Howard Hughes Holdings Inc

Operating Assets

Segment EBTSegment EBT for Operating Assets is presented below:

Operating Assets segment EBT decreased $10.4 million compared to the prior-year period primarily due to the following:

–Other land, rental, and property revenues decreased $5.4 million primarily due to office lease termination fees in the prior year.

–Interest expense increased $4.4 million primarily due to increased borrowings on construction loans secured by our operating assets.

–Depreciation expense increased $3.0 million primarily related to new assets placed in service during 2023.

–Equity earnings decreased $1.7 million primarily as a result of a decrease related to the change in value of certain derivative instruments associated with Metropolitan Downtown and TEN.m.flats.

–Rental revenues, net of Operating costs increased $4.9 million primarily due to increased leasing activity across our portfolio.

Operating Assets segment EBT decreased $12.0 million compared to the prior-year period primarily due to the following:

–Interest expense increased $9.0 million primarily due to increased borrowings on construction loans secured by our operating assets.

–Depreciation expense increased $7.6 million primarily related to new assets placed in service during 2023.

–Other land, rental, and property revenues decreased $4.9 million primarily due to office lease termination fees in the prior year.

–Other income decreased $1.3 million primarily due to winter-weather-related insurance recoveries in 2023.

–Rental revenues, net of Operating costs increased $11.6 million primarily due to increased leasing activity across our portfolio.

–Equity earnings increased $2.2 million primarily as a result of increases at Metropolitan Downtown and TEN.m.flats and changes in value of certain derivative instruments.

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 decreased $0.6 million compared to the prior-year period primarily due to the following:

–Other NOI decreased $3.3 million primarily due to reduced attendance and sales revenues at the Las Vegas Ballpark.

–Office NOI decreased $0.4 million primarily due to lower occupancy at 1725 Hughes Landing and office lease termination fees received in the prior-year period. These decreases were offset by strong leasing activity and abatement expirations at various properties in The Woodlands and Summerlin, most notably at 9950 Woodloch Forest and 1700 Pavilion.

The decrease was offset by the following:

–Multi-family NOI increased $1.1 million primarily due to continued lease-up at our newer properties, Marlow in Downtown Columbia, Starling at Bridgeland, and Tanager Echo in Summerlin.

Operating Assets NOI increased $3.4 million compared to the prior-year period primarily due to the following:

–Office NOI increased $2.4 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 at 1725 Hughes Landing and office lease termination fees received in the prior-year period.

–Multi-family NOI increased $2.2 million primarily due to continued lease-up at our newer properties, Marlow in Downtown Columbia and Starling at Bridgeland, and Tanager Echo in Summerlin, partially offset by winter-weather-related insurance recoveries in 2023.

–These increases were partially offset by a $3.1 million decrease in Other NOI, primarily driven by reduced attendance and sales revenues at the Las Vegas Ballpark.