Condo Sales Continue to Drive Howard Hughes Corp's Results

Image source: Howard Hughes Corp.

Real estate sales are hard to predict, which causes very uneven results for Howard Hughes (NYSE: HHC). However, this quarter the company was able to more than even things out thanks to continued strong condo sales in Hawaii.

Howard Hughes results: The raw numbers

Metric

Q3 2016 Actuals

Q3 2016 Actuals

Growth (YOY)

Adjusted Net Income

$47.2 million

$28.5 million

65.7%

NOI from Operating Assets

$30.7 million

$31.9 million

-3.8%

Adjusted EPS

$1.10

$0.66

66.7%

Data source: Howard Hughes Corp.

What happened with Howard Hughes this quarter?

Howard Hughes' condo development in Hawaii drove the quarter:

  • Net operating income from the company's operating assets slipped due to headwinds in the Houston economy, which negatively impacted occupancy and conference business at The Woodlands Resort & Conference Center as well as its two recently opened hotels.
  • Land sales in the master planned community segment declined 46.5% to $31.9 million due primarily to the absence oflarge commercial sales, which bolstered the year-ago period. Summerlin's sales slipped 14.5% to $16.5 million due to a decline in acres sold. Meanwhile, residential land sales in Bridgeland jumped 110.4% due to increased demand from homebuilders. However, overall sales at Bridgeland slumped 79.4% to $4.7 million because it had no additional sales of commercial land this quarter. Finally, residential land sales at The Woodlands edged up 1% to $10.6 million, due to stronger acreage sales, which offset weaker prices. That said, total sales at The Woodlands were down 40%, again due to the lack of commercial land sales.
  • Sales at Ward Village, the company's condominium development in Hawaii, remained active with the company recording 35 new contracts during the quarter, representing 11.1% of the inventory it has under construction. Further, the company recorded $115.4 million in revenue from the development in the third-quarter, which was up 46.1% year over year.

What management had to say

CEO David Weinreb commented on the company's results by saying that,

The key driver of Howard Hughes' third-quarter results is the continued progress on its Hawaii condo development. The company has now sold 92% of the available units at its Waiea towerand 93.7% at the Anaha tower. Meanwhile, the company began construction of the Ke Kilohana tower,which had pre-sold 91.3% of the available units. That said, the company still has nearly half of the units at theAe'o tower left to sell, which means that there's still plenty of running room for this development.

Looking forward

Aside from the progress in Hawaii, the company continues to move forward on several other strategic developments. It commenced construction of a Class A mixed-use office building in Columbia, Maryland, it continues to sign up premier tenants for its Seaport District redevelopment project in New York City, and it announced a joint venture project on a new 130-acre mixed-use development in Westlake, Texas. These projects are critical to driving earnings and cash flow in future years.

10 stocks we like better than Howard Hughes When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Howard Hughes wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 7, 2016

Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Howard Hughes. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.