hhc_Current Folio_10K

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Washington, D.C. 20549




For the fiscal year ended December 31, 2016



For the transition period from          to

Commission File Number 001-34856


(Exact name of registrant as specified in its charter)






(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

13355 Noel Road, 22nd Floor, Dallas, Texas


(Address of principal executive offices)

(Zip Code)

(214) 741‑7744
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class:


Name of Each Exchange on Which Registered:

Common Stock, $.01 par value


New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   YES [X]  NO [   ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   YES [   ]  NO [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   YES [X]  NO [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES [X]  NO [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.




Large accelerated filer   [X]

Accelerated filer   [   ]

Non-accelerated filer   [   ] (Do not check if a smaller reporting company)

Smaller reporting company   [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   YES [   ]  NO [X]

As of June 30, 2016, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $3.1 billion based on the closing sale price as reported on the New York Stock Exchange.

As of February 16, 2017, there were 40,115,936 shares of the registrant’s common stock outstanding.


Portions of the registrant’s Proxy Statement for its 2017 Annual Meeting of Stockholders are incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K.  The registrant intends to file its Proxy Statement with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2016.




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Item No.






Part I 















Risk Factors





Unresolved Staff Comments












Legal Proceedings






Mine Safety Disclosure










Part II 




Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities






Selected Financial Data






Management’s Discussion and Analysis of Financial Condition and Results of Operations






Quantitative and Qualitative Disclosures About Market Risk






Financial Statements and Supplementary Data






Changes in and Disagreements with Accountants on Accounting and Financial Disclosure






Controls and Procedures






Other Information










Part III 




Directors, Executive Officers and Corporate Governance






Executive Compensation






Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters






Certain Relationships and Related Transactions, and Director Independence






Principal Accountant Fees and Services










Part IV 




Exhibits and Financial Statement Schedule





















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This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this Annual Report on Form 10-K are forward-looking statements. Forward-looking statements give our current expectations relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to current or historical facts. These statements may include words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “plan,” “project,” “realize,” “should,” “transform,” “would,” and other statements of similar expression. Forward-looking statements should not be relied upon. They give our expectations about the future and are not guarantees. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements to materially differ from any future results, performance and achievements expressed or implied by such forward-looking statements.

Factors that could cause actual results to differ materially from those expressed or implied by forward-looking statements include:


our inability to obtain operating and development capital, including our inability to obtain debt capital from lenders and the capital markets;


slower growth in the national economy and adverse economic conditions in the homebuilding, condominium development, retail, office and hospitality sectors;


the continued negative impact of sustained low oil prices on economic growth of, and demand for, our properties in the Houston, Texas region;


our ability to lease new or redeveloped space;


our inability to obtain rents sufficient to justify developing our properties and/or the inability of our tenants to pay their contractual rents;


our inability to control certain of our properties due to the joint ownership of such property and our inability to successfully attract desirable strategic partners;


our directors may be involved or have interests in other businesses, including real estate activities and investments, which may compete with us; and


the other risks described in “Item 1A. Risk Factors.”


These forward-looking statements present our estimates and assumptions only as of the date of this Annual Report. Except as may be required by law, we undertake no obligation to modify or revise any forward-looking statements to reflect events or circumstances occurring after the date of this report.



Throughout this Annual Report, references to the “Company”, “HHC”, “we” and “our” refer to The Howard Hughes Corporation and its consolidated subsidiaries, unless the context requires otherwise.



Our mission is to be the preeminent developer of master planned communities and mixed-use properties. We create timeless places and extraordinary experiences that inspire people while driving sustainable, long-term growth and value for our shareholders. We specialize in the development of master planned communities (“MPCs”), in the ownership, management and redevelopment of revenue-generating real estate assets (“Operating Assets”), and in the development of other real estate assets in the form of entitled and unentitled land and residential condominium developments (“Strategic Developments”). We expect to generate income from the growth of our operating asset portfolio, through the continued development of strategic project opportunities, and from ongoing MPC land development and home site sales. We generate cash flow from the operations of our operating properties and the sale of land in our MPC business, which funds the development of strategic development opportunities in order to generate meaningful growth in recurring income which translates to our Operating Assets segment. We are focused on maximizing value from our assets, and we continue to acquire, develop and manage our assets to achieve this goal. We are headquartered in Dallas, Texas, and our assets are located across the United States.



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We were incorporated in Delaware in 2010. Through our predecessors, we have been in business for several decades. We operate our business in three segments: MPC, Operating Assets and Strategic Developments. Financial information about each of our segments is presented in Note 17 – Segments of our audited consolidated financial statements.


Our Competitive Strengths


We believe that we distinguish ourselves from other real estate companies through the following competitive strengths:



Management Team with Track Record of Value CreationWe have completed the development of over 3.9 million square feet of office and retail operating properties, 1,208 multi-family units and 913 hospitality keys since 2011, investing approximately $1.6 billion, which is projected to generate a 9.2% yield on cost or $143.7 million per year of net operating income (“NOI”) upon stabilization. At today’s market cap rates, this implies value creation to our shareholders of roughly $1 billion. These investments and returns are exclusive of land and condominium development as well as projects under construction such as the Seaport District. Because of our low cost basis in the land relative to the market value, we only invested approximately $354 million of cash equity in these projects, generating a 21.9% return on cash equity assuming a 5.5% cost of debt, which approximates our historical cost.



Unparalleled Value Creation OpportunityWe own one of the preeminent development pipelines in the world with over 50 million square feet of vertical entitlements remaining across our portfolio. That is over 12 times the 3.9 million square feet we have delivered in the last six years without having to acquire another development site or external asset – we believe this is a very significant competitive advantage over other real estate development corporations.



Unique, Diverse Portfolio.  We own a portfolio of diverse trophy assets located in the United States, spanning 14 states with a combination of steady cash flow and longer term value creation opportunities that encompass over 50 million square feet.



Low-Leverage, Flexible Balance Sheet.  As of December 31, 2016, our total debt equaled approximately 42.3% of our total assets. Our net debtˡ equaled approximately 36.8% of our total market capitalization. We finished the year with approximately $665.5 million of cash on hand. We have focused almost exclusively on obtaining non-recourse debt for both our construction financing and long-term fixed rate mortgage financing and have limited cross-collateralization across the portfolio. Our low-leverage, with a focus on project specific financing, provides substantial insulation against potential downturns and provides us with the flexibility to evaluate new opportunities.   



Self-Funded Business Plan.  One of the most important key differentiators for The Howard Hughes Corporation is our ability to deliver on our value creation proposition through self-funding without having to dispose of our recently completed developments or raise additional equity. In normal years, our MPC segment’s residential land sales and our Operating Asset segment’s recurring NOI generates substantial amounts of free cash flow. This free cash flow provides the liquidity to match-fund the current equity requirements necessary to execute the many opportunities within our Strategic Developments segment. 

ˡNet debt, as further discussed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, includes our share of debt of Real Estate and Other Affiliates less cash and SID and MUD receivables. Total market capitalization is calculated as shares issued plus diluted shares relating to our restricted stock, options, and warrants.


Overview of Business Segments

The following describes our three business segments and provides a general description of the assets comprising these segments. This section should be referred to when reading “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” which contains information about our financial results and operating performance for our business segments.

Master Planned Communities. Our MPC segment includes the development and sale of residential and commercial land, primarily in large-scale long-term projects. Our five master planned communities, listed according to total acreage, are: The Woodlands, Summerlin, Maryland, Bridgeland and The Woodlands Hills.



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Our MPCs have won numerous awards for, among other things, design and community contribution. We expect the competitive position and desirable locations of our assets (which collectively comprise millions of square feet and thousands of acres of developable land), combined with their operations and long-term opportunity through development entitlements and home site sales, to drive our long-term growth.

Our MPCs include approximately 11,500 acres of land remaining to be developed or sold. Residential sales, which are made primarily to homebuilders, include standard and custom parcels designated for detached and attached single family homes, ranging from entry-level to luxury homes. Commercial sales include land parcels designated for retail, office, resort, high density residential projects (e.g., condominiums and apartments), services and other for-profit activities, as well as those parcels designated for use by government, schools and other not-for-profit entities. Our strategy is to retain commercial land for our own development unless we deem its intended use will not compete with our existing assets and current development plans.

Operating Assets. Our Operating Assets segment contains 54 properties, investments in joint ventures and other assets, the majority of which generate revenue, consisting of 13 retail, 24 office, six multi-family and four hospitality properties (one is closed for redevelopment) and seven other operating assets and investments. We believe that there are opportunities to redevelop or reposition certain of these assets to increase operating performance. These opportunities will require new capital investment and vary in complexity and scale. The redevelopment opportunities range from those that would have minimal disruption to the property to those requiring partial or full demolition of existing structures for new construction.

Strategic Developments. Our Strategic Developments segment consists of 23 development projects, most of which will require substantial future development to maximize their highest and best use. We are in various stages of creating or executing strategic plans for many of these assets based on market conditions and availability of capital. As of December 31, 2016, we had 11 properties under construction and not yet placed into service, representing total estimated aggregate project costs totaling $1.9 billion. In addition to the permitting and approval process required in almost all large-scale real estate developments of this nature, we generally obtain construction financing to fund a majority of the costs associated with developing these assets.

Our business strategy relies on the synergies among our three business segments. As we sell residential acreage in our MPCs we create increased demand for operating assets and cash flow to fund our strategic developments. Our Operating Assets segment provides amenities to our MPC residents, which increases demand at our MPCs. The recurring cash flow from operating assets is another source of funds to fuel our strategic developments, which when developed generate meaningful recurring income. Our Strategic Developments segment uses some of the commercial acreage within our MPCs to construct new developments that are transferred into our Operating Assets segment when they are complete. We believe the combination and interaction of our three business segments is advantageous to our financial performance.



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The chart below presents our assets classified by reportable segment and predominant use at December 31, 2016:









Master Planned









Operating Assets
















Under Construction

• Bridgeland


▪ Columbia Regional Building


▪ One Mall North


▪ Ae`o

• Maryland


▪ Cottonwood Square


▪ 10-70 Columbia Corporate Center


▪ Anaha

• Summerlin


▪ Creekside Village Green


▪ Columbia Office Properties


▪ Creekside Park Apartments

• The Woodlands


▪ Downtown Summerlin


▪ One Hughes Landing


▪ 100 Fellowship Drive

• The Woodlands Hills


▪ Hughes Landing Retail


▪ Two Hughes Landing


▪ HHC 242 Self-Storage



▪ 1701 Lake Robbins


▪ Three Hughes Landing (b)


▪ HHC 2978 Self-Storage



▪ Lakeland Village Center at Bridgeland (b)


▪ 1725-35 Hughes Landing Boulevard


▪ Ke Kilohana

• The Summit (a)


▪ Landmark Mall


▪ 2201 Lake Woodlands Drive


▪ One Merriweather



▪ Outlet Collection at Riverwalk


▪ 110 N. Wacker


▪ Two Merriweather



▪ South Street Seaport


▪ 9303 New Trails


▪ m.flats/TEN.M (a)



 (under construction)


▪ ONE Summerlin


▪ Waiea



▪ Ward Village Retail


▪ 3831 Technology Forest Drive





▪ 20/25 Waterway Avenue


▪ 3 Waterway Square





▪ Waterway Garage Retail


▪ 4 Waterway Square


▪ AllenTowne





▪ 1400 Woodloch Forest


▪ American City Building (c)







▪ Bridges at Mint Hill



▪ Constellation (a) (b)




▪ Century Plaza Mall



▪ Millennium Waterway Apartments


▪ Las Vegas 51s (a) (d)


▪ Circle T Ranch and



▪ Millennium Six Pines Apartments


▪ Kewalo Basin Harbor


 Power Center (a)



▪ One Lakes Edge


▪ Stewart Title of Montgomery


▪ Cottonwood Mall



▪ 85 South Street


  County, TX (a)


▪ 80% Interest in Fashion



▪ The Metropolitan Downtown


▪ Summerlin Hospital Medical


 Show Air Rights



  Columbia (a)


 Center (a)


▪ Kendall Town Center





▪ The Woodlands Parking Garages


▪ Lakemoor (Volo) Land





▪ 2000 Woodlands Parkway


▪ Maui Ranch Land



▪ Embassy Suites at Hughes Landing


▪ Woodlands Sarofim #1 (a)


▪ The Outlet Collection at Elk Grove



▪ 33 Peck Slip (Grandview SHG, LLC) (a)




▪ West Windsor



▪ The Westin at The Woodlands (b)







▪ The Woodlands Resort &







  Conference Center













A non-consolidated investment. Refer to Note 5 – Real Estate and Other Affiliates in our Consolidated Financial Statements.


Asset was placed in service and moved from the Strategic Developments segment to the Operating Assets segment during 2016.


Asset was operating under a master lease agreement and previously reported in Columbia Office Properties. The operations under the master lease agreement are reported with Columbia Office Properties. The property is included in Strategic Developments. It is now reported separately as a result of our acquisition of this property in December 2016, as discussed in “Item 7. - Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


Formerly known as Summerlin Baseball Club, part of the Clark County Las Vegas Stadium LLC joint venture.



The nature and extent of our competition depends on the type of property involved. With respect to our MPC segment, we compete with other landholders and residential and commercial property developers primarily in the development of properties within Las Vegas, Nevada; Houston, Texas; and the Baltimore, Maryland/Washington, D.C. markets. Significant factors which we believe allow us to compete effectively in this business include:


the size and scope of our master planned communities;


years of experience serving and strong reputation within the industry;


the recreational and cultural amenities available within the communities;


the commercial centers in the communities, including the properties that we own and/or operate or may develop;


our relationships with homebuilders;


our low level of debt relative to total assets; and


the proximity of our developments to major metropolitan areas.

With respect to our Operating Assets segment, we primarily compete for retail and office tenants, residential tenants and hospitality guests. We believe the principal factors that retailers consider in making their leasing decisions include: (1) consumer demographics; (2) age, quality, design and location of properties; (3) neighboring real estate projects that have been developed or that we, or others, may develop in the future; (4) diversity of retailers and anchor tenants at shopping center locations; (5) management and operational expertise; and (6) rental rates. The principal factors influencing tenant leasing decisions for our office space include: (1) rental rates; (2) attractive views; (3) walkable retail; and (4) commute time. For residential tenants, the factors that impact their decision where to live are: (1) walkability/proximity to work; (2) amenities, as they are looking for the best and most enjoyable quality of life all in one; and (3) the best value for their money. Most of our



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hospitality guests generally make decisions on which hotel they prefer for the following reasons: (1) the nature and intention of their trip; (2) brand loyalty; or (3) location and convenience to either an urban or open resort experience.

With respect to our Strategic Developments segment, our direct competitors include other commercial property developers, residential condominium developers and other owners of commercial real estate that engage in similar businesses. We hold an advantage over many of our competitors in that we already own and control substantial acreage for development, with significant existing entitlements.

Environmental Matters

Under various federal, state and local laws and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on such real estate. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner’s ability to sell such real estate or to obtain financing using such real estate as collateral.

Substantially all of our properties have been subject to third-party Phase I environmental assessments, which are intended to evaluate the environmental condition of the surveyed and surrounding properties. As of December 31, 2016, the assessments have not revealed any known environmental liability that we believe would have a material adverse effect on our overall business, financial condition or results of operations. Nevertheless, it is possible that these assessments do not reveal all environmental liabilities or that the conditions have changed since the assessments were prepared (typically at the time the property was purchased or encumbered with debt). Moreover, no assurances can be given that future laws, ordinances or regulations will not impose any material environmental liability on us, or the current environmental condition of our properties will not be adversely affected by tenants and occupants of the properties, by the condition of properties in the vicinity of our properties (such as the presence on such properties of underground storage tanks) or by third parties unrelated to us.

Future development opportunities may require additional capital and other expenditures to comply with federal, state and local statutes and regulations relating to the protection of the environment. In addition, there is a risk when redeveloping sites, that we might encounter previously unknown issues that require remediation or residual contamination warranting special handling or disposal, which could affect the speed of redevelopment. Where redevelopment involves renovating or demolishing existing facilities, we may be required to undertake abatement and/or the removal and disposal of building materials or other remediation or cleanup activities that contain hazardous materials. We cannot predict with any certainty the magnitude of any such expenditures or the long-range effect, if any, on our operations. Compliance with such laws has not had a material adverse effect on our current or past operating results or competitive position, but could have such an effect on our operating results or competitive position in the future.


As of December 31, 2016, we had approximately 1,100 employees, approximately 500 of whom were employed at our hospitality properties.

Available Information

Our website address is www.howardhughes.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other publicly filed documents are available and may be accessed free of charge through the “Investors” section of our website under the SEC Filings subsection, as soon as reasonably practicable after those documents are filed with, or furnished to, the SEC. Also available through our Investors section of our website are reports filed by our directors and executive officers on Forms 3, 4 and 5, and amendments to those reports. Our website and included or linked information on the website are not intended to be incorporated into this Annual Report on Form 10-K.





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The risks and uncertainties described below are those that we deem currently to be material, and do not represent all of the risks that we face. Additional risks and uncertainties not presently known to us or that we currently do not consider material may in the future become material and impair our business operations. If any of the following risks actually occur, our business could be materially harmed, and our financial condition and results of operations could be materially and adversely affected. Our business, prospects, financial condition or results of operations could be materially and adversely affected by the following:

Risks Related to our Business

A decline in oil prices over the past several years has had, and may continue to have, a negative effect on the future economic growth of, and demand for our properties in Texas where we have asset concentrations that are highly dependent on the energy sector.

In addition to general and national economic conditions, our operating results are impacted by the economic conditions of the specific regional markets in which we have concentrations of properties. In certain regions where we have asset concentrations, such as the Houston, Texas region (home to a large number of energy companies), economic activity, growth and employment opportunities depend in part on the energy sector.

The Houston area has experienced a slowdown in economic growth due to low oil prices, which have decreased by over 50% since mid-2014. In the event that oil prices remain depressed for a sustained period, or decline further, demand may continue to decrease for housing and commercial space in The Woodlands, Bridgeland and The Woodlands Hills. If we are unable to sell or lease our residential and commercial property in or near the Houston area, or if we are unable to recover or replace revenue from a delinquent paying tenant, it could materially and adversely impact our business, financial condition and results of operations.

The homebuilding recovery has continued its progression at a slow and steady pace; however, a downturn in the recovery or decline in economic conditions could adversely affect our operations.


Although our business does not involve the sale or resale of homes, we believe that new home sales are an important indicator of future demand for our superpad sites and lots. In fiscal 2016, we continued to experience a steadily improving housing market, and we saw an increase in new home sales in our MPCs compared with the prior year. Demand for new homes is sensitive to changes in economic conditions such as the level of employment, consumer confidence, consumer income, the availability of financing and interest rate levels. The prior economic downturn severely affected both the numbers of homes that could be sold in our MPCs and the prices for which homebuilders could sell them. We cannot predict whether the recovery in the housing market will continue. If the recovery were to slow or stop, or there were another economic downturn, the resulting decline in demand for new homes would negatively impact our business, financial condition and results of operations.

Our MPC segment is highly dependent on homebuilders.


We are highly dependent on our relationships with homebuilders to purchase lots at our master planned communities. Our business will be adversely affected if homebuilders do not view our master planned communities as desirable locations for homebuilding operations or due to a change in demand, our inability to achieve certain pricing arrangements or upon an overall decline in general market conditions. Also, some homebuilders may be unwilling or unable to close on previously committed lot purchases due to our failure to meet certain conditions in our agreements or otherwise. As a result, we may sell fewer lots and, in certain instances suspend any of our MPC developments and may have lower sales revenues, which could have an adverse effect on our financial position and results of operations.

Our development, construction and sale of condominiums are subject to state regulations and may be subject to claims from the condominium owners association at each project.

A portion of our business is dedicated to the development and sale of condominiums. Condominiums are generally regulated by an agency of the state in which they are located or where the condominiums are marketed to be sold. In connection with our development and offering of condominium units for sale, we must submit regulatory filings to various state agencies and engage in an entitlement process by which real property owned under one title is converted into individual units. Responses or



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comments on our condominium filings may delay our ability to sell condominiums in certain states and other jurisdictions in a timely manner, or at all. Further, we will be required to transfer control of a condominium association’s board of directors once we trigger one of several statutory thresholds, with the most likely triggers being tied to the sale of not less than a majority of units to third-party owners. Transfer of control can result in claims with respect to deficiencies in operating funds and reserves, construction defects and other condominium-related matters by the condominium association and/or third-party condominium unit owners. Any material claims in these areas could negatively affect our reputation in condominium development and ultimately have a material adverse effect on our business, financial condition and results of operations.


Our condominium sales are sensitive to interest rates and the ability of consumers to obtain mortgage financing.

The ability of the ultimate buyers of condominiums to finance their purchases is generally dependent on their personal savings and availability of third-party financing. Consequently, the demand for condominiums will be adversely affected by increases in interest rates, unavailability of mortgage financing, increasing housing costs and unemployment levels. Levels of income and savings, including retirement savings, available to condominium purchasers can be affected by declines in the capital markets. Any significant increase in the prevailing low mortgage interest rate environment or decrease in available credit could reduce consumer demand for housing, and result in fewer condominium sales, which may have an adverse effect on our business, financial condition and results of operations.

Purchasers may default on their obligations to purchase condominiums.


We enter into contracts for the sale of condominium units that generally provide for the payment of a substantial portion of the sales price at closing when a condominium unit is ready to be delivered and occupied. A significant amount of time may pass between the execution of a contract for the purchase of a condominium unit and the closing thereof. Defaults by purchasers to pay any remaining portions of the sales prices for condominium units under contract may have an adverse effect on our business, financial condition and results of operations.

We may be unable to develop and expand our properties.

Our business objective includes the development and redevelopment of our properties, which we may be unable to do if we do not have or cannot obtain sufficient capital or government incentives, such as tax increment financing, to proceed with planned development, redevelopment or expansion activities. We may be unable to obtain an anchor store, mortgage lender and property partner approvals that are required for any such development, redevelopment or expansion. We may abandon redevelopment or expansion activities already underway that we are unable to complete due to inability to secure additional capital, obtain required approvals or otherwise, which may result in charge-offs of costs previously capitalized. In addition, if redevelopment, expansion or reinvestment projects are unsuccessful, the investment in such projects may not be recoverable, in full or in part, from future operations or sale resulting in impairment charges.

We are exposed to risks associated with the development, redevelopment or construction of our properties.

Our development, redevelopment and construction activities entail risks that could adversely impact our results of operations, cash flows and financial condition, including:


increased construction costs for a project that exceeded our original estimates due to increases in materials, labor or other costs, which could make completion of the project less profitable because market rents may not increase sufficiently to compensate for the increased construction costs;


construction delays, which may increase project development costs;


claims for construction defects after a property has been developed;


poor performance or nonperformance by any of our joint venture partners or other third parties on whom we rely;


health and safety incidents and site accidents;


compliance with building codes and other local regulations;


an inability to secure tenants necessary to support commercial projects or obtain construction financing for the development or redevelopment of our properties; and


disruption of our project financing.



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Our development projects may subject us to certain liabilities.


We may hire and supervise third-party contractors to provide construction, engineering and various other services for wholly owned development projects or development projects undertaken by real estate ventures in which we hold an equity interest. Certain of these contracts are structured such that we are the principal rather than the agent. As a result, we may assume liabilities in the course of the project and be subjected to, or become liable for, claims for construction defects, negligent performance of work or other similar actions by third parties we have engaged.


Adverse outcomes of disputes or litigation could negatively impact our business, results of operations and financial condition, particularly if we have not limited the extent of the damages to which we may be liable, or if our liabilities exceed the amounts of the insurance that we carry. Moreover, our tenants may seek to hold us accountable for the actions of contractors because of our role even if we have technically disclaimed liability as a legal matter, in which case we may determine it necessary to participate in a financial settlement for purposes of preserving the tenant or customer relationship. Acting as a principal may also mean that we pay a contractor before we have been reimbursed by our tenants, which exposes us to additional risks of collection in the event of a bankruptcy or insolvency. The reverse can occur as well, where a contractor we have paid files bankruptcy or commits fraud with the funds before completing a project which we have funded in part or in full.

Development of properties entails a lengthy, uncertain and costly entitlement process.

Approval to develop real property sometimes requires political support and generally entails an extensive entitlement process involving multiple and overlapping regulatory jurisdictions and often requires discretionary action by local governments. Real estate projects must generally comply with local land development regulations and may need to comply with state and federal regulations. In addition, our competitors and local residents may challenge our efforts to obtain entitlements and permits for the development of properties. The process to comply with these regulations is usually lengthy and costly, may not result in the approvals we seek, and can be expected to materially affect our development activities.

Specifically, our redevelopment plans for the Seaport District are subject to a Uniform Land Use Review Procedure (“ULURP”) that requires approval by the New York City Council, the New York City Landmarks Preservation Commission and various other government agencies. Our inability to obtain the ULURP could negatively affect our future redevelopment plans for the Seaport District.

Government regulations and legal challenges may delay the start or completion of our communities, increase our expenses or limit our homebuilding or other activities.


The approval of numerous governmental authorities must be obtained in connection with our development activities, and these governmental authorities often have broad discretion in exercising their approval authority. We incur substantial costs related to compliance with legal and regulatory requirements. Any increase in legal and regulatory requirements may cause us to incur substantial additional costs, or in some cases cause us to determine that the property is not feasible for development. Various local, state and federal statutes, ordinances, rules and regulations concerning building, health and safety, site and building design, environment, zoning, sales and similar matters apply to and/or affect the real estate development industry. In addition, our ability to obtain or renew permits or approvals and the continued effectiveness of permits already granted or approvals already obtained depends on factors beyond our control, such as changes in federal, state and local policies, rules and regulations and their interpretations and application.


Municipalities may restrict or place moratoriums on the availability of utilities, such as water and sewer taps. If municipalities in which we operate take such actions, it could have an adverse effect on our business by causing delays, increasing our costs or limiting our ability to operate in those municipalities. These measures may reduce our ability to open new MPCs and to build and sell other real estate development projects in the affected markets, including with respect to land we may already own, and create additional costs and administration requirements, which in turn may harm our future sales, margins and earnings.


In addition, there is a variety of legislation being enacted, or considered for enactment, at the federal, state and local level relating to energy and climate change. This legislation relates to items such as carbon dioxide emissions control and building codes that impose energy efficiency standards. New building code requirements that impose stricter energy efficiency standards could significantly increase our cost to construct homes. Such environmental laws may affect, for example, how we manage



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storm water runoff, wastewater discharges and dust; how we develop or operate on properties on or affecting resources such as wetlands, endangered species, cultural resources, or areas subject to preservation laws; and how we address contamination. As climate change concerns continue to grow, legislation and regulations of this nature are expected to continue and become more costly to comply with. In addition, it is possible that some form of expanded energy efficiency legislation may be passed by the U.S. Congress or federal agencies and certain state legislatures, which may, despite being phased in over time, significantly increase our costs of building MPCs and the sale price to our buyers and adversely affect our sales volumes. We may be required to apply for additional approvals or modify our existing approvals because of changes in local circumstances or applicable law.


Energy-related initiatives affect a wide variety of companies throughout the United States and the world and, because our operations are heavily dependent on significant amounts of raw materials, such as lumber, steel and concrete, they could have an indirect adverse impact on our operations and profitability to the extent the manufacturers and suppliers of our materials are burdened with expensive cap and trade and similar energy related taxes and regulations. Our noncompliance with environmental laws could result in fines and penalties, obligations to remediate, permit revocations and other sanctions.


Governmental regulation affects not only construction activities but also sales activities, mortgage lending activities and other dealings with consumers. Further, government agencies routinely initiate audits, reviews or investigations of our business practices to ensure compliance with applicable laws and regulations, which can cause us to incur costs or create other disruptions in our business that can be significant. Further, we may experience delays and increased expenses as a result of legal challenges to our proposed communities, whether brought by governmental authorities or private parties.


We may be negatively impacted by the consolidation or closing of anchor stores.

Many of our mixed-used properties are anchored by “big box” tenants, like the iPic Theaters at our Fulton Market Building development project or CVS at our Lakeland Village Center at Bridgeland. We could be adversely affected if these or other anchor stores were to consolidate, close or enter into bankruptcy. Given the current economic environment for certain retailers, there is a heightened risk an anchor store could close or enter into bankruptcy. Even if we own the anchor space, we may be unable to re-lease this area or to re-lease it on comparable terms. The loss of these revenues could adversely affect our results of operations and cash flows. Further, the temporary or permanent loss of any anchor would likely reduce customer traffic in the retail center, which could lead to decreased sales at other retail stores. Rents obtained from other tenants may be adversely impacted as a result of co-tenancy clauses in their leases. One or more of these factors could cause the retail center to fail to meet its debt service requirements. The consolidation of anchor stores may also negatively affect current and future development projects.


We may have to make significant capital expenditures to maintain our hotel properties, and any development activities we undertake may be more costly than we anticipate.


Our hotels have an ongoing need for renovations and other capital improvements, including replacements, from time to time, of furniture, fixtures and equipment. Managers or franchisors of our hotels also will require periodic capital improvements pursuant to the management agreements or as a condition of maintaining franchise licenses. Generally, we are responsible for the cost of these capital improvements. As part of our long-term growth strategy, we may also develop hotel properties, timeshare units or other alternate uses of portions of our existing properties, including the development of retail, office or apartments, including through joint ventures. Such renovation and development involves substantial risks, including, but not limited to:



construction cost overruns and delays;


the disruption of operations and displacement of revenue at operating hotels, including revenue lost while rooms, restaurants or meeting


space under renovation are out of service;


the cost of funding renovations or developments and inability to obtain financing on attractive terms;


the return on our investment in these capital improvements or developments failing to meet expectations;


governmental restrictions on the nature or size of a project;


inability to obtain all necessary zoning, land use, building, occupancy, and construction permits;


loss of substantial investment in a development project if a project is abandoned before completion;


acts of God such as earthquakes, hurricanes, floods or fires that could adversely affect a project;



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environmental problems; and


disputes with franchisors or property managers regarding compliance with relevant franchise agreements or management agreements.


The occurrence of any of the aforementioned risks or any others not currently known to us could have a material adverse effect on our business, results of operation or financial condition.

Our business model includes entering into joint venture arrangements with strategic partners.

We currently have and intend to enter into other joint venture partnerships. These joint venture partners may bring local market knowledge and relationships, development experience, industry expertise, financial resources, financing capabilities, brand recognition and credibility or other competitive assets. In the future, we may not have sufficient resources, experience and/or skills to locate desirable partners. We also may not be able to attract partners who want to conduct business in the locations where our properties are located, and who have the assets, reputation or other characteristics that would optimize our development opportunities.

While we generally participate in making decisions for our jointly owned properties and assets, we might not always have the same objectives as the partner in relation to a particular asset, and we might not be able to formally resolve any issues that arise. In addition, actions by a partner may subject property owned by the joint venture to liabilities greater than those contemplated by the joint venture agreements, be contrary to our instructions or requests or result in adverse consequences. We cannot control the ultimate outcome of any decision made, which may be detrimental to our interests.

The bankruptcy or, to a lesser extent, financial distress of any of our joint venture partners could materially and adversely affect the relevant property or properties. If this occurred, we would be precluded from taking some actions affecting the estate of the other investor without prior court approval which would, in most cases, entail prior notice to other parties and a hearing. At a minimum, the requirement to obtain court approval may delay the actions we would or might want to take. If the relevant joint venture through which we have invested in a property has incurred recourse obligations, the discharge in bankruptcy of one of the other partners might result in our ultimate liability for a greater portion of those obligations than would otherwise be required.

Significant competition could have an adverse effect on our business.

The nature and extent of the competition we face depends on the type of property. With respect to our master planned communities, we compete with other landholders and residential and commercial property developers in the development of properties within the Las Vegas, Nevada; Houston, Texas; and Baltimore, Maryland/Washington, D.C. markets. A number of residential and commercial developers, some with greater financial and other resources, compete with us in seeking resources for development and prospective purchasers and tenants. Competition from other real estate developers may adversely affect our ability to attract purchasers and sell residential and commercial real estate, sell undeveloped rural land, attract and retain experienced real estate development personnel, or obtain construction materials and labor. These competitive conditions can make it difficult to sell land at desirable prices and can adversely affect our results of operations and financial condition.

There are numerous shopping facilities that compete with our operating retail properties in attracting retailers to lease space. In addition, retailers at these properties face continued competition from other retailers, including retailers at other regional shopping centers, outlet malls and other discount shopping centers, discount shopping clubs, catalog companies, internet sales and telemarketing. Competition of this type could adversely affect our results of operations and financial condition.

In addition, we will compete with other major real estate investors with significant capital for attractive investment and development opportunities. These competitors include REITs and private institutional investors.

Our substantial indebtedness could adversely affect our business, prospects, financial condition or results of operations and prevent us from fulfilling our obligations under the notes.

We have a significant amount of indebtedness. On October 2, 2013, we issued $750.0 million aggregate principal amount of our 6.875% Senior Notes due 2021 (the “Senior Notes”) and received net cash proceeds of $741.3 million. As of December 31, 2016, our total consolidated debt was approximately $2.7 billion (excluding an undrawn balance of $25.0 million under our



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revolving facilities) of which $906.9 million was recourse to the Company. In addition, we have $46.1 million of recourse guarantees associated with undrawn construction financing commitments as of December 31, 2016. As of December 31, 2016, our proportionate share of the debt of our Real Estate and Other Affiliates was $55.5 million based upon our economic ownership. All of the debt of our Real Estate and Other Affiliates is non-recourse to us.


Subject to the limits contained in the indenture governing the Senior Notes and any limits under our other debt agreements, we may be required to incur substantial additional indebtedness from time to time, including project indebtedness for developments by our subsidiaries. If we incur additional indebtedness, the risks related to our level of indebtedness could intensify. Specifically, an increased level of indebtedness could have important consequences, including:


making it more difficult for us to satisfy our obligations with respect to the Senior Notes and our other debt;


limiting our ability to obtain additional financing to fund future working capital, capital expenditures, debt service requirements, execution of our business strategy or finance other general corporate requirements;


requiring us to make non-strategic divestitures, particularly when the availability of financing in the capital markets is limited, which may adversely impact sales prices;  


requiring a substantial portion of our cash flow to be allocated to debt service payments instead of other business purposes, thereby reducing the amount of cash flow available for working capital, capital expenditures, acquisitions, dividends and other general corporate purposes;


increasing our vulnerability to general adverse economic and industry conditions, including increases in interest rates, particularly given that certain indebtedness bears interest at variable rates;


limiting our ability to capitalize on business opportunities, reinvest in and develop properties, and to react to competitive pressures and adverse changes in government regulations;


placing us at a disadvantage compared to other, less leveraged competitors;


limiting our ability, or increasing the costs, to refinance indebtedness; and


resulting in an event of default if we fail to satisfy our obligations under the Senior Notes or our other debt agreements or fail to comply with the financial and other restrictive covenants contained in the indenture governing the Senior Notes or our other debt, which event of default could result in the Senior Notes and all of our debt becoming immediately due and payable and, in the case of our secured debt, could permit the lenders to foreclose on our assets securing such debt.

The indenture governing our Senior Notes contains, and our other debt agreements contain, restrictions which may limit our ability to operate our business.


The indenture governing our Senior Notes contains, and some of our other debt agreements contain, certain restrictions. These restrictions limit our ability or the ability of certain of our subsidiaries to, among other things:



incur indebtedness or issue certain equity;


create certain liens;


pay dividends on, redeem or repurchase capital stock or make other restricted payments;


make investments;


incur obligations that restrict the ability of our subsidiaries to make dividend or other payments to us;


consolidate, merge or transfer all or substantially all of our assets;


enter into transactions with our affiliates; and


create or designate unrestricted subsidiaries.

Additionally, certain of our debt agreements also contain various restrictive covenants, including minimum net worth requirements, maximum payout ratios on distributions, minimum debt yield ratios, minimum fixed charge coverage ratios, minimum interest coverage ratio and maximum leverage ratios.

The restrictions under the indenture and or other debt agreements could limit our ability to finance our future operations or capital needs, make acquisitions or pursue available business opportunities.

We may be required to take action to reduce our debt or act in a manner inconsistent with our business objectives and strategies to meet such ratios and satisfy the covenants in our debt agreements. Events beyond our control, including changes in economic and business conditions in the markets in which we operate, may affect our ability to do so. We may not be able to meet the ratios or satisfy the covenants in our debt agreements, and we cannot assure you that our lenders will waive any failure to do



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so. A breach of any of the covenants in, or our inability to maintain the required financial ratios, under our debt agreements would likely result in a default under such debt agreements, which may accelerate the principal and interest payments of the debt and, if such debt is secured, result in the foreclosure on certain of our assets that secure such debt. A breach of any of the covenants in, or our inability to maintain the required financial ratios, under our debt agreements also would prevent us from borrowing additional money under such agreements that include revolving credit facilities. A default under any of our debt agreements could, in turn, result in defaults under other obligations and result in other creditors accelerating the payment of other obligations and foreclosing on assets securing such obligations, if any.

Any such defaults could materially impair our financial condition and liquidity. In addition, if the lenders under any of our debt agreements or other obligations accelerate the maturity of those obligations, we cannot assure you that we will have sufficient assets to satisfy our obligations under the notes or our other debt. 

We are subject to risks associated with hedging arrangements.

We enter into interest rate swap agreements and other interest rate hedging contracts, including caps and cash settled forward starting swaps, to mitigate or reduce our exposure to interest rate volatility or to satisfy lender requirements. These agreements expose us to additional risks, including a risk that counterparties of these hedging and swap agreements will not perform. There also could be significant costs and cash requirements involved to fulfill our obligations under a hedging agreement. In addition, our hedging activities may not have the desired beneficial impact on interest rate exposure and have a negative impact on our business, financial condition and results of operations.

We may not realize the value of our tax assets.

Certain provisions of the Internal Revenue Code could limit our ability to fully utilize certain tax assets if we were to experience a “change of control.” If such an event were to occur, the cash flow benefits we might otherwise have received would be eliminated. For example, we currently have approximately $33.8 million of federal net operating loss carryforwards, $25.0 million of which are subject to the separate return year limitation rules.


The new Trump Administration may make substantial changes to fiscal and tax policies that may adversely affect our business.


The Trump Administration has called for substantial change to fiscal and tax policies, which may include comprehensive tax reform. We cannot predict the impact, if any, of these changes to our business. However, it is possible that these changes could adversely affect our business and the real estate industry generally. It is likely that some policies adopted by the new administration will benefit us and others will negatively affect us. Until we know what changes are enacted, we will not know whether in total we benefit from, or are negatively affected by, the changes.

Our results of operations are subject to significant fluctuation by various factors that are beyond our control.

Our results of operations are subject to significant fluctuations by various factors that are beyond our control. Fluctuations caused by these factors may decrease or eliminate the income generated by a property, and include:


the regional and local economy, which may be negatively impacted by material relocation by residents, industry slowdowns, plant closings, increased unemployment, lack of availability of consumer credit, levels of consumer debt, housing market conditions, adverse weather conditions, natural disasters and other factors;


strength of the residential housing and condominium markets;


local real estate conditions, such as an oversupply of, or a reduction in demand for, retail space or retail goods and the availability and creditworthiness of current and prospective tenants;


decrease in traffic to our retail properties due to the convenience of other retailing options such as the internet;


perceptions by retailers or shoppers of the safety, convenience and attractiveness of our retail property;


the convenience and quality of competing retail properties;


our ability to lease existing, new or redeveloped  space, collect rent and attract new tenants;


ability to re-let space as leases expire on similar or more favorable terms than the terms of the expiring leases;


vacancies and changes in rental rates;


tenant rental rates, which may decline for a variety of reasons, including the impact of co-tenancy provisions in lease



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agreements with certain tenants; and


the decline of the reputation or perceived quality of the brands of our hotels.

A decline in our results of operations could have a negative impact on the market’s perception or view of our business and affect the trading price of our common stock.


Because real estate is illiquid, we may not be able to sell properties when in our best interest.


Real estate investments generally, and in particular large office and mixed-use properties like those that we develop and construct, often cannot be sold quickly. The capitalization rates at which properties may be sold could be higher than historic rates, thereby reducing our potential proceeds from sale. Consequently, we may not be able to alter our portfolio promptly in response to changes in economic or other conditions. All of these factors reduce our ability to respond to changes in the performance of our investments and could adversely affect our business, financial condition and results of operations.


Monetary policy actions by the U.S Federal Reserve could adversely impact our financial condition and our ability to make distributions to our stockholders.


In December 2016, the U.S. Federal Reserve raised the target range for the federal funds rate to a range from 0.50 to 0.75 percent. This decision was only the second increase since the Federal Reserve’s adoption of the low-interest-rate policy that was in effect for the seven years prior to December 2015. The targeted federal funds rate increase will likely result in an increase in market interest rates, which may increase our interest expense under our unhedged variable-rate borrowings and the costs of refinancing existing indebtedness or obtaining new debt. In addition, increases in market interest rates may result in a decrease in the value of our real estate and a decrease in the market price of our common stock. Increases in market interest rates may also adversely affect the securities markets generally, which could reduce the market price of our common stock without regard to our operating performance. Any such unfavorable changes to our borrowing costs and stock price could significantly impact our ability to raise new debt and equity capital going forward.


Inflation may adversely affect us by increasing costs beyond what we can recover through price increases.

Inflation can adversely affect us by increasing costs of land, materials and labor. In addition, significant inflation is often accompanied by higher interest rates, which have a negative impact on demand for homes in our MPCs and demand for our condominium projects, and our ability to refinance existing indebtedness on favorable terms, or at all. In an inflationary environment, depending on the homebuilding industry and other economic conditions, we may be precluded from raising land prices enough to keep up with the rate of inflation, which could significantly reduce our profit margins. In recent years we have been experiencing increases in the prices of labor and materials above the general inflation rate. Our inability to recover increasing costs due to inflation through price increases could have a material adverse effect on our results of operations, financial conditions and cash flows.

Some of our properties are subject to potential natural or other disasters.

A number of our properties are located in areas which are subject to natural or other disasters, including hurricanes, floods, earthquakes and oil spills. Some of our properties, including Ward Village, South Street Seaport and the Outlet Collection at Riverwalk are located in coastal regions, and could be affected by increases in sea levels, the frequency or severity of hurricanes and tropical storms, or environmental disasters, whether such events are caused by global climate changes or other factors.

Some potential losses are not insured.

We carry comprehensive liability, fire, flood, earthquake, terrorism, extended coverage and rental loss insurance on all of our properties. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are some types of losses, including lease and other contract claims, which generally are not insured. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital invested in a property, as well as the anticipated future revenue from the property. If this happens, we might remain obligated for any mortgage debt or other financial obligations related to the property.



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Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our tenants and business partners and personally identifiable information of our employees on our networks. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breaches due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks, and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings and liability under laws that protect the privacy of personal information, which could adversely affect our business, financial conditions and results of operations.

Possible terrorist activity or other acts of violence could adversely affect our financial condition and results of operations.

Future terrorist attacks in the United States or other acts of violence may result in declining economic activity, which could harm the demand for goods and services offered by tenants and the value of our properties and might adversely affect the value of an investment in our securities. Such a resulting decrease in retail demand could make it difficult to renew or re-lease properties at lease rates equal to or above historical rates. Terrorist activities or violence also could directly affect the value of our properties through damage, destruction or loss, and the availability of insurance for such acts, or of insurance generally, might be lower or cost more, which could increase our operating expenses and adversely affect our financial condition and results of operations. To the extent that tenants are affected by future attacks, their businesses similarly could be adversely affected, including their ability to continue to meet obligations under their existing leases. These acts might erode business and consumer confidence and spending and might result in increased volatility in national and international financial markets and economies. Any one of these events might decrease demand for real estate, decrease or delay the occupancy of new or redeveloped properties, and limit access to capital or increase the cost of capital.

We may be subject to potential costs to comply with environmental laws.

Future development opportunities may require additional capital and other expenditures to comply with laws and regulations relating to the protection of the environment. Under various federal, state or local laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property and may be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by the parties in connection with the contamination. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of the hazardous or toxic substances. The presence of contamination or the failure to remediate contamination may adversely affect the owner's ability to sell or lease real estate or to borrow using the real estate as collateral. Other federal, state and local laws, ordinances and regulations require abatement or removal of asbestos-containing materials in the event of demolition or certain renovations or remodeling, the cost of which may be substantial for certain redevelopments, and also govern emissions of and exposure to asbestos fibers in the air. Federal and state laws also regulate the operation and removal of underground storage tanks. In connection with our ownership, operation and management of certain properties, we could be held liable for the costs of remedial action with respect to these regulated substances or tanks or related claims.

We cannot predict with any certainty the magnitude of any expenditures relating to the environmental compliance or the long-range effect, if any, on our operations. Compliance with such laws has not had a material adverse effect on our operating results or competitive position in the past, but could have such an effect on our operating results and competitive position in the future.


Americans with Disabilities Act compliance could be costly.

The Americans with Disabilities Act of 1990, as amended (“ADA”), requires that all public accommodations and commercial facilities, including office buildings, meet certain federal requirements related to access and use by disabled persons. Compliance with ADA requirements could involve the removal of structural barriers from certain disabled persons' entrances which could adversely affect our financial condition and results of operations. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such accesses. Noncompliance with the ADA or similar or related laws or regulations could result in the United States government imposing fines or private litigants being awarded damages against us. In addition, changes to existing requirements or enactments of new requirements could require significant expenditures. Such costs may adversely affect our business, financial and results of operations.



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Some of our directors are involved in other businesses including real estate activities and public and/or private investments and, therefore, may have competing or conflicting interests with us.

Certain of our directors have and may in the future have interests in other real estate business activities, and may have control or influence over these activities or may serve as investment advisors, directors or officers. These interests and activities, and any duties to third parties arising from such interests and activities, could divert the attention of such directors from our operations. Additionally, certain of our directors are engaged in investment and other activities in which they may learn of real estate and other related opportunities in their non-director capacities. Our Code of Business Conduct and Ethics applicable to our directors expressly provides, as permitted by Section 122(17) of the Delaware General Corporation Law (the “DGCL”), that our non-employee directors are not obligated to limit their interests or activities in their non-director capacities or to notify us of any opportunities that may arise in connection therewith, even if the opportunities are complementary to, or in competition with, our businesses. Accordingly, we have no expectation that we will be able to learn of or participate in such opportunities. If any potential business opportunity is expressly presented to a director exclusively in his or her director capacity, the director will not be permitted to pursue the opportunity, directly or indirectly through a controlled affiliate in which the director has an ownership interest, without the approval of the independent members of our board of directors.

There is a risk of investor influence over our company that may be adverse to our best interests and those of our other stockholders.

Pershing Square Capital Management, L.P. (“Pershing Square”) beneficially owns approximately 9.0% of our outstanding common stock (excluding shares issuable upon the exercise of warrants) as of December 31, 2016. Under the terms of our stockholder agreements, Pershing Square has the ability to designate three members of our board of directors.

The concentration of ownership of our outstanding common stock held by Pershing Square and other substantial stockholders may make some transactions more difficult or impossible without the support of these stockholders, or more likely with the support of these stockholders. The interests of our substantial stockholders could conflict with or differ from the interests of our other stockholders. For example, the concentration of ownership held by Pershing Square and other substantial stockholders, even if these stockholders are not acting in a coordinated manner, could allow Pershing Square and other substantial stockholders to influence our policies and strategy and could delay, defer or prevent a change of control or impede a merger, takeover or other business combination that management and our board of directors believe may otherwise be favorable to us and our other stockholders.

Risks Related to Our Common Stock

Provisions in our certificate of incorporation, our by-laws, Delaware law, stockholders rights agreement and certain other agreements may prevent or delay an acquisition of us, which could decrease the trading price of our common stock.

Our certificate of incorporation and bylaws contain the following limitations:


the inability of our stockholders to act by written consent;


restrictions on the ability of stockholders to call a special meeting without 15% or more of the voting power of the issued and outstanding shares entitled to vote generally in the election of our directors;


rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; and


the right of our board of directors to issue preferred stock without stockholder approval.

We have also adopted a Section 382 rights agreement. This agreement assists in the preservation of our valuable tax attributes by acting as a deterrent to any person or group acquiring 4.99% or more of our outstanding common stock. The term of the stockholders rights agreement generally expires on the earlier of March 14, 2018, or the final day of a taxable year of the Company to which the Board of Directors of the Company determines that no tax benefit may be carried forward. All of these provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. There also may be dilution of our common stock from the exercise of outstanding warrants, which may materially adversely affect the market price and negatively impact a holder’s investment.




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Our principal executive offices are located in Dallas, Texas and New York, New York. We also maintain offices at certain of our properties nationwide, including The Woodlands, Texas; Honolulu, Hawaii; Columbia, Maryland and Las Vegas, Nevada. We believe our present facilities are sufficient to support our operations.


Master Planned Communities

The development of master planned communities requires expertise in large-scale and long-range land use planning, residential and commercial real estate development and sales. These developments often require decades of investment and continual focus on the changing market dynamics surrounding the communities. We believe that the long-term value of our master planned communities remains strong because of their competitive positioning in their respective markets, our expertise in diverse land use planning and the fact that we have substantially completed the entitlement processes within the majority of our communities.

Our MPC segment engages in the development and sale of residential land and the development of commercial land to hold or sell. Our master planned communities are located in and around Houston, Texas; Las Vegas, Nevada; and Columbia, Maryland. Residential revenues are generated primarily from the sale of finished lots and undeveloped superpads to residential homebuilders and developers. We also occasionally sell or lease land for commercial development when we deem its use will not compete with our existing properties or our Strategic Developments strategy. Superpad sites are generally 20 to 25 acre parcels of unimproved land where we develop and construct the major utilities (water, sewer and storm drainage) and roads to the borders of the parcel and the homebuilder completes the on-site utilities, roads and finished lots. Revenue is also generated through price participation with homebuilders. As of December 31, 2016, we had 8,109 residential and 3,423 commercial acres remaining to be developed in our MPCs.

The following table summarizes our master planned communities, all of which are wholly-owned as of December 31, 2016:






























































Approx. No.




Average Price Per Acre






Average Cash


Uninflated Value







People Living


Remaining Saleable Acres


(In thousands)






Margin (e)


($ in millions)





Acres (a)


in Community


Residential (b)


Commercial (c)






Lots (d)











Houston, TX






























Columbia, MD






























Las Vegas, NV




























The Woodlands


Houston, TX




























The Woodlands Hills (g)


Conroe, TX



























































Encompasses all of the land located within the borders of the master planned community, including parcels already sold, saleable parcels and non-saleable areas such as roads, parks and recreation areas, conservation areas and parcels acquired during the year.


Includes standard and custom residential land parcels. Standard residential lots are designed for detached and attached single family homes, ranging from entry-level to luxury homes. Certain residential parcels are designated as custom lots as their premium price reflects a larger size and other distinguishing features such as location within a gated community, having golf course access or higher elevations.


Designated for retail, office, resort, high density residential projects (condominiums and apartments), services and other for-profit activities, as well as those parcels allocated for use by government, schools, houses of worship and other not-for-profit entities.


Remaining Saleable Residential Lots are estimates and include only lots that are intended for sale or joint venture. The mix of intended use on our remaining saleable and developable acres is primarily based on assumptions regarding entitlements and zoning of the remaining project and are likely to change over time as the master plan is refined.


Average Cash Margin represents the total projected cash profit (total projected cash sales minus total projected cash development expenditures excluding land costs), divided by total projected cash sales.


Amount represents remaining entitlements, not necessarily the number of lots that will ultimately be developed and sold.


Total Gross Acres does not include 61 acres of land under contract to be acquired for $2.5 million in 2017.



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The Summit

Within our Summerlin MPC, we are currently developing an exclusive luxury community named The Summit, which is being developed and managed through a joint venture with Discovery Land Company (“Discovery”), a leading developer of luxury communities and private clubs. The 555-acre community will consist of approximately 262 homes, an 18-hole Tom Fazio designed golf course and other amenities for residents.

We contributed undeveloped land to the venture at an agreed upon value of $125.4 million (“Our Capital Contribution”), or $226,000 per acre. Discovery is required to fund up to a maximum of $30.0 million cash for development costs as their capital contribution, and we have no further capital obligations. After receipt of Our Capital Contribution and a 5.0% preferred return, Discovery is entitled to cash distributions by the joint venture until it has received two times its equity contribution. Any further cash distributions are shared 50/50. Discovery is the manager on the project, and land development began in second quarter 2015. Through December 2016, 136 custom home sites were mapped and available for sale, of which 60 were sold and closed as of December 31, 2016, and an additional 16 built product homesites will be available for sale in April 2017. Development of the golf course is nearing completion with a projected opening in March 2017. Final approvals for the remaining homesites and built product units are expected to be obtained in 2017. See further discussion in “Item 7. - Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


Operating Assets

In our Operating Assets segment, we own a variety of asset types including retail, office, multi-family, hospitality and other assets and investments. We have developed many of these assets since our spin-off in 2010. Our portfolio includes approximately 7.0 million square feet of retail and office, 1,118 wholly-owned multi-family units, 985 combined keys at hospitality properties, and other properties and investments. In addition to several other locations, our assets are primarily located in and around The Woodlands, Texas; Las Vegas, Nevada; Honolulu, Hawaii; New York, New York; and Columbia, Maryland. Revenue is generated through rental and hospitality services and is directly impacted by trends in rental and occupancy rates and operating costs. We will also occasionally sell an operating asset when it does not complement our existing properties or our strategy. We believe that the long-term value of our Operating Assets lies in our premier portfolio located in geographically diverse locations.

For certain of the remaining assets, we believe there are opportunities to improve their operating performance through redevelopment or repositioning. Factors we evaluate in determining whether to redevelop or reposition an asset include the following: (1) existing and forecasted demographics surrounding the property; (2) competition related to existing and/or alternative uses; (3) existing entitlements of the property and our ability to change them; (4) compatibility of the physical site with proposed uses; and (5) environmental considerations, traffic patterns and access to the properties.

We believe these assets have the potential for future growth by means of an improved tenant mix, additional gross leasable area (“GLA”), or a repositioning of the asset for alternative use. Redevelopment plans for these assets may include office, retail or residential space, shopping centers, movie theaters, parking complexes or open space and may require that we obtain permits, licenses, consents and/or waivers from various parties.




Table of Contents

The following table summarizes certain metrics of the retail properties within our Operating Assets segment as of December 31, 2016:


















Retail Properties




Existing Gross Leasable Area


% Leased


Annualized Base Rent
(In thousands) (a)


Annualized Base Rent Per Square Foot (a)


Year Built/ Acquired/Last Renovated

The Woodlands

















Creekside Village Green


The Woodlands, TX















Hughes Landing Retail


The Woodlands, TX















1701 Lake Robbins


The Woodlands, TX















One Lakes Edge Retail


The Woodlands, TX















20/25 Waterway Avenue


The Woodlands, TX














2007 / 2009

Waterway Garage Retail


The Woodlands, TX

















































Columbia Regional Building


Columbia, MD

















































Downtown Summerlin


Las Vegas, NV
































Ward Village

















Ward Village - Newly Renovated


Honolulu, HI















Ward Village Retail - Pending Redevelopment


Honolulu, HI

















































Cottonwood Square


Salt Lake City, UT















Lakeland Village Center at Bridgeland


Houston, TX















Landmark Mall


Alexandria, VA















Outlet Collection at Riverwalk


New Orleans, LA















South Street Seaport


New York, NY


















































Annualized Base Rent is calculated as the monthly Base Minimum Rent for the property for December 31, 2016 multiplied by 12. Annualized Base Rent Per Square Foot is the Annualized Base Rent for the property at December 31, 2016 divided by the average occupied square feet. 


Excludes 381,767 square feet of anchors, 162,300 square feet of pad sites, and 236,229 square feet of office.


41,612 square feet of the Existing Gross Leasable Area is part of a ground lease where we are the ground lessee. The ground lease payments are paid by the current tenant directly to the ground lessor.


Excludes 438,937 square feet that is owned and occupied by Sears and Macy's. We acquired the Macy’s space in January 2017. Macy’s recently announced their intention to close this location. We closed the mall for future redevelopment on January 31, 2017.


All of the project is on a ground lease where we are the ground lessee. With the opening of Nordstrom Rack in 2016, the property was expanded to 263,892 square feet.


A significant portion of the project is on a ground lease where we are the ground lessee. The existing GLA reflects square feet in service as of December 31, 2016. Upon completion of the redevelopment, South Street Seaport will be approximately 348,504 square feet, excluding future square feet to be constructed related to the Tin Building.




Table of Contents

The following table summarizes certain metrics of our office assets within our Operating Assets Segment as of December 31, 2016:
























Office Assets




Existing Gross
Leasable Area


% Leased



Base Rent
(In thousands) (a)


Annualized Base Rent Per Square Foot (a)



Annual Rent

(In thousands) (b)


Effective Annual 

Rent per Square Foot (b)



Year Built/
Acquired/ Last Renovated

The Woodlands























One Hughes Landing


The Woodlands, TX





















Two Hughes Landing


The Woodlands, TX





















Three Hughes Landing (c)


The Woodlands, TX





















1725 Hughes Landing Boulevard


The Woodlands, TX





















1735 Hughes Landing Boulevard


The Woodlands, TX





















2201 Lake Woodlands Drive (d)


The Woodlands, TX





















9303 New Trails


The Woodlands, TX





















3831 Technology Forest Drive


The Woodlands, TX





















3 Waterway Square


The Woodlands, TX





















4 Waterway Square


The Woodlands, TX





















1400 Woodloch Forest


The Woodlands, TX



































































American City Building (e)


Columbia, MD





















10-70 Columbia Corporate Center


Columbia, MD




















2012 / 2014

Columbia Office Properties


Columbia, MD





















One Mall North (f)


Columbia, MD



































































ONE Summerlin


Las Vegas, NV



































































110 N. Wacker


Chicago, IL




































































Annualized Base Rent is calculated as the monthly Base Minimum Rent for the property for December 31, 2016 multiplied by 12. Annualized Base Rent Per Square Foot is the Annualized Base Rent for the property at December 31, 2016 divided by the average occupied square feet. 


Effective Annual Rent includes Base Minimum Rent and Common Area Maintenance (CAM) Recovery Revenue. Effective Annual Rent Per Square Foot is the Effective Annual Rent divided by the average occupied square feet.


Three Hughes Landing was opened in third quarter 2016; therefore, Effective Annual Rent per Square Foot data is not meaningful (NM).


2201 Lake Woodlands Drive serves as temporary space for tenants relocating to permanent space; therefore, the Effective Annual Rent per Square Foot data is not meaningful.


American City Building has been moved to the Strategic Developments segment as of December 31, 2016, but we have included in this table relevant details relating to minimum rental revenues for the 117,098 square feet included in our results for the year ended December 31, 2016.


One Mall North was acquired in fourth quarter 2016; therefore, Effective Annual Rent per Square Foot data is not meaningful.




Table of Contents

The following tables summarize certain metrics of our multi-family, hospitality, and other Operating Assets (exclusive of wholly-owned retail and office properties in the above tables) as of December 31, 2016:

























Multi-family Assets




Ownership %


#  Units


Retail Square Feet


% Leased


Average Monthly Rate


Average Monthly Rate Per Square Foot


Year Built / Acquired / Last Renovated

The Woodlands























Millennium Six Pines Apartments (a)


The Woodlands, TX





















Millennium Waterway Apartments


The Woodlands, TX





















One Lakes Edge


The Woodlands, TX












































The Metropolitan Downtown Columbia


Columbia, MD














































Las Vegas, NV





















South Street Seaport























85 South Street


New York, NY









































Hospitality Assets




Ownership %