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TABLE OF CONTENTS
THE HOWARD HUGHES CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-K

(MARK ONE)
ý   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

or

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                        to                         

Commission File Number 001-34856



The Howard Hughes Corporation
(Exact name of registrant as specified in its charter)

Delaware   36-4673192
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)

13355 Noel Road, 22nd Floor, Dallas, Texas

 

75240
(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 ý    NO o

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 o    NO ý

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 ý    NO o

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 ý    NO o

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. o

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   ý   Accelerated filer   o

Non-accelerated filer

 

o (Do not check if a smaller reporting company)

 

Smaller reporting company

 

o

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

As of June 30, 2013, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately $4.4 billion based on the closing sale price as reported on the New York Stock Exchange.

As of February 24, 2014, there were 39,498,912 shares of the registrant's common stock outstanding.



DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement relating to its 2014 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 end of the fiscal year to which this Annual Report on Form 10-K relates.

 

Table of Contents

TABLE OF CONTENTS

Item No.
  Page Number  

Part I

 

1.

 

Business

   
2
 

1A.

 

Risk Factors

    24  

1B.

 

Unresolved Staff Comments

    36  

2.

 

Properties

    36  

3.

 

Legal Proceedings

    40  

4.

 

Mine Safety Disclosure

    40  

Part II

 

5.

 

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

   
41
 

6.

 

Selected Financial Data

    42  

7.

 

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

    44  

7A.

 

Quantitative and Qualitative Disclosures About Market Risk

    80  

8.

 

Financial Statements and Supplementary Data

    80  

9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

    80  

9A.

 

Controls and Procedures

    80  

9B.

 

Other Information

    83  

Part III

 

10.

 

Directors, Executive Officers and Corporate Governance

   
83
 

11.

 

Executive Compensation

    83  

12.

 

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

    83  

13.

 

Certain Relationships and Related Transactions, and Director Independence

    83  

14.

 

Principal Accountant Fees and Services

    83  

Part IV

 

15.

 

Exhibits and Financial Statement Schedule

   
84
 

Signatures

   
85
 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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," "estimate," "expect," "project," "forecast," "plan," "intend," "believe," "may," "should," "would," "likely," "realize," "transform" 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. These forward-looking statements present our estimates and assumptions only as of the date of this Annual Report on Form 10-K. 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.

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;

    continued low growth in the national economy and adverse economic conditions in the homebuilding, condominium development and retail sectors;

    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 compete effectively;

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

    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; and

    the other risks described in "Item 1A. Risk Factors."

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PART I

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.


ITEM 1. BUSINESS

OVERVIEW

Our mission is to be the preeminent developer of master planned communities and mixed use properties. We create timeless places and memorable experiences that inspire people while driving sustainable, long-term growth and value for our shareholders. We specialize in the development of master planned communities and the ownership, management and the redevelopment or repositioning of real estate assets currently generating revenues, also called Operating Assets, as well as other strategic real estate opportunities in the form of entitled and unentitled land and other development rights, also called Strategic Developments. We are headquartered in Dallas, Texas and our assets are located across the United States.

Unlike most publicly traded real estate companies which are limited in their activities because they have elected to be taxed as a real estate investment trust, we, except for Victoria Ward, Limited, one of our subsidiaries which is a captive REIT, have no restrictions on our operating activities or the types of services that we can offer. We believe our structure provides the greatest flexibility for maximizing the value of our real estate portfolio. As of December 31, 2013, our consolidated debt equaled approximately 33.2% of our total assets, and we had $894.9 million of cash on hand.

Our master planned communities 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 entitlements, land and home site sales and project developments will drive our long-term growth.

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: Master Planned Communities, Operating Assets and Strategic Developments. Financial information about each of our segments is presented in Note 18 – Segments of our audited financial statements on pages F-48 to F-52.

Recent Significant Transactions

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 $739.6 million. We have and will continue to use the net proceeds for development, acquisitions and other general corporate purposes. Interest is payable semiannually, on April 1 and October 1 of each year starting in April 2014. The Notes contain customary terms and covenants and have no maintenance covenants.

In the fourth quarter of 2012, we retired warrants to purchase 6,083,333 shares of our common stock pursuant to the warrant purchase agreements by and among the Company and affiliates of Brookfield Asset Management, Fairholme Funds and Blackstone Real Estate Partners. We paid a total of $80.5 million in cash and issued 1,525,272 shares of our common stock to Brookfield in connection with the warrant transactions. The warrant transactions reduced diluted common shares outstanding by 9.2%, or 4,558,061 shares, to a total of 45,119,706 shares assuming all stock options and warrants outstanding at December 31, 2012, were exercised.

On July 1, 2011, we acquired our former partner's 47.5% economic interest in The Woodlands pursuant to a Partnership Interest Purchase Agreement. We paid $20.0 million in cash at closing and the remaining $97.5 million of the purchase price was represented by a non-interest bearing promissory note which we repaid from available cash on hand on December 1, 2011. Following the acquisition, we

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own 100% of The Woodlands and control all aspects related to the management and development of The Woodlands. Our management and development staff for The Woodlands master planned community also manages the development of Bridgeland, our other Houston, Texas master planned community. We are leveraging The Woodlands' nearly 40 years of master planned community development experience to replicate The Woodlands success at Bridgeland, which is located 40 miles southwest of The Woodlands and is in the early stages of its development life cycle.

Overview of Business Segments

Master Planned Communities.    Our Master Planned Communities segment consists of the development and sale of residential and commercial land, primarily in large-scale projects. We own four master planned communities (The Woodlands, Summerlin, Bridgeland and Maryland). Our master planned community in Maryland includes four separate communities that are collectively referred to as the "Maryland Communities."

Our master planned communities include over 11,500 acres of land remaining to be sold. Residential sales, which are made primarily to home builders, include standard and custom parcels as well as high density (e.g., condominiums, townhomes and apartments) parcels designated for detached and attached single- and multi-family homes, ranging from entry-level to luxury homes. Commercial sales include land parcels designated for retail, office, resort, services and other for-profit activities, as well as those parcels designated for use by government, schools and other not-for-profit entities.

Operating Assets.    Our Operating Assets segment contains 27 properties, investments and other assets that currently generate revenue, consisting primarily of commercial mixed-use, retail, multi-family and office properties. These assets include eight mixed-use and retail properties, nine office properties (the "Columbia Office Properties" contain five separate office buildings), a multi-family apartment building, a resort and conference center, a 36-hole golf and country club, three equity investments and four other assets. We believe that there are opportunities to redevelop or reposition many of these assets, primarily the retail properties, to increase operating performance. These opportunities will require new capital investment and vary in complexity and scale. The redevelopment opportunities range from minimal disruption to the property to the partial or full demolition of existing structures for new construction.

Strategic Developments.    Our Strategic Developments segment consists of near, medium and long-term development projects for 24 of our real estate properties. We believe most of these 24 assets will require substantial future development to achieve 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. In addition to the permitting and approval process attendant to almost all large-scale real estate developments of this nature, we will likely need to obtain financing to realize a development plan for one or more of these assets.

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The chart below presents our assets by reportable segment at December 31, 2013.

CHART

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, sales and other special skills. The development of our large scale master planned communities requires decades of investment and continual focus on the changing market dynamics surrounding these communities. We believe that the long-term value of our master planned communities remains strong because of their competitive and dominant positioning in their respective markets, our expertise and flexibility in land use planning and the fact that we have substantially completed the entitlement process within our communities.

Our Master Planned Communities segment consists of the development and sale of residential land and the development of commercial land to hold, develop or sell. Our master planned communities are located in and around Las Vegas, Nevada; Houston, Texas; and Columbia, Maryland. Residential revenues are generated primarily from the sale of finished lots and undeveloped superpads to residential builders and commercial developers. Revenue is also generated through profit participation with builders. Revenues and net income are affected by factors such as: (1) the availability of construction and permanent mortgage financing to purchasers at acceptable interest rates; (2) consumer and business confidence; (3) regional economic conditions in the areas surrounding the projects, which includes levels of employment and homebuilder inventory; (4) other factors generally affecting the homebuilder business and sales of residential properties; (5) availability of saleable land for particular uses; and (6) our decisions to sell, develop or retain land.

The geographic markets in which our master planned communities operate are experiencing different rates of recovery following the housing market decline that started in 2007. The Woodlands has benefited from companies relocating to Houston and the growth of energy sector companies, particularly with the announcement in 2012 of the new 385-acre Exxon Mobil Corporation ("ExxonMobil") campus located just four miles south of The Woodlands. Bridgeland land sales were adversely affected in 2013 compared to prior years due to a pending wetland permit application from the U.S. Army Corps of Engineers ("USACE"). On February 27, 2014, we received the wetlands permit from USACE and expect to begin delivering new finished lots by mid-2014. The Las Vegas, Nevada market is recovering and our Summerlin Master Planned Community has experienced significant improvement in 2013 land sales compared to the past two years, with the bulk of their land sales coming in the form of superpad sites. The Maryland Communities have no more remaining residential saleable acres and represent primarily a commercial real estate development opportunity.

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The following table summarizes our master planned communities, all of which are wholly owned, as of December 31, 2013:

 
   
   
   
  Remaining Saleable Acres    
   
   
 
Community
  Location   Total
Gross
Acres(a)
  People
Living in
Community
(Approx.
No.)
  Residential
(b)
  Commercial
(c)
  Total   Other
Acres(d)
  Remaining
Saleable
Residential
Lots(e)
  Projected
Community
Sell-Out
Date
 

Bridgeland

  Houston, TX     11,400     7,350     3,452     1,149     4,601     —       17,665     2036  

Maryland

                                                     

Columbia

  Howard County     14,200     100,000     —       —       —       35     —       2022 (f)

Gateway

  Howard County     630     —       —       63     63     40     —       2018  

Emerson

  Howard County     520     3,400     —       34     34     —       —       2017  

Fairwood

  Prince George's County     1,100     2,600     —       11     11     24     —       2017  

Summerlin

  Las Vegas, NV     22,500     100,000     4,804     873     5,677     —       42,000 (g)   2039  

The Woodlands

  Houston, TX     28,400     107,800     623     563     1,186     290     2,064     2022  
                                         

Total

        78,750     321,150     8,879     2,693     11,572     389     61,729        
                                         
                                         

(a)
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 and conservation areas.
(b)
Includes standard, custom and high density residential land parcels. Standard residential lots are designed for detached and attached single- and multi-family homes, consisting of a broad range, from entry-level to luxury homes. At Summerlin and The Woodlands, we have designated certain residential parcels as custom lots as their premium price reflects their larger size and other distinguishing features – such as being located within a gated community, having golf course access or being located at higher elevations. High density residential includes townhomes, apartments and condominiums. Reflected are the remaining residential acres.
(c)
Designated for retail, office, resort, 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.
(d)
With the exception of Gateway, reflects the number of net developable acres of raw land and subdivided land parcels available for new development, and which we currently intend to hold. In 2013, The Woodlands began developing 26 acres for its own use, which includes three office buildings, an apartment complex and two retail centers.
(e)
Includes only parcels that are intended for sale or joint venture. The mix of intended use, as well as the amount of remaining saleable acres, are 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. Remaining saleable lots are estimates.
(f)
We currently intend to develop the land surrounding the Columbia Town Center. The date represents our estimated redevelopment completion date.
(g)
Amount represents remaining entitlements, not necessarily the number of lots that will ultimately be developed and sold.

Bridgeland (Houston, Texas)

Bridgeland is located near Houston, Texas and consists of approximately 11,400 acres. It was voted "Master Planned Community of the Year" in 2013 by Greater Houston Builders Association and voted by The National Association of Home Builders as the "Master Planned Community of the Year" in 2009. The first residents moved into their homes in June 2006. There were approximately 2,100 homes occupied by approximately 7,350 residents as of December 31, 2013.

We anticipate that the Bridgeland community will eventually accommodate approximately 20,000 homes and 65,000 residents. We further believe that it is poised to be one of the top master planned communities in the nation. The Woodlands senior management team, averages over 25 years each of experience developing master planned communities, is leading the development and marketing of Bridgeland. As of December 31, 2013, Bridgeland had approximately 3,452 residential acres and 1,149 commercial acres remaining to be sold.

Bridgeland's conceptual plan was revised in 2012 and includes four villages – Lakeland Village, Parkland Village, Prairieland Village and Creekland Village. The conceptual plan also includes an 800-acre Town Center mixed-use district and a carefully designed network of trails totaling over 60 miles that will provide pedestrian connectivity to distinct residential villages and neighborhoods and access to recreational, educational, cultural, employment, retail, religious and other offerings.

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The conceptual plan also contemplates that the Town Center will be located adjacent to the expansion of State Highway 99 (the "Grand Parkway"), which is a 180-mile circumferential highway traversing seven counties that provides access to southwest, west, northwest, north and northeast Houston. Segment E of the Grand Parkway is a 15-mile four-lane controlled access toll road with intermittent frontage roads from Interstate 10 to Highway 290 through Harris County. Segment E, which has four interchanges serving Bridgeland, provides direct access to the portion of Bridgeland designated for the Town Center and to future residential sections of Bridgeland allowing for enhanced access to the master planned development. Construction on Segment E began in October 2011 and was officially opened for traffic on December 21, 2013. Additional segments are scheduled for completion in 2015 that will connect Bridgeland to The Woodlands, the new ExxonMobil Campus and Houston's George Bush Intercontinental Airport.

Bridgeland's first five neighborhoods are located in Lakeland Village. Bridgeland has many home sites that have views of the water, buried power lines to maximize the views of open space, fiber-optic technology, brick-lined terrace walkways and brick, stone and timber architecture. The prices of the homes range from approximately $200,000 to more than $1.0 million. Lakeland Village is approximately 65% complete. The complex is anchored by a 6,000 square foot community center and features a water park with three swimming pools, two lighted tennis courts and a state-of-the-art fitness room. A grand promenade wrapping around Lake Bridgeland offers a boat dock, canoes, kayaks, sailboats and paddleboats.

We expect Bridgeland to feature more than 3,000 acres of waterways, lakes, trails, parks and open spaces, as well as an expansive Town Center that will provide employment and room for retail, educational and entertainment facilities.

Maryland Communities

Our Maryland communities consist of four distinct projects:

    Columbia;

    Gateway;

    Emerson; and

    Fairwood.

Columbia

Columbia, located in Howard County, Maryland, is an internationally recognized model of a successful master planned community that began development in the 1960's. As of December 31, 2013, Columbia was home to approximately 100,000 people.

Situated between Baltimore and Washington, D.C., and encompassing 14,200 acres of land, Columbia offers a wide variety of living, business and recreational opportunities. The master planned community's full range of housing options is located in nine distinct, self-contained villages and a Town Center. Columbia has an estimated 5,500 businesses, which occupy approximately 26 million square feet of space and provide more than 63,000 jobs. There is a wide variety of retail options encompassing approximately 4.8 million square feet of retail space in more than 500 stores.

As a result of the 2005 Base Realignment and Closure Commission, additional government agencies have been relocated to Fort George G. Meade, just 11 miles from Downtown Columbia. The overall workforce on the base is projected to be 60,000 people by 2015 due to its role in cyber security and protecting the nation's information technology assets from foreign threats. An economic engine for the region, Fort Meade directly or indirectly supports approximately 170,000 local jobs and growth projections indicate that there will be demand for office space and housing for highly paid personnel.

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In downtown Columbia, 1.6 million square feet of office space is located close to shopping, restaurants and entertainment venues. We believe there is significant opportunity to redevelop this area in the future. During 2010, we received entitlements to develop up to 5,500 new residential units, 4.3 million square feet of commercial office space, 1.25 million square feet of retail space and 640 hotel rooms.

In November, 2010, we entered into development agreements with General Growth Properties, Inc. ("GGP") that provide for the division of properties between our Company and GGP in an area within the Mall Ring Road surrounding the Mall in Columbia, which is owned by GGP. We have a preferred residential and office development covenant that provides us the right of first offer for new development densities of residential and office within the Columbia Mall Ring Road. This covenant expires in 2030. The development agreements contain the key terms, conditions, responsibilities and obligations with respect to the future development of this area within the greater Downtown Columbia Redevelopment District. The agreements also provide us with a five-year right of first refusal and a subsequent six-month purchase option to acquire seven office buildings and associated parking lots, totaling approximately 22 acres. In August 2012, we acquired 70 Columbia Corporate Center, a 168,000 square foot office building, one of the buildings associated with our right of first refusal. There are now six office buildings remaining under this right of first refusal.

During 2011, we contributed more than four acres of land to The Metropolitan Downtown Columbia Project for the development of a 380-unit Class A apartment building with a local multi-family developer, Kettler, Inc. ("Kettler"), which is described under "– Strategic Developments".

On October 4, 2013, we entered into a joint venture agreement with Kettler to construct a 437-unit, Class A apartment building with 31,000 square feet of ground floor retail on Parcel C, which is described under "– Strategic Developments".

We also own approximately 35 acres, net of road and related infrastructure improvements, on the land around Merriweather Post Pavilion, an outdoor amphitheater and concert venue, which is south of Columbia Mall. The acreage currently consists of raw land and subdivided land parcels readily available for new development. We held the initial public meeting called for in the county's Final Development Plan (FDP) process and intend to formally submit an FDP application in early 2014. Preliminary plans call for at least four million square feet of development activity, with high-rise buildings encompassing the Central Park-like setting afforded by the Pavilion and its surrounding property.

Gateway

Gateway is a 630-acre premier master planned corporate community located in a high traffic area in Howard County, Maryland. Gateway offers quality office space in a campus setting with approximately 63 commercial acres remaining to be sold as of December 31, 2013.

Emerson

Emerson is located in Howard County, Maryland and consists of approximately 520 acres. The first residents moved into their homes in 2002. Emerson has a wide assortment of single-family homes and townhomes offered by some of the region's top homebuilders and is located in one of Maryland's top-performing public school districts. As of December 31, 2013, there were approximately 1,210 homes occupied by approximately 3,400 residents with 34 commercial acres remaining to be developed. The remaining commercial land is fully entitled for build-out, subject to meeting local requirements for subdivision and land development permits.

Fairwood

Fairwood is a fully developed master planned community located in Prince George's County, Maryland, consisting of approximately 1,100 acres. Fairwood consists of single-family and townhouse lots, as well as undedicated open space and two historic houses. The first residents moved into their single-family

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homes in 2002. As of December 31, 2013, there were approximately 1,200 homes occupied by approximately 2,600 residents with 11 commercial acres available for sale. In addition to the commercial acres remaining to be sold, we own a few undedicated open space parcels, and 24 acres of unsubdivided land which cannot be developed as long as the nearby airport is operating.

Summerlin (Las Vegas, Nevada)

Spanning the western rim of the Las Vegas Valley and located approximately nine miles from downtown Las Vegas, our 22,500 acre Summerlin Master Planned Community is comprised of planned and developed villages and offers suburban living with accessibility to the Las Vegas Strip. For much of its 20-year history, Summerlin has consistently ranked in the Robert Charles Lesser annual poll of Top-Selling Master Planned Communities in the nation, ranking 11th in 2013. With 22 public and private schools (K-12), four institutions of higher learning, nine golf courses, and cultural facilities, Summerlin is a fully integrated community. The first residents moved into their homes in 1991. As of December 31, 2013, there were approximately 41,000 homes occupied by approximately 100,000 residents.

Summerlin is comprised of hundreds of neighborhoods located in 19 developed villages, out of 30 currently planned, with nearly 150 neighborhood and village parks that are all connected by a 150-mile long trail system. Summerlin is located adjacent to Red Rock Canyon National Conservation Area, a landmark in southern Nevada, which has become a world-class hiking and rock climbing destination. It is also in close proximity to our Shops at Summerlin development site. As described in "Item 7 – Management Discussion and Analysis of Financial Condition and Results of Operations – Strategic Developments", in 2013 we executed agreements with two anchor retailers for approximately 380,000 square feet at The Shops at Summerlin, a 1.6 million square foot mixed-use downtown development. We believe that the completion of the downtown will significantly increase the value of our surrounding land due to the addition of retail, office, restaurant and entertainment amenities. Red Rock Casino Resort & Spa, which is adjacent to our site, receives more than one million visitors annually. Summerlin contains approximately 2.1 million square feet of developed retail space, 3.3 million square feet of developed office space and three hotel properties containing approximately 1,400 hotel rooms. Health and medical centers are also located at Summerlin, including Summerlin Hospital.

Summerlin is divided into three separate regions known as Summerlin North, Summerlin West and Summerlin South. Summerlin North is fully developed and sold out. In Summerlin South, we are entitled to develop 740 acres of commercial property with no square footage restrictions, 355 of such acres are owned by third parties or already committed to commercial development. We also have entitlements for an additional 18,000 residential units yet to be developed in Summerlin South. In Summerlin West, we are entitled to develop 5.85 million square feet of commercial space on up to 508 acres of which 100,000 square feet has already been developed through the construction of a grocery store anchored shopping center. We are also entitled to develop 30,000 residential units in Summerlin West, approximately 24,000 of which remain to be developed. The remaining 42,000 saleable residential lots represent Summerlin's total entitlements, and utilization of these entitlements is based on current and forecasted economic conditions. As of December 31, 2013, Summerlin had approximately 4,804 residential acres and 873 commercial acres remaining to be sold. Summerlin's population upon completion of the project is expected to be in excess of 200,000 residents.

The Woodlands (Houston, Texas)

The Woodlands is a 28,400 acre mixed-use self-contained master planned community approximately 1.5 times the size of Manhattan, New York, situated 27 miles north of Houston. The Woodlands provides an exceptional lifestyle and integrates recreational amenities, residential neighborhoods, commercial office space, retail shops and entertainment venues.

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During its nearly 40-year history, The Woodlands has won numerous awards, with the most recent being the Urban Land Institute's 2014 "Vision Award for Exemplary Leadership." Past awards include the Master Planned Community of the Year presented by the Greater Houston Builders Association in 2010 for overall planning and design of The Woodlands. The Woodlands has consistently ranked as one of the top master planned communities in the nation and Texas with regard to annual home sales. The Woodlands was ranked 8th nationally and was also ranked 3rd in the Houston area in 2013 for the number of home sales by Robert Charles Lesser.

The Woodlands includes a waterway, outdoor art and an open-air performance pavilion, a resort and conference center, a luxury hotel and convention center, educational opportunities for all ages, hospitals and health care facilities. The Fountains at Waterway Square located on The Woodlands Waterway connects all of the amenities of the community via a water taxi system serving The Woodlands Town Center area and will eventually have connectivity to East Shore and Hughes Landing.

Home site sales began in 1974. To maximize long term values, the development started with residential activity with land reserved for the eventual development of a town center containing office, retail, multi-family and hotel properties to serve the residents. Over time the residential success created demand for commercial development. In recent years, the commercial and residential components have achieved significant appreciation in values and acceleration of development. The development and opening in 2014 of the new ExxonMobil campus four miles south of The Woodlands, should further accelerate commercial development and drive residential pricing and velocity as employees relocate to the ExxonMobil campus and businesses serving ExxonMobil relocate to our commercial properties in order to be close to the campus. Additionally, by virtue of the fact that The Woodlands owns most of the available land, we have substantial influence over the market and our competitors.

As of December 31, 2013, there were approximately 40,618 homes occupied by approximately 107,800 residents and more than 1,900 businesses providing employment for approximately 54,500 people. We estimate that The Woodlands has a jobs to home ratio of approximately 1.34 to 1.00. This ratio implies that many residents also work within the MPC, making it a more attractive place to live compared to purely residential communities by improving quality of life through short commute times.

Approximately 28% of The Woodlands is dedicated to green space, including parks, pathways, open spaces, golf courses and forest preserves. The population is projected to be approximately 130,000 by 2021. The Woodlands has full or partial ownership interests in commercial properties totaling approximately 1,709,782 square feet of office space (of which 865,782 square feet is complete and 844,000 square feet is under construction), 398,632 square feet of retail and service space (of which 201,280 square feet are complete and 197,352 square feet are under construction) and 1,097 rental apartment units (of which 393 units are complete and 704 units are under construction). We also own and operate a 440-room resort and conference center facility, with a second 300-room hotel soon to be under construction, and a 36-hole golf course with a country club facility. These commercial properties are more fully described under "– Operating Assets". As of December 31, 2013, The Woodlands had approximately 623 acres of unsold residential land representing approximately 2,064 lots.

As of December 31, 2013, The Woodlands had 853 acres of land designated for commercial use remaining to be sold or developed, which is currently designated as 563 acres for third-party land sales and 290 acres for development. The 290 acres intended to be developed is comprised of 110 acres for apartments or condominiums, 28 acres for retail development, three acres for hotel facilities, nine acres for mixed-use and 140 acres for office buildings. The Woodlands is well positioned to dominate the commercial market for the next several years because we have the largest inventory of vacant commercial land available in the area and we offer virtually every product type being sought after by our customers. The mix of acreage designated for development versus sale may change over time based on market conditions, projected demand, our view of the economic benefits of developing or selling and other factors.

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The ExxonMobil corporate campus that is located on a 385-acre site south of The Woodlands is expected to include approximately 20 buildings, representing three million square feet of space. ExxonMobil expects to begin relocating employees into this new location starting in 2014 and ending in mid-2015. Upon completion of the relocation, ExxonMobil estimates there will be approximately 10,000 employees working at the new campus. We believe that the direct and indirect jobs related to this relocation will have a significant positive impact on The Woodlands and Bridgeland due to increased housing demand, as well as commercial space needs for companies servicing ExxonMobil.

Since inception, The Woodlands has always sought to maintain a wide array of home choices and marketed that information to the realtor community as they are critical in providing guidance to the corporate relocation homebuyer. As a result of this effort, over the last ten years The Woodlands has achieved an average of approximately 42% of new home sales attributable to "Outside of Houston Area" residents. Due to the new ExxonMobil campus that opens in 2014, we are seeing increased home sales to ExxonMobil employees who are relocating to The Woodlands in order to live in closer proximity to the new campus.

We believe the construction of The Grand Parkway linking The Woodlands and Bridgeland to the new ExxonMobil campus and the rest of the greater Houston area will have a positive impact on purchasing decisions for residents in our Houston master planned communities. Construction of the segments of The Grand Parkway that will serve The Woodlands and Bridgeland are expected to be completed in 2015.

Operating Assets

We own eight mixed-use and retail properties, nine office properties (the Columbia Office Properties contain six separate office buildings, which includes 70 Columbia Corporate Center), a multi-family apartment building, a resort and conference center, a 36-hole golf course and country club, three equity investments and four other assets that generate revenue. Based on a variety of factors, we believe that there are opportunities to redevelop or reposition certain of these assets, primarily the retail and Columbia office properties, to improve their operating performance. These factors include, but are not limited to 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 that, subject to obtaining all necessary consents and approvals, these assets have the potential for future growth by means of an improved tenant mix, additional gross leasable area ("GLA"), or 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 and open space. Any future redevelopment will require the receipt of permits, licenses, consents and waivers from various parties. Our retail properties include approximately 2.2 million total square feet of GLA in the aggregate. Our office properties include approximately 1.5 million total square feet of GLA in the aggregate.

Retail

20 & 25 Waterway Avenue (The Woodlands, Texas)

20 & 25 Waterway Avenue are two retail properties located in The Waterway Square commercial district in The Woodlands Town Center. The properties total 49,972 square feet and were completed in 2009 and 2007, respectively. The properties are currently 100% leased as of December 31, 2013.

Cottonwood Square (Salt Lake City, Utah)

Cottonwood Square is a 77,079 square foot community center situated in a high traffic area. This site is across from our Cottonwood Mall property, which provides an opportunity for development synergies. The property is currently 94% leased.

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Landmark Mall (Alexandria, Virginia)

Anchored by Macy's and Sears, Landmark Mall is an 879,413 square foot shopping mall located just nine miles west of Washington, D.C. The mall is within one mile of public rail service on D.C.'s metro blue line. In 2013 we received unanimous rezoning approval from the City of Alexandria for Phase I of the redevelopment which includes converting 11 acres of our 22 acre site, located within the center of the property between Macy's and Sears, from a traditional enclosed mall to a vibrant outdoor mixed-use environment with street retail shops and restaurants and high density residential. The redevelopment requires the consent of Macy's and Sears, and within Phase I of the redevelopment, we will construct approximately 285,000 square feet of new retail including a upscale dine-in movie theater, and up to 400 residential units. Future phases may include the balance of the mall site with mixed-use densities to total up to 5.5 million square feet as prescribed in the City of Alexandria's 2009 Van Dorn Small Area Plan. Future redevelopment will also be subject to approval of the anchor tenants as part of a reciprocal easement agreement that governs the property. We expect to begin redevelopment in 2014.

Park West (Peoria, Arizona)

Park West is a 249,184 square foot open-air shopping, dining and entertainment destination which is approximately one mile northwest of the Arizona Cardinals' football stadium and the Phoenix Coyote's hockey arena. Park West has an additional 100,000 square feet of available development rights as permitted for retail, restaurant and hotel uses. On November 5, 2012, we acquired four parcels of land adjacent to our Park West property consisting of approximately 18 acres. The acquisition enhances our control over infrastructure requirements and development rights associated with our property. The property is 76.4% leased as of December 31, 2013.

South Street Seaport (New York, New York)

South Street Seaport is comprised of the historic area and Pier 17. The historic area (area west of the FDR Drive) includes three mid-rise buildings and retail condominium space in an adjacent 1.1 million square foot office tower. Pier 17 includes a pavilion shopping center located in a historic waterfront district on the East River in Manhattan. The property is subject to a ground lease expiring in 2072. Upon completion of the Pier 17 Renovation Project ("Renovation Project", as described below), South Street Seaport will have approximately 362,000 square feet of leasable space, substantially all of which is retail.

On November 20, 2013, we announced plans for further redevelopment of the South Street Seaport district. The current zoning will support an additional 700,000 square feet of development. The plan features East River Esplanade improvements, restoration of the historic Tin Building, replacement of the wooden platform piers adjacent to Pier 17 and a mixed-use tower. The plan will need the approval of the New York City Landmarks Preservation Commission and will be subject to a Uniform Land Use Review Procedure ("ULURP") that requires approval by the New York City Council. We expect to begin the ULURP process in 2014.

On June 27, 2013, the City of New York executed the amended and restated ground lease for South Street Seaport, which was the final step necessary for the commencement of the renovation and reconstruction of the existing Pier 17 Building. Simultaneously with the execution of the lease, we executed a completion guaranty which requires us to perform certain obligations under the lease, including the commencement of construction with a scheduled completion date of March 31, 2016. The Renovation Project will increase the leasable area of Pier 17 to approximately 182,000 square feet and features a complete transformation of the Pier 17 building designed to include a vibrant, open rooftop with 40% more open space, upscale retail and outdoor entertainment venues. Construction on this site began during September 2013. In addition to the Renovation Project, we plan to retenant approximately 180,000 square feet of the historic area. The estimated costs for the Renovation Project and retenanting of the historic area are approximately $425 million.

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On October 29, 2012, South Street Seaport was heavily impacted by Superstorm Sandy. The storm caused massive flooding in the waterfront areas of Lower Manhattan, including the South Street Seaport historic area. Reconstruction efforts are ongoing and the property is only partially operating.

Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this redevelopment project.

Outlet Collection at Riverwalk (New Orleans, Louisiana)

The Outlet Collection at Riverwalk (formerly known as "Riverwalk Marketplace") is located along the Mississippi River in downtown New Orleans and is adjacent to the New Orleans Memorial Convention Center and the Audubon Aquarium of the Americas. Construction of the Outlet Collection at Riverwalk began in July 2013 and is expected to open in the second quarter of 2014. This redevelopment expands our existing footprint by 50,000 square feet to approximately 250,000 square feet, and the total estimated costs are approximately $82 million (exclusive of our land value).

Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this redevelopment project.

Ward Centers (Honolulu, Hawaii)

Ward Centers is comprised of approximately 60 acres situated along Ala Moana Beach Park and is within one mile of Waikiki and downtown Honolulu. It is also a ten minute walk from Ala Moana Center, Hawaii's largest shopping center. Ward Centers currently includes a 665,000 square foot shopping district containing seven specialty centers and approximately 140 unique shops, a variety of restaurants and an entertainment center which includes a 16-screen movie theater.

In January 2009, the Hawaii Community Development Authority ("HCDA") approved a 15-year master plan, which entitles us to develop a mixed-use development encompassing a maximum of 9.3 million square feet, including up to 7.6 million square feet of residential space. In January 2011, we executed a development agreement with the HCDA which expires in 2024.

During 2011, we completed a 722-stall parking deck that directly serves the Ward Village Shops and the Auahi Shops tenants at a cost of $70.8 million. In 2012, Ward Village Shops was completed consisting of approximately 70,000 square feet at a cost of $32.1 million, and as of December 31, 2013, construction for Auahi Shops consisting of 57,000 square feet was substantially complete and at final completion we expect total costs to approximate $26.0 million. Pier 1 Imports and Nordstrom Rack occupy 100% of this retail center and relocated from their former locations within Ward Centers.

Consistent with the master plan approved by the HCDA, we announced plans in October 2012 to create a world-class urban master planned community that will transform Ward Centers into Ward Village, a vibrant neighborhood offering unique retail experiences, exceptional residences and workforce housing set among dynamic open spaces and pedestrian friendly streets. Ward Village has received LEED Neighborhood Development (LEED-ND) Platinum certification, making the project the nation's largest LEED-ND Platinum certified project, and the only LEED-ND Platinum project in the state of Hawaii. The LEED rating system is the foremost program for buildings, homes, and communities that are designed, constructed, maintained and operated for improved environmental and human health performance. LEED certification is generally important to buyers and users of such facilities because it is a third party certification regarding the facility's water efficiency, energy saving capability, indoor environmental quality, carbon dioxide emissions and resource preservation.

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The project is expected to include approximately 4,000 condominium units assuming an average of approximately 1,500 square feet per unit, and over one million square feet of retail and other commercial space.

Phase One of the redevelopment consists of four components on four separate blocks: the renovation of the IBM building, a portion of which will serve as the information center and sales gallery for Ward Village, two mixed-use market rate residential towers and one reserved housing tower.

During 2013, we began the redevelopment of the IBM building, a well-known office building located at Ward Centers, into a world class information center and sales gallery for the entire Ward Village project. The information center and sales gallery will dedicate a section to the history of the land, while another will showcase our vision for Ward Village. The sales center opened in January 2014.

Development permit applications and detailed plans for Phase One, which includes the first three residential towers, were approved by the HCDA in the third quarter of 2013 and condominium documents have been approved by the Hawaii Real Estate Commission for two market rate towers. The first of the two market rate towers, Waiea, is planned to be developed at a surface parking lot on Ala Moana Boulevard and will have 171 market rate condominium units for sale, six levels of parking, and approximately 8,000 square feet of new retail space. Waiea will consist of one, two and three-plus bedroom units ranging from approximately 1,100 to 17,500 square feet.

The second market rate tower, Anaha, is planned for Auahi Street and will have 311 market rate condominium units for sale, six levels of parking, and approximately 17,000 square feet of new retail space. Anaha will consist of studios, one, two and three-bedroom units, townhomes and penthouses ranging from approximately 450 to 6,500 square feet.

Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this redevelopment project.

Waterway Garage Retail (The Woodlands, Texas)

Waterway Garage Retail is attached to The Waterway Square Garage located within The Woodlands Town Center. The 21,513 square feet retail portion of the garage was completed in 2011 and is currently 92.8% leased as of December 31, 2013.

Rio West Mall (Gallup, New Mexico)

Rio West Mall, a 521,194 square foot shopping center, is the only enclosed regional shopping center within a 125-mile radius and is easily accessed from Interstate 40 and historic Route 66. On September 30, 2013, we sold the property for $12.0 million and received $10.8 million of net proceeds, inclusive of a credit to the purchaser for certain improvement obligations. The net book value of the property was $10.2 million and we recognized a pre-tax gain of $0.6 million which is included in other income.

Office Operating Assets

110 N. Wacker (Chicago, Illinois)

The property is a 226,000 square foot office building located at 110 N. Wacker Drive in downtown Chicago. This office building is subject to a ground lease that expires in 2055, and is 100% net leased through October 2019. The tenant has several options to extend their lease through the duration of the ground lease, and we have the right to terminate the lease with six months' notice following the expiration of the initial term in 2019. We receive approximately $6.1 million in annual lease payments. We own a 99% ownership interest in the property which, upon a capital event, entitles us to a 11% preferred return on our invested capital. After we have received the preferred return, and a return of our capital, the excess cash flow is evenly split with our partners.

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The Woodlands (The Woodlands, Texas)

1400 Woodloch Forest Drive

1400 Woodloch Forest Drive is a five-story Class B office building located at the entrance to The Woodlands Town Center. The property totals 95,667 square feet, was completed in 1981 and is 79.4% leased as of December 31, 2013.

2201 Lake Woodlands Drive

2201 Lake Woodlands Drive is a two-story Class C office building located in the East Shore commercial district of The Woodlands. The property totals 24,119 square feet, was completed in 1994 and was recently vacated by its single tenant who moved to our office building at One Hughes Landing. We are seeking a tenant for this building.

3 Waterway Square

In June 2013, we opened an 11-story 232,000 square foot Class A office building located in The Woodlands Town Center and adjacent to the 4 Waterway Square office building. The property is 97.3% leased as of December 31, 2013.

4 Waterway Square

4 Waterway Square is a nine-story Class A office building located within The Woodlands Town Center. The property totals 218,551 square feet, was completed in 2010, and is 100% leased as of December 31, 2013.

9303 New Trails

9303 New Trails is a four-story Class B office building located within the Research Forest district of The Woodlands. The property totals 97,705 square feet, was completed in 2008, and is 94.3% leased as of December 31, 2013.

One Hughes Landing

In September 2013, we opened One Hughes Landing, an eight-story, 197,719 square foot Class A office building set on 2.7 acres, including a 632 space parking garage. One Hughes Landing is the first building to open for the 66-acre mixed-use development site called Hughes Landing on Lake Woodlands. The property is 97.8% leased as of December 31, 2013.

Columbia Office Properties (Columbia, Maryland)

We own five office buildings, and are a master tenant of a sixth office building, in downtown Columbia, Maryland. Columbia is located 14 miles from the Baltimore Beltway and 17 miles from the Washington Beltway. The master ground lease under the sixth office building has a 2020 initial expiration and a 2060 final expiration date, including the market renewal options. The buildings, which comprise approximately 491,000 square feet in the heart of downtown Columbia, include: (1) American City Building (master tenant); (2) the Columbia Association Building; (3) 70 Columbia Corporate Center; (4) the Columbia Exhibit Building; (5) the Columbia Regional Office Building and (6) the Ridgley Building. This group also contains the Merriweather Post Pavilion. Both the Columbia Regional Building and Merriweather Post Pavilion were designed by Frank Gehry. The Columbia Regional Office Building is being redeveloped as a mixed-use project. Construction is expected to be completed during the fourth quarter of 2014, and the total development cost is $25 million (exclusive of land value). In July 2012, we executed a lease with Whole Foods Market for 41,000 square feet. In December 2012, we executed a lease with The Columbia Association Inc. for an upscale fitness center comprised of 27,556 square feet. The tenants are expected to take occupancy in the fourth quarter of 2014.

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Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this redevelopment project.

Multi-family

The Millennium Waterway Apartments (The Woodlands, Texas)

The Millennium Waterway Apartments is a 393-unit apartment building located within The Woodlands Town Center. We acquired our partners' interest on May 31, 2012, and it is now consolidated in our financials. This property was previously an equity investment. As of December 31, 2013, the property is 90.1% leased.

Resort and Conference Center and Country Club

The Woodlands Resort & Conference Center (The Woodlands, Texas)

The Woodlands Resort & Conference Center is located approximately two miles south of The Woodlands Town Center and consists of 440 hotel rooms and 90,000 square feet of meeting space, including the 30,000 square feet currently leased by ExxonMobil.

In 2013, we announced plans for the redevelopment and expansion of The Woodlands Resort & Conference Center. Completion of the project is expected during the summer of 2014. Total estimated construction costs for this project are approximately $75 million.

Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this redevelopment project.

The Club at Carlton Woods (The Woodlands, Texas)

The Club at Carlton Woods is located within one of the most exclusive communities in The Woodlands. In addition to an 18-hole Jack Nicklaus Signature Golf Course and an 18-hole Tom Fazio Championship Course, it contains two clubhouses, a spa, tennis courts, a golf learning center and fitness facilities totaling approximately 78,000 square feet.

Other Operating Assets and Investments

Waterway Square Garage (The Woodlands, Texas)

Waterway Square Garage, located within The Woodlands Town Center, is a five-story parking garage that contains 1,933 parking spaces and 21,513 square feet of retail space. The garage was completed in 2009 and is reported separately from the retail space. The retail space is included in our retail operating asset section above.

Woodlands Sarofim #1 Limited (The Woodlands, Texas)

We own a 20% interest in three office/industrial buildings located in The Woodlands Research Forest district within The Woodlands. The portfolio contains 129,790 square feet and the various buildings were constructed between the late 1980s and 2002.

Participation Interest in Golf Courses at TPC Summerlin and TPC Las Vegas, located in the Summerlin Master Planned Community (Las Vegas, Nevada)

The TPC Summerlin is an 18-hole private championship course designed by golf course architect Bobby Weed with player consultant Fuzzy Zoeller. TPC Las Vegas is an 18-hole public championship course designed by Bobby Weed with player consultant Raymond Floyd. These courses represent the only two golf courses in Nevada that are owned and operated by the Professional Golfers' Association of America (the "PGA").

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We are entitled to receive residual payments from the PGA with respect to the two golf courses through October 31, 2021, the termination date of the agreement with the PGA. We receive 75% of the net operating profits and 90% of all profits from membership sales at TPC Summerlin until such time as the original investment in the courses of $23.5 million has been recouped, which is projected to occur no sooner than 2015. Once we have received payments from the PGA totaling $23.5 million, we are entitled to receive 20% of all net operating profits from the two courses through the termination date of the agreement. As of December 31, 2013, the remaining balance of our investment is approximately $5.6 million, approximately $4.4 million greater than our $1.2 million book value.

Note Approximating Office Lease Payments

We receive payments approximating the lease revenue that GGP receives from the Arizona 2 Office in Phoenix, Arizona. The right to receive these payments is in the form of a fully amortizing promissory note issued by a subsidiary of GGP. These payments total approximately $6.9 million per year through the end of 2015 and are recorded as interest income and principal amortization. The underlying real property interests in the Arizona 2 Office are owned by GGP, and we will not own or obtain any real property interest therein or have any rights to receive payments after 2015.

Summerlin Las Vegas Baseball Club

In 2012, we became a 50% partner in a joint venture, Summerlin Las Vegas Baseball Club, LLC, formed for the purpose of acquiring 100% of the operating assets of the Las Vegas 51s, a Triple-A baseball team which is affiliated with the New York Mets. The Las Vegas 51s is a member of the Pacific Coast League and has been based in Las Vegas for 30 years. In May 2013, the joint venture acquired the team for approximately $21.0 million, of which our 50% share was $10.5 million. The team is located near our Summerlin Master Planned Community. Our strategy in acquiring an ownership interest is to pursue a potential relocation of the team to a stadium which we would then build in our Summerlin Master Planned Community. There can be no assurance that such a stadium will ultimately be built.

Interest in Stewart Title (The Woodlands, Texas)

We own a 50% interest in Stewart Title, a real estate services company located in The Woodlands which handles a majority of the residential and commercial land sale closings for The Woodlands.

Interest in Summerlin Hospital Medical Center (Las Vegas, Nevada)

We have an indirect ownership interest of approximately 6.8% in the Summerlin Hospital Medical Center. Our ownership interest entitles us to a pro rata share of the cumulative undistributed profit in the hospital and we typically receive a distribution one time per year during the first quarter. The annual distributions have typically been between $2.0 million to $3.0 million, but vary from year to year. This medical center is a 450-bed hospital located on a 32-acre medical campus in our Summerlin Master Planned Community. The hospital completed a major renovation in 2009 that expanded the hospital to 450 beds (from 281 beds) and added a new six-story patient tower, an expanded emergency room, a four-story 80,000 square foot medical office building and a 600-space parking garage. Our interest relates to the contributed land, and Universal Health Services, Inc. provided the funds to build the hospital.

Interest in Head Acquisition (Hexalon)

On October 30, 2013, we sold our interest in Head Acquisition, LP ("Head"), a cost basis investment, for cash proceeds of $13.3 million. The sale resulted in a gain of approximately $8.5 million.

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Strategic Developments

Our Strategic Developments segment is made up of near, medium and long-term real estate properties and development projects. We continue to advance the development plans for each of these assets based on market conditions and availability of capital. We will likely need to obtain financing to undertake a development plan, in addition to obtaining the proper permits and approvals which are typical of most large-scale real estate developments of this nature. Unless otherwise indicated, estimated costs associated with developments are exclusive of land value because we typically own all of the land underlying our Strategic Developments.

We are continuing to execute our strategic plans to substantially develop several of these assets with construction either under way or pending. The remainder of these assets will require substantial future development to achieve their highest and best use.

The following table summarizes our Operating Assets undergoing redevelopment and our Strategic Development projects, some of which are currently under construction as of December 31, 2013:

 
  Location   Size/GLA   Size (Acres)   Net Book Value,
December 31, 2013
(Millions)
  Acquisition
Year
 

Operating Assets Undergoing Redevelopment:

                             

Outlet Collection at Riverwalk

  New Orleans, LA     250,000     11   $ 36.4 (a)   2004  

South Street Seaport

  New York, NY     362,000     11     41.0 (b)   2004  

The Woodlands Resort & Conference Center (c)

  The Woodlands, TX     440 rooms     70     75.1 (d)   1974 / 2002  

Strategic Developments Under Construction:

                             

Columbia Regional Building

  Columbia, MD     89,000     —       20.9 (e)   2004  

Creekside Village Green

  The Woodlands, TX     74,352     7     2.9     —    

ExxonMobil Build-to-Suit

  The Woodlands, TX     647,000     4     6.6     —    

Hughes Landing Retail

  The Woodlands, TX     123,000     9     6.2     —    

Millennium Woodlands Phase II (f)

  The Woodlands, TX     314 units     5     2.2     —    

ONE Ala Moana Condo Project (f)

  Honolulu, HI     206 units     —       19.9     2002  

One Lake's Edge

  The Woodlands, TX     390 units / 22,289 retail     3     6.1     —    

The Metropolitan Downtown Columbia Project (f)

  Columbia, MD     380 units / 14,000 retail     4     5.0     2004  

The Shops at Summerlin Center

  Las Vegas, NV     1,600,000     106     141.4     2004  

Two Hughes Landing

  The Woodlands, TX     197,000     4     22.4     —    

Ward Sales Center

  Honolulu, HI     —       —       16.0 (g)   —    

Other Strategic Developments:

                             

Alameda Plaza (h)

  Pocatello, ID     65,292     7     0.7     2002  

AllenTowne

  Allen, TX     —       238     25.5     2006  

Bridges at Mint Hill (i)

  Charlotte, NC     —       210     21.4     2007  

Century Plaza

  Birmingham, AL     755,573 (j)   63     4.5     1997  

Circle T Ranch and Power Center (f)

  Dallas / Ft. Worth, TX     —       279     9.1     2005  

Commercial Land (k)

  The Woodlands, TX     —       19     14.0     —    

Cottonwood Mall

  Holladay, UT     232,843     54     20.3     2002  

Elk Grove Promenade

  Elk Grove, CA     —       100     6.2     2003  

Fashion Show Air Rights

  Las Vegas, NV     —       —       —       2004  

Kendall Town Center

  Kendall, FL     —       70     18.1     2004  

Lakemoor (Volo) Land

  Lakemoor, IL     —       40     0.3     1995  

Maui Ranch Land

  Maui, HI     —       20 (l)   —       2002  

Parcel C (f)

  Columbia, MD     437 units / 31,000 retail     5     5.8     2004  

Redlands Promenade

  Redlands, CA     —       10     3.0     2004  

Redlands Mall

  Redlands, CA     174,787     12 (m)   6.5     2004  

Ward Condominiums

  Honolulu, HI     906 units     —       17.1 (n)   2002  

West Windsor

  West Windsor, NJ     —       658     23.0     2004  
                           

Total

              2,019   $ 577.6        
                           
                           

Note: Projects are grouped according to development activity. For the purposes of this table, the assets under or pending construction are grouped first. All other projects under development are grouped alphabetically.

(a)
Net Book Value includes $25.0 million of development costs at the Outlet Collection at Riverwalk.
(b)
Net Book Value includes $24.2 million of development costs at South Street Seaport.
(c)
The Woodlands Resort & Conference Center was built in 1974, expanded in 2002, and is currently being renovated.

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(d)
Net Book Value includes $27.5 million of development costs at The Woodlands Resort & Conference Center.
(e)
Net Book Value includes $16.4 million of development costs at the Columbia Regional Building.
(f)
Net Book Value is made up of our investment in the joint venture. Please refer to Note 5 – Real Estate Affiliates, in our Consolidated Financial Statements.
(g)
Net Book Value represents development costs at December 31, 2013.
(h)
During 2013, we sold 1.3 acres including 10,000 square feet of retail space.
(i)
Net Book Value represents net consolidated investment in the joint venture.
(j)
Century Plaza square footage represents GLA for entire mall.
(k)
Represents land identified for future retail, office, hotel and / or other commercial developments at The Woodlands.
(l)
Maui Ranch Land size represents two-10 acre land parcels.
(m)
The Village at Redlands acreage represents total mall site inclusive of anchor lots. Five of the twelve acres is owned by us, and the remaining seven acres are parking owned by The City of Redlands.
(n)
Net Book Value represents development costs for the first three residential towers approved by the HDCA.

The Woodlands (The Woodlands, Texas)

Creekside Village Green

Creekside Village Green is located within the 100-acre mixed-use commercial development that is anchored by H-E-B grocery store and will ultimately include 400,000 square feet of retail and office space, 800 units of multi-family, 200 units of senior living facility and an 85,000 square foot campus within the Lone Star College System. Creekside Village Green is a 74,352 square foot retail center which will consist of retail, restaurant and professional office space across two main buildings and a centrally located restaurant building. Creekside Village Green will also include a one-acre tree-lined park designed to be the hub of all activity within the greater 100-acre development. During the fourth quarter 2013, we began construction. Total development costs are expected to be approximately $19 million. We anticipate the project will open in the fourth quarter of 2014. Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this redevelopment project.

ExxonMobil Build-to-Suit

On December 16, 2013 we announced the development of two adjacent Class A office buildings. The building located at 1725 Hughes Landing Boulevard (West Building) will be 12 stories and approximately 318,000 rentable square feet, and the one located at 1735 Hughes Landing Boulevard (East Building) will be 13 stories and 329,000 rentable square feet. A 2,617 space parking garage will also be located on the 4.3 acre site and will be exclusive to the office project. ExxonMobil Corporation has executed leases to occupy the entire West Building for twelve years and 160,000 square feet in the East Building for eight years, with an option to lease the remaining space before the building opens. Total development costs are expected to be approximately $171 million (exclusive of land value) and the project is expected to be completed by the fourth quarter of 2015. Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this development project.

Hughes Landing Retail

During the fourth quarter 2013, we began construction of Hughes Landing Retail, a 123,000 square foot retail component of Hughes Landing. The project will consist of Whole Foods, an anchor tenant with 40,000 square feet of space, 32,900 square feet of retail, and a 50,100 square foot restaurant row. Total development costs are expected to be approximately $36 million, and the project is expected to be completed in the fourth quarter of 2014. The majority of the restaurants on restaurant row will open during the first quarter 2015. Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this development project.

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Millennium Woodlands Phase II

On May 14, 2012, we entered into a joint venture, Millennium Woodlands Phase II, LLC ("Millennium Phase II"), with The Dinerstein Companies, for the construction of a 314-unit Class A multi-family complex in The Woodlands Town Center. Total development costs are expected to be $38 million (exclusive of land value), and completion is expected in the second quarter of 2014. Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this development project.

One Lake's Edge

In October 2013, we began construction of an eight-story, Class A, multi-family project within Hughes Landing that will be comprised of 390 multi-family units (averaging 984 square feet per unit), 22,289 square feet of retail and an approximately 750 space parking garage, all situated on 2.92 acres of land. Additionally, the project will feature an amenity deck on the third floor which will house the pool, courtyard and other amenities overlooking Lake Woodlands. Total development costs are expected to be approximately $88 million and completion is expected in the first quarter of 2015. Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this development project.

Two Hughes Landing

During the third quarter 2013, we began construction of Two Hughes Landing, the second Class A office building located in Hughes Landing on Lake Woodlands. Two Hughes Landing will be a 197,000 square foot, eight-story office building with an adjacent 630 space parking garage. The building and the garage will be situated on 3.6 acres of land and is estimated to cost approximately $49 million. Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this redevelopment project.

ONE Ala Moana Tower Condo Project (Honolulu, Hawaii)

In October 2011, we and an entity jointly owned by two local developers, Kobayashi Group and The MacNaughton Group, formed a joint venture called HHMK Development, LLC ("HHMK Development"), to explore the development of a luxury condominium tower above an existing parking structure at Ala Moana Center. We own 50% of the venture and our partner owns the remaining 50%. In June 2012, we formed another 50/50 joint venture, KR Holdings, LLC ("KR Holdings"), with the same two development partners. KR Holdings was responsible for development activities and obtained construction financing for the project. Construction of the 23-story, 206-unit tower consisting of one, two and three-bedroom units ranging from 760 to 4,100 square feet commenced in April of 2013, and we expect completion at the end of 2014. The venture is expected to invest approximately $265.1 million, which includes construction, selling and all financing costs.

During the fourth quarter of 2012, we pre-sold all of the condominium units at an average price of $1.6 million, or approximately $1,170 per square foot and the average unit size is approximately 1,350 square feet.

Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this development project.

Parcel C (Columbia, Maryland)

On October 4, 2013, we entered into a joint venture agreement with a local multi-family developer, Kettler, Inc., ("Kettler") to construct a 437-unit, Class A apartment building with 31,000 square feet of ground floor retail. We contributed approximately five acres of land having an estimated book value of $4.0 million in exchange for a 50% interest in the joint venture. When the joint venture closes on a

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construction loan our interest in the joint venture will be stepped up to $23.4 million or $53,500 per constructed unit and our partner will be required to make a cash contribution to the venture, the amount of which will depend on the size of the construction financing obtained for the development. Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this development project.

The Metropolitan Downtown Columbia Project (Columbia, Maryland)

In October 2011, we entered into a joint venture with Kettler to construct an approximate 380-unit Class A apartment building with approximately 10,000 square feet of ground floor retail space in downtown Columbia, Maryland. We contributed a 4.2 acre site, having a $3.0 million book value, in exchange for a 50% interest in the venture. Our partner is responsible for providing construction and property management services, including the funding and oversight of development activities. The venture began construction of The Metropolitan in February 2013. On July 11, 2013, the venture closed on a $64.1 million construction financing. Our contributed land was valued at $20.3 million and Kettler contributed $13.3 million in cash, of which $7.0 million was distributed to us. Total development costs are expected to be $97 million and completion is expected in the third quarter of 2014. Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this development project.

The Shops at Summerlin (Las Vegas, Nevada)

This 106-acre development project is part of a 400-acre mixed-use town center for the Summerlin Master Planned Community and faces Interstate 215 between Sahara Drive and Summerlin Centre Drive, approximately nine miles west of the Las Vegas Strip. The project is planned for approximately 1.6 million square feet of retail and office development. The project consists of retail, office, and anchor space and has the potential for a hotel and multi-family residential units. Construction began again in 2013 with completion anticipated at the end of 2014. Total development costs are expected to be $391 million.

In the fourth quarter of 2013, we sold approximately eight acres of land to Dillard's for the construction of a two-level, 200,000 square foot department store. Also in the fourth quarter, we leased approximately six acres of land to Macy's for the construction of an 180,000 square foot department store. Dillard's and Macy's are two anchor tenants of a total of three planned anchors for The Shops at Summerlin, which is expected to open in late 2014. We are actively pre-leasing the non-anchor space at the property. Please refer to "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding this development project.

Other Development Projects

Alameda Plaza (Pocatello, Idaho)

Alameda Plaza is located in Pocatello, Idaho at the intersection of Yellowstone Park Highway and Alameda Road. The approximate 19.7-acre site contains 190,341 square feet of mostly vacant retail space. During 2013, we sold a 1.3 acre site for $1.3 million that had a book value of $0.4 million. During 2012, we sold 11.5 acres, including 104,705 square feet of mostly vacant retail spaces for $4.5 million which had a book value of $1.3 million. We are continuing to explore the sale of the remaining 6.9 acres.

AllenTowne (Allen, Texas)

AllenTowne consists of 238 acres located at the high-traffic intersection of Highway 121 and U.S. Highway 75 in Allen, Texas, 27 miles northeast of downtown Dallas. We are continuing to consider our plans to best position the property for the opportunities presented by evolving market conditions.

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Bridges at Mint Hill (Charlotte, North Carolina)

On September 8, 2011, we entered into a joint venture with the owner of land adjacent to our land to develop a shopping center on the combined property located southeast of Charlotte, North Carolina.. On October 30, 2012, we contributed $4.5 million in cash to pay off the existing mortgage on our partner's property, and both parties contributed their respective properties in the venture. Our ownership in the venture increased from 79.0% to 90.5% as a result of the contribution. The combined parcel is now approximately 210 acres consisting of 120 developable acres and is currently zoned for approximately 1.3 million square feet of retail, hotel and commercial development. The land is divided by a small stream known as Goose Creek. The current zoning plan contemplates connecting the resulting parcels with bridges over the creek. Development will require construction of internal roadways, connecting bridges, expansion of roads and an installation of a force main (offsite) for sewer utility.

Century Plaza (Birmingham, Alabama)

Century Plaza is located on the southeastern side of Birmingham, Alabama, on U.S. Route 78 (Crestwood Blvd.) near Interstate 20. In May 2009, the mall was shuttered. The site consists of approximately 63 acres with approximately 740,000 square feet of GLA.

Circle T Ranch and Circle T Power Center (Fort Worth, Texas)

Located at the intersection of Texas highways 114 and 170, Circle T Ranch is 20 miles north of downtown Fort Worth, in Westlake, Texas. The property is approximately 279 total acres on two parcels. The Circle T Ranch parcel contains 128 acres while the Circle T Power Center parcel contains 151 acres. We have a 50% ownership interest with Hillwood Properties, a local developer, in this joint venture.

Cottonwood Mall (Holladay, Utah)

Located 7.5 miles from downtown Salt Lake City, in the city of Holladay, Utah, Cottonwood Mall is a unique infill development opportunity. In 2008, work began on a complete redevelopment of the 54-acre site, but development has been delayed due to the changing economic environment. The original mall was completely demolished with the exception of Macy's which continues to operate as a stand-alone department store on the site. The project is entitled for 575,000 square feet of retail, 195,000 square feet of office and 614 residential units. We are exploring the feasibility of a mixed-use development and are soliciting retailer interest in the site.

Elk Grove Promenade (Elk Grove, California)

Elk Grove Promenade was originally planned as a 1.1 million square foot outdoor shopping center on approximately 100 acres. Construction began in 2007, but has been delayed due to changing economic conditions. Located approximately 17 miles southeast of Sacramento, the location affords easy access and visibility from State Highway 99 at Grant Line Road. Plans for the site are being evaluated in light of evolving market conditions.

Fashion Show Air Rights (Las Vegas, Nevada)

We entered into a binding set of core principles with GGP pursuant to which we will have the right to acquire for nominal consideration an 80% ownership interest in the air rights above the Fashion Show Mall located on the Las Vegas Strip. This right is contingent upon the satisfaction of a number of conditions and does not become effective unless the existing loans of the Fashion Show Mall and The Shoppes at the Palazzo and related guarantees are settled in full, which is currently expected to occur with GGP's scheduled repayment in May 2017.

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Kendall Town Center (Kendall, Florida)

Kendall Town Center is a 141 acre mixed-used site located at the intersection of North Kendall Drive and SW 158th, approximately 20 miles southwest of downtown Miami. A 31-acre parcel was sold to Baptist Hospital in March 2008, a 282,000 square foot hospital with 133 beds and a 62,000 square foot medical office building, opened in 2011. In addition, we sold five acres in 2011 and 18 acres in 2009. These 23 acres are expected to include a 120-room hotel with ancillary office and retail space and a senior housing development. Land totaling 14 acres has been deeded to the property owners association and three acres have been deeded to the County. We own the remaining 70 acres, which are currently entitled for 621,300 square feet of retail, 60,000 square feet of office space and a 50,000 square foot community center. We are currently developing a mixed-use program and site plan and expect to submit a rezoning application to permit residential development in 2014.

Lakemoor (Volo) Land (Lakemoor, Illinois)

This 40-acre vacant land parcel is located on Route 12 which is 50 miles north of Chicago in a growing suburb. The project has no utilities in place and is currently designated as farmland.

Maui Ranch Land (Maui, Hawaii)

This site consists of two, non-adjacent, ten-acre undeveloped land-locked parcels located near the Kula Forest Preserve on the island of Maui, Hawaii. The land currently is zoned for native vegetation. There is no ground right of way access to the land and there is no infrastructure or utilities currently in the surrounding area. Accordingly, only a nominal value was ascribed to these parcels when they were acquired by our predecessors in conjunction with the purchase of Ward Centers.

Redlands Promenade (Redlands, California)

Redlands Promenade is a ten-acre site located at Eureka and the Interstate 10 off ramp in Redlands, California. The project is entitled for 125,000 square feet of retail development.

Redlands Mall (Redlands, California)

The Redlands Mall is a single-level, 174,787 square foot enclosed shopping center at the intersection of Redlands Boulevard and Orange Street. Currently anchored by CVS, Denny's and Union Bank, the site is located in downtown Redlands two blocks south of the Redlands Promenade site. The interior portion of the mall closed in September 2010. This center is envisioned as a mixed-use retail and residential redevelopment.

West Windsor (West Windsor, New Jersey)

West Windsor is a former Wyeth Agricultural Research & Development Campus on Quakerbridge Road and U.S. Route One near Princeton, New Jersey. The land consists of 658 total acres comprised of two large parcels which are bisected by Clarksville Meadows Road and a third smaller parcel. Zoning, environmental and other development factors are currently being evaluated in conjunction with a development feasibility study of the site.

Competition

The nature and extent of the competition we face depends on the type of property involved. With respect to our master planned communities segment, we compete with other landholders and residential and commercial property developers in the development of properties within Las Vegas; Nevada, Houston; Texas and the Baltimore/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 the industry;

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    the recreational and cultural amenities available within the communities;

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

    our relationships with homebuilders;

    our 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, and to a lesser extent, residential tenants. We believe the principal factors that retailers consider in making their leasing decisions include: (1) consumer demographics; (2) quality, design and location of properties; (3) neighboring real estate projects that have been developed by our predecessors or that we, in the future, may develop; (4) diversity of retailers and anchor tenants at shopping center locations; (5) management and operational expertise; and (6) rental rates.

With respect to our Strategic Developments segment, our direct competitors include other commercial property developers, retail mall development and operating companies and other owners of retail real estate that engage in similar businesses.

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 borrow using such real estate as collateral.

Substantially, all of our properties have been subject to Phase I environmental assessments, which are intended to evaluate the environmental condition of the surveyed and surrounding properties. As of December 31, 2013, 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 operating results or competitive position in the past, but could have such an effect on our operating results or competitive position in the future.

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Employees

As of December 31, 2013, we had approximately 1,000 employees.

Available Information

We maintain a website at www.howardhughes.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K 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.


ITEM 1A. RISK FACTORS

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

Our performance is subject to risks associated with the real estate industry.

Our economic performance and the value of our properties are subject to developments that affect real estate generally and that are specific to our properties. If our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow will be adversely affected. The following factors, among others, may adversely affect the income generated by our properties:

    downturns in the economic conditions at the national, regional or local levels, particularly a decline in one or more of our primary markets;

    competition from other master planned communities, retail properties, office properties or other commercial space;

    increases in interest rates;

    the availability of financing, including refinancing or extensions of existing mortgage debt, on acceptable terms, or at all;

    increased operating costs, including insurance expense, utilities, real estate taxes, state and local taxes and heightened security costs;

    fluctuating condominium prices and absorption rates;

    vacancies and changes in rental rates;

    declines in the financial condition of our tenants and our ability to collect rents from our tenants;

    declines in consumer confidence and spending that adversely affect our revenue from our retail properties;

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

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    natural disasters or terrorist acts which may result in uninsured or underinsured losses;

    adoption of more restrictive laws and government regulations, including more restrictive zoning, land use or environmental regulations and an increase in real estate taxes; and

    opposition from local community or political groups with respect to the development, construction or operations at a particular site.

We may face potential difficulties in obtaining operating and development capital.

The successful execution of our business strategy will require us to obtain substantial amounts of operating and development capital. Sources of such capital could include bank borrowings, public and private offerings of debt or equity, or the sale of certain assets which may include entry into joint ventures with one or more third parties. We may be unable to obtain financing in the future and any financing we are able to secure may only be available on unfavorable terms.

A downturn in national or regional economic conditions, could adversely impact our business.

Fluctuations in growth in the national economy may negatively impact our earnings, cash flow and liquidity by weakening demand for our real estate properties.

In addition, the housing market and the demand from builders for lots vary depending on location. Projected lot sales used in our feasibility analyses may not be met. In addition, the success of our master planned communities business is heavily dependent on local housing markets in Las Vegas; Nevada, Houston, Texas; and Baltimore, Maryland/Washington, D.C., which in turn are dependent on the health and growth of the economies and availability of credit in these regions.

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 to proceed with planned development, redevelopment or expansion activities. We may be unable to obtain 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 under way that we are unable to complete, 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 fully recoverable from future operations or sale resulting in impairment charges.

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

Our development or redevelopment 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 increase of construction costs;

    construction delays or cost overruns, which may increase project development costs;

    claims for construction defects after a property has been developed;

    compliance with building codes and other local regulations; and

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

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

Approval to develop real property entails an extensive entitlement process involving multiple and overlapping regulatory jurisdictions and often requires discretionary action by local governments. This process is often political and uncertain. 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.

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

A portion of our business is dedicated to the formation 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 of condominiums 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. Any responses or comments on our condominium filings may delay our ability to sell condominiums in certain states and other jurisdictions. 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, constructions 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 operations as a whole.

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 financial condition and results of operations.

Our Master Planned Communities 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. Also, some homebuilders may be unwilling or unable to close on previously committed lot purchases. As a result, we may sell fewer lots and may have lower sales revenues, which could have an adverse effect on our financial position and results of operations.

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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 in 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;

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

    the convenience and quality of competing retail properties and other retailing options such as the internet;

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

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

A decline in our results of operations could have a negative impact on the trading price of our common stock.

We may experience construction delays and cost overruns in connection with the construction of our condominium projects and development or redevelopment of our properties.

Several of our condominium and other development and redevelopment projects are under construction. Construction projects entail significant risks, which can substantially increase costs or delay completion of a project. Such risks include shortages of materials or skilled labor, unforeseen engineering, environmental or geological problems, health and safety incidents and site accidents, poor performance or nonperformance by any of our joint venture partners or other third parties on whom we rely, work stoppages, weather interference and unanticipated cost increases. Most of these factors are beyond our control. Difficulties or delays with respect to construction projects could adversely affect our results of operations.

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 $739.6 million. As of December 31, 2013, our total consolidated debt was approximately $1,514.6 million (excluding an undrawn balance of $103.3 million under our revolving facilities) of which $778.3 million was recourse to the Company. In addition, we have $32.2 million of recourse guarantees associated with undrawn construction financing commitments as of December 31, 2013. As of December 31, 2013, our share of the debt of our Real Estate Affiliates was $39.0 million based upon our economic ownership which 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 able to incur substantial additional indebtedness from time to time, including project indebtedness at our subsidiaries. If we do so, the risks related to our level of

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indebtedness could intensify. Specifically, a high level of indebtedness could have important consequences to holders of the notes and equity holders, including:

    making it more difficult for us to satisfy our obligations with respect to the 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 other general corporate requirements, or requiring us to make non-strategic divestitures, particularly when the availability of financing in the capital markets is limited;

    requiring a substantial portion of our cash flow to be dedicated to debt service payments instead of other 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 notes or our other debt or fail to comply with the financial and other restrictive covenants contained in the indenture governing the notes or our other debt, which event of default could result in the 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:

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

    make investments;

    incur indebtedness or issue certain equity;

    create certain liens;

    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.

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We may be required to take action to reduce our debt or act in a manner contrary to our business objectives 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 so. A breach of any of the covenants in, or our inability to maintain the required financial ratios under, our debt agreements could result in a default under such debt agreements, which could lead to that debt becoming immediately due and payable and, if such debt is secured, foreclosure on 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 lending 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 may be unable to renew leases or re-let space as leases expire.

When a lease expires, a tenant may elect not to renew it. We may not be able to re-let the property on similar terms, if we are able to re-let the property at all. The terms of renewal or re-lease (including the cost of required tenant improvements, renovations and/or concessions to tenants) may be less favorable to us than the prior lease. If we are unable to re-let all or a substantial portion of our properties, or if the rental rates upon such re-letting are significantly lower than expected, our cash generated before debt repayments and capital expenditures and our ability to make expected distributions, may be adversely effected.

The Houston, Texas economy is highly dependent on the energy sector.

The greater Houston area is home to a large number of energy companies. A decline in the energy sector could have a significant negative effect on the performance of energy companies and may lead to layoffs. A decrease in economic activity and increased unemployment levels in Houston may negatively affect The Woodlands and Bridgeland by decreasing demand for housing and commercial space.

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/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

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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 business model includes entering into joint venture arrangements with strategic partners. This model may not be successful and our business could be adversely affected if we are not able to successfully attract desirable strategic partners or complete agreements with strategic partners or if our strategic partners fail to satisfy their obligations to the joint venture.

We currently have and intend to enter into future 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. Some of our interests, such as the Summerlin Medical Hospital Center are controlled entirely by our partners.

The bankruptcy of one of the other investors in any of our joint ventures 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 investors might result in our ultimate liability for a greater portion of those obligations than would otherwise be required.

If the recoverable values of our real estate assets were to drop below the book value of those properties, we would be required to write-down the book value of those properties, which would have an adverse effect on our balance sheet and our earnings.

Adverse market conditions, in certain circumstances, may require the book value of real estate assets to be decreased, often referred to as a "write-down" or "impairment." A write-down of an asset would decrease the value of the asset on our balance sheet and would reduce our earnings for the period in which the write-down is recorded.

The derivative instruments that we may use to hedge against interest rate fluctuations may not be successful in mitigating our risks associated with interest rates.

We sometimes seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements, such as interest rate swap agreements. There cannot be any assurance that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging of these transactions will not result in losses. Our policy is to use derivatives only to hedge

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interest rate risks related to our borrowings, not for speculative or trading purposes, and to enter into contracts only with major financial institutions based on their credit ratings and other factors. These hedging arrangements, which could include a number of counterparties, may expose us to additional risks, including failure of any of our counterparties to perform under these contracts, and may involve extensive costs, such as transaction fees or breakage costs, if we terminate them. Failure to hedge effectively against interest rate changes may materially adversely affect our results of operations.

In addition, hedging instruments involve risks because the business failure of a hedging counterparty with whom we entered into a hedging transaction will most likely result in the counterparty's default on its obligation to pay. Further, the credit quality of the counterparty owing money on the hedge may be downgraded to such an extent that it impacts our ability to sell or assign our side of the hedging transaction.

We may not realize the value of our tax assets.

Certain provisions of the Internal Revenue Code could limit our ability to fully utilize the 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. We currently have approximately $95 million of federal net operating loss carryforwards, of which $25 million are subject to the separate return year limitation rules. A change of control could limit our ability to use our net operating losses prior to their expiration.

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.

We are a holding company and depend on our subsidiaries for cash.

We are a holding company, with no operations of our own. In general, we rely on our subsidiaries for cash and our operations are conducted almost entirely through our subsidiaries. Our ability to generate cash to pay our operating expenses is dependent on the earnings of and the receipt of funds from subsidiaries through dividends and distributions. The ability of our subsidiaries to pay dividends or to make distributions or other payments to us will depend on their respective operating results and may be restricted by, among other things, the laws of their respective jurisdiction of organization, regulatory requirements, agreements entered into by those operating subsidiaries and the covenants of any existing or future outstanding indebtedness that we or our subsidiaries may incur.

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We may face potential successor liability.

We may be subject to successor liability based on previous actions of our predecessors. Such liability may arise in a number of circumstances, such as: (1) if a creditor of our predecessors did not receive proper notice of the pendency of the GGP bankruptcy proceedings or the deadline for filing claims; (2) the injury giving rise to, or source of, a creditor's claim did not manifest itself in time for the creditor to file the creditor's claim; (3) a creditor did not timely file the creditor's claim in such bankruptcy case due to excusable neglect; (4) we are found liable for our predecessors' tax liabilities under a federal and/or state theory of successor liability; or (5) the order of confirmation for the GGP bankruptcy plan is found to be procured by fraud. If we should become subject to such successor liability, it could materially adversely affect our business, financial condition and results of operations.

Ineffective internal controls could impact the Company's business and results of operations.

Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in our implementation, our business and operating results could be harmed and we could fail to meet our financial reporting obligations.

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 Centers, South Street Seaport and the Outlet Collection at Riverwalk are located in coastal regions, and could therefore 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.

A downgrade or financial failure of our insurance carrier may have an adverse impact on our financial condition.

The insurance carriers that we utilize had satisfactory financial ratings at the time the policies were placed and made effective based on various insurance carrier rating agencies commonly used in the insurance industry. We cannot assure our investors that these financial ratings will remain satisfactory or constant throughout the policy period. There is a risk that these financial ratings may be downgraded throughout the policy period or that the insurance carriers may experience a financial failure. A downgrade or financial failure of our insurance carriers may result in their inability to pay current and future claims. This inability to pay claims may have an adverse impact on our financial

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condition. In addition, a downgrade or a financial failure of our insurance carriers may cause our insurance renewal or replacement policy costs to increase.

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.

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 9.0% of our outstanding common stock (excluding shares issuable upon the exercise of warrants) as of December 31, 2013. Under the terms of our stockholder agreements, Pershing Square currently has the ability to designate three members of our board of directors.

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Although Pershing Square has entered into a standstill agreement to limit its influence over us, 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 may otherwise be favorable to us and our other stockholders.

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 breached 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.

Risks Related to Spin-off

We may be required to pay substantial U.S. federal income taxes related to certain prior sales of assets in our Master Planned Communities segment.

In connection with the spin-off, GGP has agreed to indemnify us from and against 93.75% of any losses, claims, damages, liabilities and reasonable expenses to which we become subject, in each case solely to the extent attributable to certain taxes related to sales of certain assets in our Master Planned Communities segment prior to March 31, 2010, in an amount equal to a maximum of $303.8 million, plus applicable interest. We will be responsible for the remainder of any such taxes. GGP may not have sufficient cash to reimburse us for its share of these taxes described above. As of December 31, 2013, the maximum amount covered by the GGP indemnity is $282.3 million plus applicable interest. We have ongoing litigation related to the foregoing taxes that, whether resolved in our favor or otherwise, could impact the timing of the items subject to indemnification by GGP. In addition, if the IRS were successful in litigation with respect to such audits, we may be required to change our method of tax accounting for certain transactions, which could affect the timing of our future tax payments, increasing our tax payments in the short term relative to our current tax cost projections.

Risks Related to Our Common Stock

The trading price of our common stock may fluctuate widely.

We cannot predict the prices at which our common stock may trade. The market price of our common stock may fluctuate widely, depending upon many factors, some of which may be beyond our control, including:

    our quarterly or annual earnings, or those of other comparable companies;

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    actual or anticipated fluctuations in our operating results and other factors related to our business;

    announcements by us or our competitors of significant acquisitions or dispositions;

    the failure of securities analysts to cover our common stock;

    changes in earnings estimates by securities analysts or our ability to meet those estimates;

    the operating and stock price performance of other comparable companies;

    our ability to implement our business strategy;

    our tax payments;

    our ability to raise capital;

    overall market fluctuations; and

    general economic conditions.

Further, Pershing Square and other substantial shareholders may hold their investments for an extended period of time, thereby decreasing the number of shares available in the market and creating artificially low supply for, and trading prices of our common stock. If one or more of these principal holders sell a significant amount of our common stock, it could decrease the price of 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 implemented a so-called poison pill by adopting our stockholders rights agreement. The poison pill assists in the preservation of our valuable tax attributes by significantly increasing the costs that would be incurred by an unwanted third party acquirer if such party owns or announces its intent to commence a tender offer for the Threshold Percentage or more of our securities. The stockholders rights agreement expires on March 14, 2015. 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 may be dilution of our common stock from the exercise of outstanding warrants, which may materially adversely affect the market price of our common stock and negatively impact a holder's investments.

The exercise of some or all of the outstanding warrants to purchase shares of our common stock held by Pershing Square and certain members of our management would materially dilute the ownership interest of our existing stockholders. Likewise, any additional issuances of common stock, through The Howard Hughes Corporation Amended and Restated 2010 Incentive Plan or otherwise, will dilute the ownership interests of our existing stockholders. Any sales in the public market of such additional

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common stock could adversely affect prevailing market prices of the outstanding shares of our common stock. In addition, the existence of our outstanding warrants may encourage short selling or arbitrage trading activity by market participants because the exercise of our warrants could depress the price of our common stock.

Additional issuances and sales of our capital stock or securities convertible into or exchangeable for our capital stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at a favorable time and price.

Certain of our substantial stockholders, including Pershing Square, have the right to purchase the number of our shares as necessary to allow the stockholder to maintain its proportionate ownership interest on a fully diluted basis, for so long as the stockholder beneficially owns at least 5% of our outstanding common stock on a fully-diluted basis.

In most circumstances, stockholders will not be entitled to vote on whether or not additional capital stock or securities convertible into or exchangeable for our capital stock is issued. In addition, depending on the terms and pricing of an additional offering of common stock or securities convertible into or exchangeable for our capital stock, and the value of our properties, stockholders may experience dilution in both the book value and the market value of their shares.


ITEM 1B. UNRESOLVED STAFF COMMENTS

None.


ITEM 2. PROPERTIES

Our principal executive offices are located in Dallas, Texas where we lease approximately 34,932 square feet under an arrangement that expires in 2021. We also maintain offices at certain of our properties as well as in The Woodlands, Texas, New York, New York, and Los Angeles, California. We believe our present facilities are sufficient to support our operations.

Our Master Planned Communities, Operating Assets, and our Strategic Developments assets are described above in "Item 1. Business Overview of Business Segments". Leases with tenants at our retail operating asset locations generally include base rent and common area maintenance charges.

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The following table summarizes certain metrics of the retail properties within our Operating Assets segment as of December 31, 2013.

 
   
   
   
   
  Year Ended December 31, 2013    
 
Property
  Location   Existing
Gross
Leasable
Area
  Size
(Acres)
  Net Book
Value,
December 31,
2013
(Millions)
  Average
Annual
Tenant
Sales per
Square
Foot(a)
  Mall and
Other
Rental NOI
(000)(b)
  Average
Sum of
Rent and
Recoverable
Common
Area
Costs per
Square
Foot(c)
  Occupancy
Cost(d)
  NOI
Margin(e)
  Year Built /
Acquired
 

20/25 Waterway Avenue

  The Woodlands, TX     49,972     1   $ 10.9   $ 385   $ 1,640   $ 51     13.2 %   63.5 %   2007/2009  

Cottonwood Square (f)

  Salt Lake City, UT     77,079 (g)   7 (h)   5.4     n.a.     451     n.a.     n.a.     66.4 %   2002  

Landmark Mall

  Alexandria, VA     440,476 (i)   22     33.8 (j)   351     491     21     6.0 %   11.0 %   2004  

Park West

  Peoria, AZ     249,184     66     79.0 (k)   363     1,608     22     6.1 %   43.8 %   2006  

South Street Seaport (l)

  New York, NY     88,419 (m)(n)   11     41.0 (o)   n.a.     (8,980 )   n.a.     n.a.     n.a.     2004  

Outlet Collection at Riverwalk

  New Orleans, LA     6,735 (p)   11     36.4 (q)   826     (763 )   49     5.9 %   n.a.     2004  

Ward Centers

  Honolulu, HI     1,289,714     60     370.9 (r)   533     24,144     55     10.3 %   55.5 %   2002  

Waterway Garage Retail (s)

  The Woodlands, TX     21,513 (t)   —       6.3     n.a.     370     42     n.a.     57.9 %   2011  
                                                 

Total

        2,223,092     178   $ 583.7         $ 18,961                          
                                                     
                                                     

n.a. – not available

(a)
Average Annual Tenant Sales per Square Foot is calculated by the sum of all comparable sales for the year ended December 31, 2013 for tenants that are contractually obligated to report sales data, divided by the comparable square footage for the same period. When calculating comparable sales and comparable square footage, we include all tenants that have operated for the entire year, under a lease agreements less than 30,000 square feet except for tenants whereby we do not maintain their premises.
(b)
Mall and Other Rental NOI includes mall and other rental revenue and expenses according to accounting principles generally accepted in the United States of America ("GAAP"), excludes straight-line rent, market lease amortization, depreciation and other amortization expense. For the year ended December 31, 2013, tenant recoveries represented approximately 23.5% of total revenue for the above mentioned retail properties only. The impact of concessions, such as free rent and new tenant inducements, are not significant to our business.
(c)
Average Sum of Rent and Recoverable Common Area Costs per Square Foot is calculated as the sum of total rent and tenant recoveries for the year ended December 31, 2013 for the tenant base used to calculate (a), divided by the total square footage occupied by the above mentioned tenant base.
(d)
Occupancy Cost is calculated by dividing (c) Average Sum of Rent and Recoverable Common Area Costs per Square Foot by (a) Average Annual Tenant Sales per Square Foot.
(e)
NOI Margin is calculated by dividing NOI by total contractual and other property revenue. Please refer to "Item 7 – MD&A" for definition of NOI.
(f)
Tenants at Cottonwood Square are not required to report sales.
(g)
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.
(h)
Cottonwood Square includes only seven acres; three acres of which we are a ground lessee, and four acres of which we own fee-simple.
(i)
Excludes 438,937 square feet that is owned and occupied by Sears and Macy's.
(j)
Net Book Value includes $13.8 million of development costs at Landmark Mall.
(k)
Net Book Value includes $0.5 million of development costs at Park West.
(l)
As a result of Super Storm Sandy, tenants did not operate for an entire twelve month period and therefore; (a) Average Annual Tenant Sales per Square Foot, (c) Average Sum of Rent and Recoverable Common Area Costs per Square Foot, and (d) Occupancy Costs are incalculable.
(m)
All of the project is on a ground lease where we are the ground lessee, except for 6,513 square feet.
(n)
Reflects square footage in service as of December 31, 2013. Upon completion of the redevelopment, South Street Seaport will be approximately 362,000 square feet.
(o)
Net Book Value includes $33.0 million of development costs at South Street Seaport.
(p)
Reflects square footage in service as of December 31, 2013. Upon completion of the redevelopment of the Outlet Collection at Riverwalk, gross leasable area will be approximately 250,000 square feet.
(q)
Net Book Value includes $25.0 million of development costs at the Outlet Collection at Riverwalk.
(r)
Net Book Value includes $16.0 million of development costs at Ward Centers.
(s)
Ground floor retail space attached to the Waterway Square Garage.
(t)
Waterway Garage Retail has two retail tenants that are not required to report sales data.

With respect to certain of our office properties, we enter into triple net leases. These leases typically include provisions whereby tenants are required to pay their pro-rata share of certain property operating costs such as real estate taxes, utilities and insurance.

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The following table summarizes certain metrics of our office assets within our Operating Assets Segment as of December 31, 2013:

Asset
  Economic
Ownership
%
  Existing
Gross
Leasable
Area
  % Leased   Average
Effective
Annual
Rent per
Square
Foot(a)
  Year Built /
Acquired
  Net Book
Value,
December 31,
2013
(Millions)
 

3 Waterway Square

    100 %   232,021     97.3 % $ 28.19 (b)   2013   $ 41.8  

4 Waterway Square

    100 %   218,551     100.0 %   36.51     2010     54.8  

70 Columbia Corporate Center

    100 %   167,858     96.8 %   18.77     2012     20.3  

110 N. Wacker (Chicago, IL)

    99 %   226,000     100.0 %   27.08     1957     21.9  

1400 Woodloch Forest

    100 %   95,667     79.4 %   24.14     1981     8.8  

2201 Lake Woodlands Drive

    100 %   24,119     0.0 %   —       1994     3.8  

9303 New Trails

    100 %   97,705     94.3 %   26.64     2008     14.8  

Columbia Office Properties (c)

    100 %   224,550     59.6 %   21.62     1969/1972     23.2  

One Hughes Landing

    100 %   197,719     97.8 %   28.78 (b)   2013     35.5  
                                   

Total

          1,484,190                     $ 224.9  
                                     
                                     

(a)
Average Effective Annual Rent per Square Foot is equal to the sum of base minimum rent and tenant reimbursements divided by the average occupied square feet. For the year ended December 31, 2013, tenant reimbursements represented approximately 17.6% of total revenue. The impact of concessions, such as free rent and new tenant inducements, are not significant to our business.
(b)
3 Waterway Square opened in June 2013 and One Hughes Landing opened in September 2013. The amounts included in the table represent leases in place as of December 31, 2013 as if the leases were in place as of January 1, 2013.
(c)
% Leased is computed based on the weighted average square feet of each office building. At December 31, 2013 the occupancies of each building were as follows: 70 Columbia Corporate Center – 96.8%; American City Building – 17.0%; Columbia Association Building – 100.0%; Columbia Exhibit Building – 100.0%; Ridgely Building – 70.5%.

The following table summarizes certain metrics of our other Operating Assets (exclusive of owned retail and office properties) as of December 31, 2013:

Other than Owned Retail and Office Operating
  Economic Ownership %   Property Type   Square Feet / Keys / Other   % Leased   Year Built   Net Book Value, December 31, 2013 (Millions)  

Arizona 2 Office Lease

    100 % Note     —       —       —     $ 13.2  

Golf Courses at Summerlin and TPC Las Vegas

    Participation   Golf     —       —       —       1.2  

Howard Hughes Management Services Company

    100 % Management Company     —       —       —       —    

Millennium Waterway Apartments

    100 % Apartments     393 units     90.1 %   2010     68.3  

Stewart Title of Montgomery Company

    50 % Title Company     —       —       —       2.2  

Summerlin Baseball Club, LLC

    50 % Athletic Team     —       —       —       10.6  

Summerlin Hospital Medical Center

    7 % Hospital     —       —       1997     4.1  

The Club at Carlton Woods

    100 % Country Club     36 holes     —       2001     15.9  

The Woodlands Parking Garages

    100 % Garage     2,988 spaces     —       2008/2009 (a)   6.0  

The Woodlands Resort & Conference Center

    100 % Hotel     440 rooms     —       1974/2002 (b)   75.1  

Woodlands Sarofim #1 Ltd.

    20 % Industrial     129,790     91.3 %   late 1980s     2.6  
                                   

Total Net Book Value

                              $ 199.2  
                                   
                                   

(a)
The Woodlands Parking Garages consist of two garages; Woodloch Forest Garage built in 2008, and Waterway Square Garage built in 2009.
(b)
The Woodlands Resort & Conference Center was built in 1974, expanded in 2002, and is currently being renovated.

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The following table summarizes our retail and office lease expirations:

Year
  Number of
Expiring Leases
  Total
Square Feet
Expiring
  Total
Annualized
Base Rent
Expiring
(Thousands)
  % of Total
Annual Gross
Rent Expiring
 

2014 (a)

    206     498,973   $ 4,700     8.0 %

2015

    82     249,367     4,203     7.2 %

2016

    59     247,512     9,211     15.7 %

2017

    45     209,127     4,856     8.3 %

2018

    64     274,608     6,348     10.8 %

2019

    19     97,061     1,621     2.8 %

2020

    38     196,149     4,571     7.8 %

2021

    13     217,340     3,569     6.1 %

2022

    17     294,917     5,428     9.3 %

2023

    23     274,908     7,010     12.0 %

2024+

    84     1,230,171     6,995     12.0 %
                   

    650     3,790,133   $ 58,512     100.0 %
                   
                   

(a)
Includes 136 specialty leases which expire in less than 365 days.

The following table sets forth the occupancy rates, for each of the last five years for our wholly owned retail and office properties:

 
   
  Annual Weighted Average Occupancy Rates(a)  
 
  Occupancy as of
December 31, 2013
 
 
  2013   2012   2011   2010   2009  

Retail:

                                     

20/25 Waterway Avenue (b)

    100.0 %   94.2 %   95.6 %   91.7 %   64.2 %   51.8 %

Cottonwood Square

    94.0 %   86.5 %   74.1 %   73.8 %   78.2 %   73.8 %

Landmark Mall (c)

    77.1 %   79.2 %   75.0 %   73.7 %   76.0 %(d)   85.5 %

Park West

    77.2 %   72.1 %   65.1 %   64.6 %   62.5 %   63.6 %

South Street Seaport (e)

    33.0 %   46.5 %   92.1 %   89.7 %   89.7 %   91.3 %

Outlet Collection at Riverwalk (f)

    100.0 %   56.2 %   92.2 %   89.9 %   87.9 %   84.5 %

Ward Centers

    84.4 %   90.8 %   89.5 %   90.1 %   90.0 %   88.6 %

Waterway Garage Retail (g)

    92.8 %   68.4 %   24.8 %   19.3 %   n.a.     n.a.  

Office:

                                     

110 N. Wacker

    100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %

1400 Woodloch Forest

    79.4 %   85.7 %   100.0 %   78.3 %   94.2 %   100.0 %

2201 Lake Woodlands Drive

        66.7 %   83.4 %   100.0 %   100.0 %   100.0 %

3 Waterway Square (h)

    97.3 %   84.9 %   n.a.     n.a.     n.a.     n.a.  

4 Waterway Square

    100.0 %   100.0 %   99.3 %   59.8 %   25.7 %   n.a.  

9303 New Trails

    94.3 %   94.3 %   99.0 %   78.8 %   73.8 %   52.4 %

Columbia Office Properties (i)

    70.5 %   63.2 %   76.6% (j)   89.3 %   89.9 %   89.9 %

One Hughes Landing (k)

    47.6 %   36.1 %   n.a.     n.a.     n.a.     n.a.  

n.a. – not available

(a)
Occupancy rates represent the weighted average square footage occupied during the year divided by total GLA.
(b)
25 Waterway opened in February 2007 and 20 Waterway opened in May 2009.
(c)
Occupancy rates exclude 438,937 square feet that is owned and occupied by Sears and Macy's.
(d)
Reflects the loss of permanent and specialty tenants in 2010 due to potential redevelopment.

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(e)
Occupancy rates are lower in 2013 due to the effects of Superstorm Sandy and potential redevelopment efforts.
(f)
Occupancy rates are lower in 2013 due to redevelopment efforts. Occupancy as of December 31, 2013 is based on 15,812 square feet that was in service as of the end of the year.
(g)
Waterway Garage Retail opened in July 2011.
(h)
3 Waterway Avenue opened in June 2013.
(i)
% Leased is computed based on the weighted average square feet of each office building. At December 31, 2013 the occupancies of each building were as follows: 70 Columbia Corporate Center – 96.8%; American City Building – 17.0%; Columbia Association Building – 100.0%; Columbia Exhibit Building – 100.0%; Ridgely Building – 70.5%.
(j)
Decrease in occupancy is attributed to acquisition of 70 Columbia Corporate Center, which was 44.1% occupied upon acquisition.
(k)
One Hughes Landing opened in September 2013 and is 97.8% leased as of December 31, 2013.


ITEM 3. LEGAL PROCEEDINGS

In the ordinary course of our business, we are from time to time involved in legal proceedings related to the ownership and operations of our properties. Neither we nor any of our Real Estate Affiliates is currently involved in any legal or administrative proceedings that we believe are likely to have a material adverse effect on our business, results of operations or financial condition.


ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

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PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company's common stock is traded on the New York Stock Exchange (the "NYSE") under the symbol "HHC". The following table shows the high and low sales prices of the Company's common stock on NYSE, as reported in the consolidated transaction reporting system for each quarter of fiscal 2013 and 2012.

 
  Common Stock
Price Range
 
 
  High   Low  

Year Ended December 31, 2013

             

Fourth Quarter

  $ 121.68   $ 105.51  

Third Quarter

  $ 118.86   $ 100.35  

Second Quarter

  $ 113.79   $ 82.72  

First Quarter

  $ 84.42   $ 70.74  

Year Ended December 31, 2012

             

Fourth Quarter

  $ 76.71   $ 67.43  

Third Quarter

  $ 73.88   $ 60.85  

Second Quarter

  $ 68.94   $ 55.36  

First Quarter

  $ 65.63   $ 44.02  

No dividends have been declared or paid in 2013 or 2012. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including future earnings, capital requirements, restrictions under debt agreements, financial condition and future prospects and other factors the board of directors may deem relevant.

Number of Holders of Record

As of February 24, 2014, there were 2,409 stockholders of record of the Company's common stock.

Performance Graph

The following performance graph compares the monthly dollar change in the cumulative shareholder return on our common stock with the cumulative total returns of the NYSE Composite Index and the group of companies in the Morningstar Real Estate – General Index. The graph was prepared on the following assumptions:

    Dividends have been reinvested subsequent to the initial investment.

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Cumulative Total Return
Assumes Initial Investment of $100
on November 5, 2010

GRAPHIC

ITEM 6.    SELECTED FINANCIAL DATA

The following table sets forth the selected consolidated financial and other data of our business for the most recent five years. We were formed in 2010 to receive certain assets and liabilities of our predecessors in connection with their emergence from bankruptcy. We did not conduct any business and did not have any material assets or liabilities until our spin-off from GGP was completed on November 9, 2010.

Our selected historical data for 2013, 2012 and 2011, which is presented in accordance with GAAP is not comparable to prior periods due to the acquisition of our partner's 47.5% economic interest in The Woodlands on July 1, 2011. As of the acquisition date, we consolidated The Woodlands' financial results. Prior to the acquisition, we accounted for our investment in The Woodlands using the equity method.

The selected historical financial data as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012, and 2011 has been derived from our audited Consolidated Financial Statements, which are included in this Annual Report as referenced in the index on page F-1.

The selected historical combined financial data as of and for the year ended December 31, 2011 has been derived from our audited Consolidated Financial Statements which are not included in this Annual Report.

The selected historical combined financial data as of and for the years ended December 31, 2010 and 2009 have been derived from our audited Consolidated and Combined Financial Statements which are not included in this Annual Report. Our spin-off did not change the carrying value of our assets and liabilities. Operations for 2010 are presented as the aggregation of the combined results from January 1, 2010 to November 9, 2010 and the consolidated results from November 10, 2010 to December 31, 2010.

Prior to the spin-off, our combined financial statements were carved out from the financial books and records of GGP at a carrying value reflective of historical cost in GGP's records. Our historical financial results for these periods reflect allocations for certain corporate costs, and we believe such allocations are reasonable. Such results do not reflect what our expenses would have been had we been operating as a separate, stand-alone publicly traded company. The historical combined financial information presented for periods prior to our separation from GGP are not indicative of the results of operations, financial position or cash flows that would have been obtained if we had been an independent, stand-alone entity during such periods.

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The historical results set forth below do not indicate results expected for any future periods. The selected financial data set forth below are qualified in their entirety by, and should be read in conjunction with, "Item 7- Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and related notes thereto included on pages F-2 to F-56 in this Annual Report on Form 10-K.

 
  Year Ended December 31,  
 
  2013   2012   2011   2010   2009  
 
  (In thousands, except per share amounts)
 

Operating Data:

                               

Revenues

  $ 474,610   $ 376,886   $ 275,689   $ 142,718   $ 136,348  

Depreciation and amortization

    (33,845 )   (24,429 )   (16,782 )   (16,563 )   (19,841 )

Provisions for impairment

    —       —       —       (503,356 )   (680,349 )

Other property operating costs

    (329,551 )   (279,992 )   (231,442 )   (134,666 )   (128,833 )

Interest (expense) income, net

    (6,574 )   8,473     9,876     (2,053 )   712  

Reorganization items

    —       —       —       (57,282 )   (6,674 )

Warrant liability gain (loss)

    (181,987 )   (185,017 )   101,584     (140,900 )   —    

Benefit from (provision for) income taxes

    (9,570 )   (6,887 )   18,325     633,459     23,969  

Reduction in tax indemnity receivable

    (1,206 )   (20,260 )   —       —       —    

Equity in income (loss) of Real Estate Affiliates

    14,428     3,683     8,578     9,413     (28,209 )

Investment in real estate affiliate basis adjustment

    —       —       (6,053 )   —       —    

Early extinguishment of debt

    —       —       (11,305 )   —       —    
                       

Income (loss) from continuing operations

    (73,695 )   (127,543 )   148,470     (69,230 )   (702,877 )

Discontinued operations – loss on dispositions

    —       —       —       —       (939 )
                       

Net income (loss)

    (73,695 )   (127,543 )   148,470     (69,230 )   (703,816 )

Net (income) loss attributable to noncontrolling interests

    (95 )   (745 )   (1,290 )   (201 )   204  
                       

Net income (loss) attributable to common stockholders

  $ (73,790 ) $ (128,288 ) $ 147,180   $ (69,431 ) $ (703,612 )
                       
                       

Basic Earnings (Loss) Per Share:

                               

Continuing operations

  $ (1.87 ) $ (3.36 ) $ 3.88   $ (1.84 ) $ (18.64 )

Discontinued operations

    —       —       —       —       (0.02 )
                       

Total basic income (loss) per share

  $ (1.87 ) $ (3.36 ) $ 3.88   $ (1.84 ) $ (18.66 )
                       
                       

Diluted Earnings (Loss) Per Share:

                               

Continuing operations

  $ (1.87 ) $ (3.36 ) $ 1.17   $ (1.84 ) $ (18.64 )

Discontinued operations

    —       —       —       —       (0.02 )
                       

Total diluted income (loss) per share          

  $ (1.87 ) $ (3.36 ) $ 1.17   $ (1.84 ) $ (18.66 )
                       

Cash dividends per common share

  $ —     $ —     $ —     $ —     $ —    
                       
                       

 

 
  Year Ended December 31,  
 
  2013   2012   2011   2010   2009  
 
  (In thousands, except per share amounts)
 

Cash Flow Data:

                               

Operating activities

  $ 129,332   $ 153,064   $ 86,508   $ (67,899 ) $ (17,870 )

Investing activities

    (294,325 )   (81,349 )   (39,680 )   (111,829 )   (21,432 )

Financing activities

    830,744     (70,084 )   (103,944 )   461,206     37,543  

 

 
  As of December 31,  
 
  2013   2012   2011   2010   2009  
 
  (In thousands)
 

Balance Sheet Data:

                               

Investments in real estate – cost

  $ 3,085,854   $ 2,778,775   $ 2,648,520   $ 2,311,520   $ 2,822,692  

Total assets

    4,567,868     3,503,042     3,399,593     3,022,707     2,905,227  

Total debt

    1,514,623     688,312     606,477     318,660     342,833  

Total equity

    2,245,146     2,310,997     2,329,599     2,179,107     1,503,520  

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks, uncertainties, assumptions and other factors, including those described in Part I, "Item 1A. Risk Factors" and elsewhere in this Annual Report. These factors could cause our actual results in 2014 and beyond to differ materially from those expressed in, or implied by, those forward-looking statements. You are cautioned not to place undue reliance on this information which speaks only as of the date of this report. We are not obligated to update this information, whether as a result of new information, future events or otherwise, except as may be required by law.

All references to numbered Notes are to specific Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K and which descriptions are incorporated into the applicable response by reference. Capitalized terms used, but not defined, in this Management's Discussion and Analysis of Financial Condition and Results of Operation ("MD&A") have the same meanings as in such Notes.

Overview

Our mission is to be the preeminent developer and operator of master planned communities and mixed-use and other real estate properties. We create timeless places and memorable experiences that inspire people while driving sustainable, long-term growth and value for our shareholders. We specialize in the development of master planned communities, the redevelopment or repositioning of real estate assets currently generating revenues, also called operating assets, and other strategic real estate opportunities in the form of entitled and unentitled land and other development rights. Our assets are located across the United States. We expect to drive income and growth through entitlements, land and home site sales and project developments. We are focused on maximizing value from our assets, and we continue to develop and refine business plans to achieve that goal.

We operate our business in three segments: Master Planned Communities ("MPCs"), Operating Assets and Strategic Developments. Unlike real estate companies that are limited in their activities because they have elected to be taxed as real estate investment trusts, we, except for Victoria Ward, Limited, one of our subsidiaries which is a captive REIT, have no restrictions on our operating activities or types of services that we can offer. We believe our structure provides the greatest flexibility for maximizing the value of our real estate portfolio.

We believe many of our operating and strategic development assets require repositioning or redevelopment to maximize their value. We have commenced construction on certain key assets, and we are continuing to develop plans for other strategic development assets for which no formal plans had been previously established.

The development and redevelopment process for each specific asset is complex and takes several months to several years prior to the commencement of actual construction. We must study each local market, determine the highest and best use of the land and improvements, obtain entitlements and permits, complete architectural design, construction drawings and plans, secure tenant commitments and commit sources of capital. During this period, these activities generally have very little impact on our operations relative to the activity and effort involved in the development process.

Significant milestones achieved during 2013:

    Generated a $68.6 million increase in MPC land sales revenue for 2013, a 37.5% increase compared to 2012.

    Increased average price per lot sold at The Woodlands by 51.9% to $156,000, and increased the average price per superpad acre sold at Summerlin by 42.9% to $323,000, compared to 2012.

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    Completed two Class A office towers in The Woodlands, 3 Waterway and One Hughes Landing, totaling approximately 429,000 square feet. Both buildings are 98% leased and combined will generate annual NOI of approximately $11.7 million upon stabilization in 2014.

    Began construction of three Class A office towers in The Woodlands. Two Hughes Landing is a 197,000 square foot multi-tenant building scheduled for completion in second quarter 2014. Two build-to-suit buildings totaling 647,000 square feet are being constructed at Hughes Landing and are scheduled for completion in the first quarter of 2015. Exxon Mobil Corporation ("ExxonMobil") has pre-leased 478,000 square feet and has an option on the remaining space.

    Commenced construction of a 123,000 square foot Whole Foods-anchored retail center at Hughes Landing scheduled for completion in the first quarter of 2015.

    Launched construction of One Lake's Edge, a 390-unit Class A apartment building located in Hughes Landing which will open in the first quarter of 2015.

    Began the $75.4 million redevelopment of The Woodlands Resort & Conference Center which will be completed in the third quarter of 2014.

    Obtained all entitlements, including approval from the New York City Council, and began construction to transform Pier 17. The Pier will have a vibrant open rooftop and a glass façade encompassing dynamic retail space filled with destination stores, restaurants and neighborhood shops. Pre-leased a portion of the Fulton Market building to iPic Entertainment, which will be the first luxury movie theater in Manhattan. The new Pier 17, containing approximately 182,000 square feet, is expected to open in 2016 and the renovation of the historic area, containing approximately 180,000 square feet, is expected to be completed in 2015.

    Began construction of the 1.6 million square foot Shops at Summerlin mixed-use development, which is expected to open by the fourth quarter of 2014.

    Commenced the redevelopment of the Outlet Collection at Riverwalk into the nation's first upscale urban outlet center. The 250,000 square foot project is 95.1% pre-leased and expected to be completed in May 2014. Closed on a $64.4 million construction loan. The project is expected to generate approximately $7.8 million of stabilized annual NOI based on leases in place.

    Received approval for two market rate and one workforce housing condominium towers at Ward Village and in February 2014, commenced public presales of the two market rate condominium towers.

    Substantially completed the transformation of the IBM building at Ward Village into a world-class information center and sales gallery.

    Began the redevelopment of the 89,000 square foot Columbia Regional Building, anchored by Whole Foods Market, Inc. and The Columbia Association, located in downtown Columbia, MD.

    Continued construction at The Metropolitan Downtown Columbia Project, a 380-unit multi-family project under a 50/50 joint venture and obtained $64.1 million non-recourse construction financing for this project. Entered into a second 50/50 joint venture with the same partner to develop Parcel C, an adjacent 437-unit Class A apartment building on five acres. The land will be contributed to the venture at a $23.4 million valuation, which is approximately 585% of book value, or $53,500 per unit.

    Received unanimous approval from the City of Alexandria for a zoning change for the Landmark Mall. The site will be transformed into an open-air, mixed-use community with retail, residential and entertainment components designed to create an urban village.

    Sold the One Ala Moana condominium rights into our 50/50 development joint venture for $47.5 million, and closed on a $132.0 million non-recourse construction loan and $40.0 million in

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      mezzanine financing. The condo rights had a $22.8 million book value. The expected completion date for the sold out 206-unit project is the fourth quarter of 2014.

    Extended and modified The Woodlands Master Credit Facility to reduce its interest rate to one-month LIBOR plus 2.75% with no minimum rate from one-month LIBOR plus 4.00% with a 5.00% minimum rate. The final maturity was extended to August 2018 from March 2015.

    Issued $750.0 million of Senior Notes, raising $739.6 million of net cash proceeds. The notes bear interest at 6.875% and mature October 1, 2021.

    Obtained $768.0 million of other aggregate financings in addition to our Senior Notes noted above.

    Sold our Head Acquisition investment for $13.3 million, generating a $8.5 million pre-tax gain.

    Sold Rio West Mall for net cash proceeds of $10.8 million, generating a $0.6 million pre-tax gain.

Real Estate Property Earnings Before Taxes

We use a number of operating measures for assessing operating performance of our communities, assets, properties and projects within our segments, some of which may not be common among all three of our segments. We believe that investors may find some operating measures more useful than others when separately evaluating each segment. One common operating measure used to assess operating results for our business segments is Real Estate Property Earnings Before Taxes ("REP EBT"). We believe REP EBT provides useful information about our operating performance because it excludes certain non-recurring and non-cash items, which we believe are not indicative of our core business. REP EBT may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.

REP EBT, as it relates to our business, is defined as net income (loss) excluding general and administrative expenses, corporate interest income, corporate interest and depreciation expense, provision for income taxes, warrant liability gain (loss) and the increase (reduction) in tax indemnity receivable. We present REP EBT because we use this measure, among others, internally to assess the core operating performance of our assets. We also present this measure because we believe certain investors use it as a measure of a company's historical operating performance and its ability to service and incur debt. We believe that the inclusion of certain adjustments to net income (loss) to calculate REP EBT is appropriate to provide additional information to investors. A reconciliation of REP EBT to consolidated net income (loss) as computed in accordance with GAAP has been presented in Note 18 – Segments.

REP EBT should not be considered as an alternative to GAAP net income (loss) attributable to common stockholders or GAAP net income (loss), as it has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of the limitations of this metric are that it does not include the following:

    cash expenditures, or future requirements for capital expenditures or contractual commitments;

    corporate general and administrative expenses;

    interest expense on our corporate debt;

    income taxes that we may be required to pay;

    any cash requirements for replacement of depreciated or amortized assets or take into account that these assets have different useful lives;

    limitations on, or costs related to, transferring earnings from our Real Estate Affiliates to us.

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Operating Assets Net Operating Income

We believe that net operating income ("NOI") is a useful supplemental measure of the performance of our Operating Assets because it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating real estate properties and the impact on operations from trends in rental and occupancy rates and operating costs. We define NOI as revenues (rental income, tenant recoveries and other income) less expenses (real estate taxes, repairs and maintenance, marketing and other property expenses). NOI excludes straight line rents and amortization of tenant incentives, net interest expense, ground rent, demolition costs, amortization, depreciation and equity in earnings from Real Estate Affiliates. We use NOI to evaluate our operating performance on a property-by-property basis because NOI allows us to evaluate the impact that factors such as lease structure, lease rates and tenant mix, which vary by property, have on our operating results, gross margins and investment returns.

Although we believe that NOI provides useful information to investors about the performance of our Operating Assets, due to the exclusions noted above, NOI should only be used as an alternative measure of the financial performance of such assets and not as an alternative to GAAP net income (loss). For reference, and as an aid in understanding our computation of NOI, a reconciliation of Operating Assets NOI to Operating Assets REP EBT has been presented in the Operating Assets segment discussion below.

Results of Operations

Our revenues primarily are derived from the sale of individual lots at our master planned communities to home builders and from tenants at our operating assets in the form of fixed minimum rents, overage rent and recoveries of operating expenses.

On July 1, 2011, we acquired our partner's economic interest in The Woodlands located near Houston, Texas. As a result of the acquisition, we consolidated The Woodlands' operations in our Consolidated Financial Statements. Consequently, our consolidated statements of operations and cash flows for the years ended December 31, 2013 and 2012, respectively, are not comparable to the same period in 2011. Prior to such acquisition, The Woodlands was presented as a Real Estate Affiliate and accounted for using the equity method. The Woodlands operating results for periods prior to July 1, 2011 when this investment was a Real Estate Affiliate are presented on a consolidated basis for the purposes of this MD&A and segment reporting, in order to provide comparability between periods for analyzing operating results. For a reconciliation of REP EBT to net income (loss) see Note 18 – Segments to the Consolidated Financial Statements.

Consolidated revenues for the year ended December 31, 2013 increased $97.7 million or 25.9% to $474.6 million from $376.9 million for the year ended December 31, 2012. The increase is primarily due to higher revenues in our MPCs and Strategic Developments segments. MPC segment land sale revenues increased $68.6 million for the year ended December 31, 2013 compared to the year ended December 31, 2012, due to the higher demand for our residential superpad sites in Summerlin and finished lots in The Woodlands. Strategic Developments revenue increased $34.5 million for the year ended December 31, 2013, respectively, compared to the year ended December 31, 2012, due primarily to the recognition of $33.0 million of revenue from the sale of our ONE Ala Moana condominium rights into a 50/50 joint venture in the second quarter of 2013.

Consolidated revenues for the year ended December 31, 2012 increased $101.2 million or 36.7% to $376.9 million from $275.7 million for the year ended December 31, 2011. The increase is primarily due to the inclusion of $83.3 million of revenue from The Woodlands for the first half of 2012 compared to no revenues for the same period in 2011 because we did not begin consolidating The Woodlands operations until July 1, 2011. Master Planned Community land sales and builder price participation increased $27.5 million primarily due to price increases and accelerated lot sales at The Woodlands resulting from an auction of 375 lots in August 2012. Minimum rents and tenant recoveries increased

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$8.8 million primarily due to the acquisition of our partner's interest in, and consolidation of, Millennium Waterway apartments, 4 Waterway reaching stabilization in 2012, improved occupancy at Ward Centers and 1400 Woodloch Forest slightly offset by lost revenue due to Superstorm Sandy at South Street Seaport. The Woodlands Resort & Conference Center revenues increased $2.4 million primarily due to higher revenue per available room. Condominium unit sales decreased $21.8 million in 2012 compared to 2011 due to the sale of the last two units in the first quarter of 2012.

Net loss attributable to common stockholders was $73.8 million for the year ended December 31, 2013 compared to net loss attributable to common stockholders of $128.3 million for 2012. The $54.5 million decrease in net loss for 2013 as compared to 2012 was primarily due to higher earnings from our MPC segment of $39.0 million, higher earnings from our Strategic Developments segment of $27.7 million, lower warrant liability loss of $3.0 million, a $19.1 million lower reduction in tax indemnity receivable, and $23.7 million increase in other income. These were offset by lower earnings in our Operating Assets segment of $22.0 million, higher interest expense of $20.7 million, mainly due to the issuance of our Senior Notes, higher income tax expense of $2.7 million, a decrease in net income attributable to noncontrolling interests of $0.7 million, along with additional corporate general and administrative expenses of $11.9 million primarily due to higher headcount. The lower earnings in our Operating Assets segment was mainly due to increased interest expense of $2.9 million, increased depreciation and amortization of $8.1 million, increased other property operating costs of $4.5 million, and decreased revenues of $4.5 million principally caused by the effects of Superstorm Sandy at the South Street Seaport and redevelopment of the Outlet Collection at Riverwalk. Please refer to the individual segment operations sections and the general and administrative section for explanations of these variances.

Net loss attributable to common stockholders was $128.3 million for the year ended December 31, 2012 compared to net income attributable to common stockholders of $147.2 million for the same period in 2011. The net loss in 2012 is primarily due to the $185.0 million warrant liability loss related to the increase in value of the Sponsors and Management warrants in 2012 compared to the $101.6 million warrant liability gain in 2011. Land sales, builder price participation and other land sales revenue net of cost of sales and MPC operations improved $32.9 million in 2012 compared to 2011 primarily due to higher lot prices and lower cost of sales for The Woodlands MPC in 2012. The Woodlands also contributed $17.1 million to net income during the first half of 2012 as compared to $3.7 million during the first half of 2011 when it was an equity investment. The increases in income were somewhat offset by income taxes of $6.1 million attributable to our higher earnings, the reduction in tax indemnity receivable of $20.3 million related to our utilization of tax assets and the profit contribution from Nouvelle at Natick decreasing by $7.4 million due to the sale of the two remaining units in the first quarter of 2012.

Master Planned Communities

MPC revenues vary between periods based on economic conditions and several factors such as, but not limited to, location, availability of land for sale, development density and residential or commercial use. Although our business does not involve the sale or resale of homes, we believe that net new home sales are an important indicator of future demand for our superpad sites and lots; therefore, we use this statistic in the discussion of our MPCs below. Net new home sales reflect home sales made by home builders, less cancelations. Cancelations occur when a home buyer signs a contract to purchase a home, but later fails to qualify for a home mortgage or is unable to provide an adequate down payment to complete the home sale. Reported results may differ significantly from actual cash flows generated principally because cost of sales for GAAP purposes is derived from margins calculated using carrying values, projected future improvements and other capitalized project costs in relation to projected future land sale revenues. Carrying values, generally, represent acquisition and development costs less adjustment for previous impairment charges. Development expenditures are capitalized and generally not reflected in the Consolidated Statements of Operations in the current year.

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MPC Sales Summary

 
  Land Sales   Acres Sold   Number of Lots/Units   Price per acre   Price per lot  
 
  Year Ending December 31,  
 
  2013   2012   2011   2013   2012   2011   2013   2012   2011   2013   2012   2011   2013   2012   2011  
 
  ($ In thousands)
 

Maryland

                                                                                           

Residential

                                                                                           

Single family – detached

  $ —     $ —     $ 1,480     —       —       1.4     —       —       7   $  —     $ —     $ 1,057   $ —     $ —     $ 211  

Townhomes

    —       4,156     5,538     —       1.2     1.8     —       28     39     —       3,463     3,077     —       148     142  

Commercial

                                                                                           

Office and other

    13,000     —       —       56.2     —       —       —       —       —       231     —       —       —       —       —    

Apartments

    —       5,300     —       —       18.7     —       —       —       —       —       283     —       —       —       —    
                                                               

    13,000     9,456     7,018     56.2     19.9     3.2     —       28     46     231     475     2,193     —       148     153  

Bridgeland

                                                                                           

Residential

                                                                                           

Single family – detached

    10,974     21,875     16,707     33.2     80.5     63.2     143     389     318     331     272     264     77     56     53  

Commercial

                                                                                           

Apartments

    2,636     —       —       16.6     —       —       —       —       —       159     —       —       —       —       —    
                                                               

    13,610     21,875     16,707     49.8     80.5     63.2     143     389     318     273     272     264     77     56     53  

Summerlin

                                                                                           

Residential

                                                                                           

Single family – detached

    18,038     14,394     30,247     23.4     20.7     83.5     157     158     419     771     695     362     115     91     72  

Custom lots

    4,813     4,141     679     5.3     5.3     1.0     12     10     2     908     781     679     401     414     340  

Superpad Sites

    83,191     12,505     —       257.3     55.3     —       1,164     232     —       323     226     —       71     54     —    

Commercial

                                                                                           

Office and other

    4,526     —       —       7.3     —       —       —       —       —       620     —       —       —       —       —    

Retail

    —       784                 1.0                                   784                          

Not-for-profit

    1,334     —       3,616     5.9     —       16.1     —       —       —       226     —       225     —       —       —    

Other

    575     —       —       17.2     —       —       —       —       —       33     —       —       —       —       —    
                                                               

    112,477     31,824     34,542     316.4     82.3     100.6     1,333     400     421     355     387     343     80     78     73  

The Woodlands

                                                                                           

Residential

                                                                                           

Single family – detached

    100,142     100,235     76,362     162.8     241.6     210.4     589     979     826     615     415     363     170     102     92  

Single family – attached

    3,897     —       1,235     7.1     —       3.0     80     —       46     549     —       409     49     —       27  

Commercial

                                                                                           

Office and other

    1,500     9,069     6,213     2.1     14.2     14.0     —       —       —       714     639     449     —       —       —    

Retail

    1,261     7,904     6,365     1.6     18.4     12.0     —       —       —       788     430     547     —       —       —    

Other

    135     50     1,839     0.7     0.8     5.0     —       —       —       193     63     348     —       —       —    
                                                               

    106,935     117,258     92,014     174.3     275.0     244.4     669     979     872     614     426     376     156     102     89  
                                                                           

Total acreage sales revenue

    246,022     180,413     150,281     596.7     457.7     411.4     2,145     1,796     1,657                                      
                                                                           
                                                                                 

Deferred revenue

    (12,451 )   (2,092 )   5,680                                                                          

Special Improvement District revenue

    17,646     4,322     5,420                                                                          
                                                                                       

Total segment land sale revenues

    251,217     182,643     161,381                                                                          

Less: Real Estate Affiliates land sales revenue

    —       —       (46,771 )                                                                        
                                                                                       

Total land sales revenue – GAAP basis

  $ 251,217   $ 182,643   $ 114,610                                                                          
                                                                                       
                                                                                       

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MPC land sales increased 37.5%, or $68.6 million to $251.2 million for the year ended December 31, 2013 as compared to $182.6 million for the year ended December 31, 2012. MPC land sales increased 59.4% or $68.0 million to $182.6 million for the year ended December 31, 2012 as compared to $114.6 million for the year ended December 31, 2011. Land sales for the year ended December 31, 2013, including Special Improvement District ("SID") revenues and reimbursements and deferred revenue, increased at Summerlin and Maryland by 200.3%, or $87.2 million to $130.7 million, and decreased by $8.3 million at Bridgeland and $10.3 million at The Woodlands. The increase in land sales is primarily due to the low inventory of homes for sale and strong homebuilder demand for superpad sites at Summerlin.

For large MPCs such as ours, sales prices on a per lot basis and per acre basis generally increase as the size of the developed lot grows. This increase is because smaller lots are more commodity-like and larger lots may have more unique features. Additionally, the average homebuyer finds more competition for new and resale homes on the lower end of the price range in the broader residential market. As lot sizes and prices increase, the number of potential customers and developers decreases. Barring a softening in market conditions, when a MPC reaches the level whereby land is relatively scarce, pricing begins to escalate on a per lot and per acre basis due to a scarcity premium resulting from the market's realization that new home site inventory will be depleted, as is being experienced at The Woodlands.

Maryland

Maryland's land sales increased 37.5%, or $3.5 million to $13.0 million for the year ended December 31, 2013 as compared to $9.5 million for the year ended December 31, 2012 due to a 56.2 acre commercial land sale at Emerson. Maryland's land sales increased 34.7%, or $2.4 million to $9.5 million for the year ended December 31, 2012 as compared to 2011, primarily due to an 18.7 acre apartment site sale.

The Woodlands and Bridgeland

The Woodlands land sales decreased 8.8%, or $10.3 million to $106.9 million for the year ended December 31, 2013 as compared to $117.3 million for the year ended December 31, 2012. The decrease was primarily due to approximately $14.2 million lower commercial land sales. In 2013 we began emphasizing holding land for development rather than selling. This decrease was partially offset by an approximately $3.8 million increase in residential land sales. For the year ended December 31, 2013, The Woodlands sold 169.9 residential acres compared to 241.6 acres in 2012, but average price per residential acre (single-family – detached) increased 48.2% to $615,000 compared to $415,000 in 2012. The Woodlands land sales increased 27.4%, or $25.2 million to $117.3 million, for the year ended December 31, 2012 as compared to $92.0 million for the year ended December 31, 2011 due to the continued strong housing market.

In recognition of the pent up demand for lots in The Woodlands, a competitive bid process was introduced in August 2012. During the period from August 2012 through December 31, 2013, The Woodlands sold 1,077 residential lots of which 786 have closed, providing total revenues of $81.4 million and $38.5 million for the years ended December 31, 2013 and 2012, respectively. The remaining 291 lots are expected to close in 2014 and 2015 providing an estimated $53.2 million of revenues. We plan to continue the bid process for future sections to ensure we maximize values; however, we expect that the bid process will result in a slower pace of annual lot sales. With the anticipated slower lot sales pace, our current projections indicate a complete sell-out of all lots within five to six years. As of December 31, 2013, we estimate the cash costs to complete and deliver the remaining lots, net of expected future collections from municipal district receivables, to be approximately $2,600 per lot.

Bridgeland's land sales decreased 37.8%, or $8.3 million, to $13.6 million for the year ended December 31, 2013, as compared to land sales of $21.9 million and $16.7 million for the years ended

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December 31, 2012 and 2011, respectively. The decrease in lot sales revenues for the year ended December 31, 2013, as compared to the same periods in 2012 and 2011, relates primarily to the availability of lot inventory. Bridgeland's inventory levels are low due to the inability to develop finished lots in 2013 pending obtaining wetlands permits from the U.S. Army Corps of Engineers ("USACE"), we expect to have the right to build on 806 acres of land. Bridgeland offered 32 lots for sale in October 2013 in a competitive bid process. These lot sales closed in December 2013 at an average lot price of $115,000, which was 105.0%, or $59,000 higher than the average lot price of $56,000 as of December 31, 2012. On February 27, 2014, we obtained the needed permits from USACE to develop 806 acres of land, and expect to begin delivering new finished lots by mid-2014. Land sales for the year ended December 31, 2013 include a $2.6 million sale of a commercial parcel.

The average price per residential acre at Bridgeland increased 21.3%, or $59,000, to $331,000 for the year ended December 31, 2013, as compared to $272,000 and $265,000 per acre, for the years ended December 31, 2012 and 2011, respectively. The average lot price for the year ended December 31, 2013 increased 36.5% or $21,000 to $77,000 as compared to $56,000 and $53,000 for the years ended December 31, 2012 and 2011, respectively. The 2013 average lot price increase relates to a 10% lot price increase implemented in late 2012 that benefitted the 2013 average lot prices, the competitive bid process implemented in the fourth quarter of 2013 and the sale of more higher priced lots. There were 11 finished lots remaining at Bridgeland available for sale as of December 31, 2013.

The Houston, Texas area continues to benefit from a strong energy sector. Additionally, we expect the completion of construction of the Grand Parkway to positively impact the surrounding areas. The Grand Parkway is an approximate 180-mile circumferential highway traversing seven counties and encircling the Greater Houston region. Construction of segment E of the Grand Parkway, which bisects Bridgeland, (from IH 10 to US 290) was completed and open to the public on December 21, 2013, and segments F1 (from US 290 to SH 249) and F2 (from SH 249 to IH 45) are scheduled for completion in 2015. Completion of these segments will improve travel patterns for residents living in The Woodlands and Bridgeland. In addition, we believe the Grand Parkway was instrumental in ExxonMobil's decision to relocate and construct a large corporate campus on a 385-acre site just south of The Woodlands. The site is expected to include approximately 20 buildings, representing three million square feet of space, and we believe it is one of the largest construction projects currently under way in the United States. ExxonMobil expects to begin relocating employees to this new location starting in early 2014 and ending in 2015. Upon completion of the relocation, ExxonMobil expects approximately 10,000 employees will be employed at the new campus. The direct and indirect jobs related to this relocation are positively impacting The Woodlands and Bridgeland due to increased housing demand, as well as commercial space needs for companies servicing ExxonMobil.

As more fully discussed in the Strategic Developments segment, ExxonMobil has pre-leased 478,000 square feet in two to-be-constructed Class A office buildings at Hughes Landing in The Woodlands.

Summerlin

Summerlin's land sales increased 253.4%, or $80.7 million, to $112.5 million for the year ended December 31, 2013, compared to $31.8 million and $34.5 million for the years ended December 31, 2012 and 2011, respectively. This increase was primarily due to increasing new home demand and low new home sales inventory, resulting in significantly higher sales of superpad sites to homebuilders in terms of volume and price per acre. Superpad sites are generally 20-acre parcels of unimproved land where we develop and construct the major utilities (water, sewer and drainage) and roads to the borders of the parcel and the homebuilder completes the on-site utilities, roads and finished lots. The average price per acre for superpads increased 42.9%, or $97,000 to $323,000 for the year ended December 31, 2013 when compared to 2012. The increase in average price per acre is primarily due to a scarcity of attractive developable residential land in the market and the improving new housing demand. The volume of lot sales increased 233.3%, or 933 lots, to 1,333 lots for the year ended December 31, 2013 as compared to 400 lots for 2012. Summerlin had 421 lot sales during 2011. As of

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December 31, 2013, Summerlin had 152 residential lots under contract of which 60 lots are scheduled to close in 2014, providing an estimated $11.2 million of revenues. The remaining 92 lots are scheduled to close in 2015, providing an estimated $16.9 million of revenues.

Builder and new home sales activity continues to improve in Summerlin with 566 new home sales for the year ended December 31, 2013, representing a 20.2% increase as compared to the 471 and 215 new home sales for the years ended December 31, 2012 and 2011, respectively. Inventory levels for both the new home segment and the resale market continue to decline, resulting in increasing home pricing, which we believe will translate to higher per acre land prices in the future. As new home prices increase, we also earn higher builder price participation revenue from the home builders, and the value of our land inventory also increases. Furthermore, as more fully discussed in our Strategic Developments segment, we are constructing the 1.6 million square foot Shops at Summerlin development on 106 acres in the future downtown of Summerlin. We believe this destination for shopping and entertainment will further increase residential sales and pricing when completed in the fourth quarter of 2014.


Master Planned Communities Revenues and Expenses (*)

 
  Year Ended December 31,  
 
  2013   2012   2011 (**)  
 
  (In thousands)
 

Land sales

  $ 251,217   $ 182,643   $ 161,383  

Builder price participation

    9,356     5,747     4,924  

Other land sale revenues

    14,197     18,649     17,730  
               

Total revenues

    274,770     207,039     184,037  

Cost of sales – land

    124,040     89,298     94,040  

Land sales operations

    38,414     40,375     41,584  

Depreciation and amortization

    32     72     48  

Interest expense, net (***)

    (18,694 )   (14,643 )   (10,296 )
               

Total expenses

    143,792     115,102     125,376  
               

Venture partner share of The Woodlands EBT

    —       —       (7,949 )
               

MPC REP EBT

  $ 130,978   $ 91,937   $ 50,712  
               
               

(*)
For a detailed breakdown of our Master Planned Communities segment EBT, refer to Note 18 – Segments.

(**)
Amounts include The Woodlands as if consolidated.

(***)
Negative interest expense amounts relate to interest capitalized on debt assigned to our Operating Assets segment and Corporate.

Land sales increased $68.6 million to $251.2 for the year ended December 31, 2013 as compared to $182.6 million for the year ended December 31, 2012. The increase for the year ended December 31, 2012, as compared to 2011 was $21.3 million. These year-over-year increases were due to factors described more fully above.

Builder price participation represents the contractual amount we collect from home builders when the homes they have constructed sell for more than an agreed upon amount when the land was sold to them. Builder price participation increased $3.6 million to $9.4 million for the year ended December 31, 2013, as compared to $5.7 million in 2012, primarily due to increased home closings at higher prices at Summerlin and increased participation fees at The Woodlands due to home sales price appreciation since initial lot closing. Builder price participation increased $0.8 million to $5.7 million for the year ended December 31, 2012 as compared to 2011.

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Other land revenues decreased 23.9%, or $4.5 million, to $14.2 million for the year ended December 31, 2013, as compared to $18.6 million and $17.7 million in 2012 and 2011, respectively. The primary reasons for the decrease were the land use modification fees collected in 2012 that were not repeated in 2013 and the termination of a contract in June 2012 that provided easement fee revenues to The Woodlands during 2011 and the first half of 2012.

Land sales margins, which include builder price participation, were 52.4%, 52.6% and 43.5% for the years ended December 31, 2013, 2012 and 2011, respectively. The margin increase in 2012 as compared to 2011 was principally caused by a lower cost of sales percentage attributed to The Woodlands sales in 2012 as compared to 2011 because the majority of The Woodlands third and fourth quarter cost of sales for 2011 reflected their finished lots at the fair value established in connection with our acquisition of our partner's interest.

Cost of sales – land increased $34.7 million to $124.0 million for the year ended December 31, 2013, as compared to $89.3 million and $94.0 million in 2012 and 2011, respectively, primarily due to higher land sales revenue. Cost of land sales is based on cost ratios which are determined as a specified percentage of land sales revenues for each master planned community project. The cost ratios are based on actual costs incurred and estimates of development costs and sales revenues for completion of each project.

Land sales operations expenses decreased 4.9%, or $2.0 million, to $38.4 million for the year ended December 31, 2013, as compared to $40.4 million and $41.6 million for the years ended December 31, 2012 and 2011, respectively. The majority of the decrease in 2013 relates to reduced advertising and marketing costs, commissions, closing costs, sale incentives and real estate taxes. The fewer commercial land sales in 2013 resulted in lower commissions and selling expenses, and co-branding for The Woodlands and Bridgeland resulted in lower advertising and marketing expenses.

Interest expense, net reflects the amount of interest that is capitalized at the project level. Interest expense, net increased by 27.7%, or $4.1 million, to $18.7 million for the year ended December 31, 2013, as compared to $14.6 million and $10.3 million for the years ended December 31, 2012 and 2011, respectively. The increase in 2013 was related primarily to higher consolidated company debt levels which resulted in increased capitalized interest.

In addition to REP EBT for the MPCs, we believe that certain investors measure the value of the assets in this segment based on their contribution to liquidity and capital available for investment. MPC Net Contribution is defined as MPC REP EBT, plus MPC cost of sales and depreciation and amortization reduced by MPC development and acquisition expenditures. Although MPC Net Contribution can be computed from GAAP elements of income and cash flows, it is not a GAAP-based operational metric and should not be used to measure operating performance of the MPC assets as a substitute for GAAP measures of such performance. A reconciliation of REP EBT to consolidated net income (loss) as computed in accordance with GAAP is presented in Note 18 – Segments.

The following table sets forth the MPC Net Contribution for the years ended December 31, 2013, 2012 and 2011.

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MPC Net Contribution

 
  Year Ended December 31,  
 
  2013   2012   2011 (**)  
 
  (In thousands)
 

MPC REP EBT (*)

  $ 130,978   $ 91,937   $ 50,712  

Plus:

                   

Cost of sales – land

    124,040     89,298     82,672  

Depreciation and amortization

    32     72     26  

Less:

                   

MPC land/residential development and acquisition expenditures          

    139,257     107,144     97,216  
               

MPC Net Contribution

  $ 115,793   $ 74,163   $ 36,194  
               
               

(*)
For a detailed breakdown of our Master Planned Communities segment EBT, refer to Note 18 – Segments.

(**)
Amounts include The Woodlands as if consolidated.

The MPC Net Contribution increased by 56.1%, or $41.6 million, to $115.8 million for the year ended December 31, 2013 as compared to $74.2 million in 2012. The MPC Net Contribution increased 104.9%, or $38.0 million, to $74.2 million for the year ended December 31, 2012 as compared to $36.2 million for 2011. The increase in MPC Net Contribution was primarily attributable to increased land sales at Summerlin, partially offset by increased development expenditures at Bridgeland, Summerlin and The Woodlands to produce inventory to meet expected future demand. MPC land and residential development expenditures consist primarily of land development costs, such as water, sewer, drainage and paving.

Operating Assets

Operating assets typically generate rental revenues sufficient to cover their operating costs except when a substantial portion, or all, of the property is being redeveloped or vacated for development. Variances between years in NOI typically result from changes in rental rates, occupancy, tenant mix and operating expenses. We view NOI as an important measure of the operating performance of our Operating Assets.

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Operating Assets NOI and REP EBT

 
  Year Ended December 31,  
 
  2013   2012   2011  
 
  (In thousands)
 

Retail

                   

Cottonwood Square

  $ 451   $ 432   $ 380  

Landmark Mall (a)

    491     923     737  

Park West (b)

    1,608     830     576  

South Street Seaport (c)

    (8,980 )   639     5,650  

Outlet Collection at Riverwalk (c)

    (763 )   221     418  

Ward Centers (d)

    24,144     22,045     21,481  

20/25 Waterway Avenue

    1,640     1,582     1,310  

Waterway Garage Retail

    370     97     7  
               

Total Retail

    18,961     26,769     30,559  
               

Office

                   

70 Columbia Corporate Center (e)

    757     140     —    

Columbia Office Properties (f)

    1,151     2,304     2,649  

2201 Lake Woodlands Drive

    (167 )   53     332  

9303 New Trails

    1,679     1,819     742  

110 N. Wacker

    6,023     6,073     6,115  

One Hughes Landing (g)

    (139 )   —       —    

3 Waterway Square (g)

    2,059     —       —    

4 Waterway Square

    5,886     5,544     1,639  

1400 Woodloch Forest (h)

    1,160     1,995     649  
               

Total Office

    18,409     17,928     12,126  
               

Millennium Waterway Apartments (i)

    4,457     2,589     —    

The Woodlands Resort & Conference Center

    10,167     10,670     7,726  
               

Total Retail, Office, Multi-family, Resort & Conference Center

    51,994     57,956     50,411  
               

The Club at Carlton Woods (j)

    (5,241 )   (4,242 )   (5,126 )

The Woodlands Ground leases

    444     404     403  

The Woodlands Parking Garages

    (749 )   (1,128 )   (1,204 )

Other Properties (k)

    (41 )   1,749     1,463  
               

Total Other

    (5,587 )   (3,217 )   (4,464 )
               

Operating Assets NOI – Consolidated and Owned as of December 31, 2013

    46,407     54,739     45,947  
               
               

Dispositions:

                   

Rio West Mall (l)

    790     1,250     1,319  

Head Acquisition (m)

    —       (46 )   67  
               

Total Operating Asset Dispositions

    790     1,204