Howard Hughes Holdings Inc (HHH) 2017 Q1 法說會逐字稿

Good morning, and welcome to the Howard Hughes Corporation First Quarter 2017 Earnings Conference Call.

(Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to David Striph, Executive Vice President of Investor Relations.

Please go ahead.

Good morning, and welcome to the Howard Hughes Corporation's First Quarter 2017 Earnings Call.

With me today are David Weinreb, Chief Executive Officer; Grant Herlitz, President; David O'Reilly, Chief Financial Officer; and Peter Riley, General Counsel.

Before we begin, I would like to direct you to our website, www.howardhughes.com, where you can download both our first quarter earnings press release and our supplemental package.

The earnings release and supplemental package include reconciliations of non-GAAP financial measures that will be discussed today to their most directly comparable GAAP financial measures.

Certain statements made today that are not in the present tense or that discuss the company's expectations are forward-looking statements within the meaning of the Federal securities laws.

Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that these expectations will be achieved.

Please see the forward-looking statement disclaimer in our first quarter earnings press release for factors that could cause material differences between forward-looking statements and actual results.

We are not under any duty to update forward-looking statements, unless required by law.

I will now turn the call over to our CEO, David Weinreb.

Thank you, Dave, and thank you for joining us today and welcome to our 2017 first quarter earnings call.

Before we begin, I would like to encourage those of you who have not yet done so to review our recently released shareholder letter, as it is a valuable read and provides detailed context on our business.

On our last call in February, I highlighted a number of areas of focus for the Howard Hughes Corporation in 2017.

I am pleased to report today that we have made substantial progress on all those fronts.

First, in our operating asset segment, we increased total net operating income from operating assets to $44.7 million for the first quarter.

This represents a year-over-year increase of $13.3 million or approximately 42% and a quarter-over-quarter increase of $6.3 million or approximately 16%.

Our first quarter annualized NOI now stands at $169 million, a solid increase from last quarter and symbolic of our continued progress in growing our recurring income stream.

In addition, we also continued to raise the bar on our potential stabilized NOI, excluding the Seaport by $9 million to $240.8 million.

This increase was predominantly driven by our expectation for the Mr. C's Hotel at 33 Peck Slip, which we recently moved into our strategic development segment as well as the recently announced build-to-suit for Aristocrat Technologies in Summerlin.

In our MPC segment, we increased total segment revenues to $68.7 million, an increase of $19 million compared to the first quarter of 2016.

The increase was driven by continued strength in Summerlin and Bridgeland as well as by the sale of land for a utility right-of-way in Bridgeland.

While total segment revenues increased, we did experience a decline in residential sales year-over-year, resulting from a decline in residential sales in Summerlin.

In the first quarter of 2016, we executed a large bulk sale to a homebuilder, which did not make the comparison meaningful.

Therefore, we are very pleased with progress made to date in Summerlin and do not believe that this year-over-year decrease is reflective of underlying demand, which remains strong.

In our strategic development segment, we placed into service our Class A 204,000 square foot office building, One Merriweather, in Columbia, Maryland, which is 60% leased.

It is the first Class A office building in Columbia, Maryland in over a decade.

We have recently seen activity pick up on the remaining vacancy in One Merriweather and have prospects looking at much of the remaining vacant space.

In The Woodlands, we recently delivered our first of 2 self-storage facilities consisting of 654 units.

Unlike retail or office developments, self-storage typically has no pre-leasing, so we expect the asset to stabilize within the next 3 years.

And while very early in our process, we are pleased with our performance to date.

We also announced a new build-to-suit lease for a corporate campus containing 2 buildings totaling 180,000 square feet for Aristocrat Technologies in Summerlin.

Turning to our balance sheet.

We executed a new $800 million senior note offering at 5.375%, with a maturity of March 2025, which we financed our existing $750 million senior notes.

This reduced our coupon by 1.5%, saving over $8.5 million in annual interest expense, also extending the maturity 4 additional years.

We often compare our noncore assets to out-of-the-money options.

Their value in today's market could be eclipsed through careful planning, entitlements or other activities that our teams are constantly pursuing, which could become incredibly valuable.

This quarter, we were able to talk about 2 of these opportunities.

First, we sold 36 acres of our 100-acre property, The Elk Grove Collection, for total proceeds of $36 million.

This resulted in a pretax book gain of $32.2 million and monetized the tax loss of $41.8 million.

Secondly, earlier this year, we announced our intention to redevelop 110 N. Wacker Drive in Chicago into a trophy Class A 1.35 million leasable square foot office building.

This development will be in collaboration with Riverside Investment & Development and Goettsch Partners, the accomplished development and design team behind the recently completed 150 North Riverside Plaza office tower.

With its prominent riverfront location, 110 N. Wacker is perhaps the premier office development site in Chicago.

And with its dynamic design, will become an important addition to Chicago's skyline.

The tower will feature views up and down the river as well as of the Chicago skyline and Lake Michigan, while providing tenants with access to abundance of first-class amenities.

Today, we are happy to announce that we have signed our first lease with Bank of America to make 110 N. Wacker their new Chicago headquarters.

The lease is for 489,000 square feet or approximately 1/3 of the square footage of the building for a term of 15 years.

With this lease in hand, we expect to be in a position to begin demolition and construction in early 2018.

Before I turn the call over to Grant and David to discuss our operational and financial results in more detail, I want to highlight the progress we have made in 2 of our major strategic developments.

First, in the Seaport district, we achieved 2 key milestones in the first quarter.

In January, we received the permits needed to complete the west facade of Pier 17, and we immediately began construction on that part of the building.

Additionally, we filed for construction permits on the Tin Building, which will be home to a food hall operated by Jean-Georges and look forward to commencing construction immediately.

On the leasing front, we executed Dita and Big Gay Ice Cream during the first quarter.

These 2 tenants will open in the Uplands next year and continue our vision of creating a unique destination that will encourage visitors to discover the Seaport and all the offerings we are curating across the Seaport district.

Despite being under construction, we continue to generate strong demand for event space at the Seaport, particularly among fashion brands.

In February, we hosted the F is for Fendi show in the Fulton Market Building, and that was one of the most important events during New York Fashion Week.

Turning to Ward Village in Honolulu, we had another solid quarter making substantial progress in both sales of our remaining units as well as in our construction efforts.

During the first quarter, we sold an additional 31 units across all 4 projects, which represents approximately 11% of our inventory, and increased our total percent of units sold across our 4 buildings under construction to 82.5%.

At Waiea, where we welcomed our first residents in November 2016, we are just under 94% sold.

And as of April 18, 2017, we have closed on 150 of the 163 units under contract and expect to be complete with construction in the second quarter of this year.

At Anaha, our second building, we have sold 95% of the units and remain on track to complete construction in the third quarter of this year.

We are early on in the development as our current master plan includes 4,000 to 5,000 homes across 19 buildings and approximately 1 million square feet of retail at full build-out.

I would like to spend a minute speaking to how Ward Village has established itself as an increasingly important destination in Honolulu.

And in many ways, we hope will become the new center of the city.

We have started to see more local, national and international retailers considering opening in Ward Village as the best long-term location for their businesses.

After 10 years in Waikiki, Nobu chose to relocate to the base of Waiea late last year and has experienced a significant increase in their business.

In our third tower, Whole Foods Market chose Ward Village as the preferred location for their flagship Oahu store.

In our fourth tower, CVS Pharmacy will open, joining an established lineup of retailers like Consolidated Theatres, who operates the #1 theater in the state in Ward Village.

After nearly 15 years, Consolidated recently renewed their lease for an additional 15 years and are spending approximately $8 million on a complete renovation, demonstrating their continued belief in Ward Village.

While the near-term NOI generated from Ward Village will have some volatility as we demolish certain areas to make way for our next towers, the outlook for our long-term stabilized NOI continues to improve as our vision for this community advances.

With that, I will now turn the call over to Grant to discuss the details of our operational results.

Thanks, David.

I would like to begin by taking a deeper dive on some of the underlying themes driving our recent results in our operational assets, MPC and strategic development segments and then turn it over to David O'Reilly to discuss our earnings and financial activities for the quarter.

First, within our MPC segment.

In Bridgeland, we continue to see increasing velocity of home sales, which has translated into continued demand for our land from homebuilders.

In the first quarter, there were 118 new-home sales compared to 71 in the first quarter last year, representing an increase of over 66%.

Bridgeland sold 18.6 residential acres at an average price per acre of $390,000.

This compares favorably to land sales in the first quarter of last year of 11.1 acres at an average price per acre of $380,000.

Also in Bridgeland, our total profit was driven higher by the sale of nonresidential land for utility right-of-ways generating incremental revenue of approximately $6.4 million.

Turning to Houston, at The Woodlands, we saw strong uptick in the sale of new home builds, with 92 sales compared to 56 in the same period in 2016.

This 64% increase in sales was executed at an average price per house of $608,000 an increase from $545,000 in the previous year.

While this increase should be encouraging, it has not yet translated into demand for our residential land, as homebuilders in The Woodlands still have a fair amount of inventory to work through.

As we've previously stated, given our limited supply of residential lots in The Woodlands, we will hold off on any meaningful land sales until pricing returns to levels we believe are more commensurate with long-term value.

Turning to Summerlin.

We continue to experience solid demand for residential land.

While our residential land sales decreased from last year, which is not representative of any slowing in the underlying demand.

In 2016, as David mentioned, we executed a bulk land sale to a homebuilder, which helped drive gross revenues higher, albeit at a lower price per acre.

As a result, the first quarter of 2016 did not represent typical results.

In the first quarter of this year, we sold 207 home sales in Summerlin, a year-over-year increase of 39%.

We executed on the sales of 37.7 acres for a total revenue of $26.3 million.

After so much, our joint venture with Discovery Land company in Summerlin, we had another solid quarter with 3 customer residential lots closed for $10.6 million, and we placed an additional 14 lots under contract for $51.9 million.

As it relates to Summerlin, I would like to highlight our recent purchase of our partner's 50% interest in the Las Vegas 51’s, the New York Mets AAA affiliate.

Now that we own 100% of the team, we have taking a solid step in the right direction towards realizing our goal of relocating the team into a new stadium in Downtown Summerlin.

While we still have a number of hurdles to overcome to achieve this goal, we believe that bringing the stadium to Downtown Summerlin will have a significantly positive impact on both our existing residential and retail assets as well as on the prospects for new commercial development.

As David mentioned earlier, within our operating asset segment, we drove our quarterly total NOI from operating assets to $44.7 million in the first quarter, a year-over-year increase of $13.3 million or over 42% and a quarter-over-quarter increase of $6.3 million or approximately 16%.

Specifically, approximately $5.1 million of the $13.3 million year-over-year increase was driven by stronger performance in our office property driven by the continued stabilization of Two Hughes Landing and 1735 [1725 [sic]] Hughes Landing, as well as contractual rent increases across our Woodlands office portfolio.

It is worth noting that Three Hughes Landing is now approximately 30% leased.

Hospitality NOI growth of $3.4 million in the first quarter 2017 compared to 2016 was driven by increased activity and the continued stabilization of the recently completed Westin, which accounted for $2.3 million of the increase as well as continued strength at the Embassy Suites in Hughes Landing.

Retail also provided strong performance compared to last year, driving $3.3 million of the increase, with particularly strong performance at Ward Village and The Outlet Collection at Riverwalk.

As David mentioned earlier on the call, we have executed a build-to-suit lease for a corporate campus containing 2 buildings totaling 180,000 square feet with Aristocrat Technologies in Summerlin, Las Vegas.

The project, which is outside of Downtown Summerlin, will have a total construction cost excluding our land base of $45 million and is expected to generate approximately $4.1 million of cash NOI as stabilization for a 9% yield on our costs.

This is another great example of the team constantly finding opportunities to create value in our commercial acreage.

In January, we executed on the acquisition of the 11.4 acre Macy's store and parking lot for $22.2 million at Landmark Mall in Alexandria, Virginia.

We plan to transform the mall and Macy's parcel into an open-air mixed-use destination with retail, residential and entertainment components.

This acquisition helps pave the way for this future redevelopment.

With that, I will turn the call over to David O'Reilly for our financial results and outlook.

Thank you, Grant.

I'd like to start with a quick overview of our earnings before summarizing our recent financing activity and then finally turning to our current leverage and liquidity metrics.

I hope by now, that you've got a chance to download or print our first supplemental package.

We hope that you find this package helpful as you evaluate our quarterly results but more importantly, underwrite the net asset value of our company.

Also included in the supplemental is the summary and reconciliation of net income to FFO and core FFO.

While our reported FFO will be entirely consistent with NAREIT-defined FFO, we are also going to be publishing core FFO as an additional metric to help you better understand the company's quarterly cash flow.

The details of the adjustments from FFO to core FFO are found on Page 8 of the supplemental package.

As this is our first supplemental, we have tried to provide the information that we feel is most important to investors.

It is our expectation that we will continue to expand our disclosure over the next several quarters.

We completed the first quarter with GAAP earnings per diluted share of $0.13 as compared to $2.69 for the first quarter 2016.

NAREIT-defined FFO per diluted share was $0.23 as compared to $1.86 for the first quarter of 2016.

Importantly, both GAAP net income and FFO are impacted by the noncash changes in our warrant liability gains and losses.

Core FFO, which eliminates mainly noncash and on-time items as detailed in our supplemental, was $1.66 for the first quarter compared to $1.64 for the first quarter last year.

This increase was primarily driven by significant improvements in our operating asset segment.

In early March, we executed on opportunistic refinancing of our $750 million senior notes.

The 2021 notes carried a coupon of 6.875% and became open to call on October 2016.

Our goal is to execute a transaction that would refinance our debt obligation on a positive net present value basis, add meaningful duration to our maturity schedule and maintain or improve our current liquidity profile.

When we closed on our new $800 million note issuance of 5.375%, which was a 150 basis point improvement to our existing senior notes, and extended the maturity of our notes to 2025, we accomplished all of those goals.

We also received an upgrade on the ratings of our new senior notes from S&P, to B+.

Also during the quarter, we refinanced a $23 million construction loan on the Columbia Regional Building with a new $25 million nonrecourse mortgage financing with a 4.48% interest rate and a February 2037 maturity.

As you may recall from our last earnings call, in December of last year, we acquired the One Mall North office building in Columbia, Maryland.

After we closed on the acquisition, we amended and restated our existing 10-60 Columbia Corporate Center Financing to include One Mall North as collateral, increasing our loan proceeds by $14.5 million.

The loan bears interest at LIBOR plus 1.75% and has an initial maturity in May of 2020 with 2 1-year extension option.

Subsequent to the quarter end, we upsized The Woodlands master credit facility to increase the revolver by $30 million for a total facility size of $180 million.

The increased capacity will be used upon the construction of Creekside Park apartments in The Woodlands.

The facility bears interest at LIBOR plus 2.75% and has an initial maturity in April 2020 with a 1-year extension option.

As of the end of the first quarter, our total consolidated debt to total assets was approximately 43%, and our debt-to-enterprise value closed the quarter at 38%.

From a liquidity perspective, we finished the first quarter with over $541 million of cash on hand.

As of the end of the quarter, we had 14 projects in our strategic development segment, with an anticipated total cost of $2.66 billion.

Of that amount, we have previously funded $1.46 billion, leaving $1.2 billion in estimated remaining costs.

We expect to meet this obligation with a combination of existing construction loans, which have approximately $650 million of committed-but-undrawn capacity, buyer deposits of approximately $112 million and new construction financing totaling $82 million, of which $30 million is closed since the end of the quarter.

This leaves a net remaining equity requirement of $353 million.

The majority of this amount is tied to the Seaport district for which we have not yet obtained construction financing.

We expect to fund our remaining equity commitments through a combination of new construction financing; our free cash flow from our operating assets and MPC segments; net proceeds from noncore asset sales; and lastly, our existing cash balance.

Again, as of the end of the quarter, with over $542 million of cash on hand and a net equity requirement of $353 million, we have more than enough cash and liquidity on hand to meet all of our funding commitments without any additional cash being generated from MPC land sales or our operating properties.

Now for closing remarks, I'd like to turn the call back over to David.

Thank you all for joining us today.

I would also like to remind everyone that we are planning our Investor Day on May 17 at the Seaport district in New York City.

If you have not already done so, please RSVP to reserve your spot.

And with that, I will open the call to Q&A.

(Operator Instructions) The first question will come from Craig Bibb with CJS securities.

This is actually Larry Solow calling in for Craig.

So couple of quickies.

I know you guys gave some good detail on Summerlin.

If you could just -- high-end sales have remained outstanding there, but the super pad sales have sort of flattened out.

Can you sort of give us a little color on that?

And is your residential strategy at Summerlin continuing to evolve?

This is Grant speaking, Larry, so I don't think our sales have flattened out at all.

But if you look at our results, 2016 first quarter included a sale to a homebuilder at a much lower price because the infrastructure was taken on -- the responsibility for the infrastructure was taken on by that homebuilder.

So when you're looking at Q1 '17, we think pricing is very stable and increasing.

Okay.

And then could you just give us a little more detail on the lease up in Downtown Summerlin?

Sure.

So we've seen a little fallout from a couple of tenants through bankruptcy.

We have several LOIs we're working as backup to those.

We hopefully expect to announce replacement tenants over the course of the year.

We've seen our sales actually stable at over $5.50 a foot, which we're quite happy with.

But with the way we look at Downtown Summerlin is that it -- as an amenity to the rest of the master plan.

And as we've said before, we've seen residential sales pick up as a result of the core -- of the Downtown being open.

Furthermore, at the office building, we're around 77% leased today, and we have leases that we're currently in negotiation with that will stabilize the building at over 90%.

Might add one other thing that would be helpful, and that is with the addition of the hockey practice facility and our hope to ultimately move the ball team to Downtown Summerlin, those are all things that are going to further activate the Downtown and we expect will be vibrant additions.

Absolutely.

Ok great, just switching gears real quick just to Hawaii, any color on how the condo sales have been?

And perhaps a quick update on the presales of the towers not yet under construction?

So the only 2 -- the only tower that really has presales remaining are Anaha, which has about 13 sales left; and Ae’o, which is the Whole Foods tower.

That tower is around 60% sold, just over there.

We think the sales have been actually quite brisk in that regard.

We have seen a little slowdown in sales over the $2 million, $2.5 million number.

We delivered Waiea at the end of last year as well as being closing a lot of the units in the first quarter, we expect to be closed with the balance of the units that are under contract by the end of the second quarter or early third quarter.

It's worth noting though that Honolulu's housing market is at a 10-year low with only 3 months' supply.

Our next question will come from Steve Shaw with Compass Point.

What needs to happen to reach the high end of that South Street Seaport NOI range?

Is that all negotiated revenue percentages?

Steve, it’s David.

Look, the South Street Seaport, as we talked through our strategy, we're very focused on curating the right tenants, not the first tenants, and that strategy takes time.

We are actively working with multiple prospects for both the Uplands and the Pier, not close enough that we're comfortable talking about today but we do remain comfortable with our existing guidance.

And because of the way we're structuring deals with upside in many of the businesses, we feel good about the opportunity to hit the higher range providing sales are strong.

And they're directly tied to sales per square foot.

So to the extent tenants are performing at higher levels, we're going to directly benefit from it.

So if you're looking for an understanding and clarity between the 6% to 8% yield on cost that we've guided you to, that's directly correlated to sales per square foot.

Okay.

And then sticking on timing at the Seaport, the sup says total project stabilization of 1Q 2021, what's the driver behind that?

Is that more of the Uplands?

Or more of the Tin Building?

Well, certainly, it's focused on Tin, which probably won't open until the end of '19 at this point.

We have to take the building down.

We have to take the Pier down.

We have to reconstruct the Pier, et cetera.

But we're expecting the Uplands delivery in 2018 and the curation of tenants to be ongoing.

We expect the Tin Building, as I said, most likely late '19.

And the Pier building, we are expecting to see open in the summer of next year.

And other income streams that will take time to stabilize will include sponsorship income as well as the event-driven income for the Pier and for the historic district.

Are you guys any closer on the roof sponsorship?

We have a number of people we're talking to, prospects.

And as soon as we have one signed up, we will announce it.

And what is BofA paying on that N. Wacker lease?

So that we haven't disclosed the terms of the lease today.

We're really excited about this building.

Its 1.35 million feet in the heart of Chicago.

It's arguably the best development site in Chicago.

BofA is excited to relocate their offices.

They're taking it further, the building.

And the renderings are out there in the news.

So we haven't disclosed either their income or total costs yet.

We expect to do that later on during the year as we finalize everything and we put together the final capital structure.

Okay.

And then lastly, you guys are reporting some REIT metrics now.

I have to ask what kind of impact does potential tax reform have on your decision to possibly convert to a REIT at some point down the line?

This is David, Steve.

It's a question that we’ve talked a lot about.

Given the built-up NOLs that we have today as well as the embedded tax losses in some of the noncore assets, we don't see a near-term impetus that would have us look at a reconversion in the next 24 months.

I think as those start to dwindle and we get towards the goal line on getting to the place where we might have to start to pay taxes, I think the current tax environment at that point in time will have a significant impact.

At a 40% corporate tax rate environment, our desire to become a REIT would obviously be greater than if there is meaningful tax reform and that rate is significantly lower, even as low as 20% or 15%.

And if there is the proposed tax reform of shifting from deducting interests to now deducting capital expenditures, I think that would further disincentivize us from a REIT conversion.

We do believe that one of the greatest benefits of having our combined 3 businesses together is that we're able to self-fund our business plan.

We are not distributing 90% or 95% of our taxable net income.

We are able to keep that capital, retain it and put it into great risk-adjusted return opportunities in our development pipeline.

And if a REIT would potentially hinder our ability to do that, that's a significant impact, a significant negative that we have to weigh against the benefit of not paying taxes.

So it's something that we evaluate as a management team at the board constantly, and we're going to continue to look at as we get more clarity hopefully in the next couple of quarters on tax reform.

Next question will come from Alex Goldfarb of Sandler O'Neill.

Just first, David, good to see the FFO rolling out, obviously help reach a broader audience in the REIT today.

Just a few questions here.

You mentioned the closings at Woodland Downtown -- sorry, Downtown Summerlin, apologize there's feedback on the line.

At Downtown Summerlin with the retail tenants.

Can you just give a sense of the overall retail environment?

And how you're tackling bankruptcies if they're out of norm with what you guys would normally experience?

And if this has caused you to change any of your retail rollout plans as far as your developments go?

Obviously, the disruption in the retail business, Alex, is something that we're watching constantly.

I think that one of our strengths is underwriting tenant credits and you can look to the performance of The Woodlands Office Buildings during the downturn there to see that we had no defaults in any of our office tenant leasing as a result of oil prices dropping significantly.

And now that they've recovered, obviously those tenants are much stronger.

On the retail front, our portfolio is really -- I don't want to say insulated because obviously, we're susceptible to tenant bankruptcy.

But unlike the more REITs or other retailers, the vast majority there of our retail portfolio outside of Downtown Summerlin and The Riverwalk is neighborhood retail, which has not been typically affected by the same disruption that's occurring in the retail market.

On the other hand, as it relates to Alexandria, Virginia, we've been able to take advantage of that disruption by acquiring the Macy's parcel from them, which we think will be a huge uptick once we develop final plans.

For the company's business strategy, as David mentioned, and the last question of being in both all 3 segments makes it very strong and able to withstand those types of disruptions.

And then so when you are down at the Seaport, the whole softness in street retail rents, that hasn't impacted your ability to achieve the rents of your underwriting?

So the way to answer that, it's a little different.

The national retailers have suffered significantly.

Our strategy has never been to attract those.

From our perspective, attracting F&B, entertainment, sponsorship and event-driven income is the way to drive this asset and make it very valuable asset.

People are looking for experience retail and experience economy, and I think the South Street Seaport is exactly what we're going to deliver for them.

Okay.

And then you mentioned in your MD&A the Summerlin land, I think you said was a little bit softer or you're holding off further land sales.

Just a little more color, especially because oil got hit probably 3-plus years ago, so sort of curious what's changed now?

Or maybe I just misunderstood your land comments there.

Okay.

So on -- in regard to Summerlin, the average home sales we're looking for at a normalized market is around 15,000 units per year for the entire Las Vegas market.

Today, we're at about 7,000.

So to the extent there is excess land in the hands of builders, we could see a slowdown in sales.

That has not occurred to date, and we see an uptick in home sales, which will translate to land sales and -- but we just wanted to make sure that the disclosure was out there.

I thought you were talking about Woodland land?

Or did I confuse that with Summerlin land?

I think Summerlin and you mentioned oil, so I wasn't sure which you are referring to.

Sorry.

We've had a crazy night of earnings, so apologize.

No problem.

I meant The Woodlands, I thought you said, you guys were holding off a little bit.

Okay.

As it relates to The Woodlands, we saw an uptick in home sales this quarter.

This business is a long-term business.

It's not a quarterly business, you guys know that.

And although we did see an uptick in home sales, but that hasn't translated yet into landfills.

We expect it will over time as the economy recovers.

We do not believe that we should be selling our land at a discount to what we believe its worth.

And so until such time as the market recovers to a value in which we believe we should be selling at, we'll hold that land.

There's only x number of lots remaining, a very small amount.

It's a very valuable asset to us and it destroys value by selling.

Okay.

Just a final question.

I appreciate your time.

The baseball stadium, the AAA team in Summerlin, what is your long-term plans for that team?

Is it once you relocate it then sell the team?

Or is there a strategic reason why you would want to maintain control of the team after you've been able to relocate it to Summerlin?

So we own the team today.

We're excited about it potentially moving to Downtown Summerlin.

I don't think we have a view on long-term hold.

I think that for Howard Hughes as one of the -- as the largest private landowner in Las Vegas, it would be an advantage for us to own the team as a give back to the community.

Baseball is a very important part of Las Vegas.

And if Howard Hughes can contribute to the community in that way, I think it would be well worth doing.

It's not an integral part of our business, i.e., it doesn't move the needle that much.

And if it doesn't take that much to operate it and we can deliver back to the community, I think we should be doing that.

(Operator Instructions) The next question will come from Alex Barron with Housing Research Center.

I was hoping you could discuss a bit on the Hawaii condos.

Which towers are recognizing revenues at this point?

And then can you give us an update on the Gateway Tower?

From a revenue recognition perspective, it's Waiea, Anaha right now.

We expect it will start crossing that threshold on the next couple of towers during the remainder of this year.

But as of now from a GAAP revenue recognition perspective, it's just Waiea and Anaha.

As it relates to...

I'm sorry.

What's the threshold to start recognizing?

It's a whole complicated structure regarding qualified mortgages, whether they're first-time or second-time homebuyers, it's extensive, the criteria.

We're happy to take it on a cycle.

If you'd like, I can go through with you.

Okay.

And then on Gateway?

So it's David.

At the Gateway and as I've reported in past correspondence, I believe a shareholder letter a couple of years ago, we always expected when we announced that building that the absorption would be slow.

As with every residential development, we won't start until we have enough risks taken off the table.

But as noted earlier, it’s worth mentioning again that there's a housing shortage on Oahu.

The population is growing fast.

We have the most dominant position in the market, and we have great insight into market demand.

We have other product that we're bringing to market later in the year, which we do think is going to speak directly to current market demands, but we still believe in the Gateway project.

And we're taking the buildings down that sit on the land where that will be built in the beginning of the third quarter I think of this year.

And we're going to stay the course and look forward to delivering that building.

Okay.

If we switch to Columbia, you guys have a big apartment building going up right now.

When would that be expected to deliver?

That's a joint venture with Keppler.

It's our second building, and we expect to start leasing that actually at the -- towards the end of the second quarter of this year.

Okay.

And then lastly, on your land in Bridgeland.

What type of lots are buyers -- are builders buying at this stage?

Is it mostly low-priced entry-level type lots?

Or is it across the board?

Well, it's more moderately priced lots than before, though we did see an uptick in price per lot over the quarter.

Bridgeland, now that the 99 is open, the Grand Parkway and we're putting in the major monument signage, Bridgeland’s turn is now.

And we're in the direct path to growth.

We're really excited about the prospects for that asset over the next number of years, but it does meet a different segment of the market and we're currently meeting that market.

It's more -- as I said, it was more moderately priced.

It's not -- I wouldn't say -- there are some entry-level homes but there are also step-up as well.

(Operator Instructions) The conference is now concluded.

I would like to turn the conference back over to David Weinreb for any closing remarks.

Just wanted to say thank you again for joining us today.

We hope the call was helpful.

We also encourage everyone to RSVP for our Investor Day on May 17.

Look forward to seeing you down at the South Street Seaport.

And as always, feel free to call myself, Grant or David O'Reilly if you have any questions and want further insight on any of our businesses.

And thank you, sir.

The conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.

Take care.