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Howard Hughes' Hotel Income Drops 90% In 2020, But Office Income Up 37%

An aerial view of Hughes Landing in The Woodlands, Howard Hughes Corp.'s master-planned community in north Houston.

Master-planned community developer Howard Hughes Corp. reported a net income loss of $26.2M in 2020, a departure from the net income gain of $74M in 2019, according to the firm’s Q4 2020 earnings report.

Howard Hughes Corp. posted a loss of $6.6M in the fourth quarter, compared with a loss of $1.1M during the same quarter in 2019.

Like many other companies in the commercial real estate sector, the coronavirus pandemic took a significant toll on the performance of Howard Hughes’ portfolio. For its operating assets, the developer reported a loss of $24.3M in 2020, down 11% from 2019.

Hospitality was the most heavily affected segment, reporting a net operating income of $2.9M in 2020, down 90% from the previous year. Retail reported net operating income of $40M in 2020, which was 36% lower than 2019.

Howard Hughes Corp. CEO David O’Reilly said the performance of its operating assets was disrupted early in the year as the effects of the pandemic negatively impacted the firm’s retail, hospitality and ballpark properties across the country.

“We experienced a precipitous fall in [net operating income] beginning in the second quarter as most of our nonessential retail tenants and hotel assets were forced to shutter,” O’Reilly said during the firm’s Q4 2020 earnings call.

In contrast, the firm’s office portfolio reported a gain of $30.7M, or 37%, in 2020, while multifamily reported a gain of $736K, or 4%. Howard Hughes Corp. attributed those gains to new assets in those segments being placed into service during the year.

Howard Hughes Corp.’s master-planned community segment reported earnings before tax of $209M in 2020, a decrease of 21% from the prior year. However, the developer attributed the decline to an outsized year in 2019, as the firm’s Summerlin development in Las Vegas, Nevada, closed on large super pad sales that year, which was not repeated in 2020.

O’Reilly noted that despite the decline, the 2020 earnings from master-planned communities exceeded the firm’s pre-pandemic target, as Howard Hughes Corp. typically expects those communities to generate between $180M and $200M in a normal year.

“Despite a pause in activity during the second quarter due to stay-at-home orders issued across the country, 253 more homes were sold in 2020 compared to 2019,” O’Reilly said.

O'Reilly has served as CEO and interim chief financial officer since September, when former CEO Paul Layne abruptly stepped down from the role.