Stock-Based Plans

12 Months Ended

Dec. 31, 2011

Stock-Based Plans [Abstract]

STOCK-BASED PLANS

NOTE 12 STOCK BASED PLANS

Incentive Stock Plans

On November 9, 2010, HHC adopted The Howard Hughes Corporation 2010 Equity Incentive Plan (the “Equity Plan”). Pursuant to the Equity Plan, 3,698,050 shares of HHC common stock are reserved for issuance. The Equity Plan provides for grants of options, stock appreciation rights, restricted stock, other stock-based awards and performance-based compensation (collectively, “the Awards”). Directors, employees and consultants of HHC and its subsidiaries and affiliates are eligible for awards.

Prior to the Chapter 11 cases, our predecessors granted qualified and non-qualified stock options and restricted stock to certain GGP officers and key employees whose compensation costs related specifically to our assets. Accordingly, an allocation of stock-based compensation costs pertaining to such employees has been reflected in our financial statements for periods prior to the Effective Date.

All stock plans are administered by the Compensation Committee of the Board of Directors (“Committee”). Option grant amounts are awarded by the Committee. Options normally extend for ten years and generally become exercisable after five years. Recorded compensation cost for share-based payment arrangements totaled $3.0 million for 2011.

For 2010 and 2009, the GGP stock compensation expense for employees specifically attributed to the HHC Businesses, of approximately $0.6 million and $0.2 million, respectively, has been included in the accompanying financial statements for periods prior to the Effective Date.

As of December 31, 2011, there were a maximum of 2,934,610 shares available for future grant under our various stock plans.

Stock Options

Pursuant to the Plan, each outstanding option to acquire shares of GGP stock (“Old GGP Options”) was converted into (i) an option to acquire the same number of shares of common stock of reorganized GGP (“New GGP Options”) and (ii) a separate option to acquire 0.0983 shares of our common stock for each existing option for one share of GGP common stock (“HHC Options”). The replacement options are fully vested as of the Effective Date and have the same terms and conditions as the outstanding GGP options.

The exercise price under the Old GGP Options was allocated to the New GGP Options and the HHC options based on the relative market values of the two underlying stocks. For purposes of such allocation, the volume-weighted price of shares of GGP after its emergence of bankruptcy and HHC during the last ten-day trading period (the “Trading Period”) ending on or before the 60th day after the Effective Date was used. As the date of emergence was November 9, 2010, the Trading Period was December 27, 2010 through January 7, 2011. The volume-weighted price of one GGP common share upon emergence from bankruptcy was $15.29 and one HHC common share was $54.13 (that was subsequently adjusted by .0983 to be on a comparable basis), during the Trading Period and, therefore, the exercise prices for the Old GGP Options replaced were allocated in a ratio of approximately 74.15% to GGP and 25.85% to HHC. In addition, we have agreed with GGP that all exercises of GGP replacement options would be settled by, except those of the former top two executive officers of GGP whose options were exercised at their termination in December 2010, the employer of the pre-emergence GGP employee at the time of exercise. As of December 31, 2011, the number of shares of common stock issuable upon exercise of the HHC options is insignificant.

The following tables summarize stock option activity:

	Shares			Weighted Average Exercise Price
Stock options outstanding at January 1, 2010	$	—		$	—
Granted		—			—
Exercised		—			—
Forfeited		—			—
Expired		—			—
Stock options outstanding at December 31, 2010		—			—
Granted		751,840			57.81
Exercised		—			—
Forfeited		(39,200	)		59.44
Expired		—			—
Stock options outstanding at December 31, 2011		712,640			57.72

Exercise Price		Shares		Weighted Average Remaining Contractual Term (in years)
$	57.77		595,500		9.2
	69.75		19,640		9.2
	64.41		5,000		9.3
	66.27		21,000		9.4
	55.81		34,500		9.6
	46.49		37,000		9.9
	57.72		712,640		9.2

The fair value on the grant date and the significant assumptions used in the Black-Scholes option-pricing model are as follows:

	2011
Weighted average grant date fair value	$	21.31
Weighted-average expected life of options (in years)		7.9
Weighted-average risk-free interest rate		2.9	%
Weighted-average expected volatility		26	%
Expected annual dividend per share	$	—

The computation of the expected volatility assumption used in the Black-Scholes calculations is based on the median asset volatility of comparable companies as of each of the grant dates.

The balance of unamortized stock option expense as of December 31, 2011 was $12.6 million, which is expected to be recognized over a weighted-average period of 4.2 years. Expense associated with stock options for the year ended December 31, 2011 which is included in general and administrative expense in the accompanying Consolidated Statement of Income (Loss), totaled $2.3 million.

As of December 31, 2011, there were no options exercisable under the plan.

Restricted Stock

In 2010, we granted 8,247 shares of restricted stock to certain non-employee directors as part of an annual retainer for their services on the board of directors and the restrictions on these shares lapsed in June 2011. In 2011, we granted 12,553 shares of restricted stock to certain non-employee directors, as part of an annual retainer for their services on the board of directors. The restrictions on these shares lapsed on June 1, 2012.

Restricted stock awards issued under the plan provide that shares awarded may not be sold or otherwise transferred until restrictions have lapsed as established by the Committee. Generally, upon termination of employment or directorship, restricted stock units and restricted shares which have not vested are forfeited. For the year 2011, recognized compensation expense of $0.7 million is included in general and administrative expense related to restricted stock awards. The fair value of restricted stock that vested during 2011 was $0.5 million. The balance of unamortized restricted stock expense as of December 31, 2011 was $2.2 million, which is expected to be recognized over a weighted-average period of 3.5 years.

The following table summarizes restricted stock activity:

	Shares			Weighted Average Grant Date Fair Value
Restricted stock outstanding at January 1, 2010		—		$	—
Granted		8,247			41.42
Vested		—			—
Cancelled		—			—
Restricted stock outstanding at December 31, 2010		8,247			41.42
Granted		42,553		$	65.18
Vested		(6,895	)		41.42
Cancelled		(1,352	)		41.42
Restricted stock outstanding at December 31, 2011		42,553		$	65.18