Howard Hughes Holdings Inc

Segment EBTSegment EBT for Operating Assets is presented below:

Operating Assets segment EBT decreased $1.6 million compared to the prior-year period primarily due to the following:

–Interest expense increased $4.6 million primarily due to increased borrowings on construction loans secured by our operating assets.

–Depreciation expense increased $4.5 million primarily related to new assets placed in service during 2023.

–Other income decreased $1.9 million primarily due to winter-weather-related insurance recoveries in 2023.

These decreases to EBT were partially offset by the following:

–Equity earnings increased $3.9 million primarily as a result of a $2.4 million increase related to the change in value of certain derivative instruments.

–Total revenues, net of Total operating expenses increased $5.4 million primarily due to increased leasing activity across our portfolio, primarily related to 9950 Woodloch Forest and our newly completed multi-family properties.

Net Operating Income In addition to the required presentations using GAAP, we use certain non-GAAP performance measures, as we believe these measures improve the understanding of our operational results and make comparisons of operating results among peer companies more meaningful. Management continually evaluates the usefulness, relevance, limitations and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change.

We define NOI as operating revenues (rental income, tenant recoveries, and other revenue) less operating expenses (real estate taxes, repairs and maintenance, marketing, and other property expenses). NOI excludes straight-line rents and amortization of tenant incentives, net; interest expense, net; ground rent amortization; demolition costs; other income (loss); depreciation and amortization; development-related marketing costs; gain on sale or disposal of real estate and other assets, net; loss on extinguishment of debt; provision for impairment; and equity in earnings from unconsolidated ventures.

We believe that NOI is a useful supplemental measure of the performance of our Operating Assets and Seaport segments because it provides a performance measure that reflects the revenues and expenses directly associated with owning and operating real estate properties. We use NOI to evaluate our operating performance on a property-by-property basis because NOI allows us to evaluate the impact that property-specific factors such as rental and occupancy rates, tenant mix, and operating costs have on our operating results, gross margins, and investment returns.

A reconciliation of Operating Assets segment EBT to Operating Assets NOI is presented in the table below. Refer to the Seaport section for a reconciliation of Seaport segment EBT to Seaport NOI.

The table below presents Operating Assets NOI by property type:

(a)Properties that were transferred to our Strategic Developments segment for redevelopment and properties that were sold are shown separately for all periods presented.

Operating Assets NOI increased $4.0 million compared to the prior-year period primarily due to the following:

–Office NOI increased $2.8 million primarily due to strong leasing activity and abatement expirations at various properties in The Woodlands and Summerlin, most notably at 9950 Woodloch Forest and 1700 Pavilion, partially offset by decreases related to lower occupancy and a tenant bankruptcy at 1725 Hughes Landing.

–Multi-family NOI increased $1.1 million primarily due to continued lease-up at our newer properties, Marlow in Downtown Columbia and Starling at Bridgeland, partially offset by winter-weather-related insurance recoveries in 2023.

–These increases were partially offset by a $0.2 million decrease primarily related to the disposition of two self-storage properties in The Woodlands in 2023.