Prospective homebuyers making deposits on condominiums being developed at Ward Village helped boost third-quarter profits for the development firm creating the new community in Kakaako.
Texas-based Howard Hughes Corp. reported $156.2 million in net income for the July-September period, more than triple its $45.6 million profit in the same period last year.
Some of the increased earnings were derived from buyer deposits on two Ward Village condo towers under construction: Waiea and Anaha.
Most of the income came from noncash obligations tied to the company’s stock price, while the sale of a mainland golf club and higher retail property rents also contributed.
At Ward Village, Hughes Corp. has ongoing sales at four towers, though two of the towers — Ae‘o, which is to be built with a Whole Foods store, and the first of two Gateway Towers that will replace much of Ward Warehouse — are not yet at the point where buyer deposits can be used for construction or profit taking.
At Ae‘o, Hughes Corp. reported selling 167 of 466 condo units, or 36 percent of units, since sales began in July. The company said it believes strong demand exists for this tower because units are smaller and priced lower than Waiea and Anaha, making them affordable to more people.
Ae‘o unit prices range from $405,016 for a studio with 409 square feet of living space to $2 million for a three-bedroom unit with 1,331 square feet of living space. The average is about $1 million and 836 square feet.
At the Gateway project, where sales also began in July, Hughes Corp. has not disclosed sales or prices for the initial 125-unit tower. The company, however, said this tower will set “a new peak” for condo pricing at Ward Village.
“With this product, we are bringing a level of product quality and overall experience never before seen in the market,” the company stated in its earnings report.
The top published price for a Waiea penthouse is $19.8 million. A “grand penthouse” spanning Waiea’s top two floors with a 3,661-square-foot lanai fronting an infinity-edge pool also is envisioned without a disclosed price. One prospective buyer has claimed this unit is available for just under $100 million, while others have said it is closer to $50 million.
Hughes Corp. said that because of the pricing for the first Gateway tower, it expects sales will be much slower than for Waiea, Anaha and Ae‘o.
A timetable for starting construction on the Gateway project has not been set, and will depend on obtaining a certain level of sales along with financing, the company said. To date, Hughes Corp. has spent $13.2 million on predevelopment costs for the first Gateway tower and $12.2 million for the second one.
Construction on Ae‘o is projected to begin in March and finish in 2018. Hughes Corp. said it has spent $14.4 million on predevelopment costs for this tower.
At Waiea, construction began in mid-2014 and is on schedule for completion by the end of next year. Buyers, who make nonrefundable deposits representing 20 percent of the purchase price, have bought 155, or 89 percent, of the 174 units in Waiea as of Oct. 20.
Sales at Anaha are at about 85 percent, or 270 of 317 units. Construction on this tower began about a year ago and is slated to finish in the second quarter of 2017.
Between July 24 and Oct. 20, Hughes Corp. reported 12 sales at Anaha and Waiea.
There is one other tower permitted for development at Ward Village, a moderate-priced condo called 988 Halekauwila, where sales are projected to begin next year.
Ward Village is a master-planned community envisioned for up to 4,300 condo units in 22 towers along with about 1 million square feet of retail space converted from mainly retail and industrial space on 60 acres formerly known as Ward Centers.
Hughes Corp. reported that 89 percent of its Ward Village retail space is leased, and generated $6.4 million in net operating income in the third quarter, up from $6.2 million in the same quarter last year.
Hughes Corp. acquired Ward Centers and its redevelopment plan in 2010 from General Growth Properties Inc. as part of a bankruptcy reorganization by which General Growth, which owns Ala Moana Center, transferred a group of properties outside its core collection of shopping centers to a group of investors who formed Hughes Corp.
Other properties acquired by Hughes Corp. in that deal include master-planned communities such as Summerlin in Las Vegas and The Woodlands in Houston, as well as retail development projects such as South Street Seaport in Manhattan, N.Y., and Riverwalk Marketplace in New Orleans.
Revenue for Hughes Corp. in the third quarter totaled $203.4 million.
Hughes Corp. said one major contributor to profit was the sale of a 36-hole golf club at The Woodlands that produced a $29.1 million pretax gain.
A bigger impact came from a $123.6 million noncash gain on rights by shareholders to acquire stock in the company. Excluding this along with a $25 million noncash loss reducing the value of some real estate produced adjusted net income of $57.6 million. Comparable adjusted net income excluding noncash items in the 2014 third quarter was $28.5 million.
Shares of Hughes Corp. stock closed Monday at $123.39 before the earnings announcement. Shares over the past 52 weeks have closed between a low of $112.52 on Sept. 29 and a high of $159.12 on April 6.
