Howard Hughes Holdings Inc. 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements and Financial Statement Schedule Page Consolidated Financial Statements Management’s Report on Internal Control over Financial Reporting 63 Report of Independent Registered Public Accounting Firm (PCAOB ID : 185 ) 64 Report of Independent Registered Public Accounting Firm (PCAOB ID : 42 ) 67 Consolidated Balance Sheets as of December 31, 2023 and 2022 68 Consolidated Statements of Operations for the years ended December 31, 2023 , 2022, and 2021 69 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023 , 2022, and 2021 70 Consolidated Statements of Equity for the years ended December 31, 2023 , 2022, and 2021 71 Consolidated Statements of Cash Flows for the years ended December 31, 2023 , 2022, and 2021 72 Notes to Consolidated Financial Statements 74 Note 1. Presentation of Financial Statements and Significant Accounting Policies 74 Note 2. Investments in Unconsolidated Ventures 84 Note 3. Acquisitions and Dispositions 88 Note 4. Impairment 89 Note 5. Other Assets and Liabilities 91 Note 6. Intangibles 91 Note 7. Mortgages, Notes , and Loans Payable, Net 92 Note 8. Fair Value 94 Note 9. Derivative Instruments and Hedging Activities 96 Note 10. Commitments and Contingencies 98 Note 11. Stock-Based Compensation Plans 100 Note 12. Income Taxes 102 Note 13. Warrants 103 Note 14. Accumulated Other Comprehensive Income (Loss) 104 Note 15. Earnings Per Share 105 Note 16. Revenues 106 Note 17. Leases 107 Note 18. Segments 109 Schedule III – Real Estate and Accumulated Depreciation 112 HHH 2023 FORM 10-K | 62 FINANCIAL STATEMENTS Table of Contents Index to Financial Statements Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining a system of internal control over financial reporting designed to provide reasonable assurance that transactions are executed in accordance with management authorization and that such transactions are properly recorded and reported in the financial statements, and that records are maintained so as to permit preparation of the financial statements in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has assessed the effectiveness of the Company’s internal control over financial reporting utilizing the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013 Framework). Management concluded, based on its assessment, that Howard Hughes Holdings Inc. internal control over financial reporting was effective as of December 31, 2023. KPMG LLP, an independent registered public accounting firm, has audited the Company’s internal control over financial reporting as of December 31, 2023, as stated in their report which is included in this Annual Report on Form 10-K. HHH 2023 FORM 10-K | 63 FINANCIAL STATEMENTS Table of Contents Index to Financial Statements Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Howard Hughes Holdings Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Howard Hughes Holdings Inc. (the Company) as of December 31, 2023 and 2022 , the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for the years then ended, and the related notes and financial statement schedule III (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2023 , based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022 , and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Controls Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions . Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. HHH 2023 FORM 10-K | 64 FINANCIAL STATEMENTS Table of Contents Index to Financial Statements Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Master Planned Communities (MPC) cost of sales estimates As discussed in Note 1 to the consolidated financial statements, when developed residential or commercial land is sold, the cost of sales includes actual costs incurred and estimates of future development costs, based on relative sales value, that benefit the property sold. For purposes of allocating development costs, estimates of future revenues and future development costs are re-evaluated throughout the year, with adjustments being allocated prospectively to the remaining parcels available for sale. MPC cost of sales estimates are highly judgmental as they are sensitive to cost escalation and sales price escalation, which are subject to judgment and affected by expectations about future market or economic conditions. The Company recognized MPC cost of sales of $140.1 million for the year ended December 31, 2023 . We identified the evaluation of estimated future development costs and revenues that drive the MPC cost of sales estimates as a critical audit matter. Subjective auditor judgment and the involvement of valuation professionals with specialized skills and knowledge were required to evaluate the cost escalation and sales price escalation assumptions. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the process to estimate MPC cost of sales. This included controls related to management’s monitoring and review of the assumptions noted above. We tested the assumptions related to cost escalation and sales price escalation by: • agreeing the current year estimates for revenues and costs to actual results, where applicable • comparing the Company’s historical cost escalation and sales price escalation estimates to actual results to assess the Company’s ability to accurately estimate these amounts • performing site visits for certain MPC developments to compare the overall status of the developments to what is reflected within the MPC cost of sales estimates. In addition, we involved valuation specialists with specialized skills and knowledge, who assisted in evaluating the cost escalation and sales price escalation assumptions by: • comparing expected price per acre for each property type available for sale to applicable market data • comparing the cost and sales price escalation rates throughout the duration of the development to available market data. Impairment of the Seaport Segment As discussed in Note 4 to the consolidated financial statements, the Company reviews its long-lived assets for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. During the third quarter of 2023, the Company recorded a $709.5 million impairment charge related to the Seaport segment. The impairment charges consisted of $672.5 million related to net investment in real estate and $37.0 million related to investments in unconsolidated ventures. These charges represent the amounts by which the carrying value of the assets exceeded the estimated fair value. We identified the assessment of the fair value of the net investment in real estate and investments in unconsolidated ventures as a critical audit matter. Subjective auditor judgment and specialized skills and knowledge were required to evaluate 1) certain components of future cash flows, specifically, the projected revenue growth rate and projected operating expense ratio, 2) capitalization rates, and 3) discount rates used to determine the fair value of these assets for which there was limited observable market information. HHH 2023 FORM 10-K | 65 FINANCIAL STATEMENTS Table of Contents Index to Financial Statements The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s assessment of the fair value of the net investment in real estate and investments in unconsolidated ventures. This included controls related to the future cash flows, capitalization rates, and discount rates. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s: • projected revenue growth rate by comparing it to rates that were independently developed using publicly available third-party market data for comparable entities • projected operating expense ratio by comparing it to 1) market data that was independently developed using publicly available third-party market data for comparable entities and 2) historical operating expense • determination of capitalization rates by comparing them against capitalization rates that were independently developed using publicly available third-party market data for comparable entities • determination of discount rates by comparing them against discount rates that were independently developed using publicly available third-party market data for comparable entities. /s/ KPMG LLP We have served as the Company’s auditor since 2022. Dallas, Texas February 27, 2024 HHH 2023 FORM 10-K | 66 FINANCIAL STATEMENTS Table of Contents Index to Financial Statements Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Howard Hughes Holdings Inc. Opinion on the Financial Statements We have audited the accompanying consolidated statements of operations, comprehensive income (loss), equity and cash flows of Howard Hughes Holdings Inc. (the Company) for the year ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Ernst & Young LLP We served as the Company’s auditor from 2013 to 2021. Houston, Texas February 28, 2022 HHH 2023 FORM 10-K | 67 FINANCIAL STATEMENTS Table of Contents Index to Financial Statements HOWARD HUGHES HOLDINGS INC. CONSOLIDATED BALANCE SHEETS December 31, thousands except par values and share amounts 2023 2022 ASSETS Master Planned Communities assets $ 2,445,673 $ 2,411,526 Buildings and equipment 4,177,677 4,246,389 Less: accumulated depreciation ( 1,032,226 ) ( 867,700 ) Land 303,685 312,230 Developments 1,272,445 1,125,027 Net investment in real estate 7,167,254 7,227,472 Investments in unconsolidated ventures 220,258 246,171 Cash and cash equivalents 631,548 626,653 Restricted cash 421,509 472,284 Accounts receivable, net 115,045 103,437 Municipal Utility District receivables, net 550,884 473,068 Deferred expenses, net 142,561 128,865 Operating lease right-of-use assets 44,897 46,926 Other assets, net 283,047 278,587 Total assets $ 9,577,003 $ 9,603,463 LIABILITIES Mortgages, notes, and loans payable, net $ 5,302,620 $ 4,747,183 Operating lease obligations 51,584 51,321 Deferred tax liabilities, net 87,835 254,336 Accounts payable and other liabilities 1,076,040 944,511 Total liabilities 6,518,079 5,997,351 Commitments and Contingencies (see Note 10) EQUITY Preferred stock: $ 0.01 par value; 50,000,000 shares authorized, none issued — — Common stock: $ 0.01 par value; 150,000,000 shares authorized, 56,495,791 issued, and 50,038,014 outstanding as of December 31, 2023, and 56,226,273 shares issued and 49,801,997 outstanding as of December 31, 2022 565 564 Additional paid-in capital 3,988,496 3,972,561 Retained earnings (accumulated deficit) ( 383,696 ) 168,077 Accumulated other comprehensive income (loss) 1,272 10,335 Treasury stock, at cost, 6,457,777 shares as of December 31, 2023, and 6,424,276 shares as of December 31, 2022 ( 613,766 ) ( 611,038 ) Total stockholders' equity 2,992,871 3,540,499 Noncontrolling interests 66,053 65,613 Total equity 3,058,924 3,606,112 Total liabilities and equity $ 9,577,003 $ 9,603,463 See Notes to Consolidated Financial Statements. HHH 2023 FORM 10-K | 68 FINANCIAL STATEMENTS Table of Contents Index to Financial Statements HOWARD HUGHES HOLDINGS INC. CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, thousands except per share amounts 2023 2022 2021 REVENUES Condominium rights and unit sales $ 47,707 $ 677,078 $ 514,597 Master Planned Communities land sales 370,185 316,065 346,217 Rental revenue 405,363 399,103 369,330 Other land, rental, and property revenues 139,858 144,481 152,619 Builder price participation 60,989 71,761 45,138 Total revenues 1,024,102 1,608,488 1,427,901 EXPENSES Condominium rights and unit cost of sales 55,417 483,983 414,199 Master Planned Communities cost of sales 140,050 119,466 153,630 Operating costs 337,018 317,389 293,999 Rental property real estate taxes 57,650 54,033 55,398 Provision for (recovery of) doubtful accounts ( 2,561 ) 1,959 ( 459 ) General and administrative 91,193 81,772 81,990 Depreciation and amortization 216,118 200,361 205,100 Other 13,383 11,977 10,668 Total expenses 908,268 1,270,940 1,214,525 OTHER Provision for impairment ( 672,492 ) — ( 13,068 ) Gain (loss) on sale or disposal of real estate and other assets, net 24,162 29,678 53,079 Other income (loss), net 4,284 1,909 ( 11,515 ) Total other ( 644,046 ) 31,587 28,496 Operating income (loss) ( 528,212 ) 369,135 241,872 Interest income 25,750 3,818 107 Interest expense ( 156,951 ) ( 110,891 ) ( 130,036 ) Gain (loss) on extinguishment of debt ( 144 ) ( 2,377 ) ( 38,014 ) Equity in earnings (losses) from unconsolidated ventures ( 55,708 ) ( 14,549 ) ( 9,852 ) Income (loss) before income taxes ( 715,265 ) 245,136 64,077 Income tax expense (benefit) ( 163,735 ) 60,500 15,153 Net income (loss) ( 551,530 ) 184,636 48,924 Net (income) loss attributable to noncontrolling interests ( 243 ) ( 103 ) 7,176 Net income (loss) attributable to common stockholders $ ( 551,773 ) $ 184,533 $ 56,100 Basic income (loss) per share $ ( 11.13 ) $ 3.65 $ 1.03 Diluted income (loss) per share $ ( 11.13 ) $ 3.65 $ 1.03 See Notes to Consolidated Financial Statements. HHH 2023 FORM 10-K | 69 FINANCIAL STATEMENTS Table of Contents Index to Financial Statements HOWARD HUGHES HOLDINGS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, thousands 2023 2022 2021 Net income (loss) $ ( 551,530 ) $ 184,636 $ 48,924 Other comprehensive income (loss) Interest rate caps and swaps (a) ( 9,322 ) 31,698 17,960 Pension adjustment (b) 259 ( 183 ) 452 Reclassification of the Company's share of previously deferred derivative gains to net income (c) — ( 6,723 ) — Share of investee's other comprehensive income (d) — — 5,721 Other comprehensive income (loss) ( 9,063 ) 24,792 24,133 Comprehensive income (loss) ( 560,593 ) 209,428 73,057 Comprehensive (income) loss attributable to noncontrolling interests ( 243 ) ( 103 ) 7,176 Comprehensive income (loss) attributable to common stockholders $ ( 560,836 ) $ 209,325 $ 80,233 (a) Amounts are shown net of deferred tax benefit of $ 2.7 million for the year ended December 31, 2023, deferred tax expense of $ 9.5 million for the year ended December 31, 2022, and deferred tax expense of $ 5.1 million for the year ended December 31, 2021. (b) The deferred tax impact was not meaningful for the years ended December 31, 2023, 2022, and 2021. (c) In March 2022, the Company completed the sale of its ownership interest in 110 North Wacker and released a net of $ 6.7 million from Accumulated other comprehensive income (loss), representing the Company’s $ 8.6 million share of previously deferred gains associated with the Venture’s derivative instruments net of tax expense of $ 1.9 million. See Note 2 - Investments in Unconsolidated Ventures for additional information. (d) Amount is shown net of deferred tax expense of $ 1.6 million for the year ended December 31, 2021. See Notes to Consolidated Financial Statements. HHH 2023 FORM 10-K | 70 FINANCIAL STATEMENTS Table of Contents Index to Financial Statements HOWARD HUGHES HOLDINGS INC. CONSOLIDATED STATEMENTS OF EQUITY Retained Accumulated Additional Earnings Other Total thousands except shares Common Stock Paid-In (Accumulated Comprehensive Treasury Stock Stockholders' Noncontrolling Total Shares Amount Capital Deficit) Income (Loss) Shares Amount Equity Interests Equity Balance, December 31, 2020 56,042,814 $ 562 $ 3,947,278 $ ( 72,556 ) $ ( 38,590 ) ( 1,070,558 ) $ ( 122,091 ) $ 3,714,603 $ 420 $ 3,715,023 Net income (loss), excluding income of $( 7,431 ) attributable to redeemable noncontrolling interest — — — 56,100 — — — 56,100 255 56,355 Interest rate swaps, net of tax expense (benefit) of $ 5,080 — — — — 17,960 — — 17,960 — 17,960 Pension adjustment, net of tax expense (benefit) of $ 136 — — — — 452 — — 452 — 452 Share of investee's other comprehensive income, net of tax expense (benefit) of $ 1,627 — — — — 5,721 — — 5,721 — 5,721 Issuance of common shares — — ( 5 ) — — — — ( 5 ) — ( 5 ) Repurchase of common shares — — — — — ( 1,023,284 ) ( 96,620 ) ( 96,620 ) — ( 96,620 ) Stock plan activity 130,462 1 13,145 — — ( 13,773 ) ( 1,362 ) 11,784 — 11,784 Balance, December 31, 2021 56,173,276 $ 563 $ 3,960,418 $ ( 16,456 ) $ ( 14,457 ) ( 2,107,615 ) $ ( 220,073 ) $ 3,709,995 $ 675 $ 3,710,670 Net income (loss) — — — 184,533 — — — 184,533 103 184,636 Interest rate swaps, net of tax expense (benefit) of $ 9,460 — — — — 31,698 — — 31,698 — 31,698 Pension adjustment, net of tax expense (benefit) of $( 71 ) — — — — ( 183 ) — — ( 183 ) — ( 183 ) Deconsolidation of Ward Village homeowners’ associations — — — — — — — — ( 211 ) ( 211 ) Teravalis noncontrolling interest — — — — — — — — 65,046 65,046 Reclassification of the Company’s share of previously deferred derivative gains, net of tax expense of $ 1,912 (a) — — — — ( 6,723 ) — — ( 6,723 ) — ( 6,723 ) Repurchase of common shares — — — — — ( 4,283,874 ) ( 388,372 ) ( 388,372 ) — ( 388,372 ) Stock plan activity 52,997 1 12,143 — — ( 32,787 ) ( 2,593 ) 9,551 — 9,551 Balance, December 31, 2022 56,226,273 $ 564 $ 3,972,561 $ 168,077 $ 10,335 ( 6,424,276 ) $ ( 611,038 ) $ 3,540,499 $ 65,613 $ 3,606,112 Net income (loss) — — — ( 551,773 ) — — — ( 551,773 ) 243 ( 551,530 ) Interest rate swaps, net of tax expense (benefit) of $( 2,729 ) — — — — ( 9,322 ) — — ( 9,322 ) — ( 9,322 ) Pension adjustment, net of tax expense (benefit) of $ 70 — — — — 259 — — 259 — 259 Teravalis noncontrolling interest — — — — — — — — 219 219 Stock plan activity 269,518 1 15,935 — — ( 33,501 ) ( 2,728 ) 13,208 — 13,208 Other — — — — — — — — ( 22 ) ( 22 ) Balance, December 31, 2023 56,495,791 $ 565 $ 3,988,496 $ ( 383,696 ) $ 1,272 ( 6,457,777 ) $ ( 613,766 ) $ 2,992,871 $ 66,053 $ 3,058,924 (a) In March 2022, the Company completed the sale of its ownership interest in 110 North Wacker and released a net of $ 6.7 million from Accumulated other comprehensive income (loss), representing the Company’s $ 8.6 million share of previously deferred gains associated with the Venture’s derivative instruments net of tax expense of $ 1.9 million. See Note 2 - Investments in Unconsolidated Ventures for additional information. See Notes to Consolidated Financial Statements. HHH 2023 FORM 10-K | 71 FINANCIAL STATEMENTS Table of Contents Index to Financial Statements HOWARD HUGHES HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, thousands 2023 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ ( 551,530 ) $ 184,636 $ 48,924 Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation 195,630 180,201 185,418 Amortization 16,839 16,834 16,891 Amortization of deferred financing costs 12,303 10,754 10,301 Amortization of intangibles other than in-place leases 3,275 3,275 2,843 Straight-line rent amortization ( 7,680 ) ( 8,468 ) ( 9,278 ) Deferred income taxes ( 163,843 ) 42,022 10,356 Restricted stock and stock option amortization 16,394 11,895 9,885 Net gain on sale of properties ( 24,162 ) ( 29,687 ) ( 53,057 ) Net gain on sale of unconsolidated ventures — ( 5,016 ) — (Gain) loss on extinguishment of debt 144 2,377 38,014 Impairment charges 672,492 — 15,335 Equity in (earnings) losses from unconsolidated ventures, net of distributions and impairment charges 66,676 28,081 52,390 Provision for doubtful accounts 8,601 ( 2,235 ) ( 2,027 ) Master Planned Community land acquisitions — — ( 574,253 ) Master Planned Community development expenditures ( 403,633 ) ( 396,125 ) ( 322,255 ) Master Planned Community cost of sales 126,167 111,723 144,933 Condominium development expenditures ( 472,666 ) ( 340,793 ) ( 345,289 ) Condominium rights and units cost of sales 53,156 465,711 394,427 Other 1,319 — — Net Changes: Accounts receivable, net 112,048 83,443 30,594 Other assets, net ( 19,615 ) ( 33,078 ) ( 17,140 ) Condominium deposits received, net 88,595 21,273 59,108 Deferred expenses, net ( 27,037 ) ( 30,441 ) ( 22,903 ) Accounts payable and other liabilities 38,045 8,872 42,825 Cash provided by (used in) operating activities ( 258,482 ) 325,254 ( 283,958 ) CASH FLOWS FROM INVESTING ACTIVITIES Property and equipment expenditures ( 7,340 ) ( 2,004 ) ( 1,814 ) Operating property improvements ( 56,320 ) ( 54,715 ) ( 35,915 ) Property development and redevelopment ( 275,084 ) ( 353,098 ) ( 274,742 ) Acquisition of assets ( 5,898 ) — — Proceeds from sales of properties, net 39,543 81,720 322,451 Reimbursements under tax increment financings 1,469 127 667 Distributions from unconsolidated ventures 13,014 207,685 92,060 Investments in unconsolidated ventures, net ( 45,527 ) ( 100,410 ) ( 1,249 ) Cash provided by (used in) investing activities ( 336,143 ) ( 220,695 ) 101,458 HHH 2023 FORM 10-K | 72 FINANCIAL STATEMENTS Table of Contents Index to Financial Statements Year Ended December 31, thousands 2023 2022 2021 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from mortgages, notes, and loans payable 792,441 1,235,895 2,422,862 Principal payments on mortgages, notes, and loans payable ( 249,435 ) ( 1,065,348 ) ( 2,140,340 ) Repurchases of common shares — ( 403,863 ) ( 81,127 ) Debt extinguishment costs — ( 60 ) ( 29,793 ) Special Improvement District bond funds released from (held in) escrow 11,037 23,148 11,477 Deferred financing costs and bond issuance costs, net ( 2,821 ) ( 18,515 ) ( 28,517 ) Taxes paid on stock options exercised and restricted stock vested ( 2,696 ) ( 3,011 ) ( 2,500 ) Stock options exercised — 345 4,078 Issuance of Teravalis noncontrolling interest — 31,234 — Distribution to noncontrolling interest upon sale of 110 North Wacker — ( 22,084 ) — Contributions from Teravalis noncontrolling interest owner 219 — — Cash provided by (used in) financing activities 548,745 ( 222,259 ) 156,140 Net change in cash, cash equivalents, and restricted cash ( 45,880 ) ( 117,700 ) ( 26,360 ) Cash, cash equivalents, and restricted cash at beginning of period 1,098,937 1,216,637 1,242,997 Cash, cash equivalents, and restricted cash at end of period $ 1,053,057 $ 1,098,937 $ 1,216,637 RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH Cash and cash equivalents $ 631,548 $ 626,653 $ 843,212 Restricted cash 421,509 472,284 373,425 Cash, cash equivalents, and restricted cash at end of period $ 1,053,057 $ 1,098,937 $ 1,216,637 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid, net $ 249,702 $ 214,583 $ 182,654 Interest capitalized 120,667 100,607 71,798 Income taxes paid (refunded), net 10,608 24,974 1,789 NON-CASH TRANSACTIONS Issuance of Teravalis noncontrolling interest — 33,810 — MPC land contributed to unconsolidated venture — 21,450 — Accrued property improvements, developments, and redevelopments 4,253 131 16,885 Non-cash consideration from sale of properties 5,250 — — Special Improvement District bond transfers associated with land sales 13,883 7,774 8,697 Special Improvement District bonds held in third-party escrow 21,290 — 45,425 Capitalized stock compensation 4,669 4,785 2,326 Initial recognition of ASC 842 operating lease ROU asset — 1,488 6,189 Initial recognition of ASC 842 operating lease obligation — 1,621 6,189 Accrued repurchase of common shares — — 15,492 See Notes to Consolidated Financial Statements . HHH 2023 FORM 10-K | 73 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 1. Presentation of Financial Statements and Significant Accounting Policies General On July 17, 2023, The Howard Hughes Corporation (HHC) announced that its Board of Directors authorized the creation of a holding company structure. On August 11, 2023, upon the consummation of the transaction, Howard Hughes Holdings Inc. (HHH or the Company), the new holding company, replaced HHC as the public company trading on the New York Stock Exchange. Existing shares of common stock of HHC were automatically converted, on a one -for-one basis, into shares of common stock of HHH, with the same designations, rights, powers, and preferences, and the same qualifications, limitations, and restrictions, as the shares of HHC common stock immediately prior to the reorganization. HHH became the successor issuer to HHC pursuant to Rule 12g-3 (a) under the Exchange Act and replaced HHC as the public company trading on the New York Stock Exchange under the ticker symbol "HHH." The holding company reorganization is intended to be a tax-free transaction for U.S. federal income tax purposes for the Company stockholders. The Board and the executive officers of HHC now hold their same roles at HHH. The Company believes that the reorganization will promote the growth of its businesses by providing additional flexibility to fund future investment opportunities and to segregate assets and related liabilities in separate subsidiaries. References to HHH, the Company, we, us, and our refer to Howard Hughes Holdings Inc. and its consolidated subsidiaries, which includes The Howard Hughes Corporation, unless otherwise specifically stated. References to HHC refer to The Howard Hughes Corporation and its consolidated subsidiaries unless otherwise specifically stated. Together with its subsidiaries, HHH develops Master Planned Communities (MPC), invests in other strategic real estate opportunities in the form of entitled and unentitled land and other development rights (Strategic Developments) and owns, manages, and operates real estate assets currently generating revenues (Operating Assets), which may be redeveloped or repositioned from time to time. Seaport Entertainment On October 5, 2023, HHH announced the intent to form a new division, Seaport Entertainment, that is expected to include the Company’s entertainment-related assets in New York and Las Vegas, including the Seaport in Lower Manhattan and the Las Vegas Aviators Triple-A Minor League Baseball team, as well as the Company’s ownership stake in Jean-Georges Restaurants and other partnerships and its 80 % interest in the air rights above the Fashion Show Mall in Las Vegas. HHH is establishing Seaport Entertainment with the intention of completing its spinoff as an independent, publicly traded company in 2024, but there can be no assurance regarding the ultimate timing of the spinoff or that the spinoff will ultimately occur. The planned separation of Seaport Entertainment will refine the identity of HHH as a pure-play real estate company focused solely on its portfolio of master planned communities and allow the new company, Seaport Entertainment, to operate independently as an entertainment-focused enterprise. Principles of Consolidation and Basis of Presentation The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The consolidated financial statements include the accounts of Howard Hughes Holdings Inc. and its subsidiaries after elimination of intercompany balances and transactions. The Company also consolidates certain variable interest entities (VIEs) in accordance with Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) 810 Consolidation (ASC 810). The outside equity interests in certain entities controlled by the Company are reflected in the Consolidated Financial Statements as noncontrolling interests. Certain amounts in the 2022 Consolidated Balance Sheet have been reclassified to conform to the current presentation. Specifically, the Company reclassified Net investment in lease receivable and Notes receivable, net to Other assets, net within Total assets. Certain amounts in the 2022 and 2021 Consolidated Statements of Cash Flows have been reclassified to conform to the current balance sheet presentation. Specifically, the Company reclassified the Notes receivable, net from the Accounts receivable, net to Other assets, net within cash flows from operating activities. Certain amounts in the 2021 Consolidated Statement of Operations have been reclassified to conform to the current presentation. Specifically, the Company reclassified Demolition costs and Development-related marketing costs to Other within Total expenses. Management has evaluated for disclosure or recognition all material events occurring subsequent to the date of the Consolidated Financial Statements up to the date and time this Annual Report was filed. HHH 2023 FORM 10-K | 74 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Variable Interest Entities The Company has interests in various legal entities that represent a variable interest entity. A VIE is an entity: (a) that has total equity at risk that is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other entities; (b) where the group of equity holders does not have the power to direct the activities of the entity that most significantly impact the entity’s economic performance, or the obligation to absorb the entity’s expected losses or the right to receive the entity’s expected residual return, or both (i.e., lack the characteristics of a controlling financial interest); or (c) where the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. The Company determines if a legal entity is a VIE by performing a qualitative analysis that requires certain subjective decisions, taking into consideration the design of the entity, the variability that the entity was designed to create and pass along to its interest holders, the rights of the parties and the purpose of the arrangement. Upon the occurrence of certain reconsideration events, the Company reassesses its initial determination as to whether the entity is a VIE. The Company also performs a qualitative assessment of each VIE to determine if it is the primary beneficiary. The Company is the primary beneficiary and would consolidate the VIE if it has a controlling financial interest where it has both (a) the power to direct the economically significant activities of the entity and (b) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. This assessment requires certain subjective decisions, taking into consideration the contractual agreements that define the ownership structure, the design of the entity, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties. Management’s assessment of whether the Company is the primary beneficiary of a VIE is continuously performed. Upon initial consolidation of a VIE, the Company records the assets, liabilities, and noncontrolling interests at fair value and recognizes a gain or loss for the difference between (i) the fair value of the consideration paid, the fair value of noncontrolling interests and the reported amount of any previously held interests and (ii) the net amount of the fair value of the assets and liabilities. If the Company determines it is no longer the primary beneficiary of a VIE, it will deconsolidate the entity and measure the initial cost basis for any retained interests that are recorded upon the deconsolidation at fair value. The Company will recognize a gain or loss for the difference between the fair value and the previous carrying amount of HHH’s investment in the VIE . Investments in Unconsolidated Ventures The Company’s investments in unconsolidated ventures are accounted for under the equity method to the extent that, based on contractual rights associated with the investments, the Company can exert significant influence over a venture’s operations. Under the equity method, the Company’s investment in the venture is recorded at cost and is subsequently adjusted to recognize the Company’s allocable share of the earnings or losses of the venture. Dividends and distributions received by the Company are recognized as a reduction in the carrying amount of the investment. Generally, joint venture operating agreements provide that assets, liabilities, funding obligations, profits and losses, and cash flows are shared in accordance with ownership percentages. For certain equity method investments, various provisions in the joint venture operating agreements regarding distributions of cash flow based on capital account balances, allocations of profits and losses, and preferred returns may result in the Company’s economic interest differing from its stated ownership or if applicable, the Company’s final profit-sharing interest after receipt of any preferred returns based on the venture’s distribution priorities. For these investments, the Company recognizes income or loss based on the joint venture’s distribution priorities, which could fluctuate over time and may be different from its stated ownership or final profit-sharing percentage. The Company periodically assesses the appropriateness of the carrying amount of its equity method investments, as events or changes in circumstance may indicate that a decrease in value has occurred which is other‑than‑temporary. In addition to the property‑specific impairment analysis performed on the underlying assets of the investment, the Company also considers the ownership, distribution preferences, limitations and rights to sell and repurchase its ownership interests. If a decrease in value of an investment is deemed to be other‑than‑temporary, the investment is reduced to its estimated fair value, and an impairment-related loss is recognized in the Consolidated Statements of Operations as a component of Equity in earnings (losses) from investments in unconsolidated ventures. HHH 2023 FORM 10-K | 75 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements For investments in ventures where the Company has virtually no influence over operations and the investments do not have a readily determinable fair value, the Company has elected the measurement alternative to carry the securities at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the issuer. Equity securities not accounted for under the equity method, or where the measurement alternative has not been elected, are required to be reported at fair value with unrealized gains and losses reported in the Consolidated Statements of Comprehensive Income (Loss) as Net unrealized gains (losses) on instruments measured at fair value through earnings. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The estimates and assumptions include, but are not limited to, capitalization of development costs, provision for income taxes, recoverable amounts of receivables and deferred tax assets, initial valuations of tangible and intangible assets acquired, and the related useful lives of assets upon which depreciation and amortization is based. Estimates and assumptions have also been made with respect to future revenues and costs, and the fair value of warrants, debt, and options granted. MPC cost of sales estimates are highly judgmental as they are sensitive to cost escalation, sales price escalation, and lot absorption, which are subject to judgment and affected by expectations about future market or economic conditions. Additionally, the future cash flow estimates and fair values used for impairment analysis are highly judgmental and reflect current and projected trends in rental, occupancy, pricing, development costs, sales pace, capitalization rates, selling costs, and estimated holding periods for the applicable assets. Both MPC cost of sale estimates and estimates used in impairment analysis are affected by expectations about future market or economic conditions. Actual results could differ from these and other estimates. Segments Segment information is prepared on the same basis that management reviews information for operational decision-making purposes. Management evaluates the performance of each of HHH’s real estate assets or investments individually and aggregates such properties into segments based on their economic characteristics and types of revenue streams. The Company operates in four business segments: (i) Operating Assets; (ii) MPC; (iii) Seaport and (iv) Strategic Developments. Net Investment in Real Estate Master Planned Community Assets, Buildings and Equipment and Land Real estate assets are stated at cost less any provisions for impairments and depreciation as applicable. Expenditures for significant improvements to the Company’s assets are capitalized. Tenant improvements relating to the Company’s operating assets are capitalized and depreciated over the shorter of their economic lives or the lease term. Maintenance and repair costs are charged to expense when incurred. Depreciation The Company periodically reviews the estimated useful lives of properties. Depreciation or amortization expense is computed using the straight‑line method based upon the following estimated useful lives: Asset Type Years Balance Sheet Location Buildings and improvements 7 - 40 Buildings and Equipment Equipment and fixtures 5 - 20 Buildings and Equipment Computer hardware and software, and vehicles 3 - 5 Buildings and Equipment Tenant improvements Related lease term Buildings and Equipment Leasing costs Related lease term Other assets, net From time to time, the Company may reassess the development strategies for certain buildings and improvements which results in changes to the Company’s estimate of their remaining useful lives. The Company did not recognize additional depreciation expense of significance for the years ended December 31, 2023, 2022, and 2021. HHH 2023 FORM 10-K | 76 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Developments Development costs, which primarily include direct costs related to placing the asset in service associated with specific development properties, are capitalized as part of the property being developed. Construction and improvement costs incurred in connection with the development of new properties or the redevelopment of existing properties are capitalized before they are placed into service. Costs include planning, engineering, design, direct material, labor, and subcontract costs. Real estate taxes, utilities, direct legal and professional fees related to the sale of a specific unit, interest, insurance costs, and certain employee costs incurred during construction periods are also capitalized. Capitalization commences when the development activities begin and cease when a project is completed, put on hold, or at the date that the Company decides not to move forward with a project. Capitalized costs related to a project where HHH has determined not to move forward are expensed if they are not deemed recoverable. Capitalized interest costs are based on qualified expenditures and interest rates in place during the construction period. Demolition costs associated with redevelopments are expensed as incurred unless the demolition was included in the Company’s development plans and imminent as of the acquisition date of an asset. Once the assets are placed into service, they are depreciated in accordance with the Company’s policy. In the event that management no longer has the ability or intent to complete a development, the costs previously capitalized are evaluated for impairment. Developments consist of the following categories as of December 31: thousands 2023 2022 Land and improvements $ 238,921 $ 339,540 Development costs 1,033,524 785,487 Total Developments $ 1,272,445 $ 1,125,027 Acquisitions of Properties The Company accounts for the acquisition of real estate properties in accordance with ASC 805 Business Combinations (ASC 805). This methodology requires that assets acquired and liabilities assumed be recorded at their fair values on the date of acquisition for business combinations and at relative fair values for asset acquisitions. Acquisition costs related to the acquisition of a business are expensed as incurred. Costs directly related to asset acquisitions are considered additions to the purchase price and increase the cost basis of such assets. The fair value of tangible assets of an acquired property (which includes land, buildings and improvements) is determined by valuing the property as if it were vacant, and the as-if-vacant value is then allocated to land, buildings and improvements based on management’s determination of the fair value of these assets. The as-if-vacant values are derived from several sources which incorporate significant unobservable inputs that are classified as Level 3 inputs in the fair value hierarchy and primarily include a discounted cash flow analysis using discount and capitalization rates based on recent comparable market transactions, where available. The fair value of acquired intangible assets consisting of in-place, above-market, and below-market leases is recorded based on a variety of considerations, some of which incorporate significant unobservable inputs that are classified as Level 3 inputs in the fair value hierarchy. In-place lease considerations include, but are not necessarily limited to: (1) the value associated with avoiding the cost of originating the acquired in-place leases (i.e., the market cost to execute a lease, including leasing commissions and tenant improvements); (2) the value associated with lost revenue related to tenant reimbursable operating costs incurred during the assumed lease-up period (i.e., real estate taxes, insurance, and certain other operating expenses); and (3) the value associated with lost rental revenue from existing leases during the assumed lease-up period. Above-market and below-market leases are valued at the present value, using a discount rate that reflects the risks associated with the leases acquired, of the difference between (1) the contractual amounts to be paid pursuant to the in-place lease; and (2) management’s estimate of current market lease rates, measured over the remaining non-cancelable lease term, including any below-market renewal option periods. Impairment HHH reviews its long-lived assets (including those held by its unconsolidated ventures) for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an asset is not recoverable and exceeds its fair value. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future economic conditions, such as occupancy, rental rates, capital requirements, and sales values that could differ materially from actual results in future periods. If impairment indicators exist and it is expected that undiscounted cash flows generated by the asset are less than its carrying amount, an impairment provision is recorded to write down the carrying amount of the asset to its fair value. HHH 2023 FORM 10-K | 77 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Impairment indicators for HHH’s assets or projects within MPCs are assessed separately and include, but are not limited to, significant decreases in sales pace or average selling prices, significant increases in expected land development and construction costs or cancellation rates, and projected losses on expected future sales. MPC assets have extended life cycles that may last 20 to 40 years, or longer, and have few long‑term contractual cash flows. Further, MPC assets generally have minimal to no residual values because of their liquidating characteristics. MPC development periods often occur through several economic cycles. Subjective factors such as the expected timing of property development and sales, optimal development density, and sales strategy impact the timing and amount of expected future cash flows and fair value. Impairment indicators for Operating Assets are assessed for each property and include, but are not limited to, significant decreases in net operating income, significant decreases in occupancy, ongoing low occupancy, and significant net operating losses. Impairment indicators for Seaport include, but are not limited to, significant changes in projected completion or stabilization dates, operating revenues or cash flows, development costs, ongoing low occupancy, and market factors. Impairment indicators for assets in the Strategic Developments are assessed by project and include, but are not limited to, significant changes in projected completion dates, revenues or cash flows, development costs, market factors, significant decreases in comparable property sale prices, and feasibility. The cash flow estimates used for determining recoverability and estimating fair value are inherently judgmental and reflect current and projected trends in rental rates, occupancy, pricing, development costs, sales pace, capitalization rates, and estimated holding periods for the applicable assets. Although the estimated fair value of certain assets may be exceeded by the carrying amount, a real estate asset is only considered to be impaired when its carrying amount is not expected to be recovered through estimated future undiscounted cash flows. To the extent an impairment provision is necessary, the excess of the carrying amount of the asset over its estimated fair value is expensed to operations. In addition, the impairment provision is allocated proportionately to adjust the carrying amount of the asset. The adjusted carrying amount, which represents the new cost basis of the asset, is depreciated over the remaining useful life of the asset or, for MPCs, is expensed as a cost of sales when land is sold. Assets that have been impaired will in the future have lower depreciation and cost of sale expenses. The impairment will have no impact on cash flow. Cash and Cash Equivalents Cash and cash equivalents consist of highly-liquid investments with maturities at date of purchase of three months or less and include registered money market mutual funds which are invested in United States Treasury bills that are valued at the net asset value of the underlying shares in the funds as of the close of business at the end of each period as well as deposits with major banks throughout the United States. Such deposits are in excess of FDIC limits and are placed with high-quality institutions in order to minimize concentration of counterparty credit risk. Restricted Cash Restricted cash reflects amounts segregated in escrow accounts in the name of the Company, primarily related to escrowed condominium deposits from buyers and other amounts related to legally restricted deposits, escrowed taxes, insurance, and leasing costs. Accounts Receivable, net Accounts receivable includes straight-line rent receivables, tenant receivables, and other receivables. On a quarterly basis, management reviews straight-line rent receivables and tenant receivables for collectability. As required under ASC 842 Leases , this analysis includes a review of past due accounts and considers factors such as the credit quality of tenants, current economic conditions, and changes in customer payment trends. When full collection of a lease receivable or future lease payment is not probable, a reserve for the receivable balance is charged against rental revenue and future rental revenue is recognized on a cash basis. The Company also records reserves for estimated losses under ASC 450 Contingencies if the estimated losses are probable and can be reasonably estimated. The following table represents the components of Accounts Receivable, net of amounts considered uncollectible, in the accompanying Consolidated Balance Sheets as of December 31: thousands 2023 2022 Straight-line rent receivables $ 87,669 $ 84,145 Tenant receivables 4,780 12,044 Other receivables 22,596 7,248 Accounts receivable, net (a) $ 115,045 $ 103,437 HHH 2023 FORM 10-K | 78 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements (a) As of December 31, 2023, the total reserve balance for amounts considered uncollectible was $ 15.0 million, comprised of $ 12.6 million related to ASC 842 and $ 2.4 million related to ASC 450. As of December 31, 2022, the total reserve balance was $ 8.9 million, comprised of $ 3.4 million related to ASC 842 and $ 5.5 million related to ASC 450. The following table summarizes the impacts of the ASC 842 and ASC 450 reserves in the accompanying Consolidated Statements of Operations for the years ended December 31: thousands Statements of Operations Location 2023 2022 2021 ASC 842 reserve Rental revenue $ 11,272 $ ( 3,715 ) $ ( 1,562 ) ASC 450 reserve Provision for (recovery of) doubtful accounts ( 2,561 ) 1,959 ( 459 ) Total (income) expense impact (a) $ 8,711 $ ( 1,756 ) $ ( 2,021 ) (a) Total expense recognized for the year ended December 31, 2023, is primarily comprised of reserves for two retail tenants in Ward Village and an office tenant with leases in both The Woodlands and Summerlin. The ASC 450 recovery amount for the year ended December 31, 2023, primarily relates to the reclassification of the reserve for the two Ward Village tenants to an ASC 842 reserve as full collection is not considered probable. Municipal Utility District Receivables, net In Houston, Texas, certain development costs are reimbursable through the creation of a Municipal Utility District (MUD), also known as Water Control and Improvement Districts, which are separate political subdivisions authorized by Article 16, Section 59 of the Texas Constitution and governed by the Texas Commission on Environmental Quality (TCEQ). MUDs are formed to provide municipal water, wastewater, drainage services, recreational facilities, and roads to those areas where they are currently unavailable through the regular city services. Typically, the developer advances funds for the creation of the facilities, which must be designed, bid, and constructed in accordance with the City of Houston’s and TCEQ requirements. The MUD Board of Directors authorizes and approves all MUD development contracts, and MUD bond sale proceeds are used to reimburse the developer for its construction costs, including interest. At the date the expenditures occur, the Company determines the costs it believes will be eligible for reimbursement and recognizes that as MUD receivables. These expenditures are subject to review by the MUD engineers for eligibility in accordance with the development contracts as part of the process for reimbursement. MUD receivables are pledged as security to creditors under the debt facilities relating to Bridgeland. Other Assets, net The major components of Other assets, net include security, escrow, and other deposits; Special Improvement District (SID) receivables; in-place leases; intangibles; Tax increment financing (TIF) receivables; prepaid expenses related to the Company’s properties; condominium inventory; and various other assets. SID receivables are amounts due from SID bonds related to the Company’s Summerlin MPC. Proceeds from SID bonds are held in escrow by a third-party and are used to reimburse the Company for a portion of the development costs incurred in Summerlin. The Company’s intangibles include in-place lease assets and above-market lease assets where HHH is the lessor, trademark and trade name intangibles related to MPCs, and other intangibles relating to the Company’s Las Vegas Aviators Triple-A professional baseball team. The Company amortizes finite-lived intangible assets less any residual value, if applicable, on a straight-line basis over the term of the related lease or the estimated useful life of the asset. TIF receivables are amounts which the Company has submitted for reimbursement from Howard County, Maryland, in conjunction with development costs expended on key roads and infrastructure work within the Merriweather District of Downtown Columbia specified per the terms of the county’s TIF legislation, Special Obligation Bonds issued in October 2017, and Grant Disbursement Agreement executed in April 2023. Notes receivable, net includes non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, they are recorded at amortized cost less any provision for impairment as required under ASC 326 - Financial Instruments - Credit Losses . Condominium inventory includes available for sale units at HHH’s completed condominium towers and is stated at the lower of cost or fair value less selling costs. Condominium inventory includes land acquisition and development costs, construction costs, and interest and real estate taxes that are capitalized during the development period. HHH evaluates condominium inventory for impairment when potential indicators exist. An impairment loss is recognized if the carrying amount of condominium inventory exceeds the fair value less selling costs, which is based on comparable sales in the normal course of business under existing and anticipated market conditions. HHH 2023 FORM 10-K | 79 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Financial Instruments - Credit Losses The Company is exposed to credit losses through the sale of goods and services to the Company’s customers. Receivables held by the Company primarily relate to short-term trade receivables and financing receivables, which include MUD receivables, SID bonds, TIF receivables, net investments in lease receivables, and notes receivable. The Company assesses its exposure to credit loss based on historical collection experience and future expectations by portfolio segment. Historical collection experience is evaluated on a quarterly basis by the Company. The amortized cost basis of financing receivables, consisting primarily of MUD and SID receivables, totaled $ 632.8 million as of December 31, 2023, and $ 545.4 million as of December 31, 2022. The MUD receivable balance includes accrued interest of $ 35.8 million at December 31, 2023, and $ 36.4 million at December 31, 2022. The allowance for credit losses for financing receivables was not material as of December 31, 2023 and 2022, and there was no material activity related to the allowance for credit losses for the years ended December 31, 2023, 2022, and 2021. Financing receivables are considered to be past due once they are 30 days contractually past due under the terms of the agreement. The Company currently does not have significant financing receivables that are past due or on nonaccrual status. There have been no significant write-offs or recoveries of amounts previously written-off during the current period for financing receivables. Income Taxes The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. The Company periodically assesses the realizability of its deferred tax assets. If the Company concludes that it is more likely than not that some of the deferred tax assets will not be realized, the tax asset is reduced by a valuation allowance. The Company considers many factors when assessing the likelihood of future realization of deferred tax assets, including expectations of future taxable income, carryforward periods available to the Company for tax reporting purposes, various income tax strategies, and other relevant factors. In addition, interest and penalties related to uncertain tax positions, if necessary, are recognized in income tax expense. In the Company’s MPCs, gains with respect to land sales, whether for commercial use or for single-family residences, are reported for tax purposes either on the modified accrual method or on the percentage-of-completion method. Under the percentage-of-completion method, a gain is recognized for tax purposes as costs are incurred in satisfaction of contractual obligations. Deferred Expenses, net Deferred expenses consist principally of leasing costs. Deferred leasing costs are amortized to amortization expense using the straight‑line method over the related lease term. Deferred expenses are shown net of accumulated amortization of $ 60.4 million as of December 31, 2023, and $ 53.8 million as of December 31, 2022. Marketing and Advertising Each of the Company’s segments incur various marketing and advertising costs as part of their development, branding, leasing, or sales initiatives. These costs include special events, broadcasts, direct mail and online digital and social media programs, and they are expensed as incurred. Fair Value of Financial Instruments The carrying values of cash and cash equivalents, escrows, receivables, accounts payable, accrued expenses, and other assets and liabilities are reasonable estimates of their fair values because of the short maturities of these instruments. Derivative Instruments and Hedging Activities Derivative instruments and hedging activities require management to make judgments on the nature of its derivatives and their effectiveness as hedges. These judgments determine if the changes in fair value of the derivative instruments are reported as a component of Net Income in the Consolidated Statements of Operations or as a component of Comprehensive Income in the Equity on the Consolidated Balance Sheets. While management believes its judgments are reasonable, a change in a derivative’s effectiveness as a hedge could materially affect expenses, net income, and equity. The Company accounts for the changes in the fair value of an effective hedge in other comprehensive income (loss) and subsequently reclassifies the balance from other comprehensive income (loss) to earnings over the term that the hedged transaction affects earnings. The Company accounts for the changes in the fair value of an ineffective hedge directly in earnings. HHH 2023 FORM 10-K | 80 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Stock-Based Compensation The Company maintains two equity incentive plans, which include stock options and restricted stock. In 2023, pursuant to the holding company reorganization discussed above, each outstanding share of HHC’s common stock was automatically converted into one share of HHH common stock. HHH assumed all obligations under the equity incentive plans. All stock options and restricted stock outstanding will be settled in HHH stock. The Company applies the provisions of ASC 718 Stock Compensation which requires all share‑based payments to be recognized in the Consolidated Statements of Operations based on their fair values. The fair value of stock option awards is determined using the Black-Scholes option-pricing model. Restricted stock awards are valued using the market price of the Company’s common stock on the grant date. For restricted stock awards with market conditions or performance conditions, the award is valued using a Monte Carlo simulation. The Company records compensation cost for stock-based compensation awards over the requisite service period. If the requisite service period is satisfied, compensation cost is not adjusted unless the award contains a performance condition. If an award contains a performance condition, expense is recognized only for those shares that ultimately vest using the per-share fair value measured at the grant date. The Company recognizes forfeitures as they occur. See Note 11 - Stock-Based Compensation Plans for additional information. Revenue Recognition and Related Matters Condominium Rights and Unit Sales Revenue from the sale of an individual unit in a condominium project is recognized at a point in time (i.e., the closing) when HHH satisfies the single performance obligation to construct a condominium project and transfer control of a completed unit to a buyer. The transaction price, which is the amount of consideration the Company receives upon delivery of the completed condominium unit to the buyer, is allocated to this single obligation and is received at closing less any amounts previously paid on deposit. The Company receives cash payments in the form of escrowed condominium deposits from customers who have contracted to purchase a condominium unit based on billing schedules established in HHH’s condominium purchase agreement contracts. The amounts are recorded in Restricted cash until released from escrow in accordance with the escrow agreement and on approval of HHH’s lender to fund construction costs of a project. A corresponding condominium contract deposit liability is established at the date of receipt, representing a portion of HHH’s unsatisfied performance obligation at each reporting date. These deposits, along with the balance of the contract value, are recognized at closing upon satisfaction of HHH’s performance obligation and transfer of title to the buyer. Real estate project costs directly associated with a condominium project, which are HHH’s costs to fulfill contracts with condominium buyers, are capitalized while all other costs are expensed as incurred. Total estimated project costs include direct costs such as the carrying value of the land, site planning, architectural, construction, and financing costs, as well as indirect cost allocations. The allocations include costs which clearly relate to the specific project, including certain infrastructure and amenity costs which benefit the project as well as others, and are based upon the relative sales value of the units. Furthermore, incremental costs incurred to obtain a contract to sell condominium units are evaluated for capitalization in accordance with ASC 340-40, with incremental costs to fulfill a contract only being capitalized if the costs relate directly to a specifically identified contract, enhance resources to satisfy performance obligations in the future, and are expected to be recovered. Master Planned Communities Land Sales Revenues from land sales are recognized at a point in time when the land sale closing process is complete. The transaction price generally has both fixed and variable components, with the fixed price stipulated in the contract and representative of a single performance obligation. See Builder Price Participation (BPP) below for a discussion of the variable component. The fixed transaction price, which is the amount of consideration received in full upon transfer of the land title to the buyer, is allocated to this single obligation and is received at closing of the land sale less any amounts previously paid on deposit. The Company receives cash payments in the form of land purchase deposits from homebuilders or other commercial buyers who have contracted to purchase land within the Company’s MPCs, and HHH holds any escrowed deposits in Restricted cash or Cash and cash equivalents based on the terms of the contract. In situations where the Company has completed the closing of a developed land parcel or superpad and consideration is paid in full, but a portion of HHH’s performance obligation relating to the enhancement of the land is still unsatisfied, revenue related to HHH’s obligation is recognized over time. The Company recognizes only the portion of the improved land sale where the improvements are fully satisfied based on a cost input method. The aggregate amount of the transaction price allocated to the unsatisfied obligation is recorded as deferred land sales and is presented in Accounts payable and other liabilities. The Company measures HHH’s unsatisfied obligation based on the costs remaining relative to the total cost at the date of closing. HHH 2023 FORM 10-K | 81 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements When residential or commercial land is sold, the cost of sales includes actual costs incurred and estimates of future development costs benefiting the property sold. In accordance with ASC 970-360-30-1, when land is sold, costs are allocated to each sold superpad or lot based upon the relative sales value. For purposes of allocating development costs, estimates of future revenues and development costs are re-evaluated throughout the year, with adjustments being allocated prospectively to the remaining parcels available for sale. For certain parcels of land, including acquired parcels that the Company does not intend to develop or for which development was complete at the date of acquisition, the specific identification method is used to determine the cost of sales. Builder Price Participation BPP is the variable component of the transaction price for certain Master Planned Communities land sales. BPP is earned when a developer that acquired land from HHH develops and sells a home to an end user at a price higher than a predetermined breakpoint. The excess over the breakpoint is shared between HHH and the developer at the time of closing on the sale of the home based on a previously agreed-upon percentage. Generally, BPP is constrained, and accordingly, the Company does not recognize an estimate of variable consideration. The Company’s conclusion is based on the following factors: – BPP is highly susceptible to factors outside HHH’s influence such as unemployment and interest rates – the time between the sale of land to a homebuilder and closing on a completed home can take up to three years – there is significant variability in home pricing from period to period The Company evaluates contracts with homebuilders with respect to BPP at each reporting period to determine whether a change in facts and circumstances has eliminated the constraint and will record an estimate of BPP revenue, if applicable. For Condominium rights and unit sales, Master planned communities land sales, and Builder price participation the Company elected the practical expedient to not adjust promised amount of consideration for the effects of a significant financing component when the expected period between transfer of the promised asset and payment is one year or less. Rental Revenues Revenue associated with the Company’s operating assets includes minimum rent, percentage rent in lieu of fixed minimum rent, tenant recoveries, and overage rent. Minimum rent revenues are recognized on a straight‑line basis over the terms of the related leases when collectability is reasonably assured and the tenant has taken possession of, or controls, the physical use of the leased asset. Percentage rent in lieu of fixed minimum rent is recognized as sales are reported from tenants. Minimum rent revenues also include amortization related to above and below‑market tenant leases on acquired properties. Recoveries from tenants are stipulated in the leases, are generally computed based upon a formula related to real estate taxes, insurance, and other real estate operating expenses, and are generally recognized as revenues in the period the related costs are incurred. Overage rent is recognized on an accrual basis once tenant sales exceed contractual thresholds contained in the lease and is calculated by multiplying the tenant sales in excess of the minimum amount by a percentage defined in the lease. If the lease provides for tenant improvements, the Company determines whether the tenant improvements are owned by the tenant or by HHH. When HHH is the owner of the tenant improvements, rental revenue begins when the improvements are substantially complete. When the tenant is the owner of the tenant improvements, any tenant allowance funded by the Company is treated as a lease incentive and amortized as an adjustment to rental revenue over the lease term. Other Land, Rental, and Property Revenues - Over Time and Point in Time Other land revenues recognized over time include ground maintenance revenue, homeowner association management fee revenue, and revenue from providing exclusive cable and internet services at the Company’s MPCs for the benefit of the tenants and owners of the communities. These revenues are recognized over time, as time elapses. The amount of consideration and the duration are fixed, as stipulated in the related agreements, and represent a single performance obligation. Other land revenues also include transfer fees on the secondary sales of homes in MPCs, forfeitures of earnest money deposits by buyers of HHH’s condominium units, and other miscellaneous items. These items are recognized at a point in time when the real estate closing process is complete or HHH has a legal right to the respective fee or deposit. HHH 2023 FORM 10-K | 82 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Other rental and property revenues related to contracts with customers is generally comprised of baseball-related ticket sales, retail operations, food sales, advertising, and sponsorships. Season ticket sales are recognized over time as games take place. Single tickets and total net sales from retail operations are recognized at a point in time, at the time of sale when payment is received and the customer takes possession of the merchandise. In all cases, the transaction prices are fixed, stipulated in the ticket, contract, or product, and representative in each case of a single performance obligation. Events-related service revenue is recorded at the time the customer receives the benefit of the service. Baseball-related and other sponsorships generally cover a season or contractual period of time, and the related revenue is generally recognized on a straight-line basis over time, as time elapses, unless a specific performance obligation exists within the sponsorship contract where point-in-time delivery occurs and recognition at a specific performance or delivery date is more appropriate. Advertising and sponsorship agreements that allow third parties to display their advertising and products at HHH’s venues for a certain amount of time relate to a single performance obligation, consideration terms for these services are fixed in each respective agreement, and HHH generally recognizes the related revenue on a straight-line basis over time, as time elapses. Noncontrolling Interests As of December 31, 2023, Noncontrolling interests is primarily related to the 12 % noncontrolling interest in Teravalis and the noncontrolling interest in the Ward Village Homeowners’ Associations (HOAs). All revenues and expenses related to the HOAs are attributable to noncontrolling interests and do not impact net income attributable to common stockholders. Refer to Note 3 - Acquisitions and Dispositions for additional information on Teravalis. Recently Issued Accounting Standards The following is a summary of recently issued and other notable accounting pronouncements which relate to the Company’s business. ASU 2020-04, Reference Rate Reform The amendments in this Update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform when certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has applied certain optional expedients, that are retained through the end of the hedging relationship. The amendments in this Update are effective as of March 12, 2020, through December 31, 2022. On December 21, 2022, the FASB issued Accounting Standards Update (ASU) 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 , which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04, from December 31, 2022, to December 31, 2024. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the transition, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedge transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserved the presentation of derivatives consistent with past presentation. As of December 31, 2023, the Company had no remaining contracts or hedging relationships that referenced LIBOR. HHH 2023 FORM 10-K | 83 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 2. Investments in Unconsolidated Ventures In the normal course of business, the Company enters into partnerships and ventures with an emphasis on investments associated with the development and operation of real estate assets. As of December 31, 2023, the Company does not consolidate the investments below as it does not have a controlling financial interest in these ventures. As such, the Company primarily reports its interests in accordance with the equity method. As of December 31, 2023, these ventures had debt totaling $ 273.1 million, with the Company’s proportionate share of this debt totaling $ 134.9 million. All of this indebtedness is without recourse to the Company, with the exception of the collateral maintenance obligation for Floreo. See Note 10 - Commitments and Contingencies for additional information related to the Company’s collateral maintenance obligation. Investments in unconsolidated ventures consist of the following: Ownership Interest (a) Carrying Value Share of Earnings/Dividends December 31, December 31, December 31, December 31, Year Ended December 31, thousands except percentages 2023 2022 2023 2022 2023 2022 2021 Equity Method Investments Operating Assets 110 North Wacker — % — % $ — $ — $ — $ 4,910 $ ( 74,309 ) The Metropolitan (b) 50.0 % 50.0 % — — 33 4,556 582 Stewart Title of Montgomery County, TX 50.0 % 50.0 % 3,785 4,217 168 1,294 1,860 Woodlands Sarofim 20.0 % 20.0 % 2,990 3,029 ( 40 ) ( 13 ) 96 TEN.m.flats (c) 50.0 % 50.0 % — — ( 225 ) 6,878 974 Master Planned Communities The Summit (d) 50.0 % 50.0 % 59,112 49,368 24,787 ( 30 ) 59,407 Floreo (e) 50.0 % 50.0 % 55,880 58,001 ( 2,121 ) ( 1,377 ) ( 8 ) Seaport The Lawn Club (d) 50.0 % 50.0 % 1,266 2,553 ( 1,287 ) — — Ssäm Bar (d)(e)(f) 50.0 % 50.0 % — 5,551 ( 5,981 ) ( 783 ) ( 1,988 ) Tin Building by Jean-Georges (d)(e)(f) 65.0 % 65.0 % 11,658 6,935 ( 43,330 ) ( 36,182 ) — Jean-Georges Restaurants (f) 25.0 % 25.0 % 14,535 45,626 ( 30,887 ) 692 — Strategic Developments HHMK Development 50.0 % 50.0 % 10 10 — — — KR Holdings 50.0 % 50.0 % 486 485 2 797 ( 221 ) West End Alexandria (d) 58.3 % 58.3 % 56,757 56,617 140 71 — 206,479 232,392 ( 58,741 ) ( 19,187 ) ( 13,607 ) Other equity investments (g) 13,779 13,779 3,033 4,638 3,755 Investments in unconsolidated ventures $ 220,258 $ 246,171 $ ( 55,708 ) $ ( 14,549 ) $ ( 9,852 ) (a) Ownership interests presented reflect the Company’s stated ownership interest or if applicable, the Company’s final profit-sharing interest after receipt of any preferred returns based on the venture’s distribution priorities. (b) The Metropolitan was in a deficit position of $ 10.9 million at December 31, 2023, and $ 9.0 million at December 31, 2022. These deficit balances are presented in Accounts payable and other liabilities at December 31, 2023 and 2022. (c) TEN.m.flats was in a deficit position of $ 4.7 million at December 31, 2023, and $ 1.8 million at December 31, 2022. The deficit balance is presented in Accounts payable and other liabilities at December 31, 2023 and 2022. (d) For these equity method investments, various provisions in the venture operating agreements regarding distributions of cash flow based on capital account balances, allocations of profits and losses, and preferred returns may result in the Company’s economic interest differing from its stated interest or final profit-sharing interest. For these investments, the Company recognizes income or loss based on the venture’s distribution priorities, which could fluctuate over time and may be different from its stated ownership or final profit-sharing interest. (e) Classified as a VIE; however, the Company is not the primary beneficiary and accounts for its investment in accordance with the equity method. Refer to discussion below for additional information. (f) These investments were impaired as part of the Seaport impairment recognized in 2023. Refer to specific investment discussion below and Note 4 - Impairment for additional detail. (g) Other equity investments represent investments not accounted for under the equity method. The Company elected the measurement alternative as these investments do not have readily determinable fair values. There were no impairments, or upward or downward adjustments to the carrying amounts of these securities either during 2023, or cumulatively. As of December 31, 2023, Other equity investments primarily includes $ 10.0 million of warrants, which represents cash paid by the Company for the option to acquire additional ownership interest in Jean-Georges Restaurants. Refer to discussion below for additional detail. HHH 2023 FORM 10-K | 84 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 110 North Wacker The Company formed a partnership with a local developer (the Partnership) during the second quarter of 2017. During the second quarter of 2018, the Partnership executed an agreement with USAA to construct and operate the building at 110 North Wacker through a separate legal entity (the Venture). Construction was completed in the third quarter of 2020. In 2021, the Company recorded a $ 17.7 million impairment of its equity investment in the Venture due to a change in the anticipated holding period as it entered into a plan to sell the Partnership’s interest in the Venture. In March 2022, the Partnership completed the sale of its ownership interest in the Venture for a gross sales price of $ 208.6 million. Upon sale, the Company recognized income of $ 5.0 million in Equity in earnings (losses) from unconsolidated ventures in the Consolidated Statements of Operations. Based upon the Partnership’s waterfall, $ 168.9 million of the net sales proceeds were allocated to the Company with the remaining $ 22.1 million allocated to the local developer. The Lawn Club In January 2021, the Company formed HHC Lawn Games, LLC with The Lawn Club NYC, LLC (Endorphin Ventures), to construct and operate an immersive indoor and outdoor restaurant that includes an extensive area of indoor grass, a stylish clubhouse bar, and a wide variety of lawn games. This concept opened in the fourth quarter of 2023. Under the terms of the initial agreement, the Company funded 80 % of the cost to construct the restaurant, and Endorphin Ventures contributed the remaining 20 %. In October 2023, the members executed an amended LLC agreement, in which the Company will fund 90 % of any remaining capital requirements, and Endorphin Ventures will contribute the remaining 10 %. The Company recognizes its share of income or loss based on the joint venture distribution priorities, which could fluctuate over time. Upon return of each member’s contributed capital and a preferred return to HHH, distributions and recognition of income or loss will be allocated to the Company based on its final profit-sharing interest. The Company also entered into a lease agreement with HHC Lawn Games, LLC to lease 20,000 square feet of the Fulton Market Building for this venture. Ssäm Bar In 2016, the Company formed Pier 17 Restaurant C101, LLC (Ssäm Bar) with MomoPier, LLC (Momofuku) to construct and operate a restaurant and bar at Pier 17 in the Seaport, which opened in 2019. The Company recognizes its share of income or loss based on the joint venture’s distribution priorities, which could fluctuate over time. During the third quarter of 2023, the Ssäm Bar restaurant closed, and the Company and Momofuku are in the process of dissolving the venture. Additionally, the Company recognized an impairment of $ 5.0 million related to this investment during the year ended December 31, 2023. See Note 4 - Impairment for additional detail. Tin Building by Jean-Georges In 2015, the Company formed Fulton Seafood Market, LLC (Tin Building by Jean-Georges), with VS-Fulton Seafood Market, LLC (Fulton Partner), to operate a 53,783 square foot culinary marketplace in the historic Tin Building. The Fulton Partner is a wholly owned subsidiary of Jean-Georges Restaurants. The Company purchased a 25 % interest in Jean-George Restaurants in March 2022 as discussed below. The Company owns 100 % of the Tin Building and leased 100 % of the space to the Tin Building by Jean-Georges joint venture. Throughout this report, references to the Tin Building relate to the Company’s 100 % owned landlord operations and references to the Tin Building by Jean-Georges refer to the managed business in which the Company has an equity ownership interest. The Company, as landlord, funded 100 % of the development and construction of the Tin Building. Under the terms of the Tin Building by Jean-Georges LLC agreement, the Company contributes the cash necessary to fund pre-opening, opening, and operating costs of Fulton Seafood Market LLC. The Fulton Partner is not required to make any capital contributions. The Tin Building was completed and placed in service during the third quarter of 2022, and the Tin Building by Jean-Georges culinary marketplace began operations in the third quarter of 2022. Based on capital contribution and distribution provisions for the Tin Building by Jean-Georges, the Company currently receives substantially all of the economic interest in the venture. Upon return of the Company’s contributed capital and a preferred return, distributions and recognition of income or loss will be allocated to the Company based on its final profit-sharing interest. As of December 31, 2023 and 2022, the Tin Building by Jean-Georges is classified as a VIE as the equity holders, as a group, lack the characteristics of a controlling financial interest. The Company is not the primary beneficiary of the VIE as it does not have the power to direct the restaurant-related activities that most significantly impact its economic performance. As the Company is unable to quantify the maximum amount of additional capital contributions that may be funded in the future associated with this investment, the Company’s maximum exposure to loss is currently equal to the $ 11.7 million carrying value of the investment as of December 31, 2023. The Company funded capital contributions of $ 48.1 million for the year ended December 31, 2023, and $ 43.1 million for the year ended December 31, 2022. The Company recognized an impairment of $ 1.2 million related to this investment in the year ended December 31, 2023. See Note 4 - Impairment for additional detail. HHH 2023 FORM 10-K | 85 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Jean-Georges Restaurants In March 2022, the Company acquired a 25 % interest in JG Restaurant HoldCo LLC (Jean-Georges Restaurants) for $ 45.0 million from JG TopCo LLC (Jean-Georges). Jean-Georges Restaurants currently has over 40 hospitality offerings and a pipeline of new concepts. The Company accounts for its ownership interest in accordance with the equity method and recorded its initial investment at cost, inclusive of legal fees and transaction costs. Under the terms of the agreement, all cash distributions and the recognition of income-producing activities will be pro rata based on stated ownership interest. The Company recognized an impairment of $ 30.8 million related to this investment in the year ended December 31, 2023. See Note 4 - Impairment for additional detail. Concurrent with the Company’s acquisition of the 25 % interest in Jean-Georges Restaurants, the Company entered into a warrant agreement with Jean-Georges. The Company paid $ 10.0 million for the option to acquire up to an additional 20 % interest in Jean-Georges Restaurants at a fixed exercise price per share subject to certain anti-dilution provisions. Should the warrant agreement be exercised by the Company, the $ 10.0 million will be credited against the aggregate exercise price of the warrants. Per the agreement, the $ 10.0 million is to be used for working capital of Jean-Georges Restaurants. The warrant became exercisable on March 2, 2022, subject to automatic exercise in the event of dissolution or liquidation, and will expire on March 2, 2026. As of December 31, 2023, this warrant has not been exercised. The Company elected the measurement alternative for this purchase option as the equity security does not have a readily determinable fair value. As such, the investment is measured at cost, less any identified impairment charges. Creative Culinary Management Company, LLC (CCMC), a wholly owned subsidiary of Jean-Georges Restaurants, provides management services for certain retail and food and beverage businesses that HHH owns, either wholly or through partnerships with third parties. The Company’s businesses managed by CCMC include The Tin Building by Jean-Georges, The Fulton and Malibu Farm. Pursuant to the various management agreements, CCMC is responsible for employment and supervision of all employees providing services for the food and beverage operations and restaurants as well as the day-to-day operations and accounting for the food and beverage operations. The Summit In 2015, the Company formed DLV/HHPI Summerlin, LLC (The Summit) with Discovery Land Company (Discovery) to develop a custom home community in Summerlin. Phase I The Company contributed land with a carrying value of $ 13.4 million and transferred SID bonds related to such land with a carrying value of $ 1.3 million to The Summit at the agreed upon capital contribution value of $ 125.4 million, or $ 226,000 per acre, and has no further capital obligations. Discovery is required to fund up to a maximum of $ 30.0 million of cash as their capital contribution, of which $ 3.8 million has been contributed. The gains on the contributed land are recognized in Equity in earnings (losses) from unconsolidated ventures as The Summit sells lots. The Company has received its preferred return distributions and recognizes its share of income or loss for Phase I based on its final profit-sharing interest. Phase II In July 2022, the Company contributed an additional 54 acres to The Summit (Phase II land) with a fair value of $ 21.5 million. The Company recognized an incremental equity method investment at the fair value of $ 21.5 million and recognized a gain of $ 13.5 million recorded in Equity in earnings (losses) from unconsolidated ventures. This gain is the result of marking the cost basis of the land contributed to its estimated fair value at the time of contribution. The Phase II land is adjacent to the existing Summit development and includes approximately 28 custom home sites. The first lot sales closed in the first quarter of 2023. The Company will receive distributions and recognize its share of income or loss for Phase II based on the joint venture’s distribution priorities in the amended Summit LLC agreement, which could fluctuate over time. Upon receipt of preferred returns to HHH, distributions and recognition of income or loss will be allocated to the company based on its final profit-sharing interest. Floreo In the fourth quarter of 2021, simultaneous with the Teravalis land acquisition, the Company closed on the acquisition of a 50 % interest in Trillium Development Holding Company, LLC (Floreo), for $ 59.0 million and entered into a Limited Liability Company Agreement (LLC Agreement) with JDM Partners and El Dorado Holdings to develop the first village within the new Teravalis MPC on 3,029 acres of land in the greater Phoenix, Arizona area. The first Floreo land sales were contracted as of December 31, 2023, and are expected to close in the first quarter of 2024. HHH 2023 FORM 10-K | 86 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements In October 2022, Floreo closed on a $ 165.0 million financing, with outstanding borrowings of $ 78.3 million as of December 31, 2023. The Company provided a guarantee on this financing in the form of a collateral maintenance obligation and received a guarantee fee of $ 5.0 million. The financing and related guarantee provided by the Company triggered a reconsideration event, and as of December 31, 2022, Floreo was classified as a VIE. Due to rights held by other members, the Company does not have a controlling financial interest in Floreo and is not the primary beneficiary. As of December 31, 2023, the Company’s maximum exposure to loss as a result of this investment is limited to the $ 55.9 million aggregate carrying value as the Company has not made any other firm commitments to fund amounts on behalf of this VIE, and cash collateral that the Company may be obligated to post related to its collateral maintenance obligation. See Note 10 - Commitments and Contingencies for additional information related to the Company’s collateral maintenance obligation. West End Alexandria In the fourth quarter of 2021, the Company entered into an Asset Contribution Agreement with Landmark Land Holdings, LLC (West End Alexandria) to redevelop a 52 -acre site previously known as Landmark Mall. Other equity owners include Foulger-Pratt Development, LLC (Foulger-Pratt) and Seritage SRC Finance (Seritage). The Company conveyed its 33 -acre Landmark Mall property with an agreed upon fair value of $ 56.0 million and Seritage conveyed an additional 19 acres of land with an agreed upon fair value of $ 30.0 million to West End Alexandria in exchange for equity interest. Additionally, Foulger-Pratt agreed to contribute $ 10.0 million to West End Alexandria. Also in the fourth quarter of 2021, West End Alexandria executed a Purchase and Sale Agreement with the City of Alexandria to sell approximately 11 acres to the City of Alexandria. The city will lease this land to Inova Health Care Services for construction of a new hospital. Development plans for the remaining 41 -acre property include approximately four million square feet of residential, retail, commercial, and entertainment offerings integrated into a cohesive neighborhood with a central plaza and a network of parks and public transportation. Foulger-Pratt manages construction of the development. Demolition began in the second quarter of 2022 and was completed in 2023, with the completion of infrastructure work expected in 2025. The Company does not have the ability to control the activities that most impact the economic performance of the venture as Foulger-Pratt is the managing member and manages all development activities. As such, the Company accounts for its ownership interest in accordance with the equity method. Summarized Financial Information The following tables provide combined summarized financial statement information for the Company’s unconsolidated ventures. Financial statement information is included for each investment for all periods in which the Company’s ownership interest was accounted for as an equity method investment. thousands December 31, 2023 December 31, 2022 Consolidated Balance Sheets Total Assets $ 990,138 $ 878,546 Total Liabilities 580,056 505,643 Total Equity 410,082 372,903 Year Ended December 31, thousands 2023 2022 2021 Consolidated Statements of Operations Revenues $ 465,758 $ 232,786 $ 377,837 Operating Income 35,903 9,815 145,471 Net income (loss) 11,788 ( 2,646 ) 69,904 HHH 2023 FORM 10-K | 87 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 3. Acquisitions and Dispositions Acquisitions In May 2023, the Company acquired the Grogan’s Mill Village Center and related anchor site, a retail property in The Woodlands, Texas consisting of approximately 8.7 acres for $ 5.9 million in an asset acquisition. The property is being held in the Strategic Developments segment. In March 2022, the Company acquired a 25 % interest in Jean-Georges Restaurants for $ 45.0 million and paid $ 10.0 million for the option to acquire up to an additional 20 % interest in Jean-Georges Restaurants through March 2026. Jean-Georges Restaurants currently has over 40 hospitality offerings and a pipeline of new concepts. See Note 2 - Investments in Unconsolidated Ventures for additional information. Teravalis In October 2021, the Company acquired Teravalis, a new large-scale master planned community in the West Valley of Phoenix, Arizona. The Company closed on the all-cash purchase of approximately 33,810 acres (Teravalis Property) for a purchase price of $ 541.0 million. The executed purchase and sale agreement included a repurchase option that allowed the seller, or permitted assignee, to repurchase up to 50 % interest in the Teravalis Property within a set term. In June 2022, the seller’s assignee, JDM Member, exercised a minimum purchase option and purchased a 9.24 % interest in the Teravalis Property for $ 50.0 million. Additionally, in August 2022, JDM Member purchased an additional 2.78 % interest in the Teravalis Property for $ 15.0 million, after which the remaining repurchase option expired. Following the execution of the minimum purchase option, the Company entered into a Limited Liability Company Agreement (LLC Agreement) with JDM Member to form Douglas Ranch Development Holding Company (Teravalis). The Company and JDM Member then contributed their interests in the Teravalis Property to Teravalis in exchange for an equity interest. At December 31, 2023, the Company holds 88.0 % of the Teravalis interests, and JDM Member holds the remaining 12.0 %. Teravalis was determined to be a VIE, and as the Company has the power to direct the activities that most significantly impact its economic performance, the Company is considered the primary beneficiary and continues to consolidate Teravalis. Under the terms of the LLC agreement, cash distributions and the recognition of income-producing activities will be pro rata based on economic ownership interest. As of December 31, 2023, the Company’s Consolidated Balance Sheets include $ 541.6 million of Master Planned Community assets, $ 0.6 million of Accounts Payable and other liabilities, and $ 65.0 million of Noncontrolling interest related to Teravalis. Floreo Simultaneous with the Teravalis land acquisition, the Company closed on the acquisition of a 50 % interest in Trillium Development Holding Company, LLC (Floreo), for $ 59.0 million. Floreo owns approximately 3,029 acres of land which will be the first village developed within the Teravalis community in the greater Phoenix, Arizona area. See Note 2 - Investments in Unconsolidated Ventures for additional information. Dispositions Gains and losses on asset dispositions are recorded to Gain (loss) on sale or disposal of real estate and other assets, net in the Consolidated Statements of Operations, unless otherwise noted. Operating Assets Subsequent to period end, in February 2024, the Company completed the sale of Creekside Park Medical Plaza, a 32,689 square-foot medical office building in The Woodlands, Texas, for $ 14.0 million. In December 2023, the Company completed the sale of Memorial Hermann Medical Office, a 20,000 square-foot medical office building in The Woodlands, Texas, for $ 9.6 million resulting in a gain of $ 3.2 million. In July 2023, the Company completed the sale of two self-storage facilities with a total of 1,370 storage units in The Woodlands, Texas, for $ 30.5 million resulting in a gain of $ 16.1 million. In March 2023, the Company completed the sale of two land parcels in Honolulu, Hawai‘i, including an 11,929 -square-foot building at the Ward Village Retail property, for total consideration of $ 6.3 million, resulting in a gain of $ 4.7 million. In December 2022, the Company completed the sale of Creekside Village Green, a 74,670 -square-foot retail property in The Woodlands, Texas, for $ 28.4 million resulting in a gain of $ 13.4 million. In December 2022, the Company completed the sale of Lake Woodlands Crossing, a 60,261 -square-foot retail property in The Woodlands, Texas, for $ 22.5 million resulting in a gain of $ 12.2 million. The Company retained the underlying land and simultaneously with the sale executed a 99-year ground lease with the buyer, which is classified as an operating lease. HHH 2023 FORM 10-K | 88 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements In June 2022, the Company completed the sale of the Outlet Collection at Riverwalk, a 264,080 -square-foot outlet center located in downtown New Orleans, Louisiana, for $ 34.0 million resulting in a gain on sale of $ 4.0 million, inclusive of $ 0.5 million in related transaction costs. In March 2022, the Company completed the sale of its ownership interest in 110 North Wacker for $ 208.6 million. See Note 2 - Investments in Unconsolidated Ventures for additional information. In September 2021, the Company completed the sale of The Woodlands Resort, The Westin at The Woodlands, and Embassy Suites at Hughes Landing for $ 252.0 million resulting in a gain on sale of $ 39.1 million, inclusive of approximately $ 2.9 million in related transaction costs. Additionally, as part of the sale, the Company repaid $ 132.3 million of debt directly associated with the properties sold. Strategic Developments In December 2021, the Company completed the sale of Century Park, a 63 -acre, 1,302,597 -square-foot campus with 17 office buildings in the West Houston Energy Corridor, for $ 25.0 million resulting in a loss on sale of $ 7.4 million, inclusive of approximately $ 0.4 million in related transaction costs. In May 2021, the Company completed the sale of Monarch City, a property that comprised approximately 229 acres of undeveloped land in Collin County, Texas, for $ 51.4 million, resulting in a gain on sale of $ 21.3 million, inclusive of approximately $ 1.5 million in related transaction costs. 4. Impairment The Company reviews its long-lived assets for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Impairment or disposal of long‑lived assets in accordance with ASC 360 requires that if impairment indicators exist and expected undiscounted cash flows generated by the asset over an anticipated holding period are less than its carrying amount, an impairment provision should be recorded to write down the carrying amount of the asset to its fair value. The impairment analysis does not consider the timing of future cash flows and whether the asset is expected to earn an above- or below-market rate of return. The Company periodically evaluates strategic alternatives with respect to each property and may revise the strategy from time to time, including the intent to hold the asset on a long-term basis or the timing of potential asset dispositions. For example, the Company may decide to sell property that is held for use, and the sale price may be less than the carrying amount. As a result, changes in strategy could result in impairment charges in future periods. The Company evaluates each investment in an unconsolidated venture discussed in Note 2 - Investments in Unconsolidated Ventures periodically for recoverability and valuation declines that are other-than-temporary. If the decrease in value of an investment is deemed to be other-than-temporary, the investment is reduced to its estimated fair value. Seaport In 2023, the Company recorded a $ 709.5 million impairment charge related to the Seaport segment. The Company recognized the impairment due to decreases in estimated future cash flows due to significant uncertainty of future performance as stabilization and profitability are taking longer than expected, pressure on the current cost structure, decreased demand for office space, as well as an increase in the capitalization rate and a decrease in restaurant multiples used to evaluate future cash flows. The Company used a discounted cash flow analysis to determine fair value, with capitalization rates ranging from 5.5 % to 6.75 %, discount rates ranging from 8.5 % to 13.3 %, and restaurant multiples ranging from 8.3 to 11.8 . The assumptions and estimates included in the Company’s impairment analysis require significant judgment about future events, market conditions, and financial performance. Actual results may differ from these assumptions. There can be no assurance that these estimates and assumptions will prove to be an accurate prediction of the future. Operating Assets In 2021, the Company recorded a $ 13.1 million impairment charge for Century Park, a non-core asset acquired as part of the acquisition of The Woodlands Towers at The Waterway. The Century Park asset included both building and land components. The impairment related to the building component, while the land component was not impaired. The Company recognized an impairment due to decreases in estimated future cash flows and as a result of the impact of a shorter-than-anticipated holding term. The Company used weighted market and income valuation techniques to estimate the fair value of Century Park. Market valuation was based on recent sales of similar commercial properties in and around Houston, Texas. For the income approach, the Company utilized a capitalization rate of 8.75 %, probability-weighted scenarios assuming lease-up periods ranging from 24 months to 48 months, and management’s estimate of future lease income and carry costs. In December 2021, the Company completed the sale of Century Park. HHH 2023 FORM 10-K | 89 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements In 2021, the Company recorded a $ 17.7 million impairment of its equity investment in 110 North Wacker. The Company recognized the impairment due to a change in the anticipated holding period as the Company entered into a plan to sell its interest in 110 North Wacker. In March 2022, the Company completed the sale of its ownership interest in 110 North Wacker. For information regarding the asset sales discussed above, see Note 3 - Acquisitions and Dispositions. The following table summarizes the pre-tax impacts of the items mentioned above on the Consolidated Statements of Operations for the years ended December 31: thousands Statements of Operations Line Item 2023 2022 2021 Seaport Buildings and equipment (a) Provision for impairment $ 445,818 $ — $ — Land (a) Provision for impairment 11,734 — — Developments (a) Provision for impairment 214,940 — — Net investment in real estate 672,492 — — Investments in unconsolidated ventures (b) Equity in earnings (losses) from unconsolidated ventures 37,001 — — Total Seaport $ 709,493 $ — $ — Operating Assets Buildings and equipment (c) Provision for impairment $ — $ — $ 13,068 Investments in unconsolidated ventures (d) Equity in earnings (losses) from unconsolidated ventures — — 17,673 Total Operating Assets $ — $ — $ 30,741 (a) The above table represents the final balance sheet impacts of the 2023 Seaport impairment. Due to an adjustment to the allocation of the impairment between properties, this differs slightly from what was initially reported in the third quarter of 2023. The adjustment did not have an impact on the total impairment amount. (b) Impairment charges relate to the Company’s investments in Jean-Georges Restaurants, Ssäm Bar, and Tin Building unconsolidated ventures. See Note 2 - Investments in Unconsolidated Ventures for additional information. (c) Impairment charges related to Century Park as discussed above. (d) Impairment charges related to the Company’s investment in 110 North Wacker as discussed above. HHH 2023 FORM 10-K | 90 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 5. Other Assets and Liabilities Other Assets, Net The following table summarizes the significant components of Other assets, net as of December 31: thousands 2023 2022 Security, escrow, and other deposits $ 81,891 $ 48,578 Special Improvement District receivable, net 74,899 64,091 In-place leases, net 35,490 39,696 Intangibles, net 21,894 25,170 Other 19,248 12,555 Prepaid expenses 16,984 18,806 Tenant incentives and other receivables, net 10,840 8,252 Interest rate derivative assets 10,318 30,860 TIF receivable, net 6,371 1,893 Net investment in lease receivable 2,883 2,895 Notes receivable, net 1,558 3,339 Condominium inventory 671 22,452 Other assets, net $ 283,047 $ 278,587 Accounts Payable and Other Liabilities The following table summarizes the significant components of Accounts payable and other liabilities as of December 31: thousands 2023 2022 Condominium deposit liabilities $ 478,870 $ 390,253 Construction payables 257,227 260,257 Deferred income 118,432 85,006 Accrued interest 54,301 49,156 Accounts payable and accrued expenses 49,363 36,174 Accrued payroll and other employee liabilities 33,314 30,874 Accrued real estate taxes 30,096 37,835 Tenant and other deposits 29,976 26,100 Other 24,461 28,856 Accounts payable and other liabilities $ 1,076,040 $ 944,511 6. Intangibles The following table summarizes the Company’s intangible assets and liabilities: As of December 31, 2023 As of December 31, 2022 Gross Asset (Liability) Accumulated (Amortization)/ Accretion Net Carrying Amount Gross Asset (Liability) Accumulated (Amortization)/ Accretion Net Carrying Amount thousands Intangible Assets: Other intangibles (a) $ 34,123 $ ( 12,386 ) $ 21,737 $ 34,123 $ ( 9,110 ) $ 25,013 Indefinite lived intangibles 157 — 157 157 — 157 Tenant leases: In-place value 54,180 ( 18,690 ) 35,490 57,087 ( 17,391 ) 39,696 Above-market 292 ( 261 ) 31 500 ( 446 ) 54 Below-market ( 4,255 ) 3,940 ( 315 ) ( 4,255 ) 3,512 ( 743 ) Total indefinite lived intangibles $ 157 $ 157 Total amortizing intangibles $ 56,943 $ 64,020 HHH 2023 FORM 10-K | 91 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements (a) Primarily associated with the Company’s Las Vegas Aviators Triple-A professional baseball team The tenant in-place, above-market, and below-market lease intangible assets resulted from real estate acquisitions. The in‑place value and above-market value of tenant leases are included in Other assets, net and are amortized over periods that approximate the related lease terms. The below‑market tenant leases are included in Accounts payable and other liabilities and are amortized over the remaining non-cancelable terms of the respective leases. See Note 5 - Other Assets and Liabilities for additional information regarding Other assets, net and Accounts payable and other liabilities. Net amortization and accretion expense for these intangible assets and liabilities was $ 7.1 million in 2023, $ 7.5 million in 2022, and $ 7.5 million in 2021. Future net amortization and accretion expense is estimated for each of the five succeeding years as shown below: thousands 2024 2025 2026 2027 2028 Net amortization and accretion expense $ 7,080 $ 7,242 $ 7,208 $ 6,933 $ 6,881 7. Mortgages, Notes, and Loans Payable, Net Mortgages, Notes, and Loans Payable All mortgages, notes, and loans payable of HHH are held by HHC and its subsidiaries. December 31, thousands 2023 2022 Fixed-rate debt Senior unsecured notes $ 2,050,000 $ 2,050,000 Secured mortgages payable 1,485,494 1,500,841 Special Improvement District bonds 65,627 59,777 Variable-rate debt (a) Secured Bridgeland Notes 475,000 275,000 Secured mortgages payable 1,276,489 916,570 Unamortized deferred financing costs (b) ( 49,990 ) ( 55,005 ) Mortgages, notes, and loans payable, net $ 5,302,620 $ 4,747,183 (a) The Company has entered into derivative instruments to manage the variable interest rate exposure. The Company had an interest rate swap and two interest rate caps that expired in the third quarter of 2023. See Note 9 - Derivative Instruments and Hedging Activities for additional information. (b) Deferred financing costs are amortized to interest expense over the initial contractual term of the respective financing agreements using the effective interest method (or other methods which approximate the effective interest method). As of December 31, 2023, land, buildings and equipment, developments, and other collateral with an aggregate net book value of $ 4.7 billion have been pledged as collateral for the Company’s debt obligations. Senior notes totaling $ 2.1 billion and $ 68.4 million of Secured mortgages payable are recourse to the Company. Senior Unsecured Notes During 2020 and 2021, the Company issued $ 2.1 billion of aggregate principal of senior unsecured notes. These notes have fixed rates of interest that are payable semi-annually and are interest only until maturity. These debt obligations are redeemable prior to the maturity date subject to a “make-whole” premium which decreases annually until 2026 at which time the redemption make-whole premium is no longer applicable. The following table summarizes the Company’s senior unsecured notes by issuance date: $ in thousands Principal Maturity Date Interest Rate August 2020 $ 750,000 August 2028 5.375 % February 2021 650,000 February 2029 4.125 % February 2021 650,000 February 2031 4.375 % Senior unsecured notes $ 2,050,000 HHH 2023 FORM 10-K | 92 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Secured Mortgages Payable The Company’s outstanding mortgages are collateralized by certain of the Company’s real estate assets. Certain of the Company’s loans contain provisions that grant the lender a security interest in the operating cash flow of the property that represents the collateral for the loan. Certain mortgage notes may be prepaid subject to a prepayment penalty equal to a yield maintenance premium, defeasance, or a percentage of the loan balance. Construction loans related to the Company’s development properties are generally variable-rate, interest-only, and have maturities of five years or less. Debt obligations related to the Company’s operating properties generally require monthly installments of principal and interest. The following table summarizes the Company’s Secured mortgages payable: December 31, 2023 December 31, 2022 $ in thousands Principal Range of Interest Rates Weighted-average Interest Rate Weighted-average Years to Maturity Principal Range of Interest Rates Weighted-average Interest Rate Weighted-average Years to Maturity Fixed rate (a) $ 1,485,494 3.13 % - 8.67 % 4.46 % 7.2 $ 1,500,841 3.13 % - 7.67 % 4.39 % 7.4 Variable rate (b) 1,276,489 7.08 % - 10.48 % 8.73 % 2.2 916,570 6.05 % - 9.39 % 7.36 % 2.6 Secured mortgages payable $ 2,761,983 3.13 % - 10.48 % 6.44 % 4.9 $ 2,417,411 3.13 % - 9.39 % 5.51 % 5.6 (a) Interest rates presented are based upon the coupon rates of the Company’s fixed-rate debt obligations. (b) Interest rates presented are based on the applicable reference interest rates as of December 31, 2023 and 2022, excluding the effects of interest rate derivatives. The Company has entered into derivative instruments to manage its variable interest rate exposure. The weighted-average interest rate of the Company’s variable-rate mortgages payable, inclusive of interest rate derivatives, was 7.98 % as of December 31, 2023, and 5.91 % as of December 31, 2022. See Note 9 - Derivative Instruments and Hedging Activities for additional information. The Company’s secured mortgages mature over various terms through September 2052. On certain of its debt obligations, the Company has the option to exercise extension options, subject to certain terms, which may include minimum debt service coverage, minimum occupancy levels or condominium sales levels, as applicable, and other performance criteria. In certain cases, due to property performance not meeting identified covenants, the Company may be required to pay down a portion of the loan to exercise the extension option. During 2023, the Company’s mortgage activity included draws on existing mortgages of $ 384.4 million, refinancings of $ 161.0 million, and repayments of $ 48.4 million. As of December 31, 2023, the Company’s secured mortgage loans had $ 1.0 billion of undrawn lender commitment available to be drawn for property development, subject to certain restrictions. Special Improvement District Bonds The Summerlin MPC uses SID bonds to finance certain common infrastructure improvements. These bonds are issued by the municipalities and are secured by the assessments on the land. The majority of proceeds from each bond issued is held in a construction escrow and disbursed to the Company as infrastructure projects are completed, inspected by the municipalities, and approved for reimbursement. Accordingly, the SID bonds have been classified as debt, and the Summerlin MPC pays the debt service on the bonds semi‑annually. As Summerlin sells land, the buyers assume a proportionate share of the bond obligation at closing, and the residential sales contracts provide for the reimbursement of the principal amounts that the Company previously paid with respect to such proportionate share of the bond. These bonds bear interest at fixed rates ranging from 4.13 % to 7.00 % with maturities ranging from 2025 to 2053 as of December 31, 2023, and fixed rates ranging from 4.13 % to 6.05 % with maturities ranging from 2025 to 2051 as of December 31, 2022. For the year ended December 31, 2023, $ 21.3 million in SID bonds were issued and obligations of $ 13.9 million were assumed by buyers. Secured Bridgeland Notes In September 2021, the Company closed on a $ 275.0 million financing with maturity in 2026. This financing is secured by MUD receivables and land in Bridgeland. The loan required a $ 27.5 million fully refundable deposit and has an interest rate of 7.64 % at December 31, 2023, and 6.60 % at December 31, 2022. Due to the maturity of one of the Company’s interest rate swaps in September 2023, this financing was not covered by an interest rate derivative at December 31, 2023. The interest rate inclusive of interest rate derivatives was 5.28 % at December 31, 2022. In December 2022, the borrowing capacity of this obligation was expanded from $ 275.0 million to $ 475.0 million. An additional $ 200.0 million was drawn in 2023, bringing outstanding borrowings to $ 475.0 million as of December 31, 2023. HHH 2023 FORM 10-K | 93 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Debt Compliance As of December 31, 2023, the Company was in compliance with all property-level debt covenants with the exception of five property-level debt instruments. As a result, the excess net cash flow after debt service from the underlying properties became restricted. While the restricted cash could not be used for general corporate purposes, it could be used to fund operations of the underlying assets and did not have a material impact on the Company’s liquidity or its ability to operate these assets. Additionally, one property-level debt instrument that was not in compliance as of September 30, 2023, is in compliance as of December 31, 2023, but requires two consecutive quarters of compliance to remove the cash flow restriction. Scheduled Maturities The following table summarizes the contractual obligations relating to the Company’s mortgages, notes, and loans payable as of December 31, 2023: thousands Mortgages, notes, and loans payable principal payments 2024 $ 214,526 2025 527,478 2026 968,964 2027 298,601 2028 835,522 Thereafter 2,507,519 Total principal payments 5,352,610 Unamortized deferred financing costs ( 49,990 ) Mortgages, notes, and loans payable $ 5,302,620 8. Fair Value ASC 820, Fair Value Measurement , emphasizes that fair value is a market-based measurement that should be determined using assumptions market participants would use in pricing an asset or liability. The standard establishes a hierarchical disclosure framework that prioritizes and ranks the level of market price observability used in measuring assets or liabilities at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the asset or liability. Assets or liabilities with readily available active quoted prices, or for which fair value can be measured from actively quoted prices, generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The following table presents the fair value measurement hierarchy levels required under ASC 820 for the Company’s assets that are measured at fair value on a recurring basis. The Company does not have any liabilities that are measured at a fair value on a recurring basis for the periods presented. December 31, 2023 December 31, 2022 Fair Value Measurements Using Fair Value Measurements Using thousands Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Interest rate derivative assets $ 10,318 $ — $ 10,318 $ — $ 30,860 $ — $ 30,860 $ — The fair values of interest rate derivatives are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates derived from observable market interest rate curves. HHH 2023 FORM 10-K | 94 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements The estimated fair values of the Company’s financial instruments that are not measured at fair value on a recurring basis are as follows: December 31, 2023 December 31, 2022 thousands Fair Value Hierarchy Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Assets: Cash and restricted cash Level 1 $ 1,053,057 $ 1,053,057 $ 1,098,937 $ 1,098,937 Accounts receivable, net (a) Level 3 115,045 115,045 103,437 103,437 Notes receivable, net (b) Level 3 1,558 1,558 3,339 3,339 Liabilities: Fixed-rate debt (c) Level 2 3,601,121 3,294,431 3,610,618 3,298,859 Variable-rate debt (c) Level 2 1,751,489 1,751,489 1,191,570 1,191,570 (a) Accounts receivable, net is shown net of an allowance of $ 15.0 million at December 31, 2023, and $ 8.9 million at December 31, 2022. Refer to Note 1 - Presentation of Financial Statements and Significant Accounting Policies for additional information on the allowance. (b) Notes receivable, net is shown net of an immaterial allowance at December 31, 2023, and December 31, 2022. (c) Excludes related unamortized financing costs. The carrying amounts of Cash and restricted cash, Accounts receivable, net, and Notes receivable, net approximate fair value because of the short‑term maturity of these instruments. The fair value of the Company’s Senior Notes, included in fixed-rate debt in the table above, is based upon the trade price closest to the end of the period presented. The fair value of other fixed-rate debt in the table above was estimated based on a discounted future cash payment model, which includes risk premiums and risk-free rates derived from the Secured Overnight Financing Rate (SOFR) or U.S. Treasury obligation interest rates as of December 31, 2023. Refer to Note 7 - Mortgages, Notes, and Loans Payable, Net for additional information. The discount rates reflect the Company’s judgment as to what the approximate current lending rates for loans or groups of loans with similar maturities and credit quality would be if credit markets were operating efficiently and assuming that the debt is outstanding through maturity. The carrying amounts for the Company’s variable-rate debt approximate fair value given that the interest rates are variable and adjust with current market rates for instruments with similar risks and maturities. The below table includes a non-financial asset that was measured at fair value on a non-recurring basis resulting in the property being impaired: Fair Value Measurements Using thousands Total Fair Value Measurement (a) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) 2023 Seaport Net investment in real estate $ 321,180 $ — $ — $ 321,180 Seaport Investments in unconsolidated ventures 40,225 — — 40,225 (a) The fair value was measured as of the impairment date in the third quarter of 2023 using a discounted cash flow analysis to determine fair value, with capitalization rates ranging from 5.5 % to 6.75 %, discount rates ranging from 8.5 % to 13.3 %, and restaurant multiples ranging from 8.3 to 11.8 . Refer to Note 4 - Impairment for additional information. HHH 2023 FORM 10-K | 95 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 9. Derivative Instruments and Hedging Activities The Company is exposed to interest rate risk related to its variable interest rate debt, and it manages this risk by utilizing interest rate derivatives. The Company uses interest rate swaps, collars, and caps to add stability to interest costs by reducing the Company’s exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company’s fixed‑rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above an established ceiling rate and payment of variable amounts to a counterparty if interest rates fall below an established floor rate, in exchange for an upfront premium. No payments or receipts are exchanged on interest rate collar contracts unless interest rates rise above or fall below the established ceiling and floor rates. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an upfront premium. Certain of the Company’s interest rate caps are not currently designated as hedges, and therefore, any gains or losses are recognized in current-period earnings within Interest expense on the Consolidated Statements of Operations. These derivatives are recorded on a gross basis at fair value on the balance sheet. Assessments of hedge effectiveness are performed quarterly using regression analysis. The change in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in Accumulated other comprehensive income (loss) (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item being hedged. Derivatives accounted for as cash flow hedges are classified in the same category in the Consolidated Statements of Cash Flows as the items being hedged. Gains and losses from derivative financial instruments are reported in Cash provided by (used in) operating activities within the Consolidated Statements of Cash Flows. The Company is exposed to credit risk in the event of non-performance by its derivative counterparties. To mitigate its credit risk, the Company reviews the creditworthiness of counterparties and enters into agreements with those that are considered credit-worthy, such as large financial institutions with favorable credit ratings. There were no derivative counterparty defaults as of December 31, 2023 and 2022. If the derivative contracts are terminated prior to their maturity, the amounts previously recorded in AOCI are recognized in earnings over the period that the hedged transaction impacts earnings. During the years ended December 31, 2023 and 2022, there were no termination events. During the year ended December 31, 2023, the Company recorded an immaterial reduction in Interest expense related to the amortization of a previously terminated swap. Amounts reported in AOCI related to derivatives will be reclassified to Interest expense as interest payments are made on the Company’s variable‑rate debt. Over the next 12 months, HHH estimates that $ 4.6 million of net gain will be reclassified to Interest expense including amounts related to the amortization of terminated swaps. HHH 2023 FORM 10-K | 96 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements The following table summarizes certain terms of the Company’s derivative contracts. The Company reports derivative assets in Other assets, net and derivative liabilities in Accounts payable and other liabilities. Fair Value Asset (Liability) Notional Fixed Interest Effective Maturity December 31, December 31, thousands Amount Rate (a) Date Date 2023 2022 Derivative instruments not designated as hedging instruments: (b) Interest rate cap 285,000 2.00 % 3/12/2021 9/15/2023 $ — $ 5,748 Interest rate cap 83,200 2.00 % 3/12/2021 9/15/2023 — 1,677 Interest rate cap 75,000 2.50 % 10/12/2021 9/29/2025 2,274 3,791 Interest rate cap 59,500 2.50 % 10/12/2021 9/29/2025 1,804 3,007 Interest rate collar 53,272 2.00 % - 4.50 % 6/1/2023 6/1/2025 417 — Interest rate collar 33,260 2.00 % - 4.50 % 6/1/2023 6/1/2025 440 — Derivative instruments designated as hedging instruments: Interest rate swap 615,000 2.98 % 9/21/2018 9/18/2023 $ — $ 8,262 Interest rate swap 200,000 3.69 % 1/3/2023 1/1/2027 117 978 Interest rate cap 127,000 5.50 % 11/10/2022 11/7/2024 28 378 Interest rate cap 74,120 5.00 % 12/22/2022 12/21/2025 223 655 Interest rate swap 40,800 1.68 % 3/1/2022 2/18/2027 2,496 3,321 Interest rate swap 34,857 4.89 % 11/1/2019 1/1/2032 2,519 3,043 Total fair value derivative assets $ 10,318 $ 30,860 Total fair value derivative liabilities — — Total fair value derivatives asset (liability), net $ 10,318 $ 30,860 (a) These rates represent the swap rate and cap strike rate on HHH’s interest rate swaps, caps, and collars. (b) Interest income related to these contracts was $ 0.5 million in 2023 and $ 13.0 million in 2022. The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the years ended December 31: Derivatives in Cash Flow Hedging Relationships Amount of Gain (Loss) Recognized in AOCI on Derivatives thousands 2023 2022 2021 Interest rate derivatives $ 3,809 $ 25,657 $ 5,300 Location of Gain (Loss) Reclassified from AOCI into Statements of Operations Amount of Gain (Loss) Reclassified from AOCI into Statements of Operations thousands 2023 2022 2021 Interest expense $ 13,131 $ ( 6,041 ) $ ( 12,660 ) Credit-risk-related Contingent Features The Company has agreements with certain derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has agreements with certain derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. No ne of the Company’s derivatives which contain credit-risk-related features were in a net liability position as of December 31, 2023. HHH 2023 FORM 10-K | 97 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 10. Commitments and Contingencies Litigation In the normal course of business, from time to time, the Company is involved in legal proceedings relating to the ownership and operations of its properties. In management’s opinion, the liabilities, if any, that may ultimately result from normal course of business legal actions are not expected to have a material effect on the Company’s consolidated financial position, results of operations, or liquidity. Timarron Park On June 14, 2018, the Company was served with a petition involving approximately 500 individuals or entities who claim that their properties, located in the Timarron Park neighborhood of The Woodlands, were damaged by flood waters that resulted from the unprecedented rainfall that occurred throughout Harris County and surrounding areas during Hurricane Harvey in August 2017. The complaint was filed in State Court in Harris County of the State of Texas. In general, the plaintiffs allege negligence in the development of Timarron Park and violations of Texas’ Deceptive Trade Practices Act and name as defendants The Howard Hughes Corporation, The Woodlands Land Development Company, and two unaffiliated parties involved in the planning and engineering of Timarron Park. The plaintiffs are seeking restitution for damages to their property and diminution of their property values. On August 9, 2022, the Court granted the Company’s summary judgment motions and dismissed the plaintiffs’ claims. On September 8, 2022, the plaintiffs filed a motion for a new trial. On October 21, 2022, the Court denied the motion for a new trial. On November 7, 2022, the Plaintiffs filed their notice of appeal. The Company will continue to vigorously defend the matter as it believes that these claims are without merit and that it has substantial legal and factual defenses to the claims and allegations contained in the complaint. Based upon the present status of this matter, the Company does not believe it is probable that a loss will be incurred. Accordingly, the Company has not recorded a charge as a result of this action. Waiea The Company entered into a settlement agreement with the Waiea homeowners association related to certain construction defects at the condominium tower. Pursuant to the settlement agreement, the Company will pay for the repair of the defects. The Company believes that the general contractor is ultimately responsible for the defects and as such the Company should be entitled to recover all the repair costs from the general contractor, other responsible parties, and insurance proceeds; however, the Company can provide no assurances that all or any portion of the costs will be recovered. Total estimated cost related to the remediation is $ 155.4 million, inclusive of $ 16.1 million of additional anticipated costs recognized in 2023. As of December 31, 2023, a total of $ 8.7 million remains in Construction payables for the estimated repair costs related to this matter, which is included in Accounts payable and other liabilities in the accompanying Consolidated Balance Sheets. 250 Water Street In 2021, the Company received the necessary approvals for its 250 Water Street development project, which includes a mixed-use development with affordable and market-rate apartments, community-oriented spaces, and office space. In May 2021, the Company received approval from the New York City Landmarks Preservation Commission (LPC) on its proposed design for the 250 Water Street site. The Company received final approvals in December 2021 through the New York City Uniform Land Use Review Procedure known as ULURP, which allowed the necessary transfer of development rights to the parking lot site. The Company began initial foundation and voluntary site remediation work in the second quarter of 2022 and completed remediation work in December 2023. The Company has prevailed in various lawsuits filed in 2021 and 2022 challenging the development approvals in order to prevent construction of this project. In September 2021, the New York State Supreme Court dismissed on procedural grounds a lawsuit challenging the LPC approval. In February 2022, an additional lawsuit was filed in New York State Supreme Court by opponents of the project challenging the land use approvals for 250 Water Street previously granted to the Company under the ULURP, and in August 2022 the Court ruled in the Company’s favor, denying all claims of the petitioners. The same petitioners subsequently filed a request to reargue and renew the case, which the Court rejected in January 2023. HHH 2023 FORM 10-K | 98 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements A separate lawsuit was filed in July 2022 again challenging the Landmarks Preservation Commission approval. In January 2023, a Court ruled in favor of the petitioners vacating the Certificate of Appropriateness (COA) issued by the LPC. The Company immediately appealed this decision to the New York State Supreme Court’s Appellate Division, and on June 6, 2023, an Appellate Division panel of five judges unanimously reversed the lower Court’s decision, reinstating the COA. Subsequently, on June 29, 2023, petitioners filed a motion requesting reargument or, in the alternative, permission to appeal the decision of the Appellate Division to the New York State Court of Appeals. On August 31, 2023, the Appellate denied petitioners’ motion in full. Subsequently, petitioners filed a motion in the Court of Appeals for permission to appeal to that court. The decision on the motion by the Court of Appeals is pending. Although it is not possible to predict with certainty the outcome of petitioners’ motion, such requests are rarely granted and there is no further judicial recourse after the Court of Appeals. If the pending motion for permission to appeal were to be granted by the Court of Appeals, the Company believes the Appellate Division’s ruling will be upheld based on the substantial legal and factual arguments supporting its decision. The lawsuit is not seeking monetary damages as the petitioners are seeking to enjoin the Company from moving forward with the development of 250 Water Street. Because the Company believes that a potential loss is not probable or estimable, it has not recorded any reserves or contingencies related to this legal matter. Letters of Credit and Surety Bonds As of December 31, 2023, the Company had outstanding letters of credit totaling $ 3.9 million and surety bonds totaling $ 470.4 million. As of December 31, 2022, the Company had outstanding letters of credit totaling $ 2.1 million and surety bonds totaling $ 346.3 million. These letters of credit and surety bonds were issued primarily in connection with insurance requirements, special real estate assessments, and construction obligations. Operating Leases The Company leases land or buildings at certain properties from third parties, which are recorded in Operating lease right-of-use assets and Operating lease obligations on the Consolidated Balance Sheets. See Note 17 - Leases for further discussion. Contractual rental expense, including participation rent, was $ 5.3 million for the year ended December 31, 2023, $ 5.6 million for the year ended December 31, 2022, and $ 7.2 million for the year ended December 31, 2021. The amortization of above and below‑market ground leases and straight‑line rents included in the contractual rent amount was not significant. Guarantee Agreements The Company evaluates the likelihood of future performance under the below guarantees and, as of December 31, 2023 and 2022, there were no events requiring financial performance under the following guarantees. Floreo In October 2022, Floreo, the Company’s 50 % owned joint venture in Teravalis, closed on a $ 165 million bond financing with Mizuho Capital Markets, LLC (Mizuho). Outstanding borrowings as of December 31, 2023, were $ 78.3 million. A wholly owned subsidiary of the Company (HHC Member) provided a guarantee for the bond in the form of a collateral maintenance commitment under which it will post refundable cash collateral if the Loan-to-Value (LTV) ratio exceeds 50 %. A separate wholly owned subsidiary of the Company also provided a backstop guarantee of up to $ 50 million of the cash collateral commitment in the event HHC Member fails to make necessary payments when due. The cash collateral becomes nonrefundable if Floreo defaults on the bond obligation. The Company received a fee of $ 5.0 million in exchange for providing this guarantee, which was recognized in Accounts payable and other liabilities on the Consolidated Balance Sheets as of December 31, 2023. This liability amount will be recognized in Other income (loss), net in a manner that corresponds to the bond repayment by Floreo. The Company’s maximum exposure under this guarantee is equal to the cash collateral that the Company may be obligated to post. As of December 31, 2023, the Company has not posted any cash collateral. Given the existence of other collateral including the undeveloped land owned by Floreo, the entity’s extensive and discretionary development plan, and its eligibility for reimbursement of a significant part of the development costs from the Community Facility District in Arizona, the Company does not expect to have to post collateral. Tin Building In conjunction with the execution of the ground lease for the Seaport, the Company executed a completion guarantee for the core and shell construction of the Tin Building. The core and shell construction was completed in the fourth quarter of 2021, and the remainder of construction was completed in the third quarter of 2022. The Company received the necessary approvals from the New York City Economic Development Corporation to relinquish the guarantee in early 2023. Downtown Columbia The Company’s wholly owned subsidiaries agreed to complete defined public improvements and to indemnify Howard County, Maryland, for certain matters as part of the Downtown Columbia Redevelopment District TIF bonds. To the extent that increases in taxes do not cover debt service payments on the TIF bonds, the Company’s wholly owned subsidiary is obligated to pay special taxes. Management has concluded that, as of December 31, 2023, any obligations to pay special taxes are not probable. HHH 2023 FORM 10-K | 99 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Ward Village As part of the Company’s development permits with the Hawai‘i Community Development Authority for the condominium towers at Ward Village, the Company entered into a guarantee whereby it is required to reserve 20 % of the residential units for local residents who meet certain maximum income and net worth requirements. This guarantee, which is triggered once the necessary permits are granted and construction commences, was satisfied for Waiea, Anaha, and Ae‘o, with the opening of Ke Kilohana, which is a workforce tower fully earmarked to fulfill this obligation for the first four towers. The reserved units for ‘A‘ali‘i tower are included in the ‘A‘ali‘i tower. Units for Kō‘ula, Victoria Place, and The Park Ward Village will be satisfied with the construction of Ulana Ward Village, which is a second workforce tower fully earmarked to fulfill the remaining reserved housing guarantee in the community. Ulana Ward Village began construction in early 2023. 11. Stock-Based Compensation Plans In May 2020, the Company’s shareholders approved The Howard Hughes Corporation 2020 Equity Incentive Plan (the 2020 Equity Plan). Pursuant to the 2020 Equity Plan, 1,350,000 shares of the Company’s common stock were reserved for issuance. The 2020 Equity Plan provides for grants of stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards (collectively, the Awards). Employees, directors, and consultants of the Company are eligible for Awards. The 2020 Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors (Compensation Committee). Prior to the adoption of the 2020 Equity Plan, equity awards were issued under The Howard Hughes Corporation Amended and Restated 2010 Equity Incentive Plan (the 2010 Equity Plan). The adoption of the 2020 Equity Plan did not impact the administration of Awards issued under the 2010 Equity Plan but following adoption of the 2020 Equity Plan, equity awards will no longer be granted under the 2010 Equity Plan. As of December 31, 2023, there were a maximum of 727,758 HHH shares available for future grants under the 2020 Equity Plan. The following summarizes stock-based compensation expense, net of amounts capitalized to development projects, for the years ended December 31: thousands 2023 2022 2021 Stock Options (a) $ 336 $ 250 $ 227 Restricted Stock (b) 11,389 6,860 7,332 Pre-tax stock-based compensation expense $ 11,725 $ 7,110 $ 7,559 Income tax benefit $ 1,001 $ 636 $ 882 (a) Amounts shown are net of immaterial amounts capitalized to development projects. (b) Amounts shown are net of $ 4.6 million capitalized to development projects in 2023, $ 4.8 million capitalized to development projects in 2022, and $ 2.2 million capitalized to development projects in 2021. Stock Options There were no grants or exercises of stock options in 2023. The following table summarizes stock option activity: Stock Options Weighted-average Exercise Price Weighted-average Remaining Contractual Term (years) Aggregate Intrinsic Value Stock options outstanding at December 31, 2022 258,987 $ 110.20 Forfeited ( 8,000 ) 106.83 Expired ( 116,650 ) 112.09 Stock options outstanding at December 31, 2023 134,337 $ 108.76 4.4 $ 663,915 Stock options vested and expected to vest at December 31, 2023 133,096 $ 109.08 4.4 $ 647,298 Stock options exercisable at December 31, 2023 79,500 $ 131.19 2.4 $ — The total intrinsic value of stock options exercised was $ 0.1 million during 2022 and $ 2.6 million during 2021, based on the difference between the market price at the exercise date and the exercise price. Cash received from stock option exercises was $ 0.3 million in 2022 and $ 4.1 million in 2021. The tax benefit from these exercises was immaterial. HHH 2023 FORM 10-K | 100 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements The fair value of stock option awards is determined using the Black-Scholes option-pricing model with the following assumptions: – Expected life —Based on the average of the time to vesting and full term of an option – Risk-free interest rates —Based on the U.S. Treasury rate over the expected life of an option – Expected volatility —Based on the average of implied and historical volatilities as of each of the grant dates The fair value on the grant date and the significant assumptions used in the Black‑Scholes option‑pricing model are as follows: 2022 2021 Weighted-average grant date fair value $ 37.70 $ 41.52 Assumptions Expected life of options (in years) 7.5 7.5 Risk-free interest rate 3.4 % 1.2 % Expected volatility 50.3 % 36.5 % Expected annual dividend per share — — Generally, options granted vest over requisite service periods, expire ten years after the grant date and generally do not become exercisable until their restrictions on exercise lapse after the five-year anniversary of the grant date. The balance of unamortized stock option expense as of December 31, 2023, is $ 0.9 million, which is expected to be recognized over a weighted‑average period of 2.6 years. Restricted Stock Restricted stock awards issued under the 2020 Equity Plan provide that shares awarded may not be sold or otherwise transferred until restrictions have lapsed as established by the Compensation Committee. In addition to the granting of restricted stock to certain members of management, the Company awards restricted stock to non‑employee directors as part of their annual retainer. The management awards generally vest over a range of three to five years , and non‑employee director awards generally vest in approximately one year . The following table summarizes restricted stock activity: Restricted Stock Weighted-average Grant Date Fair Value Restricted stock outstanding at December 31, 2022 353,463 $ 75.14 Granted 267,820 83.85 Vested ( 119,744 ) 84.42 Forfeited ( 107,841 ) 68.92 Restricted stock outstanding at December 31, 2023 393,698 $ 79.94 The grant date fair value of restricted stock is based on the closing price of common stock at grant date. For restricted stock awards that vest based on shareholder returns, the grant date fair value is calculated using a Monte-Carlo approach which simulates the Company’s stock price on the corresponding vesting dates and is reflected at the target level of performance. For restricted stock awards that vest based on net asset value per share, the grant date fair value is calculated using a Monte-Carlo approach which simulates the Company’s net asset value on the vesting date and is reflected at the target level of performance. The weighted-average grant-date fair value per share of restricted stock granted was $ 88.19 during 2022 and $ 83.91 during 2021. The fair value of restricted stock that vested was $ 9.6 million during 2023, $ 8.0 million during 2022, and $ 6.9 million during 2021, based on the HHH market price at the vesting date. The balance of unamortized restricted stock expense as of December 31, 2023, was $ 21.2 million, which is expected to be recognized over a weighted‑average period of 1.9 years. HHH 2023 FORM 10-K | 101 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 12. Income Taxes Deferred income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities using enacted tax rates currently in effect. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. The following summarizes income tax expense (benefit) for the years ended December 31: thousands 2023 2022 2021 Current $ 108 $ 18,478 $ 4,797 Deferred ( 163,843 ) 42,022 10,356 Total $ ( 163,735 ) $ 60,500 $ 15,153 Reconciliation of the Income tax expense (benefit) if computed at the U.S. federal statutory income tax rate to the Company’s reported Income tax expense (benefit) for the years ended December 31 is as follows: thousands except percentages 2023 2022 2021 Income (loss) before income taxes $ ( 715,265 ) $ 245,136 $ 64,077 U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % Tax computed at the U.S. federal statutory rate $ ( 150,206 ) $ 51,479 $ 13,456 Increase (decrease) in valuation allowance, net 25,401 1,065 2,378 State income tax expense (benefit), net of federal income tax ( 32,041 ) 5,483 ( 3,182 ) Tax expense (benefit) from other change in rates, prior period adjustments, and other permanent differences 2,014 315 ( 181 ) Tax expense on compensation disallowance 2,604 2,180 1,570 Net (income) loss attributable to noncontrolling interests ( 51 ) ( 22 ) 1,507 Tax expense (benefit) on tax credits ( 11,456 ) — ( 395 ) Income tax expense (benefit) $ ( 163,735 ) $ 60,500 $ 15,153 Effective tax rate 22.9 % 24.7 % 23.6 % As of December 31, 2023, the amounts and expiration dates of operating loss carryforwards for tax purposes are as follows: thousands Amount Net operating loss carryforwards - Federal (a) $ 51,731 Net operating loss carryforwards - State (b) 587,852 (a) Federal net operating loss carryforwards have an indefinite carryforward period. (b) State net operating loss carryforwards of $ 272.1 million have an indefinite carryforward period. The remaining $ 315.8 million of carryforwards have varying carryforward periods through 2043. A valuation allowance has been recorded against the deferred tax benefit related to a majority of the state net operating loss carryforwards. HHH 2023 FORM 10-K | 102 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements The following summarizes tax effects of temporary differences and carryforwards included in the net deferred tax liabilities as of December 31: thousands 2023 2022 Deferred tax assets: Operating and Strategic Developments properties and fixed assets $ 204,228 $ 22,447 Investments in unconsolidated ventures 11,577 6,698 Accrued expenses 6,924 6,282 Prepaid expenses 2,020 1,972 Other 1,845 — Operating loss and tax carryforwards 52,433 65,829 Total deferred tax assets 279,027 103,228 Valuation allowance ( 62,921 ) ( 39,478 ) Total net deferred tax assets $ 216,106 $ 63,750 Deferred tax liabilities: Master Planned Communities properties $ ( 208,347 ) $ ( 214,046 ) Deferred income ( 76,908 ) ( 86,104 ) Accounts receivable ( 18,686 ) ( 17,761 ) Other — ( 175 ) Total deferred tax liabilities ( 303,941 ) ( 318,086 ) Total net deferred tax liabilities $ ( 87,835 ) $ ( 254,336 ) The deferred tax liability associated with the Company’s MPCs is largely attributable to the difference between the basis and value determined as of the date of the acquisition by its predecessors adjusted for sales that have occurred since that time. The recognition of these deferred tax liabilities is dependent upon the timing and sales price of future land sales and the method of accounting used for income tax purposes. The deferred tax liability related to deferred income represents the difference between the income tax method of accounting and the financial statement method of accounting for prior sales of land in the Company’s MPCs. Generally, the Company is currently open to audit under the statute of limitations by the Internal Revenue Service as well as state taxing authorities for the years ended December 31, 2020 through 2023. In the Company’s opinion, it has made adequate tax provisions for years subject to examination. However, the final determination of tax examinations and any related litigation could be different from what was reported on the returns. The Company applies the generally accepted accounting principle related to accounting for uncertainty in income taxes, which prescribes a recognition threshold that a tax position is required to meet before recognition in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition issues. The Company recognizes and reports interest and penalties related to unrecognized tax benefits, if applicable, within the provision for income tax expense. The Company had no unrecognized tax benefits for the years ended December 31, 2023, 2022, or 2021, and therefore did no t recognize any interest expense or penalties on unrecognized tax benefits. 13. Warrants In 2017, the Company entered into warrant agreements with its then Chief Executive Officer, David R. Weinreb, (Weinreb Warrant) and then President, Grant Herlitz, (Herlitz Warrant) to acquire 1,965,409 shares and 87,951 shares of common stock for the purchase price of $ 50.0 million and $ 2.0 million, respectively. The purchase prices paid by the respective executives for the Weinreb Warrant and the Herlitz Warrant, which qualify as equity instruments, were credited to Additional paid-in capital. In October 2019, in connection with their respective terminations of employment, the Weinreb Warrant became exercisable at an exercise price of $ 124.64 per share, and the Herlitz Warrant became exercisable at an exercise price of 117.01 per share. Both warrants expired in 2023 without being exercised. HHH 2023 FORM 10-K | 103 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 14. Accumulated Other Comprehensive Income (Loss) The following tables summarize changes in AOCI, all of which are presented net of tax: thousands Balance at December 31, 2020 $ ( 38,590 ) Derivative instruments: Other comprehensive income (loss) before reclassifications 5,300 (Gain) loss reclassified to net income 12,660 Pension adjustment 452 Share of investee’s other comprehensive income 5,721 Net current-period other comprehensive income (loss) 24,133 Balance at December 31, 2021 $ ( 14,457 ) Derivative instruments: Other comprehensive income (loss) before reclassifications 25,657 (Gain) loss reclassified to net income 6,041 Reclassification of the Company's share of previously deferred derivative gains to net income (a) ( 6,723 ) Pension adjustment ( 183 ) Net current-period other comprehensive income (loss) 24,792 Balance at December 31, 2022 $ 10,335 Derivative instruments: Other comprehensive income (loss) before reclassifications 3,809 (Gain) loss reclassified to net income ( 13,131 ) Pension adjustment 259 Net current-period other comprehensive income (loss) ( 9,063 ) Balance at December 31, 2023 $ 1,272 (a) In March 2022, the Compa ny completed the sale of its ownership interest in 110 North Wacker and released a net of $ 6.7 million from Accumulated other comprehensive income (loss), representing the Company’s $ 8.6 million share of previously deferred gains associated with the Venture’s derivative instruments net of tax expense of $ 1.9 million. Refer to Note 2 - Investments in Unconsolidated Ventures for additional information. The following table summarizes the amounts reclassified out of AOCI for the years ended December 31: Accumulated Other Comprehensive Income (Loss) Components thousands Affected line items in the Statements of Operations 2023 2022 (Gains) losses on cash flow hedges $ ( 16,970 ) $ 7,778 Interest expense Company's share of previously deferred derivative gains — ( 8,636 ) Equity in earnings (losses) from unconsolidated ventures Income taxes on (gains) losses on cash flow hedges 3,839 176 Income tax expense (benefit) Total reclassifications of (income) loss for the period $ ( 13,131 ) $ ( 682 ) HHH 2023 FORM 10-K | 104 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 15. Earnings Per Share Basic earnings (loss) per share (EPS) is computed by dividing net income (loss) available to common stockholders by the weighted‑average number of common shares outstanding. Diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all potentially dilutive common shares. The dilutive effect of options and non-vested stock issued under stock‑based compensation plans is computed using the treasury stock method. The dilutive effect of the warrants is computed using the if-converted method. Information related to the Company’s EPS calculations is summarized for the years ended December 31 as follows: thousands except per share amounts 2023 2022 2021 Net income (loss) Net income (loss) $ ( 551,530 ) $ 184,636 $ 48,924 Net (income) loss attributable to noncontrolling interests ( 243 ) ( 103 ) 7,176 Net income (loss) attributable to common stockholders $ ( 551,773 ) $ 184,533 $ 56,100 Shares Weighted-average common shares outstanding - basic 49,568 50,513 54,596 Restricted stock and stock options — 45 53 Weighted-average common shares outstanding - diluted 49,568 50,558 54,649 Net income (loss) per common share Basic income (loss) per share $ ( 11.13 ) $ 3.65 $ 1.03 Diluted income (loss) per share $ ( 11.13 ) $ 3.65 $ 1.03 Anti-dilutive shares excluded from diluted EPS Restricted stock and stock options 528 531 555 Warrants — 2,053 2,103 Common Stock Repurchases In October 2021, the Company’s board of directors (Board) authorized a share repurchase program, pursuant to which the Company was authorized to purchase up to $ 250.0 million of its common stock through open-market transactions. During the fourth quarter of 2021, the Company repurchased 1,023,284 shares of its common stock, par value $ 0.01 per share, for $ 96.6 million, or approximately $ 94.42 per share. During the first quarter of 2022, the Company repurchased an additional 1,579,646 shares of its common stock, for $ 153.4 million, or approximately $ 97.10 per share, thereby completing all authorized purchases under the October 2021 plan. In March 2022, the Board authorized an additional share repurchase program, pursuant to which the Company may, from time to time, purchase up to $ 250.0 million of its common stock through open-market transactions. The date and time of such repurchases will depend upon market conditions, and the program may be suspended or discontinued at any time. During 2022, the Company repurchased 2,704,228 shares of its common stock under this program for approximately $ 235.0 million at an average price of $ 86.90 per share. All purchases were funded with cash on hand. HHH 2023 FORM 10-K | 105 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 16. Revenues Revenues from contracts with customers (excluding lease-related revenues) are recognized when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Revenue and cost of sales for condominium units sold are not recognized until the construction is complete, the sale closes, and the title to the property has transferred to the buyer (point in time). Additionally, certain real estate selling costs, such as the costs related to the Company’s condominium model units, are either expensed immediately or capitalized as property and equipment and depreciated over their estimated useful life. The following presents the Company’s revenues disaggregated by revenue source for the years ended December 31: thousands 2023 2022 2021 Revenues from contracts with customers Recognized at a point in time: Condominium rights and unit sales $ 47,707 $ 677,078 $ 514,597 Master Planned Communities land sales 370,185 316,065 346,217 Builder price participation 60,989 71,761 45,138 Total 478,881 1,064,904 905,952 Recognized at a point in time or over time: Other land, rental, and property revenues 139,858 144,481 152,619 Rental and lease-related revenues Rental revenue 405,363 399,103 369,330 Total revenues $ 1,024,102 $ 1,608,488 $ 1,427,901 Revenues by segment Operating Assets revenues $ 443,632 $ 431,834 $ 442,698 Master Planned Communities revenues 448,452 408,365 409,746 Seaport revenues 81,971 88,468 55,008 Strategic Developments revenues 49,987 679,763 520,109 Corporate revenues 60 58 340 Total revenues $ 1,024,102 $ 1,608,488 $ 1,427,901 Contract Assets and Liabilities Contract assets are the Company’s right to consideration in exchange for goods or services that have been transferred to a customer, excluding any amounts presented as a receivable. Contract liabilities are the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration. There were no contract assets for the periods presented. The contract liabilities primarily relate to escrowed condominium deposits, MPC land sales deposits, and deferred MPC land sales related to unsatisfied land improvements. The beginning and ending balances of contract liabilities and significant activity during the periods presented are as follows: thousands Contract Liabilities Balance at December 31, 2021 $ 431,177 Consideration earned during the period ( 799,401 ) Consideration received during the period 826,055 Balance at December 31, 2022 $ 457,831 Consideration earned during the period ( 151,225 ) Consideration received during the period 272,722 Balance at December 31, 2023 $ 579,328 HHH 2023 FORM 10-K | 106 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Remaining Unsatisfied Performance Obligations The Company’s remaining unsatisfied performance obligations represent a measure of the total dollar value of work to be performed on contracts executed and in progress. These performance obligations primarily relate to the completion of condominium construction and transfer of control to a buyer, as well as the completion of contracted MPC land sales and related land improvements. These obligations are associated with contracts that generally are non-cancelable by the customer after 30 days; however, purchasers of condominium units have the right to cancel the contract should the Company elect not to construct the condominium unit within a certain period of time or materially change the design of the condominium unit. The aggregate amount of the transaction price allocated to the Company’s remaining unsatisfied performance obligations as of December 31, 2023, is $ 2.8 billion. The Company expects to recognize this amount as revenue over the following periods: thousands Less than 1 year 1-2 years 3 years and thereafter Total remaining unsatisfied performance obligations $ 924,789 $ 411,598 $ 1,432,456 The Company’s remaining performance obligations are adjusted to reflect any known project cancellations, revisions to project scope and cost, and deferrals, as appropriate. These amounts exclude estimated amounts of variable consideration which are constrained, such as builder price participation. 17. Leases The Company has lease agreements with lease and non-lease components and has elected to aggregate these components into a single component for all classes of underlying assets. Certain of the Company’s lease agreements include non-lease components such as fixed common area maintenance charges. Lessee Arrangements The Company determines whether an arrangement is a lease at inception. Operating leases are included in Operating lease right-of-use assets and Operating lease obligations on the Consolidated Balance Sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an estimate of the incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. The Operating lease right-of-use asset also includes any lease payments made, less any lease incentives and initial direct costs incurred. The Company does not have any finance leases. The Company’s lessee agreements consist of operating leases primarily for ground leases and other real estate. The Company’s leases have remaining lease terms of less than 2 years to approximately 50 years, excluding extension options. The Company considers its strategic plan and the life of associated agreements in determining when options to extend or terminate lease terms are reasonably certain of being exercised. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Certain of the Company’s lease agreements include variable lease payments based on a percentage of income generated through subleases, changes in price indices and market rates, and other costs arising from operating, maintenance, and taxes. The Company’s lease agreements do not contain residual value guarantees or restrictive covenants. The Company leases certain buildings and office space constructed on its ground leases to third parties. The Company’s operating leases primarily relate to the Seaport ground leases. The Company’s leased assets and liabilities are as follows: thousands 2023 2022 Operating lease right-of-use assets $ 44,897 $ 46,926 Operating lease obligations $ 51,584 $ 51,321 The components of lease cost for the years ended December 31 are as follows: thousands 2023 2022 Operating lease cost $ 6,829 $ 7,449 Variable lease cost 975 904 Total lease cost $ 7,804 $ 8,353 HHH 2023 FORM 10-K | 107 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Future minimum lease payments as of December 31, 2023, are as follows: thousands Operating Leases 2024 $ 5,057 2025 3,668 2026 3,368 2027 3,360 2028 3,424 Thereafter 240,646 Total lease payments 259,523 Less: imputed interest ( 207,939 ) Present value of lease liabilities $ 51,584 Other information related to the Company’s lessee agreements is as follows: Supplemental Consolidated Statements of Cash Flows Information Year ended December 31, thousands 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows on operating leases $ 4,634 $ 5,718 Other Information 2023 2022 Weighted-average remaining lease term (years) Operating leases 44.1 43.8 Weighted-average discount rate Operating leases 7.8 % 7.7 % Lessor Arrangements The Company receives rental income from the leasing of retail, office, multi-family, and other space under operating leases, as well as certain variable tenant recoveries. Such operating leases are with a variety of tenants and have a remaining average term of approximately four years . Lease terms generally vary among tenants and may include early termination options, extension options, and fixed rental rate increases or rental rate increases based on an index. Minimum rent revenues related to operating leases are as follows : Year ended December 31, thousands 2023 2022 Total minimum rent payments $ 236,350 $ 229,302 Total future minimum rents associated with operating leases are as follows: thousands Total Minimum Rent 2024 $ 254,076 2025 245,775 2026 227,398 2027 214,671 2028 191,548 Thereafter 822,354 Total $ 1,955,822 Minimum rent revenues are recognized on a straight‑line basis over the terms of the related leases when collectability is reasonably assured and the tenant has taken possession of, or controls, the physical use of the leased asset. Percentage rent in lieu of fixed minimum rent is recognized as sales are reported from tenants. Minimum rent revenues reported on the Consolidated Statements of Operations also include amortization related to above and below‑market tenant leases on acquired properties. HHH 2023 FORM 10-K | 108 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements 18. Segments The Company has four business segments that offer different products and services. HHH’s four segments are managed separately because each requires different operating strategies or management expertise and are reflective of management’s operating philosophies and methods. Because the Company’s four segments, Operating Assets, MPC, Seaport, and Strategic Developments, are managed separately, the Company uses different operating measures to assess operating results and allocate resources among them. The one common operating measure used to assess operating results for the Company’s business segments is earnings before tax (EBT). EBT, as it relates to each business segment, includes the revenues and expenses of each segment, as shown below. EBT excludes corporate expenses and other items that are not allocable to the segments. The Company presents EBT for each segment because the Company use this measure, among others, internally to assess the core operating performance of the Company’s assets. The Company’s segments or assets within such segments could change in the future as development of certain properties commences or other operational or management changes occur. All operations are within the United States. The Company’s reportable segments are as follows: – Operating Assets – consists of developed or acquired retail, office, and multi-family properties along with other real estate investments. These properties are currently generating revenues and may be redeveloped, repositioned, or sold to improve segment performance or to recycle capital. – MPC – consists of the development and sale of land in large‑scale, long‑term community development projects in and around Las Vegas, Nevada; Houston, Texas; and Phoenix, Arizona. – Seaport – consists of approximately 472,000 square feet of restaurant, retail, and entertainment properties situated in three primary locations in New York City: Pier 17, Historic Area/Uplands, and Tin Building as well as the 250 Water Street development, and equity interest in Jean-Georges Restaurants. – Strategic Developments – consists of residential condominium and commercial property projects currently under development and all other properties held for development which have no substantial operations. HHH 2023 FORM 10-K | 109 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements Segment operating results are as follows: thousands Operating Assets Segment (a) MPC Segment Seaport Segment Strategic Developments Segment Total Year Ended December 31, 2023 Total revenues $ 443,632 $ 448,452 $ 81,971 $ 49,987 $ 1,024,042 Total operating expenses ( 210,166 ) ( 193,470 ) ( 103,466 ) ( 80,472 ) ( 587,574 ) Segment operating income (loss) 233,466 254,982 ( 21,495 ) ( 30,485 ) 436,468 Depreciation and amortization ( 170,731 ) ( 418 ) ( 37,791 ) ( 3,963 ) ( 212,903 ) Interest income (expense), net ( 127,388 ) 64,291 3,065 16,074 ( 43,958 ) Other income (loss), net 1,843 ( 102 ) ( 1,290 ) 690 1,141 Equity in earnings (losses) from unconsolidated ventures 2,969 22,666 ( 81,485 ) 142 ( 55,708 ) Gain (loss) on sale or disposal of real estate and other assets, net 23,926 — — 236 24,162 Gain (loss) on extinguishment of debt ( 96 ) — ( 48 ) — ( 144 ) Provision for impairment — — ( 672,492 ) — ( 672,492 ) Segment EBT $ ( 36,011 ) $ 341,419 $ ( 811,536 ) $ ( 17,306 ) $ ( 523,434 ) Corporate income, expenses, and other items ( 28,096 ) Net income (loss) ( 551,530 ) Net (income) loss attributable to noncontrolling interests ( 243 ) Net income (loss) attributable to common stockholders $ ( 551,773 ) Year Ended December 31, 2022 Total revenues $ 431,834 $ 408,365 $ 88,468 $ 679,763 $ 1,608,430 Total operating expenses ( 194,496 ) ( 173,905 ) ( 104,393 ) ( 504,036 ) ( 976,830 ) Segment operating income (loss) 237,338 234,460 ( 15,925 ) 175,727 631,600 Depreciation and amortization ( 154,626 ) ( 394 ) ( 36,338 ) ( 5,319 ) ( 196,677 ) Interest income (expense), net ( 89,959 ) 50,305 3,902 17,073 ( 18,679 ) Other income (loss), net ( 1,140 ) 23 245 1,799 927 Equity in earnings (losses) from unconsolidated ventures 22,263 ( 1,407 ) ( 36,273 ) 868 ( 14,549 ) Gain (loss) on sale or disposal of real estate and other assets, net 29,588 — — 90 29,678 Gain (loss) on extinguishment of debt ( 2,230 ) — — — ( 2,230 ) Segment EBT $ 41,234 $ 282,987 $ ( 84,389 ) $ 190,238 $ 430,070 Corporate income, expenses, and other items ( 245,434 ) Net income (loss) 184,636 Net (income) loss attributable to noncontrolling interests ( 103 ) Net income (loss) attributable to common stockholders $ 184,533 Year Ended December 31, 2021 Total revenues $ 442,698 $ 409,746 $ 55,008 $ 520,109 $ 1,427,561 Total operating expenses ( 209,020 ) ( 193,851 ) ( 77,198 ) ( 436,698 ) ( 916,767 ) Segment operating income (loss) 233,678 215,895 ( 22,190 ) 83,411 510,794 Depreciation and amortization ( 163,031 ) ( 366 ) ( 30,867 ) ( 6,512 ) ( 200,776 ) Interest income (expense), net ( 75,391 ) 42,683 357 3,701 ( 28,650 ) Other income (loss), net ( 10,746 ) — ( 3,730 ) 2,536 ( 11,940 ) Equity in earnings (losses) from unconsolidated ventures ( 67,042 ) 59,399 ( 1,988 ) ( 221 ) ( 9,852 ) Gain (loss) on sale or disposal of real estate and other assets, net 39,168 — — 13,911 53,079 Gain (loss) on extinguishment of debt ( 1,926 ) ( 1,004 ) — — ( 2,930 ) Provision for impairment — — — ( 13,068 ) ( 13,068 ) Segment EBT $ ( 45,290 ) $ 316,607 $ ( 58,418 ) $ 83,758 $ 296,657 Corporate income, expenses, and other items ( 247,733 ) Net income (loss) 48,924 Net (income) loss attributable to noncontrolling interests 7,176 Net income (loss) attributable to common stockholders $ 56,100 HHH 2023 FORM 10-K | 110 FINANCIAL STATEMENTS FOOTNOTES Table of Contents Index to Financial Statements (a) Total revenues includes hospitality revenues of $ 35.6 million for the year ended December 31, 2021. Total operating expenses includes hospitality operating costs of $ 30.5 million for the year ended December 31, 2021. In September 2021, the Company completed the sale of its three hospitality properties. Refer to Note 3 - Acquisitions and Dispositions for additional information. The following represents assets by segment and the reconciliation of total segment assets to Total assets in the Consolidated Balance Sheets as of December 31: thousands 2023 2022 Operating Assets $ 3,577,694 $ 3,448,823 Master Planned Communities 3,358,821 3,272,655 Seaport (a) 485,898 1,166,950 Strategic Developments 1,638,955 1,359,180 Total segment assets 9,061,368 9,247,608 Corporate 515,635 355,855 Total assets $ 9,577,003 $ 9,603,463 (a) In 2023, the Company recorded a $ 709.5 million impairment charge related to the Seaport segment. Refer to Note 4 - Impairment for additional information. HHH 2023 FORM 10-K | 111 FINANCIAL STATEMENT SCHEDULE Table of Contents Index to Financial Statements SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2023 Initial Cost (b) Costs Capitalized Subsequent to Acquisition (c) Gross Amounts at Which Carried at Close of Period (d) Name of Center thousands Location Center Type Encumbrances (a) Land Buildings and Improvements Land (e) Buildings and Improvements (e) Land Buildings and Improvements (f) Total Accumulated Depreciation (f) Date of Construction Date Acquired / Completed Bridgeland Bridgeland Cypress, TX MPC $ 475,000 $ 260,223 $ — $ 272,809 $ 1,720 $ 533,032 $ 1,720 $ 534,752 $ ( 860 ) 2004 Bridgeland Predevelopment Cypress, TX Development — — 10,904 — — — 10,904 10,904 — Houston Ground Leases - Bridgeland Cypress, TX Other — 3,935 — — — 3,935 — 3,935 — Various Lakeland Village Center at Bridgeland Cypress, TX Retail — 2,404 11,135 — 3,489 2,404 14,624 17,028 ( 3,258 ) 2015 2016 Lakeside Row Cypress, TX Multi-family 35,500 812 42,875 — 703 812 43,578 44,390 ( 7,496 ) 2018 2019 Starling at Bridgeland Cypress, TX Multi-family 37,946 1,511 57,505 — — 1,511 57,505 59,016 ( 2,459 ) 2021 2022 Wingspan Cypress, TX Multi-family 27,827 1,214 63,680 — — 1,214 63,680 64,894 ( 368 ) 2022 2023 Columbia (g) Color Burst Park Retail (h) Columbia, MD Retail — 337 6,945 10 2,157 347 9,102 9,449 ( 832 ) 2019 2020 Columbia Office Properties (i) Columbia, MD Office — 1,175 14,394 — ( 1,294 ) 1,175 13,100 14,275 ( 6,730 ) 2004 / 2007 Columbia Parking Garages (i) Columbia, MD Other — — 42,940 — ( 157 ) — 42,783 42,783 ( 5,794 ) Various Various Columbia Predevelopment Columbia, MD Development — — 36,236 — — — 36,236 36,236 — Juniper Columbia, MD Multi-family 117,000 3,923 112,435 — 7,124 3,923 119,559 123,482 ( 16,230 ) 2018 2020 10285 Lakefront Medical Office (h) Columbia, MD Development 4,400 — 27,195 — — — 27,195 27,195 — 2022 Lakefront District Columbia, MD Development — 400 80,053 ( 400 ) ( 45,892 ) — 34,161 34,161 — Various One Mall North Columbia, MD Office 6,855 7,822 10,818 — 2,035 7,822 12,853 20,675 ( 5,860 ) 2016 Marlow Columbia, MD Multi-family 72,823 4,088 130,083 — — 4,088 130,083 134,171 ( 5,048 ) 2021 2022 6100 Merriweather (i) Columbia, MD Office 76,000 2,550 86,867 — 2,762 2,550 89,629 92,179 ( 12,987 ) 2018 2019 One Merriweather (i) Columbia, MD Office 49,800 1,433 56,125 — 1,617 1,433 57,742 59,175 ( 14,592 ) 2015 2017 Two Merriweather Columbia, MD Office 25,600 1,019 33,016 — 5,302 1,019 38,318 39,337 ( 7,877 ) 2016 2017 Merriweather District Columbia, MD Development — — 76,808 — 8,492 — 85,300 85,300 — 2015 Merriweather Row (h) Columbia, MD Office 67,265 24,685 94,824 — 51,706 24,685 146,530 171,215 ( 38,982 ) 2012/2014 Rouse Building (h) Columbia, MD Retail 22,865 — 28,865 — 3,063 — 31,928 31,928 ( 9,198 ) 2013 2014 Teravalis Teravalis Phoenix, AZ MPC — 544,546 312 278 4 544,824 316 545,140 ( 58 ) 2021 Seaport Historic District Area / Uplands New York, NY Retail — — 7,884 — 66,012 — 73,896 73,896 ( 30,799 ) 2013 2016 Pier 17 New York, NY Retail — — 468,476 — ( 218,115 ) — 250,361 250,361 ( 109,036 ) 2013 2018 85 South Street New York, NY Multi-family — 15,913 8,137 ( 11,735 ) ( 563 ) 4,178 7,574 11,752 ( 6,248 ) 2014 Tin Building New York, NY Retail — — 61,872 — — — 61,872 61,872 ( 13,963 ) 2017 2022 250 Water Street New York, NY Development 115,000 — 179,471 — ( 83,450 ) — 96,021 96,021 — 2018 199 Water Street, 28th Floor (j) New York, NY Lease — — 14,054 — 782 — 14,836 14,836 ( 12,563 ) Various Various Summerlin Aristocrat Las Vegas, NV Office 33,987 5,004 34,588 — 152 5,004 34,740 39,744 ( 6,801 ) 2017 2018 Constellation Las Vegas, NV Multi-family 24,200 3,069 39,759 — 2,264 3,069 42,023 45,092 ( 9,339 ) 2017 Downtown Summerlin (k)(l) Las Vegas, NV Retail/Office 1,732 30,855 364,100 — 30,257 30,855 394,357 425,212 ( 128,533 ) 2013 2014 / 2015 Hockey Ground Lease (k) Las Vegas, NV Other 161 — — 6,705 2,198 6,705 2,198 8,903 ( 348 ) 2017 Las Vegas Ballpark (m) Las Vegas, NV Other 42,990 5,318 124,391 — 2,222 5,318 126,613 131,931 ( 30,599 ) 2018 2019 Meridian (h) Las Vegas, NV Development — — 37,533 — — — 37,533 37,533 — 2022 1700 Pavilion (k) Las Vegas, NV Office 57,460 1,700 101,760 — — 1,700 101,760 103,460 ( 3,149 ) 2021 2022 HHH 2023 FORM 10-K | 112 FINANCIAL STATEMENT SCHEDULE Table of Contents Index to Financial Statements Initial Cost (b) Costs Capitalized Subsequent to Acquisition (c) Gross Amounts at Which Carried at Close of Period (d) Name of Center thousands Location Center Type Encumbrances (a) Land Buildings and Improvements Land (e) Buildings and Improvements (e) Land Buildings and Improvements (f) Total Accumulated Depreciation (f) Date of Construction Date Acquired / Completed Two Summerlin (k) Las Vegas, NV Office 40,865 3,037 47,104 — 1,999 3,037 49,103 52,140 ( 10,810 ) 2017 2018 Summerlin (k) Las Vegas, NV MPC 63,322 990,179 — 89,747 1,076 1,079,926 1,076 1,081,002 ( 619 ) 2004 Summerlin Grocery Anchored Center (k) Las Vegas, NV Development 114 — 10,460 — — — 10,460 10,460 — 2023 Summerlin Predevelopment Las Vegas, NV Development — — 12,796 — — — 12,796 12,796 — Tanager (k) Las Vegas, NV Multi-family 58,633 7,331 53,978 — 351 7,331 54,329 61,660 ( 9,422 ) 2017 2019 Tanager Echo (k) Las Vegas, NV Multi-family 59,007 2,302 85,329 — — 2,302 85,329 87,631 ( 1,750 ) 2021 2023 The Woodlands Creekside Park The Woodlands, TX Multi-family 37,615 729 40,116 — 891 729 41,007 41,736 ( 8,400 ) 2017 2018 Creekside Park Medical Plaza (n) The Woodlands, TX Office — 306 8,361 — — 306 8,361 8,667 ( 241 ) 2022 2022 Creekside Park The Grove The Woodlands, TX Multi-family 57,000 1,876 52,382 — 213 1,876 52,595 54,471 ( 5,518 ) 2019 2021 Creekside Park West The Woodlands, TX Retail 15,969 1,228 17,922 — 1,122 1,228 19,044 20,272 ( 2,603 ) 2018 2019 Houston Ground Leases - The Woodlands The Woodlands, TX Other — 14,582 2,582 — — 14,582 2,582 17,164 ( 275 ) Various One Hughes Landing The Woodlands, TX Office 46,938 1,678 34,761 — ( 3,193 ) 1,678 31,568 33,246 ( 10,614 ) 2012 2013 Two Hughes Landing The Woodlands, TX Office 45,445 1,269 34,950 — ( 2,692 ) 1,269 32,258 33,527 ( 11,483 ) 2013 2014 Three Hughes Landing The Woodlands, TX Office 70,000 2,626 46,372 — 32,342 2,626 78,714 81,340 ( 23,027 ) 2014 2016 1725 Hughes Landing Boulevard The Woodlands, TX Office 61,221 1,351 36,764 — 24,841 1,351 61,605 62,956 ( 16,959 ) 2013 2015 1735 Hughes Landing Boulevard The Woodlands, TX Office 59,134 3,709 97,651 — ( 305 ) 3,709 97,346 101,055 ( 34,797 ) 2013 2015 Hughes Landing Daycare The Woodlands, TX Other — 138 — — — 138 — 138 — 2018 2019 Hughes Landing Retail The Woodlands, TX Retail 32,166 5,184 32,562 — 803 5,184 33,365 38,549 ( 11,027 ) 2013 2015 1701 Lake Robbins The Woodlands, TX Retail — 1,663 3,725 — 856 1,663 4,581 6,244 ( 1,139 ) 2014 2201 Lake Woodlands Drive The Woodlands, TX Office — 3,755 — — 1,210 3,755 1,210 4,965 ( 658 ) 2011 Lakefront North The Woodlands, TX Office 50,000 10,260 39,357 — 17,535 10,260 56,892 67,152 ( 10,798 ) 2018 One Lakes Edge The Woodlands, TX Multi-family 66,370 1,057 81,768 — 901 1,057 82,669 83,726 ( 22,839 ) 2013 2015 Two Lakes Edge The Woodlands, TX Multi-family 105,000 1,870 96,349 — 962 1,870 97,311 99,181 ( 14,517 ) 2018 2020 Millennium Six Pines The Woodlands, TX Multi-family 42,234 4,000 54,624 7,225 1,024 11,225 55,648 66,873 ( 15,426 ) 2016 Millennium Waterway The Woodlands, TX Multi-family 51,000 15,917 56,002 — 2,494 15,917 58,496 74,413 ( 25,240 ) 2012 8770 New Trails The Woodlands, TX Office 34,857 2,204 35,033 — 80 2,204 35,113 37,317 ( 6,358 ) 2019 2020 9303 New Trails The Woodlands, TX Office 7,352 1,929 11,915 — 1,618 1,929 13,533 15,462 ( 4,340 ) 2011 1 Riva Row The Woodlands, TX Development 1 — 18,385 — — — 18,385 18,385 — 2023 3831 Technology Forest Drive The Woodlands, TX Office 19,192 514 14,194 — 1,813 514 16,007 16,521 ( 7,258 ) 2014 2014 The Lane at Waterway The Woodlands, TX Multi-family 37,500 2,029 40,033 — 456 2,029 40,489 42,518 ( 5,186 ) 2019 2020 The Woodlands The Woodlands, TX MPC — 269,411 9,814 ( 96,758 ) ( 9,744 ) 172,653 70 172,723 ( 70 ) 2011 The Woodlands Parking Garages The Woodlands, TX Other — 5,857 — 2,497 15,066 8,354 15,066 23,420 ( 3,832 ) 2011 / 2013 The Woodlands Predevelopment The Woodlands, TX Development — — 49,643 — — — 49,643 49,643 ( 1,193 ) The Woodlands Towers at the Waterway (o) The Woodlands, TX Office 362,537 11,044 437,561 — 38,140 11,044 475,701 486,745 ( 62,368 ) 2019 The Woodlands Warehouse The Woodlands, TX Other 13,700 4,480 4,389 — 103 4,480 4,492 8,972 ( 718 ) 2019 20/25 Waterway Avenue The Woodlands, TX Retail 14,500 2,346 8,871 — 575 2,346 9,446 11,792 ( 3,088 ) 2011 3 Waterway Square The Woodlands, TX Office 41,610 748 42,214 — ( 2,758 ) 748 39,456 40,204 ( 16,477 ) 2012 2013 4 Waterway Square The Woodlands, TX Office 21,530 1,430 51,553 — 7,610 1,430 59,163 60,593 ( 22,918 ) 2011 Waterway Square Retail (h) The Woodlands, TX Retail — 1,341 4,255 — 1,314 1,341 5,569 6,910 ( 1,802 ) 2011 1400 Woodloch Forest The Woodlands, TX Office — 1,570 13,023 — 5,538 1,570 18,561 20,131 ( 7,171 ) 2011 The Woodlands Hills The Woodlands Hills Conroe, TX MPC — 99,284 — 15,955 43 115,239 43 115,282 ( 23 ) 2014 HHH 2023 FORM 10-K | 113 FINANCIAL STATEMENT SCHEDULE Table of Contents Index to Financial Statements Initial Cost (b) Costs Capitalized Subsequent to Acquisition (c) Gross Amounts at Which Carried at Close of Period (d) Name of Center thousands Location Center Type Encumbrances (a) Land Buildings and Improvements Land (e) Buildings and Improvements (e) Land Buildings and Improvements (f) Total Accumulated Depreciation (f) Date of Construction Date Acquired / Completed Ward Village ‘A‘ali‘i Honolulu, HI Condominium — — 714 — 1,188 — 1,902 1,902 ( 47 ) 2018 2021 Ae‘o Honolulu, HI Condominium — — 1,162 — — — 1,162 1,162 ( 146 ) 2016 2018 Anaha Honolulu, HI Condominium — — 1,097 — — — 1,097 1,097 ( 167 ) 2014 2017 Ke Kilohana Honolulu, HI Condominium — — 656 — — — 656 656 ( 77 ) 2016 2019 Kewalo Basin Harbor Honolulu, HI Other 10,984 — 24,116 — ( 786 ) — 23,330 23,330 ( 5,960 ) 2017 2019 Kō‘ula Honolulu, HI Condominium — — 1,184 — — — 1,184 1,184 ( 43 ) 2019 2022 The Park Ward Village Honolulu, HI Development 41,242 — 156,957 — — — 156,957 156,957 ( 3,427 ) 2022 Ulana Ward Village Honolulu, HI Development 31,527 — 115,061 — — — 115,061 115,061 ( 594 ) 2023 Victoria Place Honolulu, HI Development 197,017 — 373,729 — — — 373,729 373,729 ( 6,210 ) 2021 Waiea Honolulu, HI Condominium — — 1,206 — 417 — 1,623 1,623 ( 253 ) 2014 2017 Ward Predevelopment Honolulu, HI Development 37,617 — 193,023 — — — 193,023 193,023 ( 7,771 ) 2013 Ward Village Retail Honolulu, HI Retail 175,000 164,548 138,723 ( 105,692 ) 289,422 58,856 428,145 487,001 ( 132,829 ) Various Total excluding Corporate and Deferred financing costs 3,302,610 2,568,718 5,160,466 180,641 277,115 2,749,359 5,437,581 8,186,940 ( 1,028,495 ) Corporate Various 2,050,000 885 1,027 ( 885 ) 11,513 — 12,540 12,540 ( 3,731 ) Deferred financing costs N/A ( 49,990 ) Total $ 5,302,620 $ 2,569,603 $ 5,161,493 $ 179,756 $ 288,628 $ 2,749,359 $ 5,450,121 $ 8,199,480 $ ( 1,032,226 ) (a) Refer to Note 7 - Mortgages, Notes, and Loans Payable, Net for additional information. (b) Initial cost for projects undergoing development or redevelopment is cost through the end of first complete calendar year subsequent to the asset being placed in service. (c) For retail and other properties, costs capitalized subsequent to acquisitions is net of cost of disposals or other property write‑downs. For MPCs, costs capitalized subsequent to acquisitions are net of the cost of land sales. (d) The aggregate cost of land, building, and improvements for federal income tax purposes is approximately $ 7.3 billion. (e) Reductions in Land reflect transfers to Buildings and Improvements for projects which the Company is internally developing. (f) Depreciation is based upon the useful lives in Note 1 - Presentation of Financial Statements and Significant Accounting Policies . (g) Columbia MPC land development is complete, and the sale of remaining land or development of additional commercial assets will occur as the market dictates. As such, the remaining Columbia land was transferred to the Strategic Developments segment in the first quarter of 2023. (h) In 2023, the Company rebranded Color Burst Park Retail (formerly Merriweather District Area 3 Retail), 10285 Lakefront Medical Office (formerly South Lake Medical Office Building), Merriweather Row (formerly 10 - 70 Columbia Corporate Center), Rouse Building (formerly Columbia Regional Building), Meridian (formerly Summerlin South Office), and Waterway Square Retail (formerly Waterway Garage Retail). (i) In 2023, the Company reclassed the freestanding Columbia Parking Garages from Columbia Office Properties, 6100 Merriweather, and One Merriweather to Columbia Parking Garages. (j) The 199 Water Street, 28th Floor line relates to tenant improvement for the Seaport office lease. (k) Encumbrances balance either represents or is inclusive of SIDs. (l) Downtown Summerlin includes the One Summerlin office property, which was placed in service in 2015. (m) Includes the Las Vegas Aviators. (n) Subsequent to period end, in February 2024, the Company completed the sale of Creekside Park Medical Plaza, a 32,689 square-foot medical office building in The Woodlands, Texas, for $ 14.0 million. (o) The Woodlands Towers at the Waterway includes 1201 Lake Robbins and 9950 Woodloch Forest. HHH 2023 FORM 10-K | 114 FINANCIAL STATEMENT SCHEDULE Table of Contents Index to Financial Statements Reconciliation of Real Estate thousands 2023 2022 2021 Balance at January 1 $ 8,095,172 $ 7,776,555 $ 7,319,133 Change in land 403,633 396,125 896,508 Additions 817,308 750,610 657,760 Impairments ( 672,492 ) — ( 13,068 ) Dispositions, write-offs, and land and condominium costs of sales ( 444,141 ) ( 828,118 ) ( 1,083,778 ) Balance at December 31 $ 8,199,480 $ 8,095,172 $ 7,776,555 Reconciliation of Accumulated Depreciation thousands 2023 2022 2021 Balance at January 1 $ 867,700 $ 743,311 $ 634,064 Depreciation Expense 195,630 180,201 185,418 Dispositions and write-offs ( 31,104 ) ( 55,812 ) ( 76,171 ) Balance at December 31 $ 1,032,226 $ 867,700 $ 743,311 HHH 2023 FORM 10-K | 115 Table of Contents Index to Financial Statements Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.