Howard Hughes Holdings Inc

LIQUIDITY AND CAPITAL RESOURCES

We continue to maintain a strong balance sheet and ensure we maintain the financial flexibility and liquidity necessary to fund future growth. In 2023, our financing activity included draws on existing mortgages of $384.4 million, an additional draw of $200.0 million on the Secured Bridgeland Notes, refinancings of $161.0 million, and repayments of $48.4 million. As of December 31, 2023, we have $1.0 billion of undrawn lender commitment available to be drawn for property development, subject to certain restrictions.

In 2022, the Company sold its ownership interest in 110 North Wacker for net proceeds to the Company of $168.9 million and sold the Outlet Collection at Riverwalk for net proceeds of $8.2 million. Additionally, during the fourth quarter of 2022, the Company completed the sale of two retail properties in The Woodlands, Lake Woodlands Crossing and Creekside Village Green, for combined net proceeds after debt repayment of $38.8 million.

In 2023, the Company completed the sale of two land parcels in Honolulu, Hawai‘i, including an 11,929-square-foot building at the Ward Village Retail property, two self-storage facilities in The Woodlands, and Memorial Hermann Medical Office in The Woodlands for total net proceeds after debt repayment of $43.3 million.

Cash Flows

Operating Activities Each segment’s relative contribution to our cash flows from operating activities will likely vary significantly from year to year given the changing nature of our development focus. Other than our condominium properties, most of the properties and projects in our Strategic Developments segment do not generate revenues, and the cash flows and earnings may vary. Condominium deposits received from contracted units offset by other various cash uses related to condominium development and sales activities are a substantial portion of our operating activities in 2023. Operating cash continued to be utilized in 2023 to fund ongoing development expenditures in our Strategic Developments and MPC segments, consistent with prior years.

The cash flows and earnings from the MPC business may fluctuate more than from our operating assets because the MPC business generates revenues from land sales rather than recurring contractual revenues from operating leases. MPC land sales are a substantial portion of our cash flows from operating activities and are partially offset by development costs associated with the land sales business and acquisitions of land that is intended to ultimately be developed and sold.

Net cash used in operating activities was $258.5 million in 2023 and net cash provided by operating activities was $325.3 million in 2022. The change in operating activities of $583.7 million was primarily due to a $693.9 million increase in net cash used associated with our condominiums due to timing, as we continued development activity on our three under construction projects and did not complete a condominium project in 2023. This change was also impacted by a $35.1 million increase in interest payments, partially offset by a $20.2 million increase in MUD receivable collections and a $14.4 million decrease in income tax payments.

Investing Activities Net cash used in investing activities was $336.1 million in 2023 and net cash used in investing activities was $220.7 million in 2022. The $115.4 million increase in cash used in investing activities was primarily due to a $194.7 million decrease in distributions from unconsolidated ventures and a $42.2 million decrease in proceeds from sales of properties. The decrease in distributions primarily related to distributions received from the sale of the Company’s interest in 110 North Wacker in the first quarter of 2022, which resulted in a net increase to the Company’s liquidity of $168.9 million after the payment of transaction costs and distributions to our partner. The impact of these changes was partially offset by a decrease in cash used related to investments in unconsolidated ventures of $54.9 million, primarily attributable to the Company’s investment in Jean-Georges Restaurants in the first quarter of 2022, and a $78.0 million decrease in cash used for property development and redevelopment expenditures.

Financing Activities Net cash provided by financing activities was $548.7 million in 2023 and net cash used in financing activities was $222.3 million in 2022. The change in financing activities of $771.0 million was primarily due to a decrease in cash used related to principal payments on mortgages, notes, and loans payable of $815.9 million and repurchases of common shares of $403.9 million in 2022, with no similar activity in 2023. These decreases in cash used were partially offset by a decrease in proceeds from mortgages, notes, and loans payable of $443.5 million.

Short- and Long-Term Liquidity

Short-Term Liquidity In the next 12 months, we expect our primary sources of cash to include cash flow from MPC land sales and condominium closings, cash generated from our operating assets, first mortgage financings secured by our assets, and deposits from condominium sales (which are restricted to funding construction of the related developments). We expect our primary uses of cash to include condominium pre-development and development costs, debt principal payments and debt service costs, MPC land development costs, other strategic developments costs, and general operating costs. We believe that our sources of cash, including existing cash on hand, will provide sufficient liquidity to meet our existing obligations and anticipated ordinary course operating expenses for at least the next 12 months.

Long-Term Liquidity The development and redevelopment opportunities in Strategic Developments and Operating Assets are capital intensive and will require significant additional funding, if and when pursued. Any additional funding beyond those sources listed above would be raised with a mix of construction, bridge, and long-term financings, by entering into joint venture arrangements, as well as future equity raises.

We cannot provide assurance that financing arrangements for our properties will be on favorable terms or occur at all, which could have a negative impact on our liquidity and capital resources. In addition, we typically must provide completion guarantees to lenders in connection with their financing for our projects.

Summary of Remaining Development Costs The following table summarizes remaining development costs and related debt for projects held in the Operating Assets and Strategic Developments segments as of December 31, 2023. Total cost remaining to be paid net of debt and buyer deposits consists of $88.0 million related to substantially completed projects, $36.9 million related to projects with estimated completion dates within the next 12 months, and $114.6 million related to projects with estimated completion dates in 2025 and 2026.

Projects that are substantially complete and have been placed into service in the Operating Assets segment and completed condominium projects in the Strategic Developments segment are included in the following table if the project has more than $1.0 million of estimated costs remaining to be incurred. As of December 31, 2023, $23.4 million primarily relates to warranty repairs at Waiea in Ward Village. However, we anticipate recovering a substantial amount of these costs in the future, which is not reflected in the table below. The remaining cost related to substantially completed projects primarily represent costs associated with the completion of common areas at our completed condominium towers and budgeted tenant allowances necessary to bring our completed operating assets to stabilized occupancy.

We expect to be able to meet our cash funding requirements with a combination of existing and anticipated construction loans, condominium buyer deposits, free cash flow from our Operating Assets and MPC segments, net proceeds from condominium sales, and our existing cash balances.

(a)Refer to Note 7 -Mortgages, Notes, and Loans Payable, Net in the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K for additional information on debt.

(b)Estimated remaining to be spent includes amounts for Waiea warranty repairs. However, we anticipate recovering a substantial amount of these costs in the future, which is not reflected in this schedule.

Contractual Cash Obligations and Commitments The following table aggregates our contractual cash obligations and commitments as of December 31, 2023:

(a)Interest is based on the borrowings that are presently outstanding and current floating interest rates.

(b)Ground lease commitments totaling $247.5 million relate to the Seaport ground lease, which has an initial expiration date of December 31, 2072, and is subject to extension options through December 31, 2120. Future cash payments are not inclusive of extension options. The remaining $7.7 million in ground lease commitments relates to Kewalo Basin Harbor.

Debt As of December 31, 2023, the Company had $5.3 billion of outstanding debt and $1.0 billion of undrawn lender commitment available to be drawn for property development, subject to certain restrictions. Refer to Note 7 -Mortgages, Notes, and Loans Payable, Net in the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K for additional detail. Our proportionate share of the debt of our unconsolidated ventures totaled $134.9 million as of December 31, 2023. All of this indebtedness is without recourse to the Company, with the exception of the collateral maintenance obligation for Floreo. See Note 10 - Commitments and Contingencies in the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K for additional information related to the Company’s collateral maintenance obligation.

Debt Compliance As of December 31, 2023, the Company was in compliance with all property-level debt covenants with the exception of five property-level debt instruments. As a result, the excess net cash flow after debt service from the underlying properties became restricted. While the restricted cash could not be used for general corporate purposes, it could be used to fund operations of the underlying assets and did not have a material impact on the Company’s liquidity or its ability to operate these assets. Additionally, one property-level debt instrument that was not in compliance as of September 30, 2023, is in compliance as of December 31, 2023, but requires two consecutive quarters of compliance to remove the cash flow restriction.

Net Debt The following table summarizes our net debt on a segment basis as of December 31, 2023. Net debt is defined as Mortgages, notes, and loans payable, net, including our ownership share of debt of our unconsolidated ventures, reduced by liquidity sources to satisfy such obligations such as our ownership share of Cash and cash equivalents and SID, MUD, and TIF receivables. Although net debt is a non-GAAP financial measure, we believe that such information is useful to our investors and other users of our financial statements as net debt and its components are important indicators of our overall liquidity, capital structure, and financial position. However, it should not be used as an alternative to our debt calculated in accordance with GAAP.

Unconsolidated Ventures We have interests in certain unconsolidated ventures which, as of December 31, 2023, have mortgage financing totaling $273.1 million, with our proportionate share of this debt totaling $134.9 million. All of this indebtedness is without recourse to the Company, with the exception of the collateral maintenance obligation for Floreo. See Note 10 -Commitments and Contingenciesin the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K for additional information related to the Company’s collateral maintenance obligation. The following table summarizes our share of affiliate debt and cash as of December 31, 2023: