10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2015

or

☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 001-34856

THE HOWARD HUGHES CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	36-4673192
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification number)

13355 Noel Road, 22nd Floor, Dallas, Texas 75240

(Address of principal executive offices, including zip code)

(214) 741-7744

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes    ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

☒ Yes    ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes    ☒ No

The number of shares of common stock, $0.01 par value, outstanding as of May 8, 2015 was 39,707,335.

THE HOWARD HUGHES CORPORATION

INDEX

	PAGE NUMBER
PART I FINANCIAL INFORMATION
Item 1: Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	3
Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014	4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2015 and 2014	5
Condensed Consolidated Statements of Equity for the three months ended March 31, 2015 and 2014	6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014	7
Notes to Condensed Consolidated Financial Statements	9
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3: Quantitative and Qualitative Disclosures about Market Risk	56
Item 4: Controls and Procedures	56
PART II  OTHER INFORMATION	57
Item 1: Legal Proceedings	57
Item 1A: Risk Factors	57
Item 6: Exhibits	57
SIGNATURE	58
EXHIBIT INDEX	59

2

THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

	March 31,		December 31,
	2015		2014
	(In thousands, except share amounts)
Assets:
Investment in real estate:
Master Planned Community assets	$	1,639,464	$	1,641,063
Land		321,176		317,211
Buildings and equipment		1,295,694		1,243,979
Less: accumulated depreciation		(173,439)		(157,182)
Developments		1,109,109		914,303
Net property and equipment		4,192,004		3,959,374
Investment in Real Estate and Other Affiliates		56,127		53,686
Net investment in real estate		4,248,131		4,013,060
Cash and cash equivalents		458,372		560,451
Accounts receivable, net		37,271		28,190
Municipal Utility District receivables, net		111,066		104,394
Notes receivable, net		26,892		28,630
Deferred expenses, net		73,845		75,070
Prepaid expenses and other assets, net		293,199		310,136
Total assets	$	5,248,776	$	5,119,931
Liabilities:
Mortgages, notes and loans payable	$	2,123,617	$	1,993,470
Deferred tax liabilities		63,568		62,205
Warrant liabilities		474,890		366,080
Uncertain tax position liability		4,709		4,653
Accounts payable and accrued expenses		458,267		466,017
Total liabilities		3,125,051		2,892,425
Commitments and Contingencies (see Note 15)
Equity:
Preferred stock: $.01 par value; 50,000,000 shares authorized, none issued		—		—
Common stock: $.01 par value; 150,000,000 shares authorized, 39,707,335 shares issued and outstanding as of March 31, 2015 and 39,638,094 shares issued and outstanding as of December 31, 2014		397		396
Additional paid-in capital		2,839,709		2,838,013
Accumulated deficit		(712,894)		(606,934)
Accumulated other comprehensive loss		(7,259)		(7,712)
Total stockholders' equity		2,119,953		2,223,763
Noncontrolling interests		3,772		3,743
Total equity		2,123,725		2,227,506
Total liabilities and equity	$	5,248,776	$	5,119,931

See Notes to Consolidated Financial Statements.

3

THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

	Three Months Ended March 31,
	2015		2014
	(In thousands, except per share amounts)
Revenues:
Master Planned Community land sales	$	48,081	$	47,671
Builder price participation		5,698		4,097
Minimum rents		35,194		20,360
Tenant recoveries		9,667		6,015
Condominium rights and unit sales		34,857		3,126
Resort and conference center revenues		12,003		9,426
Other land revenues		3,293		2,512
Other rental and property revenues		6,297		5,446
Total revenues		155,090		98,653
Expenses:
Master Planned Community cost of sales		23,896		23,078
Master Planned Community operations		9,983		9,261
Other property operating costs		18,145		13,804
Rental property real estate taxes		6,200		3,740
Rental property maintenance costs		2,744		1,915
Condominium rights and unit cost of sales		22,409		1,571
Resort and conference center operations		9,078		7,511
Provision for doubtful accounts		809		143
Demolition costs		117		2,516
Development-related marketing costs		6,243		4,224
General and administrative		18,963		16,882
Other income, net		(1,464)		(10,448)
Depreciation and amortization		21,510		10,509
Total expenses		138,633		84,706
Operating income		16,457		13,947
Interest income		136		2,188
Interest expense		(13,246)		(7,321)
Warrant liability loss		(108,810)		(96,440)
Equity in earnings from Real Estate and Other Affiliates		1,788		6,068
Loss before taxes		(103,675)		(81,558)
Provision for income taxes		2,284		4,773
Net loss		(105,959)		(86,331)
Net income attributable to noncontrolling interests		—		15
Net loss attributable to common stockholders	$	(105,959)	$	(86,316)
Basic loss per share:	$	(2.68)	$	(2.19)
Diluted loss per share:	$	(2.68)	$	(2.19)

See Notes to Consolidated Financial Statements.

4

THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

UNAUDITED

	Three Months Ended March 31,
	2015		2014
	(In thousands)
Comprehensive loss, net of tax:
Net loss	$	(105,959)	$	(86,331)
Other comprehensive income (loss):
Interest rate swaps (a)		512		199
Capitalized swap interest (b)		(59)		(133)
Other comprehensive income		453		66
Comprehensive loss		(105,506)		(86,265)
Comprehensive income attributable to noncontrolling interests		—		15
Comprehensive loss attributable to common stockholders	$	(105,506)	$	(86,250)

(a) Net of deferred tax expense of $0.1 million for the three months ended March 31, 2015 and 2014, respectively.

(b) Net of deferred tax benefit of $0.1 million for the three months ended March 31, 2015 and 2014, respectively.

See Notes to Consolidated Financial Statements.

5

THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

UNAUDITED

(In thousands, except share amounts)	Shares	Common Stock		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total Equity
Balance, January 1, 2014	39,576,344	$	396	$	2,829,813	$	(583,403)	$	(8,222)	$	6,562	$	2,245,146
Net loss			—		—		(86,316)		—		(15)		(86,331)
Interest rate swaps, net of tax of $10			—		—		—		199		—		199
Capitalized swap interest, net of tax of $75			—		—		—		(133)		—		(133)
Stock plan activity	54,204		—		1,764		—		—		—		1,764
Balance, March 31, 2014	39,630,548	$	396	$	2,831,577	$	(669,719)	$	(8,156)	$	6,547	$	2,160,645
Balance, January 1, 2015	39,638,094	$	396	$	2,838,013	$	(606,934)	$	(7,712)	$	3,743	$	2,227,506
Net loss			—		—		(105,959)		—		—		(105,959)
Distribution to noncontrolling interest			—		—		—		—		29		29
Interest rate swaps, net of tax of  $61			—		—		—		512		—		512
Capitalized swap interest, net of tax of  $31			—		—		—		(59)		—		(59)
Stock plan activity	69,241		1		1,696		(1)		—		—		1,696
Balance, March 31, 2015	39,707,335	$	397	$	2,839,709	$	(712,894)	$	(7,259)	$	3,772	$	2,123,725

See Notes to Consolidated Financial Statements.

6

THE HOWARD HUGHES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

	Three Months Ended March 31,
	2015		2014
	(In thousands)
Cash Flows from Operating Activities:
Net loss	$	(105,959)	$	(86,331)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation		17,087		9,346
Amortization		4,423		1,163
Amortization of deferred financing costs		1,569		1,014
Amortization of intangibles other than in-place leases		421		161
Straight-line rent amortization		(1,886)		(472)
Deferred income taxes		2,127		4,465
Restricted stock and stock option amortization		1,696		1,764
Gain on disposition of asset		—		(2,373)
Warrant liability loss		108,810		96,440
Equity in earnings from Real Estate and Other Affiliates, net of distributions		1,264		(3,743)
Provision for doubtful accounts		809		143
Master Planned Community land acquisitions		(1,101)		—
Master Planned Community development expenditures		(37,343)		(28,434)
Master Planned Community cost of sales		21,782		20,815
Condominium development expenditures		(34,439)		(5,604)
Condominium and other cost of sales		22,409		1,571
Percentage of completion revenue recognition from sale of condominium rights and units		(34,857)		(3,126)
Net changes:
Accounts and notes receivable		(2,880)		19,780
Prepaid expenses and other assets		20,294		(959)
Condominium deposits received		9,572		37,827
Deferred expenses		1,572		(3,093)
Accounts payable and accrued expenses		(7,735)		320
Condominium deposits held in escrow		(9,572)		(37,827)
Other, net		35		3,378
Cash provided by (used in) operating activities		(21,902)		26,225
Cash Flows from Investing Activities:
Property and equipment expenditures		(2,221)		(2,053)
Operating property improvements		(1,857)		(877)
Property developments and redevelopments		(218,550)		(137,579)
Proceeds from dispositions		—		5,500
Investment in KR Holdings, LLC		8,933		—
Investments in Real Estate and Other Affiliates, net		(436)		(807)
Change in restricted cash		1,707		(4,943)
Cash used in investing activities		(212,424)		(140,759)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgages, notes and loans payable		137,566		48,811
Principal payments on mortgages, notes and loans payable		(4,923)		(2,138)
Deferred financing costs		(396)		—
Cash provided by financing activities		132,247		46,673
Net change in cash and cash equivalents		(102,079)		(67,861)
Cash and cash equivalents at beginning of period		560,451		894,948
Cash and cash equivalents at end of period	$	458,372	$	827,087

7

THE HOWARD HUGHES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

	Three Months Ended March 31,
	2015		2014
	(In thousands)
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	10,471	$	7,051
Interest capitalized		11,264		11,281
Income taxes paid		210		—
Non-Cash Transactions:
Special Improvement District bond transfers associated with land sales		2,114		2,259
Property developments and redevelopments		(3,534)		25,550
Accrued interest on construction loan borrowing		905		—
MPC Land contributed to Real Estate Affiliates		15,231		—
Special Improvement District bond transfers to Real Estate Affiliates		(1,518)		—

See Notes to Consolidated Financial Statements

8

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 1 BASIS OF PRESENTATION AND ORGANIZATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as issued by the Securities and Exchange Commission (the “SEC”). Such Condensed Consolidated Financial Statements do not include all of the information and disclosures required by GAAP for complete financial statements. In addition, readers of this Quarterly Report on Form 10-Q (“Quarterly Report”) should refer to The Howard Hughes Corporation’s (“HHC” or the “Company”) audited Consolidated Financial Statements which are included in the Company’s Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended December 31, 2014. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. The results for the three months ended March 31, 2015 are not necessarily indicative of the results for the full fiscal year.

Certain amounts in 2014 have been reclassified to conform to 2015 presentation. As a result of the increasing significance of development-related marketing costs in our operations, we present as a separate line item in the Condensed Consolidated Statements of Operations the amount of such costs expensed.Previously, these expenses were included in the line item Other property operating costs.  Development-related marketing costs include salaries, benefits, agency fees, events, advertising, online hosting, marketing-related travel and other costs that we incur for the benefit of our developments and redevelopments.

Management has evaluated for disclosure or recognition all material events occurring subsequent to the date of the Condensed Consolidated Financial Statements up to the date and time this Quarterly Report was filed.

NOTE 2 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” This ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The standard requires a retrospective application in order to reflect the period-specific effects of applying the new guidance. The Company is evaluating the impact of the adoption of this ASU on the Company’s Consolidated Financial Statements.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810) - Amendments to the Consolidation Analysis.” This ASU affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The standard is effective for interim and annual periods beginning after December 15, 2015, and permits the use of a modified retrospective or retrospective approach. The Company is evaluating the impact of the adoption of this ASU on the Company’s Consolidated Financial Statements.

In August 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements – Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This ASU requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards as specified in the guidance. This ASU becomes effective for the annual period ending after December 15, 2016 and for annual and interim periods thereafter. Early adoption is permitted. The Company does not expect the adoption of this ASU to have an impact on the Company’s Consolidated Financial Statements.

9

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” This ASU states that entities should recognize revenue to properly depict the transfer of negotiated goods or services to customers in an amount that properly reflects the agreed upon consideration which the entity expects to be exchanged. The standard is effective for interim and annual periods beginning after December 15, 2016 and permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the impact of the adoption of this ASU on the Company’s Consolidated Financial Statements.

NOTE 3 SPONSORS AND MANAGEMENT WARRANTS

On November 9, 2010, we issued warrants to purchase 8.0 million shares of our common stock to certain of our sponsors (the “Sponsors Warrants”) with an estimated initial value of approximately $69.5 million. The initial exercise price for the warrants of $50.00 per share and the number of shares of common stock underlying each warrant are subject to adjustment for future stock dividends, splits or reverse splits of our common stock or certain other events. In 2012, a sponsor exercised 1,525,272 shares, and we purchased 4,558,061 Sponsor Warrants from certain sponsors for a net cash amount of $80.5 million. As a result of these transactions, $108.6 million of additional paid‑in-capital was recorded in our financial statements in the year ended December 31, 2012. The Sponsors Warrants expire on November 9, 2017.

In November 2010 and February 2011, we entered into certain agreements (the “Management Warrants”) with David R. Weinreb, our Chief Executive Officer, Grant Herlitz, our President, and Andrew C. Richardson, our Chief Financial Officer, in each case prior to his appointment to such position to purchase shares of our common stock. The Management Warrants represent 2,862,687 underlying shares, which may be adjusted pursuant to a net settlement option, were issued pursuant to such agreements at fair value in exchange for a combined total of approximately $19.0 million in cash from such executives at the commencement of their respective employment. Mr. Weinreb and Mr. Herlitz’s warrants have exercise prices of $42.23 per share and Mr. Richardson’s warrants have an exercise price of $54.50 per share. Generally, the Management Warrants become exercisable in November 2016 and expire in February 2018.

As of March 31, 2015, the estimated $203.2 million fair value for the Sponsors Warrants representing warrants to purchase 1,916,667 shares and the estimated $271.7 million fair value for the Management Warrants representing warrants to purchase 2,862,687 shares have been recorded as liabilities because the holders of these warrants could require us to settle such warrants in cash upon a change of control. The estimated fair values for the outstanding Sponsors Warrants and Management Warrants were $157.1 million and $209.0 million, respectively, as of December 31, 2014. The fair values were estimated using an option pricing model and Level 3 inputs due to the unavailability of comparable market data, as further discussed in Note 7 – Fair Value of Financial Instruments. Decreases and increases in the fair value of the Sponsors Warrants and the Management Warrants are recognized as either warrant liability gains or losses, respectively, in the Consolidated Statements of Operations.

NOTE 4 EARNINGS PER SHARE

Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted‑average number of common shares outstanding. Diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all potentially dilutive common shares. The dilutive effect of options and nonvested stock issued under stock‑based compensation plans is computed using the “treasury stock” method. The dilutive effect of the Sponsors Warrants and Management Warrants is computed using the if‑converted method. Gains associated with the changes in the fair value of the Sponsors Warrants and Management Warrants are excluded from the numerator in computing diluted earnings per share because inclusion of such gains in the computation would be anti‑dilutive.

10

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

Information related to our EPS calculations is summarized as follows:

	Three Months Ended March 31,
	2015		2014
	(In thousands, except per share amounts)
Basic EPS:
Numerator:
Net loss	$	(105,959)	$	(86,331)
Net income attributable to noncontrolling interests		—		15
Net loss attributable to common stockholders	$	(105,959)	$	(86,316)
Denominator:
Weighted average basic common shares outstanding		39,465		39,454
Diluted EPS:
Numerator:
Net loss attributable to common stockholders	$	(105,959)	$	(86,316)
Less: Warrant liabilitygain		—		—
Adjusted net loss attributable to common stockholders	$	(105,959)	$	(86,316)
Denominator:
Weighted average basic common shares outstanding		39,465		39,454
Restricted stock and stock options		—		—
Warrants		—		—
Weighted average diluted common shares outstanding		39,465		39,454
Basic loss per share:	$	(2.68)	$	(2.19)
Diluted loss per share:	$	(2.68)	$	(2.19)

The diluted EPS computation for the three months ended March 31, 2015 excludes 1,027,740 stock options, 241,931 shares of restricted stock, 1,916,667 shares of common stock underlying the Sponsors Warrants and 2,862,687 shares of common stock underlying the Management Warrants because their inclusion would have been anti-dilutive.

The diluted EPS computations for the three months ended March 31, 2014 excludes 1,024,940 stock options, 176,536 shares of restricted stock, 1,916,667 shares of common stock underlying the Sponsor Warrants and 2,862,687 shares of common stock underlying the Management Warrants because their inclusion would have been anti-dilutive.

11

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 5    RECENT TRANSACTIONS

During the first quarter 2015, we acquired a 58,000 square foot commercial building and air rights with total residential and commercial development rights of 196,133 square feet for $91.4 million.  These acquisitions combined with adjacent property acquisitions in 2014 create a 42,694 square foot lot with 817,784 square feet of available development rights. These properties are collectively referred to as the Seaport District Assemblage and are located in close proximity to our South Street Seaport property.

NOTE 6IMPAIRMENT

We review our real estate assets, including operating assets, land held for development and sale and developments in progress, for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. GAAP requires that if impairment indicators exist and the undiscounted cash flows expected to be generated by an asset are less than its carrying amount, an impairment charge should be recorded to write down the carrying amount of such asset to fair value (or for land and properties held for sale, fair value less cost to sell). The impairment analysis does not consider the timing of future cash flows and whether the asset is expected to earn an above or below market rate of return.

Our investment in each of the Real Estate and Other Affiliates is evaluated periodically and as deemed necessary for recoverability and valuation declines that are other-than-temporary. If the decrease in value of our investment in a Real Estate and Other Affiliate is deemed to be other-than-temporary, our investment in such Real Estate and Other Affiliate is reduced to its estimated fair value.

No impairment charges were recorded during the three months ended March 31, 2015 or 2014. We continually evaluate our strategic alternatives with respect to each of our properties and may revise our strategy from time to time, including our intent to hold the asset on a long-term basis or the timing of potential asset dispositions. For example, we may decide to sell property that is held for use and the sale price may be less than the carrying amount. As a result, these changes in strategy could result in impairment charges in future periods.

NOTE 7 FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents, for each of the fair value hierarchy levels required under FASB Accounting Standards (“ASC”) 820 Fair Value Measurement, our assets and liabilities that are measured at fair value on a recurring basis.

	March 31, 2015								December 31, 2014
	Fair Value Measurements Using								Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)								(In thousands)
Assets:
Cash equivalents	$	110,077	$	110,077	$	—	$	—	$	75,027	$	75,027	$	—	$	—
Liabilities:
Warrants		474,890		—		—		474,890		366,080		—		—		366,080
Interest rate swaps		3,307		—		3,307		—		3,144		—		3,144		—

Cash equivalents consist primarily of two registered money market mutual funds which invest in United States treasury securities that are valued at the net asset value of the underlying shares in the funds as of the close of business at the end of each period. The fair value approximates carrying value.

12

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

The valuation of warrants is based on an option pricing valuation model. The inputs to the model include the fair value of stock related to the warrants, exercise price of the warrants, term, expected volatility, risk-free interest rate and dividend yield and, with respect to the Management Warrants, a discount for lack of marketability.

The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates derived from observable market interest rate curves.

The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3) which are our Sponsors and Management Warrants:

	2015		2014
	(In thousands)
Balance as of January 1	$	366,080	$	305,560
Warrant liability loss (a)		108,810		96,440
Balance as of March 31	$	474,890	$	402,000

(a) All losses during 2015 and 2014 were unrealized.

The fair values were estimated using an option pricing model and Level 3 inputs due to the unavailability of comparable market data. Changes in the fair values of the Sponsors Warrants and the Management Warrants are recognized in earnings as a warrant liability gain or loss.

The significant unobservable inputs used in the fair value measurement of our warrants designated as Level 3 as of March 31, 2015 are as follows:

				Unobservable Inputs
	Fair Value		Valuation Technique	Expected Volatility(a)	Marketability Discount (b)
	(In thousands)
Warrants	$	474,890	Option Pricing Valuation Model	26.3%	16.0% - 18.0%

(a) Based on our implied equity volatility.

(b) Represents the discount rate for lack of marketability of the Management Warrants. The discount rates ranged from 18.0%-20.0% at December 31, 2014.

The expected volatility and marketability discount in the table above are significant unobservable inputs used to estimate the fair value of our warrant liabilities. An increase in expected volatility would increase the fair value of the liability, while a decrease in expected volatility would decrease the fair value of the liability. As the period of restriction lapses, the marketability discount reduces to zero and increases the fair value of the warrants.

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UNAUDITED

The estimated fair values of our financial instruments that are not measured at fair value on a recurring basis are as follows:

		March 31, 2015				December 31, 2014
	Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:		(In thousands)
Cash and cash equivalents	Level 1	$	348,295	$	348,295	$	485,424	$	485,424
Notes receivable, net (a)	Level 3		26,892		26,892		28,630		28,630
Liabilities:
Fixed-rate debt	Level 2	$	1,049,407	$	1,088,862	$	1,030,554	$	1,050,333
Variable-rate debt	Level 2		1,074,210		1,074,210		962,916		962,916
Total mortgages, notes and loans payable		$	2,123,617	$	2,163,072	$	1,993,470	$	2,013,249

(a) Notes receivable is shown net of an allowance of $463  and $471 as of March 31, 2015 and December 31, 2014, respectively.

Notes receivable are carried at net realizable value which approximates fair value. The estimated fair values are based on certain factors, such as current interest rates, terms of the note and credit worthiness of the borrower.

The fair value of fixed-rate debt in the table above, not including our Senior Notes (as defined in Note 9 – Mortgages, Notes and Loans Payable), was estimated based on a discounted future cash payment model, which includes risk premiums and a risk free rate derived from the current London Interbank Offered Rate (“LIBOR”) or U.S. Treasury obligation interest rates. The discount rates reflect our judgment as to what the approximate current lending rates for loans or groups of loans with similar maturities and credit quality would be if credit markets were operating efficiently and assuming that the debt is outstanding through maturity. The fair value of our Senior Notes, included in fixed rate debt in the table above, was estimated based upon its most recent trade price.

The carrying amounts for our variable-rate debt approximate fair value given that the interest rates are variable and adjust with current market rates for instruments with similar risks and maturities.

The carrying amounts of cash and cash equivalents and accounts receivable approximate fair value because of the short‑term maturity of these instruments.

NOTE 8 REAL ESTATE AND OTHER AFFILIATES

In the ordinary course of business, we enter into partnerships or joint ventures primarily for the development and operations of real estate assets which are referred to as “Real Estate Affiliates”. These partnerships or joint ventures are accounted for in accordance with FASB ASC 810 Consolidation.

In accordance with ASC 810, we assess our joint ventures at inception to determine if any meet the qualifications of a variable interest entity (“VIE”). We consider a partnership or joint venture a VIE if: (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity); or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either

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UNAUDITED

involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events outlined in ASC 810, we reassess our initial determination of whether the partnership or joint venture is a VIE.

We perform a qualitative assessment of each VIE to determine if we are the primary beneficiary, as required by ASC 810. Under ASC 810, a company concludes that it is the primary beneficiary and consolidates the VIE if the company has both (a) the power to direct the economically significant activities of the entity and (b) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The company considers the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties in determining if the company is the primary beneficiary. As required by ASC 810, management’s assessment of whether the company is the primary beneficiary of a VIE is continuously performed.

We account for investments in joint ventures deemed to be VIEs for which we are not considered to be the primary beneficiary but have significant influence, using the equity method, and investments in joint ventures where we do not have significant influence over the joint venture’s operations and financial policies, using the cost method. Generally, the operating agreements with respect to our Real Estate Affiliates provide that assets, liabilities and funding obligations are shared in accordance with our ownership percentages.

Our investment in real estate and other affiliates which are reported on the equity and cost methods are as follows:

	Economic/ Legal Ownership				Carrying Value				Share of Earnings/Dividends
	March 31,		December 31,		March 31,		December 31,		Three Months Ended March 31,
	2015		2014		2015		2014		2015		2014
	(In percentages)				(In thousands)				(In thousands)
Equity Method Investments
Master Planned Communities:
Discovery Land	N/A		N/A		$	12,052	$	—	$	—	$	—
Operating Assets:
Millennium Woodlands Phase II, LLC (a) (b)	81.43	%	81.43	%		362		1,023		(661)		(36)
Stewart Title	50.00	%	50.00	%		3,663		3,869		194		93
Summerlin Las Vegas Baseball Club, LLC (b)	50.00	%	50.00	%		10,431		10,548		(117)		(126)
The Metropolitan Downtown Columbia (c)	50.00	%	50.00	%		4,562		4,800		(319)		—
Woodlands Sarofim	20.00	%	20.00	%		2,635		2,595		40		57
Strategic Developments:
Circle T Ranch and Power Center	50.00	%	50.00	%		9,004		9,004		—		—
HHMK Development (b)	50.00	%	50.00	%		10		10		539		290
KR Holdings (b)	50.00	%	50.00	%		876		9,183		365		4,009
Parcel C (b)	50.00	%	50.00	%		6,934		8,737		—		—
Summerlin Apartments, LLC (b)	50.00	%	50.00	%		1,661		—		—		—
						52,190		49,769		41		4,287
Cost basis investments						3,937		3,917		1,747		1,781
Investment in Real Estate and Other Affiliates					$	56,127	$	53,686	$	1,788	$	6,068

N/A – Not Applicable

(a) Millennium Woodlands Phase II, LLC was placed into service in the beginning of the third quarter of 2014.

(b) Equity method variable interest entities.

(c) The Metropolitan Downtown Columbia was placed into service in the first quarter 2015.

We are not the primary beneficiary of any of the equity method variable interest entities listed above because we do not have the power to direct activities that most significantly impact the economic performance of such joint ventures and

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UNAUDITED

therefore we report our interests on the equity method. Our maximum exposure to loss as a result of these investments is limited to the aggregate carrying value of the investment as we have not provided any guarantees or otherwise made firm commitments to fund amounts on behalf of these VIEs. The aggregate carrying value of the unconsolidated VIEs was $20.3 million and $29.5 million as of March, 31, 2015 and December 31, 2014, respectively, and was classified as Investments in Real Estate and Other Affiliates in the Consolidated Balance Sheets.

As of March 31, 2015, approximately $97.8 million of indebtedness was secured by the properties owned by our Real Estate and Other Affiliates of which our share was approximately $58.9 million based upon our economic ownership. All of this indebtedness is without recourse to us.

The Company is the primary beneficiary of one VIE which is consolidated in the financial statements. The creditors of the consolidated VIE do not have recourse to the Company. As of March 31, 2015, the carrying values of the assets and liabilities associated with the operations of the consolidated VIE were $21.2 million and $0.8 million, respectively. As of December 31, 2014, the carrying values of the assets and liabilities associated with operations of the consolidated VIE were $21.1 million and $0.6 million, respectively. The assets of the VIE are restricted for use only by the particular VIE and are not available for our general operations.

Our recent and more significant investments in Real Estate Affiliates and the related accounting considerations are described below.

Discovery Land

During the second quarter 2014, we announced an agreement to enter into a joint venture with Discovery Land Company (“Discovery Land”) which was formed in the first quarter 2015. We contributed land with a book basis of $13.4 millionand transferred SID bonds related to such land with a carrying value of $1.3 million to the joint venture at the agreed upon value of $226,000 per acre, or $125.4 million, in the first quarter of 2015. At the time of our contribution, we assessed if the venture’s equity was sufficient to permit it to finance its activities without additional subordinated support and determined it was not a VIE. In addition, we determined that our partner has substantive participation rights, and therefore we account for this joint venture using the equity method. Discovery Land’s capital contribution funding requirement is up to a maximum of $30.0 million. We have no further capital obligations.

After receipt of our capital contribution and a 5.0% preferred return, Discovery Land is entitled to all remaining cash distributed by the joint venture until two times its equity contribution has been repaid. Any further cash distributions are shared 50/50. Discovery Land is the manager on the project, and development is expected to begin in the second quarter 2015 with the first lot and home sales expected to begin in early 2016.

ONE Ala Moana Condominium Project

KR Holdings is a 50/50 joint venture which was formed to develop a 206-unit luxury condominium tower at the One Ala Moana Center in Honolulu, Hawaii. The venture substantially completed construction in the fourth quarter 2014 and closed on the sale of 201 out of 206 total units. The venture uses the percentage of completion method to recognize earnings. We recorded $0.4 million and $4.0 million in earnings from Real Estate and Other Affiliates for the three months ended March 31, 2015 and 2014 respectively. We received cash distributions of $8.9 million during the three months ended March 31, 2015. All units available for sale as of March 31, 2015 have been sold and closed with the exception of one unit. The one remaining unit is expected to close in the second quarter 2015.

Millennium Woodlands Phase II, LLC

On May 14, 2012, we entered into a joint venture, Millennium Woodlands Phase II, LLC (“Millennium Phase II”), with The Dinerstein Companies, for the construction of a new 314-unit Class A multi‑family complex in The Woodlands Town Center. Our partner is the managing member of Millennium Phase II. As the managing member, our partner controls,

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UNAUDITED

directs, manages and administers the affairs of Millennium Phase II. On July 5, 2012, Millennium Phase II was capitalized by our contribution of 4.8 acres of land valued at $15.5 million, our partner’s contribution of $3.0 million in cash and a construction loan in the amount of $37.7 million which is guaranteed by our partner. The development of Millennium Phase II further expands our multi‑family portfolio in The Woodlands Town Center. During the third quarter 2014, the joint venture completed construction and leasing commenced.

Parcel C

On October 4, 2013, we entered into a joint venture agreement with a local developer, Kettler, Inc. (“Kettler”), to construct a 437-unit, Class A apartment building with 31,000 square feet of ground floor retail on Parcel C in downtown Columbia, Maryland. We contributed approximately five acres of land having an approximate book value of $4.0 million to the joint venture. Our land was valued at $23.4 million or $53,500 per constructed unit. When the venture closes on the construction loan and upon completion of certain other conditions, including obtaining completed site development and construction plans and an approved project budget, our partner will be required to contribute cash to the venture.

Summerlin Apartments, LLC

On January 24, 2014, we entered into a joint venture with a national multi-family real estate developer, The Calida Group (“Calida”), to construct, own and operate a 124-unit gated luxury apartment development in Summerlin, Nevada. We and our partner each own 50% of the venture, and unanimous consent of the partners is required for all major decisions. This project represents the first residential development in Summerlin’s 400-acre downtown. In the first quarter 2015, we contributed a 4.5-acre parcel of land with an agreed value of $3.2 million in exchange for a 50% interest in the venture. Our partner contributed $3.2 million of cash for their 50% interest, acts as the development manager, funded all pre-development activities, obtained construction financing in the first quarter 2015 and provided guarantees required by the lender. Upon a sale of the property, we are entitled to 50% of the proceeds up to, and 100% of the proceeds in excess of, an amount determined by applying a 7.0% capitalization rate to net operating income (“NOI”). The venture commenced construction in February 2015 with the first units expected to become available for rent by second quarter 2016.

Summerlin Las Vegas Baseball Club, LLC

On August 6, 2012, we entered into a joint venture for the purpose of acquiring 100% of the operating assets of the Las Vegas 51s, a Triple‑A baseball team which is a member of the Pacific Coast League. We own 50% of the venture and our partners jointly own the remaining 50%. Unanimous consent of the partners is required for all major decisions. As of the date the joint venture acquired the baseball team, we had funded our capital contribution of $10.5 million. Our strategy in owning an interest is to pursue a potential relocation of the team to a to‑be‑built stadium in our Summerlin master planned community. Efforts to relocate the team are ongoing and there can be no assurance that such a stadium will ultimately be built.

The Metropolitan Downtown Columbia Project

On October 27, 2011, we entered into a joint venture, Parcel D Development, LLC (“Parcel D”), with Kettler to construct a 380-unit Class A apartment building with ground floor retail space in downtown Columbia, Maryland. We and our partner each own50% of the venture, and unanimous consent of the partners is required for all major decisions. On July 11, 2013, the joint venture closed a $64.1 million construction loan which is non‑recourse to us and $52.3 million is outstanding as of March 31, 2015. The loan bears interest at one-month LIBOR plus 2.40% and matures in July 2020. At loan closing, our land contribution was valued at $53,500 per unit, or $20.3 million, and Kettler contributed $13.3 million in cash, of which $7.0 million was distributed to us. Both we and Kettler made additional contributions of $3.1 million to the joint venture in accordance with the loan agreement, thus increasing our total capital account to $16.4 million. This transaction was accounted for as a partial sale of the land for which we recognized a net profit of $0.7 million. The venture substantially completed

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

construction of The Metropolitan Downtown Columbia Project during the first quarter of 2015 and the property was reclassified into our Operating Assets segment.

NOTE 9 MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable are summarized as follows:

	March 31,		December 31,
	2015		2014
	(In thousands)
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	1,030,671	$	1,008,165
Special Improvement District bonds		18,736		22,389
Variable-rate debt:
Collateralized mortgages, notes and loans payable (a)		1,074,210		962,916
Total mortgages, notes and loans payable	$	2,123,617	$	1,993,470

(a) As more fully described below, $172.0 million of variable‑rate debt has been swapped to a fixed rate for the term of the related debt.

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UNAUDITED

The following table presents our mortgages, notes, and loans payable by property:

				Maximum		Carrying Value
		Interest		Facility		March 31,		December 31,
$ In thousands	Maturity (a)	Rate		Amount		2015		2014
Master Planned Communities
Bridgeland Land Loan	June 2022	5.50	%			$	15,874	$	15,874
Bridgeland Development Loan	June 2015	5.00	%(b)	$	30,000		15,389		10
Summerlin South SID Bonds - S108	December 2016	5.95	%				548		563
Summerlin South SID Bonds - S124	December 2019	5.95	%				236		236
Summerlin South SID Bonds - S128	December 2020	6.05	%				623		623
Summerlin South SID Bonds - S128C	December 2030	6.05	%				5,097		5,274
Summerlin South SID Bonds - S132	December 2020	6.00	%				2,538		2,936
Summerlin South SID Bonds - S151	June 2025	6.00	%				4,885		6,211
Summerlin West SID Bonds - S808/S810	April 2031	6.00	%				1,069		2,805
The Woodlands Master Credit Facility	August 2018	2.93	%(b)		250,000		196,663		176,663
Master Planned Communities Total							242,922		211,195
Operating Assets
70 Columbia Corporate Center	July 2019	2.43	%(b)				20,000		20,000
Columbia Regional Building	March 2018	2.18	%(b)		23,008		20,627		20,513
Downtown Summerlin	July 2019	2.43	%(b)		311,800		256,955		229,153
Downtown Summerlin SID Bonds - S108	December 2016	5.95	%				310		310
Downtown Summerlin SID Bonds - S128	December 2030	6.05	%				3,431		3,431
One Hughes Landing	December 2029	4.30	%(b)				52,000		52,000
Two Hughes Landing	September 2018	2.83	%(b)		41,230		27,927		19,992
Hughes Landing Retail	December 2018	2.13	%(b)		36,575		21,518		17,424
1701 Lake Robbins	April 2017	5.81	%				4,600		4,600
Millennium Waterway Apartments	June 2022	3.75	%				55,584		55,584
110 N. Wacker (c)	October 2019	5.21	%(b)				29,000		29,000
9303 New Trails	December 2023	4.88	%				12,991		13,074
Outlet Collection at Riverwalk	October 2018	2.93	%(b)		64,400		51,306		47,118
3831 Technology Forest Drive	March 2026	4.50	%				23,000		—
The Woodlands Resort & Conference Center	February 2019	3.68	%(b)		95,000		83,109		76,027
Ward Village (d)	September 2016	3.35	%(b)		250,000		238,716		238,716
20/25 Waterway Avenue	May 2022	4.79	%				14,274		14,330
3 Waterway Square	August 2028	3.94	%				52,000		52,000
4 Waterway Square	December 2023	4.88	%				38,044		38,289
Capital lease obligations	various	3.60	%				123		135
Operating Assets Total							1,005,515		931,696
Strategic Developments
1725-35 Hughes Landing Boulevard	June 2019	2.08	%(b)		143,000		63,815		47,513
Three Hughes Landing	December 2019	2.53	%(b)		65,455		—		—
Hughes Landing Hotel	October 2020	2.68	%(b)		37,100		—		—
One Lake's Edge	November 2018	2.68	%(b)		73,525		49,184		40,787
Waiea and Anaha Condominiums	November 2019	6.93	%(b)		600,000		—		—
Waterway Square Hotel	August 2019	2.83	%(b)		69,300		—		—
Strategic Developments Total							112,999		88,300
Other Corporate Financing Arrangements	June 2018	3.00	%		22,700		19,645		19,968
Senior Notes	October 2021	6.88	%				750,000		750,000
Unamortized underwriting fees							(7,464)		(7,689)
						$	2,123,617	$	1,993,470

(a) Maturity date includes any extension periods which can be exercised at our option and are subject to customary extension terms.

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UNAUDITED

(b) The interest rate presented is based on the one month LIBOR rate, as applicable, at March 31, 2015 which was 0.1756%.

(c) The $29.0 million outstanding principal balance is swapped to a 5.21% fixed rate through maturity.

(d) $143.0 million of the outstanding principal balance is swapped to a 3.81% fixed rate maturity.

The weighted average interest rate on our mortgages, notes and loans payable, inclusive of interest rate hedges, was 4.53% and 4.61% as of March 31, 2015 and December 31, 2014, respectively.

All of the mortgage debt is secured by the individual properties as listed in the table above and is non-recourse to HHC, except for:

(i) $750.0 million of Senior Notes;

(ii) $311.8 million financing for the Downtown Summerlin development which has an initial maximum recourse of 35.0% of the outstanding balance, which will reduce to 15.0% upon completion of the project and achievement of a 1.15:1.0 debt service coverage ratio.  The recourse further reduces to 10% upon achievement of a 1.25:1.0 debt service coverage ratio, a 90% occupancy level, and average tenant sales of at least $500.00 per net rentable square foot;

(iii) $64.4 million of construction financing for the Outlet Collection at Riverwalk with an initial maximum recourse of 50% of the outstanding balance, which will be reduced to 25.0% upon completion of the project and the achievement of an 11.0% debt yield and a minimum level of tenant sales per square foot for twelve months;

(iv) $20.4 million of Other Corporate Financing Arrangements; and

(v) $7.0 million parent guarantee associated with the 110 N. Wacker mortgage.

The Woodlands Master Credit Facility and The Woodlands Resort & Conference Center loans are recourse to the entities that directly own The Woodlands operations. Certain of our loans contain provisions which grant the lender a security interest in the operating cash flow of the property that represents the collateral for the loan. Such provisions are not expected to impact our operations in 2015. Certain mortgage notes may be prepaid, but may be subject to a prepayment penalty equal to a yield-maintenance premium, defeasance, or a percentage of the loan balance. As of March 31, 2015, land, buildings and equipment and developments with a cost basis of $2.4 billion have been pledged as collateral for our mortgages, notes and loans payable. 

As of March 31, 2015, we were in compliance with all of the financial covenants related to our debt agreements.

Master Planned Communities

The Woodlands Master Credit Facility is a $250.0 million credit facility consisting of a $125.0 million term loan and a $125.0 million revolver (together, the “TWL Facility”). The TWL Facility bears interest at one-month LIBOR plus 2.75% and has an August 2016 initial maturity date with two, one–year extension options. The extension options require a reduction of the total commitment to $220.0 million for the first extension and $185.0 million for the second extension. The TWL Facility also contains certain covenants that, among other things, require the maintenance of specified financial ratios, limit the incurrence of additional recourse indebtedness at The Woodlands, and limit distributions from The Woodlands to us based on a loan‑to‑value test. As of March 31, 2015, there is no undrawn availability based on the collateral value underlying the facility.

The Bridgeland Land Loan bears a fixed interest rate of 5.50% for the first five years and three-month LIBOR plus 2.75% for the remaining term and matures in June 2022. Beginning on June 29, 2014, annual principal payments are required in the amount of 5.00% of the then outstanding principal balance. In addition, Bridgeland has a revolving credit facility with aggregate maximum borrowing capacity of $140.0 million, of which $115.7 million has been utilized as of March 31, 2015, and which has a $30.0 million maximum outstanding loan amount at any time. The revolving loan bears interest at the greater of 5.00% or one-month LIBOR plus 3.25% and matures on June 29, 2015. We expect to refinance this loan

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UNAUDITED

prior to its maturity. This loan is intended to provide working capital at Bridgeland to accelerate development efforts to meet the demand of homebuilders for finished lots in the community. The Bridgeland loans are cross‑collateralized and cross‑defaulted and the Bridgeland Master Planned Community serves as collateral for the loans. The loans also require that Bridgeland maintain a minimum $3.0 million cash balance and a minimum net worth of $250.0 million. Additionally, we are restricted from making cash distributions from Bridgeland unless the revolving credit facility has no outstanding balance and one year of real estate taxes and debt service on the term loan have been escrowed with the lender.

The Summerlin Master Planned Community uses Special Improvement District (“SID”) bonds to finance certain common infrastructure improvements. These bonds are issued by the municipalities and, although unrated, are secured by the assessments on the land. The majority of proceeds from each bond issued is held in a construction escrow and disbursed to us as infrastructure projects are completed, inspected by the municipalities and approved for reimbursement. Accordingly, the SID bonds have been classified as debt, and the Summerlin Master Planned Community pays the debt service on the bonds semi‑annually. As Summerlin sells land, the buyers assume a proportionate share of the bond obligation at closing, and the residential sales contracts provide for the reimbursement of the principal amounts that we previously paid with respect to such proportionate share of the bond.

Operating Assets

On May 6, 2015, we closed on a $80.0 million non-recourse mortgage financing for the 10-60 Columbia Corporate Center buildings. The loan bears interest at LIBOR plus 1.75% and has an initial maturity date of May 6, 2020, with two, one-year extension options.

On March 25, 2015, we closed on a $23.0 million loan for 3831 Technology Forest Drive. The loan bears fixed interest at 4.50% and matures on March 24, 2026.

On November 10, 2014 we refinanced our $38.0 million loan and closed on a new $52.0 million loan for One Hughes Landing. The loan bears fixed interest at 4.30% and matures on December 1, 2029.

On July 18, 2014, we assumed a $4.6 million non-recourse mortgage loan at 1701 Lake Robbins. The loan bears fixed interest at 5.81% and has a maturity date of April 2017.

On July 15, 2014, we closed a $311.8 million financing for the construction of Downtown Summerlin development bearing interest at one-month LIBOR plus 2.25%. The loan has an initial maturity date of July 15, 2017, with two, one-year extension options.

On April 15, 2014, we paid $17.0 million cash in full satisfaction of the $16.0 million participating loan that we assumed as part of the acquisition of 70 CCC in August 2012. The non-recourse, interest only promissory note was due to mature on August 31, 2017 and included a participation right to the lender for 30.0% of the appreciation in the market value of the property after our 10.0% cumulative preferred return and repayment of the outstanding debt and our contributed equity. The final payment included approximately $0.7 million for this participation right based upon the appraised value of the property. On June 27, 2014, we closed on a new $20.0 million loan for 70 CCC that bears interest at one-month LIBOR plus 2.25% and has an initial maturity date of July 2017 with two, one-year extension options.

The $250.0 million non‑recourse first mortgage financing secured by Ward Village in Honolulu, Hawaii, bears interest at one-month LIBOR plus 2.50%. The loan may be drawn to a maximum $250.0 million to fund capital expenditures at the property, provided that the outstanding principal balance cannot exceed 65% of the property’s appraised value, and the borrowers are required to have a minimum 10.0% debt yield to draw additional loan proceeds under the facility. The loan permits partial repayment during its term in connection with property releases for development. In the third quarter of

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UNAUDITED

2013, certain properties securing the loan were approved for condominium development. As a result, the properties were removed from the collateral pool and a minor principal paydown of the loan was required. The loan matures in September 2016, and $143.0 million of the principal balance was swapped to a 3.80% fixed rate for the term of the loan. The loan had a weighted‑average interest rate of 3.35% as of March 31, 2015. The undrawn portion of this loan was $11.3 million as of March 31, 2015.

Strategic Developments

On December 5, 2014 we closed on a $65.5 million non-recourse financing for the construction of Three Hughes Landing. The loan bears interest at one-month LIBOR plus 2.35%. The loan has an initial maturity date of December 5, 2017 with two, one-year extension options.

On November 6, 2014 we closed on a $600.0 million non-recourse construction loan for the Waiea and Anaha Condominium towers bearing interest at one-month LIBOR plus 6.75%. The loan has an initial maturity date of November 6, 2017, with two, one-year extension options.

On October 2, 2014, we closed on a $37.1 million construction financing for our Hughes Landing Hotel. The loan bears interest at one-month LIBOR plus 2.50%. The loan has an initial maturity of October 2018, with two, one-year extension options.

On August 6, 2014, we closed on a $69.3 million non-recourse construction financing for the Waterway Hotel bearing interest at one-month LIBOR plus 2.65%. The loan has an initial maturity of August 2018, with a one-year extension option. The development will be a 302-room Westin-branded hotel that will be owned and managed by us.

On June 30, 2014, we closed on a $143.0 million non-recourse construction financing for two office buildings bearing interest at one-month LIBOR plus 1.90%. The loan has an initial maturity date of June 30, 2018, with a one-year extension option.

Corporate

The $750.0 million in aggregate principal amount of 6.875% Senior Notes matures in 2021 (the “Senior Notes”). Interest is payable semiannually, on April 1 and October 1 of each year starting in April 2014. At any time prior to October 1, 2016, we may redeem up to 35% of the Senior Notes at a price equal to 106.875% using the proceeds from equity offerings. We may redeem all or part of the Senior Notes at any time on or after October 1, 2016 with a declining call premium thereafter to maturity. The Senior Notes contain customary terms and covenants for non‑investment grade senior notes and have no maintenance covenants.

NOTE 10 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to interest rate risk related to our variable interest rate debt, and we manage this risk by utilizing interest rate derivatives. Our objectives in using interest rate derivatives are to add stability to interest costs by reducing our exposure to interest rate movements. To accomplish this objective, we use interest rate swaps and caps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company’s fixed‑rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up‑front premium.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is

22

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

recognized directly in earnings. During the three months ended March 31, 2015, the ineffective portion recorded in earnings was insignificant.

As of March 31, 2015, we had gross notional amounts of $172.0 million for interest rate swaps and a $100.0 million interest rate cap that were designated as cash flow hedges of interest rate risk. The fair value of the interest rate cap derivative was insignificant.

If the interest rate swap agreements are terminated prior to their maturity, the amounts previously recorded in AOCI are recognized into earnings over the period that the hedged transaction impacts earnings. If the hedging relationship is discontinued because it is probable that the forecasted transaction will not occur according to the original strategy, any related amounts previously recorded in AOCI are recognized in earnings immediately.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on our variable‑rate debt. Over the next 12 months, we estimate that an additional $2.1 million will be reclassified to interest expense.

The table below presents the fair value of our derivative financial instruments which are included in accounts payable and accrued liabilities in the Consolidated Balance Sheets:

	March 31,		December 31,
	2015		2014
	(In thousands)
Interest Rate Swaps	$	3,307	$	3,144

The table below presents the effect of our derivative financial instruments on the Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014:

	Three Months Ended March 31,					Three Months Ended March 31,
	2015		2014		Location of Loss	2015		2014
Cash Flow Hedges	Amount of Loss Recognized in OCI		Amount of Loss Recognized in OCI		Reclassified from AOCI into Earnings	Amount of Loss Reclassified from AOCI into Earnings		Amount of Loss Reclassified from AOCI into Earnings
	(In thousands)					(In thousands)
Interest Rate Swaps	$	(761)	$	(342)	Interest Expense	$	(380)	$	(541)

NOTE 11 INCOME TAXES

Two of our subsidiaries are involved in a dispute with the IRS relating to years in which those subsidiaries were owned by General Growth Properties (“GGP”), and in connection therewith, GGP provided us with an indemnity against certain potential tax liabilities. Pursuant to the Tax Matters Agreement with GGP, GGP had indemnified us from and against 93.75% of any and all losses, claims, damages, liabilities and reasonable expenses to which we become subject (the “Tax Indemnity”), in each case solely to the extent directly attributable to certain taxes related to sales of certain assets in our Master Planned Communities segment prior to March 31, 2010 (“MPC Taxes”), in an amount up to $303.8 million, plus interest and penalties related to these amounts (the “Indemnity Cap”) so long as GGP controlled the action in the United States Tax Court (the “Tax Court”) related to the dispute with the IRS.

On May 6, 2011, GGP filed Tax Court petitions on behalf of the two former REIT subsidiaries of GGP seeking a redetermination of federal income tax for the years 2007 and 2008.  The petitions sought to overturn determinations by

23

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

the IRS that the taxpayers were liable for combined deficiencies totaling $144.1 million.  The case was heard by the Tax Court in November 2012 and filed its ruling in favor of the IRS on June 2, 2014. 

In December 2014, we entered into a tax indemnity and mutual release agreement with GGP (the “Settlement Agreement”) pursuant to which, in consideration of the full satisfaction of GGP’s obligation for reimbursement of taxes and interest related to certain assets in our Master Planned Communities segment prior to March 31, 2010, GGP (i) made a cash payment to us in the amount of $138.0 million and (ii) conveyed to us fee simple interest in six office properties and related parking garages located in Columbia, Maryland, known as 10-60 Columbia Corporate Center, for an agreed upon total value of $130.0 million.  Under the Settlement Agreement, the Company now controls the right to decide whether to appeal the decision rendered by the Tax Court. On December 15, 2014, the Company paid the MPC Taxes and filed an appeal of the decision to the Fifth Circuit Court of Appeals.  The appeal seeks to overturn the lower court decision and allow the Company to continue to use its current method of tax accounting for the sale of assets in the Company’s Master Planned Communities Segment.  If the decision stands, we may be required to change our method of tax accounting for certain transactions, which could affect the timing of our future tax payments.  We expect the appeal to be heard by the appellate court in 2015.

Unrecognized tax benefits pursuant to uncertain tax positions were $184.2 million as of March 31, 2015 and December 31, 2014, none of which would impact our effective tax rate. This amount is not reduced for either amounts reclassified under ASU 2013-11, or payments made to the IRS pursuant to the appeal filed with the Fifth Circuit Court of Appeals. A significant amount of the unrecognized tax benefits is related to the appeal of the Tax Court decision, which is expected to be resolved within the next 12 months.

We have significant permanent differences, primarily from warrant liability gains and losses, interest income on the tax indemnity receivable and changes in valuation allowances that cause our effective tax rate to deviate from statutory rates. The effective tax rate based upon actual operating results was (2.2)% and (5.9)% for the three months ended March 31, 2015 and 2014, respectively. The changes in the tax rates were primarily attributable to changes in the warrant liability, valuation allowance and unrecognized tax benefits.

We file a consolidated corporate tax return which, through December 31, 2014, includes all of our subsidiaries with the exception of Victoria Ward, Limited (“Ward”). Ward elected to be taxed as a REIT commencing with the taxable year beginning January 1, 2002 and ending with the taxable year ending December 31, 2014.  Ward satisfied the REIT distribution requirements for 2014 and beginning January 1, 2015, Ward will be included in our consolidated tax return. 

NOTE 12 STOCK BASED PLANS

Our stock based plans are described, and informational disclosures are provided, in the Notes to the Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2014.

Stock Options

The following table summarizes our stock option plan:

	Stock Options	Weighted Average Exercise Price
Stock Options outstanding at January 1, 2015	1,043,490	$	72.60
Granted	42,000		148.01
Forfeited	(57,750)		108.19
Stock Options outstanding at March 31, 2015	1,027,740	$	73.68

24

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

Stock option expense was $0.7 million and $1.0 million for the three months ended March 31, 2015 and 2014, respectively, which is included in General and administrative expense in the accompanying Condensed Consolidated Statements of Operations.

Restricted Stock

Restricted stock awards issued under The Howard Hughes Corporation 2010 Incentive Plan provide that shares awarded may not be sold or otherwise transferred until restrictions have lapsed as established by the Compensation Committee of our Board of Directors. For the three months ended March 31, 2015, compensation expense of $1.1 million is included in general and administrative expense in our Condensed Consolidated Statements of Operations related to restricted stock awards. The balance of unamortized restricted stock awards as of March 31, 2015 was $17.6 million, which is expected to be expensed over a weighted-average period of 3.9 years.

The following table summarizes restricted stock activity:

	Restricted Stock	Weighted Average Grant Date Fair Value
Restricted stock outstanding at January 1, 2015	172,690	$	92.02
Granted	73,243		119.01
Forfeited	(4,002)		99.33
Restricted Stock outstanding at March 31, 2015	241,931	$	100.01

NOTE 13 OTHER ASSETS AND LIABILITIES

Prepaid Expenses and Other Assets

The following table summarizes the significant components of prepaid expenses and other assets.

	March 31,		December 31,
	2015		2014
	(In thousands)
Special Improvement District receivable	$	33,040	$	33,318
Equipment, net of accumulated depreciation of $2.8 million and $2.4 million, respectively		19,906		20,284
Tenant incentives and other receivables		12,014		14,264
Federal income tax receivable		8,629		8,629
Prepaid expenses		10,560		9,196
Below-market ground leases		19,579		19,663
Condominium deposits		139,559		151,592
Security and escrow deposits		9,483		9,829
Above-market tenant leases		4,365		4,656
Uncertain tax position asset		402		383
In-place leases		29,645		32,715
Intangibles		3,994		3,593
Other		2,023		2,014
	$	293,199	$	310,136

25

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

The $16.9 million decrease as of March 31, 2015 compared to December 31, 2014 primarily relates to a $12.0 million decrease in condominium deposits at Ward Village due to utilization of deposits for construction costs. The $3.1 million decrease related to in-place leases is primarily attributable to normal amortization of these intangibles.

Accounts Payable and Accrued Expenses

The following table summarizes the significant components of accounts payable and accrued expenses.

	March 31,		December 31,
	2015		2014
	(In thousands)
Construction payables	$	191,599	$	170,935
Accounts payable and accrued expenses		31,827		34,154
Condominium deposits		60,706		82,150
Membership deposits		21,448		21,023
Above-market ground leases		2,232		2,272
Deferred income		65,305		65,675
Accrued interest		28,127		14,791
Accrued real estate taxes		5,041		9,903
Tenant and other deposits		11,758		12,756
Accrued payroll and other employee liabilities		10,561		25,838
Interest rate swaps		3,307		3,144
Other		26,356		23,376
	$	458,267	$	466,017

The $7.8 million decrease as of March 31, 2015 compared to December 31, 2014 is primarily due to the decrease of $21.4 million in condominium deposits for the two market rate towers at Ward Village as revenue was recognized during the period, $15.3 million decrease in accrued payroll and other employee liabilities due to year-end compensation payments and a $4.9 million decrease in accrued real estate taxes. These decreases are partially offset by a $20.7 million increase in construction payables primarily due to continued development activities at Downtown Summerlin, Ward Village, 1725-35 Hughes Landing Boulevard, South Street Seaport and Three Hughes Landing, and $13.3 million increase in accrued interest related to our Senior Notes for which interest is paid semiannually.

26

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

NOTE 14 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (“AOCI”)

The following table summarizes AOCI for the period indicated:

Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)

Gains and (Losses) on Cash Flow Hedges

(In Thousands)

	For the Three Months Ended March 31, 2015
Balance as of January 1, 2015	$	(7,712)
Other comprehensive loss before reclassifications		73
Amounts reclassified from accumulated other comprehensive loss		380
Net current-period other comprehensive income		453
Balance as of March 31, 2015	$	(7,259)

(a) All amounts are net of tax.

The following table summarizes the amounts reclassified out of AOCI for the period indicated:

Reclassifications out of Accumulated Other Comprehensive Income (Loss)

(In Thousands)

	Amounts reclassified from Accumulated Other Comprehensive Income (Loss)
	For the Three Months Ended		Affected line item in the
Accumulated Other Comprehensive Income (Loss) Components	March 31, 2015		Statement of Operations
Gains and losses on cash flow hedges
Interest rate swap contracts	$	(608)	Interest expense
		228	Provision for income taxes
Total reclassifications for the period	$	(380)	Net of tax

NOTE 15 COMMITMENTS AND CONTINGENCIES

In the normal course of business, from time to time, we are involved in legal proceedings relating to the ownership and operations of our properties. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material effect on our consolidated financial position, results of operations or liquidity.

We had outstanding letters of credit and surety bonds totaling $80.2 million and $53.7 million as of March 31, 2015 and December 31, 2014, respectively. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.

On June 27, 2013, the City of New York executed the amended and restated ground lease for South Street Seaport. The restated lease terms provide for annual fixed rent of $1.2 million starting July 1, 2013 with an expiration of December 30,

27

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

2072, including our options to extend. The rent escalates at 3.0% compounded annually. On July 1, 2018 the base rent will be adjusted to the higher of the fair market value or the then base rent. In addition to the annual base rent of $1.2 million, we are required to make annual payments of $210,000 as additional rent through the term of the lease. The additional rent escalates annually at the Consumer Price Index. We are entitled to a total rent credit of $1.5 million, to be taken monthly over a 30-month period. Simultaneously with the execution of the lease, we executed a completion guaranty for the redevelopment of Pier 17. The completion guaranty requires us to perform certain obligations under the lease, including the commencement of construction by October 1, 2013 with a scheduled completion date in 2017.

In the fourth quarter of 2012, the Uplands portion of South Street Seaport suffered damage due to flooding as a result of Superstorm Sandy. Reconstruction efforts are ongoing and the property is only partially operating. We have received $47.9 million in insurance proceeds through March 31, 2015 related to our claim. We recognized Other income relating to these insurance recoveries of $0.3 million and $7.8 million for the three months ended March 31, 2015 and 2014, respectively. We are in litigation with several of the insurance carriers to recover additional amounts that we believe are owed to us under the policies. We believe that our insurance will reimburse substantially all of the costs of repairing the property and will also compensate us for substantially all lost income resulting from the storm.

Please refer to Note 11 – Income Taxes for additional contingencies related to our uncertain tax positions.

NOTE 16 SEGMENTS

We have three business segments which offer different products and services. Our three segments are managed separately because each requires different operating strategies or management expertise and are reflective of management’s operating philosophies and methods. In addition, our segments or assets within such segments could change in the future as development of certain properties commences or other operational or management changes occur. We do not distinguish or group our combined operations on a geographic basis. Furthermore, all operations are within the United States. Our reportable segments are as follows:

· Master Planned Communities (“MPCs”) – includes the development and sale of land, in large‑scale, long‑term community development projects in and around Las Vegas, Nevada; Houston, Texas; and Columbia, Maryland.

· Operating Assets – includes retail, office, and multi-family properties, The Woodlands Resort & Conference Center, The Club at Carlton Woods and other real estate investments. These assets are currently generating revenues, and we believe there is an opportunity to redevelop or reposition certain of these assets to improve operating performance.

· Strategic Developments – includes our condominium and commercial property projects currently under development and all other properties held for development which have no substantial operations.

Revenue recognition for contracted individual units in a condominium project are accounted for under the percentage of completion method when the following criteria are met: a) construction is beyond a preliminary stage; b) buyer is unable to require a refund of its deposit, except for non‑delivery of the unit; c) sufficient units are sold to assure that it will not revert to a rental property; d) sales prices are collectible; and e) aggregate sales proceeds and costs can be reasonably estimated. Those units that do not meet the criteria are accounted for using the full accrual or deposit method which defers revenue recognition until the unit is closed.

Revenue recognized on the percentage-of-completion method is calculated based upon the ratio of project costs incurred to date compared to total estimated project cost. Total estimated project costs include direct costs such as the carrying value of our land, site planning, architectural, construction costs, financing costs andindirect costallocations for certain infrastructure and amenity costswhichbenefit the project based upon the relative fair value of the land prior to

28

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

development. Changes in estimated project costsimpact the amount of revenue and profit recognized on a percentage of completion basis during the period in which they are determined and in future periods.

The assets included in each segment as of March 31, 2015, are contained in the following chart

MasterPlanned
Communities	OperatingAssets		Strategic Developments
	Retail	Office	Under Construction	Other
• Bridgeland	▪ Columbia Regional Building	▪ 10-60 Columbia Corporate Center	▪ ONE Ala Moana (c)	▪ Alameda Plaza
• Conroe	▪ Cottonwood Square	▪ 70 Columbia Corporate Center	▪ Anaha Condominiums	▪ AllenTowne
• Maryland	▪ Creekside Village Green (b)	▪ Columbia Office Properties	▪ Three Hughes Landing	▪ Bridges at Mint Hill
• Summerlin (a)	▪ Downtown Summerlin	▪ One Hughes Landing	▪ 1725-35 Hughes Landing	▪ Century Plaza Mall
• The Woodlands	▪ Hughes Landing Retail (b)	▪ Two Hughes Landing	Boulevard	▪ Circle T Ranch and
	▪ 1701 Lake Robbins	▪ 2201 Lake Woodlands Drive	▪ Hughes Landing Hotel	Power Center (d)
	▪ Landmark Mall	▪ 9303 New Trails	(Embassy Suites)	▪ Cottonwood Mall
	▪ Outlet Collection at Riverwalk	▪ 110 N. Wacker	▪ One Lake's Edge	▪ Elk Grove Promenade
	▪ Park West	▪ 3831 Technology Forest Drive	▪ Summerlin Apartments, LLC (d)	▪ 80% Interest in Fashion
	▪ South Street Seaport	▪ 3 Waterway Square	▪ Waiea Condominiums	Show Air Rights
	(under construction)	▪ 4 Waterway Square	▪ Waterway Square Hotel	▪ Kendall Town Center
	▪ Ward Village	▪ 1400 Woodloch Forest	(Westin)	▪ Lakeland Village Center
	▪ 20/25 Waterway Avenue			▪ Lakemoor (Volo) Land
	▪ Waterway Garage Retail			▪ Maui Ranch Land
				▪ Parcel C (d)
	Other			▪ Seaport District Assemblage
	▪ Golf Courses at TPC Summerlin	▪ Stewart Title of Montgomery		▪ Ward Block M
	and TPC Las Vegas	County, TX (d)		▪ Ward Gateway Towers
	(participation interest)	▪ Summerlin Hospital Medical		▪ Ward Workforce Housing
	▪ Kewalo Basin Harbor	Center (d)		▪ West Windsor
	▪ Merriweather Post Pavilion	▪ Summerlin Las Vegas
	▪ Millennium Waterway Apartments	Baseball Club (d)
	▪ Millennium Woodlands	▪ The Metropolitan Downtown
	Phase II (d)	Columbia Project (b) (d)
	▪ 85 South Street	▪ The Club at Carlton Woods
		▪ The Woodlands Resort &
		Conference Center
		▪ The Woodlands Parking Garages
		▪ Woodlands Sarofim #1 (d)

(a) The Summerlin MPC includes our Discovery Land joint venture.

(b) Asset was placed in service and moved from the Strategic Developments segments to the Operating Assets segment during 2015.

(c) Asset consists of two equity method investments.

(d) A non-consolidated investment.

As our segments are managed separately, different operating measures are utilized to assess operating results and allocate resources among the segments. The one common operating measure used to assess operating results for the business segments is Real Estate Property Earnings Before Taxes (“REP EBT”), which represents the operating revenues of the properties less property operating expenses and adjustments for interest, as further described below. We believe REP EBT provides useful information about the operating performance for all of our properties.

REP EBT, as it relates to our business, is defined as net income (loss) excluding general and administrative expenses, other income, corporate interest income, corporate interest and depreciation expense, provision for income taxes, warrant liability gain or loss and the change in tax indemnity receivable. We present REP EBT because we use this measure, among others, internally to assess the operating performance of our assets. We also present this measure because we believe certain investors use it as a measure of a company’s historical operating performance and its ability to service and incur debt. We believe that the inclusion of certain adjustments to net income (loss) to calculate REP EBT is appropriate to provide additional information to investors.

29

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

Segment operating results are as follows:

	Three Months Ended March 31,
	2015		2014
	(In thousands)
Master Planned Communities
Land sales	$	48,081	$	47,671
Builder price participation		5,698		4,097
Minimum rents		215		197
Other land revenues		3,286		2,504
Other rental and property revenues		(2)		67
Total revenues		57,278		54,536
Cost of sales - land		23,896		23,078
Land sales operations		7,579		7,304
Land sales real estate and business taxes		2,404		1,954
Depreciation and amortization		95		100
Interest income		(16)		(57)
Interest expense (*)		(4,762)		(5,066)
Total expenses		29,196		27,313
MPC EBT		28,082		27,223
Operating Assets
Minimum rents		34,312		19,900
Tenant recoveries		9,573		5,884
Resort and conference center revenues		12,003		9,426
Other rental and property revenues		6,274		5,110
Total revenues		62,162		40,320
Other property operating costs		17,486		13,181
Rental property real estate taxes		5,520		3,107
Rental property maintenance costs		2,627		1,800
Resort and conference center operations		9,078		7,511
Provision for doubtful accounts		809		143
Demolition costs		117		2,494
Development-related marketing costs		2,266		2,079
Depreciation and amortization		18,762		9,010
Other income		—		—
Interest income		(10)		(119)
Interest expense		6,495		2,044
Equity in Earnings from Real Estate and Other Affiliates		(885)		(1,805)
Total expenses		62,265		39,445
Operating Assets EBT		(103)		875
Strategic Developments
Minimum rents		667		263
Tenant recoveries		94		131
Condominium rights and unit sales		34,857		3,126
Other land revenues		6		8
Other rental and property revenues		26		269
Total revenues		35,650		3,797
Condominium rights and unit cost of sales		22,409		1,571
Other property operating costs		659		626
Real estate taxes		680		633
Rental property maintenance costs		117		115
Provision for doubtful accounts		—		—
Demolition costs		—		22
Development-related marketing costs		3,977		2,145
Depreciation and amortization		1,016		424
Other income		(333)		(2,373)
Interest expense (*)		(1,807)		(2,649)
Equity in Earnings from Real Estate and Other Affiliates		(904)		(4,263)
Total expenses		25,814		(3,749)
Strategic Developments EBT		9,836		7,546
REP EBT	$	37,815	$	35,644

(*)Negative interest expense amounts are due to interest capitalized in our Master Planned Communities and Strategic Developments segments related to Operating Assets segment debt and the Senior Notes.

30

THE HOWARD HUGHES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

The following reconciles REP EBT to GAAP‑basis income (loss) before taxes:

Reconciliation of  REP EBT to GAAP	Three Months Ended March 31,
loss before taxes	2015		2014
	(In thousands)
REP EBT	$	37,815	$	35,644
General and administrative		(18,963)		(16,882)
Corporate interest income/(expense), net		(13,212)		(10,980)
Warrant liability loss		(108,810)		(96,440)
Corporate other income, net		1,132		8,075
Corporate depreciation and amortization		(1,637)		(975)
Loss before taxes	$	(103,675)	$	(81,558)

The following reconciles segment revenues to GAAP‑basis consolidated revenues:

Reconciliation of Segment Basis Revenues to	Three Months Ended March 31,
GAAP Revenues	2015		2014
	(In thousands)
Master Planned Communities	$	57,278	$	54,536
Operating Assets		62,162		40,320
Strategic Developments		35,650		3,797
Total revenues	$	155,090	$	98,653

The assets by segment and the reconciliation of total segment assets to the total assets in the Condensed Consolidated Balance Sheets are summarized as follows:

	March 31,		December 31,
	2015		2014
	(In thousands)
Master Planned Communities	$	1,920,953	$	1,877,043
Operating Assets		2,027,494		1,934,350
Strategic Developments		1,000,014		879,896
Total segment assets		4,948,461		4,691,289
Corporate and other		300,315		428,642
Total assets	$	5,248,776	$	5,119,931

The increase in the Strategic Development segment asset balance as of March 31, 2015 of $120.1 million compared to December 31, 2014 is primarily due to the acquisition of additional land and air rights near South Street Seaport, increase in development costs of $34.1 million for Ward Village, $17.6 million for the 1725-35 Hughes Landing Boulevard office buildings, $17.3 million for Three Hughes Landing, $14.6 million for Waterway Square Hotel (Westin) and $10.7 million for One Lake’s Edge, the collection of $9.6 million of buyer deposits on the pre-sales of condominium units for both Waiea Condominiums and Anaha Condominiums in Ward Village, the reduction of $46.2 million resulting from the transfer of Hughes Landing Retail, Creekside Village and The Metropolitan Downtown Columbia to the Operating segment, the use of $21.6 million of buyer deposits to reimburse for development costs for Ward Village and the cash distribution of $8.9 million from the investment in ONE Ala Moana.

Corporate and other assets as of March 31, 2015 consist primarily of Cash and cash equivalents. The $128.3 million decrease compared to December 31, 2014 is primarily due to our pre-development and development activities.

31

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and notes and the company’s Annual Report on Form 10-K for the year ended December 31, 2014. All references to numbered Notes are to specific notes to our Condensed Consolidated Financial Statements included in this Quarterly Report.

Forward-looking information

We may make forward-looking statements in this Quarterly Report and in other reports that we file with the SEC. In addition, our management may make forward-looking statements orally to analysts, investors, creditors, the media and others.

Forward-looking statements include:

· projections of our revenues, operating income, net income, earnings per share, REP EBT, capital expenditures, income tax, other contingent liabilities, dividends, leverage, capital structure or other financial items;

· forecasts of our future economic performance; and

· descriptions of assumptions underlying or relating to any of the foregoing.

In this Quarterly Report, for example, we make forward-looking statements discussing our expectations about:

· capital required for our operations and development opportunities for the properties in our Operating Assets and Strategic Developments segments;

· expected performances of our Master Planned Communities segment and other current income producing properties; and

· future liquidity, development opportunities, development spending and management plans.

Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements often include words such as "anticipate," "believe," “can,” “could,” "estimate," "expect," “forecast,” "intend," “may,” “likely,” "plan," "project," “realize,” "should," "target," "would," and other words of similar expressions.  Forward-looking statements should not be unduly relied upon. They give our expectations about the future and are not guarantees. 

There are several factors, many beyond our control, which could cause results to differ materially from our expectations. These risk factors are described in our Annual Report on Form 10-K for the year ended December 31, 2014 (the “Annual Report”) and are incorporated herein by reference. Any factor could, by itself, or together with one or more other factors, adversely affect our business, results of operations or financial condition. There may also be other factors that we have not described in this Quarterly Report or in our Annual Report that could cause results to differ from our expectations. These forward-looking statements present our estimates and assumptions only as of the date of this Quarterly Report. Except as may be required by law, we undertake no obligation to modify or revise any forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.

Real Estate Property Earnings Before Taxes

We use a number of operating measures for assessing operating performance of our communities, assets, properties and projects within our segments, some of which may not be common among all three of our segments. We believe that investors may find some operating measures more useful than others when separately evaluating each segment. One common operating measure used to assess operating results for our business segments is Real Estate Property Earnings Before Taxes (“REP EBT”). We believe REP EBT provides useful information about our operating performance because it excludes certain non-recurring and non-cash items which we believe are not indicative of our core business. REP EBT may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.

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REP EBT, as it relates to our business, is defined as net income (loss) excluding general and administrative expenses, corporate interest income and corporate interest and depreciation expense, provision for income taxes, warrant liability gain (loss), other income and, prior to 2015, the changes in tax indemnity receivable. We present REP EBT because we use this measure, among others, internally to assess the core operating performance of our assets. We also present this measure because we believe certain investors use it as a measure of a company’s historical operating performance and its ability to service and incur debt. We believe that the inclusion of certain adjustments to net income (loss) to calculate REP EBT is appropriate to provide additional information to investors. A reconciliation of REP EBT to consolidated net income (loss) as computed in accordance with GAAP has been presented in Note 16 – Segments.

REP EBT should not be considered as an alternative to GAAP net income (loss) attributable to common stockholders or GAAP net income (loss), as it has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of the limitations of this metric are that it does not include the following:

· cash expenditures, or future requirements for capital expenditures or contractual commitments;

· corporate general and administrative expenses;

· interest expense on our corporate debt;

· income taxes that we may be required to pay;

· any cash requirements for replacement of depreciated or amortized assets; and

· limitations on, or costs related to, transferring earnings from our Real Estate and Other Affiliates to us.

Operating Assets Net Operating Income

We believe that net operating income (“NOI”) is a useful supplemental measure of the performance of our Operating Assets because it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating real estate properties and the impact on operations from trends in rental and occupancy rates and operating costs. We define NOI as revenues (rental income, tenant recoveries and other income) less expenses (real estate taxes, repairs and maintenance, marketing and other property expenses). NOI excludes straight line rents and amortization of tenant incentives, net interest expense, ground rent amortization, demolition costs, amortization, depreciation, development-related marketing costs and equity in earnings from Real Estate and Other Affiliates. We use NOI to evaluate our operating performance on a property-by-property basis because NOI allows us to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on our operating results, gross margins and investment returns.

Although we believe that NOI provides useful information to investors about the performance of our Operating Assets, due to the exclusions noted above, NOI should only be used as an alternative measure of the financial performance of such assets and not as an alternative to GAAP net income (loss). For reference, and as an aid in understanding our computation of NOI, a reconciliation of NOI to REP EBT has been presented in the Operating Assets segment discussion below.

Results of Operations

Our revenues are primarily derived from the sale of individual lots at our master planned communities to homebuilders, from tenants at our operating assets in the form of fixed minimum rents, overage rent and recoveries of operating expenses, and from the sale of condominium units.

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The following table reflects our results of operations for the three months ended March 31, 2015 and 2014, respectively:

	Three Months Ended March 31,
	2015		2014		Change
	(In thousands, except per share amounts)
Revenues
MPC segment revenues	$	57,278	$	54,536	$	2,742
Operating Assets segment revenues		62,162		40,320		21,842
Strategic Developments segment revenues		35,650		3,797		31,853
Total segment revenues	$	155,090	$	98,653	$	56,437
MPC segment REP EBT	$	28,082	$	27,223	$	859
Operating Assets segment REP EBT		(103)		875		(978)
Strategic Developments segment REP EBT		9,836		7,546		2,290
Total segment REP EBT		37,815		35,644		2,171
General and administrative		(18,963)		(16,882)		(2,081)
Corporate interest expense, net		(13,212)		(10,980)		(2,232)
Warrant liability loss		(108,810)		(96,440)		(12,370)
Corporate other income, net		1,132		8,075		(6,943)
Corporate depreciation and amortization		(1,637)		(975)		(662)
Provision for income taxes		(2,284)		(4,773)		2,489
Net loss		(105,959)		(86,331)		(19,628)
Net income attributable to noncontrolling interests		-		15		(15)
Net loss attributable to common stockholders	$	(105,959)	$	(86,316)	$	(19,643)
Basic and diluted loss per share	$	(2.68)	$	(2.19)	$	(0.49)

Consolidated revenues for the three months ended March 31, 2015 increased compared to the same period in 2014 primarily due to higher revenues in our Operating Assets and Strategic Developments segments. Operating Assets segment revenue increased primarily due to higher minimum rents and tenant recoveries from both our retail and office properties.  The growth related to our retail properties is primarily due to openings in 2014 in Las Vegas and New Orleans and higher rental rates and a bad debt recovery at Ward Village. The increase in our office properties is due to our recent acquisition of six office buildings in Downtown Columbia and openings in 2014 in The Woodlands. Strategic Developments segment revenue increased due to recognition of revenue related to our Waiea Condominiums, which began recognizing revenue in the fourth quarter 2014.

The Operating Assets segment REP EBT decreased primarily due to $9.8 million of higher non-cash depreciation expense, a majority of which relates to assets placed into service in 2014. The properties placed into service in 2014 will be stabilizing over the next 12 to 24 months, yet the full amount of annual depreciation and amortization associated with them begins as soon as they are placed into service.  Please refer to the Operating Assets Segment discussion for a more complete discussion of the impact of depreciation and amortization on our Operating Assets segment REP EBT.

General and administrative expenses for the three months ended March 31, 2015 increased compared to the same period in 2014. The increase is primarily due to $1.1 million of increased headcount and compensation costs and $1.1 million of various other items due to our growth.

Corporate interest expense, net increased for the three months ended March 31, 2015 due to the settlement of the GGP Tax Indemnity Receivable in the fourth quarter 2014, which indemnified us for taxes and interest related to certain assets in our Master Planned Communities segment prior to March 31, 2010. As a result of this settlement, we no longer record interest income related to the receivable.

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Corporate other income for the three months ended March 31, 2015 decreased $6.9 million primarily because for the three months ended March 31, 2014 Corporate other income included a $7.8 million pre-tax gain recognized on insurance proceeds received relating to South Street Seaport.

The warrant liability loss for the three months ended March 31, 2015 and 2014 was due to appreciation in our stock price, thereby increasing the value of the warrants.

The decrease in the provision for income taxes for the three months ended March 31, 2015 compared to 2014 is attributable to decreases in income (loss) before taxes, excluding the warrant liability loss, and interest expense on the uncertain tax position.

We have significant permanent differences, primarily from warrant liability gains and losses, interest income on the tax indemnity receivable (prior to 2015), and changes in valuation allowances that cause our effective tax rate to deviate greatly from statutory rates. The effective tax rates based upon actual operating results were (2.2%) for the three months ended March 31, 2015 compared to (5.9%) for the three months ended March 31, 2014. The changes in the tax rate were primarily attributable to the changes in the warrant liability, valuation allowance and unrecognized tax benefits as well as other permanent items. If changes in the warrant liability, valuation allowance, unrecognized tax benefits and other material discrete adjustments to deferred tax liabilities were excluded from the effective tax rate computation, the effective tax rates would have been 34.8% and 35.3% for the three months ended March 31, 2015 and 2014, respectively.

The higher net loss attributable to common stockholders for the three months ended March 31, 2015 compared to the same period in 2014 is primarily due to the following:

· Higher warrant liability loss due to appreciation in our stock price;

· Higher depreciation expense from assets placed in service during 2014;

· Lower corporate other income in 2015 due to the receipt of Superstorm Sandy insurance proceeds in 2014;

· Higher corporate interest expense due to higher mortgage indebtedness and fewer capital expenditures in 2015 qualifying for interest capitalization; and

· Lower income taxes due to the lower interest expense related to the uncertain tax position.

Please refer to the individual segment operations sections that follow for explanations of the segment performance.

Segment Operations

Please refer to Note 16 - Segments for additional information including reconciliations of our segment basis results to generally accepted accounting principles (“GAAP”) basis results.

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Master Planned Communities Segment

Master Planned Communities Revenues and Expenses(*)

For the three months ended March 31, 2015 and 2014

(In thousands)

	Bridgeland						Conroe						Maryland						Summerlin						The Woodlands						Total MPC
	Three Months Ended March 31,
	2015			2014			2015			2014			2015			2014			2015			2014			2015			2014			2015			2014
Land sales	$	4,578		$	136		$	-		$	-		$	-		$	-		$	36,288		$	29,326		$	7,215		$	18,209		$	48,081		$	47,671
Builder price participation		123			128			-			-			-			-			4,262			2,595			1,313			1,374			5,698			4,097
Minimum rents		-			-			-			-			-			-			215			197			-			-			215			197
Other land sale revenues		137			100			-			-			51			2			1,780			1,370			1,318			1,032			3,286			2,504
Other rental and property revenues		-			(7)			-			-			-			-			(2)			-			-			74			(2)			67
Total revenues		4,838			357			-			-			51			2			42,543			33,488			9,846			20,689			57,278			54,536
Cost of sales - land		1,672			61			-			-			-			5			19,795			17,219			2,429			5,793			23,896			23,078
Land sales operations		988			720			-			-			104			113			2,692			2,556			3,795			3,915			7,579			7,304
Land sales real estate and business taxes		74			(3)			-			-			166			201			936			843			1,228			913			2,404			1,954
Depreciation and amortization		30			32			-			-			5			8			30			30			30			30			95			100
Total expenses		2,764			810			-			-			275			327			23,453			20,648			7,482			10,651			33,974			32,436
Operating income		2,074			(453)			-			-			(224)			(325)			19,090			12,840			2,364			10,038			23,304			22,100
Interest expense, net (a)		(2,277)			(2,128)			(194)			-			(10)			(38)			(3,517)			(4,186)			1,220			1,229			(4,778)			(5,123)
MPC REP EBT	$	4,351		$	1,675		$	194		$	-		$	(214)	(c)	$	(287)		$	22,607		$	17,026		$	1,144		$	8,809		$	28,082		$	27,223
Gross Margin % (b)		63.5	%		55.1	%		0.0	%		0.0	%		0.0	%		0.0	%		45.5	%		41.3	%		66.3	%		68.2	%		50.3	%		51.6	%

(*)   For a reconciliation of MPC REP EBT to consolidated income (loss) before taxes, refer to Note 16 – Segments.

(a) Negative interest expense amounts relate to interest capitalized on MPC land derived from debt associated with our Operating Assets segment and corporate debt.

(b) Gross margin % is the ratio of Land sales less Cost of sales-land, divided by Land sales.

(c) The negative MPC REP EBT in Maryland is due to no land sales because the residential lot inventory was sold out in 2012; however, certain costs such as real estate taxes and administrative expenses continue to be incurred.

MPC revenues vary between periods based on economic conditions and several factors such as, but not limited to, location, availability of land for sale, development density and residential or commercial use. Although our business does not involve the sale or resale of homes, we believe that net new home sales are an important indicator of future demand for our superpad sites and lots; therefore, we use this statistic in the discussion of our MPC operating results. Net new home sales reflect home sales made by homebuilders, less cancelations. Cancelations occur when a homebuyer signs a contract to purchase a home, but later fails to qualify for a home mortgage or is unable to provide an adequate down payment to complete the home sale. Reported results may differ significantly from actual cash flows generated principally because cost of sales for GAAP purposes is derived from margins calculated using carrying values, projected future improvements and other capitalized project costs in relation to projected future land sale revenues. Carrying values, generally, represent acquisition and development costs reduced by any previous impairment charges. Development expenditures are capitalized and generally not reflected in the Consolidated Statements of Operations in the current year.

Builder price participation generally represents the amount collected in excess of the base lot price. The excess amount is calculated based on the actual home price multiplied by an agreed upon percentage stipulated in the land sales contract, less the base lot price.

Interest expense, net reflects the amount of interest that is capitalized at the project level.

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MPC sales for the three months ended March 31, 2015 and 2014 is summarized as follows:

	MPC Sales Summary
	Land Sales				Acres Sold		Number of Lots/Units		Price per Acre				Price per Lot/Units
	Three Months Ended March 31,
($ in thousands)	2015		2014		2015	2014	2015	2014	2015		2014		2015		2014
Bridgeland
Residential
Single family - detached	$	4,578	$	136	11.8	0.5	41	3	$	388	$	272	$	112	$	45
Total		4,578		136	11.8	0.5	41	3		388		272		112		45
$ Change		4,442			11.3		38			116				67
% Change		NM			NM		NM			42.6%				148.9%
Maryland Communities
No land sales
Summerlin
Residential
Superpad sites		16,774		16,281	29.2	31.3	78	121		574		520		215		135
Single family - detached		13,650		4,800	14.9	6.9	75	25		916		696		182		192
Custom lots		2,545		5,036	2.0	3.8	5	8		1,273		1,325		509		630
Commercial
Not-for-profit		—		2,250	—	10.0	—	—		—		225		—		—
Total		32,969		28,367	46.1	52.0	158	154		715		546		209		170
$ Change		4,602			(5.9)		4			169				39
% Change		16.2%			-11.3%		2.6%			31.0%				22.9%
The Woodlands
Residential
Single family - detached		6,807		17,271	9.8	23.8	37	83		695		726		184		208
Single family - attached		408		938	0.8	1.4	9	14		510		670		45		67
Total		7,215		18,209	10.6	25.2	46	97		681		723		157		188
$ Change		(10,994)			(14.6)		(51)			(42)				(31)
% Change		-60.4%			-57.9%		-52.6%			-5.8%				-16.5%
Total acreage sales revenue		44,762		46,712	68.5	77.7	245	254
Deferred revenue		393		(1,658)
Special Improvement District revenue *		2,926		2,617
Total segment land sale revenue - GAAP basis	$	48,081	$	47,671

* Applicable exclusively to Summerlin.

NM – Not Meaningful

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For large MPCs such as ours, sales prices on a per lot basis and per acre basis generally increase as the size of the developed lot grows. This is because smaller lots are more commodity-like and larger lots may have more unique features. Additionally, the average homebuyer finds more competition for new and resale homes on the lower end of the price range in the broader residential market. As lot sizes and prices increase, the number of potential customers and developers decreases. Barring a softening in market conditions, when an MPC reaches the level whereby land is scarce, pricing begins to escalate on a per lot and per acre basis due to a scarcity premium resulting from the market's realization that new home site inventory will be depleted.

Houston MPC’s

Houston is known as the energy capital of the world and is home to more than 5,000 energy related firms. With crude oil prices dropping by over 50% since mid-2014, the Houston area is widely expected to experience a slowdown in economic growth. According to the Houston Association of Realtors, the Greater Houston area housing market had its strongest year ever in 2014, with 75,319 homes sold, an increase of 3% over 2013. Houston’s housing market started with rising home sales despite plummeting oil prices.  March 2015 statistics showed year-over-year gains in home sales and prices, keeping housing inventory near historic lows. Many believe that diversification in the industrial-base has left Houston better equipped to meet the challenges of a prolonged downturn in oil prices.  Current inventory in the Houston area is highest among homes priced at $1 million or more, with the strongest sector of the market being homes priced between $500,000 and $1 million. According to Metrostudy, a housing market research firm, new homes priced in the range of $350,000 to $500,000 would be most vulnerable to an extended drop in oil prices.  The Woodlands and Bridgeland MPCs are dominant sellers in the Houston area and continue to be price leaders in comparison to other MPCs.

The ongoing consolidation and relocation of approximately 10,000 employees to ExxonMobil’s three million square foot corporate campus, and completion by the end of 2015 of the latest phase of the Grand Parkway may mitigate a portion of the negative impact of declining oil prices on our MPCs. The ExxonMobil campus is under construction and located just south of The Woodlands. The segment of the Grand Parkway being completed in 2015 will bisect Bridgeland and connect the ExxonMobil campus, the airport and the energy corridor, significantly reducing commute times between these locations.

Bridgeland

The increase for the three months ended March 31, 2015 compared to 2014 in Bridgeland land sales is due to having virtually no inventory for the first quarter of 2014 caused by delays in development associated with a needed wetlands permit, which was obtained in February 2014. The average price per residential acre in the first quarter 2015 increased primarily due to homebuilders adding larger sized lots to their inventory resulting from the pent up demand for new homes. We sold 338 finished lots at Bridgeland during the last six months of 2014.  This activity represented a high level of sales volume compared to prior years and, as expected, first quarter 2015 sales volume of 41 lots reflected the strong 2014 activity.  Homebuilders are currently developing single family homes for sale on the lots purchased during the second half of 2014 and we expect demand for new lots at Bridgeland to be modest until a portion of these homes are completed and sold later in 2015.

Bridgeland had 47 new home sales for the three months ending March 31, 2015, representing an increase of 147.4% compared to 19 new home sales for the same period in 2014.  The increase in new home sales was a result of higher home inventory availability due to new finished lots having been delivered in the second half of 2014.

Interest expense, net reflects the amount of interest that is capitalized at the project level. Interest expense, net increased for the three months ended March 31, 2015 compared to 2014 at Bridgeland due to higher interest capitalization as a result of the increased level of development expenditures after receipt of the wetlands permit.

Conroe

During the first quarter 2015, we revised our plan for the Conroe property. The new plan contemplates development of nearly 5,100 residential lots on over 1,320 acres of land, 155 acres of land projected for commercial use and 10 acres

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projected for institutional use. The revised plan includes an additional 61 acres of land under contract to be acquired for $2.5 million during 2015.

The Woodlands

The decrease in land sales revenue for the three months ended March 31, 2015 compared to 2014 was primarily due to fewer lot sales in 2015 in addition to higher priced premium lots sold in the first quarter 2014. The range of lot types/sizes available for sale is decreasing as The Woodlands’ inventory of residential land for sale decreases. There are less than 1,500 lots remaining until full sell out. This factor combined with an uncertain economic climate in the greater Houston area due to the decline in oil prices, is likely contributing to a slowing sales velocity.

Gross margin decreased slightly for the three months ended March 31, 2015 compared to 2014 because we sold a number of large premium lots in the first quarter 2014.

Las Vegas MPC

Summerlin

The increase in Summerlin’s land sales revenue for the three months ended March 31, 2015 compared to 2014 was primarily due to higher per-acre pricing for superpad sites along with higher residential acreage sold compared to the same period in 2014. Homebuilder demand for land in Summerlin continues to remain strong. We expect prices per acre for superpad sales for the remainder of 2015 to be in the mid $400,000 to low $500,000 range compared to $574,000 for the first quarter of 2015. The lower expected prices are due to a majority of these expected future 2015 sales being located in a different region of Summerlin.

Summerlin had 144 new home sales for the three months ended March 31, 2015, representing a 32.1% increase compared to 109 new home sales for the same period in 2014. The median new home price in Summerlin also increased 2.9% to $503,000 for the three months ended March 31, 2015 compared to a median new home price of $489,000 for the same period in 2014. This resulted in an increase in builder price participation for the three months ended March 31, 2015 compared to 2014.

Gross margin increased for the three months ended March 31, 2015 compared to 2014 due to increased land pricing driven by homebuilder demand.

During the second quarter 2014, we announced a joint venture with Discovery Land Company (“Discovery Land”), a leading developer of private clubs and luxury communities, to develop an exclusive luxury community on approximately 555 acres of land within the Summerlin MPC. We contributed our land with a book basis of $13.4 million to the joint venture at the agreed upon value of $226,000 per acre, or $125.4 million in the first quarter 2015. Discovery Land’s capital contribution funding requirement consists of the initial development costs and total project costs up to a maximum of $30.0 million and we have no further capital obligations. We are entitled to all cash distributed by the joint venture until our equity contribution plus a 5% preferred return on our contributed capital has been repaid. After receipt of our capital contribution and preferred return, Discovery Land is entitled to all remaining cash distributed by the joint venture until two times its equity contribution has been repaid. Any further cash distributions are shared 50/50. Discovery Land is the manager on the project, and development is expected to begin in the second quarter 2015 with the first lot and home sales expected to begin in early 2016.

MPC Net Contribution

In addition to REP EBT for the MPCs, we believe that certain investors measure the value of the assets in this segment based on their contribution to liquidity and capital available for investment. MPC Net Contribution is defined as MPC REP EBT, plus MPC cost of sales and depreciation and amortization reduced by MPC development and acquisition expenditures. Although MPC Net Contribution can be computed from GAAP elements of income and cash flows, it is not a GAAP-based operational metric and should not be used to measure operating performance of the MPC assets as a substitute for GAAP measures of such performance. A reconciliation of REP EBT to consolidated net income (loss) as

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computed in accordance with GAAP is presented in Note 16 - Segments.

The following table sets forth the MPC Net Contribution for the three months ended March 31, 2015 and 2014.

MPC Net Contribution

	Three Months Ended March 31,
	2015		2014		Change
	(In thousands)
MPC REP EBT (*)	$	28,082	$	27,223	$	859
Plus:
Cost of sales - land		23,896		23,078		818
Depreciation and amortization		95		100		(5)
Less:
MPC land acquisitions		(1,101)		—		(1,101)
MPC development expenditures		(37,343)		(28,434)		(8,909)
MPC Net Contribution	$	13,629	$	21,967	$	(8,338)

(*)For a detailed breakdown of our MPC segment EBT, please refer to Note 16 - Segments of our Condensed Consolidated Financial Statements.

MPC Net Contribution decreased for the three months ended March 31, 2015 compared to 2014 primarily due to increased development expenditures at Bridgeland.

The following table sets forth MPC land inventory activity for the three months ended March 31, 2015 and 2014.

MPC Land Inventory Activity

(In thousands)

	Bridgeland		Conroe		Maryland		Summerlin		TheWoodlands		Total MPC
Balance December 31, 2014	$	414,793	$	99,284	$	58,365	$	861,659	$	206,962	$	1,641,063
Acquisitions		—		(6)		—				1,107		1,101
Development expenditures (*)		18,318		431		141		8,019		10,434		37,343
Cost of Sales		(1,672)		—		—		(19,793)		(2,431)		(23,896)
MUD reimbursable costs (**)		(1,966)		—		—		—		(3,884)		(5,850)
Other		18		17		(12)		(14,933)		4,613		(10,297)
Balance March 31, 2015	$	429,491	$	99,726	$	58,494	$	834,952	$	216,801	$	1,639,464

(*)Development expenditures are inclusive of capitalized interest, property taxes and overhead.

(**)MUD reimbursable costs represent land development expenditures transferred to MUD Receivables.

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Operating Assets Segment

These assets primarily consist of repositioned properties with a stable tenant base, and newly developed properties transferred from our Strategic Development segment. These assets typically generate rental revenues sufficient to cover their operating costs except when a substantial portion, or all, of the property is being redeveloped or vacated for development. Variances between years in net operating income typically result from changes in rental rates, occupancy, tenant mix and operating expenses.

Total revenues and expenses for the Operating Assets segment are summarized as follows:

Operating Assets Revenues and Expenses (*)

	Three Months Ended March 31,
	2015		2014			Change
	(In thousands)
Minimum rents	$	34,312	$	19,900	$	14,412
Tenant recoveries		9,573		5,884		3,689
Resort and conference center revenues		12,003		9,426		2,577
Other rental and property revenues		6,274		5,110		1,164
Total revenues		62,162		40,320		21,842
Other property operating costs		17,486		13,181		4,305
Rental property real estate taxes		5,520		3,107		2,413
Rental property maintenance costs		2,627		1,800		827
Resort and conference center operations		9,078		7,511		1,567
Provision for doubtful accounts		809		143		666
Depreciation and amortization		18,762		9,010		9,752
Interest income		(10)		(119)		109
Interest expense		6,495		2,044		4,451
Equity in Earnings from Real Estate and Other Affiliates		(885)		(1,805)		920
Total operating expenses		59,882		34,872		25,010
Income (loss) before development expenses		2,280		5,448		(3,168)
Demolition costs		117		2,494		(2,377)
Development-related marketing costs		2,266		2,079		187
Total development expenses		2,383		4,573		(2,190)
Operating Assets REP EBT	$	(103)	$	875	$	(978)

(*)For a detailed breakdown of our Operating Assets segment EBT, please refer to Note 16 - Segments.

Minimum rents and tenant recoveries increased $18.1 million, primarily due to increases of $9.8 million and $7.6 million for our retail and office properties, respectively. The increase for our retail properties was primarily due to higher rental rates and a bad debt recovery at Ward Village and the openings of Downtown Summerlin and The Outlet Collection at Riverwalk in 2014. The increase in our office properties was primarily due to the purchase of 10 through 60 Columbia Corporate Centers, the openings of 3831 Technology Forest Drive and Two Hughes Landing in 2014, and higher occupancy at One Hughes Landing.

Other rental and property revenues consists primarily of membership revenues at The Club at Carlton Woods, and other rental and special event revenue, percentage rents and lease termination fees at our rental properties. Other rental and property revenue increased primarily due to higher membership fees and usage at The Club at Carlton Woods and the openings of Downtown Summerlin and The Outlet Collection at Riverwalk.

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Other property operating and rental property maintenance costs increased $5.1 million, primarily due to increases of $3.3 million and $1.7 million for our retail and office properties, respectively. The increase for our retail properties was primarily due to the openings of Downtown Summerlin and The Outlet Collection at Riverwalk. The increase for our office properties was primarily due to the operating costs at 10 through 60 Columbia Corporate Center which was acquired in the fourth quarter 2014.

Rental property real estate taxes increased $2.4 million, primarily due to increases of $1.2 million and $1.0 million for our retail and office properties, respectively.  The increase for our retail properties was primarily due to the openings of Downtown Summerlin and The Outlet Collection at Riverwalk, partially offset by a reduction in property taxes at Landmark Mall due to a favorable tax settlement with the City of Alexandria.  The increase for our office properties was primarily due to the acquisition of 10 through 60 Columbia Corporate Centers, higher assessed values for The Woodlands properties and the openings of 3831 Technology Forest Drive and Two Hughes Landing.

Depreciation and amortization increased $9.8 million compared to the prior period, primarily due to increases of $5.3 million for retail properties, $3.7 million for office properties and $0.6 million for the completion of construction at The Woodlands Resort & Conference Center. The increase for retail properties was primarily due to the openings of Downtown Summerlin and The Outlet Collection at Riverwalk and accelerated depreciation at Ward Village related to the planned redevelopment.  The increase for office properties is primarily due to the acquisition of 10 through 60 Columbia Corporate, the openings of 3831 Technology Forest Drive and Two Hughes Landing and additional amortization at One Hughes Landing.

When a development is placed into service we immediately begin depreciating the property ratably over the estimated useful lives of each of its components.  However, most of our newly-developed properties reach stabilized revenues and income over the 12 to 24 month period following being placed into service due to tenants taking occupancy and subsequent leasing of remaining unoccupied space during that period.  As a result, operating income, earnings before taxes and net income will not reflect the ongoing earnings potential of operating assets in this transition period to stabilization.  We also expense development-related demolition and marketing costs, which do not represent recurring costs for stabilized real estate properties.  Excluding depreciation and amortization, demolition and development-related marketing costs, Operating Assets segment REP EBT would have increased $6.6 million, or 45.5%, to $21.0 million for the three months ended March 31, 2015 compared to the same period in 2014.

Interest expense increased primarily due to increases in loan funding at Columbia Regional Building, The Outlet Collection at Riverwalk, Downtown Summerlin, One Hughes Landing, Two Hughes Landing, and The Woodlands Resort & Conference Center. First quarter 2014 includes a $2.0 million decrease in interest expense due to the change in value of the previous lender’s participation right resulting from the repayment of the loan at 70 Columbia Corporate Center.

Demolition costs decreased due to the substantial completion of the demolition of Pier 17 at South Street Seaport in 2014.

Equity in Earnings from Real Estate and Other Affiliates primarily includes the $1.7 million distribution from our Summerlin Hospital investment offset by the loss at Millennium Woods Phase II as we are still in the initial lease up period.

Development-related marketing costs in 2015 relate to events at South Street Seaport. Development-related marketing costs in 2014 relate to South Street Seaport and The Outlet Collection at Riverwalk.

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Operating Assets NOI and REP EBT

	Three Months Ended March 31,
	2015		2014		Change
	(In thousands)
Retail
Columbia Regional (a)	$	261	$	—	$	261
Cottonwood Square		160		153		7
Creekside Village Green (b)		39		—		39
Downtown Summerlin (b)		1,744		—		1,744
Hughes Landing Retail (b)		58		—		58
1701 Lake Robbins (c)		169		—		169
Landmark Mall (d)		(76)		549		(625)
Outlet Collection at Riverwalk (e)		1,153		(1)		1,154
Park West		640		564		76
Ward Village (f)		6,315		5,629		686
20/25 Waterway Avenue		420		421		(1)
Waterway Garage Retail		169		168		1
Total Retail		11,052		7,483		3,569
Office
10-70 Columbia Corporate Center (g)		3,232		144		3,088
Columbia Office Properties		14		88		(74)
One Hughes Landing (h)		1,322		469		853
Two Hughes Landing (i)		204		—		204
2201 Lake Woodlands Drive		(52)		(33)		(19)
9303 New Trails		493		467		26
110 N. Wacker		1,529		1,520		9
3831 Technology Forest Drive (j)		391		—		391
3 Waterway Square		1,474		1,567		(93)
4 Waterway Square		1,460		1,441		19
1400 Woodloch Forest		328		240		88
Total Office		10,395		5,903		4,492
85 South Street (k)		107		—		107
Millennium Waterway Apartments		1,052		1,060		(8)
The Woodlands Resort & Conference Center (l)		2,925		1,915		1,010
Total Retail, Office, Multi-family, Resort & Conference Center		25,531		16,361		9,170
The Club at Carlton Woods (b)		(846)		(1,213)		367
The Woodlands Ground leases		216		110		106
The Woodlands Parking Garages		(176)		(179)		3
Other Properties		891		280		611
Total Other		85		(1,002)		1,087
Operating Assets NOI - Consolidated and Owned		25,616		15,359		10,257
Redevelopments
South Street Seaport (b)		(14)		(394)		380
Total Operating Asset Redevelopments		(14)		(394)		380
Dispositions
Rio West Mall		—		49		(49)
Total Operating Asset Dispositions		—		49		(49)
Total Operating Assets NOI - Consolidated		25,602		15,014		10,588
Straight-line lease amortization (m)		1,194		(436)		1,630
Demolition costs (n)		(117)		(2,494)		2,377
Development-related marketing costs		(2,266)		(2,079)		(187)
Depreciation and amortization		(18,762)		(9,010)		(9,752)
Write-off of lease intangibles and other		(154)		—		(154)
Equity in earnings from Real Estate and Other Affiliates		885		1,805		(920)
Interest, net		(6,485)		(1,925)		(4,560)
Total Operating Assets REP EBT (o)	$	(103)	$	875	$	(978)

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	Three Months Ended March 31,
	2015		2014		Change
	(In thousands)
Operating Assets NOI - Equity and Cost Method Investments
Millennium Woodlands Phase II	$	(104)	$	—	$	(104)
Stewart Title Company		391		198		193
Summerlin Baseball Club		(234)		(247)		13
The Metropolitan Downtown Columbia (b)		(508)		—		(508)
Woodlands Sarofim # 1		391		401		(10)
Total NOI - equity investees		(64)		352		(416)
Adjustments to NOI (p)		(680)		(31)		(649)
Equity Method Investments REP EBT		(744)		321		(1,065)
Less: Joint Venture Partner's Share of REP EBT		(118)		(297)		179
Equity in earnings from Real Estate and Other Affiliates		(862)		24		(886)
Distributions from Summerlin Hospital Investment (q)		1,747		1,781		(34)
Segment equity in earnings from Real Estate and Other Affiliates	$	885	$	1,805	$	(920)
Company's Share of Equity Method Investments NOI
Millennium Woodlands Phase II	$	(85)	$	—	$	(85)
Stewart Title Company		196		99		97
Summerlin Baseball Club		(117)		(124)		7
The Metropolitan Downtown Columbia (b)		(254)		—		(254)
Woodlands Sarofim # 1		78		80		(2)
Total NOI - equity investees	$	(182)	$	55	$	(237)

	Economic	Three Months Ended March 31, 2015
	Ownership	Debt		Cash
		(In thousands)
Millennium Woodlands Phase II	81.43%	$	37,570	$	473
Stewart Title Company	50.00%		—		268
Summerlin Baseball Club	50.00%		—		515
The Metropolitan Downtown Columbia (b)	50.00%		52,342		335
Woodlands Sarofim # 1	20.00%		6,162		940

(a) Stabilized annual NOI of $2.2 million is expected by the end of the second quarter 2016.

(b) Please refer to discussion in the following section regarding this property.

(c) This asset was acquired in July 2014.

(d) The lower NOI is due to a one time favorable property tax settlement with the City of Alexandria of $0.7 million that occurred in the first quarter 2014.

(e) Stabilized annual NOI of $7.8 million is expected by early 2017 based on leases in place as of March 31, 2015.

(f) NOI increase is primarily due to higher rental rates and a bad debt recovery.

(g) In December 2014, we acquired 10–60 Columbia Corporate Center comprised of six adjacent office buildings totaling 699,884 square feet. We acquired 70 Columbia Corporate Center in 2012.

(h) NOI increases are primarily due to increased occupancy.

(i) Stabilized annual NOI of $5.2 million is expected by the third quarter 2015.

(j) Stabilized annual NOI of $1.9 million was reached in the first quarter 2015.

(k) Acquired in 2014.

(l) The renovation project has had a significant positive impact on NOI due to the higher revenue per available room (“RevPAR”) resulting from the new and upgraded rooms. RevPAR is calculated by dividing total room revenues by total occupied rooms for the period.

(m) The net change in straight-line lease amortization for the three months ended March 31, 2015 compared to 2014 is primarily due to new leases at Downtown Summerlin, Two Hughes Landing, 3831 Technology Forest Drive and Ward Villages.

(n) Demolition costs are related to demolition of Pier 17 at South Street Seaport.

(o) For a detailed breakdown of our Operating Asset segment REP EBT, please refer to Note 16 - Segments in the Condensed Consolidated Financial Statements.

(p) Adjustments to NOI include straight-line rent and market lease amortization, demolition costs, depreciation and amortization and non-real estate taxes.

(q) During the first quarters of 2015 and 2014, we received distributions of $1.7 million and $1.8 million, respectively, from our Summerlin Hospital investment. Distributions from the Summerlin Hospital are typically made one time per year in the first quarter.

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Reconciliation of Segment Equity in Earnings

	Three Months Ended March 31,
	2015		2014
	(In thousands)
Equity Method investments	$	(862)	$	24
Cost basis investment distributions		1,747		1,781
Operating Assets segment Equity in Earnings from Real Estate and Other Affiliates		885		1,805
Strategic Developments segment Equity in Earnings from Real Estate and Other Affiliates		903		4,263
Equity in Earnings from Real Estate and Other Affiliates	$	1,788	$	6,068

Retail Properties

The following table summarizes the leases we executed at our retail properties during the three months ended March 31, 2015:

			Square Feet			Per Square Foot						(In thousands)
Retail Properties (a)	Total Executed	Avg. Lease Term (Months)	Total Leased	Associated with Tenant Improvements	Associated with Leasing Commissions	Avg. Starting Rents per Annum		Total Tenant Improvements		Total Leasing Commissions		Avg. Annual Starting Rents		Tenant Improvements		Leasing Commissions
Pre-leased (b)	—	n.a.	—	—	—	$	n.a.	$	—	$	—	$	n.a.	$	—	$	—
Comparable - Renewal (c)	15	35	48,109	—	—		26.23		—		—		1,262		—		—
Comparable - New (d)	1	60	665	665	—		65.74		25.00		—		44		17		—
Non-comparable (e)	25	72	64,439	50,570	43,228		35.13		75.20		12.50		2,263		3,803		541
Total			113,213	51,235	43,228							$	3,569	$	3,820	$	541

(a) Excludes executed leases with a term of less than 12 months.

(b) Pre-leased information is associated with projects under development at March 31, 2015.

(c) Comparable - Renewal information is associated with stabilized assets whereby the space was occupied by the same tenant within 12 months prior to the executed agreement. These leases represent an increase in cash rents from $25.82 per square foot to $26.23 per square foot, or 1.6% over previous rents.

(d) Comparable - New information is associated with stabilized assets whereby the space was occupied by a different tenant within 12 months prior to the executed agreement. These leases represent a decrease in cash rents from $67.49 per square foot to $65.74 per square foot, or (2.6%) below previous rents.

(e) Non-comparable information is associated with stabilized assets whereby the space was previously vacant for more than 12 months or has never been occupied.

Below is a discussion of our retail assets placed in service during the first quarter 2015 and assets which have significant development costs remaining until the asset is substantially complete.

Creekside Village Green

In the first quarter 2015, we substantially completed Creekside Village Green and reclassified the asset into our Operating Assets segment. Total development costs are expected to be approximately $19.0 million, of which we have incurred $15.3 million as of March 31, 2015. As of April 30, 2015, approximately 66.3% of the project has been pre-leased. We expect to reach stabilized annual NOI of $2.2 million by the first quarter 2016.

Downtown Summerlin

As of April 30, 2015, the retail portion of Downtown Summerlin is 72.6% leased and the office building is 46.0% leased of which, 12.4% has been leased by our management office. Stabilized annual NOI is expected to be $37.2 million by the end of 2017. Total estimated development costs are approximately $418 million, of which we have incurred $396.3 million as of March 31, 2015. The remaining costs to be incurred are primarily for tenant improvements and leasing. The project

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is financed by a $311.8 million construction loan. The loan has an initial rate of one-month LIBOR plus 2.25% with an initial maturity date of July 15, 2017, and with two, one-year extension options.

Hughes Landing Retail

In the first quarter 2015, the 40,000 square foot Whole Foods Space and approximately 3,000 square feet of other retail space was placed into service and reclassified to the Operating Assets segment. The remaining portion of the project is expected to be completed in the second quarter 2015. Total development costs are expected to be approximately $36 million, of which we have incurred $26.0 million as of March 31, 2015. The project is financed by a $36.6 million non-recourse construction loan bearing interest at one-month LIBOR plus 1.95% with an initial maturity date of December 20, 2016, with two, one-year extension options. As of April 30, 2015, approximately 83.4% of the project has been leased. We expect to reach stabilized annual NOI of $3.9 million by the end of the first quarter 2016.

Office Properties

The following table summarizes our executed office property leases during the three months ended March 31, 2015:

			Square Feet			Per Square Foot						(In thousands)
Office Properties (a)	Total Executed	Avg. Lease Term (Months)	Total Leased	Associated with Tenant Improvements	Associated with Leasing Commissions	Avg. Starting Rents per Annum		Total Tenant Improvements		Total Leasing Commissions		Avg. Annual Starting Rents		Tenant Improvements		Leasing Commissions
Pre-leased (b)	3	81	34,501	34,501	34,501	$	33.87	$	61.39	$	6.20	$	1,168	$	2,118	$	214
Comparable - Renewal (c)	1	36	3,590	—	—		28.95		—		—		104		—		—
Comparable - New (d)	—	n.a.	—	—	—		—		—		—		—		—		—
Non-comparable (e)	5	61	17,747	14,823	14,823		27.20		27.14		9.52		483		402		141
Total			55,838	49,324	49,324							$	1,755	$	2,520	$	355

(a) Excludes executed leases with a term of less than 12 months.

(b) Pre-leased information is associated with projects under development at March 31, 2015.

(c) Comparable - Renewal information is associated with stabilized assets whereby the space was occupied by the same tenant within 12 months prior to the executed agreement. These leases represent an increase in cash rents from $24.75 per square foot to $28.95 per square foot, or 17.0% over previous rents.

(d) Comparable - New information is associated with stabilized assets whereby the space was occupied by a different tenant within 12 months prior to the executed agreement. There were no comparable - new leases to report in the first quarter.

(e) Non-comparable information is associated with stabilized assets whereby the space was previously vacant for more than 12 months or has never been occupied.

Other

The Club at Carlton Woods

The Club at Carlton Woods (the “Club”) is a 36-hole golf and country club at The Woodlands with 739 total members as of March 31, 2015, consisting of 592 golf memberships and 147 sports memberships. The Club golf memberships decreased by 11 which consisted of 34 cancellations partially offset by 23 new and upgraded members during the three months ended March 31, 2015. We estimate the Club requires approximately 800 golf members to achieve break-even NOI, and therefore, we expect to continue to incur NOI losses for the foreseeable future. The Club’s increase in cancellations and lower NOI of $0.4 million compared to the same periods in 2014 was primarily due to higher membership fees. A significant portion of membership deposits are not recognized as revenue when collected, but are recognized over the estimated 12-year life of a membership.For the three months ended March 31, 2015, and March 31, 2014 cash membership deposits collected, but not recognized in revenue or included in NOI, were $0.9 million and $1.1 million, respectively.

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Partially Owned

The Metropolitan Downtown Columbia Project

The Parcel D venture, in which we are a 50% partner with Kettler, Inc., substantially completed construction of The Metropolitan Downtown Columbia Project and was reclassified into our Operating Assets segment during the first quarter 2015. Total development costs, including land value,  are expected to be $97.0 million, of which the venture had incurred $89.0 million as of March 31, 2015. Remaining costs are primarily related to completing the final apartment units, which will be delivered during the second quarter of 2015. The joint venture obtained a $64.1 million construction loan which is non-recourse to us. The loan bears interest at one-month LIBOR plus 2.40% and matures in July 2020.  As of April 30, 2015, 32.4% of the units have been leased or pre-leased.  We expect the apartments to reach stabilized annual NOI of $6.8 million in the fourth quarter of 2017, of which our share would be $3.4 million.

Redevelopments

The Seaport District

On October 29, 2012, as a result of Superstorm Sandy, the historic area of South Street Seaport (area west of the FDR Drive) suffered significant damage due to flooding. During 2013, we filed a claim with our insurance carriers for property damages, lost income and other expenses resulting from the storm and we believe insurance will cover substantially all of these losses. We received $0.3 million and $7.8 million of insurance recoveries for the three months ended March 31, 2015 and 2014, respectively, which was recorded in other income. The claim is currently in litigation. Insurance recoveries are excluded from NOI. 

In 2013, the City of New York executed the amended and restated ground lease for South Street Seaport and we provided a completion guarantee to New York City for the renovation and reconstruction of the existing Pier 17 Building (“Renovation Project”). Construction began in 2013 and is expected to conclude in 2017. The Renovation Project features a newly constructedpierandbuilding and is designed to include a vibrant open rooftopencompassing approximately 1.5 acres and upscale retail and outdoor entertainmentvenues. Additionally, we willrepositiona significant portion of the 180,000 square feet of retail space in the historic area.The estimated costs for the Renovation Project and repositioning of the historic area are approximately $425 million. We are in the process of replacing the pier structure that will support the new Pier 17 building. We have executed a 20-year anchor lease with iPic Entertainment for 46,000 square feet in the Fulton Market Building located in the historic area. iPic Theatres will serve as an anchor attraction for residents, workers and tourists, and we expect the historic area to be substantially repositioned by the second quarter 2016. We have incurred $122.4 million of development costs on this project as of March 31, 2015, which includes $7.3 million of demolition costs and $5.0 million of development-related marketing costs.

On December 10, 2014 we began the public approval process for our further redevelopment of the South Street Seaport districtwhich includes up to approximately 700,000 square feet of additional space. Our current proposal includes the complete restoration of the historic Tin Building, which will include a food market, greater pedestrian access to the waterfront via East River Esplanade improvements and a new marina. The proposal also includes a reconfigured South Street Seaport Museum space within Schermerhorn Row, as well as a potential building addition on the adjacent John Street lot, the replacement of wooden platform piers adjacent to Pier 17 and a newly constructed mixed-use building which may include a new public middle school and community recreation space. These plans are subject to change as we work our way through the process for obtaining the entitlements necessary to begin construction on the project and there can be no assurance that we will ultimately obtain the entitlements needed to move forward with this project. Total development costs were $9.0 million as of March 31, 2015, which include $1.2 million of development-related marketing costs. As of March 31, 2015, no demolition costs have been incurred.

Strategic Developments Segment

Our Strategic Development assets generally require substantial future development to achieve their highest and best use. For our development projects, the total estimated costs of a project including the construction costs are exclusive of our land value unless otherwise noted. Most of the properties and projects in this segment generate no or minimal revenues

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with the exception of our condominium projects, which generate non-cash revenue from the contracted sales using the percentage of completion method until such time as they are completed and the buyers close on their contracts. Our expenses relating to these assets are primarily related to costs associated with selling condominiums, marketing costs associated with our strategic developments, operational costs associated with the IBM building, carrying costs, such as property taxes and insurance, and other ongoing costs relating to maintaining the assets in their current condition. If we decide to redevelop or develop a Strategic Development asset, we would expect that, upon completion of development, the asset would be reclassified to the Operating Assets segment when the asset is placed in service and NOI would become an important measure of its operating performance. In certain instances we may sell a strategic asset.

Total revenues and expenses for the Strategic Developments segment are summarized as follows:

Strategic Developments Revenues and Expenses (*)

	Three Months Ended March 31,
	2015		2014		Change
	(In thousands)
Minimum rents	$	667	$	263	$	404
Condominium rights and unit sales		34,857		3,126		31,731
Other land, rental and property revenues		126		408		(282)
Total revenues		35,650		3,797		31,853
						—
Condominium rights and unit cost of sales		22,409		1,571		20,838
Other property operating costs		659		626		33
Real estate taxes		680		633		47
Rental property maintenance costs		117		115		2
Demolition costs		—		22		(22)
Development-related marketing costs		3,977		2,145		1,832
Depreciation and amortization		1,016		424		592
Other income		(333)		(2,373)		2,040
Interest, net (a)		(1,807)		(2,649)		842
Equity in Earnings from Real Estate and Other Affiliates		(904)		(4,263)		3,359
Total expenses		25,814		(3,749)		29,563
Strategic Developments EBT	$	9,836	$	7,546	$	2,290

(*)For a detailed breakdown of our Strategic Developments segment EBT, please refer to Note 16 - Segments.

(a)Negative interest expense amounts are due to interest capitalized in our Strategic Developments segment related to Operating Assets segment debt and the Senior Notes.

The increase in condominium rights and unit salesin the first quarter 2015 is due to the recognition of $34.4million of revenue related to our WaieaCondominium project for which we began revenue recognition in the fourth quarter 2014. This increase is offset by $2.7 millionof lowerdeferred revenue on our ONE Ala Moana condominium project, whichwas completed in the fourth quarter 2014. Condominium rights and unit costs of sales primarily representallocated costs onour Waiea Condominium sales in 2015 and costs related to our ONEAla MoanaCondominium project in 2014.

Development-related marketing costs of $4.0 million for the three months ended March 31, 2015 were primarily attributable to strategic development projects at Ward Village, South Street Seaport and Columbia.

Depreciation and amortization increased for the three months ended March 31, 2015 compared to the same period in 2014 due to the depreciation on the IBM building which was placed in service at the end of the first quarter 2014.

Other income of $2.4 million for the three months ended March 31, 2014 relates to the sale of the Redlands Promenade land.  

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Net interest (income) expense decreased for the three months ended March 31, 2015 as compared to the same period in 2014 due to less capitalized interest as we completed projects and moved them to our Operating Assets Segment.

Equity in Earnings from Real Estate and Other Affiliates represents our share of the profit from the ONE Ala Moana condominium venture which is recognized on a percentage of completion basis. Equity in earnings during the three months ended March 31, 2015 is lower as the project was substantially complete as of December 31, 2014. As of March 31, 2015, the one remaining unit is under contract and is expected to close in the second quarter 2015.

The following describes the status of our active Strategic Development Projects as of March 31, 2015:

The Woodlands

Hughes Landing

Three Hughes Landing  -During the third quarter 2014, we began construction of Three Hughes Landing, a Class A office building. The project is expected to be completed by the end of the fourth quarter 2015. Totalestimated development costs are approximately $90 million, of whichwe have incurred $28.3millionas of March 31, 2015. The project is financed by a $65.5million non-recourse construction loan bearing interest at one-month LIBOR plus 2.35% with an initial maturity date of December 5, 2017, with two, one-year extension options.  As of April 30, 2015, none of the building is pre-leased.

1725-35 Hughes Landing Boulevard– Construction began during the fourth quarter2013and is expected to be completed by the end of 2015.Total development costs are expected to be approximately $211 million, which includes $59 million of tenant improvementsthat will be reimbursed by ExxonMobil.We have incurred $105.0 million of development costsas of March 31, 2015.ExxonMobil haspre-leased theentire West Building for 12 years, and 160,000 square feet in the East Building for eight years with an option to lease the remaining space before the building opens. We expect to reach stabilized annual NOI, based on ExxonMobil’s current 478,000 square foot commitment, of approximately $10.7 million in 2018. If ExxonMobil exercises its option for the remaining space, stabilized annual NOI will increase to approximately $14.5 million.The project is financed bya $143.0million non-recourse construction loan bearing interest at one-month LIBOR plus 1.90% with an initial maturity date of June 30, 2018 with a one-year extension option. The interest rate will be reduced to LIBOR plus 1.65% when ExxonMobil takes occupancy. 

Hughes Landing Hotel(Embassy Suites)-Inthefourth quarter2014, we began construction of an Embassy Suites by Hilton in Hughes Landing, which is expectedto be completedby the end of 2015. Total development costs are expected to be approximately $46 million, of whichwe have incurred $11.3 millionas of March 31, 2015. On October 2, 2014, we closed on a $37.1 million non-recourse construction loan bearing interest at one-month LIBOR plus 2.50% with an initial maturity date of October 2, 2018,with two,one-year extension options.

One Lake’s Edge– During the fourth quarter2013, we began construction of One Lake’s Edge, a 390 unit multi-family project, and anticipate completion of construction in the second quarter 2015. Total development costs are expected to be approximately $88 million,of whichwe have incurred $75.4 millionas of March 31, 2015. The project is financed by a $73.5 million non-recourse construction loan bearing interest at one-month LIBOR plus 2.50% with an initial maturity date of November 25, 2016, with two, one-year extension options.  As of April 30, 2015, approximately 25.6% of the units are pre-leased.

Waterway Square Hotel(Westin)– In the second quarter 2014, webeganconstruction ofthe Waterway Square Hotel,a Westin-branded hotel that will be owned and managed by us. The hotelis expected to be completed and opened at the beginning of 2016.Total development costs are expected to be approximately $97 million, of whichwe have incurred $35.9 millionas of March 31, 2015.  The project is financed bya $69.3 million construction loan bearing interest at one-month LIBOR plus 2.65% with an initial maturity date of August 6, 2018, with a one-year extension option.

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Ward Village

Ward Village Master Plan

Inthe fourth quarter2012, we announced plans to transform the property formerly known as Ward Centers into Ward Village, a vibrant neighborhood offering unique retail experiences, dining and entertainment, along with exceptional residences and workforce housing set among open public spaces and pedestrian-friendly streets. The first phase of the master plan includes the renovation of the IBM building, the development of condominium units in two mixed-use market rate residential towers and the development of a workforce residential tower. The IBM building renovation has been completed. We began public presales for the two mixed-use market rate residential towers in February 2014. Sales contracts are subject to a 30-day rescission period, and the buyers are required to make a deposit equal to 5% of the purchase price at signing and an additional 5% deposit 30 days later at which point their total deposit of 10% of the purchase price becomes non-refundable. Buyers are thenrequired to make an additional 10% deposit within approximately 90 days of our receipt of the second deposit.

Waiea Condominiums - In the second quarter2014, we began construction on Waiea, the first of the market rate towers and anticipate completion bythe end of 2016. As of April 30, 2015, we had received $106.3 million of buyer deposits, representing $547.9million of contracted gross sales revenue. Of the 171 total units, 86.5% have been contracted and passed their 30-day rescission period for which the buyers have made non-refundable deposits. Total development costs are expected to be approximately $403 million, excluding land value, which includes $5.0million of development-related marketing costs that will be expensed as incurred. As of March 31, 2015, we have incurred $90.7 million of development costs of which $4.3 million were development-related marketing costs. During the fourth quarter 2014, we met all the necessary requirements to begin recognizing revenue on the percentage of completion basis. As of March 31, 2015, the project was approximately 20.9% complete, and we recognized $12.2 million of profit during the period. 

Anaha Condominiums– In November 2014 we began construction of Anaha, the second market rate tower. Completionis expected bythe second quarter 2017. As of April 30, 2015, we had received $58.3million of buyer deposits, representing $312.3million of contracted gross sales revenue. Of the 311 total units, 77.5% have been contracted and passed their 30-day rescission period for which the buyers have made non-refundable deposits. Total development costs are expected to be approximately $401 million, excluding land value, which includes $4.0million of development-related marketing costs that will be expensed as incurred. As of March 31, 2015, we have incurred $44.5 million of development costs of which $3.5 million were development-related marketing costs. As of March 31, 2015, we had not met all the necessary requirements to begin recognizing revenue on the percentage of completion basis, but we expect to begin recognizing revenue during the second quarter 2015.

On November 6, 2014 we closed on a $600.0 million non-recourse construction loan cross-collateralized by Waiea and Anaha bearing interest at one-month LIBOR plus 6.75% with an initial maturity date of November 6, 2017,with two, one-year extension options. As of March 31, 2015, we have not yet drawn on this facility.

WardWorkforce Housing-Wecontinue to finalize plans for this tower. As of March 31, 2015, we have incurred $6.1 million of development costs on this project.

In connection withPhaseTwo of the master plan, which is being finalized, we have received approval from the HCDA for the development of theWardBlock M project and Ward Village Gateway.

WardBlock M - We expect to begin construction of the Whole Foods Market, located within Ward Block M,in early 2016 with completionscheduled in 2018. Wecontinue to finalize pre-development activities and the project budget. Condominium documents will be submitted to the Hawaii Real Estate Commission in 2015 and we anticipate the Real Estate Commission’s approval in order to launch pre-sales in 2015.We have incurred $6.7 million of development costson this project as of March 31, 2015.

Ward Gateway Towers– Condominium documentswill besubmittedto the Hawaii RealEstate Commissionand we anticipate that we will receive approval in2015. We continue to finalize plans forthesetowers.  We have incurred $18.5 million of pre-development costs on this projectas of March 31, 2015.

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Seaport District Assemblage

During the first quarter 2015, we acquired a 58,000 square foot commercial building and air rights with total residential and commercial development rights of 196,133 square feet.  These acquisitions combined with adjacent property acquisitions in 2014 create a 42,694 square foot lot with 817,784 square feet of available development rights. These properties are collectively referred to as the Seaport District Assemblage and are located in close proximity to our South Street Seaport property. We are currently evaluating plans for this site.

Summerlin

Summerlin Apartments, LLC

We and our partner, The Calida Group (“Calida”), each own 50% of the venture to develop a gated luxury apartment development. The venture commenced construction in February 2015 with a projected second quarter 2016 opening. Total estimated costs are $24.0 million, including land value, of which the venture had incurred $4.9 million as of March 31, 2015. In February of 2015, the venture closed on a $15.8 million construction loan. The loan bears interest at one month LIBOR plus 2.50% and matures in February of 2018, with two, one year extension options. Upon a sale of the property, we are entitled to 50% of the proceeds up to an amount determined by applying a 7.0% capitalization rate to NOI and then 100% of proceeds above that amount.

Parcel C

The Parcel C venture located in Columbia, Maryland, of which we are a 50% partner with Kettler Inc., continues to finalize pre-development activities toconstruct a 437-unit, Class A apartment building with 31,000 square feet of ground floor retail.Our partner will provide construction and property management services, including the funding and oversight of development activities, as well as obtaining construction financing. Closing on the construction loan and commencement of construction is anticipated in 2015.Our total investment in this project was $4.9 millionas of March 31, 2015.

Bridgeland

Lakeland Village Center

We expect to begin construction in the second quarter2015 with an estimatedsecond quarter2016 completion date. Total development costs are expected to be approximately $16 million, andwe have incurred $0.6 millionas of March 31, 2015.

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The following table summarizes our projects under construction, and related debt, for Operating Assets and Strategic Developments as of March 31, 2015. Projects described as Complete are open and are operating but require additional spending and financing prior to project close out. Additionally, we are documenting construction financing for Lakeland Village Center.

Announced Project	Total Estimated Costs (a)		Costs Paid Through March 31, 2015 (b)		Estimated Remaining to be Spent		Buyer Deposits/Tenant Reimbursements		Buyer Deposits/Tenant Reimbursements Drawn Through March 31, 2015		Remaining Buyer Deposits/Tenant Remibursements to be Drawn		Committed/ Allocated Debt (c)		Amount Drawn Through March 31, 2015		Remaining Debt to be Drawn		Estimated Costs Remaining in Excess of Remaining Financing to be Drawn (d)			Estimated Completion Date
Operating Assets	(A)		(B)			(A) - (B) = (C)	(D)		(E)		(D) - (E) = (F)		(G)		(H)		(G) - (H) = (I)		(C) - (F) - (I) = (J)
Columbia Regional Building	$	24,616	$	22,733	$	1,883	$	—	$	—	$	—	$	23,008	$	20,627	$	2,381	$	(498)	(e)	Complete
Outlet Collection at Riverwalk		85,687		76,990		8,697		—		—		—		60,000		51,306		8,694		3	(f)	Complete
South Street Seaport		424,880		95,917		328,963		—		—		—		—		—		—		328,963	(g)	2017
Downtown Summerlin		418,304		355,448		62,856		—		—		—		311,800		256,955		54,845		8,011	(h)	Complete
3831 Technology Forest Drive		19,980		16,486		3,494		—		—		—		23,000		22,622		378		3,116	(i)	Complete
Creekside Village Green		18,536		12,898		5,638		—		—		—		—		—		—		5,638	(j)	Complete
Hughes Landing Retail		36,207		21,627		14,580		—		—		—		36,575		21,518		15,057		(477)	(k)	Complete
Two Hughes Landing		48,603		37,408		11,195		—		—		—		38,730		27,927		10,803		392	(l)	Complete
The Woodlands Resort & Conference Center		76,714		73,340		3,374		—		—		—		48,900		47,009		1,891		1,483	(m)	Complete
Total Operating Assets		1,153,527		712,847		440,680		—		—		—		542,013		447,964		94,049		346,631
Strategic Developments
1725-35 Hughes Landing Boulevard		211,045		83,713		127,332		58,681		1,396		57,285		132,474		63,815		68,659		1,388	(n)	Q4 2015
One Lake's Edge		88,494		64,329		24,165		—		—		—		73,525		49,184		24,341		(176)		Q2 2015
Waterway Square Hotel (Westin)		97,380		24,540		72,840		—		—		—		69,334		—		69,334		3,506	(o)	Q1 2016
Hughes Landing Hotel (Embassy Suites)		46,363		6,116		40,247		—		—		—		34,447		1		34,446		5,801	(p)	Q4 2015
Three Hughes Landing		90,162		15,388		74,774		—		—		—		65,455		—		65,455		9,319	(q)	Q4 2015
Lakeland Village Center		16,274		393		15,881		—		—		—		—		—		—		15,881		Q2 2016
Waiea Condominiums		403,440		65,297		338,143		103,815		21,606		82,209		266,144		—		266,144		(10,210)	(r)	Q4 2016
Anaha Condominiums		401,314		32,278		369,036		57,082		—		57,082		333,856		—		333,856		(21,902)	(r)	Q2 2017
Total Strategic Developments		1,354,472		292,054		1,062,418		219,578		23,002		196,576		975,235		113,000		862,235		3,607
Combined Total at March 31, 2015	$	2,507,999		1,004,901	$	1,503,098	$	219,578	$	23,002	$	196,576	$	1,517,248	$	560,964	$	956,284	$	350,238
Lakeland Village Center (in documentation)																				(13,979)
Est. Costs to be funded net of financing assuming closing on pending financing																			$	336,259

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(a) Total Estimated Costs represent all costs to be incurred on the project which include, construction costs, demolition costs, marketing costs, capitalized leasing and deferred financing and exclude land costs and capitalized corporate interest allocated to the project.  Excluded from Waiea Condominiums' and Anaha Condominiums' Total Estimated Costs are Master Plan infrastructure and amenity cost allocations related to Ward Village.

(b) Costs Paid Through March 31, 2015 includes construction costs, demolition costs, marketing costs, capitalized leasing, payroll and deferred financing costs and advances for certain accrued costs from lenders.

(c) Committed  Debt details:

a. Outlet Collection at Riverwalk - total commitment of $64,400, which includes $60,000 for construction and a $4,400 earn out which is available after completion and the achievement of operational covenants.

b. The Woodlands Resort & Conference Center - total commitment of $95,000, which includes $48,900 for construction, a $10,000 earn out and $36,100 which refinanced prior mortgage debt.

c. Two Hughes Landing - total commitment of $41,230, which includes $38,730 for construction and $2,500 for additional leasing commissions and tenant improvement allowances on One Hughes Landing.

d. 1725-35 Hughes Landing Boulevard - total commitment of $143,000, which includes $132,474 for construction, $5,158 for operating reserve and $5,368 for interest reserve after asset is placed in service.

e. Hughes Landing Hotel - total commitment of $37,097, which includes $34,447 for construction and $2,650 earn out commitment to complete garage expansion not currently included in the project.

(d) Negative balances represent cash to be received in excess of Estimated Remaining to be Spent.  The items are primarily related to March costs that were paid by us but not yet reimbursed by the lender. We expect to receive funds from our lenders for these costs in the future.  Positive balances represent cash that remains to be invested or amounts drawn in advance of payment.

(e) Columbia Regional Building wasplaced in service during August 2014.

(f) Outlet Collection at Riverwalk was placed in service during May 2014.

(g) We anticipate seeking financing for this project in the future.

(h) Downtown Summerlin was placed in service during October 2014.

(i) 3831 Technology Forest was placed in service during December 2014.  We closed on permanent financing for the project in the first quarter 2015.However $0.4 million is held in escrow until the completion of certain tenant improvements.

(j) Creekside Village Green was placed in service in March 2015 and the project has no debt financing.

(k) Hughes Landing Retail was placed in service in March 2015.

(l) Two Hughes Landing was placed in service in September 2014.

(m) The Woodlands Resort & Conference Center was substantially complete in November 2014.

(n) 1725-35 Hughes Landing Boulevard Total Estimated Costs include approximately $59 million of tenant improvements that will be reimbursed directly by ExxonMobil.  These Tenant Reimbursements are shown above, in column D, as an additional source of funds for project costs.

(o) Waterway Square Hotel's Estimated Costs Remaining in Excess of Financing is the remaining equity portion of the capital structure.

(p) Hughes Landing Hotel's Estimated Costs Remaining in Excess of Financing is the remaining equity portion of the capital structure.

(q) Three Hughes Landing's Estimated Costs Remaining in Excess of Financing is the remaining equity portion of the capital structure.

(r) Both Waiea Condominiums and Anaha Condominiums currently have nonrefundable Buyer Deposits that are required to be utilized to fund project costs prior to drawing on the loan.  When additional Buyer Deposits are received from additional unit sales, those deposits are also required to be used for project costs.  If all the remaining condominium units are sold, we currently estimate a total of approximately $78 million of additional buyer deposits that could be available to fund project costs thereby reducing the total amount needed to be drawn from the committedconstruction loan.

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The following table represents our capitalized internal development costs by segment for the three months ended March31, 2015 and 2014:

					Capitalized internal costs related
	Capitalized Internal Costs				to compensation costs
	Three Months Ended March 31,				Three Months Ended March 31,
	2015		2014		2015		2014
	(In millions)				(In millions)
MPC segment	$	2.2	$	1.5	$	1.7	$	1.3
Operating Assets segment		3.2		2.6		2.3		2.2
Strategic Developments segment		4.3		3.1		3.0		2.7
Total	$	9.7	$	7.2	$	7.0	$	6.2

Capitalized internal costs (which include compensation costs) have increased with respect to our MPC segment due to higher development activities. Capitalized internal costs have increased with respect to our properties undergoing redevelopment in our Operating Assets segment and our Strategic Developments segment as we have increased staffing and related costs from 2014 to correspond with our increase in development activities.

Liquidity and Capital Resources

Our primary sources of cash include cash flow from land sales in our MPC segment, cash generated from our operating assets, deposits from condominium sales, first mortgage financings secured by our assets and the corporate bond markets. Our primary uses of cash include working capital, overhead, debt service, property improvements, acquisitions and development costs. We believe that our sources of cash, including existing cash on hand, will provide sufficient liquidity to meet our existing non-discretionary obligations and anticipated ordinary course operating expenses for at least the next twelve months. The development and re-development opportunities in our Operating Assets and Strategic Developments segments are capital intensive and will require significant additional funding. In addition, we typically must provide completion guarantees to lenders in connection with their providing financing for our developments. We also provided a completion guarantee to the City of New York for the Pier 17 renovation project. We currently intend to raise this additional funding with a mix of construction, bridge and long-term financings, by entering into joint venture arrangements and the sale of non-core assets at the appropriate time.

As of March 31, 2015, our consolidated debt was $2.1 billion and our share of the debt of our Real Estate Affiliates aggregated $58.9 million. Please refer to Note 9 – Mortgages, Notes and Loans Payable to our condensed consolidated financial statements for a table showing our debt maturity dates.

The following table summarizes our Net Debt on a segment basis as of March 31, 2015. Net Debt is defined as our share of mortgages, notes and loans payable, at our ownership share, reduced by short-term liquidity sources to satisfy such obligations such as our ownership share of cash and cash equivalents and SID receivables. Although Net Debt is not a recognized GAAP financial measure, it is readily computable from existing GAAP information and we believe, as with our other non-GAAP measures, that such information is useful to our investors and other users of our financial statements.

Segment Basis (a)	Master Planned Communities		Operating Assets			Strategic Developments			Segment Totals		Non- Segment Amounts		Total March 31, 2015
	(In thousands)
Mortgages, notes and loans payable	$	242,922	$	1,063,512	(b)	$	113,078	(c)	$	1,419,512	$	762,181	$	2,181,693
Less: cash and cash equivalents		(82,433)		(94,584)	(d)		(36,474)	(e)		(213,491)		(249,721)		(463,212)
Special Improvement District receivables		(33,040)		—			—			(33,040)		—		(33,040)
Municipal Utility District receivables		(111,066)		—			—			(111,066)		—		(111,066)
Net Debt	$	16,383	$	968,928		$	76,604		$	1,061,915	$	512,460	$	1,574,375

(a) Please refer to Note 16 - Segments.

(b) Includes our $58.0 million share of debt of our Real Estate and Other Affiliates in Operating Assets segment (Woodlands Sarofim, Millennium Woodlands Phase II and The Metropolitan Downtown Columbia Project).

(c) Includes our $0.1 million share of debt of our Real Estate and Other Affiliates in Strategic Developments segment (Summerlin Apartments, LLC).

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(d) Includes our $1.1 million share of cash and cash equivalents of our Real Estate and Other Affiliates in Operating Assets segment (Woodlands Sarofim, Summerlin Las Vegas Baseball Club, The Metropolitan Downtown Columbia Project, Millennium Woodlands Phase II, and Stewart Title).

(e) Includes our $3.7 million share of cash and cash equivalent of our Real Estate and Other Affiliates in Strategic Developments segment (KR Holdings, HHMK Development, Parcel C, Summerlin Apartments).

Cash Flows

Operating Activities

Master Planned Community development has a significant impact on our business. The cash flows and earnings from the business vary more than from our operating assets because the MPC business generates revenues from land sales rather than recurring contractual revenues from operating leases. MPC land sales are a substantial portion of our cash flows from operating activities and are partially offset by MPC development expenditures.

Net cash used in operating activities was $21.9 million for the three months ended March 31, 2015 compared to net cash provided by operating activities of $26.2 million, for the three months ended March 31, 2014. The $48.1 million decrease in cash from operating activities is primarily due to lower MUD receivable collections of $22.6 million and Superstorm Sandy insurance proceeds of $7.5 million collected in the first quarter 2014, higher MPC and condominium development expenditures of $17.2 million partially offset by higher revenues less operating cost of $23.4 million and $18.1 million, respectively, due to the retail and office property openings in 2014.

Investing Activities

Net cash used in investing activities was $212.4 million and $140.8 million for the three months ended March 31, 2015 and 2014, respectively. During the three months ended March 31, 2015, cash used for investing activities was primarily related to development of real estate, property improvements and equipment expenditures of $222.6 million partially offset by $8.9 million of cash distributions received from the One Ala Moana project. The expenditures in 2015 relate to the Seaport District Assemblage acquisitions, Pier 17 development at South Street Seaport and the development of office, retail and multi-family properties in The Woodlands.During the three months ended March 31, 2014, cash used for development of real estate, property improvements and equipment expenditures was $140.5 million. The expenditures in 2014 relate primarily to the construction of The Shops at Summerlin, Hughes Landing Multi-family, Two Hughes Landing, South Street Seaport, The Woodlands Resort & Conference Center and the Outlet Collection at Riverwalk.

Financing Activities

Net cash provided by financing activities was $132.2 million and $46.7 million for the three months ended March 31, 2015 and 2014, respectively. For the three months ended March 31, 2015, we received loan proceeds totaling $137.6 million compared to $48.8 million during the same period in 2014. The 2015 proceeds primarily relate to draws on loans for Summerlin Center, Hughes Landing projects in The Woodlands, The Woodlands Resort & Conference Center, the Outlet Collection at Riverwalk, and The Woodlands and Bridgeland MPCs.

Off-Balance Sheet Financing Arrangements

We do not have any material off-balance sheet financing arrangements. Although we have interests in certain property owning non-consolidated ventures which have mortgage financing, the financings are non-recourse to us and totaled $96.2 million as of March 31, 2015.

REIT Requirements

We revoked Victoria Ward’s REIT status in the first quarter 2015 and it is now a regular “C” corporation subsidiary. Please refer to Note 11 – Income Taxes for more detail on Victoria Ward’s ability to remain qualified as a REIT.

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Seasonality

Generally, revenues from our Master Planned Communities segment, Operating Assets segment, and Strategic Developments segment are not subject to seasonal variations. Our conference center revenues are seasonal based upon the timing of special events which occur more frequently in the Spring and Fall because of favorable weather conditions, and rental incomes for certain retail tenants are subject to overage rent terms, which are based on tenant sales. These retail tenants are generally subject to seasonal variations, with a significant portion of their sales and earnings occurring during the last two months of the year.  As such, our rental income is higher in the fourth quarter of each year.

Critical Accounting Policies

Critical accounting policies are those that are both significant to the overall presentation of our financial condition and results of operations and require management to make difficult, complex or subjective judgments. There have been no changes to our critical accounting policies.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to interest rate risk with respect to our variable rate financings in that increases in interest rates will increase our payments under these variable rates. We intend to manage a portion of our variable interest rate exposure by using interest rate swaps and caps. With respect to fixed rate financings, increases in interest rates could make it more difficult to refinance such debt when due. As of March 31, 2015, we had $1.1 billion of variable rate debt outstanding of which $172.0 million has been swapped to a fixed-rate. Approximately $196.7 million of the $902.2 million of total variable rate debt that has not been swapped to a fixed rate is represented by the Master Credit Facility at The Woodlands. Due to the revolving nature of this type of debt, it is generally inefficient to use interest rate swaps as a hedging instrument; rather, we have purchased an interest rate cap having a $100.0 million notional amount for this facility to mitigate our exposure to rising interest rates. We also did not swap $95.7 million of the outstanding balance on the Ward Village financing to a fixed rate because it is structured to permit partial repayments to release collateral for redevelopment. Due to the uncertain timing of such partial repayments, hedging this portion of the outstanding balance is inefficient. As of March 31, 2015, annual interest costs would increase approximately $9.0 million for every 1.00% increase in floating interest rates. Generally, our interest expense is capitalized due to the level of assets we currently have under development; therefore, the current impact of a change in our interest rate on our Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income (Loss) is expected to be minimal, but we would incur higher cash payments. For additional information concerning our debt and management’s estimation process to arrive at a fair value of our debt as required by GAAP, please refer to the Liquidity and Capital Resources section of “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations”, Note 9 – Mortgages, Notes and Loans Payable and Note 10 – Derivative Instruments and Hedging Activities in our Annual Report.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures 

We maintain disclosure controls and procedures (as defined in Rule 13(a)-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in our reports to the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by SEC rules, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2015, the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were effective as of March 31, 2015.

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Internal Controls over Financial Reporting 

There have been no changes in our internal control over financial reporting during the period covered by this report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

In the ordinary course of our business, we are from time to time involved in legal proceedings related to the ownership and operations of our properties.  Neither we nor any of our real estate affiliates are currently involved in any legal or administrative proceedings that we believe is likely to have a materially adverse effect on our business, results of operations or financial condition.

ITEM 1A.   RISK FACTORS  

There are no material changes to the risk factors previously disclosed in our Annual Report.

ITEM 6   EXHIBITS

The Exhibit Index following the signature page to this Quarterly Report lists the exhibits furnished as required by Item 601 of Regulation S-K and is incorporated by reference.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

The Howard Hughes Corporation
By:	/s/ Andrew C. Richardson
	Andrew C. Richardson
	Chief Financial Officer (principal financial officer)
	May 11, 2015

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EXHIBIT INDEX

4.2	Amendment No. 1 to section 382 Rights Agreement, dated as of February 26, 2015, by and between The Howard Hughes Corporation and Computershare Trust Company, N.A., as rights agent (incorporated by reference to Exhibit 4.2 to the Company’s Current report on Form 8-K, filed on March 3, 2015.
31.1+	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2+	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS+	XBRL Instance Document
101.SCH+	XBRL Taxonomy Extension Schema Document
101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB+	XBRL Taxonomy Extension Label Linkbase Document
101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document

*Management contract, compensatory plan or arrangement

+ Filed herewith

Pursuant to Item 601(b)(4)(v) of Regulation S-K, the registrant has not filed debt instruments relating to long-term debt that is not registered and for which the total amount of securities authorized thereunder does not exceed 10% of total assets of the registrant and its subsidiaries on a consolidated basis as of March 31, 2015.  The registrant agrees to furnish a copy of such agreements to the SEC upon request.

Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014, (ii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2015 and 2014, (iii) the Condensed Consolidated Balance Sheets as of March 31, 2015and December 31, 2014, (iv) Condensed Consolidated Statements of Equity for the three months ended March 31, 2015 and 2014, and (v) the Condensed  Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014.

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a — 14(a) ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, David Weinreb, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Howard Hughes Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ David R. Weinreb
	David R. Weinreb
	Chief Executive Officer (principal executive officer)
	May 11, 2015

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a — 14(a) ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew Richardson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Howard Hughes Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

7
	By:	/s/ Andrew C. Richardson
		Andrew C. Richardson
		Chief Financial Officer (principal financial officer)
		May 11, 2015

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. 1350 ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of The Howard Hughes Corporation (the “Company”) for the period ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers, in their capacity as officers, of the Company, hereby certify, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

7
	By:	/s/ David R. Weinreb
		David R. Weinreb
		Chief Executive Officer (principal executive officer)
		May 11, 2015
	By:	/s/ Andrew C. Richardson
		Andrew C. Richardson
		Chief Financial Officer (principal financial officer)
		May 11, 2015

XML

IMPAIRMENT (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
IMPAIRMENT
Impairment charges	$ 0	$ 0

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Reclassifications out of Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014
Reclassifications out of accumulated other comprehensive income (loss)
Provision for income taxes	$ (2,284)		$ (4,773)
Net income (loss)	(105,959)	(86,331)	(86,331)
Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassifications out of accumulated other comprehensive income (loss)
Provision for income taxes	228
Net income (loss)	(380)
Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member] | Interest Rate Swap [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassifications out of accumulated other comprehensive income (loss)
Interest expense	$ (608)

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Derivative Financial Instruments on Statements of Operations (Details) (Cash Flow Hedging [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Interest Expense [Member]
Effect of the Company's derivative financial instruments on the income statement
Amount of Loss Reclassified from AOCI into Earnings	$ (380)	$ (541)
Interest Rate Swap [Member]
Effect of the Company's derivative financial instruments on the income statement
Amount of Loss Recognized in OCI	$ (761)	$ (342)

XML

COMMITMENTS AND CONTINGENCIES (Details) (USD $)	0 Months Ended		3 Months Ended
	Jun. 27, 2013	Jun. 27, 2013	Mar. 31, 2015	Dec. 31, 2014
Commitments
Letters of Credit and Surety Bonds Outstanding Amount			$ 80,200,000	$ 53,700,000
South Street Seaport Ground Lease [Member]
Commitments
Annual fixed rent	1,200,000	1,200,000
Annual rent escalation rate (as a percent)	3.00%	3.00%
Additional annual rent payments to be made through the term of the lease	210,000	210,000
Rent credit to be received			$ 1,500,000
Maximum period for rent credit			30 months

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Gross notional amounts (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Interest Rate Swap [Member]
Derivative instruments and hedging activities
Estimated additional amount to be reclassified as an increase to interest expense	$ 2.1
Interest Rate Swap [Member] | Cash Flow Hedging [Member]
Derivative instruments and hedging activities
Gross notional amounts of cash flow hedges	172.0
Interest Rate Cap [Member] | Cash Flow Hedging [Member]
Derivative instruments and hedging activities
Gross notional amounts of cash flow hedges		$ 100.0

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

3 Months Ended

Mar. 31, 2015

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Summary of AOCI

Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)

Gains and (Losses) on Cash Flow Hedges

(In Thousands)

	For the Three Months Ended March 31, 2015
Balance as of January 1, 2015	$	(7,712)
Other comprehensive loss before reclassifications		73
Amounts reclassified from accumulated other comprehensive loss		380
Net current-period other comprehensive income		453
Balance as of March 31, 2015	$	(7,259)

All amounts are net of tax.

XML

SEGMENTS (Details)	3 Months Ended
	Mar. 31, 2015 segment
SEGMENTS
Number of reportable segments	3

XML

SEGMENTS

3 Months Ended

Mar. 31, 2015

SEGMENTS

SEGMENTS

NOTE 16 SEGMENTS

We have three business segments which offer different products and services. Our three segments are managed separately because each requires different operating strategies or management expertise and are reflective of management’s operating philosophies and methods. In addition, our segments or assets within such segments could change in the future as development of certain properties commences or other operational or management changes occur. We do not distinguish or group our combined operations on a geographic basis. Furthermore, all operations are within the United States. Our reportable segments are as follows:

· Master Planned Communities (“MPCs”) – includes the development and sale of land, in large‑scale, long‑term community development projects in and around Las Vegas, Nevada; Houston, Texas; and Columbia, Maryland.

· Operating Assets – includes retail, office, and multi-family properties, The Woodlands Resort & Conference Center, The Club at Carlton Woods and other real estate investments. These assets are currently generating revenues, and we believe there is an opportunity to redevelop or reposition certain of these assets to improve operating performance.

· Strategic Developments – includes our condominium and commercial property projects currently under development and all other properties held for development which have no substantial operations.

Revenue recognition for contracted individual units in a condominium project are accounted for under the percentage of completion method when the following criteria are met: a) construction is beyond a preliminary stage; b) buyer is unable to require a refund of its deposit, except for non‑delivery of the unit; c) sufficient units are sold to assure that it will not revert to a rental property; d) sales prices are collectible; and e) aggregate sales proceeds and costs can be reasonably estimated. Those units that do not meet the criteria are accounted for using the full accrual or deposit method which defers revenue recognition until the unit is closed.

Revenue recognized on the percentage-of-completion method is calculated based upon the ratio of project costs incurred to date compared to total estimated project cost. Total estimated project costs include direct costs such as the carrying value of our land, site planning, architectural, construction costs, financing costs andindirect costallocations for certain infrastructure and amenity costswhichbenefit the project based upon the relative fair value of the land prior to development. Changes in estimated project costsimpact the amount of revenue and profit recognized on a percentage of completion basis during the period in which they are determined and in future periods.

The assets included in each segment as of March 31, 2015, are contained in the following chart

MasterPlanned
Communities	OperatingAssets		Strategic Developments
	Retail	Office	Under Construction	Other
• Bridgeland	▪ Columbia Regional Building	▪ 10-60 Columbia Corporate Center	▪ ONE Ala Moana (c)	▪ Alameda Plaza
• Conroe	▪ Cottonwood Square	▪ 70 Columbia Corporate Center	▪ Anaha Condominiums	▪ AllenTowne
• Maryland	▪ Creekside Village Green (b)	▪ Columbia Office Properties	▪ Three Hughes Landing	▪ Bridges at Mint Hill
• Summerlin (a)	▪ Downtown Summerlin	▪ One Hughes Landing	▪ 1725-35 Hughes Landing	▪ Century Plaza Mall
• The Woodlands	▪ Hughes Landing Retail (b)	▪ Two Hughes Landing	Boulevard	▪ Circle T Ranch and
	▪ 1701 Lake Robbins	▪ 2201 Lake Woodlands Drive	▪ Hughes Landing Hotel	Power Center (d)
	▪ Landmark Mall	▪ 9303 New Trails	(Embassy Suites)	▪ Cottonwood Mall
	▪ Outlet Collection at Riverwalk	▪ 110 N. Wacker	▪ One Lake's Edge	▪ Elk Grove Promenade
	▪ Park West	▪ 3831 Technology Forest Drive	▪ Summerlin Apartments, LLC (d)	▪ 80% Interest in Fashion
	▪ South Street Seaport	▪ 3 Waterway Square	▪ Waiea Condominiums	Show Air Rights
	(under construction)	▪ 4 Waterway Square	▪ Waterway Square Hotel	▪ Kendall Town Center
	▪ Ward Village	▪ 1400 Woodloch Forest	(Westin)	▪ Lakeland Village Center
	▪ 20/25 Waterway Avenue			▪ Lakemoor (Volo) Land
	▪ Waterway Garage Retail			▪ Maui Ranch Land
				▪ Parcel C (d)
	Other			▪ Seaport District Assemblage
	▪ Golf Courses at TPC Summerlin	▪ Stewart Title of Montgomery		▪ Ward Block M
	and TPC Las Vegas	County, TX (d)		▪ Ward Gateway Towers
	(participation interest)	▪ Summerlin Hospital Medical		▪ Ward Workforce Housing
	▪ Kewalo Basin Harbor	Center (d)		▪ West Windsor
	▪ Merriweather Post Pavilion	▪ Summerlin Las Vegas
	▪ Millennium Waterway Apartments	Baseball Club (d)
	▪ Millennium Woodlands	▪ The Metropolitan Downtown
	Phase II (d)	Columbia Project (b) (d)
	▪ 85 South Street	▪ The Club at Carlton Woods
		▪ The Woodlands Resort &
		Conference Center
		▪ The Woodlands Parking Garages
		▪ Woodlands Sarofim #1 (d)

(a) The Summerlin MPC includes our Discovery Land joint venture.

(b) Asset was placed in service and moved from the Strategic Developments segments to the Operating Assets segment during 2015.

(c) Asset consists of two equity method investments.

(d) A non-consolidated investment.

As our segments are managed separately, different operating measures are utilized to assess operating results and allocate resources among the segments. The one common operating measure used to assess operating results for the business segments is Real Estate Property Earnings Before Taxes (“REP EBT”), which represents the operating revenues of the properties less property operating expenses and adjustments for interest, as further described below. We believe REP EBT provides useful information about the operating performance for all of our properties.

REP EBT, as it relates to our business, is defined as net income (loss) excluding general and administrative expenses, other income, corporate interest income, corporate interest and depreciation expense, provision for income taxes, warrant liability gain or loss and the change in tax indemnity receivable. We present REP EBT because we use this measure, among others, internally to assess the operating performance of our assets. We also present this measure because we believe certain investors use it as a measure of a company’s historical operating performance and its ability to service and incur debt. We believe that the inclusion of certain adjustments to net income (loss) to calculate REP EBT is appropriate to provide additional information to investors.

Segment operating results are as follows:

	Three Months Ended March 31,
	2015		2014
	(In thousands)
Master Planned Communities
Land sales	$	48,081	$	47,671
Builder price participation		5,698		4,097
Minimum rents		215		197
Other land revenues		3,286		2,504
Other rental and property revenues		(2)		67
Total revenues		57,278		54,536
Cost of sales - land		23,896		23,078
Land sales operations		7,579		7,304
Land sales real estate and business taxes		2,404		1,954
Depreciation and amortization		95		100
Interest income		(16)		(57)
Interest expense (*)		(4,762)		(5,066)
Total expenses		29,196		27,313
MPC EBT		28,082		27,223
Operating Assets
Minimum rents		34,312		19,900
Tenant recoveries		9,573		5,884
Resort and conference center revenues		12,003		9,426
Other rental and property revenues		6,274		5,110
Total revenues		62,162		40,320
Other property operating costs		17,486		13,181
Rental property real estate taxes		5,520		3,107
Rental property maintenance costs		2,627		1,800
Resort and conference center operations		9,078		7,511
Provision for doubtful accounts		809		143
Demolition costs		117		2,494
Development-related marketing costs		2,266		2,079
Depreciation and amortization		18,762		9,010
Other income		—		—
Interest income		(10)		(119)
Interest expense		6,495		2,044
Equity in Earnings from Real Estate and Other Affiliates		(885)		(1,805)
Total expenses		62,265		39,445
Operating Assets EBT		(103)		875
Strategic Developments
Minimum rents		667		263
Tenant recoveries		94		131
Condominium rights and unit sales		34,857		3,126
Other land revenues		6		8
Other rental and property revenues		26		269
Total revenues		35,650		3,797
Condominium rights and unit cost of sales		22,409		1,571
Other property operating costs		659		626
Real estate taxes		680		633
Rental property maintenance costs		117		115
Provision for doubtful accounts		—		—
Demolition costs		—		22
Development-related marketing costs		3,977		2,145
Depreciation and amortization		1,016		424
Other income		(333)		(2,373)
Interest expense (*)		(1,807)		(2,649)
Equity in Earnings from Real Estate and Other Affiliates		(904)		(4,263)
Total expenses		25,814		(3,749)
Strategic Developments EBT		9,836		7,546
REP EBT	$	37,815	$	35,644

(*)Negative interest expense amounts are due to interest capitalized in our Master Planned Communities and Strategic Developments segments related to Operating Assets segment debt and the Senior Notes.

The following reconciles REP EBT to GAAP‑basis income (loss) before taxes:

Reconciliation of  REP EBT to GAAP	Three Months Ended March 31,
loss before taxes	2015		2014
	(In thousands)
REP EBT	$	37,815	$	35,644
General and administrative		(18,963)		(16,882)
Corporate interest income/(expense), net		(13,212)		(10,980)
Warrant liability loss		(108,810)		(96,440)
Corporate other income, net		1,132		8,075
Corporate depreciation and amortization		(1,637)		(975)
Loss before taxes	$	(103,675)	$	(81,558)

The following reconciles segment revenues to GAAP‑basis consolidated revenues:

Reconciliation of Segment Basis Revenues to	Three Months Ended March 31,
GAAP Revenues	2015		2014
	(In thousands)
Master Planned Communities	$	57,278	$	54,536
Operating Assets		62,162		40,320
Strategic Developments		35,650		3,797
Total revenues	$	155,090	$	98,653

The assets by segment and the reconciliation of total segment assets to the total assets in the Condensed Consolidated Balance Sheets are summarized as follows:

	March 31,		December 31,
	2015		2014
	(In thousands)
Master Planned Communities	$	1,920,953	$	1,877,043
Operating Assets		2,027,494		1,934,350
Strategic Developments		1,000,014		879,896
Total segment assets		4,948,461		4,691,289
Corporate and other		300,315		428,642
Total assets	$	5,248,776	$	5,119,931

The increase in the Strategic Development segment asset balance as of March 31, 2015 of $120.1 million compared to December 31, 2014 is primarily due to the acquisition of additional land and air rights near South Street Seaport, increase in development costs of $34.1 million for Ward Village, $17.6 million for the 1725-35 Hughes Landing Boulevard office buildings, $17.3 million for Three Hughes Landing, $14.6 million for Waterway Square Hotel (Westin) and $10.7 million for One Lake’s Edge, the collection of $9.6 million of buyer deposits on the pre-sales of condominium units for both Waiea Condominiums and Anaha Condominiums in Ward Village, the reduction of $46.2 million resulting from the transfer of Hughes Landing Retail, Creekside Village and The Metropolitan Downtown Columbia to the Operating segment, the use of $21.6 million of buyer deposits to reimburse for development costs for Ward Village and the cash distribution of $8.9 million from the investment in ONE Ala Moana.

Corporate and other assets as of March 31, 2015 consist primarily of Cash and cash equivalents. The $128.3 million decrease compared to December 31, 2014 is primarily due to our pre-development and development activities.

XML

STOCK-BASED PLANS - Stock Options (Details) (Stock Options, USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Stock Options
Stock Options
Stock Options Outstanding at the beginning of the period (in shares)	1,043,490
Granted (in shares)	42,000
Forfeited (in shares)	(57,750)
Stock Options Outstanding at the end of the period (in shares)	1,027,740
Weighted Average Exercise Price
Stock Options Outstanding at the beginning of the period (in dollars per share)	$ 72.60
Granted (in dollars per share)	$ 148.01
Forfeited (in dollars per share)	$ 108.19
Stock Options Outstanding at the end of the period (in dollars per share)	$ 73.68
Stock option expense	$ 0.7	$ 1.0

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS - Financial Instruments Not Measured at Fair Value (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Liabilities:
Allowance, notes receivable	$ 463	$ 471
Fair Value, Measurements, Nonrecurring [Member] | Reported Value Measurement [Member]
Assets:
Cash and cash equivalents	348,295	485,424
Notes receivable, net	26,892	28,630
Liabilities:
Fixed-rate debt	1,049,407	1,030,554
Variable-rate debt	1,074,210	962,916
Total mortgages, notes and loans payable	2,123,617	1,993,470
Fair Value, Measurements, Nonrecurring [Member] | Estimate of Fair Value Measurement [Member]
Assets:
Cash and cash equivalents	348,295	485,424
Notes receivable, net	26,892	28,630
Liabilities:
Fixed-rate debt	1,088,862	1,050,333
Variable-rate debt	1,074,210	962,916
Total mortgages, notes and loans payable	$ 2,163,072	$ 2,013,249

XML

EARNINGS PER SHARE - Antidilutive Securities (Details)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Stock Options
Antidilutive securities excluded from computation of diluted earnings per share
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	1,027,740	1,024,940
Restricted Stock [Member]
Antidilutive securities excluded from computation of diluted earnings per share
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	241,931	176,536
Sponsors Warrants [Member]
Antidilutive securities excluded from computation of diluted earnings per share
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	1,916,667	1,916,667
Management Warrants [Member]
Antidilutive securities excluded from computation of diluted earnings per share
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	2,862,687	2,862,687

XML

OTHER ASSETS AND LIABILITIES (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Prepaid Expenses and Other Assets
Special Improvement District receivable	$ 33,040,000	$ 33,318,000
Equipment, net of accumulated depreciation of $2.4 million and $0.7 million, respectively	19,906,000	20,284,000
Tenant incentives and other receivables	12,014,000	14,264,000
Federal income tax receivable	8,629,000	8,629,000
Prepaid expenses	10,560,000	9,196,000
Security and escrow deposits	9,483,000	9,829,000
Other	2,023,000	2,014,000
Total prepaid expenses and other assets	293,199,000	310,136,000
Accumulated depreciation on other equipment	2,800,000	2,400,000
Accounts Payable and Accrued Expenses
Construction payables	191,599,000	170,935,000
Accounts payable and accrued expenses	31,827,000	34,154,000
Condominium deposits	60,706,000	82,150,000
Membership deposits	21,448,000	21,023,000
Accrued interest	28,127,000	14,791,000
Accrued real estate taxes	5,041,000	9,903,000
Tenant and other deposits	11,758,000	12,756,000
Accrued payroll and other employee liabilities	10,561,000	25,838,000
Interest rate swap	3,307,000	3,144,000
Other	26,356,000	23,376,000
Total accounts payable and accrued expenses	458,267,000	466,017,000
Prepaid Expenses and Other Current Assets [Member]
Prepaid Expenses and Other Assets
Increase in prepaid expenses and other assets	16,900,000
Increase in acquired in-place leases	3,100,000
Increase in restricted condominium deposits	12,000,000
Accounts Payable and Accrued Liabilities [Member]
Accounts Payable and Accrued Expenses
Increase in accounts payable and accrued expenses	7,800,000
Increase in construction payable	20,700,000
Increase in accrued payroll	15,300,000
Decrease in accrued real estate taxes	4,900,000
Ward Centers [Member]
Prepaid Expenses and Other Assets
Number of new market rate towers	2
Ward Centers [Member] | Prepaid Expenses and Other Current Assets [Member]
Prepaid Expenses and Other Assets
Increase in condominium deposits	21,400,000
Shops at Summerlin Centre [Member] | Accounts Payable and Accrued Liabilities [Member]
Accounts Payable and Accrued Expenses
Increase in accrued interest	13,300,000
Ground Leases below Market [Member]
Prepaid Expenses and Other Assets
Net carrying amount	19,579,000	19,663,000
Condominium deposits	139,559,000	151,592,000
Tenant Leases above Market [Member]
Prepaid Expenses and Other Assets
Net carrying amount	4,365,000	4,656,000
Uncertain tax position asset	402,000	383,000
Leases, Acquired-in-Place [Member]
Prepaid Expenses and Other Assets
Net carrying amount	29,645,000	32,715,000
Intangibles	3,994,000	3,593,000
Ground Leases above Market [Member] | Accounts Payable and Accrued Liabilities [Member]
Accounts Payable and Accrued Expenses
Net carrying amount	2,232,000	2,272,000
Deferred income	$ 65,305,000	$ 65,675,000

XML

SEGMENTS - Assets by Segment (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Reconciliation of total segment assets to total assets
Assets	$ 5,248,776,000	$ 5,119,931,000
General Growth Properties [Member]
Additional information
Proceeds From Settlement Of Tax Indemnity Receivable	138,000,000
Strategic Developments [Member]
Additional information
Increase (decrease) in assets	120,100,000
Strategic Developments [Member] | ONE AlaMoana [Member]
Additional information
Cash distribution from the investment in ONE Ala Moana	8,900,000
Strategic Developments [Member] | Ward Centers [Member]
Additional information
Deposits collected on the sale of condominium units	9,600,000
New developments in progress	34,100,000
Use of buyer deposit to reimburse for development costs	21,600,000
Strategic Developments [Member] | 1725-35 Hughes Landing Boulevard [Member]
Additional information
New developments in progress	17,600,000
Strategic Developments [Member] | One Lakes Edge [Member]
Additional information
New developments in progress	10,700,000
Strategic Developments [Member] | Waterway Square Hotel [Member]
Additional information
New developments in progress	14,600,000
Strategic Developments [Member] | Three Hughes Landing [Member]
Additional information
New developments in progress	17,300,000
Operating Segments [Member]
Reconciliation of total segment assets to total assets
Assets	4,948,461,000	4,691,289,000
Operating Segments [Member] | Master Planned Communities [Member]
Reconciliation of total segment assets to total assets
Assets	1,920,953,000	1,877,043,000
Operating Segments [Member] | Operating Assets [Member]
Reconciliation of total segment assets to total assets
Assets	2,027,494,000	1,934,350,000
Operating Segments [Member] | Operating Assets [Member] | Hughes Landing Retail [Member]
Additional information
Transfer of property	46,200,000
Operating Segments [Member] | Strategic Developments [Member]
Reconciliation of total segment assets to total assets
Assets	1,000,014,000	879,896,000
Corporate, Non-Segment [Member]
Reconciliation of total segment assets to total assets
Assets	300,315,000	428,642,000
Additional information
Increase (decrease) in assets	$ 128,300,000

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Fair Value of Derivative Financial Instruments (Details) (Interest Rate Swap [Member], Designated as Hedging Instrument [Member], Accounts Payable and Accrued Liabilities [Member], USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Interest Rate Swap [Member] | Designated as Hedging Instrument [Member] | Accounts Payable and Accrued Liabilities [Member]
Fair value of derivative instruments
Derivative liabilities	$ 3,307	$ 3,144

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash Flows from Operating Activities:
Net income (loss)	$ (105,959)	$ (86,331)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation	17,087	9,346
Amortization	4,423	1,163
Amortization of deferred financing costs	1,569	1,014
Amortization of intangibles other than in-place leases	421	161
Straight-line rent amortization	(1,886)	(472)
Deferred income taxes	2,127	4,465
Restricted stock and stock option amortization	1,696	1,764
Gain on disposition of assets		(2,373)
Warrant liability loss	108,810	96,440
Equity in earnings from Real Estate and Other Affiliates, net of distributions	1,264	(3,743)
Provision for doubtful accounts	809	143
Master Planned Community land acquisitions	(1,101)
Master Planned Community development expenditures	(37,343)	(28,434)
Master Planned Community cost of sales	21,782	20,815
Condominium development expenditures	(34,439)	(5,604)
Condominium and other cost of sales	22,409	1,571
Percentage of completion revenue recognition from sale of condominium rights and units	(34,857)	(3,126)
Net changes:
Accounts and notes receivable	(2,880)	19,780
Prepaid expenses and other assets	20,294	(959)
Condominium deposits received	9,572	37,827
Deferred expenses	1,572	(3,093)
Accounts payable and accrued expenses	(7,735)	320
Condominium deposits held in escrow	(9,572)	(37,827)
Other, net	35	3,378
Cash provided by (used in) operating activities	(21,902)	26,225
Cash Flows from Investing Activities:
Property and equipment expenditures	(2,221)	(2,053)
Operating property improvements	(1,857)	(877)
Property developments and redevelopments	(218,550)	(137,579)
Proceeds from dispositions		5,500
Investments in Real Estate and Other Affiliates, net	(436)	(807)
Change in restricted cash	1,707	(4,943)
Cash used in investing activities	(212,424)	(140,759)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgages, notes and loans payable	137,566	48,811
Principal payments on mortgages, notes and loans payable	(4,923)	(2,138)
Deferred financing costs	(396)
Cash provided by (used in) financing activities	132,247	46,673
Net change in cash and cash equivalents	(102,079)	(67,861)
Cash and cash equivalents at beginning of period	560,451	894,948
Cash and cash equivalents at end of period	458,372	827,087
Supplemental Disclosure of Cash Flow Information:
Interest paid	10,471	7,051
Interest capitalized	11,264	11,281
Income taxes paid	210
Non-Cash Transactions:
Special Improvement District bond transfers associated with land sales	2,114	2,259
Property developments and redevelopments	(3,534)	25,550
Accrued interest included in construction loan payable	905
KR Holdings LLC
Cash Flows from Investing Activities:
Investments in Real Estate and Other Affiliates, net	$ 8,933

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REAL ESTATE AND OTHER AFFILIATES (Details) (USD $)	3 Months Ended		0 Months Ended						1 Months Ended	0 Months Ended
	Mar. 31, 2015 item	Mar. 31, 2014	Jul. 05, 2012 acre	May 14, 2012 item	Oct. 04, 2013 acre item sqft	Jul. 11, 2013	Oct. 27, 2011 item	Jan. 24, 2014 acre item	May 31, 2013	Aug. 06, 2012	Dec. 31, 2014	Aug. 06, 2013
Investment in Real Estate and Other Affiliates
Carrying Value	$ 56,127,000										$ 53,686,000
Share of Earnings/Dividends	1,788,000	6,068,000
Share of distributable cash		5,500,000
Aggregate carrying value of unconsolidated VIEs	20,300,000										29,500,000
Number of variable interest entities in which entity is primary beneficiary	1
Carrying values of the assets associated with the operations of the consolidated VIEs	21,200,000										21,100,000
Carrying values of the liabilities associated with the operations of the consolidated VIEs	800,000										600,000
repayments of debt	4,923,000	2,138,000
Book value of land contributed to joint venture	321,176,000										317,211,000
Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	52,190,000										49,769,000
Share of Earnings/Dividends	41,000	4,287,000
Cost-method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	3,937,000										3,917,000
Share of Earnings/Dividends	1,747,000	1,781,000
Discovery Land | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Book value of land contributed to joint venture	13,400,000
SID Bonds transferred to a joint venture	1,300,000
Transaction value of the land contributed to joint venture	125,400,000
Value of land contributed to joint venture (in dollars per acre)	226,000
Preferred return, on capital (as a percent)	5.00%
Capital obligations	0
Entitlement of distribution by joint venture (in times)	2
Discovery Land | Equity Method Investments [Member] | Maximum [Member]
Investment in Real Estate and Other Affiliates
Cash contributed by joint venture partner	30,000,000
KR Holdings LLC | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Number of units in luxury condominium tower	206
Number of units closed	201
Proceeds from Sale of Real Estate	8,900,000
Millennium Woodlands Phase II LLC
Investment in Real Estate and Other Affiliates
Area of land contributed to the joint venture (in acres)			4.8
Number of units in Class A apartment building to be constructed				314
Fair value of the land contributed to joint venture			15,500,000
Cash contributed by joint venture partner			3,000,000
Construction loan secured			37,700,000
Parcel C
Investment in Real Estate and Other Affiliates
Area of land contributed to the joint venture (in acres)					5
Number of units in Class A apartment building to be constructed					437
Area of real estate property to be constructed (in square feet)					31,000
Fair value of the land contributed to joint venture					4,000,000
Transaction value of the land contributed to joint venture					23,400,000
Transaction value, per constructed unit of land contributed to joint venture					53,500,000,000
Parcel D
Investment in Real Estate and Other Affiliates
Fair value of the land contributed to joint venture						20,300,000
Transaction value, per constructed unit of land contributed to joint venture						53,500
Cash contributed by joint venture partner						13,300,000
Percentage of ownership interest of partners in joint venture							50.00%
Additional improvements made in the venture						16,400,000
Future contribution required in accordance with the loan agreement						3,100,000
Distribution of the cash contributed by joint venture partner						7,000,000
Net profit recognized on partial sale of joint venture interest						700,000
Parcel D | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Number of units in Class A apartment building to be constructed							380
Parcel D | Construction Loan Payable [Member]
Investment in Real Estate and Other Affiliates
Aggregate principal amount of debt issued						64,100,000
Outstanding debt	52,300,000
Variable rate basis						one-month LIBOR
Interest rate margin (as a percent)						2.40%
Summerlin Apartments LLC
Investment in Real Estate and Other Affiliates
Area of land contributed to the joint venture (in acres)								4.5
Number of units in Class A apartment building to be constructed								124
Area Of Land In Downtown Summerlin								400
Fair value of the land contributed to joint venture								3,200,000
Percentage of ownership interest of partners in joint venture								50.00%
Percent Share of Proceeds Upon Sale Of Property								50
Percentage of proceeds in excess of an amount determined by applying a specified capitalization rate to NOI								100.00%
Capitalization rate (as a percent)								7.00%
Economic interest (as a percent)								50.00%
Summerlin Las Vegas Baseball Club LLC
Investment in Real Estate and Other Affiliates
Amount funded in cash to joint venture									10,500,000
Economic interest (as a percent)												50.00%
Summerlin Las Vegas Baseball Club LLC | Las Vegas 51S LLC [Member]
Investment in Real Estate and Other Affiliates
Ownership ratio in a joint venture (as a percent)										100.00%
Unconsolidated Properties [Member]
Investment in Real Estate and Other Affiliates
Secured debt	97,800,000
Share of the entity in secured debt	58,900,000
Master Planned Communities [Member] | Discovery Land
Investment in Real Estate and Other Affiliates
Carrying Value	12,052,000
Operating Assets [Member] | Millennium Woodlands Phase II LLC | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	362,000										1,023,000
Share of Earnings/Dividends	(661,000)	(36,000)
Economic interest (as a percent)	81.43%										81.43%
Operating Assets [Member] | Parcel D | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	4,562,000										4,800,000
Share of Earnings/Dividends	(319,000)
Economic interest (as a percent)	50.00%										50.00%
Operating Assets [Member] | Stewart Title | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	3,663,000										3,869,000
Share of Earnings/Dividends	194,000	93,000
Economic interest (as a percent)	50.00%										50.00%
Operating Assets [Member] | Summerlin Las Vegas Baseball Club LLC | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	10,431,000										10,548,000
Share of Earnings/Dividends	(117,000)	(126,000)
Economic interest (as a percent)	50.00%										50.00%
Operating Assets [Member] | Woodlands Sarofim 1 | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	2,635,000										2,595,000
Share of Earnings/Dividends	40,000	57,000
Economic interest (as a percent)	20.00%										20.00%
Strategic Developments [Member] | Circle T | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	9,004,000										9,004,000
Economic interest (as a percent)	50.00%										50.00%
Strategic Developments [Member] | HHMK Development LLC | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	10,000										10,000
Share of Earnings/Dividends	539,000	290,000
Economic interest (as a percent)	50.00%										50.00%
Strategic Developments [Member] | KR Holdings LLC | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	876,000										9,183,000
Share of Earnings/Dividends	365,000	4,009,000
Economic interest (as a percent)	50.00%										50.00%
Strategic Developments [Member] | Summerlin Apartments LLC | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	1,661,000
Economic interest (as a percent)	50.00%										50.00%
Strategic Developments [Member] | Parcel C | Equity Method Investments [Member]
Investment in Real Estate and Other Affiliates
Carrying Value	$ 6,934,000										$ 8,737,000
Economic interest (as a percent)	50.00%										50.00%

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MORTGAGES, NOTES AND LOANS PAYABLE (Tables)

3 Months Ended

Mar. 31, 2015

MORTGAGES, NOTES AND LOANS PAYABLE

Summary of mortgages, notes and loans payable

	March 31,		December 31,
	2015		2014
	(In thousands)
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	1,030,671	$	1,008,165
Special Improvement District bonds		18,736		22,389
Variable-rate debt:
Collateralized mortgages, notes and loans payable (a)		1,074,210		962,916
Total mortgages, notes and loans payable	$	2,123,617	$	1,993,470

(a) As more fully described below, $172.0 million of variable‑rate debt has been swapped to a fixed rate for the term of the related debt.

Schedule of mortgages, notes and loans payable by property

				Maximum		Carrying Value
		Interest		Facility		March 31,		December 31,
$ In thousands	Maturity (a)	Rate		Amount		2015		2014
Master Planned Communities
Bridgeland Land Loan	June 2022	5.50	%			$	15,874	$	15,874
Bridgeland Development Loan	June 2015	5.00	%(b)	$	30,000		15,389		10
Summerlin South SID Bonds - S108	December 2016	5.95	%				548		563
Summerlin South SID Bonds - S124	December 2019	5.95	%				236		236
Summerlin South SID Bonds - S128	December 2020	6.05	%				623		623
Summerlin South SID Bonds - S128C	December 2030	6.05	%				5,097		5,274
Summerlin South SID Bonds - S132	December 2020	6.00	%				2,538		2,936
Summerlin South SID Bonds - S151	June 2025	6.00	%				4,885		6,211
Summerlin West SID Bonds - S808/S810	April 2031	6.00	%				1,069		2,805
The Woodlands Master Credit Facility	August 2018	2.93	%(b)		250,000		196,663		176,663
Master Planned Communities Total							242,922		211,195
Operating Assets
70 Columbia Corporate Center	July 2019	2.43	%(b)				20,000		20,000
Columbia Regional Building	March 2018	2.18	%(b)		23,008		20,627		20,513
Downtown Summerlin	July 2019	2.43	%(b)		311,800		256,955		229,153
Downtown Summerlin SID Bonds - S108	December 2016	5.95	%				310		310
Downtown Summerlin SID Bonds - S128	December 2030	6.05	%				3,431		3,431
One Hughes Landing	December 2029	4.30	%(b)				52,000		52,000
Two Hughes Landing	September 2018	2.83	%(b)		41,230		27,927		19,992
Hughes Landing Retail	December 2018	2.13	%(b)		36,575		21,518		17,424
1701 Lake Robbins	April 2017	5.81	%				4,600		4,600
Millennium Waterway Apartments	June 2022	3.75	%				55,584		55,584
110 N. Wacker (c)	October 2019	5.21	%(b)				29,000		29,000
9303 New Trails	December 2023	4.88	%				12,991		13,074
Outlet Collection at Riverwalk	October 2018	2.93	%(b)		64,400		51,306		47,118
3831 Technology Forest Drive	March 2026	4.50	%				23,000		—
The Woodlands Resort & Conference Center	February 2019	3.68	%(b)		95,000		83,109		76,027
Ward Village (d)	September 2016	3.35	%(b)		250,000		238,716		238,716
20/25 Waterway Avenue	May 2022	4.79	%				14,274		14,330
3 Waterway Square	August 2028	3.94	%				52,000		52,000
4 Waterway Square	December 2023	4.88	%				38,044		38,289
Capital lease obligations	various	3.60	%				123		135
Operating Assets Total							1,005,515		931,696
Strategic Developments
1725-35 Hughes Landing Boulevard	June 2019	2.08	%(b)		143,000		63,815		47,513
Three Hughes Landing	December 2019	2.53	%(b)		65,455		—		—
Hughes Landing Hotel	October 2020	2.68	%(b)		37,100		—		—
One Lake's Edge	November 2018	2.68	%(b)		73,525		49,184		40,787
Waiea and Anaha Condominiums	November 2019	6.93	%(b)		600,000		—		—
Waterway Square Hotel	August 2019	2.83	%(b)		69,300		—		—
Strategic Developments Total							112,999		88,300
Other Corporate Financing Arrangements	June 2018	3.00	%		22,700		19,645		19,968
Senior Notes	October 2021	6.88	%				750,000		750,000
Unamortized underwriting fees							(7,464)		(7,689)
						$	2,123,617	$	1,993,470

(a) Maturity date includes any extension periods which can be exercised at our option and are subject to customary extension terms.

(b) The interest rate presented is based on the one month LIBOR rate, as applicable, at March 31, 2015 which was 0.1756%.

(c) The $29.0 million outstanding principal balance is swapped to a 5.21% fixed rate through maturity.

(d) $143.0 million of the outstanding principal balance is swapped to a 3.81% fixed rate maturity.

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REAL ESTATE AND OTHER AFFILIATES (Tables)

3 Months Ended

Mar. 31, 2015

REAL ESTATE AND OTHER AFFILIATES

Schedule of information related to investments in real estate and other affiliates

	Economic/ Legal Ownership				Carrying Value				Share of Earnings/Dividends
	March 31,		December 31,		March 31,		December 31,		Three Months Ended March 31,
	2015		2014		2015		2014		2015		2014
	(In percentages)				(In thousands)				(In thousands)
Equity Method Investments
Master Planned Communities:
Discovery Land	N/A		N/A		$	12,052	$	—	$	—	$	—
Operating Assets:
Millennium Woodlands Phase II, LLC (a) (b)	81.43	%	81.43	%		362		1,023		(661)		(36)
Stewart Title	50.00	%	50.00	%		3,663		3,869		194		93
Summerlin Las Vegas Baseball Club, LLC (b)	50.00	%	50.00	%		10,431		10,548		(117)		(126)
The Metropolitan Downtown Columbia (c)	50.00	%	50.00	%		4,562		4,800		(319)		—
Woodlands Sarofim	20.00	%	20.00	%		2,635		2,595		40		57
Strategic Developments:
Circle T Ranch and Power Center	50.00	%	50.00	%		9,004		9,004		—		—
HHMK Development (b)	50.00	%	50.00	%		10		10		539		290
KR Holdings (b)	50.00	%	50.00	%		876		9,183		365		4,009
Parcel C (b)	50.00	%	50.00	%		6,934		8,737		—		—
Summerlin Apartments, LLC (b)	50.00	%	50.00	%		1,661		—		—		—
						52,190		49,769		41		4,287
Cost basis investments						3,937		3,917		1,747		1,781
Investment in Real Estate and Other Affiliates					$	56,127	$	53,686	$	1,788	$	6,068

N/A – Not Applicable

(a) Millennium Woodlands Phase II, LLC was placed into service in the beginning of the third quarter of 2014.

(b) Equity method variable interest entities.

(c) The Metropolitan Downtown Columbia was placed into service in the first quarter 2015.

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COMMITMENTS AND CONTINGENCIES - Additional Information (Details) (Damage Due to Flooding [Member], USD $) In Millions, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Damage Due to Flooding [Member]
Insurance recoveries
Insurance recoveries collected			$ 47.9
Pre-tax gain recognized in Other (income)/expense	$ 0.3	$ 7.8

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MORTGAGES, NOTES AND LOANS PAYABLE - Debt Summarized (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Mortgages, notes and loans payable
Total mortgages, notes and loans payable	$ 2,123,617,000	$ 1,993,470,000
Secured Debt [Member]
Mortgages, notes and loans payable
Fixed-rate debt:	1,030,671,000	1,008,165,000
Variable-rate debt:	1,074,210,000	962,916,000
Amount of variable-rate debt swapped to fixed rate		172,000,000
Bonds [Member]
Mortgages, notes and loans payable
Fixed-rate debt:	$ 18,736,000	$ 22,389,000

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

3 Months Ended

Mar. 31, 2015

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Summary of fair value of the Company's derivative financial instruments which are included in accounts payable and accrued liabilities in the Consolidated Balance Sheet

	March 31,		December 31,
	2015		2014
	(In thousands)
Interest Rate Swaps	$	3,307	$	3,144

Summary of effect of the Company's derivative financial instruments on the Condensed Consolidated Statements of Operations

	Three Months Ended March 31,					Three Months Ended March 31,
	2015		2014		Location of Loss	2015		2014
Cash Flow Hedges	Amount of Loss Recognized in OCI		Amount of Loss Recognized in OCI		Reclassified from AOCI into Earnings	Amount of Loss Reclassified from AOCI into Earnings		Amount of Loss Reclassified from AOCI into Earnings
	(In thousands)					(In thousands)
Interest Rate Swaps	$	(761)	$	(342)	Interest Expense	$	(380)	$	(541)

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STOCK-BASED PLANS (Tables)

3 Months Ended

Mar. 31, 2015

STOCK-BASED PLANS

Summary of stock option plan activity

	Stock Options	Weighted Average Exercise Price
Stock Options outstanding at January 1, 2015	1,043,490	$	72.60
Granted	42,000		148.01
Forfeited	(57,750)		108.19
Stock Options outstanding at March 31, 2015	1,027,740	$	73.68

Summary of restricted stock activity

	Restricted Stock	Weighted Average Grant Date Fair Value
Restricted stock outstanding at January 1, 2015	172,690	$	92.02
Granted	73,243		119.01
Forfeited	(4,002)		99.33
Restricted Stock outstanding at March 31, 2015	241,931	$	100.01

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Interest rate swaps, tax	$ 61	$ 10
Capitalized swap interest, tax	$ 31	$ 75

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OTHER ASSETS AND LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2015

OTHER ASSETS AND LIABILITIES

Summary of the significant components of prepaid expenses and other assets

	March 31,		December 31,
	2015		2014
	(In thousands)
Special Improvement District receivable	$	33,040	$	33,318
Equipment, net of accumulated depreciation of $2.8 million and $2.4 million, respectively		19,906		20,284
Tenant incentives and other receivables		12,014		14,264
Federal income tax receivable		8,629		8,629
Prepaid expenses		10,560		9,196
Below-market ground leases		19,579		19,663
Condominium deposits		139,559		151,592
Security and escrow deposits		9,483		9,829
Above-market tenant leases		4,365		4,656
Uncertain tax position asset		402		383
In-place leases		29,645		32,715
Intangibles		3,994		3,593
Other		2,023		2,014
	$	293,199	$	310,136

Summary of the significant components of accounts payable and accrued expenses

	March 31,		December 31,
	2015		2014
	(In thousands)
Construction payables	$	191,599	$	170,935
Accounts payable and accrued expenses		31,827		34,154
Condominium deposits		60,706		82,150
Membership deposits		21,448		21,023
Above-market ground leases		2,232		2,272
Deferred income		65,305		65,675
Accrued interest		28,127		14,791
Accrued real estate taxes		5,041		9,903
Tenant and other deposits		11,758		12,756
Accrued payroll and other employee liabilities		10,561		25,838
Interest rate swaps		3,307		3,144
Other		26,356		23,376
	$	458,267	$	466,017

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FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair Value Hierarchy (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014 item	Mar. 31, 2015
Liabilities
Warrants	$ 366,080	$ 474,890
Interest rate swaps	3,144	3,307
Number of registered money market mutual funds in cash equivalents	2
Fair Value, Measurements, Recurring [Member] | Estimate of Fair Value Measurement [Member]
Assets:
Cash equivalents	75,027	110,077
Liabilities
Warrants	366,080	474,890
Interest rate swaps	3,144	3,307
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Cash equivalents	75,027	110,077
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Liabilities
Interest rate swaps	3,144	3,307
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Liabilities
Warrants	$ 366,080	$ 474,890

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Changes in Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period	$ (7,712)
Other comprehensive income before reclassifications	73
Amounts reclassified from accumulated other comprehensive loss	380
Other comprehensive income (loss)	453	66
Balance at the end of the period	$ (7,259)	$ (7,712)

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Investment in real estate:
Master Planned Community assets	$ 1,639,464	$ 1,641,063
Land	321,176	317,211
Buildings and equipment	1,295,694	1,243,979
Less: accumulated depreciation	(173,439)	(157,182)
Developments	1,109,109	914,303
Net property and equipment	4,192,004	3,959,374
Investment in Real Estate Affiliates	56,127	53,686
Net investment in real estate	4,248,131	4,013,060
Cash and cash equivalents	458,372	560,451
Accounts receivable, net	37,271	28,190
Municipal Utility District receivables, net	111,066	104,394
Notes receivable, net	26,892	28,630
Deferred expenses, net	73,845	75,070
Prepaid expenses and other assets, net	293,199	310,136
Total assets	5,248,776	5,119,931
Liabilities:
Mortgages, notes and loans payable	2,123,617	1,993,470
Deferred tax liabilities	63,568	62,205
Warrant liabilities	474,890	366,080
Uncertain tax position liability	4,709	4,653
Accounts payable and accrued expenses	458,267	466,017
Total liabilities	3,125,051	2,892,425
Commitments and Contingencies (see Note 10)
Equity:
Common stock: .01 par value; 150,000,000 shares authorized, 39,638,094 shares issued and outstanding as of December 31, 2014 and 39,576,344 shares issued and outstanding as of December 31, 2013	397	396
Additional paid-in capital	2,839,709	2,838,013
Accumulated deficit	(712,894)	(606,934)
Accumulated other comprehensive loss	(7,259)	(7,712)
Total stockholders' equity	2,119,953	2,223,763
Noncontrolling interests	3,772	3,743
Total equity	2,123,725	2,227,506
Total liabilities and equity	$ 5,248,776	$ 5,119,931

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MORTGAGES, NOTES AND LOANS PAYABLE - Debt by Property (Details) (USD $)	3 Months Ended		12 Months Ended	0 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014	Oct. 02, 2013	Aug. 08, 2013	Jun. 27, 2014	Apr. 15, 2014	May 31, 2015	Jul. 18, 2014	Jul. 15, 2014	Dec. 05, 2014	Oct. 03, 2014	Nov. 06, 2014	Aug. 06, 2014 room	Jun. 30, 2014 item	Dec. 31, 2013	Nov. 10, 2014	Mar. 25, 2015
Mortgages, notes and loans payable
Unamortized underwriting fees	$ (7,464,000)		(7,689,000)
Total mortgages, notes and loans payable	2,123,617,000		1,993,470,000
Weighted average interest rate (as a percent)			4.53%													4.61%
Land, buildings and equipment and developments in progress pledged as collateral			2,400,000,000
Net cash proceeds	137,566,000	48,811,000
One Month LIBOR
Mortgages, notes and loans payable
Variable rate basis (as a percent)			0.1756%
Other Financing Arrangements [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	3.00%
Facility Amount	22,700,000
Mortgages, notes, and loans payable, gross	19,645,000		19,968,000
Other Financing Arrangements [Member] | Recourse Debt [member]
Mortgages, notes and loans payable
Mortgages, notes, and loans payable, gross			20,400,000
Senior Notes 6.875 Percent Due 2021 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	6.88%
Mortgages, notes, and loans payable, gross	750,000,000		750,000,000
Fixed interest rate (as a percent)				6.875%
Amount of debt issued				750,000,000
Maximum percentage of Notes that can be redeemed using proceeds from equity offerings at any time prior to October 1, 2016				35.00%
Percentage of principal amount at which Notes can be redeemed				106.875%
Senior Notes 6.875 Percent Due 2021 [Member] | Recourse Debt [member]
Mortgages, notes and loans payable
Mortgages, notes, and loans payable, gross			750,000,000
Summerlin [Member]
Mortgages, notes and loans payable
Maximum recourse upon completion of the project and achievement of debt service coverage ratio			15.00%
Maximum Percentage Recourse Upon Achievement of Conditions			10.00%
Debt service coverage ratio to be achieved for reduction in maximum recourse			1.15
Debt service coverage ratio to be achieved for further reduction in maximum recourse			1.25
Minimum average tenant sales per net rentable square foot to be achieved for further reduction in maximum recourse			500.00
Occupancy percentage			90.00%
Recourse on loan (as a percent)			35.00%
Amount of debt issued			311,800,000
Master Planned Communities [Member]
Mortgages, notes and loans payable
Mortgages, notes, and loans payable, gross	242,922,000		211,195,000
Master Planned Communities [Member] | Bridgeland [Member]
Mortgages, notes and loans payable
Period for which interest rate is fixed			5 years
Master Planned Communities [Member] | Bridgeland [Member] | Minimum [Member]
Mortgages, notes and loans payable
Cash balance required to be maintained			3,000,000
Net worth required to be maintained			250,000,000
Master Planned Communities [Member] | Bridgeland [Member] | Term Loan [Member]
Mortgages, notes and loans payable
Interest rate margin (as a percent)			2.75%
Master Planned Communities [Member] | Bridgeland [Member] | Land Loan [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	5.50%
Mortgages, notes, and loans payable, gross	15,874,000		15,874,000
Variable rate basis			three-month LIBOR
Fixed interest rate (as a percent)			5.50%
Annual principal payments as a percentage of outstanding principal balance			5.00%
Master Planned Communities [Member] | Bridgeland [Member] | Development Loan [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	5.00%		5.00%
Facility Amount	30,000,000		140,000,000
Mortgages, notes, and loans payable, gross	15,389,000		10,000
Outstanding balance			30,000,000
Variable rate basis			one-month LIBOR
Interest rate margin (as a percent)			3.25%
Amount utilized			115,700,000
Master Planned Communities [Member] | Summerlin South [Member] | S108 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	5.95%
Mortgages, notes, and loans payable, gross	548,000		563,000
Master Planned Communities [Member] | Summerlin South [Member] | S124 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	5.95%
Mortgages, notes, and loans payable, gross	236,000		236,000
Master Planned Communities [Member] | Summerlin South [Member] | S128 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	6.05%
Mortgages, notes, and loans payable, gross	623,000		623,000
Master Planned Communities [Member] | Summerlin South [Member] | S128C [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	6.05%
Mortgages, notes, and loans payable, gross	5,097,000		5,274,000
Master Planned Communities [Member] | Summerlin South [Member] | S132 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	6.00%
Mortgages, notes, and loans payable, gross	2,538,000		2,936,000
Master Planned Communities [Member] | Summerlin South [Member] | S151 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	6.00%
Mortgages, notes, and loans payable, gross	4,885,000		6,211,000
Master Planned Communities [Member] | Summerlin West [Member] | S808 or 810 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	6.00%
Mortgages, notes, and loans payable, gross	1,069,000		2,805,000
Master Planned Communities [Member] | Woodlands Properties [Member] | Line of Credit [Member]
Mortgages, notes and loans payable
Facility Amount			250,000,000
Variable rate basis					one-month LIBOR
Interest rate margin (as a percent)					2.75%
Extension period at borrower's option			1 year
Maximum facility amount at first extension option			220,000,000
Maximum facility amount at second extension option			185,000,000
Master Planned Communities [Member] | Woodlands Properties [Member] | Term Loan [Member]
Mortgages, notes and loans payable
Facility Amount					125,000,000
Master Planned Communities [Member] | Woodlands Properties [Member] | Revolving Credit Facility [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	2.93%
Facility Amount	250,000,000				125,000,000
Mortgages, notes, and loans payable, gross	196,663,000		176,663,000
Operating Assets [Member]
Mortgages, notes and loans payable
Mortgages, notes, and loans payable, gross	1,005,515,000		931,696,000
Operating Assets [Member] | Capital Lease Obligations [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	3.60%
Mortgages, notes, and loans payable, gross	123,000		135,000
Operating Assets [Member] | Shops at Summerlin Centre [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	2.43%
Facility Amount	311,800,000
Mortgages, notes, and loans payable, gross	256,955,000		229,153,000
Operating Assets [Member] | Shops at Summerlin Centre [Member] | S108 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	5.95%
Mortgages, notes, and loans payable, gross	310,000		310,000
Operating Assets [Member] | Shops at Summerlin Centre [Member] | S128 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	6.05%
Mortgages, notes, and loans payable, gross	3,431,000		3,431,000
Operating Assets [Member] | Columbia Corporate Center 70 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	2.43%
Mortgages, notes, and loans payable, gross	20,000,000		20,000,000
Variable rate basis						one-month LIBOR
Interest rate margin (as a percent)						2.25%
Cash paid in full satisfaction of loan assumed as part of the acquisition							17,000,000
Loans Assumed							16,000,000
Lender participation right (as a percent)							30.00%
Percentage of cumulative preferred return on the property							10.00%
Participation right payment							700,000
Number of extension options						2
Option to extend, term						1 year
Amount of debt issued						20,000,000
Operating Assets [Member] | Columbia Regional Building [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	2.18%
Facility Amount	23,008,000
Mortgages, notes, and loans payable, gross	20,627,000		20,513,000
Operating Assets [Member] | Columbia Regional Building [Member] | Subsequent Event [Member]
Mortgages, notes and loans payable
Mortgages, notes, and loans payable, gross								80,000,000
Variable rate basis								LIBOR
Interest rate margin (as a percent)								1.75%
Number of extension options								2
Option to extend, term								1 year
Operating Assets [Member] | One Hughes Landing [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	4.30%
Mortgages, notes, and loans payable, gross	52,000,000		52,000,000														52,000,000
Fixed interest rate (as a percent)																	4.30%
Amount of debt issued																	38,000,000
Operating Assets [Member] | Two Hughes Landing [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	2.83%
Facility Amount	41,230,000
Mortgages, notes, and loans payable, gross	27,927,000		19,992,000
Operating Assets [Member] | 1701 Lake Robbins
Mortgages, notes and loans payable
Interest rate (as a percent)	5.81%
Mortgages, notes, and loans payable, gross	4,600,000		4,600,000
Loans Assumed									4,600,000
Fixed interest rate (as a percent)									5.81%
Operating Assets [Member] | Millennium Waterway Apartments
Mortgages, notes and loans payable
Interest rate (as a percent)	3.75%
Mortgages, notes, and loans payable, gross	55,584,000		55,584,000
Operating Assets [Member] | Wacker110N [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	5.21%
Mortgages, notes, and loans payable, gross	29,000,000		29,000,000
Outstanding balance			29,000,000
Fixed interest rate per swap (as a percent)			5.21%
Corporate recourse guarantee amount			7,000,000
Operating Assets [Member] | New Trails 9303 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	4.88%
Mortgages, notes, and loans payable, gross	12,991,000		13,074,000
Operating Assets [Member] | Riverwalk Marketplace
Mortgages, notes and loans payable
Interest rate (as a percent)	2.93%
Facility Amount	64,400,000
Mortgages, notes, and loans payable, gross	51,306,000		47,118,000
Operating Assets [Member] | Technology Forest Drive [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	4.50%
Mortgages, notes, and loans payable, gross	23,000,000																	23,000,000
Fixed interest rate (as a percent)																		4.50%
Operating Assets [Member] | Resort and Conference Center [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	3.68%
Facility Amount	95,000,000
Mortgages, notes, and loans payable, gross	83,109,000		76,027,000
Operating Assets [Member] | Ward Centers [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	3.35%
Facility Amount	250,000,000		250,000,000
Mortgages, notes, and loans payable, gross	238,716,000		238,716,000
Outstanding balance																143,000,000
Variable rate basis			one-month LIBOR
Interest rate margin (as a percent)			2.50%
Fixed interest rate per swap (as a percent)			3.80%
Weighted average interest rate (as a percent)			3.35%
Unused portion of the debt instrument			11,300,000
Operating Assets [Member] | Ward Centers [Member] | Minimum [Member]
Mortgages, notes and loans payable
Percentage of debt yield to draw additional loan proceeds			10.00%
Operating Assets [Member] | Ward Centers [Member] | Maximum [Member]
Mortgages, notes and loans payable
Loan to value ratio to draw additional loan proceeds (as a percent)			65.00%
Operating Assets [Member] | Waterway Square 2025 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	4.79%
Mortgages, notes, and loans payable, gross	14,274,000		14,330,000
Operating Assets [Member] | Waterway Square 3 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	3.94%
Mortgages, notes, and loans payable, gross	52,000,000		52,000,000
Operating Assets [Member] | Waterway 4 [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	4.88%
Mortgages, notes, and loans payable, gross	38,044,000		38,289,000
Operating Assets [Member] | Outlet at Riverwalk Properties [Member] | Construction Loan Payable [Member] | Recourse Debt [member]
Mortgages, notes and loans payable
Mortgages, notes, and loans payable, gross			64,400,000
Maximum percent recourse			50.00%
Maximum Percentage Recourse Upon Achievement of Conditions			25.00%
Debt Yield Required To Achieve The Reduced Maxiumum Percentage Recourse			11.00%
Time Period Of Minimum Level Of Tenat Sales Needed To Achieve The Reduced Maximum Percent Recourse			12 months
Strategic Developments [Member] | Summerlin [Member]
Mortgages, notes and loans payable
Variable rate basis										one-month LIBOR
Interest rate margin (as a percent)										2.25%
Number of extension options										2
Option to extend, term										1 year
Amount of debt issued										311,800,000
Strategic Developments [Member] | 1725-35 Hughes Landing Boulevard [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	2.08%
Facility Amount	143,000,000
Mortgages, notes, and loans payable, gross	63,815,000		47,513,000
Strategic Developments [Member] | Three Hughes Landing [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	2.53%
Facility Amount	65,455,000										65,500,000
Variable rate basis											one-month LIBOR
Interest rate margin (as a percent)											2.35%
Number of extension options											2
Option to extend, term											1 year
Strategic Developments [Member] | Hughes Landing Hotel [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	2.68%
Facility Amount	37,100,000
Variable rate basis												one-month LIBOR
Interest rate margin (as a percent)												2.50%
Number of extension options												2
Option to extend, term												1 year
Amount of debt issued												37,100,000
Strategic Developments [Member] | Hughes Landing Retail [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	2.13%
Facility Amount	36,575,000
Mortgages, notes, and loans payable, gross	21,518,000		17,424,000
Strategic Developments [Member] | One Lakes Edge [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	2.68%
Facility Amount	73,525,000
Mortgages, notes, and loans payable, gross	49,184,000		40,787,000
Strategic Developments [Member] | Waiea And Anaha Condominium Towers [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	6.93%
Facility Amount	600,000,000												600,000,000
Variable rate basis													one-month LIBOR
Interest rate margin (as a percent)													6.75%
Number of extension options													2
Option to extend, term													1 year
Strategic Developments [Member] | Waterway Square Hotel [Member]
Mortgages, notes and loans payable
Interest rate (as a percent)	2.83%
Facility Amount	69,300,000
Strategic Developments [Member] | Waterway Hotel [Member]
Mortgages, notes and loans payable
Mortgages, notes, and loans payable, gross	112,999,000		88,300,000
Variable rate basis														one-month LIBOR
Interest rate margin (as a percent)														2.65%
Option to extend, term														1 year
Number of rooms in property securing debt (in rooms)														302
Amount of debt issued														69,300,000
Strategic Developments [Member] | Two Office Buildings [Member]
Mortgages, notes and loans payable
Variable rate basis															one-month LIBOR
Interest rate margin (as a percent)															1.90%
Option to extend, term															1 year
Number of office buildings															2
Amount of debt issued															$ 143,000,000

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Interest rate swaps, deferred tax expense (benefit)	$ 0.1	$ 0.1
Capitalized swap interest, deferred tax benefit	$ 0.1	$ 0.1

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SEGMENTS - REP EBT to GAAP Basis Income (Loss) Before Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014
Reconciliation of REP EBT to GAAP net income (loss)
REP EBT	$ 37,815		$ 35,644
General and administrative	(18,963)		(16,882)
Corporate interest income, net	136		2,188
Warrant liability loss	(108,810)		(96,440)
Provision for income taxes	(2,284)		(4,773)
Corporate other income, net:	1,464		10,448
Corporate depreciation and amortization	(21,510)		(10,509)
Net income (loss)	(105,959)	(86,331)	(86,331)
Corporate, Non-Segment [Member]
Reconciliation of REP EBT to GAAP net income (loss)
Corporate interest income, net	(13,212)		(10,980)
Warrant liability loss	(108,810)		(96,440)
Corporate other income, net:	1,132		8,075
Corporate depreciation and amortization	(1,637)		(975)
Net income (loss)	(103,675)		(81,558)
Operating Segments [Member] | Consolidated Properties [Member]
Reconciliation of REP EBT to GAAP net income (loss)
General and administrative	$ (18,963)		$ (16,882)

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SPONSORS AND MANAGEMENT WARRANTS (Details) (USD $)	12 Months Ended	1 Months Ended
	Dec. 31, 2012	Feb. 28, 2011	Mar. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Nov. 09, 2010
Sponsors and Management Warrants
Warrant liabilities			$ 474,890,000	$ 366,080,000
Sponsors Warrants [Member]
Sponsors and Management Warrants
Issuance of warrants to purchase common stock (in shares)				1,916,667		8,000,000
Estimated initial value						69,500,000
Exercise price (in dollars per share)						50.00
Warrants exercised	1,525,272
Number of shares of common stock under warrants repurchased	4,558,061
Payments for repurchase of warrants	80,500,000
Additional paid-in capital	108,600,000
Warrant liabilities				203,200,000	157,100,000
Management Warrants [Member]
Sponsors and Management Warrants
Issuance of warrants to purchase common stock (in shares)		2,862,687		2,862,687	2,862,687
Proceeds from issuance of Management warrants		19,000,000
Warrant liabilities				$ 271,700,000	$ 209,000,000
Management Warrants [Member] | Chief Executive Officer [Member]
Sponsors and Management Warrants
Exercise price (in dollars per share)		42.23
Management Warrants [Member] | President [Member]
Sponsors and Management Warrants
Exercise price (in dollars per share)		42.23
Management Warrants [Member] | Chief Financial Officer [Member]
Sponsors and Management Warrants
Exercise price (in dollars per share)		54.50

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OTHER ASSETS AND LIABILITIES

3 Months Ended

Mar. 31, 2015

OTHER ASSETS AND LIABILITIES

OTHER ASSETS AND LIABILITIES

NOTE 13 OTHER ASSETS AND LIABILITIES

Prepaid Expenses and Other Assets

The following table summarizes the significant components of prepaid expenses and other assets.

	March 31,		December 31,
	2015		2014
	(In thousands)
Special Improvement District receivable	$	33,040	$	33,318
Equipment, net of accumulated depreciation of $2.8 million and $2.4 million, respectively		19,906		20,284
Tenant incentives and other receivables		12,014		14,264
Federal income tax receivable		8,629		8,629
Prepaid expenses		10,560		9,196
Below-market ground leases		19,579		19,663
Condominium deposits		139,559		151,592
Security and escrow deposits		9,483		9,829
Above-market tenant leases		4,365		4,656
Uncertain tax position asset		402		383
In-place leases		29,645		32,715
Intangibles		3,994		3,593
Other		2,023		2,014
	$	293,199	$	310,136

The $16.9 million decrease as of March 31, 2015 compared to December 31, 2014 primarily relates to a $12.0 million decrease in condominium deposits at Ward Village due to utilization of deposits for construction costs. The  $3.1 million decrease related to in-place leases is primarily attributable to normal amortization of these intangibles.

Accounts Payable and Accrued Expenses

The following table summarizes the significant components of accounts payable and accrued expenses.

	March 31,		December 31,
	2015		2014
	(In thousands)
Construction payables	$	191,599	$	170,935
Accounts payable and accrued expenses		31,827		34,154
Condominium deposits		60,706		82,150
Membership deposits		21,448		21,023
Above-market ground leases		2,232		2,272
Deferred income		65,305		65,675
Accrued interest		28,127		14,791
Accrued real estate taxes		5,041		9,903
Tenant and other deposits		11,758		12,756
Accrued payroll and other employee liabilities		10,561		25,838
Interest rate swaps		3,307		3,144
Other		26,356		23,376
	$	458,267	$	466,017

The $7.8 million decrease as of March 31, 2015 compared to December 31, 2014 is primarily due to the decrease of $21.4 million in condominium deposits for the two market rate towers at Ward Village as revenue was recognized during the period, $15.3 million decrease in accrued payroll and other employee liabilities due to year-end compensation payments and a $4.9 million decrease in accrued real estate taxes. These decreases are partially offset by a $20.7 million increase in construction payables primarily due to continued development activities at Downtown Summerlin, Ward Village, 1725-35 Hughes Landing Boulevard, South Street Seaport and Three Hughes Landing, and $13.3 million increase in accrued interest related to our Senior Notes for which interest is paid semiannually.

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EARNINGS PER SHARE - EPS Calculation (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014
Numerator:
Net income (loss)	$ (105,959)	$ (86,331)	$ (86,331)
Net income attributable to noncontrolling interests			15
Net income (loss) attributable to common stockholders	(105,959)		(86,316)
Denominator:
Weighted average basic common shares outstanding	39,465		39,454
Numerator:
Net income (loss) attributable to common stockholders	(105,959)		(86,316)
Adjusted net income (loss) attributable to common stockholders	$ (105,959)		$ (86,316)
Denominator:
Weighted average basic common shares outstanding	39,465		39,454
Weighted average diluted common shares outstanding	39,465		39,454
Basic earnings (loss) per share: (in dollars per share)	$ (2.68)		$ (2.19)
Diluted earnings (loss) per share: (in dollars per share)	$ (2.68)		$ (2.19)

XML

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2015

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 15 COMMITMENTS AND CONTINGENCIES

In the normal course of business, from time to time, we are involved in legal proceedings relating to the ownership and operations of our properties. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material effect on our consolidated financial position, results of operations or liquidity.

We had outstanding letters of credit and surety bonds totaling $80.2 million and $53.7 million as of March 31, 2015 and December 31, 2014, respectively. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.

On June 27, 2013, the City of New York executed the amended and restated ground lease for South Street Seaport. The restated lease terms provide for annual fixed rent of $1.2 million starting July 1, 2013 with an expiration of December 30, 2072, including our options to extend. The rent escalates at 3.0% compounded annually. On July 1, 2018 the base rent will be adjusted to the higher of the fair market value or the then base rent. In addition to the annual base rent of $1.2 million, we are required to make annual payments of $210,000 as additional rent through the term of the lease. The additional rent escalates annually at the Consumer Price Index. We are entitled to a total rent credit of $1.5 million, to be taken monthly over a 30-month period. Simultaneously with the execution of the lease, we executed a completion guaranty for the redevelopment of Pier 17. The completion guaranty requires us to perform certain obligations under the lease, including the commencement of construction by October 1, 2013 with a scheduled completion date in 2017.

In the fourth quarter of 2012, the Uplands portion of South Street Seaport suffered damage due to flooding as a result of Superstorm Sandy. Reconstruction efforts are ongoing and the property is only partially operating. We have received $47.9 million in insurance proceeds through March 31, 2015 related to our claim. We recognized Other income relating to these insurance recoveries of $0.3 million and $7.8 million for the three months ended March 31, 2015 and 2014, respectively. We are in litigation with several of the insurance carriers to recover additional amounts that we believe are owed to us under the policies. We believe that our insurance will reimburse substantially all of the costs of repairing the property and will also compensate us for substantially all lost income resulting from the storm.

Please refer to Note 11 – Income Taxes for additional contingencies related to our uncertain tax positions.

XML

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (USD $) In Thousands, except Share data, unless otherwise specified	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Noncontrolling Interest [Member]	Total
Balance at Dec. 31, 2013	$ 396	$ 2,829,813	$ (583,403)	$ (8,222)	$ 6,562	$ 2,245,146
Balance (in shares) at Dec. 31, 2013	39,576,344
Increase (Decrease) in Stockholders' Equity
Net income (loss)			(86,316)		(15)	(86,331)
Interest rate swaps, net of tax $61 and $10 for the three months ended March 31, 2015 and 2014, respectively				199		199
Capitalized swap interest, net of tax of $31 and $75 for the three months ended March 31, 2015 and 2014, respectively				(133)		(133)
Stock plan activity		1,764				1,764
Stock plan activity (in shares)	54,204
Balance at Mar. 31, 2014	396	2,831,577	(669,719)	(8,156)	6,547	2,160,645
Balance (in shares) at Mar. 31, 2014	39,630,548
Balance at Dec. 31, 2014	396	2,838,013	(606,934)	(7,712)	3,743	2,227,506
Balance (in shares) at Dec. 31, 2014	39,638,094
Increase (Decrease) in Stockholders' Equity
Net income (loss)			(105,959)			(105,959)
Distribution to noncontrolling interest					29	29
Interest rate swaps, net of tax $61 and $10 for the three months ended March 31, 2015 and 2014, respectively				512		512	[1]
Capitalized swap interest, net of tax of $31 and $75 for the three months ended March 31, 2015 and 2014, respectively				(59)		(59)	[2]
Stock plan activity	1	1,696	(1)			1,696
Stock plan activity (in shares)	69,241
Balance at Mar. 31, 2015	$ 397	$ 2,839,709	$ (712,894)	$ (7,259)	$ 3,772	$ 2,123,725
Balance (in shares) at Mar. 31, 2015	39,707,335

[1] Net of deferred tax expense of $0.1 million for the three months ended March 31, 2015 and 2014, respectively.

[2] Net of deferred tax benefit of $0.1 million for the three months ended March 31, 2015 and 2014, respectively.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2015	Dec. 31, 2014
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	39,707,335	39,638,094
Common stock, shares outstanding	39,707,335	39,638,094

XML

REAL ESTATE AND OTHER AFFILIATES

3 Months Ended

Mar. 31, 2015

REAL ESTATE AND OTHER AFFILIATES

REAL ESTATE AND OTHER AFFILIATES

NOTE 8 REAL ESTATE AND OTHER AFFILIATES

In the ordinary course of business, we enter into partnerships or joint ventures primarily for the development and operations of real estate assets which are referred to as “Real Estate Affiliates”. These partnerships or joint ventures are accounted for in accordance with FASB ASC 810 Consolidation.

In accordance with ASC 810, we assess our joint ventures at inception to determine if any meet the qualifications of a variable interest entity (“VIE”). We consider a partnership or joint venture a VIE if: (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity); or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events outlined in ASC 810, we reassess our initial determination of whether the partnership or joint venture is a VIE.

We perform a qualitative assessment of each VIE to determine if we are the primary beneficiary, as required by ASC 810. Under ASC 810, a company concludes that it is the primary beneficiary and consolidates the VIE if the company has both (a) the power to direct the economically significant activities of the entity and (b) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The company considers the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties in determining if the company is the primary beneficiary. As required by ASC 810, management’s assessment of whether the company is the primary beneficiary of a VIE is continuously performed.

We account for investments in joint ventures deemed to be VIEs for which we are not considered to be the primary beneficiary but have significant influence, using the equity method, and investments in joint ventures where we do not have significant influence over the joint venture’s operations and financial policies, using the cost method. Generally, the operating agreements with respect to our Real Estate Affiliates provide that assets, liabilities and funding obligations are shared in accordance with our ownership percentages.

Our investment in real estate and other affiliates which are reported on the equity and cost methods are as follows:

	Economic/ Legal Ownership				Carrying Value				Share of Earnings/Dividends
	March 31,		December 31,		March 31,		December 31,		Three Months Ended March 31,
	2015		2014		2015		2014		2015		2014
	(In percentages)				(In thousands)				(In thousands)
Equity Method Investments
Master Planned Communities:
Discovery Land	N/A		N/A		$	12,052	$	—	$	—	$	—
Operating Assets:
Millennium Woodlands Phase II, LLC (a) (b)	81.43	%	81.43	%		362		1,023		(661)		(36)
Stewart Title	50.00	%	50.00	%		3,663		3,869		194		93
Summerlin Las Vegas Baseball Club, LLC (b)	50.00	%	50.00	%		10,431		10,548		(117)		(126)
The Metropolitan Downtown Columbia (c)	50.00	%	50.00	%		4,562		4,800		(319)		—
Woodlands Sarofim	20.00	%	20.00	%		2,635		2,595		40		57
Strategic Developments:
Circle T Ranch and Power Center	50.00	%	50.00	%		9,004		9,004		—		—
HHMK Development (b)	50.00	%	50.00	%		10		10		539		290
KR Holdings (b)	50.00	%	50.00	%		876		9,183		365		4,009
Parcel C (b)	50.00	%	50.00	%		6,934		8,737		—		—
Summerlin Apartments, LLC (b)	50.00	%	50.00	%		1,661		—		—		—
						52,190		49,769		41		4,287
Cost basis investments						3,937		3,917		1,747		1,781
Investment in Real Estate and Other Affiliates					$	56,127	$	53,686	$	1,788	$	6,068

N/A – Not Applicable

(a) Millennium Woodlands Phase II, LLC was placed into service in the beginning of the third quarter of 2014.

(b) Equity method variable interest entities.

(c) The Metropolitan Downtown Columbia was placed into service in the first quarter 2015.

We are not the primary beneficiary of any of the equity method variable interest entities listed above because we do not have the power to direct activities that most significantly impact the economic performance of such joint ventures and therefore we report our interests on the equity method. Our maximum exposure to loss as a result of these investments is limited to the aggregate carrying value of the investment as we have not provided any guarantees or otherwise made firm commitments to fund amounts on behalf of these VIEs. The aggregate carrying value of the unconsolidated VIEs was $20.3 million and $29.5 million as of March, 31, 2015 and December 31, 2014, respectively, and was classified as Investments in Real Estate and Other Affiliates in the Consolidated Balance Sheets.

As of March 31, 2015, approximately $97.8 million of indebtedness was secured by the properties owned by our Real Estate and Other Affiliates of which our share was approximately $58.9 million based upon our economic ownership. All of this indebtedness is without recourse to us.

The Company is the primary beneficiary of one VIE which is consolidated in the financial statements. The creditors of the consolidated VIE do not have recourse to the Company. As of March 31, 2015, the carrying values of the assets and liabilities associated with the operations of the consolidated VIE were $21.2 million and $0.8 million, respectively. As of December 31, 2014, the carrying values of the assets and liabilities associated with operations of the consolidated VIE were $21.1 million and $0.6 million, respectively. The assets of the VIE are restricted for use only by the particular VIE and are not available for our general operations.

Our recent and more significant investments in Real Estate Affiliates and the related accounting considerations are described below.

Discovery Land

During the second quarter 2014, we announced an agreement to enter into a joint venture with Discovery Land Company (“Discovery Land”) which was formed in the first quarter 2015. We contributed land with a book basis of $13.4 millionand transferred SID bonds related to such land with a carrying value of$1.3 million to the joint venture at the agreed upon value of $226,000 per acre, or $125.4 million, in the first quarter of 2015. At the time of our contribution, we assessed if the venture’s equity was sufficient to permit it to finance its activities without additional subordinated support and determined it was not a VIE. In addition, we determined that our partner has substantive participation rights, and therefore we account for this joint venture using the equity method. Discovery Land’s capital contribution funding requirement is up to a maximum of $30.0 million. We have no further capital obligations.

After receipt of our capital contribution and a 5.0% preferred return, Discovery Land is entitled to all remaining cash distributed by the joint venture until two times its equity contribution has been repaid. Any further cash distributions are shared 50/50. Discovery Land is the manager on the project, and development is expected to begin in the second quarter 2015 with the first lot and home sales expected to begin in early 2016.

ONE Ala Moana Condominium Project

KR Holdings is a 50/50 joint venture which was formed to develop a 206-unit luxury condominium tower at the One Ala Moana Center in Honolulu, Hawaii. The venture substantially completed construction in the fourth quarter 2014 and closed on the sale of 201 out of 206 total units. The venture uses the percentage of completion method to recognize earnings. We recorded $0.4 million and $4.0 million in earnings from Real Estate and Other Affiliates for the three months ended March 31, 2015 and 2014 respectively. We received cash distributions of $8.9 million during the three months ended March 31, 2015. All units available for sale as of March 31, 2015 have been sold and closed with the exception of one unit. The one remaining unit is expected to close in the second quarter 2015.

Millennium Woodlands Phase II, LLC

On May 14, 2012, we entered into a joint venture, Millennium Woodlands Phase II, LLC (“Millennium Phase II”), with The Dinerstein Companies, for the construction of a new 314-unit Class A multi‑family complex in The Woodlands Town Center. Our partner is the managing member of Millennium Phase II. As the managing member, our partner controls, directs, manages and administers the affairs of Millennium Phase II. On July 5, 2012, Millennium Phase II was capitalized by our contribution of 4.8 acres of land valued at $15.5 million, our partner’s contribution of $3.0 million in cash and a construction loan in the amount of $37.7 million which is guaranteed by our partner. The development of Millennium Phase II further expands our multi‑family portfolio in The Woodlands Town Center. During the third quarter 2014, the joint venture completed construction and leasing commenced.

Parcel C

On October 4, 2013, we entered into a joint venture agreement with a local developer, Kettler, Inc. (“Kettler”), to construct a 437-unit, Class A apartment building with 31,000 square feet of ground floor retail on Parcel C in downtown Columbia, Maryland. We contributed approximately five acres of land having an approximate book value of $4.0 million to the joint venture. Our land was valued at $23.4 million or $53,500 per constructed unit. When the venture closes on the construction loan and upon completion of certain other conditions, including obtaining completed site development and construction plans and an approved project budget, our partner will be required to contribute cash to the venture.

Summerlin Apartments, LLC

On January 24, 2014, we entered into a joint venture with a national multi-family real estate developer, The Calida Group (“Calida”), to construct, own and operate a 124-unit gated luxury apartment development in Summerlin, Nevada. We and our partner each own 50% of the venture, and unanimous consent of the partners is required for all major decisions. This project represents the first residential development in Summerlin’s 400-acre downtown. In the first quarter 2015, we contributed a 4.5-acre parcel of land with an agreed value of $3.2 million in exchange for a 50% interest in the venture. Our partner contributed $3.2 million of cash for their 50% interest, acts as the development manager, funded all pre-development activities, obtained construction financing in the first quarter 2015 and provided guarantees required by the lender. Upon a sale of the property, we are entitled to 50% of the proceeds up to, and 100% of the proceeds in excess of, an amount determined by applying a 7.0% capitalization rate to net operating income (“NOI”). The venture commenced construction in February 2015 with the first units expected to become available for rent by second quarter 2016.

Summerlin Las Vegas Baseball Club, LLC

On August 6, 2012, we entered into a joint venture for the purpose of acquiring 100% of the operating assets of the Las Vegas 51s, a Triple‑A baseball team which is a member of the Pacific Coast League. We own 50% of the venture and our partners jointly own the remaining 50%. Unanimous consent of the partners is required for all major decisions. As of the date the joint venture acquired the baseball team, we had funded our capital contribution of $10.5 million. Our strategy in owning an interest is to pursue a potential relocation of the team to a to‑be‑built stadium in our Summerlin master planned community. Efforts to relocate the team are ongoing and there can be no assurance that such a stadium will ultimately be built.

The Metropolitan Downtown Columbia Project

On October 27, 2011, we entered into a joint venture, Parcel D Development, LLC (“Parcel D”), with Kettler to construct a 380-unit Class A apartment building with ground floor retail space in downtown Columbia, Maryland. We and our partner each own50% of the venture, and unanimous consent of the partners is required for all major decisions. On July 11, 2013, the joint venture closed a $64.1 million construction loan which is non‑recourse to us and $52.3 million is outstanding as of March 31, 2015. The loan bears interest at one-month LIBOR plus 2.40% and matures in July 2020. At loan closing, our land contribution was valued at $53,500 per unit, or $20.3 million, and Kettler contributed $13.3 million in cash, of which $7.0 million was distributed to us. Both we and Kettler made additional contributions of $3.1 million to the joint venture in accordance with the loan agreement, thus increasing our total capital account to $16.4 million. This transaction was accounted for as a partial sale of the land for which we recognized a net profit of $0.7 million. The venture substantially completed construction of The Metropolitan Downtown Columbia Project during the first quarter of 2015 and the property was reclassified into our Operating Assets segment.

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2015	May 08, 2015
Document and Entity Information
Entity Registrant Name	Howard Hughes Corp
Entity Central Index Key	0001498828
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		39,707,335
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1

XML

MORTGAGES, NOTES AND LOANS PAYABLE

3 Months Ended

Mar. 31, 2015

MORTGAGES, NOTES AND LOANS PAYABLE

MORTGAGES, NOTES AND LOANS PAYABLE

NOTE 9 MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable are summarized as follows:

	March 31,		December 31,
	2015		2014
	(In thousands)
Fixed-rate debt:
Collateralized mortgages, notes and loans payable	$	1,030,671	$	1,008,165
Special Improvement District bonds		18,736		22,389
Variable-rate debt:
Collateralized mortgages, notes and loans payable (a)		1,074,210		962,916
Total mortgages, notes and loans payable	$	2,123,617	$	1,993,470

(a) As more fully described below, $172.0 million of variable‑rate debt has been swapped to a fixed rate for the term of the related debt.

The following table presents our mortgages, notes, and loans payable by property:

				Maximum		Carrying Value
		Interest		Facility		March 31,		December 31,
$ In thousands	Maturity (a)	Rate		Amount		2015		2014
Master Planned Communities
Bridgeland Land Loan	June 2022	5.50	%			$	15,874	$	15,874
Bridgeland Development Loan	June 2015	5.00	%(b)	$	30,000		15,389		10
Summerlin South SID Bonds - S108	December 2016	5.95	%				548		563
Summerlin South SID Bonds - S124	December 2019	5.95	%				236		236
Summerlin South SID Bonds - S128	December 2020	6.05	%				623		623
Summerlin South SID Bonds - S128C	December 2030	6.05	%				5,097		5,274
Summerlin South SID Bonds - S132	December 2020	6.00	%				2,538		2,936
Summerlin South SID Bonds - S151	June 2025	6.00	%				4,885		6,211
Summerlin West SID Bonds - S808/S810	April 2031	6.00	%				1,069		2,805
The Woodlands Master Credit Facility	August 2018	2.93	%(b)		250,000		196,663		176,663
Master Planned Communities Total							242,922		211,195
Operating Assets
70 Columbia Corporate Center	July 2019	2.43	%(b)				20,000		20,000
Columbia Regional Building	March 2018	2.18	%(b)		23,008		20,627		20,513
Downtown Summerlin	July 2019	2.43	%(b)		311,800		256,955		229,153
Downtown Summerlin SID Bonds - S108	December 2016	5.95	%				310		310
Downtown Summerlin SID Bonds - S128	December 2030	6.05	%				3,431		3,431
One Hughes Landing	December 2029	4.30	%(b)				52,000		52,000
Two Hughes Landing	September 2018	2.83	%(b)		41,230		27,927		19,992
Hughes Landing Retail	December 2018	2.13	%(b)		36,575		21,518		17,424
1701 Lake Robbins	April 2017	5.81	%				4,600		4,600
Millennium Waterway Apartments	June 2022	3.75	%				55,584		55,584
110 N. Wacker (c)	October 2019	5.21	%(b)				29,000		29,000
9303 New Trails	December 2023	4.88	%				12,991		13,074
Outlet Collection at Riverwalk	October 2018	2.93	%(b)		64,400		51,306		47,118
3831 Technology Forest Drive	March 2026	4.50	%				23,000		—
The Woodlands Resort & Conference Center	February 2019	3.68	%(b)		95,000		83,109		76,027
Ward Village (d)	September 2016	3.35	%(b)		250,000		238,716		238,716
20/25 Waterway Avenue	May 2022	4.79	%				14,274		14,330
3 Waterway Square	August 2028	3.94	%				52,000		52,000
4 Waterway Square	December 2023	4.88	%				38,044		38,289
Capital lease obligations	various	3.60	%				123		135
Operating Assets Total							1,005,515		931,696
Strategic Developments
1725-35 Hughes Landing Boulevard	June 2019	2.08	%(b)		143,000		63,815		47,513
Three Hughes Landing	December 2019	2.53	%(b)		65,455		—		—
Hughes Landing Hotel	October 2020	2.68	%(b)		37,100		—		—
One Lake's Edge	November 2018	2.68	%(b)		73,525		49,184		40,787
Waiea and Anaha Condominiums	November 2019	6.93	%(b)		600,000		—		—
Waterway Square Hotel	August 2019	2.83	%(b)		69,300		—		—
Strategic Developments Total							112,999		88,300
Other Corporate Financing Arrangements	June 2018	3.00	%		22,700		19,645		19,968
Senior Notes	October 2021	6.88	%				750,000		750,000
Unamortized underwriting fees							(7,464)		(7,689)
						$	2,123,617	$	1,993,470

(a) Maturity date includes any extension periods which can be exercised at our option and are subject to customary extension terms.

(b) The interest rate presented is based on the one month LIBOR rate, as applicable, at March 31, 2015 which was 0.1756%.

(c) The $29.0 million outstanding principal balance is swapped to a 5.21% fixed rate through maturity.

(d) $143.0 million of the outstanding principal balance is swapped to a 3.81% fixed rate maturity.

The weighted average interest rate on our mortgages, notes and loans payable, inclusive of interest rate hedges, was 4.53% and 4.61% as of March 31, 2015 and December 31, 2014, respectively.

All of the mortgage debt is secured by the individual properties as listed in the table above and is non-recourse to HHC, except for:

(i) $750.0 million of Senior Notes;

(ii) $311.8 million financing for the Downtown Summerlin development which has an initial maximum recourse of 35.0% of the outstanding balance, which will reduce to 15.0% upon completion of the project and achievement of a 1.15:1.0 debt service coverage ratio.  The recourse further reduces to 10% upon achievement of a 1.25:1.0 debt service coverage ratio, a 90% occupancy level, and average tenant sales of at least $500.00 per net rentable square foot;

(iii) $64.4 million of construction financing for the Outlet Collection at Riverwalk with an initial maximum recourse of 50% of the outstanding balance, which will be reduced to 25.0% upon completion of the project and the achievement of an 11.0% debt yield and a minimum level of tenant sales per square foot for twelve months;

(iv) $20.4 million of Other Corporate Financing Arrangements; and

(v) $7.0 million parent guarantee associated with the 110 N. Wacker mortgage.

The Woodlands Master Credit Facility and The Woodlands Resort & Conference Center loans are recourse to the entities that directly own The Woodlands operations. Certain of our loans contain provisions which grant the lender a security interest in the operating cash flow of the property that represents the collateral for the loan. Such provisions are not expected to impact our operations in 2015. Certain mortgage notes may be prepaid, but may be subject to a prepayment penalty equal to a yield-maintenance premium, defeasance, or a percentage of the loan balance. As of March 31, 2015, land, buildings and equipment and developments with a cost basis of $2.4 billion have been pledged as collateral for our mortgages, notes and loans payable. 

As of March 31, 2015, we were in compliance with all of the financial covenants related to our debt agreements.

Master Planned Communities

The Woodlands Master Credit Facility is a $250.0 million credit facility consisting of a $125.0 million term loan and a $125.0 million revolver (together, the “TWL Facility”). The TWL Facility bears interest at one-month LIBOR plus 2.75% and has an August 2016 initial maturity date with two,one–year extension options. The extension options require a reduction of the total commitment to $220.0 million for the first extension and $185.0 million for the second extension. The TWL Facility also contains certain covenants that, among other things, require the maintenance of specified financial ratios, limit the incurrence of additional recourse indebtedness at The Woodlands, and limit distributions from The Woodlands to us based on a loan‑to‑value test. As of March 31, 2015, there is no undrawn availability based on the collateral value underlying the facility.

The Bridgeland Land Loan bears a fixed interest rate of 5.50% for the first five years and three-month LIBOR plus 2.75% for the remaining term and matures in June 2022. Beginning on June 29, 2014, annual principal payments are required in the amount of 5.00% of the then outstanding principal balance. In addition, Bridgeland has a revolving credit facility with aggregate maximum borrowing capacity of $140.0 million, of which $115.7 million has been utilized as of March 31, 2015, and which has a $30.0 million maximum outstanding loan amount at any time. The revolving loan bears interest at the greater of 5.00% or one-month LIBOR plus 3.25% and matures on June 29, 2015. We expect to refinance this loan prior to its maturity. This loan is intended to provide working capital at Bridgeland to accelerate development efforts to meet the demand of homebuilders for finished lots in the community. The Bridgeland loans are cross‑collateralized and cross‑defaulted and the Bridgeland Master Planned Community serves as collateral for the loans. The loans also require that Bridgeland maintain a minimum $3.0 million cash balance and a minimum net worth of $250.0 million. Additionally, we are restricted from making cash distributions from Bridgeland unless the revolving credit facility has no outstanding balance and one year of real estate taxes and debt service on the term loan have been escrowed with the lender.

The Summerlin Master Planned Community uses Special Improvement District (“SID”) bonds to finance certain common infrastructure improvements. These bonds are issued by the municipalities and, although unrated, are secured by the assessments on the land. The majority of proceeds from each bond issued is held in a construction escrow and disbursed to us as infrastructure projects are completed, inspected by the municipalities and approved for reimbursement. Accordingly, the SID bonds have been classified as debt, and the Summerlin Master Planned Community pays the debt service on the bonds semi‑annually. As Summerlin sells land, the buyers assume a proportionate share of the bond obligation at closing, and the residential sales contracts provide for the reimbursement of the principal amounts that we previously paid with respect to such proportionate share of the bond.

Operating Assets

On May 6, 2015, we closed on a $80.0 million non-recourse mortgage financing for the 10-60 Columbia Corporate Center buildings. The loan bears interest at LIBOR plus 1.75% and has an initial maturity date of May 6, 2020, with two,  one-year extension options.

On March 25, 2015, we closed on a $23.0 million loan for 3831 Technology Forest Drive. The loan bears fixed interest at 4.50% and matures on March 24, 2026.

On November 10, 2014 we refinanced our $38.0 million loan and closed on a new $52.0 million loan for One Hughes Landing. The loan bears fixed interest at 4.30% and matures on December 1, 2029.

On July 18, 2014, we assumed a $4.6 million non-recourse mortgage loan at 1701 Lake Robbins. The loan bears fixed interest at 5.81% and has a maturity date of April 2017.

On July 15, 2014, we closed a $311.8 million financing for the construction of Downtown Summerlin development bearing interest at one-month LIBOR plus 2.25%. The loan has an initial maturity date of July 15, 2017, with two,  one-year extension options.

On April 15, 2014, we paid $17.0 million cash in full satisfaction of the $16.0 million participating loan that we assumed as part of the acquisition of 70 CCC in August 2012. The non-recourse, interest only promissory note was due to mature on August 31, 2017 and included a participation right to the lender for 30.0% of the appreciation in the market value of the property after our 10.0% cumulative preferred return and repayment of the outstanding debt and our contributed equity. The final payment included approximately $0.7 million for this participation right based upon the appraised value of the property. On June 27, 2014, we closed on a new $20.0 million loan for 70 CCC that bears interest at one-month LIBOR plus 2.25% and has an initial maturity date of July 2017 with two,  one-year extension options.

The $250.0 million non‑recourse first mortgage financing secured by Ward Village in Honolulu, Hawaii, bears interest at one-month LIBOR plus 2.50%. The loan may be drawn to a maximum $250.0million to fund capital expenditures at the property, provided that the outstanding principal balance cannot exceed 65% of the property’s appraised value, and the borrowers are required to have a minimum 10.0% debt yield to draw additional loan proceeds under the facility. The loan permits partial repayment during its term in connection with property releases for development. In the third quarter of 2013, certain properties securing the loan were approved for condominium development. As a result, the properties were removed from the collateral pool and a minor principal paydown of the loan was required. The loan matures in September 2016, and $143.0 million of the principal balance was swapped to a 3.80% fixed rate for the term of the loan. The loan had a weighted‑average interest rate of 3.35% as of March 31, 2015. The undrawn portion of this loan was $11.3 million as of March 31, 2015.

Strategic Developments

On December 5, 2014 we closed on a $65.5 million non-recourse financing for the construction of Three Hughes Landing. The loan bears interest at one-month LIBOR plus 2.35%. The loan has an initial maturity date of December 5, 2017 with two,  one-year extension options.

On November 6, 2014 we closed on a $600.0 million non-recourse construction loan for the Waiea and Anaha Condominium towers bearing interest at one-month LIBOR plus 6.75%. The loan has an initial maturity date of November 6, 2017, with two,  one-year extension options.

On October 2, 2014, we closed on a $37.1 million construction financing for our Hughes Landing Hotel. The loan bears interest at one-month LIBOR plus 2.50%. The loan has an initial maturity of October 2018, with two,  one-year extension options.

On August 6, 2014, we closed on a $69.3 million non-recourse construction financing for the Waterway Hotel bearing interest at one-month LIBOR plus 2.65%. The loan has an initial maturity of August 2018, with a one-year extension option. The development will be a 302-room Westin-branded hotel that will be owned and managed by us.

On June 30, 2014, we closed on a $143.0 million non-recourse construction financing for two office buildings bearing interest at one-month LIBOR plus 1.90%. The loan has an initial maturity date of June 30, 2018, with a one-year extension option.

Corporate

The $750.0 million in aggregate principal amount of 6.875% Senior Notes matures in 2021 (the “Senior Notes”). Interest is payable semiannually, on April 1 and October 1 of each year starting in April 2014. At any time prior to October 1, 2016, we may redeem up to 35% of the Senior Notes at a price equal to 106.875% using the proceeds from equity offerings. We may redeem all or part of the Senior Notes at any time on or after October 1, 2016 with a declining call premium thereafter to maturity. The Senior Notes contain customary terms and covenants for non‑investment grade senior notes and have no maintenance covenants.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Revenues:
Master Planned Community land sales	$ 48,081	$ 47,671
Builder price participation	5,698	4,097
Minimum rents	35,194	20,360
Tenant recoveries	9,667	6,015
Condominium rights and unit sales	34,857	3,126
Resort and conference center revenues	12,003	9,426
Other land revenues	3,293	2,512
Other rental and property revenues	6,297	5,446
Total revenues	155,090	98,653
Expenses:
Master Planned Community cost of sales	23,896	23,078
Master Planned Community operations	9,983	9,261
Other property operating costs	18,145	13,804
Rental property real estate taxes	6,200	3,740
Rental property maintenance costs	2,744	1,915
Condominium rights and unit cost of sales	22,409	1,571
Resort and conference center operations	9,078	7,511
Provision for doubtful accounts	809	143
Demolition costs	117	2,516
Development-related marketing costs	6,243	4,224
General and administrative	18,963	16,882
Other income	(1,464)	(10,448)
Depreciation and amortization	21,510	10,509
Total expenses	138,633	84,706
Operating income	16,457	13,947
Interest income	136	2,188
Interest expense	(13,246)	(7,321)
Warrant liability loss	(108,810)	(96,440)
Equity in earnings from Real Estate and Other Affiliates	1,788	6,068
Income (loss) before taxes	(103,675)	(81,558)
Provision for income taxes	2,284	4,773
Net income (loss)	(105,959)	(86,331)
Net income attributable to noncontrolling interests		15
Net income (loss) attributable to common stockholders	$ (105,959)	$ (86,316)
Basic income (loss) per share: (in dollars per share)	$ (2.68)	$ (2.19)
Diluted income (loss) per share: (in dollars per share)	$ (2.68)	$ (2.19)

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SPONSORS AND MANAGEMENT WARRANTS

3 Months Ended

Mar. 31, 2015

SPONSORS AND MANAGEMENT WARRANTS

SPONSORS AND MANAGEMENT WARRANTS

NOTE 3 SPONSORS AND MANAGEMENT WARRANTS

On November 9, 2010, we issued warrants to purchase 8.0 million shares of our common stock to certain of our sponsors (the “Sponsors Warrants”) with an estimated initial value of approximately $69.5 million. The initial exercise price for the warrants of $50.00 per share and the number of shares of common stock underlying each warrant are subject to adjustment for future stock dividends, splits or reverse splits of our common stock or certain other events. In 2012, a sponsor exercised 1,525,272 shares, and we purchased 4,558,061 Sponsor Warrants from certain sponsors for a net cash amount of $80.5 million. As a result of these transactions, $108.6 million of additional paid‑in-capital was recorded in our financial statements in the year ended December 31, 2012. The Sponsors Warrants expire on November 9, 2017.

In November 2010 and February 2011, we entered into certain agreements (the “Management Warrants”) with David R. Weinreb, our Chief Executive Officer, Grant Herlitz, our President, and Andrew C. Richardson, our Chief Financial Officer, in each case prior to his appointment to such position to purchase shares of our common stock. The Management Warrants represent 2,862,687 underlying shares, which may be adjusted pursuant to a net settlement option, were issued pursuant to such agreements at fair value in exchange for a combined total of approximately $19.0 million in cash from such executives at the commencement of their respective employment. Mr. Weinreb and Mr. Herlitz’s warrants have exercise prices of $42.23 per share and Mr. Richardson’s warrants have an exercise price of $54.50 per share. Generally, the Management Warrants become exercisable in November 2016 and expire in February 2018.

As of March 31, 2015, the estimated $203.2 million fair value for the Sponsors Warrants representing warrants to purchase 1,916,667 shares and the estimated $271.7 million fair value for the Management Warrants representing warrants to purchase 2,862,687 shares have been recorded as liabilities because the holders of these warrants could require us to settle such warrants in cash upon a change of control. The estimated fair values for the outstanding Sponsors Warrants and Management Warrants were $157.1 million and $209.0 million, respectively, as of December 31, 2014. The fair values were estimated using an option pricing model and Level 3 inputs due to the unavailability of comparable market data, as further discussed in Note 7 – Fair Value of Financial Instruments. Decreases and increases in the fair value of the Sponsors Warrants and the Management Warrants are recognized as either warrant liability gains or losses, respectively, in the Consolidated Statements of Operations.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 31, 2015

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

NOTE 2 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” This ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The standard requires a retrospective application in order to reflect the period-specific effects of applying the new guidance. The Company is evaluating the impact of the adoption of this ASU on the Company’s Consolidated Financial Statements.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810) - Amendments to the Consolidation Analysis.” This ASU affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The standard is effective for interim and annual periods beginning after December 15, 2015, and permits the use of a modified retrospective or retrospective approach. The Company is evaluating the impact of the adoption of this ASU on the Company’s Consolidated Financial Statements.

In August 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements – Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This ASU requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards as specified in the guidance. This ASU becomes effective for the annual period ending after December 15, 2016 and for annual and interim periods thereafter. Early adoption is permitted. The Company does not expect the adoption of this ASU to have an impact on the Company’s Consolidated Financial Statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” This ASU states that entities should recognize revenue to properly depict the transfer of negotiated goods or services to customers in an amount that properly reflects the agreed upon consideration which the entity expects to be exchanged. The standard is effective for interim and annual periods beginning after December 15, 2016 and permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the impact of the adoption of this ASU on the Company’s Consolidated Financial Statements.

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

3 Months Ended

Mar. 31, 2015

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

NOTE 14 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (“AOCI”)

The following table summarizes AOCI for the period indicated:

Changes in Accumulated Other Comprehensive Income (Loss) by Component (a)

Gains and (Losses) on Cash Flow Hedges

(In Thousands)

	For the Three Months Ended March 31, 2015
Balance as of January 1, 2015	$	(7,712)
Other comprehensive loss before reclassifications		73
Amounts reclassified from accumulated other comprehensive loss		380
Net current-period other comprehensive income		453
Balance as of March 31, 2015	$	(7,259)

(a) All amounts are net of tax.

The following table summarizes the amounts reclassified out of AOCI for the period indicated:

Reclassifications out of Accumulated Other Comprehensive Income (Loss)

(In Thousands)

	Amounts reclassified from Accumulated Other Comprehensive Income (Loss)
	For the Three Months Ended		Affected line item in the
Accumulated Other Comprehensive Income (Loss) Components	March 31, 2015		Statement of Operations
Gains and losses on cash flow hedges
Interest rate swap contracts	$	(608)	Interest expense
		228	Provision for income taxes
Total reclassifications for the period	$	(380)	Net of tax

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Mar. 31, 2015

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 10 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to interest rate risk related to our variable interest rate debt, and we manage this risk by utilizing interest rate derivatives. Our objectives in using interest rate derivatives are to add stability to interest costs by reducing our exposure to interest rate movements. To accomplish this objective, we use interest rate swaps and caps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company’s fixed‑rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up‑front premium.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three months ended March 31, 2015, the ineffective portion recorded in earnings was insignificant.

As of March 31, 2015, we had gross notional amounts of $172.0 million for interest rate swaps and a $100.0 million interest rate cap that were designated as cash flow hedges of interest rate risk. The fair value of the interest rate cap derivative was insignificant.

If the interest rate swap agreements are terminated prior to their maturity, the amounts previously recorded in AOCI are recognized into earnings over the period that the hedged transaction impacts earnings. If the hedging relationship is discontinued because it is probable that the forecasted transaction will not occur according to the original strategy, any related amounts previously recorded in AOCI are recognized in earnings immediately.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on our variable‑rate debt. Over the next 12 months, we estimate that an additional $2.1 million will be reclassified to interest expense.

The table below presents the fair value of our derivative financial instruments which are included in accounts payable and accrued liabilities in the Consolidated Balance Sheets:

	March 31,		December 31,
	2015		2014
	(In thousands)
Interest Rate Swaps	$	3,307	$	3,144

The table below presents the effect of our derivative financial instruments on the Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014:

	Three Months Ended March 31,					Three Months Ended March 31,
	2015		2014		Location of Loss	2015		2014
Cash Flow Hedges	Amount of Loss Recognized in OCI		Amount of Loss Recognized in OCI		Reclassified from AOCI into Earnings	Amount of Loss Reclassified from AOCI into Earnings		Amount of Loss Reclassified from AOCI into Earnings
	(In thousands)					(In thousands)
Interest Rate Swaps	$	(761)	$	(342)	Interest Expense	$	(380)	$	(541)

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IMPAIRMENT

3 Months Ended

Mar. 31, 2015

IMPAIRMENT

IMPAIRMENT

NOTE 6IMPAIRMENT

We review our real estate assets, including operating assets, land held for development and sale and developments in progress, for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. GAAP requires that if impairment indicators exist and the undiscounted cash flows expected to be generated by an asset are less than its carrying amount, an impairment charge should be recorded to write down the carrying amount of such asset to fair value (or for land and properties held for sale, fair value less cost to sell). The impairment analysis does not consider the timing of future cash flows and whether the asset is expected to earn an above or below market rate of return.

Our investment in each of the Real Estate and Other Affiliates is evaluated periodically and as deemed necessary for recoverability and valuation declines that are other-than-temporary. If the decrease in value of our investment in a Real Estate and Other Affiliate is deemed to be other-than-temporary, our investment in such Real Estate and Other Affiliate is reduced to its estimated fair value.

No impairment charges were recorded during the three months ended March 31, 2015 or 2014. We continually evaluate our strategic alternatives with respect to each of our properties and may revise our strategy from time to time, including our intent to hold the asset on a long-term basis or the timing of potential asset dispositions. For example, we may decide to sell property that is held for use and the sale price may be less than the carrying amount. As a result, these changes in strategy could result in impairment charges in future periods.

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SEGMENTS - Segment Revenue to GAAP Consolidated Revenue (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Reconciliation of Segment Basis Revenues to GAAP Revenues
Total revenues	$ 155,090	$ 98,653
Master Planned Communities [Member] | Operating Segments [Member]
Reconciliation of Segment Basis Revenues to GAAP Revenues
Total revenues	57,278	54,536
Operating Assets [Member] | Operating Segments [Member]
Reconciliation of Segment Basis Revenues to GAAP Revenues
Total revenues	62,162	40,320
Strategic Developments [Member] | Operating Segments [Member]
Reconciliation of Segment Basis Revenues to GAAP Revenues
Total revenues	$ 35,650	$ 3,797

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2015

EARNINGS PER SHARE

EARNINGS PER SHARE

NOTE 4 EARNINGS PER SHARE

Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted‑average number of common shares outstanding. Diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of all potentially dilutive common shares. The dilutive effect of options and nonvested stock issued under stock‑based compensation plans is computed using the “treasury stock” method. The dilutive effect of the Sponsors Warrants and Management Warrants is computed using the if‑converted method. Gains associated with the changes in the fair value of the Sponsors Warrants and Management Warrants are excluded from the numerator in computing diluted earnings per share because inclusion of such gains in the computation would be anti‑dilutive.

Information related to our EPS calculations is summarized as follows:

	Three Months Ended March 31,
	2015		2014
	(In thousands, except per share amounts)
Basic EPS:
Numerator:
Net loss	$	(105,959)	$	(86,331)
Net income attributable to noncontrolling interests		—		15
Net loss attributable to common stockholders	$	(105,959)	$	(86,316)
Denominator:
Weighted average basic common shares outstanding		39,465		39,454
Diluted EPS:
Numerator:
Net loss attributable to common stockholders	$	(105,959)	$	(86,316)
Less: Warrant liabilitygain		—		—
Adjusted net loss attributable to common stockholders	$	(105,959)	$	(86,316)
Denominator:
Weighted average basic common shares outstanding		39,465		39,454
Restricted stock and stock options		—		—
Warrants		—		—
Weighted average diluted common shares outstanding		39,465		39,454
Basic loss per share:	$	(2.68)	$	(2.19)
Diluted loss per share:	$	(2.68)	$	(2.19)

The diluted EPS computation for the three months ended March 31, 2015 excludes 1,027,740 stock options, 241,931 shares of restricted stock, 1,916,667 shares of common stock underlying the Sponsors Warrants and 2,862,687 shares of common stock underlying the Management Warrants because their inclusion would have been anti-dilutive.

The diluted EPS computations for the three months ended March 31, 2014 excludes 1,024,940 stock options, 176,536 shares of restricted stock, 1,916,667 shares of common stock underlying the Sponsor Warrants and 2,862,687 shares of common stock underlying the Management Warrants because their inclusion would have been anti-dilutive.

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RECENT TRANSACTIONS

3 Months Ended

Mar. 31, 2015

RECENT TRANSACTIONS

RECENT TRANSACTIONS

NOTE 5    RECENT TRANSACTIONS

During the first quarter 2015, we acquired a 58,000 square foot commercial building and air rights with total residential and commercial development rights of 196,133 square feet for $91.4 million.  These acquisitions combined with adjacent property acquisitions in 2014 create a 42,694 square foot lot with 817,784 square feet of available development rights. These properties are collectively referred to as the Seaport District Assemblage and are located in close proximity to our South Street Seaport property.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2015

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 7 FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents, for each of the fair value hierarchy levels required under FASB Accounting Standards (“ASC”) 820 Fair Value Measurement, our assets and liabilities that are measured at fair value on a recurring basis.

	March 31, 2015								December 31, 2014
	Fair Value Measurements Using								Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)								(In thousands)
Assets:
Cash equivalents	$	110,077	$	110,077	$	—	$	—	$	75,027	$	75,027	$	—	$	—
Liabilities:
Warrants		474,890		—		—		474,890		366,080		—		—		366,080
Interest rate swaps		3,307		—		3,307		—		3,144		—		3,144		—

Cash equivalents consist primarily of two registered money market mutual funds which invest in United States treasury securities that are valued at the net asset value of the underlying shares in the funds as of the close of business at the end of each period. The fair value approximates carrying value.

The valuation of warrants is based on an option pricing valuation model. The inputs to the model include the fair value of stock related to the warrants, exercise price of the warrants, term, expected volatility, risk-free interest rate and dividend yield and, with respect to the Management Warrants, a discount for lack of marketability.

The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates derived from observable market interest rate curves.

The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3) which are our Sponsors and Management Warrants:

	2015		2014
	(In thousands)
Balance as of January 1	$	366,080	$	305,560
Warrant liability loss (a)		108,810		96,440
Balance as of March 31	$	474,890	$	402,000

(a) All losses during 2015 and 2014 were unrealized.

The fair values were estimated using an option pricing model and Level 3 inputs due to the unavailability of comparable market data. Changes in the fair values of the Sponsors Warrants and the Management Warrants are recognized in earnings as a warrant liability gain or loss.

The significant unobservable inputs used in the fair value measurement of our warrants designated as Level 3 as of March 31, 2015 are as follows:

				Unobservable Inputs
	Fair Value		Valuation Technique	Expected Volatility(a)	Marketability Discount (b)
	(In thousands)
Warrants	$	474,890	Option Pricing Valuation Model	26.3%	16.0%-  18.0%

(a) Based on our implied equity volatility.

(b) Represents the discount rate for lack of marketability of the Management Warrants. The discount rates ranged from 18.0%-20.0% at December 31, 2014.

The expected volatility and marketability discount in the table above are significant unobservable inputs used to estimate the fair value of our warrant liabilities. An increase in expected volatility would increase the fair value of the liability, while a decrease in expected volatility would decrease the fair value of the liability. As the period of restriction lapses, the marketability discount reduces to zero and increases the fair value of the warrants.

The estimated fair values of our financial instruments that are not measured at fair value on a recurring basis are as follows:

		March 31, 2015				December 31, 2014
	Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:		(In thousands)
Cash and cash equivalents	Level 1	$	348,295	$	348,295	$	485,424	$	485,424
Notes receivable, net (a)	Level 3		26,892		26,892		28,630		28,630
Liabilities:
Fixed-rate debt	Level 2	$	1,049,407	$	1,088,862	$	1,030,554	$	1,050,333
Variable-rate debt	Level 2		1,074,210		1,074,210		962,916		962,916
Total mortgages, notes and loans payable		$	2,123,617	$	2,163,072	$	1,993,470	$	2,013,249

(a) Notes receivable is shown net of an allowance of $463  and $471 as of March 31, 2015 and December 31, 2014, respectively.

Notes receivable are carried at net realizable value which approximates fair value. The estimated fair values are based on certain factors, such as current interest rates, terms of the note and credit worthiness of the borrower.

The fair value of fixed-rate debt in the table above, not including our Senior Notes (as defined in Note 9 – Mortgages, Notes and Loans Payable), was estimated based on a discounted future cash payment model, which includes risk premiums and a risk free rate derived from the current London Interbank Offered Rate (“LIBOR”) or U.S. Treasury obligation interest rates. The discount rates reflect our judgment as to what the approximate current lending rates for loans or groups of loans with similar maturities and credit quality would be if credit markets were operating efficiently and assuming that the debt is outstanding through maturity. The fair value of our Senior Notes, included in fixed rate debt in the table above, was estimated based upon its most recent trade price.

The carrying amounts for our variable-rate debt approximate fair value given that the interest rates are variable and adjust with current market rates for instruments with similar risks and maturities.

The carrying amounts of cash and cash equivalents and accounts receivable approximate fair value because of the short‑term maturity of these instruments.

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SEGMENTS (Tables)

3 Months Ended

Mar. 31, 2015

SEGMENTS

Schedule of segment operating results

	Three Months Ended March 31,
	2015		2014
	(In thousands)
Master Planned Communities
Land sales	$	48,081	$	47,671
Builder price participation		5,698		4,097
Minimum rents		215		197
Other land revenues		3,286		2,504
Other rental and property revenues		(2)		67
Total revenues		57,278		54,536
Cost of sales - land		23,896		23,078
Land sales operations		7,579		7,304
Land sales real estate and business taxes		2,404		1,954
Depreciation and amortization		95		100
Interest income		(16)		(57)
Interest expense (*)		(4,762)		(5,066)
Total expenses		29,196		27,313
MPC EBT		28,082		27,223
Operating Assets
Minimum rents		34,312		19,900
Tenant recoveries		9,573		5,884
Resort and conference center revenues		12,003		9,426
Other rental and property revenues		6,274		5,110
Total revenues		62,162		40,320
Other property operating costs		17,486		13,181
Rental property real estate taxes		5,520		3,107
Rental property maintenance costs		2,627		1,800
Resort and conference center operations		9,078		7,511
Provision for doubtful accounts		809		143
Demolition costs		117		2,494
Development-related marketing costs		2,266		2,079
Depreciation and amortization		18,762		9,010
Other income		—		—
Interest income		(10)		(119)
Interest expense		6,495		2,044
Equity in Earnings from Real Estate and Other Affiliates		(885)		(1,805)
Total expenses		62,265		39,445
Operating Assets EBT		(103)		875
Strategic Developments
Minimum rents		667		263
Tenant recoveries		94		131
Condominium rights and unit sales		34,857		3,126
Other land revenues		6		8
Other rental and property revenues		26		269
Total revenues		35,650		3,797
Condominium rights and unit cost of sales		22,409		1,571
Other property operating costs		659		626
Real estate taxes		680		633
Rental property maintenance costs		117		115
Provision for doubtful accounts		—		—
Demolition costs		—		22
Development-related marketing costs		3,977		2,145
Depreciation and amortization		1,016		424
Other income		(333)		(2,373)
Interest expense (*)		(1,807)		(2,649)
Equity in Earnings from Real Estate and Other Affiliates		(904)		(4,263)
Total expenses		25,814		(3,749)
Strategic Developments EBT		9,836		7,546
REP EBT	$	37,815	$	35,644

(*)Negative interest expense amounts are due to interest capitalized in our Master Planned Communities and Strategic Developments segments related to Operating Assets segment debt and the Senior Notes.

Schedule of reconciliation of REP EBT to GAAP-basis net income (loss)

Reconciliation of  REP EBT to GAAP	Three Months Ended March 31,
loss before taxes	2015		2014
	(In thousands)
REP EBT	$	37,815	$	35,644
General and administrative		(18,963)		(16,882)
Corporate interest income/(expense), net		(13,212)		(10,980)
Warrant liability loss		(108,810)		(96,440)
Corporate other income, net		1,132		8,075
Corporate depreciation and amortization		(1,637)		(975)
Loss before taxes	$	(103,675)	$	(81,558)

Schedule of reconciliation of segment revenue to GAAP-basis consolidated revenues

Reconciliation of Segment Basis Revenues to	Three Months Ended March 31,
GAAP Revenues	2015		2014
	(In thousands)
Master Planned Communities	$	57,278	$	54,536
Operating Assets		62,162		40,320
Strategic Developments		35,650		3,797
Total revenues	$	155,090	$	98,653

Summary of assets by segment and the reconciliation of total segment assets to the total assets in the Condensed Consolidated Balance Sheets

	March 31,		December 31,
	2015		2014
	(In thousands)
Master Planned Communities	$	1,920,953	$	1,877,043
Operating Assets		2,027,494		1,934,350
Strategic Developments		1,000,014		879,896
Total segment assets		4,948,461		4,691,289
Corporate and other		300,315		428,642
Total assets	$	5,248,776	$	5,119,931

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STOCK-BASED PLANS - Restricted Stock (Details) (Restricted Stock [Member], USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
Stock-based plans
Unamortized restricted stock expense	$ 17.6
Weighted-average period for recognition of unamortized restricted stock expense	3 years 10 months 24 days
Restricted stock activity
Restricted stock outstanding at the beginning of the period (in shares)	172,690
Granted (in shares)	73,243
Restricted stock outstanding at the end of the period (in shares)	241,931
Vested (in shares)	(4,002)
Weighted Average Grant Date Fair Value
Restricted stock outstanding at the beginning of the period (in dollars per share)	$ 92.02
Granted (in dollars per share)	$ 119.01
Restricted stock outstanding at the end of the period (in dollars per share)	$ 100.01
Vested (in dollars per share)	$ 99.33
General and Administrative Expense [Member]
Stock-based plans
Recognized compensation expense	$ 1.1

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STOCK-BASED PLANS

3 Months Ended

Mar. 31, 2015

STOCK-BASED PLANS

STOCK-BASED PLANS

NOTE 12 STOCK BASED PLANS

Our stock based plans are described, and informational disclosures are provided, in the Notes to the Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2014.

Stock Options

The following table summarizes our stock option plan:

	Stock Options	Weighted Average Exercise Price
Stock Options outstanding at January 1, 2015	1,043,490	$	72.60
Granted	42,000		148.01
Forfeited	(57,750)		108.19
Stock Options outstanding at March 31, 2015	1,027,740	$	73.68

Stock option expense was $0.7 million and $1.0 million for the three months ended March 31, 2015 and 2014, respectively, which is included in General and administrative expense in the accompanying Condensed Consolidated Statements of Operations.

Restricted Stock

Restricted stock awards issued under The Howard Hughes Corporation 2010 Incentive Plan provide that shares awarded may not be sold or otherwise transferred until restrictions have lapsed as established by the Compensation Committee of our Board of Directors. For the three months ended March 31, 2015, compensation expense of $1.1million is included in general and administrative expense in our Condensed Consolidated Statements of Operations related to restricted stock awards. The balance of unamortized restricted stock awards as of March 31, 2015 was $17.6 million, which is expected to be expensed over a weighted-average period of 3.9 years.

The following table summarizes restricted stock activity:

	Restricted Stock	Weighted Average Grant Date Fair Value
Restricted stock outstanding at January 1, 2015	172,690	$	92.02
Granted	73,243		119.01
Forfeited	(4,002)		99.33
Restricted Stock outstanding at March 31, 2015	241,931	$	100.01

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EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2015

EARNINGS PER SHARE

Summary of information related to the entity's EPS calculations

	Three Months Ended March 31,
	2015		2014
	(In thousands, except per share amounts)
Basic EPS:
Numerator:
Net loss	$	(105,959)	$	(86,331)
Net income attributable to noncontrolling interests		—		15
Net loss attributable to common stockholders	$	(105,959)	$	(86,316)
Denominator:
Weighted average basic common shares outstanding		39,465		39,454
Diluted EPS:
Numerator:
Net loss attributable to common stockholders	$	(105,959)	$	(86,316)
Less: Warrant liabilitygain		—		—
Adjusted net loss attributable to common stockholders	$	(105,959)	$	(86,316)
Denominator:
Weighted average basic common shares outstanding		39,465		39,454
Restricted stock and stock options		—		—
Warrants		—		—
Weighted average diluted common shares outstanding		39,465		39,454
Basic loss per share:	$	(2.68)	$	(2.19)
Diluted loss per share:	$	(2.68)	$	(2.19)

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INCOME TAXES (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		0 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	May 06, 2011 item	Dec. 31, 2014
Income taxes
Unrecognized tax benefits, excluding interest	$ 184.2			$ 184.2
Effective tax rate (as a percent)	(2.20%)	(5.90%)
General Growth Properties [Member]
Income taxes
Number of subsidiaries involved in dispute with IRS	2		2
Percentage of certain taxes indemnified by related party	93.75%
Amount of combined deficiencies determined by the IRS sought to be overturned by the petition filed			144.1
Proceeds From Settlement Of Tax Indemnity Receivable	138.0
Number Of Office Properties Received From Settlement Of Tax Indemnity Receivable	6
Value Of Buildings Received From Settlement Of Tax Indemnity Receivable	130.0
General Growth Properties [Member] | Maximum [Member]
Income taxes
Amount of certain taxes indemnified by related party	$ 303.8

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FAIR VALUE OF FINANCIAL INSTRUMENTS - Level 3 and Unobservable Inputs (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Fair Value, Inputs, Level 3 [Member]
Reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3)
Marketability discount due to lapses of restriction period	$ 0
Warrant [Member]
Reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3)
Balance at the beginning of the period	366,080	305,560	305,560
Warrant liability loss	108,810	96,440
Balance at the end of the period	$ 474,890	$ 402,000
Warrant [Member] | Fair Value, Inputs, Level 3 [Member]
Reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3)
Expected Volatility (as a percent)	26.30%
Warrant [Member] | Minimum [Member] | Fair Value, Inputs, Level 3 [Member]
Reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3)
Discount for lack of marketability (as a percent)	16.00%		18.00%
Warrant [Member] | Maximum [Member] | Fair Value, Inputs, Level 3 [Member]
Reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3)
Discount for lack of marketability (as a percent)	18.00%		20.00%

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015		Dec. 31, 2014
Comprehensive loss, net of tax
Net income (loss)	$ (105,959)		$ (86,331)
Other comprehensive income (loss):
Interest rate swaps	512	[1]	199	[1]
Capitalized swap interest	(59)	[2]	(133)	[2]
Other comprehensive income (loss)	453		66
Comprehensive loss	(105,506)		(86,265)
Comprehensive income attributable to noncontrolling interests			15
Comprehensive loss attributable to common stockholders	$ (105,506)		$ (86,250)

[1] Net of deferred tax expense of $0.1 million for the three months ended March 31, 2015 and 2014, respectively.

[2] Net of deferred tax benefit of $0.1 million for the three months ended March 31, 2015 and 2014, respectively.

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BASIS OF PRESENTATION AND ORGANIZATION

3 Months Ended

Mar. 31, 2015

ORGANIZATION

BASIS OF PRESENTATION AND ORGANIZATION

NOTE 1 BASIS OF PRESENTATION AND ORGANIZATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as issued by the Securities and Exchange Commission (the “SEC”). Such Condensed Consolidated Financial Statements do not include all of the information and disclosures required by GAAP for complete financial statements. In addition, readers of this Quarterly Report on Form 10-Q (“Quarterly Report”) should refer to The Howard Hughes Corporation’s (“HHC” or the “Company”) audited Consolidated Financial Statements which are included in the Company’s Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended December 31, 2014. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. The results for the three months ended March 31, 2015 are not necessarily indicative of the results for the full fiscal year.

Certain amounts in 2014 have been reclassified to conform to 2015 presentation. As a result of the increasing significance of development-related marketing costs in our operations, we present as a separate line item in the Condensed Consolidated Statements of Operations the amount of such costs expensed.Previously, these expenses were included in the line item Other property operating costs.  Development-related marketing costs include salaries, benefits, agency fees, events, advertising, online hosting, marketing-related travel and other costs that we incur for the benefit of our developments and redevelopments.

Management has evaluated for disclosure or recognition all material events occurring subsequent to the date of the Condensed Consolidated Financial Statements up to the date and time this Quarterly Report was filed.

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SEGMENTS - Segment Operating Results (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Segments reporting
Land sales	$ 48,081	$ 47,671
Builder price participation	5,698	4,097
Minimum rents	35,194	20,360
Tenant recoveries	9,667	6,015
Condominium rights and unit sales	34,857	3,126
Other land revenues	3,293	2,512
Other rental and property revenues	6,297	5,446
Total revenues	155,090	98,653
Cost of sales - land	23,896	23,078
Other property operating costs	18,145	13,804
Rental property real estate taxes	6,200	3,740
Rental property maintenance costs	2,744	1,915
Provision for doubtful accounts	809	143
Demolition costs	117	2,516
Development-related marketing costs	6,243	4,224
Depreciation and amortization	21,510	10,509
Other income	(1,464)	(10,448)
Interest income	(136)	(2,188)
Interest expense	13,246	7,321
Equity in Earnings from Real Estate and Other Affiliates	(1,788)	(6,068)
REP EBT	37,815	35,644
Operating Segments [Member] | Master Planned Communities [Member]
Segments reporting
Land sales	48,081	47,671
Builder price participation	5,698	4,097
Minimum rents	215	197
Other land revenues	3,286	2,504
Other rental and property revenues	(2)	67
Total revenues	57,278	54,536
Cost of sales - land	23,896	23,078
Land sales operations	7,579	7,304
Land sales real estate and business taxes	2,404	1,954
Depreciation and amortization	95	100
Interest income	(16)	(57)
Interest expense	(4,762)	(5,066)
Total expenses	29,196	27,313
REP EBT	28,082	27,223
Operating Segments [Member] | Operating Assets [Member]
Segments reporting
Minimum rents	34,312	19,900
Tenant recoveries	9,573	5,884
Resort and conference center revenues	12,003	9,426
Other rental and property revenues	6,274	5,110
Total revenues	62,162	40,320
Other property operating costs	17,486	13,181
Rental property real estate taxes	5,520	3,107
Rental property maintenance costs	2,627	1,800
Resort and conference center operations	9,078	7,511
Provision for doubtful accounts	809	143
Demolition costs	117	2,494
Development-related marketing costs	2,266	2,079
Depreciation and amortization	18,762	9,010
Interest income	(10)	(119)
Interest expense	6,495	2,044
Equity in Earnings from Real Estate and Other Affiliates	(885)	(1,805)
Total expenses	62,265	39,445
REP EBT	(103)	875
Operating Segments [Member] | Strategic Developments [Member]
Segments reporting
Minimum rents	667	263
Tenant recoveries	94	131
Condominium rights and unit sales	34,857	3,126
Other land revenues	6	8
Other rental and property revenues	26	269
Total revenues	35,650	3,797
Condominium rights and unit cost of sales	22,409	1,571
Other property operating costs	659	626
Rental property real estate taxes	680	633
Rental property maintenance costs	117	115
Demolition costs		22
Development-related marketing costs	3,977	2,145
Depreciation and amortization	1,016	424
Other income	(333)	(2,373)
Interest expense	(1,807)	(2,649)
Equity in Earnings from Real Estate and Other Affiliates	(904)	(4,263)
Total expenses	25,814	(3,749)
REP EBT	$ 9,836	$ 7,546

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2015

FAIR VALUE OF FINANCIAL INSTRUMENTS

Schedule of assets and liabilities that are measured at fair value on a recurring basis

	March 31, 2015								December 31, 2014
	Fair Value Measurements Using								Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)								(In thousands)
Assets:
Cash equivalents	$	110,077	$	110,077	$	—	$	—	$	75,027	$	75,027	$	—	$	—
Liabilities:
Warrants		474,890		—		—		474,890		366,080		—		—		366,080
Interest rate swaps		3,307		—		3,307		—		3,144		—		3,144		—

Schedule of reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3)

	2015		2014
	(In thousands)
Balance as of January 1	$	366,080	$	305,560
Warrant liability loss (a)		108,810		96,440
Balance as of March 31	$	474,890	$	402,000

(a) All losses during 2015 and 2014 were unrealized.

Schedule of significant unobservable input used in the fair value measurement of warrants designated as Level 3

				Unobservable Inputs
	Fair Value		Valuation Technique	Expected Volatility(a)	Marketability Discount (b)
	(In thousands)
Warrants	$	474,890	Option Pricing Valuation Model	26.3%	16.0%-  18.0%

(a) Based on our implied equity volatility.

(b) Represents the discount rate for lack of marketability of the Management Warrants. The discount rates ranged from 18.0%-20.0% at December 31, 2014.

Schedule of estimated fair values of the Company's financial instruments that are not measured at fair value on a recurring basis

		March 31, 2015				December 31, 2014
	Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:		(In thousands)
Cash and cash equivalents	Level 1	$	348,295	$	348,295	$	485,424	$	485,424
Notes receivable, net (a)	Level 3		26,892		26,892		28,630		28,630
Liabilities:
Fixed-rate debt	Level 2	$	1,049,407	$	1,088,862	$	1,030,554	$	1,050,333
Variable-rate debt	Level 2		1,074,210		1,074,210		962,916		962,916
Total mortgages, notes and loans payable		$	2,123,617	$	2,163,072	$	1,993,470	$	2,013,249

(a) Notes receivable is shown net of an allowance of $463  and $471 as of March 31, 2015 and December 31, 2014, respectively.

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RECENT TRANSACTIONS (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 sqft
RECENT TRANSACTIONS
Commercial building acquired	58,000
Air rights with total residential and commercial development rights (in sq ft)	196,133
Purchase price of acquisition	$ 91.4
Lot including 2014 acquisitions	42,694
Available development rights	817,784

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INCOME TAXES

3 Months Ended

Mar. 31, 2015

INCOME TAXES

INCOME TAXES

NOTE 11 INCOME TAXES

Two of our subsidiaries are involved in a dispute with the IRS relating to years in which those subsidiaries were owned by General Growth Properties (“GGP”), and in connection therewith, GGP provided us with an indemnity against certain potential tax liabilities. Pursuant to the Tax Matters Agreement with GGP, GGP had indemnified us from and against 93.75% of any and all losses, claims, damages, liabilities and reasonable expenses to which we become subject (the “Tax Indemnity”), in each case solely to the extent directly attributable to certain taxes related to sales of certain assets in our Master Planned Communities segment prior to March 31, 2010 (“MPC Taxes”), in an amount up to $303.8 million, plus interest and penalties related to these amounts (the “Indemnity Cap”) so long as GGP controlled the action in the United States Tax Court (the “Tax Court”) related to the dispute with the IRS.

On May 6, 2011, GGP filed Tax Court petitions on behalf of the two former REIT subsidiaries of GGP seeking a redetermination of federal income tax for the years 2007 and 2008.  The petitions sought to overturn determinations by the IRS that the taxpayers were liable for combined deficiencies totaling $144.1 million.  The case was heard by the Tax Court in November 2012 and filed its ruling in favor of the IRS on June 2, 2014. 

In December 2014, we entered into a tax indemnity and mutual release agreement with GGP (the “Settlement Agreement”) pursuant to which, in consideration of the full satisfaction of GGP’s obligation for reimbursement of taxes and interest related to certain assets in our Master Planned Communities segment prior to March 31, 2010, GGP (i) made a cash payment to us in the amount of $138.0 million and (ii) conveyed to us fee simple interest in six office properties and related parking garages located in Columbia, Maryland, known as 10-60 Columbia Corporate Center, for an agreed upon total value of $130.0 million.  Under the Settlement Agreement, the Company now controls the right to decide whether to appeal the decision rendered by the Tax Court. On December 15, 2014, the Company paid the MPC Taxes and filed an appeal of the decision to the Fifth Circuit Court of Appeals.  The appeal seeks to overturn the lower court decision and allow the Company to continue to use its current method of tax accounting for the sale of assets in the Company’s Master Planned Communities Segment.  If the decision stands, we may be required to change our method of tax accounting for certain transactions, which could affect the timing of our future tax payments.  We expect the appeal to be heard by the appellate court in 2015.

Unrecognized tax benefits pursuant to uncertain tax positions were $184.2 million as of March 31, 2015 and December 31, 2014, none of which would impact our effective tax rate. This amount is not reduced for either amounts reclassified under ASU 2013-11, or payments made to the IRS pursuant to the appeal filed with the Fifth Circuit Court of Appeals. A significant amount of the unrecognized tax benefits is related to the appeal of the Tax Court decision, which is expected to be resolved within the next 12 months.

We have significant permanent differences, primarily from warrant liability gains and losses, interest income on the tax indemnity receivable and changes in valuation allowances that cause our effective tax rate to deviate from statutory rates. The effective tax rate based upon actual operating results was (2.2)% and (5.9)% for the three months ended March 31, 2015 and 2014, respectively. The changes in the tax rates were primarily attributable to changes in the warrant liability, valuation allowance and unrecognized tax benefits.

We file a consolidated corporate tax return which, through December 31, 2014, includes all of our subsidiaries with the exception of Victoria Ward, Limited (“Ward”). Ward elected to be taxed as a REIT commencing with the taxable year beginning January 1, 2002 and ending with the taxable year ending December 31, 2014.  Ward satisfied the REIT distribution requirements for 2014 and beginning January 1, 2015, Ward will be included in our consolidated tax return.