HHC's second quarter report highlighted the continued progress it is making across all of its initiatives and business segments.
Net operating income ("NOT") from HHC (HHC, Financial)'s operating assets increased from $28.5 million to $36 3 million year-over-year as recently developed properties continue to stabilize. HHC held steady its projected annual stabilized NOT estimate (excluding the South Street Seaport) of $215 million after increasing it from $203 million at year-end. Land sales closed in its Master Planned Communities ("MPC") segment decreased from $47 million to $34 million year-over-year in Q2 due to weakness at Woodlands in Houston and timing of superpad sales. The housing market in Summerlin remains strong as demonstrated by $48 million in land sales at The Summit, which is HHC's luxury golf course joint venture development within Summerlin. The Woodlands, which develops and sells lots at the upper end of the Houston residential market continues to experience a slowdown in housing activity. HHC saw increased activity, land sale closings and absorption rates at Bridgeland due to stronger demand for more affordable lots in Houston.
At the Ward Village in Honolulu, construction of the Waiea and Anaha condo towers continues on plan. Over 85% of the total square feet available for sale is now under contract at both the Waiea and Anaha condos. The 174-unit Waiea condo is expected to be completed by year-end, at which point HHC will begin to generate a significant amount of cash flow from condo closings. Anaha, a 317-unit project, is expected to be completed by the second quarter of 2017. In February 2016, HHC began construction of Ae'o, the third of four mixed-use residential towers planned for the first phase of the Ward Village development. Whole Foods has pre-leased a substantial portion of the retail space at the base of this tower, which is scheduled for completion in late 2018. Pre-sales are ongoing at the 466-unit Ae'o tower with 45% of the total residential square feet available for sale under contract. The fourth condo tower, the 424-unit Ke Kilohana, sold 90% of its units in five days (in April 2016). Ke Kilohana is a workforce residential tower with 375 of its units designated for local residents. Total construction costs for all four towers are expected to be $1.45 billion of which HHC has incurred $523 million
While HHC did not announce any new material developments at the South Street Seaport in Q2, we are optimistic about the potential for significant value creation at the Seaport.
From Bill Ackman (Trades, Portfolio)'s mid-year 2016 letter.
