As of September 30, 2021, the Company does not consolidate the investments below as it does not have the power to direct the activities that most significantly impact the economic performance of the ventures and does not have controlling interests in these investments. As a result, the Company reports its interests in accordance with the equity method. As of September 30, 2021, approximately $634.5 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 $292.8 million based on 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
	September 30,		December 31,		September 30,		December 31,		Three Months Ended September 30,				Nine Months Ended September 30,
thousands except percentages	2021		2020		2021		2020		2021		2020			2021		2020
Equity Method Investments
Operating Assets:
110 North Wacker (a)	see below		see below		$	224,004	$	261,143	$	(15,954)	—			$	(42,966)	$	—
The Metropolitan Downtown Columbia (b)	50	%	50	%	—		—		(233)		215			(122)		637
Stewart Title of Montgomery County, TX	50	%	50	%	4,424		3,924		715		375			1,349		878
Woodlands Sarofim #1	20	%	20	%	3,207		3,120		34		32			87		96
m.flats/TEN.M	50	%	50	%	563		1,247		330		340			966		496
Master Planned Communities:
The Summit (c)	see below		see below		39,196		96,300		8,277		(1,563)			54,568		4,403
Seaport
Mr. C Seaport (d)	—	%	—	%	—		—		—		—			—		(6,900)
The Lawn Club (e)	see below		see below		123		—		—		—			—		—
Ssäm Bar (Momofuku) (f)	see below		see below		6,142		7,101		(1,009)		(288)			(1,697)		(2,064)
Strategic Developments:
Circle T Ranch and Power Center (g)	—	%	—	%	—		—		—		216			—		891
HHMK Development	50	%	50	%	10		10		—		—			—		—
KR Holdings	50	%	50	%	222		347		(8)		(7)			(125)		(44)

110 North Wacker (a)	see below		see below		—		—		—		267,518			—		267,518
					277,891		373,192		(7,848)		266,838			12,060		265,911
Other equity investments (h)					3,952		3,953		—		—			3,755		3,724
Investments in real estate and other affiliates					$	281,843	$	377,145	$	(7,848)	$	266,838		$	15,815	$	269,635

(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 and the equity method investment was then 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 $11.0 million at September 30, 2021, and $5.0 million at December 31, 2020, due to distributions from operating cash flows in excess of basis. These deficit balances are presented in Accounts payable and accrued expenses at September 30, 2021, and December 31, 2020. The increase in the deficit balance is primarily due to a $5.0 million distribution in the third quarter of 2021.

(c)The decrease in investment balance is primarily due to distributions of $100.5 million received during the second quarter of 2021 and $10.0 million received during the third quarter of 2021 partially offset by an increase in income. Refer to discussion below for details on the ownership structure.

(h)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. There were no impairments, or upward or downward adjustments to the carrying amounts of these securities either during current year or cumulatively.

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 variable interest entity (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 Condensed Consolidated Balance Sheets. As of September 30, 2021, 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. The following table presents changes in Redeemable noncontrolling interest:


thousands	Redeemable Noncontrolling Interest
Balance as of December 31, 2020		$	29,114

Net income (loss) attributable to noncontrolling interest		(4,296)
Share of investee’s other comprehensive income		582
Balance as of September 30, 2021		$	25,400

Balance as of December 31, 2019		$	—
Reclassification of redeemable noncontrolling interest from permanent equity		6,091
Net income (loss) attributable to noncontrolling interest		24,270

Balance as of September 30, 2020		$	30,361

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 6 - Mortgages, Notes and Loans Payable, Net. Any further cash funding requirements by the Partnership were eliminated when the construction loan was 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 had 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 Condensed Consolidated Statements of Operations and reported in the Strategic Developments segment for the three months ended September 30, 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 Condensed Consolidated Statements of Operations and reported in the Strategic Developments segment for the three months ended September 30, 2020. As 110 North Wacker was 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 will be recognized based on the Hypothetical Liquidation at Book Value (HLBV) method. Under this method, the Company will recognize 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.

The Lawn Club On January 19, 2021, the Company formed HHC Lawn Games, LLC with The Lawn Club NYC, LLC (Endorphin Ventures), to construct and operate an immersive indoor and outdoor restaurant that includes an extensive area of indoor grass, a stylish clubhouse bar and a wide variety of lawn games. This concept is expected to open in early 2022. Under the terms of the agreement, the Company will fund 80.0% of the cost to construct the restaurant, and Endorphin Ventures will contribute the remaining 20.0%. The Company also entered into a lease agreement with HHC Lawn Games, LLC (Lease Agreement) to lease 20,000 square feet of the Fulton Market Building for this venture. The Company will report its ownership interest in accordance with the equity method.

Available cash will be distributed 80.0% to the Company and 20.0% to Endorphin Ventures until each member’s unreturned capital account has been reduced to zero. Distributions will then be allocated 60.0% to the Company and 40.0% to Endorphin Ventures until the amounts paid to the Company under the Lease Agreement and the aggregate amounts distributed to the Company equal $100 per square foot of the property on an annual basis. Any remaining cash will be distributed equally between both members. Given the nature of The Lawn Club’s capital structure and the provisions for the liquidation of assets, the Company’s share of The Lawn Club’s income-producing activities will be recognized based on the HLBV method.

Ssäm Bar (formerly 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. Under the terms of the agreement, the Company funded 89.75% of the costs to construct the restaurant, and Momofuku contributed the remaining 10.25%. In 2021, Bar Wayō was rebranded as the Ssäm Bar.

As of September 30, 2021, and December 31, 2020, Ssäm Bar is classified as a VIE because the equity holders, as a group, lack the characteristics of a controlling financial interest. The carrying value of Ssäm Bar as of September 30, 2021, is $6.1 million and is classified as Investments in real estate and other affiliates in the Condensed Consolidated Balance Sheets. The Company’s maximum exposure to loss as a result of this investment is limited to the aggregate carrying value of the investment 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 to the members in proportion to their respective percentage interests, or 50.0% each to the Company and Momofuku. Given the nature of Ssäm Bar’s capital structure and the provisions for the liquidation of assets, the Company’s share of Ssäm Bar’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 and has no further capital obligations. Discovery is required to fund up to a maximum of $30.0 million of cash as their capital contribution, of which $3.75 million has been contributed. The gains on the contributed land are recognized in Equity in earnings from real estate and other affiliates as The Summit sells lots.

As of September 30, 2021, the Company had received cash distributions equal to its capital contribution of $125.4 million and a 5.0% preferred return on such capital contribution, and Discovery had received cash distributions equal to two times its equity contribution. Any further cash distributions and income-producing activities will be recognized according to equity ownership, with HHC receiving 50.0% and Discovery receiving 50.0%.


thousands	The Summit (a)(b)		110 North Wacker (c)(d)
Balance Sheet
September 30, 2021
Total assets	$	226,600	$	677,419
Total liabilities	175,960		484,721
Total equity	50,640		192,698

December 31, 2020
Total assets	$	310,855	$	634,274
Total liabilities	209,968		415,452
Total equity	100,887		218,822

Income Statement
Nine Months Ended September 30, 2021
Revenues	$	260,398	$	22,279
Gross margin	87,837		—
Operating income (loss)	—		13,811
Net income (loss)	85,925		(32,597)

Nine Months Ended September 30, 2020
Revenues	$	96,022	$	—
Gross margin	10,501		—

Net income (loss)	6,028		—