As of December 31, 2020, the Company is not the primary beneficiary of any of the investments listed below as it does not have the power to direct the activities that most significantly impact the economic performance of the ventures. As a result, the Company reports its interests in accordance with the equity method. As of December 31, 2020, approximately $545.0 million of indebtedness was secured by the properties owned by the Company’s real estate and other affiliates of which the Company’s share was $274.5 million based upon economic ownership. All of this indebtedness is without recourse to the Company, with the exception of $100.6 million related to 110 North Wacker.


	Economic/Legal Ownership				Carrying Value				Share of Earnings/Dividends
	December 31,		December 31,		December 31,		December 31,		Year Ended December 31,
thousands except percentages	2020		2019		2020		2019		2020		2019		2018
Equity Method Investments
Operating Assets
110 North Wacker (a)	see below		see below		$	261,143	$	—	$	(13,896)	$	—	$	—
The Metropolitan Downtown Columbia (b)	50.0	%	50.0	%	—		—		765		694		467
Stewart Title of Montgomery County, TX	50.0	%	50.0	%	3,924		4,175		1,250		1,105		573
Woodlands Sarofim #1	20.0	%	20.0	%	3,120		2,985		125		125		94
m.flats/TEN.M	50.0	%	50.0	%	1,247		2,431		666		(1,875)		(2,478)
Master Planned Communities
The Summit (c)	see below		see below		96,300		84,455		17,845		28,336		36,284
Seaport District
Mr. C Seaport (d)	—	%	35.0	%	—		7,650		(6,900)		(1,980)		(465)
Bar Wayō (Momofuku) (c)	see below		see below		7,101		7,469		(2,392)		(612)		—
Strategic Developments
Circle T Ranch and Power Center (e)	—	%	50.0	%	—		8,207		2,463		950		1,534
HHMK Development	50.0	%	50.0	%	10		10		—		—		—
KR Holdings	50.0	%	50.0	%	347		422		(69)		263		830
Mr. C Seaport (d)	—	%	35.0	%	—		—		—		—		(240)
110 North Wacker (a)	see below		see below		—		—		267,518		—		—
					373,192		117,804		267,375		27,006		36,599
Other equity investments (f)					3,953		3,953		3,724		3,623		3,355
Investments in real estate and other affiliates					$	377,145	$	121,757	$	271,099	$	30,629	$	39,954

(a)During the third quarter of 2020, 110 North Wacker was completed and placed in service. This triggered a reconsideration event that resulted in the deconsolidation of 110 North Wacker and the recognition of the retained equity method investment at fair market value. The $267.5 million gain on deconsolidation was recorded in the Strategic Developments segment. The equity method investment was transferred from the Strategic Development segment to the Operating Asset segment. Refer to the discussion below for additional details.

(b)The Metropolitan Downtown Columbia was in a deficit position of $5.0 million at December 31, 2020, and $4.7 million at December 31, 2019, due to distributions from operating cash flows in excess of basis. These deficit balances are presented in Accounts payable and accrued expenses at December 31, 2020 and 2019.

(f)Other equity investments represent equity investments not accounted for under the equity method. The Company elected the measurement alternative as these investments do not have readily determinable fair values. See Note 1 - Summary of Significant Accounting Policies for additional information. There were no impairments, or upward or downward adjustments to the carrying amounts of these securities either during current year 2020, or cumulatively.

Mr. C Seaport As of December 31, 2019, the Mr. C Seaport variable interest entity (VIE) did not have sufficient equity at risk to finance its operations without additional financial support and the carrying value of the Company’s investment was classified as Investment in real estate and other affiliates on the Consolidated Balance Sheets. During the three months ended June 30, 2020, the Company recognized a $6.0 million impairment of its equity investment in Mr. C Seaport. During the three months ended September 30, 2020, the Company completed the sale of its 35% equity investment in Mr. C Seaport. Refer to Note 3 - Acquisitions and Dispositions and Note 4 - Impairment for additional information.

110 North Wacker The Company formed a partnership with a local developer (the Partnership) during the second quarter of 2017. During the second quarter of 2018, the Partnership executed an agreement with USAA related to 110 North Wacker (collectively, the local developer and USAA are the Partners) to construct and operate the building at 110 North Wacker (the Venture).

The Partnership was determined to be a VIE, and as the Company has the power to direct the activities of the Partnership that most significantly impact its economic performance, the Company is considered the primary beneficiary and consolidates the Partnership. Additionally, the noncontrolling interest holder has the right to require the Company to purchase its interest in the Partnership if the Venture has not been sold or refinanced (with distributions made to the local developer and Company sufficient to repay all capital contributions), at the later of (1) the third anniversary of the issuance of the certificate of occupancy for the project or (2) the fifth anniversary of the effective date of the Partnership's LLC agreement. Therefore, the local developer’s redeemable noncontrolling interest in the Partnership is presented as temporary equity on the Consolidated Balance Sheets. As of December 31, 2020, the time restriction has not been met, and the Company believes it is not probable that the put will be redeemed. As such, the redeemable noncontrolling interest is measured at the initial carrying value plus net income (loss) attributable to the noncontrolling interest and is not adjusted to fair value.


thousands	Redeemable Noncontrolling Interest
Balance as of December 31, 2019	$	—
Reclassification of redeemable noncontrolling interest to temporary equity	6,091
Net income (loss) attributable to noncontrolling interest	22,881
Share of investee's other comprehensive income	142
Balance as of December 31, 2020	$	29,114

Upon execution of the Venture in the second quarter of 2018, the Company contributed land with a carrying value of $33.6 million and an agreed upon fair value of $85.0 million, the local developer contributed $5.0 million in cash and USAA contributed $64.0 million in cash. USAA was required to fund up to $105.6 million in addition to its initial contribution. HHC and the local developer also had additional cash funding requirements and contributed $9.8 million and $1.1 million, respectively, during 2018. The Company and its Partners entered into a construction loan agreement further described in Note 7 - Mortgages, Notes and Loans Payable, Net. Any further cash funding requirements by the Partnership were eliminated when the construction loan increased on May 23, 2019. Concurrently with the increase in the construction loan, USAA agreed to fund an additional $8.8 million, for a total commitment of $178.4 million. No changes were made to the rights of either the Company or the Partners under the construction loan agreement.

The Company concluded that the Venture was within the scope of the VIE model, and that it was the primary beneficiary of the Venture during the development phase of the project because it had the power to direct activities that most significantly impact the Venture’s economic performance, however, upon the building’s completion, the Company expected to recognize the investment under the equity method. As the primary beneficiary of the VIE during the

development phase, the Company has consolidated 110 North Wacker and its underlying entities since the second quarter of 2018. During the third quarter of 2020, 110 North Wacker was completed and placed in service, triggering a reconsideration event. Upon development completion, the Company concluded it is no longer the primary beneficiary and as such, should no longer consolidate the Venture. As there have been no changes to the structure and control of the Partnership with the local developer, the Company will continue to consolidate the Partnership.

As of September 30, 2020, the Company derecognized all assets, liabilities and noncontrolling interest related to the Venture that were previously consolidated and recognized an equity method investment of $273.6 million based on the fair value of its interest in 110 North Wacker. The Company recognized a gain of $267.5 million attributable to the initial fair value step-up at the time of deconsolidation, which is included in Equity in earnings (losses) from real estate and other affiliates on the Consolidated Statements of Operations and reported in the Strategic Developments segment for the year ended December 31, 2020. The Company utilized a third-party appraiser to measure the fair value of 110 North Wacker on an as-is basis at September 30, 2020, using the discounted cash flow approach and sales comparison approach, based on current market assumptions. Also as a result of the deconsolidation, the Company recognized an additional $15.4 million attributable to the recognition of previously eliminated development management fees, which is included in Other land, rental and property revenues on the Consolidated Statements of Operations and reported in the Strategic Developments segment for the year ended December 31, 2020. As 110 North Wacker has now been placed in service, the equity method investment was transferred from the Strategic Development segment to the Operating Asset segment.

Given the nature of the Venture’s capital structure and the provisions for the liquidation of assets, the Company’s share of the Venture’s income-producing activities is recognized based on the Hypothetical Liquidation at Book Value (HLBV) method. Under this method, the Company recognizes income or loss in Equity in earnings from real estate and other affiliates based on the change in its underlying share of the Venture’s net assets on a hypothetical liquidation basis as of the reporting date. After USAA receives a 9.0% preferred return on its capital contribution, the Partnership is entitled to cash distributions from the Venture until it receives a 9.0% return on its capital account, calculated as the initial land contribution of $85.0 million and cash contribution of $5.0 million, plus subsequent cash contributions and less subsequent cash distributions. Subsequently, USAA is entitled to cash distributions equal to 11.11% of the amount distributed to the Partnership that resulted in a 9.0% return. Thereafter, the Partnership and USAA are entitled to distributions pari passu to their profit ownership interests of 90% and 10%, respectively.

As of December 31, 2019, when the Venture was a consolidated VIE, the carrying value of the assets associated with the operations of the Venture was $393.3 million and the carrying value of the related liabilities was $186.5 million. The assets of the Venture were restricted for use only by the Venture and were not available for the Company’s general operations.

Bar Wayō During the first quarter of 2016, the Company formed Pier 17 Restaurant C101, LLC (Bar Wayō) with MomoPier, LLC (Momofuku), an affiliate of the Momofuku restaurant group, to construct and operate a restaurant and bar at Pier 17 in the Seaport District. Under the terms of the agreement, the Company will fund 89.75% of the costs to construct the restaurant, and Momofuku will contribute the remaining 10.25%.

As of December 31, 2020 and 2019, Bar Wayō is classified as a VIE because the equity holders, as a group, lack the characteristics of a controlling financial interest. The carrying value of Bar Wayō as of December 31, 2020, is $7.1 million and is classified as Investments in real estate and other affiliates in the Consolidated Balance Sheets. The Company’s maximum exposure to loss as a result of these investments is limited to the aggregate carrying value of the investments as the Company has not provided any guarantees or otherwise made firm commitments to fund amounts on behalf of this VIE.

After each member receives a 10.0% preferred return on its capital contributions, available cash will be allocated 75.0% to the Company and 25.0% to Momofuku, until each member’s unreturned capital account has been reduced to zero. Any remaining cash will be distributed 50% to each of the members. Given the nature of the Bar Wayō’s capital structure and the provisions for the liquidation of assets, the Company’s share of the Bar Wayō’s income-producing activities is recognized based on the HLBV method.

The Summit During the first quarter of 2015, the Company formed DLV/HHPI Summerlin, LLC (The Summit) with Discovery Land Company (Discovery). The Company contributed land with a carrying value of $13.4 million and transferred SID bonds related to such land with a carrying value of $1.3 million to The Summit at the agreed upon capital contribution value of $125.4 million, or $226,000 per acre. Discovery is required to fund up to a maximum of $30.0 million of cash as their capital contribution, and the Company has no further capital obligations. The gains on the contributed land are recognized in Equity in earnings from real estate and other affiliates as The Summit sells lots.


thousands	The Summit (a)(b)		110 North Wacker (c)		Other Investments (d)
Balance Sheet
2020
Total Assets	$	306,541	$	634,274	$	247,742
Total Liabilities	207,152		415,452		166,418
Total Equity	99,389		218,822		81,324

2019
Total Assets	$	221,277	$	—	$	324,926
Total Liabilities	136,314		—		208,991
Total Equity	84,963		—		115,935

Income Statement
2020
Revenues	$	147,680	$	5,333	$	36,450
Gross Margin	27,064		n/a		n/a
Operating Income	n/a		(3,148)		17,100
Net income (loss)	20,426		(8,236)		11,220

2019
Revenues	$	120,337	$	—	$	42,778
Gross Margin	32,205		n/a		n/a
Operating Income	n/a		—		16,085
Net income (loss)	26,298		—		5,162

2018
Revenues	$	102,559	$	—	$	36,613
Gross Margin	42,338		n/a		n/a
Operating Income	n/a		—		14,495
Net income (loss)	36,697		—		6,250

(a)The Summit adopted ASU 2014-09, Revenues from Contracts with Customers (Topic 606) effective in the fourth quarter of 2019 using the modified retrospective transition method. Therefore, for 2019, revenues allocated to each of The Summit’s performance obligations is recognized over time based on an input measure of progress. Prior period amounts have not been adjusted and are recognized on a percentage of completion basis. The Summit’s adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements.

(b)The decrease in gross margin for The Summit from 2018 to 2020 is primarily due to the mix of product sold in each year. Home sales, which has a lower margin than lot sales, comprised a higher percentage of revenues in both 2020 and 2019, when compared to each prior year period. Additionally, gross margin decreased from 2019 to 2020 due to an increase in projected amenity costs.

(c)The income statement amounts for 110 North Wacker only include activity for the three months ended December 31, 2020, to correspond with the period it was accounted for under the equity method. The loss for that period is the result of the asset still being in the lease-up period.

(d)Other Investments includes The Metropolitan Downtown Columbia, Stewart Title, Woodlands Sarofim #1, m.flats / TEN.M, Bar Wayō, Mr. C Seaport, Circle T Ranch and Power, HHMK Development and KR Holdings. As the Company sold its interests Mr. C Seaport and Circle T Ranch and Power in 2020, the income statement amounts only include activity through the date of sale and the balance sheet amounts do not include balances for these assets as of December 31, 2020.