Anticipated proceeds from Kakaako condominium purchases flowed onto the balance sheet of Howard Hughes Corp. in the first quarter, helping the developer of Ward Village boost earnings.
The Texas-based company announced Monday that it earned $143.8 million in the January-March period, compared with a $106 million loss a year earlier.
Some of the gain, Hughes Corp. said, was from profit booked on two partially built condo towers called Waiea and Anaha at Ward Village as well as from recently completed commercial projects on the mainland. But the big driver was the sale of a site in New York slated for skyscraper development.
The New York property sold for $390 million and generated a $140.5 million pretax gain for Hughes Corp.
At Ward Village, Hughes Corp. said it booked $122 million in revenue from condo sales at Waiea and Anaha, up from $35 million a year earlier. The company said the gain was primarily due to Anaha.
Some condo tower developers book revenue and income only when a project is completed and buyers pay for their units in full.
Hughes Corp. does it a different way: booking revenue and income based on what percent of a tower is complete. The further along the construction is, the more Hughes Corp. will claim as revenue even though the company has only collected deposits from buyers. That is an accepted accounting practice.
At Anaha, where unit prices average about $1.2 million, Hughes Corp. initially booked $121 million in revenue from sales in the second quarter of 2015 when construction was 14 percent done and about 260 units had been sold in the 317-unit tower.
As of April 18, Anaha sales had climbed to 281 units. But because the tower is now 36 percent complete, Hughes Corp. can recognize considerably more revenue in the first quarter, which compared with no revenue from Anaha in the first quarter last year.
Based on the average price, Hughes Corp. expects about $380 million in revenue from residential unit sales at Anaha.
At Waiea, which has 174 units priced at $3.6 million on average, 158 units were sold through April 18. That’s unchanged from Feb. 1. Construction on Waiea is 64 percent complete.
Finishing Waiea is projected to happen by the end of this year. Anaha is expected to be completed in mid-2017.
Hughes Corp. has three other planned towers at Ward Village with ongoing sales, though only one of these, Ae‘o, is under construction in a very early stage that began in February.
Unit sales at Ae‘o began in July and average $1 million. Hughes Corp. said it had sold 222 units in the 466-unit Ae‘o tower as of April 18, which represents 15 more since Feb. 1. Construction is slated for completion in late 2018, though a Whole Foods Market store in the tower is expected to open in mid-2018.
Two other towers are permitted for construction but have not yet begun.
One of these towers is called Ward Gateway and has 125 units with prices topping Waiea’s $3.6 million average. Sales began in July, but Hughes Corp. has declined to disclose results.
The other planned tower is Ke Kilohana. Sales of its 375 moderately priced units began in March through a lottery that sold all of them; the units are priced between $323,475 and $560,774 and are reserved for residents with moderate incomes. There are also 49 Ke Kilohana units slated to be sold later this year at higher prices.
Hughes Corp. has a master plan to develop up to 4,300 condo units in 22 towers along with about 1 million square feet of retail space at Ward Village, converted from mainly retail and industrial space on 60 acres formerly known as Ward Centers.
The existing retail and industrial complex generated $4.6 million in net operating income for Hughes Corp. in the first quarter. That was down from $6.3 million a year earlier. The company said the decrease was primarily due to making a provision for a doubtful debt related to a tenant in bankruptcy. Sports Authority filed for bankruptcy in March and said last week that it will close or sell all its stores.
Shares of Hughes Corp. stock closed at $106.47 Monday on the New York Stock Exchange after the earnings announcement, up from $105.17 on Friday. Shares of the company’s stock in the last 52 weeks have closed between a high of $154.45 on May 8 and a low of $81.34 on Feb. 11.
