run very quickly outside of our expectations. So as long as we can continue to do that, whether they're margin or price volume, right, I don't mind. All right. I think that's all of our questions. I thank you all for joining us again. We have some logistics to go through as we head down to the tour, and we'll let Eric, are you going to walk everyone through kind of the logistics now?