Mixed end-of-year for Howard Hughes Corp.
The pandemic hurt and boosted parts of Howard Hughes Corp.’s master-planned communities, which contain both residential and commercial properties, offering a glimpse of the pandemic’s impact on different segments of the real estate industry.
The company on Friday reported a $3 million loss (50 cents a diluted share) for the year ended Dec. 31, compared with $73 million profit ($1.71) for the full year-earlier period. Revenues dove 46 percent to $699 million from $1.3 billion in the prior year.
Net operating income on Howard Hughes’ residential segments increased year-over-year as people moved away from expensive and dense markets to places where the developer has communities. At the same time, net operating income on many of its commercial properties — including retail, hotels and a Minor League Baseball stadium which saw its season canceled — struggled. It ended the year with less than half the employees it started with — 600, down from 1,500.
The developer also made significant changes in response to the pandemic, including altering the Tin Building, a historic building in Manhattan where the Fulton Fish Market was long located, to be more e-commerce friendly.
The changes there included building an e-commerce platform for takeout and delivery, planning year-round outdoor programming at a nearby plaza, and increased security. Along with COVID-related construction delays, those changes increased costs by $20 million, David O’Reilly, Howard Hughes’ chief executive, said in an earnings call.
The company’s masterplanned communities benefited from the boom in single-family home sales that began during the pandemic as work-from-home, which created a demand for more spacious houses and removed worries about commutes, drove many homebuyers to the suburbs. Net new home sales in its master-planned communities increased 10 percent to 2,724 in 2020 compared to the year before.
Howard Hughes saw a significant bump to its year-over-year office net operating income after the purchase of what were formerly known as the Anadarko Towers at the end of 2019; net operating income rose 34 percent to $115 million in 2020 compared to the year before. But even without that bump, net operating income at its office properties increased 5 percent, O’Reilly said.
Retail and hotels, however, saw a dramatic decrease in income, especially in New Orleans
and Hawaii, which were more dependent on tourism. Retail saw net operating income drop 36 percent in 2020 from the year before; hospitality saw it drop 90 percent. O’Reilly expected a slow recovery in both as travel resumes.
The company’s Las Vegas Ballpark, which opened in March of 2019 and served as home of the Las Vegas Aviators, saw net operating income drop from $8.1 million to a loss of $3.6 million as the 2020 Minor League Baseball season was canceled due to the pandemic. Major League Baseball announced Feb. 18 that Minor League Baseball would resume in April.
During the ice storm in Texas, its hotels in the state briefly sold of rooms. But O’Reilly said that would likely have a “very modest impact” on its hotel revenues this quarter. “That was a two- to three-day phenomenon over a 90-day quarter.”