Howard Hughes Holdings Inc. 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our Consolidated Financial Statements and the related notes filed as a part of this Annual Report on Form 10-K (Annual Report). This discussion contains forward-looking statements that involve risks, uncertainties, assumptions, and other factors, including those described in Part I, Item 1A . Risk Factors and elsewhere in this Annual Report. These factors and others not currently known to us could cause our financial results in 2024 and subsequent fiscal years to differ materially from those expressed in, or implied by, those forward-looking statements. You are cautioned not to place undue reliance on this information which speaks only as of the date of this report. We are not obligated to update this information, whether as a result of new information, future events or otherwise, except as may be required by law. This section of our Annual Report discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussion of 2022 and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report can be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. All references to numbered Notes are to specific Notes to our Consolidated Financial Statements included in this Annual Report and which descriptions are incorporated into the applicable response by reference. Index Page Overview 37 Results of Operations 40 Operating Assets 40 Master Planned Communities 42 Strategic Developments 47 Corporate Income, Expenses, and Other Items 50 Liquidity and Capital Resources 51 Critical Accounting Policies and Estimates 55 Recently Issued Accounting Pronouncements and Developments 55 HHH 2024 FORM 10-K | 36 MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW Table of Contents Index to Financial Statements OVERVIEW Seaport Entertainment Spinoff On July 31, 2024, the spinoff of Seaport Entertainment Group Inc. and its subsidiaries (Seaport Entertainment or SEG) was completed. SEG included Howard Hughes Holdings, Inc.’s (HHH or the Company) entertainment-related assets in New York and Las Vegas, including the Seaport in Lower Manhattan, the Las Vegas Aviators Triple-A Minor League Baseball team and the Las Vegas Ballpark, as well as the Company’s ownership stake in Jean-Georges Restaurants and other partnerships, and an interest in and to 80% of the air rights above the Fashion Show Mall in Las Vegas. Under the terms of the separation, each stockholder who held HHH common stock as of the close of business on July 29, 2024, the record date for the distribution, received one share of SEG common stock for every nine shares of HHH common stock held as of the close of business on such date. SEG common stock began trading on the NYSE American stock exchange on August 1, 2024, under the symbol “SEG”. As the spinoff of SEG represents a strategic shift in the Company’s operations, the results of SEG are presented as discontinued operations for all periods throughout this Annual Report. See Note 2 - Discontinued Operations in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report for additional information. Pershing Square Proposals In August 2024, Pershing Square announced its intent to evaluate the possibility of various potential alternatives with respect to its investment in the Company, including a possible transaction in which it (either alone or together with one or more potential co-investors) might acquire all or substantially all of the shares of common stock in the Company not owned by Pershing Square and its affiliates, and in connection therewith take the Company private. Following this announcement, our board of directors formed a committee (Special Committee), composed of independent directors to review any proposal by Pershing Square. Following the August 2024 announcement, Pershing Square has engaged in additional communications with the Special Committee, including, as previously disclosed, submitting the January 13 Pershing Square Proposal, pursuant to which Pershing Square would acquire additional shares of the Company’s common stock in a merger transaction between the Company and a newly formed merger subsidiary of Pershing Square Holdco, L.P., upon the consummation of which Pershing Square would own a majority of the Company’s common stock. On February 18, 2025, Pershing Square announced that it had withdrawn the January 13 Pershing Square Proposal and submitted the February 18 Pershing Square Proposal, under which it would purchase from the Company $900 million of the Company’s Common Stock for $90 per share. Pershing Square currently beneficially owns approximately 37.4% of the Company's common stock. Should the transaction contemplated by the February 18 Pershing Square Proposal be consummated, Pershing Square’s beneficial ownership would increase to 48.0%. There can be no assurance that the Company will pursue this proposed transaction or any proposed modification thereof that Pershing Square submits, or any other strategic outcome, and HHH does not intend to comment further on this matter unless and until further disclosure is determined to be appropriate or necessary. The Special Committee is currently evaluating these matters to determine the appropriate course of action and process. General Overview Please refer to Item 1. Business for a general discussion of our business strategy, competitive strengths, and a general description of the assets contained in our three business segments and Item 2. Properties for details regarding the asset type, size, location, and key metrics about our various properties. Changes for monetary amounts between periods presented are calculated based on the amounts in thousands of dollars stated in our consolidated financial statements and then rounded to the nearest million. Therefore, certain changes may not recalculate based on the amounts rounded to the nearest million. We are primarily focused on creating stockholder value by increasing our per-share net asset value. Often, the nature of our business results in short-term volatility in our net income due to the timing of Master Planned Communities (MPC) land sales, recognition of condominium revenue, and operating business pre-opening expenses. 2024 Results During 2024, we maintained positive momentum and delivered solid financial results which met or exceeded our 2024 guidance expectations within each of our core businesses. This strong performance is a testament to our premier communities and best-in-class assets, further highlighting the strength of our unique business model. In our MPCs, we experienced heightened demand and home builder interest for new land parcels. As a result, MPC earnings before taxes (EBT) increased 2% year-over-year, driven by a new full-year record number of residential acres sold and record average price per acre. HHH 2024 FORM 10-K | 37 MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW Table of Contents Index to Financial Statements In Operating Assets, we delivered another full-year net operating income (NOI) record, outpacing 2023 results by 7%, excluding dispositions. This growth was led by strong leasing velocity at our newest multifamily developments, as well as record NOI at our office properties due to strong lease-up activity and abatement expirations in The Woodlands and Summerlin. In 2024, the Company executed 473,000 square feet of new or expanded office leases, including 323,000 square feet in The Woodlands, 91,000 square feet in Downtown Columbia, and 59,000 square feet in Summerlin. In Strategic Developments, Ward Village had another strong year, closing all 349 units at Victoria Place and generating $778.6 million of condominium revenues. Presales activity for our under construction condominiums progressed, with 111 condominium units contracted in Hawai’i and Texas in 2024, including 78 units at The Ritz-Carlton Residences, 18 units at Kalae, and 15 units at The Park Ward Village. These projects were 96% pre-sold at year end and represent more than $2.2 billion of future contracted revenue that will be recognized as these projects are completed. We also initiated presales for The Launiu, which contracted 283 units and was 58.4% pre-sold at year end. Construction on The Launiu is expected to begin in 2025. 2025 Outlook Proceeding into 2025, we maintain a positive long-term outlook for our businesses. Across our MPCs, we see strong demand for our unmatched landbank, world-class portfolio of operating assets, and premier condominium developments. MPC EBT is projected to be strong in 2025 and aided by continued tight supply of existing homes on the market and low inventories of vacant developed lots in our MPCs. As a result, we anticipate solid new home sales in Summerlin, Bridgeland, and The Woodlands Hills and continued strong homebuilder demand for residential land throughout 2025. Residential land sales are expected to occur throughout the year, but the second and third quarters will likely see a higher concentration of superpad sales in Summerlin. Overall, MPC EBT is expected to be up 5% to 10% year-over-year. Operating Assets NOI, including the contribution from unconsolidated ventures, is projected to benefit from continued growth in multifamily driven by increased occupancy at new multifamily developments. Office is also expected to improve year-over-year due to strong leasing momentum and expiring rent abatements across the portfolio. This improvement will likely be partially offset by lower occupancy at various properties in Downtown Columbia, some tenant turnover in The Woodlands, and initial operating losses from our newest office developments. Retail is expected to see a modest reduction in NOI during 2025, primarily due to non-recurring collections of tenant reserves in Ward Village during 2024 and the impact of some tenant upgrades and turnover in Downtown Summerlin as this property reaches its 10-year anniversary. Overall, Operating Assets NOI is expected to be flat to up 4% year-over-year. Condominium sales revenues are projected to be approximately $375 million in 2025, and driven entirely by the closing of units at Ulana, which is 100% pre-sold and expected to be completed in the fourth quarter. As Ulana is a workforce housing tower, the Company does not expect to recognize any gross profit from the project. Our next condominium tower, The Park Ward Village, is already 96.7% pre-sold, and is expected to contribute meaningful revenues and gross profit in 2026. 2024 Highlights Overall – Net income from continuing operations increased to $285.2 million in 2024, compared to net income of $83.4 million in the prior year. The year-over-year increase was primarily attributed to condominium closings at Victoria Place, the receipt of insurance proceeds following the execution of a settlement agreement related to the construction defect claims at Waiea, and an increase in residential acres sold in Summerlin. – We continue to maintain a strong liquidity position with $596.1 million of cash and cash equivalents, $317.0 million of undrawn capacity on our Secured Bridgeland Notes, and $1.2 billion of undrawn lender commitment available to be drawn for property development, and limited near-term debt maturities. Operating Assets – Operating Assets EBT decreased $1.4 million, with a loss of $28.5 million in 2024, compared to a loss of $27.1 million in the prior year. – Operating Assets NOI was $245.5 million in 2024, a $14.9 million increase compared to $230.6 million in the prior year. – Office NOI increased $6.4 million, primarily due to strong leasing activity and abatement expirations at various properties in The Woodlands and Summerlin, most notably at 9950 Woodloch Forest and 1700 Pavilion, partially offset by decreases related to lower occupancy at 1725 Hughes Landing and certain properties in Downtown Columbia, as well as initial operating losses at Meridian in Summerlin. HHH 2024 FORM 10-K | 38 MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW Table of Contents Index to Financial Statements – Retail NOI increased $4.2 million primarily due to the collection of previously reserved accounts receivable in Ward Village as well as improved occupancy in the ground floor retail at Juniper and Marlow in Downtown Columbia and Kō'ula in Ward Village. – Multifamily NOI increased $6.0 million primarily due to continued lease-up at our newer properties, Marlow in Downtown Columbia, Starling at Bridgeland, and Tanager Echo in Summerlin, partially offset by winter-weather-related insurance recoveries in 2023. – In 2024, the Company completed the sale of four non-core ground leases and a medical office building in The Woodlands, and a retail property in Bridgeland for total proceeds of $51.6 million, and a combined gain on sale of $22.9 million. MPC – MPC EBT totaled income of $349.1 million in 2024, a $7.7 million increase compared to income of $341.4 million in the prior year. – The increase in EBT was primarily due to higher superpad land sales and price per acre in Summerlin, partially offset by lower equity earnings at The Summit, lower commercial land sales in Bridgeland, and lower residential and commercial land sales in The Woodlands. Strategic Developments – Strategic Developments EBT totaled income of $282.8 million in 2024, a $300.1 million increase compared to a loss of $17.3 million in the prior year. – The increase in EBT was primarily due to a $203.8 million increase in profits from condominium sales and an $89.8 million increase in other income due to the receipt of insurance proceeds following the execution of a settlement agreement related to the construction defect claims at Waiea in the current year. The increase in profits from condominium sales was the result of closing on all 349 units at Victoria Place during the current year, compared to closing on 31 units at ‘A‘ali‘i and 16 units at Kō'ula during the prior year. – We began pre-sales at The Ritz-Carlton Residences, The Woodlands in March 2024. As of December 31, 2024, we had pre-sold 78 units, representing 70.3% of available units. Construction began on The Ritz-Carlton Residences in October 2024. – As of December 31, 2024, 95.5% of the units at our four towers under construction, The Park Ward Village, Ulana Ward Village, Kalae, and The Ritz-Carlton Condominiums, are under contract. – In 2024, we placed five properties in service, including the second and third phases of Wingspan, a single family build to rent property in Bridgeland; 10285 Lakefront Medical Office, an office property in Columbia; Meridian, an office property in Summerlin; Summerlin Grocery Anchored Center, a retail property in Summerlin; and Village Green at Bridgeland Central, a retail property in Bridgeland. These properties represent 189 multifamily units and approximately 328,000 square feet of retail and office space. – In 2024, we began construction on four properties, including Kalae, a condominium property in Ward Village; The Ritz-Carlton Condominiums, a condominium property in The Woodlands; One Bridgeland Green, an office property in Bridgeland; and Grogan’s Mill Retail, a retail property in The Woodlands. These properties represent 440 condominium units and approximately 96,000 square feet of retail and office space. Corporate – Net expenses related to Corporate income, expenses, and other items increased $104.6 million compared to the prior-year period primarily due to a $53.8 million increase in income tax expense and a $48.7 million loss on sale of Municipal Utility District (MUD) receivables. Capital and Financing Activities – In 2024, our financing activity included draws on existing mortgages of $417.0 million, new borrowings of $176.5 million (excluding undrawn amounts on new construction loans), refinancings of $168.0 million, and repayments of $454.8 million. In addition, we repaid $192.0 million on the Secured Bridgeland Notes using the proceeds from the sale of MUD receivables. In the fourth quarter of 2024, we expanded the borrowing capacity of these notes from $475.0 million to $600.0 million and extended the maturity to 2029. For additional information, refer to Note 8 - Mortgages, Notes, and Loans Payable, Net in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report. HHH 2024 FORM 10-K | 39 MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Table of Contents Index to Financial Statements RESULTS OF OPERATIONS Operating Assets Segment EBT The following table presents segment EBT for Operating Assets for the years ended December 31: Operating Assets Segment EBT thousands 2024 2023 $ Change Rental revenue $ 421,641 $ 383,238 $ 38,403 Other land, rental, and property revenues 22,659 27,016 (4,357) Total revenues 444,300 410,254 34,046 Operating costs (138,172) (130,125) (8,047) Rental property real estate taxes (55,915) (52,502) (3,413) (Provision for) recovery of doubtful accounts (504) 2,762 (3,266) Total operating expenses (194,591) (179,865) (14,726) Segment operating income (loss) 249,709 230,389 19,320 Depreciation and amortization (169,040) (161,138) (7,902) Interest income (expense), net (138,207) (125,197) (13,010) Other income (loss), net 822 2,092 (1,270) Equity in earnings (losses) from unconsolidated ventures 5,819 2,968 2,851 Gain (loss) on sale or disposal of real estate and other assets, net 22,907 23,926 (1,019) Gain (loss) on extinguishment of debt (465) (97) (368) Segment EBT $ (28,455) $ (27,057) $ (1,398) Operating Assets segment EBT decreased $1.4 million compared to the prior-year period primarily due to the following: – Interest expense increased $13.0 million primarily due to increased borrowings on construction loans secured by our operating assets as well as an increase related to the change in fair value of certain derivative instruments. – Depreciation and amortization increased $7.9 million primarily related to new assets placed in service. – Rental property real estate taxes increased $3.4 million primarily due to new assets placed in service. – Gain on sale of real estate decreased $1.0 million as the gain on the sale of Lakeland Village Center at Bridgeland and Creekside Park Medical Plaza, and four non-core ground leases in The Woodlands in 2024 was lower than the combined gain on the sales of two self-storage properties and Memorial Hermann Medical Office in The Woodlands and certain properties in Ward Village in 2023. – Other land, rental, and property revenues decreased $4.4 million primarily due to higher office lease termination fees in the 2023 than in 2024. These decreases to EBT were partially offset by the following: – Rental revenues, net of Operating costs and provision for doubtful accounts increased $27.1 million primarily due to increased leasing activity across our portfolio. – Equity earnings increased $2.9 million primarily due to the change in value of certain derivative instruments. Net Operating Income In addition to the required presentations using accounting principles generally accepted in the United States (GAAP), we use certain non-GAAP performance measures, as we believe these measures improve the understanding of our operational results and make comparisons of operating results among peer companies more meaningful. Management continually evaluates the usefulness, relevance, limitations and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change. We define NOI as operating revenues (rental income, tenant recoveries, and other revenue) less operating expenses (real estate taxes, repairs and maintenance, marketing, and other property expenses). NOI excludes straight-line rents and amortization of tenant incentives, net; interest expense, net; ground rent amortization; demolition costs; other income (loss); depreciation and amortization; development-related marketing costs; gain on sale or disposal of real estate and other assets, net; loss on extinguishment of debt; provision for impairment; and equity in earnings from unconsolidated ventures. HHH 2024 FORM 10-K | 40 MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Table of Contents Index to Financial Statements We believe that NOI is a useful supplemental measure of the performance of our Operating Assets segment because it provides a performance measure that reflects the revenues and expenses directly associated with owning and operating real estate properties. We use NOI to evaluate our operating performance on a property-by-property basis because NOI allows us to evaluate the impact that property-specific factors such as rental and occupancy rates, tenant mix, and operating costs have on our operating results, gross margins, and investment returns. A reconciliation of Operating Assets segment EBT to Operating Assets NOI is presented in the table below. Operating Assets NOI thousands 2024 2023 $ Change Total Operating Assets segment EBT $ (28,455) $ (27,057) $ (1,398) Add back: Depreciation and amortization 169,040 161,138 7,902 Interest (income) expense, net 138,207 125,197 13,010 Equity in (earnings) losses from unconsolidated ventures (5,819) (2,968) (2,851) (Gain) loss on sale or disposal of real estate and other assets, net (22,907) (23,926) 1,019 (Gain) loss on extinguishment of debt 465 97 368 Impact of straight-line rent (4,770) (2,256) (2,514) Other (306) 337 (643) Operating Assets NOI $ 245,455 $ 230,562 $ 14,893 The below table presents Operating Assets NOI by property type: Operating Assets NOI by Property Type thousands 2024 2023 $ Change Office $ 124,594 $ 118,165 $ 6,429 Retail 54,163 49,981 4,182 Multifamily 58,827 52,831 5,996 Other 6,153 7,411 (1,258) Redevelopments (a) — (189) 189 Dispositions (a) 1,718 2,363 (645) Operating Assets NOI $ 245,455 $ 230,562 $ 14,893 (a) Properties that were transferred to our Strategic Developments segment for redevelopment and properties that were sold are shown separately for all periods presented. Operating Assets NOI increased $14.9 million compared to the prior-year period primarily due to the following: – Office NOI increased $6.4 million primarily due to strong leasing activity and abatement expirations at various properties in The Woodlands and Summerlin, most notably at 9950 Woodloch Forest and 1700 Pavilion, partially offset by decreases related to lower occupancy at 1725 Hughes Landing and certain properties in Downtown Columbia, as well as initial operating losses at Meridian in Summerlin. – Retail NOI increased $4.2 million primarily due to the collection of previously reserved accounts receivable in Ward Village as well as improved occupancy in the ground floor retail at Juniper and Marlow in Downtown Columbia and Kō'ula in Ward Village. – Multifamily NOI increased $6.0 million primarily due to continued lease-up at our newer properties, Marlow in Downtown Columbia, Starling at Bridgeland, and Tanager Echo in Summerlin, partially offset by winter-weather-related insurance recoveries in 2023. HHH 2024 FORM 10-K | 41 MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Table of Contents Index to Financial Statements Master Planned Communities Segment EBT The following table presents segment EBT for MPC for the years ended December 31: MPC Segment EBT thousands 2024 2023 $ Change Master Planned Community land sales (a) $ 453,195 $ 370,185 $ 83,010 Other land, rental, and property revenues 17,707 17,278 429 Builder price participation (b) 52,023 60,989 (8,966) Total revenues 522,925 448,452 74,473 Master Planned Communities cost of sales (169,191) (140,050) (29,141) Operating costs (52,736) (53,420) 684 Total operating expenses (221,927) (193,470) (28,457) Segment operating income (loss) 300,998 254,982 46,016 Depreciation and amortization (438) (418) (20) Interest income (expense), net 60,473 64,291 (3,818) Other income (loss), net — (102) 102 Equity in earnings (losses) from unconsolidated ventures (11,899) 22,666 (34,565) Segment EBT $ 349,134 $ 341,419 $ 7,715 (a) MPC land sales include deferred revenue from land sales closed in a previous period that met criteria for recognition in the current period and excludes amounts deferred from current period land sales that do not yet meet the recognition criteria. (b) Builder price participation revenue is earned when a developer that acquired land from us 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 us and the developer at the time of closing on the sale of the home based on a previously agreed-upon percentage. This revenue fluctuates based upon the number and the prices of homes closed that qualify for builder price participation payments. The following table presents MPC segment EBT by MPC for the years ended December 31: MPC Segment EBT by MPC thousands 2024 2023 $ Change Bridgeland $ 77,611 $ 101,835 $ (24,224) Summerlin 260,924 227,409 33,515 Teravalis (a) 3,596 (3,777) 7,373 The Woodlands (8,863) 4,036 (12,899) The Woodlands Hills 15,866 11,916 3,950 Segment EBT $ 349,134 $ 341,419 $ 7,715 Floreo (b) $ 9,816 $ (4,150) $ 13,966 (a) As of December 31, 2024, the Company owned an 88.0% interest in and consolidates Teravalis. For additional detail, refer to Note 1 - Presentation of Financial Statements and Significant Accounting Policies in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report. (b) These amounts represent 100% of Floreo EBT. As of December 31, 2024, the Company owned a 50% interest in Floreo. Refer to Note 3 - Investments in Unconsolidated Ventures in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report for a description of the joint venture and further discussion. HHH 2024 FORM 10-K | 42 MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Table of Contents Index to Financial Statements MPC segment EBT increased $7.7 million compared to the prior-year period primarily due to higher superpad land sales and price per acre in Summerlin, partially offset by lower equity earnings, primarily related to The Summit, lower commercial land sales at Bridgeland, and no residential or commercial land sales in The Woodlands. Summerlin EBT increased $33.5 million compared to the prior year. – MPC sales, net of MPC cost of sales increased $81.7 million primarily due to the following activity: – increase in superpad acres sold, with 216.5 acres sold at an average price of $1.3 million per acre in 2024, compared to 169.2 acres sold at an average price of $1.3 million per acre in 2023 – increase in custom lots sold, with six lots totaling 3.8 acres sold at an average price of $6.0 million per acre in 2024, compared to one lot totaling 0.7 acres sold at a price of $2.9 million per acre in 2023 – increase due to $14.7 million more revenue recognized out of deferred revenue in 2024, compared to 2023 – increase due to $4.1 million in Special Improvement District (SID) bond assumptions resulting from an increase in superpad sales in 2024, compared to 2023 – Increase of $4.1 million primarily due to higher capitalized interest inclusive of derivatives. For additional detail, refer to Note 10 - Derivative Instruments and Hedging Activities in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report. – Equity earnings at The Summit decreased $41.6 million. Land and clubhouse unit sales decreased in 2024, compared to 2023, due to low remaining inventory. – Builder price participation decreased $9.1 million as fewer homes were closed with sales prices over the predetermined breakpoint necessary for participation revenue in 2024. This decrease was expected as several neighborhoods were completed in the first half of the year, and new neighborhoods were not launched until later in the year, resulting in lower available home inventory. Teravalis EBT increased $7.4 million compared to the prior year. – Equity earnings at Floreo increased $7.0 million primarily related to the closings of Floreo land sales in 2024 compared to no land sales in 2023. Our Floreo joint venture sold a total of 115.4 residential acres at an average price of $777,000 per acre in 2024. The Woodlands Hills EBT increased $4.0 million compared to the prior year. – MPC sales, net of MPC cost of sales increased $3.4 million primarily due to the following activity: – increase in residential acres sold, with 47.0 acres sold at an average price of $458,000 per acre in 2024, compared to 44.7 acres sold at an average price of $427,000 per acre in 2023 Bridgeland EBT decreased $24.2 million compared to the prior year. – MPC sales, net of MPC cost of sales decreased $15.9 million primarily due to the following activity: – decrease in commercial acres sold partially offset by an increase in price per acre, with 13.5 acres sold at an average price of $369,000 per acre in 2024, compared to 123.5 acres sold at an average price of $247,000 per acre in 2023 – decrease due to $2.7 million less recognition of deferred revenue net of associated deferred costs in 2024, compared to 2023 – increase in residential acres sold, with 178.1 acres sold at an average price of $591,000 per acre in 2024, compared to 151.0 acres sold at an average price of $564,000 per acre in 2023 – Decrease of $9.4 million primarily due increased interest expense as a result of a higher debt balance, higher variable interest rates as a result of a derivative termination in the third quarter of 2023, and amortization of the liability related to the 2024 sale of future MUD receivables, partially offset by an increase in capitalized interest. The Woodlands EBT decreased $12.9 million compared to the prior year. – MPC sales, net of MPC cost of sales decreased $15.4 million primarily due to the following activity. – decrease in residential acres sold, with no acres sold in 2024, compared to 9.8 acres sold in Aria Isle, an exclusive gated community, at an average price of $2.5 million per acre in 2023. The decrease in acres sold was expected as there are no remaining lots to be sold at Aria Isle. – decrease in commercial acres sold, with no acres sold in 2024, compared to 8.4 acres sold at an average price of $646,000 per acre in 2023 – Other land, rental, and property revenues increased $1.3 million driven by a fee received due to a change in use of previously sold commercial land. HHH 2024 FORM 10-K | 43 MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Table of Contents Index to Financial Statements MPC Equity Investments The Summit The Summit, our joint venture with Discovery Land Company, offers a mix of custom lots, single-family homes, and clubhouse suites in our Summerlin MPC. The original 555-acre community (Phase I) is nearing completion and expected to consist of approximately 245 homes and 32 condominiums. In 2022, the Company contributed an additional 54 acres (Phase II) to The Summit adjacent to the existing Summit community to develop approximately 28 custom home sites. We recognized equity losses of $16.8 million and received cash distributions of $4.9 million in 2024, compared to equity earnings of $24.8 million and cash distributions of $15.1 million in 2023. Floreo Land development is currently underway at Floreo, our joint venture with Trillium Development Holding Company, LLC. The first land sales closed in the first quarter of 2024, with the joint venture selling a total of 115.4 residential acres at an average price of $777,000 per acre in 2024. For additional detail, refer to Note 3 - Investments in Unconsolidated Ventures in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report. Master Planned Communities Land Sales The following table presents the detail of MPC land sales recognized for the years ended December 31, 2024 and 2023. Total net recognized (deferred) revenue includes revenues recognized in the current period which are related to sales closed in prior periods, offset by revenues deferred on sales closed in the current period. thousands 2024 2023 Total residential land sales closed $ 441,044 $ 354,263 Total commercial land sales closed 4,984 35,960 Net recognized (deferred) revenue: Bridgeland 6,491 10,467 The Woodlands 517 (782) The Woodlands Hills 30 22 Summerlin (18,140) (44,174) Total net recognized (deferred) revenue (11,102) (34,467) Special Improvement District revenue 18,269 14,429 Master Planned Community land sales $ 453,195 $ 370,185 HHH 2024 FORM 10-K | 44 MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Table of Contents Index to Financial Statements Residential and Commercial Land Sales Closed The following tables detail our residential and commercial land sales closed for the years ended December 31: Summary of MPC Land Sales Closed Land Sales Acres Sold Average Price Per Acre thousands, except acres sold 2024 2023 2024 2023 2024 2023 Residential Land Sales Closed Bridgeland Single family $ 105,296 $ 85,156 178.1 151.0 $ 591 $ 564 Summerlin Superpad sites 291,230 223,583 216.5 169.2 1,345 1,321 Custom lots 22,982 2,000 3.8 0.7 6,048 2,857 The Woodlands Single family — 24,421 — 9.8 — 2,492 The Woodlands Hills Single family 21,536 19,103 47.0 44.7 458 427 Total residential land sales closed (a) $ 441,044 $ 354,263 445.4 375.4 $ 990 $ 944 Commercial Land Sales Closed Bridgeland $ 4,984 $ 30,536 13.5 123.5 $ 369 $ 247 The Woodlands — 5,424 — 8.4 — 646 Total commercial land sales closed (a) $ 4,984 $ 35,960 13.5 131.9 $ 369 $ 273 (a) Excludes revenues recognized in the current period which are related to sales closed in prior periods and includes revenues deferred on sales closed in the current period. Please see the summary of MPC land sales table above which reconciles total residential and commercial land sales closed to MPC land sales revenue recognized for the years ended December 31, 2024 and 2023. Although our business does not involve the sale or resale of homes, we believe that net new home sales are an important indicator of future demand for our superpad sites and finished lots. Therefore, we use this statistic where relevant in our discussion of MPC operating results herein. Net new home sales reflect home sales made by homebuilders, less cancellations. Cancellations generally occur when a homebuyer signs a contract to purchase a home but later fails to qualify for a home mortgage or is unable to provide an adequate down payment to complete the home sale. Net New Home Sales Median Home Sales Price thousands except percentages 2024 2023 % Change 2024 2023 % Change Bridgeland 938 985 (4.8) % $ 465 $ 477 (2.5) % Summerlin 1,038 1,071 (3.1) % 692 696 (0.6) % The Woodlands (a) 9 5 80.0 % 2,249 1,565 43.7 % The Woodlands Hills 249 228 9.2 % 419 478 (12.3) % Total 2,234 2,289 (2.4) % (a) New home sales in The Woodlands are not expected to be significant as residential land development is nearing completion. MPC Net Contribution MPC Net Contribution is a non-GAAP financial measure derived from EBT, adjusted for certain items as discussed below. Management uses this measure because it captures current period performance through the velocity of sales, as well as current period development expenditures based upon demand at our MPCs, which varies depending upon the stage of the MPC’s development lifecycle, and the overall economic environment. MPC Net Contribution is defined as MPC segment EBT, plus MPC cost of sales, Depreciation and amortization, and net collections from MUD and SID bonds receivables, reduced by MPC development expenditures, land acquisitions, and Equity in earnings from unconsolidated ventures, net of distributions. MPC Net Contribution is not a GAAP-based operational metric and should not be used to measure operating performance of the MPC assets as a substitute for GAAP measures of such performance nor should it be used as a comparison metric with other comparable businesses. HHH 2024 FORM 10-K | 45 MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Table of Contents Index to Financial Statements Below is a reconciliation of segment EBT to MPC Net Contribution for the years ended December 31: thousands 2024 2023 $ Change MPC segment EBT $ 349,134 $ 341,419 $ 7,715 Plus: Master Planned Communities cost of sales 169,191 140,050 29,141 Depreciation and amortization 438 418 20 MUD and SID bonds collections, net (a) 107,031 136,409 (29,378) Proceeds from sale of MUD receivables 176,680 — 176,680 Distributions from unconsolidated ventures 4,896 15,050 (10,154) Less: MPC development expenditures (427,979) (403,633) (24,346) Equity in (earnings) losses from unconsolidated ventures 11,899 (22,666) 34,565 MPC Net Contribution $ 391,290 $ 207,047 $ 184,243 (a) SID collections are shown net of SID transfers to buyers in the respective periods. MPC Net Contribution increased $184.2 million for the year ended December 31, 2024, primarily due to proceeds from the sale of MUD receivables and higher MPC land sales, partially offset by higher SID transfers to buyers, an increase in MPC development expenditures, and a decrease in distributions from unconsolidated ventures. MPC Land Inventory The following table summarizes MPC land inventory activity: thousands Bridgeland Columbia (a) Summerlin Teravalis The Woodlands The Woodlands Hills Total MPC Balance December 31, 2022 $ 538,924 $ 16,625 $ 1,014,511 $ 544,546 $ 185,356 $ 111,564 $ 2,411,526 Development expenditures (b) 222,268 — 144,041 225 4,514 32,585 403,633 MPC Cost of sales (40,533) — (77,068) — (13,289) (9,160) (140,050) MUD reimbursable costs (c) (172,120) — — — (1,200) (25,688) (199,008) Transfer to Strategic Development and Operating Assets Segments (4,530) (16,625) (4,073) — (3,226) — (28,454) Other (10,978) — 2,516 53 497 5,938 (1,974) Balance December 31, 2023 533,031 — 1,079,927 544,824 172,652 115,239 2,445,673 Development expenditures (b) 204,542 — 186,163 573 5,853 30,848 427,979 MPC Cost of sales (47,056) — (113,844) — (117) (8,174) (169,191) MUD reimbursable costs (c) (178,701) — — — (877) (20,087) (199,665) Transfer to Strategic Development and Operating Assets Segments (1,218) — — — 11,399 — 10,181 Other (1,367) — 1,491 (16) 583 (4,006) (3,315) Balance December 31, 2024 $ 509,231 $ — $ 1,153,737 $ 545,381 $ 189,493 $ 113,820 $ 2,511,662 (a) 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. (b) Development expenditures are inclusive of capitalized interest and property taxes. (c) MUD reimbursable costs represent land development expenditures transferred to MUD Receivables. HHH 2024 FORM 10-K | 46 MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Table of Contents Index to Financial Statements Strategic Developments Our Strategic Developments assets generally require substantial future development to maximize their value. Other than our condominium properties, most of the properties and projects in this segment do not generate revenues. Our expenses relating to these assets are primarily related to costs associated with constructing the assets, selling condominiums, carrying costs including, but not limited to, property taxes and insurance and other ongoing costs relating to maintaining the assets in their current condition. If we decide to redevelop or develop a Strategic Developments asset, we expect that with the exception of the residential portion of our condominium projects, upon completion of development, the asset would likely be reclassified to Operating Assets when the asset is placed in service and NOI would become a meaningful measure of its operating performance. All development costs discussed herein are exclusive of land costs. Segment EBT The following table presents segment EBT for Strategic Developments for the years ended December 31: Strategic Developments Segment EBT thousands 2024 2023 $ Change Condominium rights and unit sales $ 778,616 $ 47,707 $ 730,909 Rental revenue 459 379 80 Other land, rental, and property revenues 4,321 1,901 2,420 Total revenues 783,396 49,987 733,409 Condominium rights and unit cost of sales (582,574) (55,417) (527,157) Operating costs (17,670) (21,908) 4,238 Real estate taxes (2,480) (3,147) 667 Total operating expenses (602,724) (80,472) (522,252) Segment operating income (loss) 180,672 (30,485) 211,157 Depreciation and amortization (7,255) (3,963) (3,292) Interest income (expense), net 18,603 16,074 2,529 Other income (loss), net 90,534 690 89,844 Equity in earnings (losses) from unconsolidated ventures 251 142 109 Gain (loss) on sale or disposal of real estate and other assets, net — 236 (236) Segment EBT $ 282,805 $ (17,306) $ 300,111 Strategic Developments segment EBT increased $300.1 million compared to the prior-year period primarily due to the following: – Condominium sales, net of cost of sales increased $203.8 million, primarily due to the timing of condominium closings. We closed on all 349 units at Victoria Place during 2024, compared to 31 units at ‘A‘ali‘i and 16 units at Kō'ula during 2023. – Other income includes an increase of $89.8 million due to the receipt of insurance proceeds following the execution of a settlement agreement related to the construction defect claims at Waiea in the current period. Refer to Note 11 - Commitments and Contingencies in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report for additional information. HHH 2024 FORM 10-K | 47 MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Table of Contents Index to Financial Statements Strategic Developments Projects The following describes the status of our major construction projects as of December 31, 2024. These properties will be transferred to the Operating Assets segment upon completion of construction, unless otherwise noted below. Bridgeland One Bridgeland Green This will be a 49,501-square-foot office property. Total development costs are expected to be approximately $35.4 million. We began construction in the second quarter of 2024, and anticipate project completion in the second quarter of 2025. We expect this property to reach projected annual stabilized NOI of $1.8 million by 2028. The Woodlands Grogan’s Mill Retail This will be a 38,378-square-foot retail property. Total development costs are expected to be approximately $8.6 million. We began construction in the third quarter of 2024, and anticipate project completion in the second quarter of 2025. We expect this property to reach projected annual stabilized NOI of $0.9 million by 2028. Grogan’s Mill Library and Community Center This will be a 53,863-square-foot property, and is being developed in connection with a land swap agreement entered into with Montgomery County, Texas. Upon completion of construction, the Company will transfer the Grogan's Mill Library and Community Center to Montgomery County in exchange for land parcels elsewhere in The Woodlands. As such, projected annual stabilized NOI is not applicable for this project. We began construction in the third quarter of 2024, and anticipate project completion in the second quarter of 2025. 1 Riva Row This will be a 268-unit multifamily property and will consist of studio, one-, two-, and three-bedroom units. Total development costs are expected to be approximately $156.0 million, which will be partially financed by a $93.3 million construction loan. We began construction in the third quarter of 2023, and anticipate project completion in the fourth quarter of 2025. We expect this property to reach projected annual stabilized NOI of $9.9 million by 2028. Condominiums Condominium revenue is recognized when construction of the condominium tower is complete and unit sales close, leading to potentially significant variability in revenue recognized between periods. For all Ward Village condominium units, sales contracts are subject to a 30-day rescission period. The buyers are required to make an initial deposit at signing and an additional deposit 30 days later at which point their total deposit becomes non-refundable. Buyers are then required to make a final deposit within approximately 90 days of our receipt of their second deposit. Buyers are required to deposit the remainder of the sales price on a predetermined pre-closing date. Contracted units disclosed below represent sales that are past the 30-day rescission period. For The Woodlands condominium units, sales contracts are subject to a 6-day rescission period. The buyers are required to make an initial deposit at signing and a final deposit 60 days later at which point their total deposit becomes non-refundable. Buyers are required to deposit the remainder of the sales price on a predetermined pre-closing date. Contracted units disclosed below represent sales that are past the 6-day rescission period. Completed Condominiums Ward Village As of December 31, 2024, our seven completed condominiums, Ae`o, Ke Kilohana, Anaha, Waiea, ‘A‘ali‘i, Kō‘ula, and Victoria Place, are completely sold. Condominiums Under Construction Ward Village As of December 31, 2024, 97.3% of the units at our three towers under construction, The Park Ward Village, Ulana Ward Village, and Kalae, are under contract. We broke ground on The Park Ward Village in October 2022 and expect to complete construction in 2026. The Park Ward Village will consist of 545 studio, one-, two-, and three-bedroom residences. As of December 31, 2024, we have entered into contracts for 527 units, representing 96.7% of total units. We broke ground on Ulana Ward Village in January 2023 and expect to complete construction in 2025. Ulana Ward Village, which is 100% presold, will consist of 696 studio, one-, two-, and three-bedroom units. All units are designated as workforce housing units and are being offered to local residents who meet certain maximum income and net worth requirements. HHH 2024 FORM 10-K | 48 MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Table of Contents Index to Financial Statements We broke ground on Kalae in June 2024 and expect to complete construction in 2027. Kalae will consist of 329 one-, two-, and three-bedroom residences. As of December 31, 2024, we have entered into contracts for 305 units, representing 92.7% of total units. The Woodlands We launched public presales of our first condominium project in The Woodlands in March 2024. The Ritz-Carlton Residences, The Woodlands will consist of 111 one-, two-, three-, and four-bedroom residences. The development sits on the last available large-scale residential site on Lake Woodlands, spanning roughly eight acres across approximately 1,200 feet of premier lakefront shoreline. As of December 31, 2024, we have entered into contracts for 78 units, representing 70.3% of total units. We broke ground on The Ritz-Carlton Residences in October 2024. Predevelopment Condominiums Ward Village We launched public presales for The Launiu in February 2024. The Launiu will consist of 485 studio, one-, two-, and three-bedroom residences. As of December 31, 2024, we have entered into contracts for 283 units, representing 58.4% of total units. The following provides further detail for all condominium projects as of December 31, 2024: Location Units Closed Units Under Contract Total Units Total % of Units Closed or Under Contract Completion Date Completed Waiea (a) Honolulu, HI 177 — 177 100.0 % Q4 2016 Anaha (a) Honolulu, HI 317 — 317 100.0 % Q4 2017 Ae`o (a) Honolulu, HI 465 — 465 100.0 % Q4 2018 Ke Kilohana (a) Honolulu, HI 423 — 423 100.0 % Q2 2019 ‘A‘ali‘i (a) Honolulu, HI 750 — 750 100.0 % Q4 2021 Kō'ula (b) Honolulu, HI 565 — 565 100.0 % Q3 2022 Victoria Place Honolulu, HI 349 — 349 100.0 % Q4 2024 Under construction Ulana Ward Village (c) Honolulu, HI — 696 696 100.0 % 2025 The Park Ward Village (d) Honolulu, HI — 527 545 96.7 % 2026 Kalae (e) Honolulu, HI — 305 329 92.7 % 2027 The Ritz-Carlton Residences (f) The Woodlands, TX — 78 111 70.3 % 2027 Predevelopment The Launiu (g) Honolulu, HI — 283 485 58.4 % 2028 (a) The retail portions of these projects are 100% leased and have been placed in service. (b) The retail portion of this project has been placed in service and is 56% leased. (c) Ulana Ward Village will include approximately 32,100 square feet of retail space. (d) The Park Ward Village will include approximately 26,800 square feet of retail space. (e) Kalae will include approximately 2,000 square feet of retail space. (f) The Ritz-Carlton Residences will include approximately 5,800 square feet of retail space. (g) The Launiu will include approximately 10,000 square feet of retail space. HHH 2024 FORM 10-K | 49 MANAGEMENT’S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Table of Contents Index to Financial Statements Corporate Income, Expenses, and Other Items The following table contains certain corporate-related and other items not related to segment activities and that are not otherwise included within the segment analyses. Variances related to income and expenses included in NOI or EBT are explained within the previous segment discussions. Significant variances for consolidated items not included in NOI or EBT are described below for the years ended December 31: thousands 2024 2023 $ Change Corporate income $ 68 $ 60 $ 8 General and administrative (91,752) (86,671) (5,081) Gain (loss) on sale of MUD receivables (48,651) — (48,651) Corporate interest expense, net (80,446) (87,243) 6,797 Corporate other income (loss), net 764 3,143 (2,379) Corporate depreciation and amortization (3,066) (3,215) 149 Other (15,002) (13,302) (1,700) Income tax (expense) benefit (80,184) (26,418) (53,766) Total Corporate income, expenses, and other items $ (318,269) $ (213,646) $ (104,623) Corporate income, expenses, and other items was unfavorably impacted compared to the prior year by the following: – Income tax expense increased $53.8 million primarily due to an increase in Income before income taxes as well as a net increase in expense related to the revaluation of deferred tax assets and liabilities as a result of the spinoff of Seaport Entertainment Group Inc. These increases were offset by a partial release of valuation allowances on the Company’s deferred tax assets including a state net operating loss carryover as a result of the spinoff. Refer to Note 13 - Income Taxes in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report for additional information. – Loss on sale of MUD receivables of $48.7 million was recognized in 2024. Refer to Note 1 - Presentation of Financial Statements and Significant Accounting Policies in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report for additional information. Corporate income, expenses, and other items was favorably impacted compared to the prior-year period by the following: – Corporate interest expense, net decreased $6.8 million primarily due to the termination of a derivative instrument in the third quarter of 2023. Refer to Note 10 - Derivative Instruments and Hedging Activities in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report for additional information. Income Taxes thousands except percentages 2024 2023 Income tax expense (benefit) $ 80,184 $ 26,418 Income (loss) before income taxes $ 365,399 $ 109,828 Effective tax rate 21.9 % 24.1 % The Company’s effective tax rate is typically impacted by non-deductible executive compensation and other permanent differences as well as state income taxes, which cause the Company’s effective tax rate to deviate from the federal statutory rate. The Company’s effective tax rate for the year ended December 31, 2024, was 21.9% compared to 24.1% for the year ended December 31, 2023. The decrease was primarily due a partial release of valuation allowances on the Company’s deferred tax assets including a state net operating loss carryover as a result of the spinoff of Seaport Entertainment Group Inc. as well as a decrease in non-deductible executive compensation, partially offset by a net increase in expense related to the revaluation of deferred tax assets and liabilities as a result of the spinoff. For additional information on income taxes, see Note 13 - Income Taxes in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report. HHH 2024 FORM 10-K | 50 MANAGEMENT’S DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Table of Contents Index to Financial Statements LIQUIDITY AND CAPITAL RESOURCES We continue to maintain a strong balance sheet and ensure we maintain the financial flexibility and liquidity necessary to fund future growth. As of December 31, 2024, we had $596.1 million of cash and cash equivalents, $317.0 million of undrawn capacity on our Secured Bridgeland Notes, and $1.2 billion of undrawn lender commitments available to be drawn for property development, subject to certain restrictions. In 2024, we drew $417.0 million on existing mortgage loans, entered into new borrowings of $176.5 million (excluding undrawn amounts on new construction loans), refinanced $168.0 million of existing indebtedness, and made repayments of $454.8 million. In addition, we repaid $192.0 million on the Secured Bridgeland Notes using the proceeds from the sale of MUD receivables. In the fourth quarter of 2024, we expanded the borrowing capacity of these notes from $475.0 million to $600.0 million and extended the maturity to 2029. Cash Flows Year Ended December 31, thousands 2024 2023 Cash provided by (used in) operating activities of continuing operations $ 447,751 $ (215,154) Cash provided by (used in) investing activities of continuing operations (430,705) (345,665) Cash provided by (used in) financing activities of continuing operations (27,754) 537,809 Net cash provided by (used in) discontinued operations (43,846) (22,870) Operating Activities Each segment’s relative contribution to our cash flows from operating activities will likely vary significantly from year to year given the changing nature of our development focus. Other than our condominium properties, most of the properties and projects in our Strategic Developments segment do not generate revenues, and the cash flows and earnings may vary. Condominium deposits received from contracted units offset by other various cash uses related to condominium development and sales activities are a substantial portion of our operating activities in 2024. Operating cash continued to be utilized in 2024 to fund ongoing development expenditures in our Strategic Developments and MPC segments, consistent with prior years. The cash flows and earnings from the MPC business may fluctuate more than from our operating assets because the MPC business generates revenues from land sales rather than recurring contractual revenues from operating leases. MPC land sales are a substantial portion of our cash flows from operating activities and are partially offset by development costs associated with the land sales business and acquisitions of land that is intended to ultimately be developed and sold. Net cash provided by operating activities of continuing operations was $447.8 million in 2024 and net cash used in operating activities of continuing operations was $215.2 million in 2023. The change in operating activities of $662.9 million was primarily due to an increase of $414.1 million in cash provided by condominium towers, primarily due to the closing of condominium units at Victoria Place in 2024; an increase of $176.7 million related to proceeds from the sale of MUD receivables in 2024; an increase of $90.0 million related to insurance proceeds received in 2024 for settlement of the construction defect claims at Waiea; an increase of approximately $66.0 million in cash provided by MPC operations, primarily related to increased MPC land sales; and an increase of $39.2 million in net cash provided related to the return of lender holdback deposits in the current year, compared to the payment of lender holdback deposits in the prior year. These changes were partially offset by a $58.4 million increase in interest payments; a $31.6 million decrease in MUD receivable collections; and a $24.3 million increase in MPC development expenditures. Investing Activities Net cash used in investing activities of continuing operations was $430.7 million in 2024 and net cash used in investing activities was $345.7 million in 2023. The $85.0 million increase in cash used in investing activities was primarily due to a $54.3 million increase in net parent investment in discontinued operations; a $21.9 million increase in cash used for property development and redevelopment expenditures; and a $12.6 million increase in cash used for acquisitions, primarily related to the acquisition of Waterway Plaza II in 2024, compared to the acquisition of Grogan’s Mill Village Center in 2023. These changes were partially offset by an $8.9 million increase in proceeds from asset sales, primarily related to the sale of a retail property in Bridgeland as well as a medical office building and four ground leases in The Woodlands in 2024, compared the sale of two self-storage properties and a medical office building in The Woodlands and certain properties in Ward Village in 2023. HHH 2024 FORM 10-K | 51 MANAGEMENT’S DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Table of Contents Index to Financial Statements Financing Activities Net cash used in financing activities of continuing operations was $27.8 million in 2024 and net cash provided by financing activities was $537.8 million in 2023. The change in financing activities of $565.6 million was primarily due to a $659.9 million increase in cash used related to principal payments on mortgages, notes, and loans payable, primarily related to the payoff of the Victoria Place construction loan upon completion of the tower and pay down of the Secured Bridgeland Notes. This activity was partially offset by an $84.0 million increase in proceeds from mortgages, notes, and loans payable. Short- and Long-Term Liquidity Short-Term Liquidity In the next 12 months, we expect our primary sources of cash to include cash flow from MPC land sales and condominium closings, cash generated from our operating assets, first mortgage financings secured by our assets, and deposits from condominium sales (which are restricted to funding construction of the related developments). We expect our primary uses of cash to include condominium pre-development and development costs, debt principal payments and debt service costs, MPC land development costs, other strategic developments costs, and general operating costs. We believe that our sources of cash, including existing cash on hand, will provide sufficient liquidity to meet our existing obligations and anticipated ordinary course operating expenses for at least the next 12 months. Long-Term Liquidity The development and redevelopment opportunities in Strategic Developments and Operating Assets are capital intensive and will require significant additional funding, if and when pursued. Any additional funding beyond those sources listed above would be raised with a mix of construction, bridge, and long-term financings, by entering into joint venture arrangements, as well as future equity raises. We cannot provide assurance that financing arrangements for our properties will be on favorable terms or occur at all, which could have a negative impact on our liquidity and capital resources. In addition, we typically must provide completion guarantees to lenders in connection with their financing for our projects. Summary of Remaining Development Costs The following table summarizes remaining development costs and related debt for projects held in the Operating Assets and Strategic Developments segments as of December 31, 2024. Total cost remaining to be paid net of debt and buyer deposits consists of $37.0 million related to substantially completed projects, $125.6 million related to projects with estimated completion dates within the next 12 months, and $74.6 million related to projects with estimated completion dates in 2026 and 2027. Projects that are substantially complete and have been placed into service in the Operating Assets segment and completed condominium projects in the Strategic Developments segment are included in the following table if the project has more than $1.0 million of estimated costs remaining to be incurred. The remaining cost related to substantially completed projects primarily represent costs associated with the completion of common areas at our completed condominium towers and budgeted tenant allowances necessary to bring our completed operating assets to stabilized occupancy. We expect to be able to meet our cash funding requirements with a combination of existing and anticipated construction loans, condominium buyer deposits, cash flow from our Operating Assets and MPC segments, net proceeds from condominium sales, and our existing cash balances. thousands Estimated Remaining to be Spent Remaining Buyer Deposits/Holdback to be Drawn Debt to be Drawn (a) Costs Remaining to be Paid, Net of Debt and Buyer Deposits/Holdbacks to be Drawn (b) Operating Assets Columbia $ 25,966 $ — $ 20,879 $ 5,087 The Woodlands 7,369 — 7,746 (377) Summerlin 41,130 — 37,780 3,350 Total Operating Assets 74,465 — 66,405 8,060 Strategic Developments The Woodlands 425,678 — 276,902 148,776 Bridgeland 21,223 — — 21,223 Ward Village 998,089 151,261 787,679 59,149 Total Strategic Developments 1,444,990 151,261 1,064,581 229,148 Total $ 1,519,455 $ 151,261 $ 1,130,986 $ 237,208 HHH 2024 FORM 10-K | 52 MANAGEMENT’S DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Table of Contents Index to Financial Statements (a) Refer to Note 8 - Mortgages, Notes, and Loans Payable, Net in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report for additional information on debt. (b) Negative balance relates to costs paid by HHH, but not yet reimbursed by our lenders. We expect to receive funds from our lenders for these costs in the future. Contractual Cash Obligations and Commitments The following table aggregates our contractual cash obligations and commitments as of December 31, 2024: thousands 2025 2026 2027 2028 2029 Thereafter Total Mortgages, notes, and loans payable $ 421,202 $ 509,097 $ 415,717 $ 838,680 $ 1,270,240 $ 1,713,501 $ 5,168,437 Interest payments (a) 272,263 229,822 198,285 164,000 99,822 223,887 1,188,079 Ground lease commitments 300 300 300 300 300 5,900 7,400 Total $ 693,765 $ 739,219 $ 614,302 $ 1,002,980 $ 1,370,362 $ 1,943,288 $ 6,363,916 (a) Interest is based on the borrowings that are presently outstanding and current floating interest rates. Debt As of December 31, 2024, the Company had $5.1 billion of outstanding debt and $1.2 billion of undrawn lender commitment available to be drawn for property development, subject to certain restrictions. Refer to Note 8 - Mortgages, Notes, and Loans Payable, Net in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report for additional detail. Our proportionate share of the debt of our unconsolidated ventures totaled $175.6 million as of December 31, 2024. All of this indebtedness is without recourse to the Company, with the exception of the collateral maintenance obligation for Floreo. See Note 11 - Commitments and Contingencies in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report for additional information related to the Company’s collateral maintenance obligation. Debt Compliance As of December 31, 2024, 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. Net Debt The following table summarizes our net debt on a segment basis as of December 31, 2024. Net debt is defined as Mortgages, notes, and loans payable, net, including our ownership share of debt of our unconsolidated ventures, reduced by liquidity sources to satisfy such obligations such as our ownership share of Cash and cash equivalents and SID, MUD, and Tax Increment Financing (TIF) receivables. Although net debt is a non-GAAP financial measure, we believe that such information is useful to our investors and other users of our financial statements as net debt and its components are important indicators of our overall liquidity, capital structure, and financial position. However, it should not be used as an alternative to our debt calculated in accordance with GAAP. thousands Operating Assets Master Planned Communities Strategic Developments Segment Totals Non- Segment Amounts December 31, 2024 Mortgages, notes, and loans payable, net $ 2,368,692 $ 359,352 $ 365,775 $ 3,093,819 $ 2,033,650 $ 5,127,469 Mortgages, notes, and loans payable of unconsolidated ventures 90,568 85,047 — 175,615 — 175,615 Less: Cash and cash equivalents (20,450) (114,302) (10,998) (145,750) (450,333) (596,083) Cash and cash equivalents of unconsolidated ventures (2,236) (10,597) (5,008) (17,841) — (17,841) Special Improvement District receivables — (97,432) — (97,432) — (97,432) Municipal Utility District receivables, net — (460,741) (3,058) (463,799) — (463,799) TIF receivable — — (4,340) (4,340) — (4,340) Net Debt $ 2,436,574 $ (238,673) $ 342,371 $ 2,540,272 $ 1,583,317 $ 4,123,589 HHH 2024 FORM 10-K | 53 MANAGEMENT’S DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Table of Contents Index to Financial Statements Unconsolidated Ventures We have interests in certain unconsolidated ventures which, as of December 31, 2024, had mortgage financing totaling $354.3 million, with our proportionate share of this debt totaling $175.6 million. All of this indebtedness is without recourse to the Company, with the exception of the collateral maintenance obligation for Floreo. See Note 11 - Commitments and Contingencies in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report for additional information related to the Company’s collateral maintenance obligation. The following table summarizes our share of affiliate debt and cash as of December 31, 2024: thousands Company’s Share of Unconsolidated Ventures’ Debt Company’s Share of Unconsolidated Ventures’ Cash Operating Assets The Metropolitan $ 40,200 $ 699 Stewart Title of Montgomery County, TX — 900 Woodlands Sarofim 1,163 134 TEN.m.flats 49,205 503 Master Planned Communities The Summit 7,687 5,198 Floreo 77,360 5,399 Strategic Developments West End Alexandria — 4,967 Other — 41 Total $ 175,615 $ 17,841 HHH 2024 FORM 10-K | 54 MANAGEMENT’S DISCUSSION AND ANALYSIS CRITICAL ACCOUNTING POLICIES AND ESTIMATES Table of Contents Index to Financial Statements CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in accordance with GAAP requires management to make informed judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Below is a discussion of the accounting policies and estimates that we consider critical to an understanding of our financial condition and operating results that may require complex or significant judgment in their application or require estimates about matters which are inherently uncertain. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 1 - Presentation of Financial Statements and Significant Accounting Policies in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report. Impairments Methodology We review our long-lived assets for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Although the carrying amount may exceed the estimated fair value of certain properties, 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 and the carrying amount of the asset is reduced. 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. Judgments and uncertainties An impairment loss is recognized if the carrying amount of an asset is not recoverable and exceeds its fair value. The cash flow estimates used both for determining recoverability and estimating fair value are inherently 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. As such, the evaluation of anticipated cash flows is highly subjective and is based in part on assumptions that could differ materially from actual results in future periods. Unfavorable changes in any of the primary assumptions could result in a reduction of anticipated future cash flows and could indicate property impairment. Uncertainties related to the primary assumptions could affect the timing of an impairment. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results. Master Planned Communities Cost of Sales Methodology 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. 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. Judgments and uncertainties MPC cost of sales estimates are highly judgmental as they are sensitive to cost escalation, sales price escalation, and pace of absorption, which are subject to judgment and affected by expectations about future market or economic conditions. Changes in the assumptions used to estimate future development costs could result in a significant impact on the amounts recorded as cost of sales. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS Please refer to Note 1 - Presentation of Financial Statements and Significant Accounting Policies in the Notes to Consolidated Financial Statements under Item 8 of this Annual Report for additional information about new accounting pronouncements. HHH 2024 FORM 10-K | 55 MARKET RISK QUANTITATIVE AND QUALITATIVE DISCLOSURES Table of Contents Index to Financial Statements