Good morning, and welcome to The Howard Hughes Corporation Fourth Quarter 2022 Earnings Conference Call. I would now like to turn the conference over to Eric Holcomb, Senior Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to The Howard Hughes Corporation's Fourth Quarter 2022 Earnings Call. With me today are David O'Reilly, Chief Executive Officer; Jay Cross, President; Carlos Olea, Chief Financial Officer; Dave Striph, Head of Operations; and Peter Riley, General Counsel. Before we begin, I would like to direct you to our website, howardhughes.com, where you can download both our fourth quarter earnings press release and our supplemental package. The earnings release and supplemental package include reconciliations of non-GAAP financial measures that will be discussed today in relation to their most directly comparable GAAP financial measures. Certain statements made today that are not in the present tense or that discuss the company's expectations are forward-looking statements within the meaning of the federal securities laws. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that these expectations will be achieved. Please see the forward-looking statement disclaimer in our fourth-quarter earnings press release and the risk factors in our SEC filings for factors that could cause material differences between forward-looking statements and actual results. We are not under any duty to update forward-looking statements unless required by law. I will now turn the call over to our CEO, David O'Reilly.

Thank you, Eric, and good morning, everyone. Welcome to our fourth quarter earnings call. On our call today, I'm going to begin with a recap of our outstanding year and cover the segment highlights for our Master Planned Communities in the Seaport. Dave Striph will cover the performance of our operating assets, followed by remarks from Jay Cross who will provide updates on our development projects in Ward Village. Finally, Carlos Olea will provide a review of our financial results before we open the lines up for Q&A. I am pleased to report that our fourth quarter results were solid and capped off another exceptional year for HHC. Considering 2022 was a year headlined by rising inflation and falling new home sales, our results were nothing short of outstanding and demonstrated the resiliency of our unique portfolio of assets, which continue to prove its ability to withstand periods of economic uncertainty. Highlights of the year included strong MPC EBT of $283 million, aided by record residential price per acre and builder price participation revenue. Our operating assets delivered record NOI of $239 million, a 6% increase over 2021. At Ward Village, we continue to experience an exceptional pace of condo sales, contracting to sell a record number of units and delivering $677 million in net revenue with strong gross margins. And at the Seaport, foot traffic rose nearly 50% year-over-year, significantly increasing revenue and reducing NOI losses before the impact of the equity losses from the Tin Building. With these operating results generating significant cash flow as well as our strong balance sheet, we were able to continue the deployment of considerable capital into projects that we believe will unlock substantial value over the long term. In 2022, we delivered 6 new projects, including a residential condominium, 388,000 square feet of office and retail space, and 830 multifamily units. The completed operating assets have projected stabilized NOI of $25 million and an implied yield on cost of 7%. Further, we commenced construction on our eighth condo project as well as 233,000 square feet of office and our first single-family for rent project. We currently estimate these operating assets will deliver combined NOI of $12 million with a 6.7% yield on cost at stabilization. Digging into our MPC segment. In the fourth quarter, we continued to deliver strong results, generating $77 million of EBT with solid land sales and a 51% increase in residential price per acre. We also benefited from record builder price participation revenue of $20 million as home prices in our communities remain strong. Ultimately, the results of the quarter contributed to full year MPC EBT of $283 million, reflecting an 11% reduction compared to our record results in 2021. When excluding equity and earnings from The Summit, which declined $61 million year-over-year as a result of its tremendous past success and current lack of inventory, MPC EBT increased $27 million compared to 2021. This growth was ultimately driven by strong land sales, a 32% increase in price per acre sold, and record full year builder price participation revenue of $72 million. In our Houston region, Bridgeland delivered another outstanding quarter with more than 60 residential acres sold at an average price of $555,000 per acre. We also closed on the sale of 2 commercial sites totaling nearly 85 acres, which generated more than $21 million of revenue. With continued strong builder price participation, Bridgeland reported nearly $43 million of EBT in the quarter. This performance capped off a fantastic year for Bridgeland, headlined by an increase in acres sold, record average price per acre of $544,000 and the highest builder price participation revenue in the MPC's history. In The Woodlands, we commenced residential lot sales at 'A'ali'i, which encompasses 25 waterfront lots on Lake Woodlands. These custom lot closings, which generated $22 million of revenue in the fourth quarter, included more than 7 acres sold for a record $3 million per acre. In The Woodland Hills, we experienced a 50% reduction in residential acres sold, partially offset by a 12% increase in price per acre. For the year, we sold 62 residential acres at a record average price per acre of $382,000 and also benefited from our first commercial land sale and strong builder price participation revenue. Out west in Summerlin, we closed on the sale of 2 superpad sites, totaling 24 acres during the quarter. Although this represented a significant year-over-year reduction when compared to the massive 216-acre superpad sale that closed in the prior year, we achieved a new record price per acre of nearly $1.3 million and further growth in builder price participation revenue. As previously mentioned, we experienced a significant $61 million reduction in equity earnings from The Summit during the year. This extremely successful joint venture with Discovery Land has limited lots remaining in inventory pending the upcoming development of Phase II, which will include another 54 acres of land for 28 custom home sites and commence sales later this year. Finally, in the Phoenix West Valley, we celebrated our official groundbreaking of Teravalis in late October with more than 200 key stakeholders in attendance. We continue to work diligently in Floreo, the community's first village, mass grading and selling the infrastructure needed for more than 1,000 residential lots. To facilitate this development, the Floreo joint venture closed on a $165 million credit facility that will fund horizontal development investments in this village. We currently expect lot sales will commence in the second half of this year. Looking at new home sales across all regions, as expected, we experienced a further reduction in the quarter with a total of 251 homes sold. For the year, homebuilders in our MPC sold 1,574 homes, representing a 43% reduction compared to the record sales in 2021. The reduction was largely attributable to Summerlin, which saw a 51% decline. In Houston, lower home sales were also recorded in Bridgeland and The Woodland Hills but a much lower magnitude of 21% and 38%, respectively. To encourage increased sales in the new year, many of our homebuilder partners are increasing incentives and offering reduced interest rates to home buyers. This is having a positive effect on sales traffic throughout our communities and has resulted in increased home sales and reduced cancellation rates on existing inventory. While it remains very early, we're cautiously optimistic given the increased pace of sales in our MPCs and markets thus far in 2023. With respect to future land sales, Carlos will discuss our 2023 guidance in a minute, but we do expect to see a reduction in acres sold in the short term as we continue our discipline of only selling land to meet the underlying demand. Long term, many of our homebuilders are eager to purchase additional land to meet demand in the years ahead with lot inventories in Houston, Las Vegas, and Phoenix remaining at near historic lows. However, for right now, many builders are in a wait-and-see mode, which we expect will subside as we progress throughout this year. As a result, we anticipate land sales this year will decline to a more normalized level seen prior to the pandemic. Shifting to the Seaport, we posted a strong year with a nearly 50% increase in foot traffic compared to the prior year. At Pier 17, this increase was particularly apparent during our Summer Concert series, which included 60 shows more than any previous year with over 180,000 tickets sold or more than 90% of ticket inventory. The success of this year's concert series was so incredible that the rooftop was recently named the #1 Top Outdoor Music Venue in New York City by Red Bull and the #3 Top Worldwide Club by... The success we experienced at the Seaport this year was not limited to the rooftop. During the year, all of our managed restaurants saw increased demand as locals and tourists return to the Seaport. We also had an increase in private events, most notably in the summer, and we leased the remaining available space in the Fulton Market Building to Alexander Wang under a 15-year agreement. The highlight of the year was without a doubt the grand opening of the Tin Building. This 54,000 square foot one-of-a-kind marketplace, curated in partnership with Jean-Georges, has been met with significant accolades from visitors in the media. Although we encountered some labor-related challenges ramping up, which ultimately contributed to reduced hours of operations and significant equity losses in the fourth quarter, we achieved 7-day per week operations in December. We fully expect the increased operating hours and full-scale operations will help to improve performance for this venue going forward. Overall, the Seaport generated full year revenue of $88 million, a 61% increase compared to 2021. Excluding equity losses generated at the Tin Building since its opening, Seaport NOI losses improved $8 million or 44% year-over-year. This improvement highlights the appeal of this iconic neighborhood, which is firmly establishing itself as a premier dining and entertainment destination in New York City. I'll now hand the call back over to Dave Striph.

Thank you, David. In the fourth quarter, our operating assets continued their solid performance, exceeding our expectations and delivering $55 million of NOI, including the contribution from unconsolidated ventures. For the full year, we generated a record NOI of $239 million, which represented a 6% increase relative to 2021. Excluding our divested hospitality and retail assets, NOI increased 9% year-over-year. The most significant increase was seen in our multifamily portfolio, which generated fourth quarter NOI of $11 million and full year NOI of $46 million. For the year, this represented a strong 39% increase, primarily driven by the rapid lease-up of new properties in The Woodlands and Downtown Columbia. Our results were also favorably impacted by strong 12% blended in-place rent growth across the portfolio. Our assets command some of the highest rents in their markets, and at year-end our stabilized properties were 95% leased, which is a testament to the quality of our product and our highly amenitized locations. With strong demand in our markets, we continue to develop best-in-class assets, including Starling at Bridgeland, which was placed into service late in the third quarter and is already 35% leased as of year-end. Similarly, in the fourth quarter, we completed and began leasing units at Marlow in Downtown Columbia, which is recently named as the best place to rent in America. With additional multifamily projects under construction in Bridgeland and Summerlin, we expect meaningful incremental NOI growth in the coming years as these new projects are completed and moved towards stabilization. In office, we produced fourth quarter NOI of $28 million and full year NOI of $111 million. For the quarter, this reflected a 7% year-over-year reduction, which was primarily the result of some tenant vacancies that occurred earlier in 2022 in The Woodlands and Downtown Columbia. These reductions were partially offset by strong lease-up and the expiration of rent abatements at 6100 Merriweather and 9950 Woodloch Forest. For the full year, office NOI was up slightly, benefiting from abatement expirations and new leasing momentum throughout the portfolio. These were largely offset by the aforementioned tenant vacancies earlier in the year. During 2022, we executed approximately 510,000 square feet of new or expanded office leases, including 253,000 square feet in The Woodlands, 155,000 square feet in Downtown Columbia, and 102,000 square feet in Summerlin. We expect to benefit from this leasing momentum later in 2023 and into 2024 and beyond as office build-outs get completed and free rent periods burn off. Overall, the strong leasing performance is a testament to our world-class and amenity-rich office assets, which continue to see elevated demand as employers continue to bring their employees back into the office. With a strong focus on a flight to quality in today's market, we expect to see continued strong leasing momentum in the year ahead. In retail, NOI was $13 million in the fourth quarter, which reflected a 6% reduction compared to the prior year primarily related to increased operating expenses and reduced retail square footage in Hawaii as a result of the decommissioning of Center to prepare for the development of the Park Ward Village Condominiums. For the full year, retail NOI was $52 million, or a modest reduction of 2% compared to 2021. This reduction was primarily due to one-time rent payments at Ward Village during the prior year, which were associated with the recovery from the COVID-19 pandemic. Overall, the remainder of our retail portfolio performed well with improved occupancy and leasing percentages in all of our markets. Finally, our share of NOI from unconsolidated ventures increased 18% in the fourth quarter and 75% for the full year. This improvement is almost entirely from the absence of net operating losses at the 110 North Wacker office building, which was sold during the first quarter of 2022. I will now turn the call over to our President, Jay Cross.

Thanks, Dave, and good morning, everyone. In the fourth quarter, we continued to advance our development pipeline with the completion of 3 office and multifamily projects including 1700 Pavilion, a 266,000 square foot office tower in Downtown Summerlin, which is already 50% leased; Marlow, a 472-unit multifamily development in Downtown Columbia, which includes 33,000 square feet of ground floor retail space; and Creekside Medical Plaza, a 33,000 square foot medical office building here in The Woodlands. All of these projects, which were completed on time and on budget, are designated as green buildings and are projected to provide more than $18 million of incremental NOI upon stabilization. We also continue to make good progress on our other projects under construction including Tanager Echo, a 294-unit multifamily complex in downtown Summerlin expected to be completed in the second quarter of this year; Wingspan, our 263-unit single-family for rent development in Bridgeland; and the new South Lake medical office building in Downtown Columbia, which started construction during the third quarter. We expect Wingspan and the South Lake medical office building will be completed in early 2024. In the fourth quarter, we commenced construction on the Summerlin South office, a 147,000 square foot 3-story office building, which we expect will be completed later this year or early 2024. We continue to see strong demand for office products in the Las Vegas Valley, and we believe this new development will nicely complement our Class A portfolio in Downtown Summerlin. Overall, 2022 was an excellent year from a development standpoint with the completion of 6 projects encompassing 388,000 square feet of office and retail space and 830 multifamily units. Combined with our 4 projects underway, all of these projects are expected to contribute incremental annual NOI of nearly $43 million to the company upon stabilization. Looking quickly at the Seaport, we continued site work at 250 Water Street during the fourth quarter, but we paused construction efforts due to a third-party lawsuit which challenged the Landmark Preservation Commission approval of the project. In January, the court ruled in favor of the petitioners and voided the Landmark's approval, requiring us to cease all construction work. We strongly disagree with the court's decision and subsequently filed an appeal. A request for a stay of the corridor was granted, which allowed foundation work to continue and pending a full hearing scheduled for this week. We'll keep you apprised as more information becomes available. Shifting over to Ward Village. We had another tremendous year, closing on 607 condo units which generated $677 million of net revenue. The majority of these sales are related to the completion of Ko'ula, our sixth condo tower, where we closed 549 units for $620 million in net revenue. 151 of these units were closed in the fourth quarter, contributing $207 million of net revenue. At year-end, Ko'ula was 97% sold. Also in the fourth quarter, we sold the last remaining condo unit at Waiea and 7 units at 'A'ali'i, generating combined net revenue of $11 million. At the end of the year, 'A'ali'i was 96% sold. On the construction front, we are making great headway at Victoria Place as well as the Park Ward Village, which commenced construction late in 2022. Victoria Place is 100% presold, and we are on track to deliver the tower in early 2024. Park Ward Village ended the year 92% presold, and we expect to complete this tower in 2025. Finally, with respect to presales, we continue to experience a rapid pace of sales at our 2 new condo buildings launched during 2022. Ulana, the community's ninth project consisting of 696 units of fully dedicated workforce housing, where we are 97% presold with only 20 units remaining at year-end. In early January, we started construction on Ulana and also closed on a $264 million construction loan for the project. Ward Village's tenth condo project consisting of 329 units launched presales in late September. This building ended the year remarkably 73% presold. Overall, in 2022, we had a record year contracting to sell 1,055 condo units with a sales value of more than $1.1 billion. Our projects under construction and in presales accounted for 961 of these units, which are secured by nonrefundable deposits. This represents significant revenue, which is a meaningful contribution to HHC's bottom line upon their completion and provides incremental funding to advance new development projects in the future. I would now like to hand the call over to our CFO, Carlos Olea, who will review our financial results.

Thank you, Jay, and good morning, everyone. In the fourth quarter, we continued our strong performance, which contributed to favorable full year results that exceeded our guidance expectations. In summary, our MPCs produced $77 million of EBT in the fourth quarter despite continued market headwinds, resulting in full year EBT of $283 million. This result for 2022 was only 11% lower than our record results in 2021 and was at the upper end of our most recent guidance, which anticipated a 10% to 17% year-over-year reduction. Our operating assets delivered $55 million of NOI during the fourth quarter with record full year NOI of $239 million. Compared to 2021, this represented a 6% increase, which compares favorably to our most recent guidance which contemplated a 3% to 5% increase. When excluding divested assets, operating asset NOI increased 9% year-over-year. At Ward Village, we generated $62 million of condo profit in the quarter, which contributed to full year condo profit of $196 million and overall gross margins of 29%. This also exceeded our guidance expectations, which projected gross margins ranging from 26.5% to 27.5%. At the Seaport, we recorded year-over-year NOI improvement of 11% in the fourth quarter and 44% in 2022 when excluding losses from unconsolidated ventures of the Tin Building. As expected, this new asset's grand opening in late September resulted in sizable equity losses from the fourth quarter, but we anticipate significant improvement going forward as this asset operates at full capacity and starts to move towards stabilization. Lastly, we reported full year G&A of $82 million, which came in at the lower end of our $80 million to $90 million guidance range. This represents more than a 30% reduction compared to our pre-transformation G&A run rate of approximately $120 million in 2019. Overall, we are very pleased with our performance in 2022. Looking forward, we remain very positive about the long-term outlook for our businesses, but we do anticipate some near-term challenges in 2023 as a result of ongoing market headwinds. In our MPC segment, we expect the current soft housing market and reduced new home sales will impact homebuilder demand for new residential acreage. As a result, we expect MPC EBT to decline 25% to 35% compared to 2022. Although this is a sizable reduction from the outsized levels of earnings experienced in recent years, this EBT level remains favorable and is comparable to more normal MPC earnings generated during 2017 and 2018. In operating assets, we anticipate the momentum throughout our multifamily portfolio to drive NOI growth going forward. In office, however, we expect a modest year-over-year NOI reduction primarily due to a loss of some office tenants during 2022. Although we had tremendous success leasing more than 500,000 square feet of vacant office space across our portfolio during 2022, office build-out times and renovation periods included in many of those new leases will limit NOI growth until later in 2023 and into 2024. Overall, excluding the contribution from divested assets in 2022, we project operating asset NOI will be down 2% to up 2% year-over-year. After another successful year of condo closings at Ward Village during 2022, we expect reduced condo sales and profit in the near term as our next tower, Victoria Place, is not expected to be delivered until early 2024. In 2023, condo sales will be driven by closings of remaining units at 'A'ali'i and Ko'ula, which are 96% and 97% sold, respectively. As a result, condo sales in 2023 are expected to range between $45 million and $55 million with a gross margin between 25% and 28%. Condo sales are expected to materially increase in 2024 with Victoria Place closings expected to generate approximately $775 million in revenue. And finally, in 2023, we expect cash G&A to range between $80 million and $85 million, which excludes anticipated noncash stock compensation of approximately $5 million. Looking at asset dispositions. During the fourth quarter, we sold 2 retail properties, including Lake Woodlands Crossing for $23 million and Creekside Village Green for $28 million. Total net proceeds were $39 million, with Lake Woodlands Crossing now subject to a 99-year ground lease with HHC. With a combined basis of only $23 million, this disposition has generated a $26 million gain during the fourth quarter. Together with the sale of the Outlet Collection at Riverwalk as well as our interest in 110 North Wacker earlier in the year, total net proceeds from asset sales in 2022 were $216 million. Turning to our balance sheet. We ended the year with $627 million of cash, which leaves us well positioned to deploy capital into our development pipeline. At the end of the fourth quarter, the remaining equity contribution needed to fund our current projects was $266 million. From a debt perspective, we have $4.7 billion outstanding at the end of the year with only $228 million of maturities in the next 2 years and approximately 87% due in 2026 or later. During the fourth quarter, we closed nearly $1 billion in financings, including $575 million of permanent debt, $219 million of construction loans for our latest developments, and a $200 million access loan for horizontal development in Bridgeland. This tremendous financing achievement not only extended our weighted average debt maturity to 6 years but also resulted in 100% of our debt being fixed, capped, or swapped to a fixed rate, which significantly mitigates our risk in this rising rate environment. With that, I would now like to turn the call back over to David.

Thank you, Carlos. Before we open up the lines for Q&A, I just want to reiterate the exceptional performance of our assets in 2022. Looking forward for 2023, we do not have a condo tower that closes and therefore we'll see reduced sales. And while we may encounter some market challenges in the short term, we believe that our unique business model has historically achieved outsized returns throughout various market cycles. We have an exceptional portfolio of assets with a robust pipeline of new development ahead of us, which well positions the company for net asset value growth in the years ahead. As the attractiveness of our communities continues to become more and more apparent, it is no accident that in 2022, The Woodlands is once again ranked the best place to live in America. Summerlin was ranked in the top 10 selling MPCs in the country, and Columbia was rated the best place to rent, best place for jobs, and safest city in America. The accolades for our communities and our company's strong results continue to speak to the success of HHC. And with the continued development in our pipeline, we know the best is yet to come. Now let's start the Q&A portion of the call. We'll begin by answering a few questions that have been generated by Safe Technology, which will be read by Eric Holcomb, Eric, first question?

Thanks, David. The first question today is, will you be considering a dividend at some point in the future? Carlos, do you want to take that one?

Thank you, Eric, and good morning, everyone. Well, one of the biggest benefits of HHC is our self-funding business model, where we can harvest free cash flow to fund our development pipeline without the need to raise capital. And we intend to continue to do this going forward because we believe that the best use of our cash is to invest in new developments that create the largest risk-adjusted returns, or like we did towards the end of 2021 and early 2022, to buy back our stock when we see it at a significant discount to intrinsic value, increasing our NAV. At some point, if free cash flow exceeded the development needs and stock buybacks didn't make sense, we could consider a dividend, but we do not have any plans to implement the dividend as of now.

Thanks, Carlos. The second question is, can you please give an overview of the water issue in Arizona? According to water authorities in Buckeye and Arizona State University, Buckeye is one of the top 3 cities that will have the largest water cuts by 2026. David, do you want to take this question?

Sure. And it's a great question and one we've been answering for a while. Look, issues of water management are inherent in desert environments. Clearly, Phoenix, Arizona, as is Summerlin in Nevada, are desert environments, and we thoroughly investigated the access to water for Teravalis leading into our acquisition in 2021. We relied strongly on our external experts as well as our experience in Summerlin, where over the past 10 years, the population has doubled but the per capita usage has decreased significantly to the overall usage today of water in Las Vegas being less than what it was 10 years ago. Shifting to Teravalis, development in Floreo, our first village, which is about 3,000 acres and 7,000 homes, is moving ahead as planned. Floreo has already secured a 100-year certificate of assured water supply from the State of Arizona, and that full development will take about 10 years to 12 years to complete. The balance of Teravalis is divided into 9 phases. In the first 5 phases, we have been awarded an analysis of assured water supply, which is the last step really before receiving a 100-year certificate that Floreo has. Look, we're going to continue to support the introduction of modern technology and innovation by collaborating with local, state, and community leaders to make sure that we're executing this in the right way. We are long-term investors. We're going to own and live in these communities. Our employees live in these communities. Their kids are going to go to school in these communities. We are absolutely committed to making sure that we protect the precious resources that we need to see the success of all of these communities. So it has our full attention, and we're incredibly confident that we're going to be able to execute the way we outlined it when we acquired that land.

Thanks, David. The third question today is, can you give an update on debt compliance? Are there any properties still in technical default or about to be? Carlos?

Thank you, Eric. So at year-end, we had 3 properties that did not meet the debt service coverage ratios. These are 1 Hughes landing, 2 Hughes Landing, and they do not have a material impact on our liquidity or our ability to operate the assets because the noncompliance triggers a cash drop, which simply means that we can still use all the cash flows for the operation of the asset. They simply cannot be put into corporate, and they don't really have any other restrictions. Further, we expect that for Waterway Square, the instance of noncompliance will be cured by the second quarter of this year because it has to do with an extension that had pre-rent. And as that burns off, it will get back into compliance, while the instances in 1 and 2 Hughes Landing are related to tenant vacates that we have active prospects for.

All right. I have another one for you, Carlos. Number four, does operating in a higher interest rate environment change the decisions on specific projects? An example would be for an office or apartment building that was planned a year ago that might not make sense anymore.

Sure. Thanks, Eric. Well, when it comes to development projects, higher interest rates get capitalized into the basis of the asset, and they're not really one of the main components of cost for a project. Where they do have an impact is on our weighted average cost of capital, which in turn affects our capital allocation decisions. So internally, we meet every 2 weeks. We have a Capital Allocation Committee that meets every 2 weeks. It's a very rigorous process that we take very, very seriously, and we evaluate all of the projects regardless of where they were initially brought up, approved, or thought of, and we allocate capital appropriately to the projects that achieve the highest risk-adjusted returns.

All right. Thanks, Carlos. And our last question from today is, please give details on the asset sales in The Woodlands. How does the company decide what to sell and what to keep? Generally, doesn't the company prefer to have a monopoly on commercial properties in its MPCs? David?

Yes, absolutely. It's a great question. And I think I'd answer it by going back to the transformation plan in late 2019 that we announced when we shifted the company. And we said that we were going to focus on those areas of assets where we had a competitive advantage. And the question references a monopoly on commercial properties. Well, it's not a monopoly, but we do have outsized control and we do have outsized ownership of the office-based multifamily space within our communities. And those assets we intend to keep. The transformation plan, we said that we were committed to keeping the downtown city center retail that impacts the way a community feels and operates. But those one-off strip centers that we developed throughout the communities we didn't see as having a competitive advantage and therefore deemed a noncore. Both Creekside Village Green and Lake Woodland Crossings are perfect examples of those noncore, outside of the city center retail strip centers, where we were able to develop these assets at incredible yields and sell them, generating a $26 million gain. That's a tremendous profit creation opportunity for our shareholders and one that we should execute on every day that can continue to add free cash flow to the bottom line that can accelerate other developments.

All right. Thanks, David. Gary, we'll move to the live Q&A now.

Our first question is from Anthony Paolone with JPMorgan.

Maybe I'll start where you just left off on the disposition and general capital allocation side. Any thoughts or plans for asset sales in 2023? And then also just thoughts around share buybacks or other capital uses for this year?

Tony, thanks for the question. It's David. We don't have anything planned, but we're always evaluating potential asset sales of those kind of noncore strip retail. Really, we don't have anything left outside of our MPCs now that we've completed all of those noncore dispositions. So we'll maybe see a one-off sale of some of those smaller retail centers. It's all going to depend on where the pricing is and where we see the market environment and what the use of that capital could be. We still feel very strong that our development pipeline can generate outsized risk-adjusted returns, and we see the vast majority of our capital allocation strategy going there. We're always going to be on the lookout for those times where the share price drops below intrinsic value. And if those opportunities arise, capital could get allocated there. But it's tough to say that this is formulaic or programmatic in terms of how we allocate capital. We have to be nimble and adjust based on what are some pretty dynamic market environments right now.

Okay. And then I guess one follow-up on the capital side. Just the thought process around starting an office building in Las Vegas on spec. Just you have another one that's in lease-up. And just how you thought about using that capital there and just the demand for space?

This is Jay Cross. I'll take that one. 1700 is continue to lease very well, and 1700 and 1 and 2 Summerlin are perhaps the best office buildings in the Vegas market. They're mid-rise buildings, which is not a typical Vegas product, and so we felt that we were missing a segment of the market by not having a 3-story simpler office product. And that's what we're building on Spec in what we call Village 15, which is south of the Downtown. If we didn't start something, we wouldn't have any product available for another 2 or 3 years in the Class A sector. And we feel it was important that given Las Vegas' intrinsic strength, that we have product that keeps us in the marketplace. So it's only just coming out of the ground, but we're very optimistic that we're going to do well with this building.

Okay. And then just in terms of the MPCs, I know mix plays a big role in terms of pricing and what you do quarter-to-quarter. But as we think about your guidance for 2023, like what type of just more macro backdrop does that assume? Like I'm trying to just put it into context of just a U.S. housing market that started off on a pretty muted foot here this year.

Yes. It's been an unusual couple of quarters in the U.S. housing market, Tony. And I would tell you that as Carlos mentioned in his prepared remarks, we really felt like the past several years have yielded outsized results. We've seen incredible results in the past 2 years, especially coming out of the pandemic. When we thought about guidance this year and where we saw with underlying home sales, we wanted to maintain our discipline of only selling land to keep up with underlying sales. From what we see right now, and as I said earlier, it's a rapidly changing market environment, we see home sales kind of reverting back to a 2017 or '18 level within our MPCs. Therefore, our guidance is at an MPC EBT level that's consistent with those years, which, from our perspective, were very good years. We're really cautiously optimistic that we'll be able to achieve those results this year. Clearly, as I mentioned in my remarks, home sales in the fourth quarter came down pretty meaningfully to about 250 homes. What we've seen in January and February already has exceeded that quarter, so we're starting to see a modest uptick early in 2023. I don't know that we've seen enough data yet to call it a trend, but I think we're pretty pleased with the results so far and hopeful that they'll continue.

Okay. And then just the last question on the MPCs and with regards to Teravalis and Floreo. What do you have assumed for this year from, I guess, Floreo?

Well, we're assuming that we're going to contract close to 1,000 lots during the year 2023. But we won't be able to close those lots until we finish all of the infrastructure associated with them. So we see very modest contribution in that guidance in 2023 from Floreo.

Next question is from Alexander Goldfarb with Piper Sandler.

So David, two questions here. First, just going back to Anthony's question on the home sales and going back to the trend. I think you guys said that MPC EBIT would be down 25% to 35%, which, if we take this year, that sort of implies a 220 run rate. I think historically you guys are at 180 to 200 so it'd still be above the historic. My question is, is this a case where because the value per acre is going up, you're selling sort of fewer acres but at higher price points? And that's why intuitively, we would think that land sales will go down more, but it's because the value per acre has gone up that you could sell fewer acres but still earn more? I'm just trying to rationalize where is the home market today versus a few years ago.

Yes, it's a great point, Alex, and one that I probably should have stressed earlier. Compared to '18 or '19, we can generate the same or greater MPC EBT with fewer acres because our price per acre continues to accelerate higher as the demand for our Master Planned Communities continues to grow. I think that is part of why we feel good that we'll be able to achieve these results. We spoke during the prepared remarks that in Summerlin, this past quarter, we were close to $1.3 million per acre, which is an all-time high. It was a moment in time that I don't know we'll perpetuate for the next several years. It's great dirt that we have left, and we think we can sell it at a great price per acre, but I don't know that we'll be able to consistently achieve those results for the next year.

Okay. And then the second question is just going back to the Arizona water issue. Obviously, it's been in the press. You spoke about a 100-year certificate that you're trying to go for. I think you also mentioned something about you have the water rights or buildable outlook for the next 10 years. Then in the media, there's also stories about how agriculture is actually the bigger user of water, not necessarily housing. So just putting it all together because there the headlines that seem scary, but obviously, you guys presumably have done a tremendous amount of due diligence politically, geologically, etc. How should we really think about what's going on here? And are the headlines that we see in the media, are those new? Or is this always the case whenever you try to develop in a water - desert-type environment, and therefore, these headlines are really nothing new? And so far, everything that you're seeing and even the governor's statements are all basically according to what you would have originally underwritten?

Look, I would tell you that the governor statements and the media focus that has been on the water issue is consistent with what our understanding was going into the acquisition. There's no new information that's come up over the past several months that changes our view. We had done our work. We had a great idea of how much water there was and how much water there wasn't. I would tell you that given the continuation of the drought across the country, this is an issue that continues to gain traction and momentum but one that we've been focused on since I've been at Howard Hughes because it's been an issue in Nevada in the Las Vegas Valley. We've seen what those efforts - the results of what great collaboration across developer city, state, local authorities and a focus on conservation can drive. We're highly confident that we can see the same kind of outcome in Phoenix West Valley because we've seen already great collaboration from the Mayor of Buckeye, from Governor Ducey, from the Mayor in terms of driving great outcomes that will allow those who want to live in the Phoenix West Valley the opportunity to forward that affordable home that they can't find in many other cities in this country.

The next question is from John Kim with BMO Capital Markets.

On guidance, I was wondering if you could provide guidance on interest expense given your debt is largely fixed or swapped for most of this year.

So I think the guidance that we provided in terms of NOI, MPC EBT, condo profitability, and G&A is about all we're going to provide, which is what we've historically done. I think our interest calculation for the forward years is pretty straightforward. They're on a line item by line item detailed basis within our supplemental. I think most of our investors and analysts have an opportunity to get to a number that's very close pretty easily.

Okay. You do have a $650 million of swaps that expire this September. What's your strategy as far as what you do upon expiration? And is this the only swap you have expiring this year?

Yes. John, this is Carlos. That is the largest swap that we have expiring this year, the only swap actually. We're already looking at alternatives right now for how we're going to cover the risk for those cash flows when that swap expires.

You mentioned also your capitalized interest policy in answer to another question. What are you expecting as far as capitalized interest in '23?

Capitalized interest in '23 will be largely dependent on how many new developments we start beyond what's been announced today. Those that have been announced today have assigned individual construction loans where we do capitalize interest into those buildings. Those are shown in the total cost of our expected spend in those buildings. So when we announce a new development project, we tell you what the total project cost is. Within that total project cost, we include the capitalized interest that we expect to put into that asset over the development period. That's a number that can change if new projects are added and continue to grow. But I think that the total capitalized interest for the development pipeline, strategic development segment is pretty straightforward.

Okay. Moving to operating assets. David, I was curious about your comments on retaining office within your MPCs. And you have been outperforming the local markets, but reflective of market conditions, leases coming down, what's going to be the catalyst for occupancy to pick up? And if you could provide any color on what leasing activity was in the fourth quarter versus the full year.

Yes. Look, I would tell you that what we've seen throughout 2022, and we don't see it slowing down, has been a meaningful flight to quality. As employers are trying to incentivize employees to get back to the office, they're focused on really bringing their employees back to amenity-rich great locations that make it easier to get back to the office. We've seen occupancy and kind of body heat within our office higher than what most national reports have been. I think that's largely because we have great amenitized buildings. We have very short commutes for those that live and work in The Woodlands. In general, for the full year, we did 253,000 square feet of new office leases in The Woodlands, over 150,000 in Colombia and over 100,000 in Summerlin. I think that is indicative of what we're seeing, employers' flight to quality to amenity-rich, great located buildings as well as meaningful out-of-state relocations into our Master Planned Communities. Of the 90,000 to 100,000 square feet of leases that we've done right here in our headquarters building, at 9950 Woodloch Forest, we've done corporate relocations from California cosmetic companies, gas and fiber relocations, and a Northeast-based crypto company come into our building. It has been different than the traditional oil and gas users that we've seen in the Houston market. I think our comfortability and our optimism with our office portfolio is driven by the quality of buildings we have that are in some of the best communities in America that continue to attract both residents and employers that are leaving those higher-tax, less business-friendly states looking for a new home.

You don't have much expirations this year. It seems pretty modest. Do you expect occupancy to trough in '23?

I think that we're going to see a combination of hopefully positive new leasing. But there are always those things that go bump in the middle of the night, whether those are tenant bankruptcies or downsizes or things that you don't necessarily anticipate. Look, I think that for the year, we should see a positive increase in occupancy throughout our office portfolio. I don't know that, that positive increase in occupancy and net absorption that we're projecting and that we're working on real-time will necessarily translate to increased NOI in '23 given the build-out times and free rent periods associated with those new leases. But long-term, I think those leases create incredible value because there are net effective rents that are significantly higher than the yields given the cost basis of these assets.

Okay. My final question is on Seaport and the Tin Building. You mentioned Tin Building is now on a 7-day operating week. But can you discuss the pressures of labor costs and if that extends out when you think both the Tin Building would be profitable?

So look, clearly, it's very difficult to drive free cash flow and profitability of a building that you can't open 7 days a week. It wasn't until December that we were actually able to get there. Consistent with how we've opened other restaurants with Jean-Georges and great restaurateurs, we want to ensure that for those first several months that we're open and running, we're delivering incredible service, incredible quality of food, and incredible experiences. As a result, we intentionally overstaff to make sure we get it right. Once we hit that point, which we believe we are achieving now, and I think the team has done an incredible job, we'll be able to pare back that overhead, that labor cost, get it back into line with what we expected going in, and hopefully minimize the losses for the next few quarters and then hopefully get towards profitability in the back half of this year. Clearly, inflationary pressures on not just labor but food as well are hurting our ability to drive profit early on in this opening. But rightsizing the labor, rightsizing the recipes, rightsizing each of the experiences within the Tin Building, we think can allow us to turn the corner pretty quickly because the revenue generated there, the foot traffic that we're generating has been nothing short of exceptional. With that much volume going through that building every day, we'll be able to turn that corner and push towards much better results for our shareholders this year.

The next question is from Hamed Khorsand with BWS Financial.

So first question I had was, could you just define your — given that you're saying you're a self-funding business, what that would entail this year given the smaller financial footprint you're expected to have with EBTs this year?

Hamed, thank you for the question. As we also talked about our Capital Allocation Committee, we are always looking and matching our sources for cash flow with our development pipeline. So what we might see is not a change in the model. It's that we will continue to match the free cash flows that we harvest from NOI, land sales, and the few condominium sales that we will have this year and take that and look at our pipeline and match out the inflows with the outflows.

I understand that. But are you going to be having a smaller amount of projects this year because you're going to have less cash flow? Or are you going to be into debt to keep the flywheel going as far as projects are concerned?

No. Yes, I mean, we're not going to see as much new development this year than we have in past years because we're not closing the condo this year, and therefore the free cash flow is lower. Our job is to match fund that net free cash flow that comes in into the uses on the other side, whether that's share buybacks or new developments. In years where we have outsized free cash flow, we can start more projects. The years that we have less free cash flow, we're going to start fewer projects. There are years where there's free cash flow that doesn't necessarily get used entirely because there's just not enough great projects or we just can't get them out of the planning stages and into the dirt fast enough. Look, we look at our unfunded cost of our existing development pipeline and the cash that we have on the books that can more than fund that and leave us an adequate cushion today. As that free cash flow comes in, we'll be able to start a handful of new projects this year. We think we have the opportunity to do some great projects that will not just create value on the projects alone, but will be incredibly additive to the overall Master Planned Communities that they're built in. Those are the unique opportunities that we'll execute on.

Okay. And my other question was, could you just talk about the competitive landscape with these tenant losses? I think it's the first time you've talked about tenant losses since COVID. What's driving that? And how are you staying competitive in your MPCs?

Well, I would tell you that our buildings, and we own the majority of the buildings within our MPCs, continue to outperform the regions. I think they do that because we offer the quality of life that so many employees and employers are looking for, that those out-of-state migrations that I talked about that have come into The Woodlands, Columbia, and Summerlin are leasing up that space. We saw good leasing momentum this year. I quoted earlier the number of square feet that we leased in each of our markets. Those were, I think, very strong results given the macro environment and the shift of more folks working hybrid or from home. I feel great that our communities and our assets will continue to outperform as they have for the past decade.

The next question is from Alex Barron with Housing Research Center.

I was just hoping you could provide a little bit more clarity on the timing of the next couple of condo tower closings. I think when you said early 2024, is that first quarter or not necessarily? And then what follows after that? Is there another one in 2024? Or is it going to be until 2025?

So our next condo delivery is going to be Victoria Place, and that will be early 2024. I'm going to hedge on 1Q, 2Q, and I know it makes it really difficult to model for you all. For us, we have to close it, we have to close it right, and we have to deliver a great experience for our new residents coming in. Whether that means the end of March or early April, I'm more focused on doing it right than hitting any particular quarter. Especially given the number of units in that building, it's not as if we close them all on 1 day. We'll space them out in blocks over the course of what would be probably at least a month. As a result, we may see some in 1Q and some in 2Q. But sitting here today, I think it's a little too difficult with over a year to go to say exactly what day we'll be closing those units. As we get closer, we can provide more detail there. We won't see another closing in 2024, but we do anticipate in 2025 with the tower after Victoria Place, which is the Park Ward Village. We have a pretty good runway with Park and Ulana that we should see a tower a year for the foreseeable future.

This concludes our question-and-answer session. I would like to turn the conference back over to David O'Reilly for any closing remarks.

We appreciate all of you joining us today and getting some great questions and fleshing out some of these details. We hope to see a lot of you at the upcoming investor conferences we have as well as our Investor Day with a few other of our peers in Hawaii. If there's any other questions or follow-up, we're always available. Thank you again.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.