What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-22 · 157 added, 131 removed, 323 unchanged (47% of the section changed)

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on July 31, 2024 in connection with SEG’s separation from HHH (the “Separation”), as well as the assets, liabilities, and operating activities of Seaport Entertainment Group Inc.

The following discussion should be read as a supplement to and should be read in conjunction with our Unaudited Condensed Combined Financial Statements for the three months ended June 30, 2024, and June 30, 2023, and six months ended June 30, 2024, and June 30, 2023 (“Unaudited Condensed Combined Financial Statements”) and the related notes which are included elsewhere in this quarterly report on Form 10-Q (“Quarterly Report”).

The following discussion should be read as a supplement to and should be read in conjunction with our Unaudited Condensed Consolidated and Combined Financial Statements for the three months ended September 30, 2024, and September 30, 2023, and nine months ended September 30, 2024, and September 30, 2023 (“Unaudited Condensed Consolidated and Combined Financial Statements”) and the related notes which are included elsewhere in this quarterly report on Form 10-Q (“Quarterly Report”).

This discussion contains forward-looking statements that involve risks, uncertainties, assumptions, and other factors, including those described in the section entitled “Risk Factors” and elsewhere in this Quarterly Report.

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We are not obligated to update this information, whether as a result of new information, future events or otherwise, except as may be required by law.

All references to numbered Notes are specific to Notes to our Unaudited Condensed Combined Financial Statements included in this Quarterly Report.

All references to numbered Notes are specific to Notes to our Unaudited Condensed Consolidated and Combined Financial Statements included in this Quarterly Report.

Capitalized terms used, but not defined, in this MD&A have the same meanings as in such Notes.

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Hospitality represents our ownership interests in various food and beverage operating businesses.

We own, either wholly or through partnerships with third parties, and operate, including license and management agreements, six fine dining and casual dining restaurants, cocktail bars and entertainment venues (The Fulton, Mister Dips, Carne Mare, Malibu Farm, Pearl Alley, and The Lawn Club), as well as our unconsolidated venture, the Tin Building by Jean-Georges, which offers over 20 culinary experiences, including restaurants, bars, grocery markets, retail, and private dining.

These businesses are all our tenants and pay rent to our Landlord Operations.

We own, either wholly or through partnerships with third parties, and operate, including license and management agreements, fine dining and casual dining restaurants, cocktail bars and entertainment venues (The Fulton, Mister Dips, Carne Mare, Malibu Farm and Pearl Alley), as well as our unconsolidated ventures, the Lawn Club and the Tin Building by Jean-Georges, which offers over 15 culinary experiences, including restaurants, bars, grocery markets, retail, and private dining.

These businesses are all our tenants and are part of to our Landlord Operations.

We also have a 25% interest in Jean-Georges Restaurants.

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The Aviators are a Triple-A affiliate of the Oakland Athletics and play at the Las Vegas Ballpark, a 10,000-person capacity ballpark located in Downtown Summerlin.

The Rooftop at Pier 17, as mentioned in Landlord Operations above, is a premier outdoor concert venue that hosts a popular Summer Concert Series featuring emerging and established musicians alike.

The Rooftop at Pier 17, as mentioned in Landlord Operations above, is a premier outdoor concert venue that hosts a popular Summer Concert Series featuring emerging and established musicians alike, and we are exploring opportunities to potentially host an enclosed concert series during the winter for year-round entertainment.

We see the Rooftop at Pier 17 as an opportunity to continue to drive events and entertainment growth as the demand for live music is strong and accelerating.

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Additionally, HHH contributed capital of $23.4 million to the Company prior to the Separation to support the operating, investing, and financing activities of the Company.

For additional discussion of the Separation, see Note 1 – Significant Accounting Policies in the Notes to Unaudited Condensed Combined Financial Statements included in this Quarterly Report.

For additional discussion of the Separation, see Note 1 – Significant Accounting Policies in the Notes to Unaudited Condensed Consolidated and Combined Financial Statements included in this Quarterly Report.

Basis of Presentation

We historically operated as part of HHH and not as a standalone company.

The accompanying Unaudited Condensed Combined Financial Statements have been prepared on a standalone basis derived from the consolidated financial statements and accounting records of HHH.

Prior to the Separation, we operated as part of HHH and not as a standalone company.

The accompanying Unaudited Condensed Consolidated and Combined Financial Statements as of September 30, 2024 and for the nine and three months ended September 30, 2024 have been prepared on a standalone basis derived from the consolidated financial statements and accounting records of SEG from August 1, 2024 to September 30, 2024 and from the combined financial statements and accounting records of HHH for January 1, 2024 to July 31, 2024.

The accompanying Unaudited Condensed Combined Financial Statements as of December 31, 2023 and for the three and nine months ended September 30, 2023 have been prepared on a standalone basis derived from the combined financial statements and accounting records of HHH.

These statements reflect the combined historical results of operations, financial position, and cash flows of Seaport Entertainment Group in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

These statements may not include all expenses that would have been incurred had the Company existed as a separate, stand-alone entity during the periods presented.

These Unaudited Condensed Combined Financial Statements are presented as if the Company had been carved out of HHH and had been combined for all periods presented.

The Unaudited Condensed Combined Financial Statements include

the attribution of certain assets and liabilities that have been held at HHH but which are specifically identifiable or attributable to the business that was transferred to the Company in connection with the Separation.

For an additional discussion on the basis of presentation of these statements, see Note 1 – Significant Accounting Policies in the Notes to Unaudited Condensed Combined Financial Statements included in this Quarterly Report.

These Unaudited Condensed Consolidated and Combined Financial Statements as of December 31, 2023 are presented as if the Company had been carved out of HHH and had been combined for the periods from January 1, 2024 to July 31, 2024 and from January 1, 2023 to September 30, 2023.

The Unaudited Condensed Combined Financial Statements include the attribution of certain assets and liabilities that had been held at HHH but which are specifically identifiable or attributable to the business that was transferred to the Company in connection with the Separation.

For an additional discussion on the basis of presentation of these statements, see Note 1 – Significant Accounting Policies in the Notes to Unaudited Condensed Consolidated and Combined Financial Statements included in this Quarterly Report.

Key Factors Affecting Our Business

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As mentioned elsewhere in this Quarterly Report, we historically operated as part of HHH and not as a standalone company.

Therefore, our historical results are reflective of the management strategies and operations of the Company based on the direction and strategies of HHH.

Additionally, our historical results reflect the allocation of expenses from HHH associated with certain services, including (1) certain support functions that are provided on a centralized basis within HHH, including, but not limited to executive oversight, treasury, accounting, finance, internal audit, legal, information technology, human resources, communications, and risk management;

Therefore, our historical results prior to the Separation are reflective of the management strategies and operations of the Company based on the direction and strategies of HHH.

Additionally, our historical results reflect the allocation of expenses from HHH associated with certain services prior to the Separation, including (1) certain support functions that were provided on a centralized basis within HHH, including, but not limited to executive oversight, treasury, accounting, finance, internal audit, legal, information technology, human resources, communications, and risk management;

and (2) employee benefits and compensation, including stock-based compensation.

As a separate public company, our ongoing costs related to such support functions may differ from, and will potentially exceed, the amounts that have been allocated to us in these financial statements.

Following the Separation, HHH will continue to provide some of these services on a transitional basis in exchange for agreed-upon fees.

Following the Separation, HHH continues to provide some of these services on a transitional basis in exchange for agreed-upon fees.

In addition to one-time costs to design and establish our corporate functions, we will also incur incremental costs associated with being a stand-alone public company, including additional labor costs, such as salaries, benefits, and potential bonuses and/or stock based compensation awards for staff additions to establish certain corporate functions historically supported by HHH and not covered by the transition services agreement, and corporate governance costs, including board of director compensation and expenses, audit and other professional services fees, annual report and proxy statement costs, SEC filing fees, transfer agent fees, consulting and legal fees and stock exchange listing fees.

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however, during the fourth quarter of 2022, despite continued labor shortages, operating hours were extended to seven days a week.

In 2023, the Tin Building by Jean-Georges was open seven days per week, with strong

foot traffic and sales.

In 2023, the Tin Building by Jean-Georges was open seven days per week, with strong foot traffic and sales.

However, operating losses at the Tin Building by Jean-Georges joint venture remained elevated, as the venture continues to refine its operating model, and the Seaport experienced poor weather conditions throughout 2023 and into the first quarter of 2024.

Performance at the Tin Building improved in the second quarter of 2024, primarily due to reductions in operating and labor costs.

Performance at the Tin Building improved in the second and third quarters of 2024, primarily due to reductions in operating and labor costs.

As the Company currently funds any operating shortfall and recognizes all of the economic interest in the venture, the future success of the Tin Building by Jean-George may have a significant impact on our results of operations.

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Lease Renewals and Occupancy

As of June 30, 2024, and December 31, 2023, the weighted average remaining term of our retail, office, and other properties leases where we are the lessor was approximately seven years, excluding renewal options.

As of September 30, 2024, and December 31, 2023, the weighted average remaining term of our retail, office, and other properties leases where we are the lessor was approximately seven years, excluding renewal options.

The stability of the rental revenue generated by our properties depends principally on our tenants’ ability to pay rent and our ability to collect rents, renew expiring leases, re-lease space upon the expiration or other termination of leases, lease currently vacant properties, and maintain or increase rental rates at our leased properties.

To the extent our properties become vacant, we would forego rental income while remaining responsible for the payment of property taxes and maintaining the property until it is re-leased, which could negatively impact our operating results.

As of June 30, 2024, our real estate assets at the Seaport were 67% leased.

As of September 30, 2024, our real estate assets at the Seaport were 68% leased.

This includes one lease at Pier 17 that is set to expire in December 2025 and represents 12% of our total 2023 rental revenues.

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Separation Costs.

The Company incurred pre-tax charges related to the planned separation from HHH, primarily related to legal and consulting costs, of $7.9 million and $17.1 million for the three months and six months ended June 30, 2024, respectively.

No costs related to the planned separation were incurred or recorded in the Unaudited Condensed Combined Statement of Operations for the three months and six months ended June 30, 2023.

The Company incurred pre-tax charges related to the planned separation from HHH, primarily related to legal and consulting costs, of $6.7 million and $23.8 million for the three months and nine months ended September 30, 2024, respectively.

No costs related to the planned separation were incurred or recorded in the Unaudited Condensed Combined Statement of Operations for the three months and nine months ended September 30, 2023.

Shared Service Costs.

HHH provided the Company certain services, including (1) certain support functions that are provided on a centralized basis within HHH, including, but not limited to executive oversight, treasury, accounting, finance, internal audit, legal, information technology, human resources, communications, and risk management;

Prior to the Separation, HHH provided the Company certain services, including (1) certain support functions that were provided on a centralized basis within HHH, including, but not limited to executive oversight, treasury, accounting, finance, internal audit, legal, information technology, human resources, communications, and risk management;

and (2) employee benefits and compensation, including stock-based compensation.

The Company’s Unaudited Condensed Combined Financial Statements reflect an allocation of these costs.

The Company’s Unaudited Consolidated and Condensed Combined Financial Statements reflect an allocation of these costs.

When specific identification or a direct attribution of costs based on time incurred for the Company’s benefit is not practicable, a proportional cost method is used, primarily based on revenue, headcount, payroll costs or other applicable measures.

The Company recorded expenses associated with shared services that are not directly attributable to the Company of $3.9 million and $3.8 million for the three months ended June 30, 2024, and 2023, respectively, $7.5 million and $6.7 million for the six months ended June 30, 2024, and 2023, respectively.

The Company recorded expenses associated with shared services that are not directly attributable to the Company of $5.3 million and $4.5 million for the three months ended September 30, 2024, and 2023, respectively, $12.8 million and $11.3 million for the nine months ended September 30, 2024, and 2023, respectively.

Non-GAAP Measure

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Results of Operations

Comparison of the Three Months Ended June 30, 2024, and 2023

Comparison of the Three Months Ended September 30, 2024, and 2023

The following table sets forth our operating results:

Three Months Ended June 30,

Three Months Ended September 30,

in thousands except percentages

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Total expenses

Provision for impairment

Other income, net

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Equity in losses from unconsolidated ventures

Loss on early extinguishment of debt

Loss before income taxes

Income tax (benefit) expense

Preferred distributions to noncontrolling interest in subsidiary

Net loss attributable to common stockholders

Not Meaningful

Net loss increased $6.9 million, or 24%, to $35.0 million for the three months ended June 30, 2024, compared to $28.1 million in the prior-year period, primarily due to an $11.6 million increase in general and administrative costs and a $3.6 million decrease in total revenue, partially offset by a $7.8 million decrease in depreciation and amortization.

Net loss attributable to common stockholders decreased $703.7 million, or 96%, to $32.5 million for the three months ended September 30, 2024, compared to $736.2 million in the prior-year period, primarily due to a $672.5 million decrease in impairment charges, a $39.0 million decrease in equity in losses from unconsolidated ventures, and a $5.9 million decrease in depreciation and amortization, partially offset by a $11.1 million increase in general and administrative expenses.

Items Included in Segment Adjusted EBITDA

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General and Administrative .

General and administrative costs increased $11.6 million, or 165%, to $18.6 million for the three months ended June 30, 2024, compared to $7.0 million in the prior-year period.

This change was primarily due to a $7.9 million increase in separation costs and a $5.4 million increase in personnel and overhead expenses, partially offset by a $1.6 million decrease in expenses related to the development of the Company’s e-commerce platform in the prior-year period that did not occur in the current period and a $0.1 million decrease in shared service costs allocated from HHH based on various allocation methodologies.

General and administrative costs increased $11.1 million, or 154%, to $18.3 million for the three months ended September 30, 2024, compared to $7.2 million in the prior-year period.

This change was primarily due to a $6.7 million increase in separation costs, a $3.6 million increase in personnel and overhead expenses, and a $0.8 million increase in shared service costs allocated from HHH based on various allocation methodologies.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $7.8 million, or 60%, to $5.3 million for the three months ended June 30, 2024, compared to $13.2 million in the prior-year period.

Depreciation and amortization expense decreased $5.9 million, or 44%, to $7.7 million for the three months ended September 30, 2024, compared to $13.6 million in the prior-year period.

This change was primarily due to a decrease in depreciation expense following the impairment recognized on the Company’s buildings and equipment in the third quarter of 2023.

Interest Expense, Net .

Interest expense, net increased $2.6 million, or 412%, to $3.2 million for the three months ended June 30, 2024, compared to $0.6 million in the prior-year period.

Interest expense, net increased $2.5 million, or 429%, to $3.1 million for the three months ended September 30, 2024, compared to $0.6 million in the prior-year period.

This change is primarily due to a $2.4 million decrease in amounts capitalized to development assets and a $0.3 million increase in interest expense on secured mortgages payable, partially offset by a $0.2 million increase in interest income.

Equity in Losses from Unconsolidated Ventures.

Equity losses from unconsolidated ventures decreased $4.3 million, or 40%, to $6.6 million for the three months ended June 30, 2024, compared to $10.9 million in the prior-year period.

This change was primarily due to a $3.6 million decrease in losses for the Tin Building by Jean Georges, and a $0.5 million increase in earnings related to the Lawn Club, which opened in the fourth quarter of 2023.

Comparison of the Six Months Ended June 30, 2024 and 2023

Equity in losses from unconsolidated ventures decreased $39.0 million, or 84%, to $7.6 million for the three months ended September 30, 2024, compared to $46.6 million in the prior-year period.

This change was primarily due to a $37.0 million impairment recognized in the three months ended September 30, 2023 against the carrying value of the Company’s investments in unconsolidated ventures, which included $30.8 million related to Jean-Georges Restaurants, $5.0 million related to Ssäm Bar, and $1.2 million related to the Tin Building by Jean-Georges.

Excluding the impact of the impairment, equity losses decreased $2.0 million, primarily related to a $0.9 million decrease in losses for the Tin Building by Jean-Georges, a $0.7 million decrease in losses for Ssäm Bar, and a $0.4 million increase in earnings for the Lawn Club, which opened in the fourth quarter of 2023.

Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table sets forth our operating results:

Six Months Ended June 30,

Nine Months Ended September 30,

in thousands except percentages

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Total expenses

Provision for impairment

Other income, net

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Equity in losses from unconsolidated ventures

Loss on early extinguishment of debt

Loss before income taxes

Income tax (benefit) expense

Preferred distributions to noncontrolling interest in subsidiary

Net loss attributable to common stockholders

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Net loss increased $13.2 million, or 20%, to $79.1 million for the six months ended June 30, 2024, compared to $65.9 million in the prior-year period, primarily due to a $22.7 million increase in general and administrative costs and a $3.7 million decrease in total revenue, partially offset by a $13.0 million decrease in depreciation and amortization.

Net loss attributable to common stockholders decreased $690.5 million, or 86%, to $111.6 million for the nine months ended September 30, 2024, compared to $802.1 million in the prior-year period, primarily due to a $672.5 million decrease in impairment charges, a $43.9 million decrease in equity in losses from unconsolidated ventures, and an $18.9 million decrease in depreciation and amortization, partially offset by a $33.8 million increase in general and administrative costs.

Items Included in Segment Adjusted EBITDA

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General and Administrative .

General and administrative costs increased $22.7 million, or 181%, to $35.2 million for the six months ended June 30, 2024, compared to $12.5 million in the prior-year period.

This change was primarily due to a $17.1 million increase in separation costs, a $6.6 million increase in personnel and overhead expenses, a $0.5 million increase in shared service costs allocated from HHH based on various allocation methodologies, and a $0.1 million increase in rent expense related to the corporate office.

General and administrative costs increased $33.8 million, or 171%, to $53.5 million for the nine months ended September 30, 2024, compared to $19.7 million in the prior-year period.

This change was primarily due to a $23.8 million increase in separation costs, a $10.1 million increase in personnel and overhead expenses, and a $1.5 million increase in shared service costs allocated from HHH based on various allocation methodologies.

These increases were partially offset by a $1.6 million decrease in expenses related to the development of the Company’s e-commerce platform in the prior-year period that did not occur in the current period.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $13.0 million, or 49%, to $13.4 million for the six months ended June 30, 2024, compared to $26.4 million in the prior-year period.

Depreciation and amortization expense decreased $18.9 million, or 47%, to $21.1 million for the nine months ended September 30, 2024, compared to $40.0 million in the prior-year period.

This change was primarily due to a decrease in depreciation expense following the impairment recognized on the Company’s buildings and equipment in the third quarter of 2023.

Interest Expense, Net .

Interest expense, net increased $4.5 million, or 358%, to $5.8 million for the six months ended June 30, 2024, compared to $1.3 million in the prior-year period.

Interest expense, net increased $7.1 million, or 381%, to $8.9 million for the nine months ended September 30, 2024, compared to $1.8 million in the prior-year period.

This change is primarily due to a $5.9 million decrease in amounts capitalized to development assets and a $1.7 million increase in interest expense on secured mortgages payable, partially offset by a $0.5 million increase in interest income.

Equity in Losses from Unconsolidated Ventures.

Equity losses from unconsolidated ventures decreased $4.9 million, or 22%, to $16.8 million for the six months ended June 30, 2024, compared to $21.7 million in the prior-year period.

This change was primarily due to a $4.1 million decrease in losses for the Tin Building by Jean Georges, and a $0.5 million decrease in losses for Ssäm Bar, which closed in the third quarter of 2023.

Equity in losses from unconsolidated ventures decreased $43.9 million, or 64%, to $24.4 million for the nine months ended September 30, 2024, compared to $68.3 million in the prior-year period.

This change was primarily due to a $37.0 million impairment recognized in the nine months ended September 30, 2023 against the carrying value of the Company’s investments in unconsolidated ventures, which included $30.8 million related to Jean-Georges Restaurants, $5.0 million related to Ssäm Bar, and $1.2 million related to the Tin Building by Jean-Georges.

Excluding the impact of the impairment, equity losses decreased $7.0 million, primarily related to a $5.0 million decrease for the Tin Building by Jean-Georges, a $1.2 million decrease in losses for Ssäm Bar, which closed in the third quarter of 2023, and a $0.5 million decrease in losses for Jean Georges.

Segment Operating Results

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Three Months Ended

Six Months Ended

Nine Months Ended

Landlord Operations Adjusted EBITDA

September 30,

in thousands except percentages

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Adjusted EBITDA

For the three months ended June 30, 2024

Landlord Operations Adjusted EBITDA loss increased $1.3 million compared to the prior-year period primarily due to the following:

For the three months ended September 30, 2024

Landlord Operations Adjusted EBITDA loss decreased $0.4 million compared to the prior-year period primarily due to the following:

Rental Revenue .

Rental revenue increased $0.6 million, or 10%, to $6.3 million for the three months ended June 30, 2024, compared to $5.7 million in the prior-year period.

Rental revenue increased $0.9 million, or 16%, to $6.2 million for the three months ended September 30, 2024, compared to $5.3 million in the prior-year period.

This change was primarily driven by a $2.0 million increase in rental revenue at the Fulton Market Building due to the commencement of the Alexander Wang lease at the end of 2023.

This increase was partially offset by a $0.3 million decrease at Schermerhorn Row, a $0.3 million decrease at the Tin Building, and a $0.1 million decrease at Pier 17.

This increase was partially offset by a $1.2 million decrease at Schermerhorn Row.

Operating Costs .

Operating costs increased $1.7 million, or 21%, to $9.8 million for the three months ended June 30, 2024, compared to $8.2 million in the prior year period.

This change was primarily due to a $1.2 million increase in labor costs, a $0.9 million increase in professional services fees, and $0.4 million increase in marketing and advertising expenses, partially offset by a $0.3 million decrease in state business tax and a $0.2 million decrease in insurance expense.

Provision for Doubtful Accounts .

Provision for doubtful accounts increased to $0.3 million for the three months ended June 30, 2024, compared to an immaterial amount in the prior-year period, primarily due to a tenant reserve established during the three months ended June 30, 2024.

For the six months ended June 30, 2024

Operating costs increased $0.5 million, or 6%, to $9.1 million for the three months ended September 30, 2024, compared to $8.6 million in the prior year period.

This change was primarily due to a $0.4 million increase in state business tax, a $0.3 million increase in professional services fees, and a $0.1 million increase in insurance expenses, partially offset by a $0.3 million decrease in marketing and advertising expenses.

For the nine months ended September 30, 2024

Landlord Operations Adjusted EBITDA loss increased $0.9 million compared to the prior-year period primarily due to the following:

Rental Revenue .

Rental revenue increased $1.6 million, or 14%, to $12.8 million for the six months ended June 30, 2024, compared to $11.2 million in the prior-year period.

Rental revenue increased $2.4 million, or 15%, to $18.9 million for the nine months ended September 30, 2024, compared to $16.5 million in the prior-year period.

This change was primarily driven by a $4.5 million increase in rental revenue at the Fulton Market Building due to the commencement of the Alexander Wang lease at the end of 2023.

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Operating Costs .

Operating costs increased $2.5 million, or 16%, to $18.1 million for the six months ended June 30, 2024, compared to $15.6 million in the prior year period.

This change was primarily due to a $1.3 million increase in labor costs and a $1.2 million increase in professional services fees.

Operating costs increased $3.0 million, or 13%, to $27.2 million for the nine months ended September 30, 2024, compared to $24.2 million in the prior year period.

This change was primarily due to a $1.5 million in professional services fees, $0.8 million in utilities and maintenance costs, and a $0.4 million increase in state business tax.

Provision for Doubtful Accounts .

Provision for doubtful accounts increased to $0.5 million for the six months ended June 30, 2024, compared to an immaterial amount in the prior-year period, primarily due to a tenant reserve established during the six months ended June 30, 2024.

Provision for doubtful accounts increased to $0.4 million for the nine months ended September 30, 2024, compared to an immaterial amount in the prior-year period, primarily due to a tenant reserve established during the nine months ended September 30, 2024.

Non-GAAP Measure

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Three Months Ended

Six Months Ended

Nine Months Ended

Landlord Operations NOI

September 30,

in thousands except percentages

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Landlord Operations NOI

For the three months ended June 30, 2024

Landlord Operations NOI losses increased $1.2 million compared to the prior-year period, primarily due to increased operating costs and provision for doubtful accounts, partially offset by the increase in rental revenue as mentioned above.

For the six months ended June 30, 2024

For the three months ended September 30, 2024

Landlord Operations NOI losses decreased $0.9 million compared to the prior-year period, primarily due to increased revenue, partially offset by increased operating costs as mentioned above.

For the nine months ended September 30, 2024

Landlord Operations NOI losses increased $0.6 million compared to the prior-year period, primarily due to increased operating costs and provision for doubtful accounts, partially offset by the increase in rental revenue as mentioned above.

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Three Months Ended

Six Months Ended

Nine Months Ended

Hospitality Adjusted EBITDA

September 30,

in thousands except percentages

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1 Not Meaningful

For the three months ended June 30, 2024

Hospitality Adjusted EBITDA loss increased $0.8 million compared to the prior-year period primarily due to the following:

For the three months ended September 30, 2024

Hospitality Adjusted EBITDA increased $3.0 million compared to the prior-year period primarily due to the following:

Hospitality Revenue .

Hospitality revenue decreased $0.8 million, or 8%, to $8.9 million for the three months ended June 30, 2024, compared to $9.7 million in the prior-year period.

This change was primarily due to a $0.5 million decrease related to small popups and short-term activations in the Cobble & Co and Garden Bar spaces in the second quarter of 2023, with no similar activity in the second quarter of 2024, and a $0.3 million decrease related to reduced restaurant performance, primarily at The Fulton and Carne Mare.

Hospitality revenue decreased $1.9 million, or 17%, to $8.8 million for the three months ended September 30, 2024, compared to $10.7 million in the prior-year period.

This change was primarily due to a $0.6 million decrease at the Greens, a $0.6 million decrease at Garden Bar, a $0.3 million decrease at Cobble & Co, and a $0.3 million decrease at the Fulton.

Hospitality Costs .

Hospitality costs decreased $0.2 million, or 3%, to $8.4 million for the three months ended June 30, 2024, compared to $8.6 million in the prior-year period, primarily due to decreases in variable costs such as food and beverage costs and labor costs, which are generally in line with the decrease in Hospitality revenue.

For the six months ended June 30, 2024

Hospitality Adjusted EBITDA loss increased $0.6 million compared to the prior-year period primarily due to the following:

Hospitality costs decreased $0.1 million, or 1%, to $8.4 million for the three months ended September 30, 2024, compared to $8.5 million in the prior-year period.

Other Income, Net .

Other income, net was $4.5 million for the three months ended September 30, 2024, compared to an immaterial amount in the prior-year period.

This Other income primarily represents reimbursements from CCMC received in the current quarter relating to prior period operating expenses.

For the nine months ended September 30, 2024

Hospitality Adjusted EBITDA increased $2.4 million compared to the prior-year period primarily due to the following:

Hospitality Revenue .

Hospitality revenue decreased $2.0 million, or 14%, to $12.9 million for the six months ended June 30, 2024, compared to $15.0 million in the prior-year period.

This change was primarily due to a $1.3 million decrease related to reduced restaurant performance, primarily at The Fulton, Carne Mare, and Malibu Farms, and a $0.7 million decrease related to small popups and short-term activations in the Cobble & Co and Garden Bar spaces in the first half of 2023, with no similar activity in the first half of 2024.

Hospitality revenue decreased $3.9 million, or 15%, to $21.7 million for the nine months ended September 30, 2024, compared to $25.6 million in the prior-year period.

This change was primarily due to a $2.1 million decrease related to reduced restaurant performance, primarily at The Fulton, Carne Mare, and Malibu Farms, and a $1.6 million decrease related to small popups and short-term activations in the Cobble & Co and Garden Bar spaces in the nine months ended September 30, 2023, with no similar activity in 2024.

The reduced restaurant performance was primarily related to poor weather conditions in the first quarter of 2024.

Hospitality Costs .

Hospitality costs decreased $1.6 million, or 10%, to $13.9 million for the six months ended June 30, 2024, compared to $15.5 million in the prior-year period, primarily due to decreases in variable costs such as food and beverage costs and labor costs, which are generally in line with the decrease in Hospitality revenue.

Hospitality costs decreased $1.7 million, or 7%, to $22.3 million for the nine months ended September 30, 2024, compared to $24.0 million in the prior-year period, primarily due to decreases in variable costs such as food and beverage costs and labor costs, which are generally in line with the decrease in Hospitality revenue.

Other Income, Net .

Other income, net was $4.5 million for the nine months ended September 30, 2024, compared to an immaterial amount in the prior-year period.

This Other income primarily represents reimbursements from CCMC received in the current quarter relating to prior period operating expenses.

Sponsorships, Events, and Entertainment

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Sponsorships, Events, and Entertainment Adjusted EBITDA

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

in thousands except percentages

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1 Not Meaningful

For the three months ended June 30, 2024

For the three months ended September 30, 2024

Sponsorships, Events, and Entertainment Adjusted EBITDA decreased $2.0 million compared to the prior-year period primarily due to the following:

Sponsorships, Events, and Entertainment Revenue .

Sponsorships, events, and entertainment revenue decreased $3.4 million, or 16%, to $18.7 million for the three months ended June 30, 2024, compared to $22.1 million in the prior-year

This change was primarily due to a $2.7 million decrease in concert series revenue at the Seaport, primarily related to the timing of concerts with 11 shows held during the second quarter of 2024, compared to 19 shows held during the second quarter of 2023.

Additionally, there was a $1.2 million decrease in concession sales at the Las Vegas Ballpark and a $0.4 million decrease in Aviators ticket revenue, primarily related to lower attendance in the current quarter.

These decreases were partially offset by a $0.6 million increase in sponsorship revenue at the Seaport due to the execution of four new sponsorship agreements in the current quarter and a $0.4 million increase in special event revenue at the Las Vegas Ballpark, primarily due to additional events held in the current quarter.

Sponsorships, events, and entertainment revenue increased $0.2 million, or 1%, to $24.7 million for the three months ended September 30, 2024, compared to $24.5 million in the prior-year period.

This change was primarily due to a $0.9 million increase in Aviators ticket revenue, primarily related to higher attendance in the current quarter, and a $0.5 million increase in concert series revenue at the Seaport, primarily related to the timing of concerts with 42 shows held during the third quarter of 2024, compared to 41 shows held during the third quarter of 2023.

These increases were partially offset by a $1.0 million decrease in special event revenue at the Las Vegas Ballpark, primarily due to fewer events held in the current quarter.

Sponsorships, Events, and Entertainment Costs .

Sponsorships, events, and entertainment costs decreased $2.3 million, or 15%, to $12.5 million for the three months ended June 30, 2024, compared to $14.8 million in the prior-year period.

This change was primarily due to a $1.4 million decrease in costs associated with the concert series at the Seaport, primarily due to the timing of concerts with fewer concerts held during the current period, and a $0.8 million decrease in costs at the Las Vegas Ballpark, primarily due to lower cost of sales and labor costs as expected with lower attendance and lower concessions revenue.

Sponsorships, events, and entertainment costs increased $2.0 million, or 13%, to $18.2 million for the three months ended September 30, 2024, compared to $16.2 million in the prior-year period.

This change was primarily due to a $1.0 million increase in costs associated with the concert series at the Seaport, primarily due to the timing of concerts with additional concerts held during the current period, and a $1.3 million increase in costs at the Las Vegas Ballpark, primarily due to higher cost of sales and labor costs as expected with higher attendance.

These increases were partially offset by a $0.4 million decrease in costs associated with special events at the Las Vegas Ballpark, primarily due to decreased variable costs associated with lower special event revenue in the current quarter.

Operating Costs .

Operating costs increased $0.1 million, or 7%, to $1.7 million for the three months ended September 30, 2024, compared to $1.6 million in the prior-year period.

This change was primarily due to a $0.5 million increase in insurance expense, a $0.1 million increase in real estate and sales and use tax, and a $0.1 million increase in marketing and advertising costs, partially offset by a $0.5 million decrease in other operating costs.

Provision for Doubtful Accounts .

Provision for doubtful accounts increased to $1.0 million for the three months ended June 30, 2024, compared to no activity in the prior-year period, primarily due to a $0.5 million reserve associated with the Winterland Skating concept at the Seaport and a $0.4 million reserve associated with events at the Las Vegas Ballpark, both established during the three months ended June 30, 2024.

For the six months ended June 30, 2024

Provision for doubtful accounts increased to $0.2 million for the three months ended September 30, 2024, compared to $0.1 million in the prior-year period, primarily due to a $0.3 million reserve associated with events at the Las Vegas Ballpark established during the three months ended September 30, 2024.

Other Income, Net .

Other income, net increased to $0.3 million for the three months ended September 30, 2024, compared to an immaterial amount in the prior-year period, primarily due to $0.3 million of other income associated with rooftop concessions at the Seaport during the three months ended September 30, 2024.

For the nine months ended September 30, 2024

Sponsorships, Events, and Entertainment Adjusted EBITDA decreased $3.9 million compared to the prior-year period primarily due to the following:

Sponsorships, Events, and Entertainment Revenue .

Sponsorships, events, and entertainment revenue decreased $3.3 million, or 13%, to $22.8 million for the six months ended June 30, 2024, compared to $26.2 million in the prior-year period.

This change was primarily due to a $2.7 million decrease in concert series revenue at the Seaport, primarily related to the timing of concerts with 11 shows held during the first half of 2024, compared to 19 shows held during the first half of 2023.

Additionally, there was a $1.3 million decrease in concession sales at the Las Vegas Ballpark and a $0.4 million decrease in Aviators ticket revenue, primarily related to lower attendance in the current period.

Sponsorships, events, and entertainment revenue decreased $3.1 million, or 6%, to $47.5 million for the nine months ended September 30, 2024, compared to $50.6 million in the prior-year period.

This change was primarily due to a $2.2 million decrease in concert series revenue at the Seaport, primarily related to the timing of concerts with 53 shows held during the first three quarters of 2024, compared to 60 shows held during the first three quarters of 2023.

Additionally, there was a $2.2 million decrease in concession sales at the Las Vegas Ballpark, primarily related to reduced attendance.

These decreases were partially offset by a $0.4 million increase in special event revenue at the Las Vegas Ballpark, a $0.3 million increase in sponsorship revenue at the Seaport due to the execution of four new sponsorship agreements in the first half of 2024, and a $0.5 million increase in private event revenue at the Seaport.

Sponsorships, Events, and Entertainment Costs .

Sponsorships, events, and entertainment costs decreased $3.4 million, or 16%, to $17.4 million for the six months ended June 30, 2024, compared to $20.8 million in the prior-year period.

Sponsorships, events, and entertainment costs decreased $1.4 million, or 4%, to $35.6 million for the nine months ended September 30, 2024, compared to $37.0 million in the prior-year period.

This change was primarily due to a $1.4 million decrease in costs associated with the Las Vegas Ballpark, primarily due to lower cost of sales and labor costs as expected with lower attendance and lower concessions revenue, a $0.3 million decrease in costs associated with the concert series at the Seaport, primarily due to the timing of concerts with fewer concerts held during the current period, and a $0.3 million decrease in breakdown and removal costs associated with the seasonal Winterland Skating concept at the Seaport.

These decreases were partially offset by a $0.6 million increase in costs associated with special events at the Las Vegas Ballpark primarily due to increased variable costs associated with higher special event revenue in the current period.

Operating Costs .

Operating costs increased $0.4 million, or 9%, to $4.7 million for the nine months ended September 30, 2024, compared to $4.3 million in the prior-year period.

This change was primarily due to a $0.5 million increase in insurance expense and a $0.1 million increase in marketing and advertising costs.

Provision for Doubtful Accounts .

Provision for doubtful accounts increased to $1.6 million for the six months ended June 30, 2024, compared to immaterial amounts in the prior-year period, primarily due to a $1.0 million reserve associated with the Winterland Skating concept at the Seaport and a $0.5 million reserve associated with events at the Las Vegas Ballpark, both established during the six months ended June 30, 2024.

Provision for doubtful accounts increased to $2.0 million for the nine months ended September 30, 2024, compared to an immaterial amount in the prior-year period, primarily due to a $1.0 million reserve associated with the Winterland Skating concept at the Seaport, a $0.5 million reserve associated with special events at the Las Vegas Ballpark, and a $0.4 million reserve associated with events at the Las Vegas Ballpark, which were established during the nine months ended September 30, 2024.

Other Income, Net .

Other income, net increased to $0.2 million for the nine months ended September 30, 2024, compared to an immaterial amount in the prior-year period, primarily due to $0.3 million of other income associated with rooftop concessions at the Seaport during the nine months ended September 30, 2024.

Liquidity and Capital Resources

We historically operated as a division within HHH’s consolidated structure, which uses a centralized approach to cash management and financing of our operations.

Prior to the Separation, we operated as a division within HHH’s consolidated structure, which uses a centralized approach to cash management and financing of our operations.

This arrangement is not reflective of the manner in which we would have financed our operations had we been an independent, publicly traded company during the periods presented.

The cash and cash equivalents held by HHH at the corporate level are not specifically identifiable to us and, therefore, have not been reflected in our Unaudited Condensed Combined Financial Statements.

As of June 30, 2024, and December 31, 2023, our

cash and cash equivalents were $3.3 million and $1.8 million, respectively.

As of June 30, 2024, and December 31, 2023, our restricted cash was $42.2 million and $42.0 million, respectively.

Restricted cash is segregated in escrow accounts related to development activity at 250 Water Street and other amounts related to payment of principal and interest on the Company’s outstanding mortgages payable.

The cash and cash equivalents held by HHH at the corporate level are not specifically identifiable to us and, therefore, have not been reflected in our Unaudited Condensed Consolidated and Combined Financial Statements.

As of September 30, 2024, and December 31, 2023, our cash and cash equivalents were $23.7 million and $1.8 million, respectively.

As of September 30, 2024, and December 31, 2023, our restricted cash was $4.0 million and $42.0 million, respectively.

Restricted cash is segregated in escrow accounts related to payment of principal and interest on the Company’s outstanding mortgages payable.

In August 2024, following the final resolution of the 250 Water Street litigation, the escrow amount of $40 million related to 250 Water Street was released to the City of New York.

See Note 7 – Commitments and Contingencies in the Notes to Unaudited Condensed Combined Financial Statements, included in this Quarterly Report for additional information on the 250 Water Street litigation.

HHH’s third-party long-term debt and the related interest expense have not been allocated to us for any of the periods presented as we are not the legal obligor nor are we a guarantor of such debt.

As of June 30, 2024, and December 31, 2023, we have third-party mortgages payable of $155.1 million and $155.6 million, respectively, related to our 250 Water Street development and the Las Vegas Ballpark.

As of June 30, 2024, and December 31, 2023, the Company’s secured mortgage loans did not have any undrawn lender commitment available to be drawn for property development.

See Note 7 – Commitments and Contingencies in the Notes to Unaudited Condensed Consolidated and Combined Financial Statements, included in this Quarterly Report for additional information on the 250 Water Street litigation.

HHH’s third-party long-term debt and the related interest expense have not been allocated to us for any of the periods presented as we were not the legal obligor nor were we a guarantor of such debt.

As of September 30, 2024, and December 31, 2023, we have third-party mortgages payable of $102.5 million and $155.6 million, respectively, related to our 250 Water Street development and the Las Vegas Ballpark.

As of September 30, 2024, and December 31, 2023, the Company’s secured mortgage loans did not have any undrawn lender commitment available to be drawn for property development.

In connection with the Separation, on July 31, 2024, the variable rate mortgage related to 250 Water Street was refinanced, with HHH paying down $53.7 million of the outstanding principal balance and SEG refinancing the remaining $61.3 million at an interest rate of SOFR plus a margin of 4.5% and scheduled maturity date of July 1, 2029.

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Additionally, on July 31, 2024, a subsidiary of HHH that became our subsidiary in connection with the Separation, issued 10,000 shares of 14.000% Series A preferred stock, par value $0.01 per share, with an aggregate liquidation preference of $10.0 million.

Management believes that our existing cash balances, restricted cash balances, funds provided by HHH prior to the Separation, along with expected borrowing capacity and access to capital markets, and the proceeds of our rights offering and the related backstop commitment as described under “—Expected Financings” below, taken as a whole, provide (i) adequate liquidity to meet all of our current and long-term obligations when due, including our third-party mortgages payable, and (ii) adequate liquidity to fund capital expenditures and development and redevelopment projects.

Management believes that our existing cash balances, including the proceeds of our Rights Offering described under “Subsequent Financing” below, restricted cash balances, and funds provided by HHH prior to the Separation, along with expected borrowing capacity and access to capital markets Rights Offering, taken as a whole, provide (i) adequate liquidity to meet all of our current and long-term obligations when due, including our third-party mortgages payable, and (ii) adequate liquidity to fund capital expenditures and development and redevelopment projects.

However, our access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including (1) our credit ratings, including the lowering of any of our credit ratings, or absence of a credit rating, (2) the liquidity of the overall capital markets, and (3) the current state of the economy and, accordingly, there can be no assurances that we will be able to obtain additional debt or equity financing on acceptable terms in the future, or at all, which could have a negative impact on our liquidity and capital resources.

The cash flows presented in our Unaudited Condensed Combined Statement of Cash Flows may not be indicative of the cash flows we would have recognized had we operated as a standalone publicly traded company for the periods presented.

Prior to the distribution, HHH contributed additional cash to the Company in order to fund its operations until a permanent capital structure is finalized.

Prior to the Separation, HHH contributed additional cash to the Company in order to fund its operations until a permanent capital structure is finalized.

However, we do not expect HHH to have an ongoing long-term relationship with the Company and HHH will not have any ongoing financial commitments to the Company.

Expected Financings

The Company expects to conduct a $175 million Rights Offering following the distribution in the third quarter of 2024.

In connection with the Rights Offering, the Company has entered into a backstop agreement with Pershing Square, which through investment funds advised by it, is our largest stockholder.

Pursuant to that agreement Pershing Square has agreed to (i) exercise its pro rata subscription right with respect to the Rights Offering at a price of $25 per share of the Company’s common stock and (ii) purchase any shares not purchased upon the expiration of the Rights Offering at the Rights Offering price, up to $175 million in the aggregate.

The backstop agreement could result in Pershing Square’s affiliated funds owning as much as approximately 72.3% of the Company’s common stock if no other stockholders participate in the Rights Offering.

Any capital raised through the Rights Offering would further strengthen the Company’s balance sheet.

With over $203.4 million of liquidity, primarily consisting of (i) $23.4 million of cash contributed by HHH pursuant to the separation and distribution agreement, (ii) expected gross proceeds from the Rights Offering and (iii)

amounts available under the Revolving Credit Agreement, we believe we will have ample capital to support the existing business and facilitate the Company’s business plan.

Six Months Ended June 30, 2024 and 2023

Subsequent Financings

In September 2024, the Company commenced a $175 million Rights Offering.

In connection with the Rights Offering, the Company entered into a backstop agreement with Pershing Square, which through investment funds advised by it, is our largest stockholder.

Pursuant to that agreement Pershing Square agreed to (i) exercise its pro rata subscription right with respect to the Rights Offering at a price of $25.00 per share of the Company’s common stock and (ii) purchase any shares not purchased upon the expiration of the Rights Offering at the Rights Offering price, up to $175 million in the aggregate.

On October 17, 2024, the Company completed the Rights Offering and issued an aggregate 7.0 million shares of common stock at the subscription price of $25.00 per whole share, for total gross proceeds of $175.0 million.

Nine Months Ended September 30, 2024 and 2023

The following table sets forth a summary of our cash flows:

Six Months Ended June 30,

Nine Months Ended September 30,

Cash used in operating activities

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Operating Activities

Cash used in operating activities increased $31.2 million to $39.1 million in the six months ended June 30, 2024, compared to $7.9 million in the prior-year period.

The increase in cash used in operating activities was primarily due to increased costs incurred in the six months ended June 30, 2024, related to the Separation from HHH, with no similar activity in the prior-year period, and an increase in cash used in operating activities at our segments.

Cash used in operating activities increased $19.8 million to $48.0 million in the nine months ended September 30, 2024, compared to $28.2 million in the prior-year period.

The increase in cash used in operating activities was primarily due to increased costs incurred in the nine months ended September 30, 2024 related to the Separation from HHH, with no similar activity in the prior-year period, and an increase in cash used in operating activities at our segments.

Sponsorships, Events, and Entertainment Adjusted EBITDA decreased $3.9 million primarily due to decreased ticket revenue, event revenue, and concessions sales;

Landlord Operations Adjusted EBITDA decreased $1.3 million primarily due to increased operating expenses, partially offset by increased rental revenue;

and Hospitality Adjusted EBITDA decreased $0.6 million primarily due to reduced restaurant performance.

While we have historically used cash in operating activities, we expect that the additional liquidity provided by our expected financings will provide sufficient capital to fund operations until such time that we may generate cash from operating activities.

Refer to “Expected Financings” above for additional explanation.

Landlord Operations Adjusted EBITDA loss increased $0.9 million primarily due to increased operating expenses, partially offset by increased rental revenue;

and Hospitality Adjusted EBITDA increased $2.4 million primarily due to increased other income, net during the current period.

While we have historically used cash in operating activities, we expect that the additional liquidity provided by the Rights Offering will provide sufficient capital to fund operations until such time that we may generate cash from operating activities.

Investing Activities

Cash used in investing activities decreased $22.4 million to $33.0 million in the six months ended June 30, 2024, compared to $55.4 million in the prior-year period.

The decrease in cash used in investing activities was primarily related to lower property development costs for 250 Water Street, and lower funding of operating costs related to the Tin Building by Jean-Georges joint venture and the Lawn Club joint venture in the six months ended June 30, 2024.

Cash used in investing activities increased $3.6 million to $82.2 million in the nine months ended September 30, 2024, compared to $78.6 million in the prior-year period.

The increase in cash used in investing activities was primarily related to restricted cash released from escrow related to the 250 Water Street development in the nine months ended September 30, 2024.

Financing Activities

Cash provided by financing activities increased $25.3 million to $73.9 million in the six months ended June 30, 2024, compared to $48.6 million in the prior-year period, primarily due to an increase in the net transfers provided by Parent to fund the operating and investing activities explained above.

Cash provided by financing activities increased $22.8 million to $114.1 million in the nine months ended September 30, 2024, compared to $91.3 million in the prior-year period, primarily due to an increase in the net transfers provided by HHH to fund the operating and investing activities explained above.

Contractual Obligations

We have material contractual obligations that arise in the normal course of business.

These contractual obligations may not be representative of our future contractual obligations profile as an independent, publicly traded company.

Our contractual obligations do not reflect changes that we expect to experience in the future as a result of the Separation, such as contractual arrangements that we may enter into in the future that were historically entered into by the HHH for shared services.

Contractual obligations entered into prior to the Separation may not be representative of our future contractual obligations profile as an independent, publicly traded company.

Our pre-Separation contractual obligations do not reflect changes that we expect to experience

in the future as a result of the Separation, such as contractual arrangements that we may enter into in the future that were historically entered into by the HHH for shared services.

We have outstanding mortgages payable related to the 250 Water Street development and Las Vegas Ballpark, which are collateralized by certain of the Company’s real estate assets.

A summary of our mortgages payable as of June 30, 2024, and December 31, 2023 can be found in Note 5 – Mortgages Payable, Net in the Notes to Unaudited Condensed Combined Financial Statements, included in this Quarterly Report.

A summary of our mortgages payable as of September 30, 2024, and December 31, 2023 can be found in Note 5 – Mortgages Payable, Net in the Notes to Unaudited Condensed Combined Financial Statements, included in this Quarterly Report.

We lease land or buildings at certain properties from third parties.

Rental payments are expensed as incurred and have been, to the extent applicable, straight-lined over the term of the lease.

Contractual rental expense was $1.6 million for the three months ended June 30, 2024 and 2023, and $3.7 million for the six months ended June 30, 2024, and 2023.

The amortization of straight-line rents included in the contractual rent amount was $0.6 million for the three months ended June 30, 2024, and 2023, and $1.2 million for the six months ended June 30, 2024, and 2023.

A summary of our lease obligations as of June 30, 2024, and December 31, 2023, can be found in Note 10 – Leases in the Notes to Unaudited Condensed Combined Financial Statements included in this Quarterly Report.

Contractual rental expense was $1.3 million and $1.9 million for the three months ended September 30, 2024 and 2023, respectively, and $5.0 million and $5.6 million for the nine months ended September 30, 2024, and 2023, respectively.

The amortization of straight-line rents included in the contractual rent amount was $0.2 million and $0.6 million for the three months ended September 30, 2024, and 2023, respectively, and $1.4 million and $1.9 million for the nine months ended September 30, 2024, and 2023, respectively.

A summary of our lease obligations as of September 30, 2024, and December 31, 2023, can be found in Note 10 – Leases in the Notes to Unaudited Condensed Combined Financial Statements included in this Quarterly Report.

Critical Accounting Estimates

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Variable Interest Entities

Our Unaudited Condensed Combined Financial Statements include all of our accounts, including our majority owned and controlled subsidiaries and VIEs for which we are the primary beneficiary.

The Company was not the primary beneficiary of any VIE’s during the six months ended June 30, 2024, and December 31, 2023, and, therefore, the Company does not consolidate any VIE’s in which it holds a variable interest.

Our Unaudited Condensed Consolidated and Combined Financial Statements include all of our accounts, including our majority owned and controlled subsidiaries and VIEs for which we are the primary beneficiary.

The Company was not the primary beneficiary of any VIE’s during the nine months ended September 30, 2024, and December 31, 2023, and, therefore, the Company does not consolidate any VIE’s in which it holds a variable interest.

Judgments and Uncertainties

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The determination of whether an entity is a VIE and whether the Company is the primary beneficiary of a VIE is based upon facts and circumstances for the VIE and requires significant judgments such as whether the entity is a VIE, whether the Company’s interest in a VIE is a variable interest, the determination of the activities that most significantly impact the economic performance of the entity, whether the Company controls those activities, and whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.

As of June 30, 2024, the Company had a variable interest in Tin Building by Jean-Georges and as of December 31, 2023, the Company had a variable interest in Tin Building by Jean-Georges and Ssäm Bar.

As of September 30, 2024, the Company had a variable interest in Tin Building by Jean-Georges and as of December 31, 2023, the Company had a variable interest in Tin Building by Jean-Georges and Ssäm Bar.

The Ssäm Bar restaurant closed during the third quarter of 2023, and the venture was liquidated in May 2024.

The Company determined that it is not the primary beneficiary of the VIE’s as of June 30, 2024, and December 31, 2023, as the Company does not have the power to direct the activities of the VIE’s that most significantly impact the VIE’s economic performance.

The Company determined that it is not the primary beneficiary of the VIE’s as of September 30, 2024, and December 31, 2023, as the Company does not have the power to direct the activities of the VIE’s that most significantly impact the VIE’s economic performance.

Therefore, the Company accounts for its investment in the VIE’s in accordance with the equity method.

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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 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.

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The capitalization of development costs requires judgment, and can directly and materially impact our results of operations because, for example, (i) if we don't capitalize costs that should be capitalized, then our operating expenses would be overstated during the development period, and the subsequent depreciation of the developed real estate would be understated, or (ii) if we capitalize costs that should not be capitalized, then our operating expenses would be understated during the development period, and the subsequent depreciation of the real estate would be overstated.

For the six months ended June 30, 2024 and 2023, we capitalized development costs of $3.9 million and $20.2 million, respectively.

For the nine months ended September 30, 2024 and 2023, we capitalized development costs of $46.1 million and $30.6 million, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis