ANNUAL REVIEW 2014 – TABLE OF CONTENTS 2014 LETTER TO SHAREHOLDERS / 1 DAVID R. WEINREB–REFLECTING ON AN EXTRAORDINARY YEAR PROJECT HIGHLIGHTS / 37 OUR PORTFOLIO FROM WALL STREET TO WAIKIKI PAST LETTERS TO SHAREHOLDERS / 74 CEO SHAREHOLDER LETTER Downtown Summerlin Grand Opening ANNUAL REVIEW 2014

REFLECTING ON AN EXTRAORDINARY YEAR TO THE SHAREHOLDERS OF THE HOWARD HUGHES CORPORATION Design Cube at ICSC RECON 2014, Las Vegas, NV Waiea Groundbreaking Ceremony, Ward Village FROM THE CHIEF EXECUTIVE OFFICER, DAVID R. WEINREB

March 13 , 2015 — The Howard Hughes Corporation had another maintain a conservative balance sheet so that our development successful year in 2014. Our financial results surpassed 2013 in plans will not be disrupted by the periodic ups and downs of every key metric. We completed and opened several projects economic and capital markets cycles. Other than the Seaport, that were underway in 2013 and made strategic acquisitions which we initially determined to finance from our balance sheet adjacent to a number of our core properties that should create for strategic reasons, each of our developments has committed meaningful shareholder value, all while maintaining a strong project-level debt financing from leading financial institutions. liquidity position and conservative capital structure. We continue to be focused on increasing the per-share value Once again, our master planned communities made significant of The Howard Hughes Corporation by directing a majority contributions to our results. 2014 consolidated revenues of our efforts to the handful of core assets which have the increased by 35%, or $166 million, to $635 million, compared greatest potential for creating value. These assets include The to $469 million in 2013. MPC land sales increased by 43%, or South Street Seaport in Lower Manhattan, the master planned $105 million, to $351 million in 2014 compared to $246 million communities in Columbia, Maryland; The Woodlands and in 2013. Operating income and income from non-consolidated Bridgeland in Houston, Texas; Summerlin in Las Vegas, Nevada, affiliates increased by 51% to $190 million in 2014, compared to including Downtown Summerlin; and Ward Village, an urban $126 million in 2013. master planned community in Honolulu, Hawai‘i. We made material progress in 2014 in advancing the development of these These strong results do not include the full year impact of a assets to maximize their value. number of major strategic developments that were substantially leased and placed in service in 2014. The 1.6 million square foot In selecting a name for our company in 2010, we chose Howard mixed-use Downtown Summerlin development was substantially Hughes because not only is it historically linked to one of our completed and opened in October. The 198,000 square foot Two great assets - Summerlin, which is named for Hughes’ maternal July 4th Pier Party, Seaport District Hughes Landing Class-A office building and 89,000 square foot grandmother, but because it is synonymous with the relentless Columbia Regional Building anchored by Whole Foods were both pursuit of achievement. With passion, determination, and completed and opened in September, and the 250,000 square- limitless imagination, Howard Hughes built one of the great foot Outlet Collection at Riverwalk retail project opened in May. American empires of the 20th century. We adopted his name to We invested over $1 billion in pre-development and development represent our brand because his values are a great reflection of in 2014 (including land), compared to $382 million in 2013. Since our own. our projects are long term in nature, these investments will begin to be reflected in our operating results over the coming years as Our numerous accomplishments in 2014, further discussed in projects are completed and stabilized. the coming pages, would not be possible without the tireless efforts and dedication of our 1,100 employees and the invaluable We finished 2014 with $560 million of unrestricted cash on guidance and support from our board of directors. Our employees, hand, and our net debt, which is total debt less cash on hand, management team and board embody the values of our namesake as a percentage of our book capital base and as a percentage and are believers that together we can make life extraordinary for of our total capital (defined as the market value of equity plus all those who encounter The Howard Hughes Corporation. As we debt) was just 34% and 18%, respectively. We maintained this complete each development and open it to its local community, strong position even after funding with cash $273 million we are beginning to demonstrate the impact that first-class of acquisition-related transactions in 2014. We endeavor to development can have on the communities we serve.

1 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

COLUMBIA THE WOODLANDS AND BRIDGELAND • We completed the renovation and repurposing of the 89,000 square We completed the following projects in 2014 on time and on budget: foot Columbia Regional Building into a Whole Foods-anchored • Two Hughes Landing, a 198,000 square foot Class A office building retail and office building. at Hughes Landing, that is 85% leased and at stabilization will • We completed The Metropolitan, a 380-unit apartment building generate $5.2 million in net operating income. developed in a 50/50 joint venture. 85% of the ground floor retail • The Woodlands Resort & Conference Center redevelopment. space and 67 units are leased. • 3831 Technology Forest Drive build-to-suit office building 100% • We began site work for the next residential project adjacent to The leased to Kiewit Energy Group. Metropolitan, a 437-unit apartment building. • Millennium Phase II, a 314-unit apartment building constructed in • We acquired 700,000 square feet of office space in six buildings a joint venture with The Dinerstein Companies. adjacent to our land in Downtown Columbia in connection with the settlement of The Tax Matters Agreement with GGP. We continued development of the following projects which we began in 2013, all of which are expected to be completed in 2015: HAWAI‘I • Two office buildings totaling 647,000 square feet, of which 478,000 • We completed the ONE Ala Moana condominium tower developed is leased to ExxonMobil Corporation, expected to be completed in a 50/50 joint venture, closed on sales of 203 of the 206 total units with Exxon taking occupancy in 2015. and, as of February 1, 2015, have received a total of $75.5 million • Creekside Village Green, a 74,000 square foot mixed use property cash distributions (including development and other related fees). that is 59% leased. • In February, we launched pre-sales for the first two market-rate • Hughes Landing Retail, a 123,000 square foot Whole Foods- towers at Ward Village, Waiea and Anaha, and as of February 1, anchored project at Hughes Landing that is 78% pre-leased. 2015, contracted for 393 of the 482 total units offered. We obtained • One Lakes Edge, a 390-unit apartment building being constructed $600 million of non-recourse financing for the project and began in Hughes Landing. The project began pre-leasing in January 2015 construction of both towers in 2014. Waiea will be completed by and 9% of the units are currently pre-leased. the end of 2016 and Anaha in the first half of 2017. During 2014 we began construction on the following projects: • We obtained approval for two additional towers, designed by Richard Meier & Partners, that will frame a park space in the center • Three Hughes Landing, a 324,000 square foot Class A office of Ward Village and front Kewalo Basin Harbor. building at Hughes Landing, which is scheduled to be completed by the end of 2015. • Whole Foods pre-leased ground floor space in a fifth, to-be-built condominium tower that also received approval in February 2015. • The 302-key Westin Hotel in The Town Center will be completed This tower is designed by world-renowned architects Bohlin by the end of 2015. Cywinski Jackson. • The 205-key Embassy Suites hotel at Hughes Landing will be • We entered into a long-term lease with the State of Hawai‘i to completed by the end of 2015. operate the Kewalo Basin Harbor, a harbor directly adjacent to We acquired 2,100 acres of raw land 13 miles north of The Woodlands Ward Village that currently has 143 boat slips. The Kewalo Basin in Conroe adjacent to Interstate 45 on which we expect to develop Hughes Landing - The Woodlands Harbor will serve as the gateway to Ward Village and a direct approximately 4,800 residential lots and 161 acres of land for sale or connection to the Pacific Ocean at our front door. hold for commercial development. First lot deliveries are targeted for 2016 with sales beginning in the first quarter of 2017. This acreage will LAS VEGAS, NEW ORLEANS AND NEW YORK CITY be developed by our experienced team at The Woodlands Development • In Downtown Summerlin, we completed and opened the 1.6 Company and will be our fifth master planned community. million square foot mixed use development on 106 acres of commercial land in the center of our master planned community. 73% of the retail space is leased and 28% of the 235,000 square foot Class A office building in the center of the development is leased. EXTRAORDINARY DEVELOPMENT • In New Orleans, we completed and opened the 250,000 square foot Outlet Collection at Riverwalk. The property is 100% leased and is the first outlet center in the country located in an urban location. DURING 2014, WE INCREASED DEVELOPMENT INVESTMENT BY 182% COMPARED • In New York City, we continued renovation of the historic area and demolished the old Pier 17 building and its concrete pier. Opening TO 2013, BEGAN CONSTRUCTION ON SEVERAL MAJOR PROJECTS NOTED LAST YEAR, of the historic area and the new Pier 17 building are targeted for AND COMPLETED AND OPENED PROJECTS THAT WERE UNDERWAY IN 2013. SOME 2016 and 2017, respectively. • We contracted for and closed on the majority of a site and OF THESE HIGHLIGHTS ARE FEATURED ON THE FOLLOWING PAGE: development rights adjacent to the Seaport called the Seaport District Assemblage that will ultimately create a 43,000 square foot lot capable of supporting an additional 818,000 square feet of mixed use development that is fully entitled for that density of development.

FROM WALL STREET TO WAIKIKI Aerial of Downtown Summerlin 2 3 2014 Highlights CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014 EXTRAORDINARY MOMENTS - ICSC DESIGN CUBE

ICSC RECON, May 18-20, 2014, Las Vegas, NV. 4 5 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

HOUSTON MASTER PLANNED COMMUNITIES

Our Houston, Texas MPCs, which include The Woodlands and The most frequently asked question of the company over the past Bridgeland, generated a combined $206 million of residential few months is our view regarding the impact of lower oil prices and commercial land sales in 2014, representing a 70.2% increase on our Houston assets. In late 2014, the benchmark price for over the $121 million generated in 2013. Both MPCs benefit from Texas oil, West Texas Intermediate, began declining from around their locations north and northwest of Houston in an area that $100 per barrel to its current price of approximately $50 per is known as the Energy Corridor. ExxonMobil is completing a barrel. We expect there to be a slowdown in economic growth 385-acre corporate campus just south of The Woodlands, and in the Houston area resulting from the rapid decline in oil prices in 2014 began moving approximately 10,000 employees to this as energy-related companies reduce headcount and defer capital location. In 2015, approximately 2,000 employees are relocating expenditures. The impact of lower oil prices will ultimately to the campus from Tysons Corner, Virginia. depend on how low prices go, and how long they stay at that level.

Left: Summerlin MPC. Top Right: The Woodlands Town Center. Bottom Right: Rendering of a future Bridgeland residential community. MASTER PLANNED COMMUNITIES THE HOWARD HUGHES CORPORATION OWNS A COLLECTION OF THE LEADING MASTER PLANNED COMMUNITIES IN THE UNITED STATES. OUR MPCS ARE WELL LOCATED NEAR MAJOR URBAN CENTERS AND HAVE EXPERIENCED STRONG ECONOMIC TRENDS OVER THE PAST SEVERAL YEARS. THEIR DOMINANT MARKET POSITION AND OUTSTANDING LEADERSHIP FROM SEASONED MANAGEMENT TEAMS HAVE RESULTED IN ANOTHER YEAR OF SIGNIFICANT REVENUE GROWTH.

6 7 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

Slower economic growth in Houston will likely Las Vegas, arguably the entertainment capital Right: result in slower absorption of vacant commercial of the world. More visitors to Las Vegas in The Woodlands Waterway. space, and may reduce demand for new homes turn create demand for more jobs and increase Below: resulting in slower velocity of land sales. economic growth, more construction activity Hughes Landing. follows, and more residents create more While the capital markets appear to be very demand for housing. Another example of where focused on challenges to the Texas economy the benefits of lower energy costs will occur Footnotes: caused by low oil prices, I believe there will be is at our Hawai‘i assets. Hawai‘i generates a 1 The Wall Street Journal a corresponding positive impact on every one majority of its energy from oil and the State must Online October 28, of our other major assets. Lower energy costs import virtually everything consumed by its 2014: Gas at $3 Carries Rewards—and Risks immediately place more disposable income into residents using oil-powered transportation. The consumers’ pockets and provide a large boost to energy-related component of our construction the economy. A rule of thumb suggests that every materials, fabrication and transportation, for one cent decrease in gasoline prices translates into example, should decrease, and operating costs $1 billion in additional income that consumers related to energy should also decrease. can spend on other goods and services, pay down debt or increase savings1. These are the same While growth will likely be slower in Houston, as consumers who shop and eat at our properties, the owner of The Woodlands, the most established, rent our apartments, purchase homes built on land and most highly regarded master planned The Woodlands generated $168 million in land sales revenue Residential lot sales totaled approximately $78 million, with 466 we have sold and who will have more cash to spend community in Houston, and Bridgeland, one of the during 2014. Commercial land sales totaled over $90 million, lots sold at an average price of $167,000 per lot. While the number on travel and entertainment. most highly regarded younger MPCs, we expect to including a $71 million, 59-acre sale to a major hospital. Since of lots sold has declined in each of the past two years, the average be somewhat insulated from the impact of reduced acquiring The Woodlands, it has been our preference to sell land price per lot has increased by over 60%. The decline in lots sold We expect that more disposable income, for growth in this economy. in locations in which we believe there is limited development can primarily be attributed to the declining residential acreage example, will lead to an increase in visitors to opportunity or where the risk of development outweighs the available for sale and our efforts to maximize the value of our return. We will continue to adhere to our strategy. It is important remaining inventory. In addition, the remaining lots are typically to note that the commercial sales executed last year are not a larger and more customized and therefore often sell at a higher principal source of revenue for the company and may not recur price point. The chart below shows the number of lots sold in with frequency. The Woodlands since 2000. The current three-month supply of existing homes is several months less than the level considered necessary to represent an equilibrium-level of supply. THE WOODLANDS THE WOODLANDS – HISTORICAL RESIDENTIAL LAND SALES ($ in thousands) ($ in thousands)

$200 $167 150 $156

$160 120

$114 $107 $106 $120 $102 900

$92 $89 $89 $82 $75 $80 $71 600 $65 $62 $59

$40 300

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Average Lot Price Revenue

8 9 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

THE WOODLANDS OPERATING ASSETS Left: THE WOODLANDS – OPERATING ASSETS Hughes Landing. We carefully calibrate the pace of our new commercial $32 million in net operating income upon stabilization, bringing Right: Square Feet / Year Projected development activity and consider a number of factors when the total Woodlands portfolio net operating income of developed Aerial of The Woodlands Asset Type # of Units % Leased Stabilized Stabilized NOI deciding to move forward with a new development. These factors assets as of year-end 2014 to $60 million by the end of 2016. Town Center. Existing Operating Assets ($MM) include market demand, vacancy rates, availability and terms of project-level financing and overall business activity that we see In addition, in 2015, we expect to deliver 507 new hotel rooms, One Hughes Landing Office 197,719 100% 2015 $ 5.5 Footnotes: as a result of our deep relationships and extensive involvement 390 multifamily units, 100,000 square feet of retail space 3 Waterway Square Office 232,021 100% 2013 6.5 in the community. Given our unique position of controlling anchored by Whole Foods and an additional one million square 4 Waterway Square Office 218,551 100% N/A 5.8 N/A = Not Applicable virtually all of the remaining commercial land, we do not feel feet of office space, half of which is leased to ExxonMobil. The 9303 New Trails Office 97,553 94% N/A 1.9 1 Applicable to assets the competitive pressures to stay ahead of the market that one- 302-room Westin will be located in the heart of The Woodlands 1400 Woodloch Forest Office 95,667 96% N/A 1.2 developed and placed in service subsequent off developers may feel, and will only begin a new development Town Center, which has adjacent demand generators for its room 1501 Lake Robbins Retail 21,513 100% N/A 0.8 when our existing portfolio is well leased and unmet demand nights comprised of over 30 million square feet of commercial to 2011. 20/25 Waterway Retail 50,022 100% N/A 1.5 exists for new commercial offerings. space in The Woodlands. The 205-room Embassy Suites is located 2 Millennium Six Pines at the Hughes Landing mixed-use development, which currently 1701 Lake Robbins Retail 12,376 100% N/A 0.4 is held in a JV. HHC’s At the beginning of 2014, our portfolio of operating assets at The has 942,000 square feet of leased or pre-leased office and retail Millennium Waterway Apartments Multi-family 393 90% N/A 4.4 ownership is 81.43%. Woodlands totaled approximately 925,000 square feet of office space. When fully stabilized and leased, these developments are Two Hughes Landing Office 197,714 86% 2015 5.2 3 Opens in the second and retail space and 393 multifamily units. The portfolio is over forecasted to generate stabilized annual net operating income of 3831 Technology Forest Office 95,078 100% 2015 2.2 quarter of 2015. 95% leased and generates approximately $28 million of net approximately $48 million. Creekside Park Village Center Retail 74,352 66% 2015 2.2 4 ExxonMobil has operating income. In 2014, we delivered an additional 367,000 Millennium Six Pines2 Multi-family 314 47% 2015 4.0 executed leases to square feet of retail and office space, a 393-unit multifamily When fully stabilized, the current portfolio and assets under occupy the entire West The Woodlands Resort and Conference Center Hospitality 406 N/A N/A 16.4 development and completed a redevelopment of the expanded construction will generate a combined $108 million in net Building for 12 years, 406-key Woodlands Resort and Conference Center. These operating income: Other Assets3 Various N/A 2.1 and 160,000 square new operating assets are expected to generate an additional Subtotal - Existing Operating Assets $ 60.1 feet in the East Building Operating Assets Completed in 2015 for eight years with an option to lease the Hughes Landing Hotel - Embassy Suites Hospitality 206 N/A 2017 $ 4.1 remaining space before Waterway Hotel - Westin Hospitality 302 N/A 2017 9.6 the building opens. 3 Hughes Landing Office 324,000 0% 2017 9.1 One Lake’s Edge4 Multi-family 390 9% 2016 6.9 ExxonMobil5 Office 647,000 74% 2017 14.5 Hughes Landing Retail - Whole Foods Retail 123,000 77% 2016 3.5 Subtotal - Operating Assets Completed in 2015 $ 47.7 Total - Operating Assets $ 107.8

As the owner and developer of one of the country’s leading master planned communities, we use a prudent approach when planning new residential villages or developing a new commercial district. With an uncertain Houston economic climate due to volatility in energy prices, we will continue to be nimble and stay the course. We will only sell land when homebuilder pricing meets our return expectations and will only develop new commercial product when demand is not matched with existing supply.

10 11 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

Grand Parkway Section E, which bisects the west and as other master planned communities Top Left: future downtown of Bridgeland and reduces the sell out, Bridgeland will benefit from the ability to Cove Bridge - Bridgeland. commute time between Bridgeland, Houston and deliver lots while maintaining control of lot supply Bottom Left: other communities, including The Woodlands. As in order to maintain value. A waterfront streetscape. the Houston region continues to grow north and BRIDGELAND – HISTORICAL RESIDENTIAL LAND SALES

$100 ($ in thousands) 500 $96

$80 400 $76

$60 300 $58 $56 $52 $54 $53 $47 $48 $40 200

$20 100

2006 2007 2008 2009 2010 2011 2012 2013 2014

Average Lot Price Number of Lots

Similar to our approach at The Woodlands, as the Bridgeland community grows and the demand arises for amenities such as neighborhood retail and office space, we will identify opportunities to develop new commercial assets. Now that we have established a critical mass of over 2,100 rooftops in Bridgeland, we have begun development of the first neighborhood retail and office center, Lakeland Village. Complete with a tree-lined main street and a CVS Pharmacy, Lakeland Village will include approximately 83,000 square feet of retail, restaurant and professional office space. We are confident that as the first commercial offering in Bridgeland, Lakeland Village will serve as a catalyst for additional lot sales and future commercial growth.

CONROE LAND ACQUISITIONS

In 2014 and early 2015, the company completed Under the current master plan, approximately the assemblage of 2,100 acres of undeveloped 1,488 acres will be allocated toward residential land, at a cost of $101 million, along Interstate 45 in use producing over 4,900 lots, while 161 acres will BRIDGELANDIn my 2013 Shareholder Letter, Montgomery County approximately 13 miles north of be used for commercial purposes. The remaining I noted that after considerable The Woodlands. Ideally located between the towns acreage will be allocated toward civic uses such as delay, we had received a of Conroe and Willis, the rolling terrain and dense schools, police and fire stations, parks and utilities. development permit from the tree cover provides a “Woodlands” feel and is in the Based on the current development pace, we expect U.S. Army Corp of Engineers direct path of future commercial and residential to deliver the first lots in 2016 and begin selling in early 2014. I am pleased development north of The Woodlands. With this in the first quarter of 2017. With our attractive to announce that 401 lots acquisition, the company is well-positioned to benefit acquisition basis, we have the luxury of developing were developed and sold to as land in and around The Woodlands becomes scarce. and selling lots at many different price points homebuilders during the While not yet formally named, the future master based on homebuilder demand for certain product second half of 2014. The 401 planned community will keep our long-tenured, types. Similar to our other Operating Properties lots sold generated over $38 Woodlands-based residential and commercial and Master Planned Communities, this asset must million in residential land development teams busy for several years. stand on its own as a separate business. Therefore, sales revenue, more than we do not anticipate adding financial leverage tripling 2013’s land sales One of our principal reasons for acquiring this until the operations become cash-flow positive revenue of $11 million. More asset was to continue to spur commercial activity after debt service. This unique ability to fund importantly, the price per lot at The Woodlands. The uniqueness of our MPC development with existing cash on the balance increased almost 25% from business is that residents can “live, work and sheet places us at a distinct competitive advantage $77,000 in 2013 to $96,000 in play” in their own community. By delivering 5,000 and allows us to maintain value and only sell land 2014. The increase in lot price additional lots, we continue to provide future when prices meet our return expectations. can be partially attributed employers in this market with an employee base to the completion of the of ready and willing talent to serve their needs.

12 13 2014 Highlights CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014 EXTRAORDINARY MOMENTS - DOWNTOWN SUMMERLIN GRAND OPENING

Downtown Summerlin Grand Opening, October 9, 2014 14 15 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

Summerlin followed 2013 with another strong year of land sales leased. We expect that total incremental project costs for this During 2014, we announced a joint venture with Discovery Land and the opening of a long-awaited downtown for this community development will be approximately $418 million and estimate that Company, the leading developer of private clubs and luxury of over 100,000 residents. Summerlin generated $145 million of it will generate an 8.9% initial yield on its annual net operating communities, to develop an exclusive luxury community on land sales in 2014 compared with $112 million in 2013. In addition income when fully leased and stabilized in 2017. approximately 555 acres of land within the Summerlin MPC. to the revenue from land sales, Summerlin received in excess The community will have approximately 270 homes, an 18- of $13 million in price participation revenue from the sale of The successful opening of this development will be a catalyst for hole Tom Fazio-designed golf course and other amenities for homes by its homebuilders because of the better-than-expected future commercial real estate development on the 200 acres of residents. Individual custom lot prices are anticipated to start appreciation in home prices. The average price per superpad acre land that we own adjacent to the project. The first commercial at $1.5 million. This development will not compete with our sold increased by 48% to $478,000 in 2014. Summerlin sold 77 development will be a 124-unit luxury apartment complex to production homebuilder activity. We will contribute our land to finished lots, six superpads (totaling 242 acres) and 20 custom be called The Constellation located just east of Downtown the joint venture at the agreed upon value of $226,000 per acre of lots. On December 31, 2014, Summerlin had 14 active subdivisions Summerlin. Earlier this year, we launched the development raw land, or $125 million. Upon realization of lot and home sales, containing 915 lots, up from 10 at the end of 2013. of this project in a joint venture with The Calida Group. The we expect proceeds from the Discovery project to be substantially Constellation will be the first multi-family property developed higher than the agreed upon land value of our land contribution. The average price per superpad acre achieved in 2014 is the in Downtown Summerlin. In addition to The Constellation, our Our development models did not anticipate that this land would highest price achieved since the housing downturn. During 2014, approved development plan entitles us to develop approximately be developed until the end of this decade at the earliest. The the velocity of land sales slowed to 280 acres from 316 acres in 2.8 million square feet of commercial space, and 4,000 residential development of this project will require no cash from us and will 2013, primarily because of increased land prices. As our land is units on this acreage, and envision that the ultimate build out of accelerate infrastructure improvements such as roads, water and a scarce asset, we are focused on maximizing its value from the Downtown Summerlin site will be similar to the development sewer that will benefit adjacent land parcels we own. Discovery increasing price when appropriate. We expect land prices in of The Woodlands Town Center. Over time, just like The Land is the manager on the project, and development is expected Summerlin to stabilize after several years of double-digit growth Woodlands, Summerlin will leverage its leading position in the to begin in the second quarter 2015 with the first lot and home from the bottom of the market, and are pleased that the current Las Vegas Valley to build commercial real estate density serving sales closings expected to begin in early 2016. level appears to be sustainable. the needs of the MPC’s residents.

In October, we opened Downtown Summerlin, a mixed use Top Left: Downtown Summerlin development designed for 1.6 million square feet of retail and Pavilion during restaurant space and containing a 235,000 square foot Class A Grand Opening. office building in the center of the project. It is worth mentioning that Downtown Summerlin is the largest retail development Bottom Left: One Summerlin. to open in the US since the economic downturn. Downtown Summerlin is but one of many examples where The Howard Bottom Right: Downtown Summerlin Grand Opening.

SUMMERLINHughes Corporation has played a role in the local economic recovery. We are especially pleased about the impact Downtown Summerlin has had in creating jobs for the residents of Las Vegas - some 2,000 jobs during construction and now 2,500 jobs and counting.

Our vision for Downtown Summerlin is to serve as a link between a storied Las Vegas legacy and the 21st century downtown experience that will engage both local residents and visitors from around the region, continually drawing them to return again and again. The grand opening of Downtown Summerlin marked such a meaningful moment for Las Vegas that the Governor of Nevada, Brian Sandoval, joined us and opened the festivities, stating that our downtown is a “destination like no other in the country” and that “all roads in Nevada lead to Downtown Summerlin.” From its opening through year-end 2014, we estimate the project has had over 3.3 million visitors. The vast majority of the retailers have reported they are exceeding their internal sales projections. The retail portion of the project is currently 73% leased, and the office building, which has not yet officially opened, is 28% pre-

16 17 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

Top Left: COLUMBIA– OPERATING ASSETS AND STRATEGIC DEVELOPMENTS The Crescent. Bottom Left: Square Feet / Year Projected Aerial of The Crescent. Asset Type # of Units Stabilized1 Stabilized NOI Bottom Right: Strategic Development ($MM) Whole Foods Market in a Columbia Regional Building Retail/Office 89,000 2015 $ 2.1 building originally designed by Frank Gehry. 70 Columbia Corporate Center Office 170,000 N/A 2.4

Columbia Operating Properties Various 220,000 N/A 0.5 Footnotes: The Metropolitan2 Multi-family 380 2016 3.4 1 Applicable to assets developed and placed in 10-60 Columbia Corporate Center Office 700,000 N/A 8.8 service subsequent to Total - Columbia Completed Development and Acquisitions $ 17.2 2011. 2 HHC owns a 50% In November, we completed construction and of Columbia known as the Crescent, by receiving equity interest in the began leasing The Metropolitan, a 380-unit site plan approval for the next 437-unit multifamily Metropolitan. NOI represents HHC’s pro multifamily development, with our joint venture development which will be built adjacent to rata share. partner. Also, in December, we acquired six The Metropolitan, and having renegotiated our office buildings located adjacent to 70 Corporate Merriweather Post Pavilion CEPPA (Community Center in Downtown Columbia. 10-60 Columbia Enhancement, Programs and Public Amenities) Corporate Center includes 700,000 square obligations with Howard County. In 2015, we will feet and generates approximately $9 million of continue advancing the infrastructure planning net operating income today. The Class A office and pre-development activities in the Crescent buildings are 93% leased. More importantly, there area and Downtown Columbia. In line with our exists an opportunity to redevelop some of the “making it happen here” tagline, this includes existing buildings into higher and better uses over pursuing a public/private partnership with the next three to seven years. Howard County, designing the first residential and retail project and beginning construction of our We acquired the 10-60 Columbia Corporate Center first office building in the Crescent. James Rouse, the founder of Columbia, is widely recognized buildings as part of a settlement with General COLUMBIAas the father of the MPC business. Predicting his approach Growth Properties to resolve The Tax Matters We believe our development activities will be a for developing Columbia back in 1963, Rouse gave a speech Agreement (an agreement that originally primarily catalyst for continued growth in Columbia. As the entitled “It Can Happen Here” at the University of California indemnified us for approximately $303 million in region begins to see our vision become reality, we Berkley. In his speech, Rouse said “I would visualize a series of MPC taxes for land sold prior to March 2010) in expect more corporations to consider the Crescent small communities separated by topography, highways, public exchange for $138 million in cash and $130 million and Downtown Columbia their home. Relocations institutions, or greenbelts and united by a center that provided in value for the office buildings. In so doing, we will result in an increase in daytime employment, cultural, educational, recreational facilities for many small towns have exchanged a non-income producing asset for creating new demand for commercial offerings and around it.” Since the company’s inception, our goal has been to an income producing asset, 700,000 square feet of amenities. As the master developer for Downtown transform Columbia into a vibrant, 21st century community. In office space in the heart of our community. Columbia, we are in a unique position to capitalize 2014, we continued to make progress toward that goal and are on this demand and continue to transform enthusiastic about the future. In 2014, we made significant progress in our effort Columbia into a community for the 21st century. to develop nearly five million square feet in the area In Columbia, we have the opportunity to develop up to 13 million square feet of commercial properties. This opportunity is fully entitled and subject to site development and other administrative approvals. We have the ability to determine use and, in some cases, can create density of up to 20 stories. Much of this opportunity lies in the redevelopment of older structures and surface lots along with construction on previously undeveloped land sites. Similar to our other Master Planned Communities, we will take a pragmatic approach to developing only when market demand exists for a certain product type.

To date, we have acquired or developed more than one million square feet of commercial properties in the area. In 2014, we completed the development of two new properties and acquired six office buildings. Combined with our existing operating assets, the current Columbia portfolio is projected to generate $17.2 million in net operating income upon stabilization:

18 19 2014 Highlights CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014 EXTRAORDINARY MOMENTS - ANAHA & WAIEA GROUNDBREAKING CEREMONIES

Traditional Hawaiian groundbreaking ceremony for Waiea, June 7, 2014. 20 21 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

will be offered at restricted income levels, with an architectural Apple stores, including the cube on 5th Avenue in Manhattan. We design and quality complementary to the market-rate towers. received approval for this project in February 2015.

Developing a community in Hawai‘i means that we have a Our focus on bringing the top architectural talent from around responsibility to support the community beyond just bricks and the globe to Hawai‘i is something that we believe will further mortar. The Ward Village Foundation is an initiative we launched separate Ward Village from its competition, creating a community in January 2014, supporting forward thinking non-profits and that is unique not just in Hawai‘i, but benchmarked against other programs with a focus on culture, community and environment great urban master plans across the globe like Hudson Yards in that will contribute to making Honolulu a great 21st century city. To Manhattan and Battersea Power Station in London. date, we have supported dozens of local charities who are making an important impact on the greater community surrounding We also made a significant addition to the area with the execution Ward Village. of a ground lease with the State of Hawai‘i in August to operate Kewalo Basin Harbor, a 143-slip harbor directly adjacent to 2014 was also a seminal year in progressing the next phase of Ward Village. Our lease includes a 35-year term with a 10-year projects at Ward Village. In November, we obtained approval of extension option. We plan to begin work towards the end of 2015 the Ward Village Gateway, two towers designed by Richard Meier on improvements to the slips, including the addition of new slips & Partners that will frame the initial portion of our four-acre and improvement of infrastructure for all harbor users. We look community park space, connecting the core of the community forward to transforming this harbor into a gathering place for from the harbor to a planned rail stop in the heart of our site. We Honolulu, a place where the community can re-connect with the also made progress on plans to bring a major grocery store to the ocean. In 2015, we look forward to making progress on construction neighborhood. In May, we executed a lease with Whole Foods of our current projects, beginning construction on our workforce Market for a 50,000 square foot store that will become its Honolulu housing and harbor improvements, and launching sales on our flagship. In addition to Whole Foods, our plans for this block next phase of residences. As momentum builds for Ward Village, include additional retail and over 400 residential units, designed our team in Honolulu continues their passionate drive to create by internationally renowned architects Bohlin Cywinski Jackson one of the great communities of the 21st Century. who are probably best known for their work creating flagship

Left: 2014 was a momentous year in the evolution of Ward Village, our Waiea under construction. urban master planned community in the heart of Honolulu. We Bottom: reached important milestones as we transitioned from project Gateway Towers designed by planning into active pre-sales and commenced construction on our Richard Meier & Partners. first two residential projects, Waiea and Anaha. We began public pre-sales in February and the response from the market has been outstanding. We have contracted and received binding deposits for over 80% of the 482 units available for sale in these two projects.

We are also encouraged by the broad base of buyers in these projects, anchored by over 50% local buyers who intend to make Ward Village their primary residence. The remaining buyers are comprised of approximately 25% from Japan and approximately 10% from the U.S. mainland, with the remainder of buyers coming from Canada, China, Taiwan, Korea and Australia.

The sales to date demonstrate the pent-up demand for quality residential product in the urban core of Honolulu, and the broader undersupply of housing on the island of Oahu. Despite the increase in recent development activity in Oahu, current housing production remains near historic lows. According to the University of Hawai‘i Economic Research Organization, Oahu needs to produce approximately 4,000 units annually simply to meet existing demand. Honolulu single family housing permits in 2014 totaled only 809, resulting in an ongoing shortfall that is difficult to close due to the lack of available land for development.

In response to this shortfall of housing, state and city government continue to intensify their focus on delivery of affordable housing in Hawai‘i, and we are looking forward to making an important contribution to that effort with our 988 Halekauwila project. In 2014, we made significant progress in advancing the design of our workforce housing project that will deliver 424 units, 375 of which

22 23 2014 Highlights CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014 EXTRAORDINARY MOMENTS - JULY 4th SEAPORT DISTRICT NYC

July 4th Pier Party, Seaport District 24 25 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

fashion and culinary talent to the Seaport by partnering with Women’s Wear Daily Top Left: SEAPORT in announcing the Ten of Tomorrow which recognizes up-and-coming leaders in The new esplanade at the Seaport District. fashion and retail innovation. As the city’s original commercial hub and birthplace of Bottom Left: innovation, it is especially fitting for the Seaport to be home to fashion’s rising stars. Historic Seaport District, 1908. Top Right: Our first project in this transformation is the redevelopment of Pier 17 and the renovation Marina at Pier 17. of the historic area west of the FDR Drive. In 2014, we completely demolished the old Bottom Right: pier building and concrete pier structure in order to begin construction of a new pier The new Fulton Market Building. in 2015. After completion of the new pier, we will construct a glass-enclosed structure which takes advantage of the unparalleled sight lines along the East River north to the

The South Street Seaport continues to be the gathering place for DISTRICTresidents and workers of Lower Manhattan and an important destination for visitors to the city. During 2014, we made progress in transforming this area into what ultimately will be known as the Seaport District, a premier destination for locals and tourists for entertainment, food, culture, shopping and living.

Similar to Ward Village, our role as stewards of the Seaport District goes far beyond bricks and mortar as our commitment to the vitality of the area played a central role in the Seaport’s revitalization following Superstorm Sandy. Throughout 2014, we enhanced our innovative See/Change program that in 2014 included dynamic programming such as music, outdoor movies, an ice rink and a televised tree-lighting event that attracted both locals and tourists and strengthened the Seaport’s position as a much-needed local gathering place for the community. In 2014, we also continued our leadership in drawing emerging

26 27 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

Brooklyn Bridge, east to the Brooklyn waterfront, south to the tip During 2014, we evaluated several programming and sponsorship Our second project in the Seaport District is a proposed 700,000 On December 29, 2014, in two separate transactions, we acquired of Manhattan and the Statue of Liberty, and west to the downtown opportunities for the roof and expect to make significant progress square foot redevelopment plan to revitalize the district that a 48,000 square foot commercial building on a 16,000 square foot Manhattan skyline. On the rooftop will be an unmatched 1.5-acre in finalizing the business plan for this unique venue in 2015. The includes over $300 million of infrastructure improvements and lot and certain air rights with total residential and commercial entertainment venue that will hold corporate, private, concert, rooftop will be an important determining factor in curating the community benefits, including the replacement of deteriorating development rights of 622,000 square feet for $136.7 million. sporting and a variety of other events year round. Furthermore, tenant mix of this destination entertainment venue. Renovation piers adjacent to Pier 17, the restoration of the historic Tin We are under contract to purchase another 58,000 square foot as part of this development, all New Yorkers will be able to enjoy of the historic area buildings also continued throughout 2014, Building, a middle school and an extension of the East River commercial building and three additional air rights parcels year round open spaces with breathtaking views. The 182,000 including build-out of the iPic movie theater in the second story Esplanade to the Brooklyn Bridge. This transformative during the first half of 2015 which will ultimately create a 43,000 square feet of leasable space inside the structure will have retail, of the Fulton Market Building. We believe that iPic provides the investment in New York’s oldest new neighborhood is made square foot lot capable of supporting an additional 818,000 square restaurant and entertainment tenants. ultimate cinematic experience available to moviegoers. Each possible by our proposed 494-foot mixed use building on the feet of mixed use development. These properties are collectively theater features screening rooms outfitted with the latest digital New Market Site. Despite broad community support for the referred to as the Seaport District Assemblage and are located in technology, premium sound systems, and 3D offerings in an project we have faced some local opposition, particularly close proximity to our South Street Seaport property. intimate, luxurious seating environment so you can experience regarding the location of the mixed use building. We look the movie the way the producers and directors intended. iPic forward to continuing to work with the community in order to will open in May 2016. obtain a workable solution that enables us to bring substantial benefits to the community while maintaining an economically feasible project.

Pier 17 rooftop 28 29 2014 Highlights CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014 EXTRAORDINARY MOMENTS - RIVERWALK GRAND OPENING

Grand Opening ceremony, May 22, 2014, New Orleans, LA 30 31 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

Left: Opening day at The Outlet Collection at Riverwalk. Right: Interior of the Food Court.

The Outlet Collection at Riverwalk, our 250,000 square-foot to capture convention and cruise passenger customers that RIVERWALKretail project in New Orleans, Louisiana opened in May after are estimated to total four million out of the estimated nine closing in June 2013 for redevelopment, and is 100% leased. We million visitors to New Orleans each year, as well as locals who are pleased to have successfully opened the first upscale urban previously had no similar shopping options. The project had over outlet center in the U.S. in this underserved and dynamic market. one million visitors in the first ten weeks after opening and had I discussed the unique and complex nature of this asset in my last over 2.5 million visitors through the end of 2014. Tenant sales are two letters, the collaborative, creative and development efforts of on pace to exceed $100 million annually, based on actual results our team, and the strong tenant base we recruited for the project, to date. Built on budget at an incremental cost of $82 million, we including retailers such as Neiman Marcus Last Call Studio, expect this project will generate a 9.5% initial annual yield on its Forever XXI and Coach. Adjacent to the Hilton Convention net operating income when fully stabilized in early 2017. Center and the cruise ship terminal, our project is well located

32 33 CEO SHAREHOLDER LETTER ANNUAL REVIEW 2014

THE EVOLUTION OF HHC The Howard Hughes Corporation in 2014 moved its major developments closer to realizing their full potential. During While we made substantial progress increasing the value of largest development pipelines in the industry, exceeding 45 million the year, we were further inspired by the overwhelming our assets in 2014, we don’t judge our progress by the volume of square feet – more than 25 million square feet in our strategic success of the opening of our first two major developments, transactions we execute, but by the quality, scale and success of developments and over 20 million square feet embedded in vertical Downtown Summerlin and the Outlet Collection at those ventures. We approach our new acquisitions with the same opportunities in our master planned community business. Riverwalk, yet we are keenly aware that headwinds can high return on investment standards as our existing holdings, arise from even the most unlikely of places. Despite these focusing our resources on assets that are adjacent to these holdings, Communicating the value of our company is complicated given new challenges, we are confident that the leading market where our market knowledge and infrastructure give us a significant that future development value potential varies based on input positions of our assets will enable us to withstand market competitive advantage. assumptions such as rental rates, absorption, construction costs stresses. We value and are grateful for the support, feedback and others. We use the cash flow generated from our MPC segment and confidence that you have given us over the past year In 2014, we acquired the land in Conroe, 10-60 Columbia Corporate to reinvest at much higher rates of return into our Strategic and look forward to making EXTRAORDINARY in 2015. Center and completed the 80 South Street assemblage. All three Development segment in order to develop properties that will acquisitions meet our criteria for scale, quality and returns and ultimately convert to Operating Assets. This business will continue Warm Regards, have the added benefit that they will not add undue burden to to grow materially over the coming years as assets are placed into our corporate overhead. While we are always seeking potential service and reach stabilization. The growth in net operating income opportunities to deploy capital intelligently, our existing portfolio over the past four years is evidence of our track record: will keep us busy for many years. We currently have one of the THE HOWARD HUGHES CORPORATION – NET OPERATING INCOME GROWTH Top Left: Ward Village Sales and Information Center at the IBM (exclusive of South Street Seaport) 2011 2012 2013 2014 Future Building. David R. Weinreb Chief Executive Officer ($MM) Top Right: Gateway Park. In-place NOI1 49.8 57.8 54.0 46.7 50.8 Footnotes: Incremental NOI from Completed Developments 0.4 0.2 1.2 18.5 88.5 1 Net operating income from Incremental NOI from Acquisitions - 2.7 5.2 6.7 16.7 2011-2014 are reported amounts. Future net operating income Incremental NOI from Strategic Development - - - - 49.4 represents projected stabilized net operating income. Total NOI $ 50.2 $ 60.8 $ 60.5 $ 72.0 $ 205.4

34 35 PROJECT HIGHLIGHTS

PROJECT HIGHLIGHTS ANNUAL REVIEW 2014

Project Highlights

36 37 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014

FROM WALL STREET TO WAIKIKI SEAPORT DISTRICT Our Portfolio is Making a Mark on the Nation

110 N WACKER

110 N WACKER WEST WINDSOR COTTONWOOD SEAPORT DISTRICT WEST WINDSOR COTTONWOOD SEAPORT DISTRICT COLUMBIA

LANDMARK COLUMBIA LANDMARK ELK GROVE SUMMERLIN COLUMBIA ELK GROVE SUMMERLIN DOWNTOWN SUMMERLIN

MINT HILL

MINT HILL

PARK WEST ALLEN TOWNE PARK WEST CENTURY PLAZA ALLEN TOWNE CENTURY PLAZA CIRCLE T RANCH

CIRCLE T RANCH At The Howard Hughes Corporation, we are THE WOODLANDS THE WOODLANDS driven by a passion for excellence. Our mission BRIDGELAND RIVERWALK THE WOODLANDS is to be the preeminent developer and operator BRIDGELAND RIVERWALK of master planned communities and mixed-use BRIDGELAND properties. We create timeless places and WARD VILLAGE SALES AND memorable experiences that inspire people INFORMATION CENTER while driving sustainable, long-term growth

KENDALL TOWN CENTER and value for our shareholders.

KENDALL TOWN CENTER

WARD VILLAGE

WARD VILLAGE

38 39 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014 STRENGTH IN TOTAL RETAIL GROSS NUMBERS 8,741,323 SQ FT LEASABLE AREA EXISTING RETAIL GROSS LEASABLE AREA 1 OUR KEY FOCUS WARD VILLAGE $1.1 BN 1,273,845 sq ft Investment In Project IS ON FULLY DOWNTOWN SUMMERLIN Pre-Development and Development 1,169,157 sq ft LANDMARK UNLOCKING 879,262 sq ft PARK WEST 249,173 sq ft 4.15 MM VALUE IN OUR OUTLET COLLECTION AT RIVERWALK $560 MM 246,221 sq ft Existing Retail GLA Unrestricted Cash on Hand CORE ASSETS SOUTH STREET SEAPORT 79,275 sq ft (Square Feet) OTHER 249,546 sq ft

REVENUES INCOME GROSS LEASABLE AREA UNDER CONSTRUCTION FUTURE GROSS LEASABLE AREA 2

ELK GROVE $635MM 35% $190MM 51% 1,300,000 sq ft 2014 Total Consolidated Increase in Consolidated 2014 Operating Income Increase in Operating BRIDGES AT MINT HILL SOUTH STREET SEAPORT 1,300,000 sq ft Revenues Revenue from 2013 & Income from Non- Income & Income from 282,725 sq ft KENDALL TOWN CENTER consolidated Affiliates Non-consolidated THE WOODLANDS 621,300 sq ft Affiliates from 2013 557K 274,352 sq ft 4.04MM COTTONWOOD Retail GLA Under Future Retail GLA 575,000 sq ft DOWNTOWN SUMMERLIN3 Construction (Sq Ft) 158,067 sq ft $346MM 33% (Sq Ft) LAKELAND VILLAGE 83,400 sq ft 2014 MPC Revenues Increase in MPC Revenue from 2013

1 Includes 825,937 square feet of space owned by anchor tenants. 2 Represents entitlements and/or planned developable retail square feet. There can be no assurance that the space will ultimately be developed. 3 Represents estimated future development on existing pad sites. 40 41 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014

TOTAL OFFICE GROSS 4,005 TOTAL CONDOMINIUM UNITS 1

LEASABLE AREA WAIEA CONDOMINIUMS WARD BLOCK M 3,936,646 SQ FT 171 466 ANAHA CONDOMINIUMS WARD VILLAGE 311 GATEWAY TOWERS EXISTING OFFICE GROSS LEASABLE AREA 236 2 WARD WORKFORCE 482 3,518 HOUSING 424 Under Construction Future Units WARD REMAINING UNITS ENTITLED 2,392

COLUMBIA 1,091,045 sq ft 3 THE WOODLANDS 1,158,422 sq ft 110 N WACKER 2.48MM EXISTING UNITS UNDER CONSTRUCTION FUTURE UNITS 4 226,000 sq ft Existing Office GLA 728 770 561 (Square Feet) 913 BRIDGELAND 4,898 TOTAL HOSPITALITY UNITS CONROE GROSS LEASABLE AREA UNDER CONSTRUCTION FUTURE GROSS LEASABLE AREA 1 13,441 THE WOODLANDS RESORT 1,613 MARYLAND REMAINING & CONFERENCE CENTER 207 406 SUMMERLIN SALEABLE 5 5,472 THE WOODLANDS KENDALL TOWN CENTER HUGHES LANDING HOTEL 971,000 sq ft 60,000 sq ft THE WOODLANDS AND DEVELOPABLE DOWNTOWN COTTONWOOD 205 1,251 1.21MM SUMMERLIN 255K 195,000 sq ft 5 ACRES FOR MPCs 235,179 sq ft WATERWAY SQUARE HOTEL Office GLA Under Future Office GLA 302 Construction 1 Total includes five finished units at One Ala Moana, a tower developed in a joint venture and completed in the fourth quarter 2014. 201 of the units were sold in 2014. 2 Represents entitlements and/or planned developable condominium units. There can be no assurance that the units will ultimately be developed. 3 1,255 units are currently owned, being developed or are planned to be developed in joint ventures. 1 Represents entitlements and/or planned developable office square feet. There can be no assurance that the space will ultimately be developed. 4 Represents units that we plan to develop in joint ventures beginning in 2015. 5 Under construction. 42 43 Project Highlights PROJECT HIGHLIGHTS ANNUAL REVIEW 2014 SEAPORT DISTRICT NEW YORK’S OLDEST NEW NEIGHBORHOOD

CELEBRATING A CITY’S UNIQUE MARITIME HISTORY AND POSITIONING A NEIGHBORHOOD FOR THE FUTURE.

44 45 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014

As the city’s original commercial hub and birthplace of Top Left: innovation, The South Street Seaport has been an essential part Fashion show at the of New York for over 300 years and the re-envisioned Seaport Seaport District. District will serve as a much needed anchor for the rapidly Bottom Left: growing population of Lower Manhattan. The ice rink at the Seaport District. The first project in the redevelopment includes transforming Top Right: over 362,000 square feet on Pier 17 and the Uplands historic The Tin Building. district in Lower Manhattan into an unmatched shopping, dining Bottom Right: and entertainment destination for residents, workers and visitors Pier 17 Rooftop. alike that captures the Seaport’s distinct maritime character.

Our objective is to create an authentic New York experience that draws the neighborhood’s fast growing population and workforce, as well as tourists who already consider the Seaport a vital attraction.

The Pier 17 building, which had its official groundbreaking in October 2013, will feature a striking glass façade and provide spectacular views of the Brooklyn Bridge, the Statue of Liberty and the Empire State Building. Inside, the cutting-edge design will offer 180,000 square feet of national retail tenants, local boutiques and a wide range of top dining options, all while embracing the energy of New York street shopping. The redeveloped Pier 17 will be highlighted by a 1.5-acre roof that will include a restaurant, two outdoor bars and a rooftop that will hold up to 4,000 people for concerts and special events— becoming the premier boutique entertainment venue in the world. iPic Theaters will be an anchor attraction in the Historic District with its new eight-screen, 505-seat luxury movie theater in the Fulton Market Building. We expect the historic area to be substantially repositioned by the second quarter of 2016 followed by the opening of the new Pier 17 in 2017.

In November 2013, we presented to the public preliminary plans for a second project, that, together with our initial project will make up the new Seaport District, a vibrant, highly engaging area that will provide a critical catalyst for the revitalization of Lower Manhattan. The district will deliver a one-of-a-kind experience incorporating the best that New York has to offer in entertainment, culture, shopping and dining while actively meeting the needs of the neighborhood and showcasing the Seaport as a treasured part of New York City’s past and future. Designed by the renowned architectural firm SHoP, the proposed second project is expected to encompass nearly 700,000 square feet of space, will be fully integrated into the East River Esplanade and enhance the neighborhood connectivity to the water while preserving views. The project will include a LEED-certified building that may include hotel and residential uses, the replacement of deteriorated wooden platform piers adjacent to Pier 17, a complete restoration of the historic Tin Building into a world-class food market open to the public seven days a week and a marina with public access and a number of maritime activities.

As we move forward with our plans, The Seaport will not only be a place of historical significance but a unique destination that serves as a link between a storied legacy and the future New York experience.

46 47 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014 Project Highlights DOWNTOWN COLUMBIA MADE DIFFERENT

LOCATED IN THE RAPIDLY GROWING REGION BETWEEN BALTIMORE AND WASHINGTON, D.C., THE MASTER PLANNED COMMUNITY OF COLUMBIA, MARYLAND OFFERS A BLEND OF NATURAL BEAUTY COMBINED WITH METROPOLITAN SOPHISTICATION.

48 49 ANNUAL REVIEW 2014

Initially opened in the late 1960s by James W. Rouse, considered one of the fathers of the master planned community business, Columbia was created to offer a metropolitan setting that would provide a high quality of life for residents. With parks, lakes, trails and the acclaimed Merriweather Post Pavilion at Symphony Woods, Columbia lives up to its recognition by Money Magazine in 2014 as one of top 10 ‘Best Places to Live” in the country.

The convenient location continues to draw highly-educated people to Columbia, with easy access to leading public and private employers and some of the best public schools in the United States. Premier homebuilders and a compelling environment have also led to a growing population. Columbia is located in Howard County, one of the nation’s most affluent counties, with a median household income of over $100,000 and population growth above 34% over the past decade. Downtown Columbia is in the midst of a transformation as we execute on our redevelopment master plan that was adopted in 2010 and allows for up to 13 million square feet of mixed use development, including 5,500 residential units, 1.3 million square feet of retail, 4.3 million square feet of office space and 640 hotel rooms.

Several key initiatives moved ahead in 2014 as Downtown Columbia continued to evolve. We converted the iconic former Rouse Headquarters Building into a Whole Foods Market that opened in August 2014 and a state of the art fitness center that opened in December 2014. The building, designed by internationally renowned architect Frank Gehry, sits on the shore of Lake Kittamaqundi and is a cornerstone of the downtown. Our first luxury multi-family project in Downtown Columbia, The Metropolitan, will feature 380 luxury units with a range of high end amenities. We began leasing available units in late 2014 and completed our first move in during Thanksgiving. We have obtained approvals and plan to begin construction in 2015 on our second multi-family project that is located adjacent to The Metropolitan.

In December 2014 we acquired 700,000 square feet of Class A and B office space in Downtown Columbia. As part of this acquisition, we now control over 50% of the office market inventory. As Columbia continues to develop, our goal is to attract employers to the area and develop additional office buildings as demand arises.

In 2015, we will begin construction on a 200,000 square-foot signature office tower, 437 residential units and more than 120,000 square feet of associated retail and continue our plans to develop 5 million square feet in the coming years for a conference center hotel, new library, higher education facilities and multiple corporate centers in the Crescent neighborhood surrounding the Merriweather Post Pavilion.

Merriweather Post Pavilion 51 Project Highlights PROJECT HIGHLIGHTS ANNUAL REVIEW 2014 THE WOODLANDS EVER GROWING

HUGHES LANDING CONTINUES TO RAPIDLY PROGRESS. THIS DEVELOPMENT INCLUDES FIVE CLASS-A OFFICE BUILDINGS, OF WHICH THREE ARE UNDER CONSTRUCTION, TOTALING MORE THAN 1.3 MILLION SQUARE FEET, 390 UNITS OF MULTIFAMILY, A WHOLE FOODS ANCHORED RETAIL CENTER, AND A 205-ROOM EMBASSY SUITES HOTEL.

52 53 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014

The Woodlands commercial office vacancy rate at less than 5% is Additional projects in The Woodlands include the 302-room Left: one of the lowest in the country. We have identified an additional Westin Hotel at Waterway Square scheduled for completion in Whole Foods Market at seven million square feet of future commercial development 2015 and the $77 million renovation of The Woodlands Resort & The Woodlands. opportunities in the premier 28,000-acre community that Conference Center that was completed in 2014. The renovation Right: houses a population of over 100,000 residents. includes upgraded meeting spaces, lobbies, guest arrival Westin Hotel at buildings, and construction of 184 new luxury guest rooms, as Waterway Square. Today, numerous businesses are looking for office space in well as a new 1,005-foot Lazy River. The changes strengthened The Woodlands due to its location, rich amenities and highly- the hotel’s competitive position in the business meeting segment educated population. A key to future growth will be development of the hospitality industry, while also attracting additional efforts designed to bring these businesses to The Woodlands, weekend transient guests. Planning also began for a new 23-story which is already home to nearly 1,900 employers and over high-rise multifamily residential tower to be constructed at 58,000 employees. Businesses continue to seek office space in Waterway Square adjacent to the new Westin Hotel. With a high The Woodlands, drawn by its location, skilled workforce and level of interest, pre-sales are expected to begin in 2015. numerous amenities. As the demand for commercial space and new amenities continues to exceed supply, we are advancing As of December 31, 2014, The Woodlands had approximately development plans for several strategic assets located within 478 acres of unsold residential land, representing over 1,480 The Woodlands. Most notably, in July 2012, we announced plans lots and approximately 773 acres of unsold land designated for Hughes Landing, a 66-acre mixed-use development located for commercial use. The Woodlands also has full ownership on Lake Woodlands. The development is envisioned at full build- interests in commercial properties which total over one million out to contain up to 2.0 million square feet of office, 200,000 square feet of office space, 50,000 square feet of retail, a 406- square feet of retail, restaurant and entertainment space, up to room resort and spa with conference facilities and 393 rental 1,500 multifamily units and a 205-room hotel. apartment units.

Hughes Landing continues to rapidly progress. This development In 2014, 2,055 acres of land was acquired for a future master- includes five Class-A office buildings, of which three are under planned community 13 miles north of The Woodlands. construction, totaling more than 1.3 million square feet, 390 Preliminary plans include 161 acres for commercial development units of multifamily, a Whole Foods anchored retail center, and a and 1,452 acres for the development of 4,800 residential lots. 205-room Embassy Suites hotel. The first lots are expected to be delivered in 2016.

54 55 Project Highlights PROJECT HIGHLIGHTS ANNUAL REVIEW 2014 BRIDGELAND NEW ENERGY

AS DEMAND INCREASES FOR ITS HIGH QUALITY OF LIFE, BRIDGELAND IS POSITIONED TO BECOME NORTHWEST HOUSTON’S PREMIER MASTER PLANNED COMMUNITY. IT IS CURRENTLY HOME TO 7,400 RESIDENTS WHO LIVE IN HOMES RANGING IN PRICE FROM $200K TO $1 MILLION, AND GROWTH IS EXPECTED TO REMAIN STRONG. BRIDGELAND HAS BEEN ACKNOWLEDGED FOR ITS SUCCESS, RECEIVING THE GREATER HOUSTON BUILDERS ASSOCIATION “MASTER PLANNED COMMUNITY OF THE YEAR” AWARD IN 2013.

56 57 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014

Less than 30 miles from Downtown Houston, Bridgeland has Residents are already close to Houston’s important Energy 11,400 acres designed to consist of four residential villages, an Corridor and will soon have convenient access to downtown 800-acre town center and over 3,000 acres of lakes, parks, trails and other locations. The Grand Parkway, a major road and open spaces. Rich amenities such as pools, playing fields, bisecting Bridgeland, now has parts open to vehicular traffic tennis courts and bike trails, as well as award-winning schools, and will offer residents improved accessibility and an under contribute to an exceptional lifestyle that is projected to draw 30-minute commute to a new ExxonMobil campus as well as 65,000 residents over time. The Woodlands.

Aerial rendering of the Bridgeland MPC 58 59 Project Highlights PROJECT HIGHLIGHTS ANNUAL REVIEW 2014 SUMMERLIN FASHION MEETS THE ROCK

“THE HOWARD HUGHES CORPORATION HAS MADE A DESTINATION LIKE NO OTHER IN THE COUNTRY, WITH ITS GRAND OPENING…ALL ROADS IN NEVADA LEAD TO DOWNTOWN SUMMERLIN.”

– NEVADA GOVERNOR BRIAN SANDOVAL OCTOBER 9TH, 2014

60 61 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014

Spanning the western rim of the Las Vegas Valley and located Bottom Left: approximately nine miles from downtown Las Vegas, our 22,500- Nevada Governor, Brian acre Summerlin Master Planned Community is comprised of Sandoval, speaking at the Downtown Summerlin planned and developed villages and offers suburban living with Grand Opening. accessibility to the Las Vegas Strip. For much of the Company’s 25-year history, Summerlin has consistently ranked in the Center: Robert Charles Lesser annual poll of top-selling master planned Downtown Summerlin streetscape. communities in the nation, ranking 15th in 2014. With 22 public and private schools (K-12), four institutions of higher learning, nine golf courses, cultural facilities and health and medical centers, Summerlin is a fully integrated community and the premier place to live in the Las Vegas Valley. The first residents moved into their homes in 1991. As of December 31, 2014, there were approximately 41,500 homes occupied by an estimated 105,000 residents. Summerlin has over 5,000 developable acres remaining and upon completion of the community the population is expected to exceed 200,000 residents. Spurred by the recovery of the Las Vegas market, Summerlin has experienced significant improvement in 2014 and 2013 land sales compared to 2012 and 2011.

Summerlin is comprised of hundreds of neighborhoods located in 19 developed villages, out of 30 currently planned, with nearly 150 neighborhood and village parks that are all connected by a 150-mile long trail system. Summerlin is located adjacent to the Red Rock Canyon National Conservation Area, a landmark in southern Nevada, which has become a world-class hiking and rock climbing destination that attracts more than a million visitors annually. Summerlin is divided into three separate regions known as Summerlin North, Summerlin South and Summerlin West. Summerlin North is fully developed and sold out. In Summerlin South, we are entitled to develop 740 acres of commercial property with no square footage restrictions, 489 of such acres, including our 106-acre Downtown Summerlin project, are either developed or committed to commercial development. The remaining 251 acres currently are under our control for future commercial development. We also have

62 63 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014

entitlements for an additional 17,000 residential units yet to land, with the remaining acreage anchored by The Red Rock be developed in Summerlin South. In Summerlin West, we are Casino, Resort & Spa and LifeTime Fitness complex. On October entitled to develop 5.85 million square feet of commercial space 9, 2014, we opened the first 106-acres of Downtown Summerlin, on up to 508 acres of which 100,000 square feet has already been the premier fashion, dining, and entertainment destination in developed through the construction of a grocery store anchored the region that offers an unmatched environment designed as a shopping center. We are also entitled to develop 30,000 walkable urban core in the heart of the Summerlin community. residential units in Summerlin West, approximately 24,000 of The development contains 1.6 million square-feet of developed which remain to be developed. The remaining 41,000 saleable retail, restaurant, entertainment and office space. The opening residential lots represent Summerlin’s total entitlements, and of Downtown Summerlin will be catalytic for increased density utilization of these entitlements will be based on current and and commercial development at Summerlin, with future plans forecasted economic conditions. for thousands of residents in apartments and condominiums in addition to more office buildings to meet the demands of The heart of this MPC contains approximately 400 acres companies wanting to enjoy this world class community where designated for residential and commercial development called their employees can work, live, and play. Downtown Summerlin. We own approximately 300 acres of this

Downtown Summerlin at night 64 65 Project Highlights PROJECT HIGHLIGHTS ANNUAL REVIEW 2014 WARD VILLAGE MOVING FORWARD

AS THE 60-ACRE WARD CENTERS TRANSFORMS INTO WARD VILLAGE, A BOLD VISION IS BEING REALIZED THAT HONORS TRADITIONS OF THE PAST WHILE LOOKING TO THE FUTURE OF HONOLULU. LOCATED BETWEEN DOWNTOWN HONOLULU AND WAIKIKI, WARD VILLAGE REPRESENTS THE FIRST URBAN MASTER PLANNED COMMUNITY ON THE ISLAND AND WILL PLAY A LEADING ROLE IN THE PLANNED REVITALIZATION OF URBAN HONOLULU.

66 67 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014

Top Left: Whole Foods Market at The Ward Village master plan allows for Ward Village. up to 9.3 million square feet of mixed-use Middle Left: development, spanning over 4,000 Pool deck at Waiea. Bottom Left: residential units and more than one Master bath at Waiea. million square feet of retail and other Right: commercial space. This is consistent Waiea residential tower. with the plan approved in 2009 by the Hawai‘i Community Development Authority.

Ward Village is designed around principles of sustainability, respect for culture and an urban-village lifestyle. The development will include high-rise and low-rise residential and neighborhood retail, making it one of the only communities in Honolulu where residents do not need a car to meet their daily needs. The pedestrian-friendly design will encourage walking and biking while other sustainable design strategies will reduce energy and water use. The plans also include open space and greenbelts to bring nature, the beach and ocean across the street and into the community. The redevelopment is planned to nearly double the current amount of retail, dining and entertainment space, creating a diverse combination of local boutiques, restaurants and national retailers.

Ward Village received LEED for Neighborhood Development Platinum certification, the highest rating possible. It is the largest Platinum-certified community in the country and the only one of its kind in Hawai‘i.

In 2014, we introduced Ward Village to the community and the world when we completed a $25 million renovation of the IBM building into a residential sales gallery and master plan information center. We also launched the Ward Village Foundation, signed a lease with Whole Foods Market for their Honolulu flagship store, and executed a long-term lease with the state of Hawai‘i to manage and make improvements to Kewalo Harbor. 2014 also saw us break ground on Waiea and Anaha, the first two market rate towers in Ward Village, which are now over 80% sold. These projects are a part of the first phase of Ward Village, which in addition to Waiea and Anaha, includes a reserved housing tower that brings the total phase one unit count to over 900 units.

With so much accomplished in 2014, we are looking forward to another year of important community milestones in 2015.

68 69 Project Highlights PROJECT HIGHLIGHTS ANNUAL REVIEW 2014 NEW ORLEANS THE OUTLET COLLECTION AT RIVERWALK

REIMAGINED AND REDEVELOPED IN ELEVEN MONTHS, THE OUTLET COLLECTION AT RIVERWALK WAS SUCCESSFULLY LAUNCHED AS THE NATION’S FIRST DOWNTOWN OUTLET CENTER IN THE HEART OF NEW ORLEANS.

70 71 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014

The Outlet Collection at Riverwalk opened May 22, 2014 in Harrah’s Casino. It is also steps away from the French Quarter New Orleans as the nation’s first outlet center in a downtown with easy access to virtually every hotel in the area, making it environment. Following a transformative redevelopment of the a must-visit destination. In six months of 2014, we welcomed iconic property, The Outlet Collection at Riverwalk is fully leased approximately 2.5 million visitors with tenant sales on pace to with 75 popular national brands and local favorites. Marquis tenants exceed $100 million. include Neiman Marcus Last Call Studio, Forever 21 and Coach. In addition to being the nation’s first downtown outlet Beyond providing a compelling shopping experience for the destination, The Outlet Collection at Riverwalk is also the first growing population, the property is ideally situated to attract the location in the region for a number of tenants, such as Neiman large number of visitors to New Orleans. At the base of Canal and Marcus Last Call Studio. The repositioning of the former Poydras Streets, the Riverwalk sits next to the recently renovated Riverwalk Marketplace included a complete redevelopment Ernest N. Morial Convention Center, the cruise terminals of the and a significant expansion of approximately 50,000 square feet, Port of New Orleans, the Hilton Riverside Hotel, Spanish Plaza, bringing the total to 250,000 square feet of much-needed retail Aquarium of the Americas, IMAX Theatre, Woldenberg Park and space in New Orleans.

View of The Outlet Collection at Riverwalk from the Mississippi River 72 73 PROJECT HIGHLIGHTS ANNUAL REVIEW 2014 OUR VISION TO THE SHAREHOLDERS OF THE HOWARD HUGHES CORPORATION FROM THE CHIEF EXECUTIVE OFFICER

MARCH 13, 2014 — During his lifetime, million compared to $76 million in 2012. Summerlin in Las Vegas; and Ward Howard Hughes built a legacy that places Notwithstanding the fact that many Village, an urban master planned him among the greatest entrepreneurs of our most valuable assets are under community in Honolulu, Hawai'i. We of the 20th century. We are inspired by construction and do not contribute to our are also redeveloping several assets that his namesake and driven by our own bottom line, cash flow from operations showcase how imaginative thinking can sharply focused ambitions. In last year’s was $129 million in 2013. We invested create value. The Outlet Collection at letter, I compared the development of $376 million in pre-development and Riverwalk in New Orleans, Louisiana, our company to the process of making development to advance our projects represents such an example. a film. In 2012, we wrote the script, to the point at which they will begin to scouted locations and cast the talent. In generate recurring cash flow and their We attribute our success in our ongoing 2013, the cameras began rolling and I intrinsic value can begin to be recognized. progress in unlocking the value of our am pleased to report from the field that We took advantage of low interest rates assets to the dedication and tireless our core developments are off to a strong by raising $750 million of cash through efforts of our exceptionally talented start. We made substantial progress in the issuance of covenant-lite bonds which employees, and the ongoing support, creating value at our most important will allow us the flexibility to stay the guidance and commitment of our board assets, increased the depth of our world- course in developing assets that will have of directors. This year we continued to class development team, delivered strong significant long-term value, regardless of add talented professionals to our team financial results, and generated liquidity short-term economic or capital markets who share our passion for excellence, that further solidified our balance sheet. disruptions during the development have accomplished track records and have The Howard Hughes Corporation had an cycle. At the end of 2013, we had $895 made immediate contributions. Together exceptional year. million of unrestricted cash on hand, and with the board, the senior management just 28% net debt against the book value team and our 1000+ employees aspire We have the preeminent master planned of our equity capital base, a value which to continue to grow the per-share value community (MPC) business in the we believe significantly understates our of The Howard Hughes Corporation at a country, and under the skilled stewardship Company’s intrinsic value. high rate over the long term. of our MPC leaders, this thriving business was primarily responsible for another We remain focused on a handful of core year of exemplary financial results. assets in which the majority of our value PAST LETTERS TO Our consolidated revenues totaled creation potential resides: The South $475 million, of which MPC land sales Street Seaport in Lower Manhattan; were up 36% to $246 million, and the master planned communities in operating income and income from Columbia, Maryland, Houston, Texas SHAREHOLDERS non-consolidated affiliates totaled $118 and Las Vegas, Nevada; the Shops at 74 75 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

CONSTRUCTION Last year I mentioned that 2013 would be a pivotal year for the company as we transition from planning to building. We did just that by initiating construction from Wall Street to Waikiki:

THE WOODLANDS HAWAI'I LAS VEGAS, NEW ORLEANS AND NEW YORK CITY • We completed construction of 3 • In Hawai'i, we completed the Waterway Square and One Hughes construction of The Ward Village • In Summerlin, we are continuing Landing. Together these office buildings Residential Sales Gallery and the to develop and lease The Shops at are approximately 430,000 square Master Plan Information Center Summerlin, a 1.6 million-square- feet in size and are 98% occupied. in the iconic IBM Building. foot retail downtown for the master • Two Hughes Landing, a 197,000- • We completed Phase Two of Ward planned community which we expect square-foot office building, Village Shops, a 57,000-square-foot to be open for the holiday season. quickly followed on the heels of retail building now occupied by • In New Orleans, we began construction An aerial view of The Shops at Summerlin under construction. the two office buildings listed Nordstrom Rack and Pier One. of the Outlet Collection at Riverwalk. above, is almost complete. • We began construction of One Ala The property is 95% preleased. This • We began construction of two office Moana, a 206-unit condominium will be the first outlet center in the buildings totaling 647,000 square feet tower that is 100% sold out and slated country located in an urban location of which 478,000 square feet have been for completion at the end of 2014. expected to open in May 2014. leased to Exxon Mobil Corporation. • In New York, we commenced • We commenced construction of COLUMBIA construction of the redevelopment our Hughes Landing Retail project, of Pier 17 and the historic (Uplands) which consists of approximately • We are continuing the construction district, just west of the FDR Drive. 122,000 square feet of retail, of The Metropolitan, a 380-unit anchored by a Whole Foods Market. multifamily development in Columbia, Maryland. The Metropolitan is being In the aggregate, the above • In the Village of Creekside Park, built in partnership with Kettler- developments represent 1.3 we are now under construction on Orchard and is expected to begin million square feet of office, a 75,000-square-foot retail center pre-leasing in the second half of 2014. 2.5 million square feet of retail, that will be complete in late 2014. • In the fourth quarter of last year we 1,725 multifamily units and a • We began construction of One Lake’s entered into a joint venture with 406-room renovated hotel with Edge, a 390-unit multifamily project Kettler-Orchard to construct Phase total project costs, excluding the • We began the redevelopment of The II, a 437-unit apartment building on South Street Seaport and the Woodlands Resort and Conference land currently known as Parcel C. One Ala Moana condominium Center, which will be completed • We continued the redevelopment development, of $1.3 billion. We by the third quarter of 2014. and conversion of the old Rouse expect to generate a stabilized • We are approaching completion headquarters into a Whole yield of approximately 10% of Millennium Phase II, 314 Foods anchored center. from these developments. We apartment units which we are have excluded the South Street building in a joint venture with The Dinerstein Companies. Seaport because we expect to generate a significantly higher yield on cost than 10% but do not have clear visibility yet.

An aerial view of construction at Hughes Landing. 76 77 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

THE WOODLANDS VALUE ESTIMATES MASTER PLANNED COMMUNITIES Asset Amount Valuation Metric Year Stabilized Estimated Value ($MM) The Howard Hughes Corporation has the best MPCs in some of the strongest markets in Land the country. Our seasoned management team took advantage of the continued demand for Residential Land (1) 2,064 Lots $ 316 our land and obtained significant price and volume increases over 2012 thereby delivering Commercial Acres (2) 791 Acres 417 outstanding results. This trend is continuing into 2014. Total Land $ 732

THE WOODLANDS Stabilized Assets 4 Waterway Square $ 5.8 Projected Annual NOI 2014 $ 83 George Mitchell was an icon of the energy industry and the visionary founder of The 3 Waterway Square 6.3 Projected Annual NOI 2014 90 Woodlands. In the 1960s, he saw the need 9303 New Trails 1.8 Projected Annual NOI 2014 26 for a thoughtfully planned community 1400 Woodloch 1.5 Projected Annual NOI 2014 21 where families and businesses could live in harmony with nature. He used the 20/25 Waterway 1.5 Projected Annual NOI 2014 21 wealth he amassed in the energy industry One Hughes Landing 5.5 Projected Annual NOI 2015 79 to acquire 28,000 acres of raw land north Millennium Waterway Apartments 4.6 Projected Annual NOI 2014 66 of Houston. In his obituary, his children wrote “He led his life with a winning Woodlands Resort & Conference Center (3) 16.0 Projected Stabilized NOI 2016 229 combination of confidence, risk, intellect, Other Assets 0.4 Projected Annual NOI 2014 6 imagination, persistence, integrity and (4) loyalty. He touched the lives of countless The Woodlands Waterway Total Stabilized Assets $ 43.4 $ 620 people and left the world a better place.” Mr. Mitchell’s passion and legacy survive to identify and execute at the highest potential value at The Woodlands. Please Under Construction as part of the culture of our team, led by level on new commercial and residential note that this table does not adjust for the Two Hughes Landing $ 5.5 Projected Stabilized NOI 2015 $ 79 Paul Layne – Executive Vice President opportunities. time value of money nor any potential Hughes Landing Retail 3.5 Projected Stabilized NOI 2016 50 Master Planned Communities, and Alex increase in future value of The Woodlands Sutton and Tim Welbes – Co-Presidents In 2011, we acquired the remaining 47.5% assets and includes several assumptions One Lake’s Edge Multifamily 7. 8 Projected Stabilized NOI 2016 111 of The Woodlands. equity interest in The Woodlands that we regarding cap rates, net operating income, Creekside Park Village Center 1.9 Projected Stabilized NOI 2015 27 did not already own for $117.5 million, development costs and sales prices, which Millennium Six Pines Multifamily 4.4 Projected Stabilized NOI 2015 63 The following napkin sketch from 1972 implying a $247 million equity value may or may not be accurate. Despite depicts the original town center concept for the entire asset. With the ongoing these caveats, we believe this back of ExxonMobil Build-to-Suit 14.4 Projected Stabilized NOI 2016 262 for The Woodlands. The creator of this commercial development and with results the envelope analysis provides a good Total Under Construction (5) $ 37.5 $ 592 drawing, Robert Heineman, is still a valued from recent land sales, we believe that the illustration of the potential magnitude executive with HHC today. In this drawing, equity value of The Woodlands today is far of the value appreciation in this property Additional Planned Development the red and orange areas between I-45 on in excess of that valuation. The following since our 2011 acquisition. (6) 7. 0 Square Feet (MM) the right and the blue residential plan on table illustrates the different elements of Commercial Development 1,050 the left represent the acreage reserved for Total Additional Planned Development 7.0 $ 1,050 commercial development. Commercial buildings were not developed on this Gross Asset Value $ 2,994 site until the 2000s, after a critical mass of residential homes had been built to Less: Cost to Complete (7) $ (428) generate demand for commercial product. Less: Existing Debt (8) (407) Today, the most valuable opportunities (9) still remain in Town Center. George Estimated Undiscounted Value $ 2,159 Mitchell possessed the vision, foresight and courage to preserve the most valuable 1. 2013 average price per lot less remaining net development costs. land for development until it really 2. Assumes $12.09 per square-foot. Excludes land in the Town Center. mattered. We continue to be a tremendous 3. Represents projected stabilized NOI upon completion of the redevelopment. 2013 actual NOI was $10.2 million. beneficiary of Mr. Mitchell’s vision. 4. Assumes a 7.0% cap rate on Projected Annual NOI. 5. Assumes a 7.0% cap rate on Projected Stabilized NOI excluding ExxonMobil, which assumes a 5.5% cap rate. Demand for residential and commercial 6. Future development valued $150 per square-foot net of development costs. property in The Woodlands continues to 7. Estimated cost to complete projects under construction as of December 31, 2013. grow at a tremendous pace, benefitting 8. Debt as of December 31, 2013. not only from a regional economic 9. The value derived does not account for timing of future developments or completion of existing developments. Future development projects tailwind but also from our team’s ability The vision for The Woodlands Town Center sketched on a napkin. assumed to be completed in this analysis may or may not actually be completed.

78 79 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

Hughes Landing is being developed into a vibrant, walkable mixed-use environment. Whole Foods will bring fresh gourmet food options to Hughes Landing.

THE WOODLANDS RESIDENTIAL AND The Woodlands Resort & Conference Due to strong demand for hotel rooms COMMERCIAL LAND Center is currently under construction at premium rates, we intend to develop a undergoing a $75 million redevelopment. 300-room hotel located in Town Center. In my 2013 shareholder letter, I discussed We are adding 184 new rooms and expect Located adjacent to 4 Waterway Square the results of a competitive bid process to demolish the older 218 rooms, which and across the street from 3 Waterway for 375 residential lots in which pricing were built in the 1970s. Our future plans Square, this hotel will serve as the newest came in 49% higher than sale prices for include replacing these at a later date generation Four Diamond hotel in an comparable lots prior to the origination with luxury townhomes. Occupancy underserved market and will complement of this process. We continue to obtain prior to the start of construction was The Woodlands Resort & Conference competitive bids for residential lots and approximately 57.6% comprised of 62.9% Center. This $100+ million project is now command an average price per lot during the week and 46.3% during the expected to break ground in the first half that is 98% higher than before the program weekend. With the addition of an 865-foot of 2014 and will welcome its first guests in was implemented in the second half of “lazy river” we expect to attract families late 2015. 2012. Based on the 2013 average lot price on the weekend which will increase of $155,500 and the uninflated future average occupancy to 67% comprised THE WOODLANDS COMMERCIAL PROPERTY net cash cost to deliver of approximately of 71% during the week and 58% on the DEVELOPMENT OPPORTUNITY $2,600, we estimate a profit of $152,900 weekend. While the property continues on the remaining 2,064 lots. Assuming no to perform well during construction, we The Woodlands commercial office further price increases, this results in $316 expect NOI to increase by over 50% to $16 vacancy rate at less than 5% is one of million in total proceeds from residential million once the redevelopment has been the lowest in the country. In light of this lots. If we use the 2013 expected value of completed and occupancy stabilizes. demand, we continue to work to identify A block of homes in a Bridgeland residential neighborhood. $12.09 per square-foot for the 791 acres future potential development sites in of our remaining commercial land outside THE WOODLANDS COMMERCIAL The Woodlands. We have identified an The Woodlands Town Center district, we PROPERTIES UNDER DEVELOPMENT additional seven million square feet of BRIDGELAND A kayaker enjoys one of the many can expect $417 million in proceeds for future commercial development waterways and lakes in Bridgeland. a combined undiscounted land value of As the demand for commercial space and opportunities since we obtained 100% Bridgeland finished 2013 with 7,350 residents in 2,100 homes, and demand for finished $732 million. new amenities continues to exceed supply, ownership of The Woodlands. Using lots remains robust. While we sold 143 residential lots at an average price of $77,000 we are advancing development plans for current market values of $400 per square- and 16.6 commercial acres generating $13.6 million in revenue, we were unable to fully THE WOODLANDS COMMERCIAL several strategic assets located within The foot and a cost to complete (excluding land capitalize on demand due to an unforeseen delay in obtaining a development permit OPERATING PROPERTIES Woodlands. Most notably, in July 2012, value) of $250 per square-foot, we estimate from the US Army Corps of Engineers. By comparison, in 2012, we sold 389 lots and we announced plans for Hughes Landing, that we can achieve more than $1 billion generated revenue of $21.9 million. I am pleased to report that on February 27, 2014 We continue to expand the platform a 66-acre mixed use development located of value from these new development we received the development permit. As a result, we should be able to deliver over 500 of stabilized operating assets in The on Lake Woodlands. The development opportunities. Strong economic trends finished lots to builders within 180 days and develop an additional 806 acres of land in Woodlands. Our commercial properties is ultimately planned for 1.6 million are expected to continue to provide us with Bridgeland, representing approximately 1,300 finished lots. currently encompass over 1,000,000 square feet of office, 250,000 square feet a unique opportunity to accelerate growth, square feet of office space, 50,000 square of retail, restaurant and entertainment density and development. The time is now There are a few reasons why we are confident that sales momentum will return to feet of retail space, 393 luxury multifamily space, up to 1,500 multifamily units and for The Woodlands and we understand the Bridgeland and lot sales will accelerate. First, Segment E of the Grand Parkway, which units, a 406-key resort and conference a 175-room hotel. We recently announced unique opportunity in front of us. bisects the future downtown of Bridgeland, is now open to vehicular traffic. The Grand center and a country club. Once 650,000 square feet of office currently Parkway will reduce the commute time between Bridgeland and The Woodlands and redevelopment of The Woodlands Resort under construction at Hughes Landing, other areas of the Houston Metropolitan Statistical Area (MSA). Next, as Houston & Conference Center has been completed of which 478,000 square feet were continues to grow northwest, many of Bridgeland’s competitors are running out of lot and stabilized, we expect the combined leased to the Exxon Mobil Corporation. inventory. With approximately 18,000 remaining developable lots and a 2013 average annual NOI from these properties to Once the commercial properties under price per lot of $77,000, we are positioned to capitalize on Bridgeland’s potential be in excess of $43 million. Applying a development are completed and for growth. Finally, with an increasing number of residents, we continue to invest in conservative 7.0% cap rate to this portfolio stabilized, we expect them to generate infrastructure so that we can stay ahead of expected growth. In 2013, we invested $29.2 of assets, results in a value before debt of approximately $37.5 million in NOI and million in the development of future residential sections and critical support items such $620 million. we estimate their value at approximately as waste water treatment plants, roads, sewers and community amenities. $600 million.

80 81 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

SUMMERLIN

When I became CEO of The Howard are 12 years ahead of our assumptions As the Las Vegas economy continues its hit by the downturn, it would be a fortress Hughes Corporation near the depth of the in the 2010 valuation model. You may recovery, we expect Summerlin to further mall today. I am excited about launching housing recession in 2010, Summerlin had remember from our Chairman’s letter in differentiate itself as the top MPC in the the development of the downtown in just $11 million of revenues. At its peak, 2011, Bill Ackman stated “small changes region. Summerlin, which is equipped Summerlin because we are not building a Summerlin generated $260 million of in assumptions on discount rates, lot with the best amenities of any MPC in mall or a town center but instead a small annual revenues. Because of this potential, pricing and sales velocity, inflation etc. the Las Vegas market, is adjacent to the city just like we did at The Woodlands. we dubbed Summerlin the Sleeping Giant, can have an enormous impact on fair Red Rock Canyon National Conservation and in 2013, this Sleeping Giant awoke. value.” Calculating the positive impact of Area and has neighborhoods connected by Part of a 400-acre site, this downtown Summerlin generated $112 million of pricing increases and sales velocity would a 150-mile trail network. The community will initially be home to over 1.35 million land sales in 2013 compared with $32 dramatically change the carrying value of also boasts the best public and private square feet of national retailers, million in 2012, and the average price per Summerlin, but under GAAP accounting, schools in the state. Eleven out of the 12 a 200,000-square-foot Class-A office superpad acre increased to $323,000 from we do not “write up” assets if they increase public schools in Summerlin received building, and in the coming years, $226,000 in 2012. In 2013, Summerlin in value. We only write them down if we one of two top scores according to the thousands of residents in apartments and sold 157 finished lots, nine superpads believe we cannot recover our book value Nevada Department of Education’s 2013 condos in addition to more office buildings (totaling 257 acres) and 12 custom lots. from the future cash flows we expect to statewide assessment. to meet the demands of companies wanting At December 31, 2013, Summerlin had receive from the property. to enjoy this world class community ten active subdivisions containing 290 I believe that anything really worth where their employees can work, live and lots, down from 13 at the end of 2012. In light of the recent rapid increase in doing, whether in life or in business, play. A 200,000-square-foot Class-A Summerlin’s new home sales increased to sales prices, one might ask whether we are requires persistence and perseverance. office building, originally begun by our 589 in 2013 from 471 in 2012. approaching peak pricing in Summerlin, Staying the course means having the predecessor, will be located in the center but we believe we are far from it. The necessary foresight, capital and, most of our city. The partially completed A view of the Summerlin master planned community in Las Vegas, Nevada. Kevin Orrock, President of Summerlin, following chart shows historical annual importantly, courage to stick to your plan. structure that we inherited provided us and his team are energized by the recovery superpad sales and price per acre for The Shops at Summerlin in Downtown the opportunity to profitably develop Dave Kautz – Senior Vice President of perfect fit for a project of this scale and of this market and growing demand for superpads. We are now at 2003/2004 Summerlin was an abandoned mall site this building at an attractive economic Development, is responsible for building complexity. When you visit this site, you land in Summerlin. Our patience paid pricing levels and one-third of the peak. that our predecessor had invested over return. This building will be a catalyst for the Downtown Summerlin project. will find it bustling with activity with as off and now our community is once again We also believe that the creation of a $150 million in infrastructure before additional office development on our site Dave has over 30 years of development many as 600 workers onsite daily. blossoming as the premier community downtown in Summerlin will have a suspending construction during the as tenants throughout the Las Vegas Valley experience in a diverse range of retail We expect the opening of The Shops at where homebuilders want to build. In substantial positive impact on land values. financial crisis. It had an all-star lineup are drawn to the amenities offered by our projects. His talent, enthusiasm, tireless Summerlin to be a huge success. 2013, median new home sales prices in the We believe the future is very bright for of tenants and if previous management downtown development. energy and no nonsense approach are a Las Vegas Valley increased approximately Summerlin. had the capital and courage to stay the 37% over the prior year. According to the course, despite how badly Las Vegas was Las Vegas Review Journal, resale inventory at the end of 2013 represented 2.8 months SALES HISTORICAL SUPERPAD SALES PRICE PER ACRE of inventory, less than half the six-month (THOUSANDS) (THOUSANDS) COLUMBIA fund nearly all of the $24.6 million renovation. The project supply of a normal market. Visitors to the $90,000 $1,200 is expected to be completed by the end of 2014 and reach Las Vegas strip were 39.7 million, just shy In Columbia, Maryland we began construction on the first two stabilized annual net operating income of $2.1 million in the $83,191 of the 2012 record. Construction activity $81,266 important commercial developments in Downtown Columbia. second quarter of 2015. $80,000 is also on the upswing, with almost $8 $1,059 The 50/50 joint venture with Kettler-Orchard to develop a $1,000 billion of investment proposed or under $72,754 $973 380-unit Class-A apartment building called The Metropolitan John DeWolf, Senior Vice President Development, and his team $70,000 $67,122 construction in Las Vegas. $65,176 began construction last year and is expected to be completed on continue to develop a master plan for the 13 million square feet $60,621 schedule by the end of 2014. Kettler-Orchard has been a great of entitlements that we have surrounding the Columbia Mall $60,000 $822 $800 To give some context to the rebound $54,936 partner on the project and we therefore decided to do a 50/50 and in the adjacent 40-acre area called the Crescent, which also in values at Summerlin, in 2010 we $720 joint venture with Kettler on a new 437-unit Class-A apartment contains the Merriweather Post Pavilion, ranked the fourth best $50,000 took an impairment charge against building adjacent to The Metropolitan. We contributed amphitheater in America by Rolling Stone Magazine in 2013. the approximately 2,000 acres in $600 approximately five acres of land with a book value of $4.0 $40,000 Summerlin South. The $203 million $37,635 million at a valuation of $4.8 million per acre, or $53,500 per Columbia is the oldest MPC in our portfolio, and was developed fair value determined at that time for unit which equates to $23.4 million in total value. We expect by Jim Rouse in the 1960s and early 1970s. Since that time, $30,000 $400 accounting purposes was computed using $26,116 construction on this second apartment building to begin in very little development has occurred in Columbia and most of $24,372 a discounted cash flow model containing $323 2014. its commercial buildings are dated. Rouse is widely recognized $289 projected future sales prices and costs to $20,000 as the father of the MPC business, and since Columbia was $226 $203 $14,657 $200 deliver parcels to homebuilders. In the $12,505 The renovation of the Frank Gehry-designed Columbia developed, Howard County, which comprises Columbia, has $160 $169 $170 $10,000 second half of 2013, we sold superpads $108 $7,042 Headquarters building began in 2013. Anchored by Whole become the sixth-most affluent county in the U.S. according to for an average of approximately $365,000 -$ -$ -$ Foods and the Columbia Association, this 89,000-square- Forbes. Downtown Columbia is poised for new development, per acre. Our model from 2010 did not $- -$ -$ -$ $0 $- foot building, when complete, will re-energize the Downtown and during 2014 we expect to unveil our master plan for its assume we would reach this price until Columbia lakefront area. We obtained a $23.0 million redevelopment. 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2025, so from a pricing standpoint we non-recourse construction loan at LIBOR plus 2.00% to SUMMERLIN SUPERPAD SALES

82 83 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014 STRATEGIC DEVELOPMENTS WARD VILLAGE SOUTH STREET SEAPORT

It is critical that we have a strong sense of who we are, both community are long-term investments. We believe that over time The South Street Seaport in Lower outdoor movie nights and Smorgasbar, as a company and in our plans for specific markets and this approach will contribute to our goal of making Ward Village Manhattan is one of our most valuable a collection of pop-up restaurants that developments. This allows us to be authentic to the communities the most desirable place to live in Honolulu. and recognizable assets. The Seaport is an generated over $2,000 per square-foot in we serve. It is this drive for authenticity that has guided our important catalyst for the revitalization sales. SEE/CHANGE is just the beginning vision for Ward Village, our vertical master planned community Earlier this year, we began pre-sales of the first two residential of Downtown Manhattan as it continues of the transformation of this area into the in urban Honolulu. towers at Ward Village called Waiea, meaning “water of life” in to recover from Superstorm Sandy. Our South Street Seaport District. We donated Hawaiian and Anaha, meaning “reflection of light”. Waiea will vision is to transform the Seaport area 100% of SEE/CHANGE revenues to the During 2013, we began the transformation of Ward Centers contain 171 residential units and Anaha will contain 311 units. into the most vibrant community in old Seaport Alliance to help businesses into Ward Village, an urban master planned community that Lower Manhattan that will become a that were hard hit by Sandy and continue will include approximately 4,000 residential units and over one The strong demand for units at ONE Ala Moana and the demand premier destination for local New Yorkers to be impacted by the storm. As described million square feet of retail and commercial space. Ward Village we are experiencing for Waiea and Anaha are consistent with and tourists for entertainment, culture, in Travel and Leisure, “The words South will be a vibrant neighborhood complete with diverse retail numerous data sources indicating strong housing demand shopping, dining and living. Street Seaport and hip have never been experiences and exceptional residences set among dynamic fundamentals in Hawai'i. A study published in February 2014 strung together by a New Yorker … That’s public open spaces and pedestrian-friendly streets. We recently by The Economic Research Organization at the University of Lower Manhattan was severely impacted changing: the cool factor is rising.” This completed the redevelopment of the onsite iconic IBM Building Hawai'i predicts a 35% increase in median condominium pricing by Superstorm Sandy in October 2012. is just the beginning as we have made into the world-class Ward Village residential sales gallery and by 2018 due to a lack of supply and hurdles to new development. Many local businesses struggled to SEE/CHANGE a part of each season master plan information center, which showcases the urban re-open or closed permanently, and the of the year and launched our winter master planned community that we are creating. In addition to strong local demand fundamentals, Hawai'i has area is still recovering to this day. As a campaign that included an ice-rink strong international appeal to second home buyers. In addition to A view of the FDR entering the Tin result of the storm, last year we created and an inflatable cube that can hold Building that will be redeveloped as In November, Ward Village was awarded LEED Neighborhood demand from the mainland U.S. and Japan, visits by Chinese and part of our Seaport master plan. innovative programming called SEE/ several hundred people with live music Development Platinum certification. Ward Village is the only Korean tourists, which had been small in the past, are increasing CHANGE to re-energize and re-activate performances, food and drinks. LEED-ND Platinum-certified project in Hawai'i and the substantially. Visits from Korean and Chinese tourists have the Seaport community and create a largest LEED-ND Platinum-certified project in the U.S. This increased on an annual compounded basis by over 20% since gathering place for the community that Our initial project includes the rede- designation confirms our commitment to sustainability of the 2007. While still less than 5% of total annual visitors to Hawai'i, did not exist in the aftermath of the velopment of Pier 17 and renovation of projects that we develop. many believe that these numbers could become much larger storm. The program includes bringing an the historic area west of the FDR Drive. with the establishment of additional non-stop service between array of new retail, culinary and cultural During 2013, we obtained all necessary Consistent with our goal of creating a thriving community Mainland China and Hawai'i. In January 2014, Air China began events to the Seaport each season to entitlements needed to begin the project at Ward Village, we established the non-profit Ward Village the first non-stop service between Beijing and Honolulu, and attract local New Yorkers and tourists, and in September, we began construction Foundation with an initial $1 million commitment to support Hawaiian Airlines has announced it will begin non-stop service in and an intensive social media campaign on the complete transformation of Pier 17. the local community over the next two years, and committed the April. An influx of tourists from areas of the world, such as China to advertise the events. The redevelopment plan balances the first $100,000 grant to Kupu, a local non-profit that provides and Korea, that had not traditionally been visitors to Hawai'i in pier’s iconic waterfront location with its experiential education and life skills development opportunities the past, will further increase demand for residential housing. SEE/CHANGE launched Memorial Day unique ability to provide a much-needed to help youth and young adults succeed in life and create lifelong weekend with over 30 small businesses community anchor for the rapidly growing community servants. These investments in sustainability and opening in containers and pop-up residential population in Lower Manhat- retail spaces for the summer. Between tan—a population that has nearly tripled Memorial Day and Labor Day we had in the past 15 years. approximately 20,000 people attend 30 Pier 17

The ground floor at one of the two luxury towers in the first phase of Ward Village. Thousands gather for a free movie screening at South Street Seaport Front Row Cinema program.

84 85 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

The Seaport will be highlighted by a 1.5-acre rooftop that will include an amphitheater that will hold up to 4,000 people for concerts and special events in becoming the premier boutique entertainment venue in the world.

12,000 skaters visited the outdoor ice rink at the Seaport.

The redeveloped pier will be highlighted culture at the Seaport that will transform Esplanade and enhance the neighborhood by a 1.5-acre rooftop that will include a this district into the most desired place connectivity to the water while preserving world-class restaurant, two outdoor bars to be in Manhattan. Containing eight- and enhancing views. The project will and an amphitheater that will hold up to screens and 505 seats, iPic’s guests will include a LEED-certified building with 4,000 people for concerts and special enjoy reserved luxury seating, in-theater hotel and residential uses, the replacement events, becoming the premier boutique dining, and a level of comfort and service of deteriorated wooden platform piers entertainment venue in the world. Larger offered nowhere else in Manhattan. adjacent to Pier 17, a complete restoration open spaces on the pier level along with The iPic theater will be located in the of the historic Tin Building into a world- the new rooftop venue will showcase historic Seaport. class food market open to the public seven breathtaking views of the city skyline. days a week, and a marina with public The structure will contain approximately We estimate our initial project will cost access and a myriad of maritime activities. 182,000 square feet of leasable space, not approximately $425 million to complete, including the rooftop. which includes the costs of fully replacing The South Street Seaport District the concrete Pier 17 structure. We have and Ward Village developments are The South Street Seaport District will chosen initially to fund the project from urban siblings of our core suburban have a character unique from the rest unrestricted cash on an unleveraged master planned community business. of Manhattan. Its location and views basis. We believe that initially developing Thoughtful planning, with an emphasis of the Brooklyn Bridge, the East River this project without construction debt on sustainability, creates a virtuous and New York Harbor, and its storied provides the most flexibility and allows us development cycle where one property history as the birthplace of New York’s to make decisions quickly for this unique type generates demand for other maritime history, will make the customer project. As development and leasing property types, which attracts more experience unique. We are curating a advances, we expect to obtain project level residents, creates more demand for tenant mix that will complement these financing for this development. development, and so forth. These urban unique attributes to further differentiate planned communities, containing retail, the South Street Seaport District and In November, we presented to the entertainment, residential, office and create a destination unlike any other in public preliminary plans for a second hotel with public open spaces, become the city. One of our new anchor tenants project, which, together with our initial desirable communities where residents is a great illustration of this strategy. In project, completes our vision and master can live, work, learn and play. late 2013, we announced that we will be plan for transforming the entire South bringing world-class cinema operator Street Seaport District. Designed by the iPic to the Seaport in what will be the first renowned architectural firm SHoP, led by of many tenant announcements. Along principal Greg Pasquarelli, the proposed with the redevelopment of Pier 17, the second project is expected to encompass theater will be part of a dynamic lineup nearly 700,000 square feet of space and of retail, dining, entertainment and will be fully integrated into the East River

86 87 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

THE OUTLET COLLECTION AT RIVERWALK

The Outlet Collection at Riverwalk The Outlet Collection is centrally located This development is a case study which demonstrates the creativity and tenacity in New Orleans’ business and tourist demonstrates the potential value that of our development, leasing, operations districts and sits on several long-term can be created with unconventional and and marketing teams in navigating ground leases and easements owned and innovative approaches to development. complex projects to drive shareholder controlled by multiple government and In 2010, we took an impairment charge to value. I discussed the unique attributes commercial constituencies. Navigating write down Riverwalk to its then fair value of this project in my 2013 letter. The these complexities, the development team of $10 million. Its redevelopment into an development is slated to become the first successfully entitled the project and the upscale urban outlet center, which will upscale urban outlet center in the United leasing team has executed leases for over cost approximately $82 million, will open States and will be the first, new, large- 95% of the rentable space. The Outlet in 2014 with approximately $8.5 million scale retail development in downtown Collection will include marquee tenants of annual net operating income. Given New Orleans since Hurricane Katrina such as Neiman Marcus Last Call Studio, the scope of the project, we believe the hit in 2005. The project solidifies Forever XXI and Coach. stabilized value of this asset will approach Downtown New Orleans’ resurgence $150 million. as a retail destination for residents and tourists alike.

A view of the interior of the Outlet Collection at Riverwalk.

Spanish Plaza, The Outlet Collection at Riverwalk.

The Outlet Collection at Riverwalk is located in the heart 88 of New Orleans’ central business and tourist districts. 89 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014 TALENT

I have always believed that all companies need two things to be successful—great assets and great people. We are constantly looking to add world-class talent that share our values and commitment. Both Grant and I spend a great deal of time recruiting top-notch talent to our company. As the lifeblood of any good organization, we have a deep appreciation for the interconnectivity of people and how important chemistry, commitment and character are to executing on our vision. We have embedded in our culture the importance that every current and future employee share our passion and our values. Below I have identified some of our key 2013 recruits.

In preparation for the impending operation and management of our soon-to-be stabilized properties, we hired Sarah Vasquez, Senior Vice President of Management and Operations, in February 2013. Sarah’s broad experience managing retail centers at Westfield provides her with an excellent background to effectively and efficiently maximize the operations ofour stabilized developments while adhering to and advancing the latest trends in customer service and sustainability. Sarah’s Tim Welbes, Robert Heineman and Alex Sutton, accept the Vision Award for Exemplary Leadership The Board of Directors and HHC executives ring the electric energy and infectious enthusiasm have already made a from the Urban Land Institute in Houston. bell at the New York Stock Exchange in March 2011. huge imprint in the fabric of our organization. It is almost as if she started with the company in November of 2010. Manager in March 2013. Previously he was responsible for The Howard Hughes Corporation has built the foundation for our In August 2012, we engaged Cornwell Design, an Australian managing Century City Mall in Los Angeles, California. Phillip future success. Our unique assets have drawn world-class talent branding and marketing firm, to develop a brand strategy for has already made a valuable contribution, leading our dynamic A to the company who will create a myriad of future possibilities our Ward Village development. The work developed by Steven SEE/CHANGE programming. to grow our business. First and foremost, however, there is a lot Cornwell, CEO and Founder, and his team gave us insight into of work yet to be done to maximize the value of our existing real his marketing brilliance and showed us the potential impact great We are actively leasing the Seaport with the help of Jonathan estate assets. In 2014, you will see ongoing vertical development content can have in bringing the vision for our properties to life. Lauren – Vice President of Leasing who began working for us in LEADING in our largest core assets as they get closer to completion. We will While working with Steve, I realized that we needed to develop January 2014. Jonathan has over 25 years of leasing experience at begin to generate significant stabilized recurring cash flows from our intellectual property in-house, and that Steve’s ability to retail centers such as Century City Mall, Topanga Mall and Valley our commercial properties and realize sales proceeds from sales translate powerful ideas into content would be invaluable to us Fair, all in California. His knowledge of and key relationships with AMERICAN of condominiums and residential and commercial land. in unlocking the potential of the Howard Hughes brand. To that national, international and local retailers will be pivotal as we end, led by Steve Cornwell, we launched the HHC Studio at continue to announce the many outstanding tenants we believe At The Howard Hughes Corporation, we love real estate, but our the beginning of this year. HHC Studio is our in-house design, will be part of this iconic project. brand is about so much more than bricks and mortar. We are about marketing and branding group. Steve relocated his family from COMPANY creating something great and transformational that will outlast Australia to New York and HHC Studio will be headquartered at Also in New York, Susi Yu joined us as Senior Vice President of us. In order to achieve this, I encourage each of our employees, our Seaport offices. Development. In this role, she is leading the planning efforts for consultants and partners to THINK BIG. I am grateful for the the future mixed-use development at the Seaport. Prior to joining FOR THE continued confidence and support you have shown as we continue In February of this year we, hired Brent Habeck as EVP Strategic Howard Hughes in August, 2013, Susi served as Senior Vice our mission to create timeless places and memorable experiences Leasing. Prior to joining our team Brent was directly responsible President for Forest City Ratner Companies. During her 12-year ST that inspire people while driving sustainable, long-term growth for leasing the World Trade Center. In partnership with tenure with Forest City Ratner, Susi led the development of large and value for our shareholders. Keith Laird – EVP Leasing, Brent will help uncover the many scale, mixed-use urban projects, including the development of 8 21 CENTURY undiscovered jewels within our portfolio, the results of which will Spruce Street, a 1.1 million-square-foot, 896-unit rental building Warm Regards, be shared with you in the coming years. designed by Frank Gehry, and the development of B2, the first residential building of Atlantic Yards. In March of 2013, we received all of the necessary approvals to begin the redevelopment of the South Street Seaport. Our I am pleased that these very talented and accomplished individuals redevelopment efforts began in earnest at the beginning of October have joined the deep bench we already have in place. I expect that but in the interim, we have been hard at work hiring the necessary these new additions will make their mark in the coming years and David R. Weinreb expertise to ensure that the reconstruction and operation of collaborate effectively with our growing family of employees. Chief Executive Officer Pier 17 is in great hands. Phillip St. Pierre joined us as General

90 91 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

TO THE SHAREHOLDERS OF THE HOWARD HUGHES CORPORATION FROM THE CHIEF EXECUTIVE OFFICER

MARCH 5, 2013 As I re ect on the past two years, I am proud of our team and their numerous accomplishments, grateful for the dedication and tireless efforts that have made these achievements possible, and sharply focused on continuing our outstanding performance. 2013 is pivotal for The Howard Hughes Corporation as we transition from planning to building and continue to unlock the value of our portfolio.

Our  nancial results for 2012 re ect the exemplary efforts of our management team and employees. Revenues totaled $377 million, operating income and income from non-consolidated af liates totaled $76 million compared to $36 million in 2011. These strong operating results permitted us to invest $155 million in pre-development, construction, and to retire the majority of the outstanding Sponsor warrants, while ending the year with a cash balance $2 million higher than at the end of 2011. We have a strong balance sheet with only 19.9% net debt against the book value of our assets. We generated $153 million of operating cash ow in 2012 up from $87 million in 2011. We have used this cash to invest in the assets and opportunities that we believe have the most potential for creating extraordinary value.

Our long-term goal is to increase the value of the company on a per-share basis. We do this by improving our assets through the development process and by opportunistically deploying excess cash. In the fourth quarter, we purchased approximately 6.1 million of the 8 million Sponsor warrants issued as part of our emergence as a public company. These warrants had a strike price of $50.00 per share and a November 2017 expiration date. They were the most expensive and dilutive security in our capital structure. Before their retirement, the warrants represented an economic drag on our per-share progress as every dollar of appreciation of our stock price above $50.00 would require us to generate $1.16 of value. The repurchase of these warrants in exchange for $81 million of cash and 1.5 million shares is a break-even proposition for the company if our stock price equals $81.10 in 2017, a price which we expect will be well below the potential value of our stock at that time. As a result of retiring the warrants, our shareholders now own 10.1% more of the company.

Our board of directors continues to be an integral part of the governance, development and operating activities of our business. Their commitment to the company, our employees, our mission and development plans is unwavering. The board consistently provides strong leadership and direction and is a guiding force in maximizing value for our shareholders. I am thankful for the board’s strong commitment and their wise stewardship of the company. 92 93 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

The majority of our value creation potential resides in a handful of core assets: South Street Seaport, in Lower Manhattan, the master planned communities in Columbia, Maryland, The Woodlands and Bridgeland in Houston, Texas, and Summerlin in Las Vegas, Nevada, The Shops at Summerlin, and Ward Village, an urban master planned community in Honolulu, Hawaii. We are focusing our resources on these core assets while repositioning the remaining assets of the portfolio in order to maximize their value for potential disposition or other forms of monetization.

WARD VILLAGE, HONOLULU, HI

MASTER PLANNED COMMUNITIES Our master planned communities (“MPC’s”), continue to be ranked as the leading MPC’s in the U.S. According to a Robert Charles Lesser & Co. LLC study, The Woodlands was ranked third with 1,007 home sales, Summerlin 12th with 471 home sales, and Bridgeland 15th with 423 home sales.

SOUTH STREET SEAPORT, NEW YORK, NY THE WOODLANDS In 2013, The Howard Hughes Corporation enters a new phase in its evolution as we move from an intense The Woodlands, led by co-presidents Alex Sutton and Tim Welbes, remains the top performer in our MPC focus on planning and design to concentrating on vertical construction. We expect to commence construction business. Ranked rst in Houston and third nationally in 2012, The Woodlands is consistently recognized in this year on all core development assets within the portfolio. In Hawaii, we are already under construction on a the United States as a leading MPC. At the end of 2012, The Woodlands had 2,750 residential lots remaining. 57,000 square foot retail project at Ward Centers and will commence construction this summer on the ONE With the expected addition of over 10,000 new direct jobs to the area at ExxonMobil’s 385-acre campus Ala Moana condominium tower. We have multiple commercial developments underway at The Woodlands located just south of The Woodlands, the market is recognizing the scarcity and value of these remaining lots. and expect to break ground on our new downtown in Summerlin. Other initiatives in 2013 include the We are hearing the comment, “buy in The Woodlands while lots are still available,” with increasing frequency redevelopment of Pier 17 at the South Street Seaport in New York City, the transformation of the Riverwalk and are adjusting pricing accordingly. Marketplace in New Orleans into the rst urban outlet center in the United States, the construction of 380 new Class-A apartment units and the renovation of the Columbia Headquarters Building in Columbia, Maryland. In my 2011 letter to shareholders, I described the value proposition of The Woodlands investment. Based on the most recent transactions, I believe that the estimated proceeds from residential land sales in that STRENGTHENING THE BENCH letter were understated. During the second half of 2012, we conducted an auction of 375 lots comprising During 2012, we continued to build our team. In April, we hired Paul Layne as Executive Vice President seven different lot sizes and invited nine additional home builders who were not already building homes Master Planned Communities. Paul joined us from Brook eld Properties Corporation where he was the in The Woodlands to participate. This auction was extremely successful, resulting in an overall 49% price Executive Vice President responsible for the nancial performance of a ten million square foot portfolio in increase over the previous sale prices for comparable lots. Applying the realized increase in pricing across the Houston Central Business District and ve million square feet in Southern California. Paul’s leadership 3,125 lots (2,750 at the end of 2012 plus the 375 in the auction) results in $196 million of incremental and business relationships in the Houston area have been invaluable in not only attracting commercial tenants proceeds above our previous forecasts. This assumes we are only able to obtain the same premium for all to The Woodlands, but also in integrating The Woodland’s leading master planned community development of our remaining lots. I believe residential land prices at The Woodlands have room to increase substantially platform into the company. I have known Paul for over 15 years and have seen him successfully manage given the demand for lots, their scarcity, and the growing commercial base within the Town Center. large and diverse portfolios around the country. It has been 11 short months, but the results of his efforts can already be seen in Bridgeland, The Woodlands and Summerlin.

Recently, we hired Steve Robinson, Senior Vice President Construction, to run our construction division. Steve worked on developments that my former company completed in Houston in the late 90’s in addition to the construction of other complex large-scale projects. He is dedicated, detailed and meticulous in his approach to project development. In 2013, we expect to begin construction on a number of our key developments. Steve’s knowledge and expertise will be critical in ensuring these developments are constructed to the highest standards at or below their budgeted costs.

In true Howard Hughes spirit, our team continues to show no limits to their tenacity and commitment to THE WOODLANDS RESORT, HOUSTON, TX the cause. Christopher Curry, Senior Executive Vice President Development, has agreed to relocate to New York as we begin the construction phase of the South Street Seaport and set our sights on expanding our Demand for commercial space in The Woodlands is also growing signi cantly. This is driven in part by platform in the city. In addition, Nick Vanderboom, who was recently promoted to Senior Vice President, businesses relocating to The Woodlands in order to better serve the new ExxonMobil campus and by has moved his family to Honolulu, Hawaii as Ward Village’s development gears up. companies who want to be in a community where their employees can “live, work, play and learn.” 94 95 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014 In July, we announced a 66-acre mixed use development called Hughes Landing at Lake Woodlands. The development is envisioned to ultimately contain 1.6 million square feet of of ce, 250,000 square feet of retail, restaurant and entertainment space, up to 1,500 multi-family units, of which 400 units will be in phase one, and a 175-room hotel. The decision to have this development carry the signature of Howard Hughes illustrates our expectation that this will be a legacy development for the company. One year ago, this development was not even on the horizon. This past fall we began construction of One Hughes Landing, a 195,227 square foot Class A of ce building. It is expected to be completed by the end of the third quarter of 2013. To date, we have pre-leased 28% of the building with an additional 7% out for signature. The total project cost will be approximately $52.8 million and the projected stabilized net operating income is anticipated to be $5.2 million. At a 7.0% cap rate, the value of this building is approximately $74.3 million, implying $21.5 million of additional value creation.

While the timing of the Hughes Landing development depends on many factors, using current market conditions, we estimate a ve-year build out for this site. The One Hughes Landing of ce building gives an indication of the value we believe can be created once this project is fully developed. As of this writing, we have planned ONE HUGHES LANDING, HOUSTON, TX another ve million square feet of of ce, 500 multi-family units and one hotel for our 65-acre Town Center. We continue to explore ways to increase total densities. If the current robust market conditions continue, driven In May 2012, we purchased our partner’s interest in Millennium Phase I, a 393 unit Class-A multi-family by the 2015 opening of ExxonMobil’s campus, we believe that there will be demand for several million square development in the Town Center. We nanced this acquisition with a $56 million non-recourse loan at a 3.75% feet of additional of ce space in The Woodlands Town Center over the next ve years. interest rate. The proceeds from this transaction were used to repay the interim construction loan, purchase our partner’s interest, and make a $4.1 million distribution to Howard Hughes. Today, Millennium I generates The Woodlands is in high performance mode, and it is incumbent on us to deliver as much value as possible $4.8 million in net operating income. At current market cap rates we estimate that this asset is worth about from this asset during this period of its life cycle. In summary, on a “same store” basis, commercial net operating $30 million more than we paid for it less than one year ago. Contemporaneous with this transaction, we income (including golf membership deposits) has grown from $12.7 million in 2011 to $26.4 million in 2012, a entered into a joint venture with The Dinerstein Companies, our partner on Phase I, to begin the next phase of 108% increase. More information on The Woodlands can be found at www.thewoodlands.com. the development and construct 314 new Class A units. We contributed our land at $75 per square foot, nearly 50% more in per square foot of land value than that of the rst phase. Land in The Woodlands is a scarce asset and we are working hard to make sure that we receive fair value as we sell off our remaining parcels.

Recently, we announced the redevelopment of The Woodlands Resort & Conference Center. We are nancing this project with a three-year $95 million construction loan at LIBOR plus 350 basis points. This loan repays the existing $36 million facility set to mature this year and provides capital for our redevelopment. The resort generated $10.7 million in net operating income for 2012, $6.3 million more than in 2010. The redevelopment will encompass the renovation of 222 existing guest rooms; the replacement of the 206 room Lodge with a new wing consisting of 184 guest rooms and suites, a new, expanded arrival area with a porte‐cochere and lobby featuring native Texas stone, massive, three-story windows; a new 3,036 square- foot “Living Room” connecting the three guest room wings, ideal for informal gatherings; a new 1,000-foot long Lazy River winding through a tree-lined outdoor area; renovation of the entire meeting and event BRIDGELAND, HOUSTON, TX facilities, including the ballroom, boardrooms and breakout space; an updated 13,000 square-foot spa and tness facility; and a new 120‐seat prime steak house restaurant and lounge adjacent to the 18th hole. This redevelopment will solidify the property’s position as the premier resort and conference center in Texas and BRIDGELAND Fueled by the sustained growth of the energy sector, the Houston-area housing market was once again meet burgeoning demand from corporate clients. among the leaders in the United States. Bridgeland had another record year and ranked fourth in Houston and 15th nationally in residential land sales in 2012. Land sales increased 30.9% to $21.9 million, and lot sales increased to a record number of 389 in 2012. We expect lot sales to continue to accelerate in 2013 and beyond as competitors run out of inventory and the Grand Parkway, which bisects the future town center, stays on track for a late 2014 completion. In anticipation of accelerated infrastructure investment needs to meet this growing demand, we obtained a non-recourse revolving credit facility with a total capacity of $140 million. This credit facility is an ef cient funding source which will minimize the need for equity capital to fund development. Bridgeland now also bene ts from The Woodlands management team in planning for commercial development in the town center. The extensive experience and track record of this team in planning, designing and developing The Woodlands Town Center gives me great con dence that Bridgeland’s future town center will rival that of The Woodlands. To see all that Bridgeland has to offer visit our website at www.bridgeland.com. 96 RESTAURANT ROW AT HUGHES LANDING, HOUSTON, TX 97 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

COLUMBIA The Las Vegas Valley housing market went through a major transition in 2012. New home sales in 2012 saw In Columbia, Maryland, John DeWolf, Senior Vice President Development, and his team achieved several an increase of approximately 42% over 2011 sales. According to a recent article in the Las Vegas Review important objectives during 2012 that will enable us to advance our redevelopment of Downtown Columbia. Journal, there were 44,902 resale homes sold in 2012, the third best year on record. At the end of 2012, the At full build-out, the area will include up to 13 million square feet of mixed-use development. Our joint number of single-family homes available for sale on the Multiple Listing Service had declined 24.1% from the venture with Kettler-Orchard to develop a 380-unit apartment complex received all necessary approvals prior year, representing only a ve-week supply. during 2012, and we began construction in February of 2013. This joint venture valued our contributed land at approximately $4.8 million per acre. We contributed our land to this project at a value of $53,500 per Summerlin’s net new home sales for 2012 were 471, an increase of 120% over 2011. 2013 has started unit or $20.3 million. Our partner is responsible for all additional equity, cost overruns, and construction on a positive note as our builders have sold 45 units versus 26 units for the same period in 2012. Led guarantees related to this project, which is a 50/50 joint venture with no promote to our partner. by Kevin Orrock, President of Summerlin, the team continued to deliver solid results with $32 million of land sales in 2012. Having kept the supply of land in builders’ hands low during the housing recession, the In July, we secured Whole Foods as an anchor tenant for our to-be-redeveloped Columbia Headquarters Summerlin team is poised to reap the bene ts of what now appears to be a solidly recovering market. Building, the former Rouse Company headquarters that was originally designed by renowned architect Frank Gehry. In November 2012, we secured The Columbia Association as another anchor tenant, which will house a state-of-the-art tness facility on the ground level of this building. The renovation of this important building, which we expect will begin during the second quarter of 2013, will energize the redevelopment of the downtown by providing important amenities to the community. It is worth noting that this building currently loses $0.8 million per year, but when stabilized, it should generate approximately $2.2 million in net operating income. We are in the process of obtaining construction nancing for this project. The adaptive reuse of this building is important for several reasons. First, it signals to the local community that we respect and honor its history. Second, it validates our development team’s capability to execute on innovative and transformative developments. Finally, the repurposing of this building will act as a catalyst to the further development of Downtown Columbia.

In August, we successfully acquired 70 Corporate Center, a 169,000 square foot of ce building that was 26% occupied. We simultaneously executed a lease to relocate Enterprise Business Partners to this building which will bring occupancy to 71% by March of this year. The acquisition was nanced with 100% of the cost provided by the previous lender on the site. We expect to invest $7 million of DOWNTOWN SUMMERLIN, LAS VEGAS, NV equity into this development for renovations and re-tenanting. At stabilization, we expect our investment will deliver an estimated 28% cash-on-cash return. 70 Corporate Center is at the gateway to The Similar to how we leverage The Woodlands development platform to bene t Bridgeland, we are also Crescent area, a 40-acre parcel that will contain the majority of our future development in Columbia. drawing on lessons from The Woodlands to implement our development strategy at Summerlin. The Visit this development at www.columbiamd.com early development of a regional shopping mall in The Woodlands was critical to establishing the long- term success of The Woodlands Town Center. The mall increased demand for residential lots and helped spur additional commercial development in the Town Center. Similarly, we expect that completion of The Shops at Summerlin will result in substantial bene ts to the greater Summerlin MPC and we have therefore made development of this project a top priority. For more information you can learn more about Summerlin on the web at www.summerlin.com. STRATEGIC DEVELOPMENTS During 2012, we substantially completed the design for Downtown Summerlin. The development will include city street grids and an outdoor shopping and entertainment district with an authentic Las Vegas sophistication and glamour. The design incorporates much of the $150 million of infrastructure improvements that our predecessor invested in the property. Building on the positive residential momentum in Las Vegas,

DOWNTOWN SUMMERLIN, LAS VEGAS, NV the development of The Shops at Summerlin made substantial progress in 2012. This 106-acre project sits SUMMERLIN within a 400-acre site located in Downtown Summerlin. Upon completion of phase one, The Shops at In 2012, we sold 158 nished lots, three superpads (232 lots) totaling 55 acres, and 10 custom lots. 2012 was a Summerlin will include approximately 1.5 million square feet of commercial development, integrating retail, transition year to move to superpad sales given our depleting nished lot inventory. 2013 land sales should be entertainment and of ce uses in a unique and compelling environment that does not exist in Las Vegas. We dominated by superpad sales, except for the remaining nished lot inventory currently on hand. secured anchor commitments from Dillard’s and Macy’s for approximately 380,000 square feet of space. Angelia Powell, Vice President Leasing, is in the process of obtaining lease commitments from retailers As of December 31, 2012, Summerlin had 13 active subdivisions of which only six neighborhoods had for the small shop space. Her passion and energy is contagious, and the line-up we expect to announce more than ten units remaining to be sold and not more than 50 units in the other subdivisions. Several new rivals the best regional centers in the country. Mike Zoob, Director of Leasing, joined us in March. He is neighborhoods will open this year introducing 508 additional lots to the market. There is little resale inventory responsible for lling up the Power Center and has hit the ground running by delivering commitments from available in Summerlin, which should bode well for an increase98 in land sales revenue as we move through 2013. many of the major big box retailers. 99 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

This project represents a strategically important development opportunity for the company and a operating income. However, Ward has an approved master plan that allows for up to 9.3 million total square catalyst for increases in residential land sale pricing and velocity. We estimate, based on current market feet of mixed-use development, including more than 4,000 residential units and approximately 1.5 million conditions, that the opening of The Shops at Summerlin will lead to an increase of $100 million of square feet of retail and other commercial space. Ward Village has development rights for 22 high-rise towers additional revenue from residential land sales. In the coming years, thousands of residents in apartments in an urban master planned community setting. Over the next decade, Ward Centers will transform into and condominiums will live in the heart of Downtown Summerlin. In addition, of ce buildings will be Ward Village, a vibrant neighborhood complete with unique retail experiences and exceptional residences constructed to meet the demands of companies wanting to enjoy this world class community where set among dynamic public open spaces and pedestrian-friendly streets. In October 2012, we announced their employees can “live, work, play and learn”. plans to move forward with the rst phase of Ward Village, which will consist of approximately 500 market rate condominium units and at least 125 workforce housing units. We also commenced the redevelopment of the historic IBM Building into a contemporary information and sales center, which will showcase the unparalleled neighborhood we are creating at Ward Village.

While we have not yet determined pricing for our rst phase towers, market data suggest that comparable existing “front row” product with unobstructed ocean views re-sold in 2012 at an average price of approximately $1,400 per square foot. Hokua, which is a condominium tower adjacent to Ward, resells at the highest average price per foot of any condominium tower in Honolulu, approximately $1,400 per square foot. Hawaii’s residential market is challenged by supply. Economic forecasts indicate approximately 20,000 housing units must be delivered to meet demand by 2020. This has led economists to project home prices will increase as much as 40% in the next few years. The market will be extremely challenged to deliver this supply given the hurdles that must be overcome to achieve development entitlements, which gives Ward Village new product a signi cant competitive advantage.

In the same way that buyers pay substantial premiums to live in Summerlin or The Woodlands, by delivering a comprehensive master planned community environment that no other competitor can deliver, we ONE ALA MOANA, HONOLULU, HI expect Ward Village to capture similar premiums and generate substantial value over the life of the project not only for our shareholders, but also for the new residents. I encourage each of you to follow In Honolulu, we are preparing to break ground this summer on ONE Ala Moana (www.onealamoana.com), our progress by visiting our website www.avisionforward.com. a 206-unit luxury condo tower that is being developed in partnership with Honolulu-based developers Kobayashi Group and The MacNaughton Group. These talented and highly respected local developers led the acceleration of this development which sold out in two days during the month of December. Units at ONE Ala Moana sold for an average price of $1.6 million, or approximately $1,170 per square foot. At an assumed cost of approximately $900 per square foot, including the value of our air rights, the project is anticipated to generate approximately $66 million in total pro t. At the closing of the construction loan, The Howard Hughes Corporation will receive $47.5 million of proceeds for its air rights. In addition, at project completion, we expect that the company will have received approximately $73 million of total proceeds. This asset has a book value of $22.8 million.

The strong response at ONE Ala Moana is good news for Ward Village, one of the company’s key value creation opportunities. In its current state, Ward Village generates approximately $23 million of annual net

SOUTH STREET SEAPORT, NEW YORK, NY OPERATING ASSETS Chris Curry leads our redevelopment of the South Street Seaport in Lower Manhattan. In June 2012, we entered into an agreement with the New York City Economic Development Corporation to amend the South Street Seaport ground lease. This agreement will enable us to proceed with the redevelopment of Pier 17. Designed by the renowned architectural rm SHoP, led by principal Greg Pasquarelli, we unveiled a new design for the new Pier 17 building, a contemporary structure with an open rooftop and glass façade encompassing retail, restaurant and entertainment space. The design balances the Pier’s iconic waterfront location with its unique ability to provide a much needed community anchor for the rapidly growing residential population in Lower Manhattan. The ultimate objective is to create an unmatched New York experience that is compelling to residents, local workers and tourists. The New York City Planning Commission along with The Landmarks Preservation Commission with support from Community Board 1 approved our design. We expect all necessary approvals will be obtained this year. 100 WARD VILLAGE, HONOLULU, HI 101 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

The South Street Seaport (www.southstreetseaport.com), like many other businesses and residents of downtown Manhattan, was impacted by Superstorm Sandy. The storm caused ongoing hardships for everyone who lives and works in Lower Manhattan, particularly small business owners who might not have had the resources to withstand such an event. Today, more than ever, we believe in the potential of the South Street Seaport to become a dynamic destination for residents and visitors. In November 2012, The Howard Hughes Corporation, along with several other property owners in the area, worked with the Downtown Alliance to provide nancial assistance in the form of grants to small businesses affected by Sandy. In addition, we supported New York City Council Speaker Christine Quinn and The United Federation of Teachers who provided 30,000 displaced New York City students with backpacks, school supplies and books. We are committed to beginning the Pier 17 redevelopment this year and look forward to transforming the South Street Seaport into a unique and vibrant urban destination.

The Riverwalk Marketplace (www.Riverwalkneworleans.com)demonstrates the creativity of our development team and highlights their ability to deal with complicated redevelopments. The property is well located in SOUTH STREET SEAPORT, NEW YORK, NY the central business district of New Orleans, is adjacent to the New Orleans Ernest N. Morial Convention Center, Harrah’s Casino, The Audubon Aquarium, and is connected to two passenger cruise terminals that we will enjoy a ve times multiple on total equity (including our land contribution), a seven times multiple support over one million passengers per year. Michelle Waak, one of our talented Vice Presidents in our on cash invested, and a 35% internal rate of return over a ten-year hold period. We will continue to exploit Leasing group, analyzed these challenges and, in collaboration with Mark Bulmash, Senior Vice President opportunities within the existing portfolio and only pursue new opportunities if the returns are exceptional Development, developed a plan to create the rst upscale urban outlet center in the United States. We relative to the risk incurred. announced the project in July 2012, and are in the process of converting retailer commitments into leases. Concurrently, we are working with multiple constituencies to solve the access, parking and ground lease THE EVOLUTION OF HOWARD HUGHES issues associated with the redevelopment. We expect to launch construction in early 2013. Howard Hughes rst gained wide recognition as a lmmaker. Much like our namesake, we have written the script, scouted locations, cast the talent, and in 2013, we are ready to begin shooting the movie.

We bene t by owning a geographically diverse portfolio of irreplaceable assets, and each is located in a strong market or is in a market that is experiencing a strong recovery. Our cast is second to none. Each of our important assets is overseen by talented senior leadership, who are supported by a dedicated and growing team of experts. I am pleased that we have continued to recruit an extremely talented team who are attracted to the culture, opportunity, challenges and mission of The Howard Hughes Corporation.

I am grateful for the con dence you have shown in us as we continue our mission to create timeless places and memorable experiences that inspire people while driving sustainable, long-term growth and value for our shareholders.

THE OUTLET COLLECTION AT RIVERWALK, NEW ORLEANS, LA Sincerely, The health of the United States economy is critical to our success especially in the master-planned community business. As the housing market continues to recover, we should see exponential growth in our revenue. As the accelerator of cash  ow, this revenue is an important source of funding for our strategic developments. The redevelopment of Pier 17, the construction of The Shops at Summerlin, and the construction of our rst two towers at Ward Village will require signi cant amounts of capital. Although we plan on sourcing this capital primarily from third-party joint venture partners, as we have successfully done with all of our other developments, over time our land sales revenue should provide a signi cant amount of the total capital required. DAVID R. WEINREB CHIEF EXECUTIVE OFFICER NEW OPPORTUNITIES Occasionally, I have been asked whether or not the company intends to acquire other companies and/or assets outside of the existing portfolio. Because we have so many opportunities to invest capital at high rates of return in the existing portfolio, the standard for new acquisitions is extraordinarily high. The opportunity set within our existing portfolio is exceptionally attractive. Our investment in One Hughes Landing is a good example. By contributing our land to the development, we were able to raise non-recourse construction nancing of $38 million, limiting our cash equity investment to $9 million. Using market values for our land contribution, we are projecting a 10.3% return on cost at completion, more than 300 basis points above market cap rates. Because of the limited equity required and the high projected returns, we anticipate that 102 103 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

FEBRUARY 29, 2012 TO THE SHAREHOLDERS OF THE HOWARD HUGHES CORPORATION FROM THE CHIEF EXECUTIVE OFFICER:

In our first full year as a company, The Howard Hughes Corporation made important strides in moving our assets closer to the point at which they can generate maximum potential value. We hired talented people, formed strategic joint ventures and made a substantial acquisition. These initiatives have positioned our company to create meaningful long-term value for our shareholders and our financial statements are beginning to reflect these efforts.

We started 2011 with the foundation of a great team, and have since hired a few more key professionals in order to complete our executive roster. It was critical to find experienced talent who shared our core values. Our people are passionate, committed to excellence, and immersed in a culture that treats the company’s money as if it were their own. We found these values and more in our Chief Financial Officer, Andy Richardson, our General Counsel, Peter Riley, and in the development executives who joined our team this past year. These industry veterans bring decades of experience and a track record of success working for prominent real estate companies across the country.

In 2011, we formed joint venture partnerships on three assets: Ala Moana Tower, Parcel D at Columbia Town Center and The Bridges at Mint Hill. In each case, we partnered with local developers who have strong reputations and a history of successful projects. Leveraging each group’s local knowledge and development expertise has already helped to accelerate our business plans for these assets.

The highlight of 2011, which I will discuss in greater detail below, was completing our acquisition of Morgan Stanley’s 47.5% economic interest in The Woodlands Master Planned Community (“MPC”) located in Houston, TX. The Woodlands is one of the most successful large-scale MPC’s in the U.S, comprising over 28,000 acres, 97,000 residents and 1,700 employers. To learn more about this vibrant community visit www.thewoodlands.com. The Woodlands is now a wholly owned subsidiary of The Howard Hughes Corporation, and we are confident that this acquisition will create significant short and long-term value for our shareholders.

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SETTING THE TABLE Before telling you about our class of 2011 executive hires, I wanted to reiterate the outstanding job the entire Howard Hughes team has done to advance the company’s goals in 2011. I am personally grateful for all of their hard work and inspired by the way they have embraced the opportunity and challenges of being a new company. ELK GROVE PROMENADE, SACRAMENTO, CA Grant Herlitz, President of the company and my partner for the past 12 years, has worked by my On the development side of the business, we began expanding our bench in May when we hired side to provide exceptional leadership in bringing together the diverse talent within the company John Dewolf to run the Northeast region. John brings over 30 years of real estate experience to the and in driving results. Grant’s analytical skills and detailed knowledge of all our assets has been team, which includes time spent with The Limited, The Disney Stores, Inc., Woolworth Corporation, invaluable in guiding our development and asset management teams as they move forward with New York & Company, and New England Development. John is responsible for our projects in pre-development activities. Among his responsibilities, he is working closely with The Woodlands Columbia, Maryland, Alexandria, Virginia, and Princeton, New Jersey. He is also playing a critical leadership team to harvest the many opportunities on the horizon from this strategic investment. role in the redevelopment of the South Street Seaport. Beyond these specific assets, John’s unique Grant’s passion for our company, our people and the example he sets for excellence in everything blend of retail and development expertise has brought valuable perspective to our portfolio of he does embodies the core values of our company. strategic developments.

Our Chief Financial Officer, Andy Richardson, has done an exceptional job of leading the accounting Mark Bulmash also joined the company in May, and is overseeing the Central and Southeast team since joining us in March of 2011. Andy also fully embraced our owner’s mentality by making a region, which includes projects in Charlotte, Miami, Birmingham, New Orleans and Dallas. Mark substantial, long-term personal investment in the company. Andy was formerly CFO and Treasurer is an impressive retail veteran who spent time at the Taubman Company, Related Companies, and of NorthStar Realty Finance Corp. (NYSE: NRF), a publicly traded commercial real estate finance most recently Forest City Enterprises where he oversaw all commercial development east of the company focused on investment in real estate loans, fixed income securities and net-leased real Mississippi. Mark brings an analytical perspective and experience steering large projects through estate properties. Andy’s track record and public company experience are great assets to our the entire development cycle. growing company. The third member of our development triumvirate, Chris Curry, is not a new hire, but an established Peter Riley joined us as General Counsel in May. However, his involvement with the company dates member of the team who played a vital role in guiding the company into existence. Chris oversees back to its inception where he was outside counsel representing our interests during the company’s our Western region, which currently spans Salt Lake City, Phoenix, Las Vegas, Sacramento and formation and emergence. Peter brings with him over 30 years of experience working in both the Honolulu. Chris has over twenty years of retail and mixed-use development experience, including public and private sector. A partner at K&L Gates LLP since 2004, Peter placed a significant focus time spent at Westfield and Forest City Enterprises where he oversaw the redevelopment of on the tax aspects of fund formation, joint ventures and the acquisition, disposition, operation and regional shopping centers as well as ground up development of projects throughout the West. financing of real estate assets. Prior to earning his law degree, Mr. Riley worked for Amerada Hess Chris is based in our Los Angeles office and epitomizes the passion of the Howard Hughes culture. Corporation (NYSE:AHC) where he became Chief Financial Officer of its Abu Dhabi subsidiary. Our most recent addition to this seasoned group of developers is John Simon, Executive Vice Andy and Peter played critical roles in executing our acquisition and transition of The Woodlands. President of Strategic Planning. John has over 35 years of experience in virtually every aspect of They also work alongside Grant and me in negotiating and forming our joint venture partnerships. real estate development, spending a majority of that time at the Taubman Company. At Taubman, They have shown an ability to execute on difficult tasks in short time frames and we are excited John was Senior Vice President and Managing Director and, for 10 years, he oversaw all development about the chemistry of our senior executive team. activities. John worked on over 40 major projects including overseeing the unprecedented task of opening four regional centers in the same year totaling over $1 billion in project costs. All projects were opened on time and within budget.

I have great confidence that John, Mark, Chris and John will accelerate our development pipeline, from New York to Hawaii, and create meaningful value across the portfolio.

While on the topic of people, I want to thank our Board of Directors. Their involvement as a resource to management in strategic decisions has led to a collaborative environment where we engage in spirited debates and ultimately determine how to best optimize the value of our assets.

RIVERWALK, NEW ORLEANS, LA

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They act like owners because they are owners, and you can take great comfort in knowing your looking for a home in western Houston money is in the hands of people whose interests are aligned with yours. then please visit www.bridgeland.com.

This past year also brought changes to the make-up of our board. David Arthur moved on to focus Further fueling Bridgeland’s growth, a on his role as President and Chief Executive Officer of Brookfield Real Estate Opportunity Fund. new beltway, commonly known as Grand We thank David for his wise counsel during the vital launch phase of the company. Concurrently, Parkway, is under construction and is we welcomed two new members to our board: Mary Ann Tighe, currently Chief Executive Officer scheduled to be complete by 2014. of CBRE’s New York Tri-State Region and Burton M. Tansky, currently Non-Executive Chairman of This freeway will link Interstate 10 to The Neiman Marcus Group and its former Chief Executive Officer. Interstate 45, bisect Bridgeland and open up opportunities to develop commercial Mary Ann has been credited with transforming New York’s skyline during her 26 years in the real estate industry. She has been responsible for over 77 million square feet of commercial transactions, land in our planned Town Center. It will and her deals have anchored more than 9.2 million square feet of new construction in the New also create a direct link from Bridgeland York region. Burt was Chief Executive Officer and President of The Neiman Marcus Group Inc. to The Woodlands, shortening a sixty- from May 2004 to October 2010. Prior to May 2004, Mr. Tansky served in several executive roles minute drive to twenty-five minutes. at Neiman Marcus and served as the Chairman and Chief Executive Officer of Bergdorf Goodman Near term, we expect 2012 to be from 1990 to 1994. Previously, Burt served as the President of Saks Fifth Avenue. We will benefit another year of record sales, after our tremendously from Mary Ann’s and Burt’s expertise as we fine tune the strategic plans for the 2011 revenues and average price per company and work to maximize the value of our assets. acre exceeded the 2007 “top of the market levels” previously established MASTER PLANNED COMMUNITIES at Bridgeland. The following graph Our master planned community business consists of the ownership, development and sale of demonstrates steady performance of property at four MPC’s: Bridgeland in Houston, Summerlin in Las Vegas, various MPC’s in the land sales revenue over the last six Maryland region and The Woodlands in Houston. Nationally housing statistics show a slow recovery, years. We will continue to look for ways to enhance the performance of Bridgeland through its but these statistics fail to show the divergent directions of local housing markets. In this regard, our association with The Woodlands brand and leverage our resources at The Woodlands to help guide company benefits from a diversity of geography that mitigates our exposure to the health of any the strategic direction of the asset. one local economy. In Las Vegas, the housing market is lagging the national recovery, but the economy is seeing continuing In Houston, the energy industry continues to fuel economic growth, making it one of the strongest improvement especially in the leisure and hospitality sector. The local housing market continues housing markets in the country. Our Bridgeland MPC had a record year and finished the year to suffer from substantial distressed inventory, tight lender underwriting, underwater borrowers ranked 4th in Houston and 13th nationally in MPC residential land sales. Since construction started unable to trade up or down and weakened demand for new homes. In 2011, the total number of in 2004, our predecessors invested over $300 million into this asset. We are poised to begin new home closings was the lowest in 23 years at 3,894 units. Our Summerlin MPC has not been harvesting those investments as major competitors run out of residential lots to sell and our on-site immune to these impacts, and as expected, certain home builders did not close on lot takedowns. team, led by Peter Houghton, continues to deliver a great community to our customers. If you are Through this challenging year, Kevin Orrock and his team have done a commendable job of managing this MPC for the company. Kevin is currently the Chairman of the Las Vegas Chamber of Commerce. This position within the Las Vegas community brings additional gravitas to our efforts. We do not know when this market will recover, but recognize that we control the largest piece of land in a land constrained market, with virtually no debt. We will continue to stay the course until the market returns, and long term, we believe that Summerlin’s future is very bright. Go to www. summerlin.com for more information on this dynamic community.

Within Summerlin, we are focused on one of our key strategic projects, Summerlin Centre. This project is widely acknowledged in the industry as one of the best regional shopping center sites SUMMERLIN MASTER PLANNED COMMUNITY, LAS VEGAS, NV

108 109 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014 in the country. It is also an opportunity to launch the downtown development for our Summerlin Second, it allows you a glimpse into the way we view our investments and the reasons for this MPC, which will spur demand, grow market share and enhance the value of the 7,000 acres of acquisition and potentially others. The value proposition is a sum of the part’s value but does land remaining to be sold in Summerlin. During 2011, we spent a considerable amount of time re- not take into account the following: (i) future vertical development opportunities, (ii) existing and planning the 400 acre downtown. We expect that during 2012, we will be in a position to announce future joint venture agreements, (iii) a change in density of uses and (iv) the time value of money. a date on which construction should start and a targeted opening date for the center. Based on an average 2011 residential lot price of $88,987 and an average uninflated cost to deliver In Columbia, Maryland we are transitioning from a traditional master planned community to focus of $23,848 per lot, we anticipate $65,139 in average net cash per lot on the remaining 3,669 lots, for on the redevelopment of Columbia Town Center. This November we took an important step in total proceeds from residential lot sales alone of $239.0 million. With respect to the commercial launching the Town Center redevelopment when we announced a joint venture agreement with land, we have three classes: 69 acres in The Woodlands Town Center, 856 acres outside of the Town Kettler and Orchard Development to develop the first phase of the Columbia Town Center Master Center and 36 acres of institutional land. Obviously, there is a wide divergence in land values given Plan, which at full build out will include up to 13 million square feet of mixed-use development. This their proximity to The Town Center, which is the most valuable land. Without giving away too much first phase includes approximately 375 units and is targeted to be completed by the end of 2013. competitive information, suffice it to say that average land prices for the remaining commercial land Our partners, Kettler and Orchard are highly regarded in the greater Washington D.C. metro region approximates $13.66 per square foot or $572 million. Based on the above land pricing, the total with a successful history in developing high-end residential products. gross proceeds to be derived from the sale of the remaining residential and commercial land in The Woodlands is expected to be approximately $811 million in the aggregate. Columbia Town Center has strong potential for continued multifamily development, which we plan to pursue as we build a new high-density urban neighborhood in the heart of Jim Rouse’s original Our income-producing operating properties, including our newest office building 3 Waterway have master planned community. In this process, John Dewolf will continue working with the local a current NOI of approximately $16.3 million and a stabilized NOI estimated to be $29.2 million. community to deliver a vision that will make us proud. Valuing the operating properties using stabilized NOI and a cap rate of 7% yields a value net of completion costs of $365 million, which brings the combined gross asset value of the acquired land As mentioned above, the headline of 2011 for our master planned community business was our and operating properties to approximately $1.176 billion. acquisition of Morgan Stanley’s 47.5% economic interest in The Woodlands for $117.5 million, including the assumption of $297 million in debt. A simple analysis of this investment based solely As mentioned above, an example of the additional value potential not included in the analysis on The Woodland’s history of land sales builds a convincing case that this acquisition will be very is value created through vertical development. While this is harder to price than land sales, The profitable for the company. The chart that follows shows actual residential and commercial land sale Woodlands has an established history of developing commercial assets in its Town Center. As of revenues and average price per acre in The Woodlands over the last ten years. the fourth quarter of 2011, the vacancy rates for Class A office and multifamily were at less than five percent. This ten year track record of steady revenues through one of the worst recessions of the last century demonstrates the stability of Houston and The Woodlands’ submarket. Furthermore, average We will break ground on 3 Waterway Square, a 232,774 square foot office building in The Woodlands residential lot selling prices are above 2005 levels and increasing. As of December 31, 2011, The Town Center in March 2012. The total project cost will be approximately $50 million (exclusive of Woodlands had approximately 1,164 acres of unsold residential land, representing approximately the land cost and existing parking garage). It is currently 67% pre-leased, with another 15% of the 3,669 lots, and approximately 961 acres of unsold land for commercial use, of which 36 acres space in active discussions. It will take approximately 15 months to deliver, and is anticipated to are categorized as institutional land. Assuming land sales alone and no vertical development, we have a stabilized NOI of approximately $6.0 million. At a 7% cap rate, the value of this building is anticipate that we will run out of residential lots for sale in 2017 and commercial land in 2022. worth approximately $85.7 million, creating $35.7 million of value for the company. 3 Waterway is a great example of how a change in density can increase value. Originally designed as a nine story The following paragraphs outline the value proposition for the acquisition of The Woodlands. This office building, we quickly realized that demand was outpacing supply. We subsequently increased is important for two reasons. First, it outlines to you the future potential profitability of the asset. the size of the building by two floors representing 45,000 square feet. At stabilization, this will create an additional $7 million in value net of completion costs. If we extrapolate this across the entire commercial land available for sale, you can quickly see how a change in density can magnify the outcome.

In the coming 18 months we plan to break ground on 800 multi-family units. Following that, we have plans for nearly 2.1 million square feet of Class A office space, another 150 multi-family units, 900 condominium units, 328,000 square feet of retail space and 300 hotel rooms.

HOWARD HUGHES DURING A TICKER TAPE PARADE UP BROADWAY, NEW YORK, NY, 1938

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It is important to recognize that this total does not account for the time value of money. This is We took advantage of capital market opportunities to extend existing debt, lower borrowing costs dependent on determining an appropriate discount rate, which is directly correlated with risk. and fund additional development by completing approximately $377 million of financings in 2011. The greatest risk for any MPC is at inception where hundreds of millions of dollars are expended This included a $250 million financing for Ward Centers that will save the company approximately prior to collecting any revenue. When looking at an MPC from inception, a 15% to 20% discount $3.6 million in annual interest charges, create flexibility for phased development of the master plan rate range would be appropriate; however, once initial infrastructure is invested and a track record and fund up to $38 million of future development expenditures. We also closed a $29 million of performance has been established, as is the case with The Woodlands, a much lower discount refinancing of our mortgage debt on 110 N. Wacker, which matched our new debt maturity with rate is justified. In addition, as we sell land, it stands to reason that in a growing vibrant community, the lease expiration date. At The Woodlands we completed a $55 million financing for 4 Waterway the remaining land will continue to appreciate in value. As we continue to build in the legacy and 9303 New Trails office buildings and in January 2012 closed a $43.3 million construction communities of Summerlin, Bridgeland and The Woodlands, it is clear that our remaining land financing of 3 Waterway Square, the 232,774 square foot office building mentioned earlier. holdings will increase in value. This is a cyclical business and we know we cannot count on linear growth. However, we are confident that staying the course will deliver meaningful value both in As a company it is our philosophy to be disciplined about the way we use leverage. From the current operating income and in the residual value of our assets. outset, both Grant and I knew that managing this company would require low leverage, and it is with this in mind that we structure the various components of debt at the company. We believe I hope by this point I have communicated the magnitude of this acquisition, but I’m not done that each development must stand on its own. We have therefore to date ensured that the leverage yet! In studying this investment it was clear that we would also be acquiring an established team we have be in silos and that to the extent possible, we maintain its non-recourse nature. of professionals who were underutilized in the former ownership structure. Co-Presidents Alex Sutton and Tim Welbes have 18 and 27 years respectively at The Woodlands, and we have already STRATEGIC DEVELOPMENTS begun to see the impact that the their experience and vision will have on the balance of our Senior management has spent the last year assessing the feasibility of each strategic development portfolio. As mentioned above, we believe the association of The Woodlands brand with Bridgeland and prioritizing those opportunities with the greatest potential. We entered into joint venture and the ability to tap into The Woodlands team for strategic planning will create additional upside partnerships with strong local developers at Ala Moana Tower, Bridges at Mint Hill and, as discussed at Bridgeland. Finally, the construction of a new 385-acre ExxonMobil campus immediately south above, Parcel D at Columbia Town Center. of The Woodlands Town Center is anticipated to hold a total of approximately 8,000 employees by the end of 2015, and an undetermined number of additional employees at full build-out, which will In Honolulu, we partnered with local developers The MacNaughton Group and Kobayashi Group only further supplement strong demand for office, retail and residential product in The Woodlands to pursue the development of Ala Moana Tower, a luxury condo tower above the Nordstrom and Bridgeland. parking garage at Ala Moana Center. In recent years, MacNaughton and Kobayashi teamed up to develop Hokua, a luxury condo tower directly adjacent to Victoria Ward. Completed in 2006, Hokua is widely recognized as the best high-rise condo address in Honolulu with units currently reselling for $1,200 - $1,300 per square foot. With their strong knowledge of the Hawaii market and experience developing first-class condominium towers, MacNaughton and Kobayashi are ideal partners to work with to maximize the value of this development opportunity.

In Charlotte, we teamed with local developer Childress Klein Properties to pursue development opportunities for The Bridges at Mint Hill. This 210-acre parcel is currently zoned for approximately 1.3 million square feet of retail, hotel and commercial development, and is positioned in the

WATERWAY SQUARE, THE WOODLANDS, HOUSTON, TX

OPERATING ASSETS The requirement to maintain flexibility for future redevelopment of our major assets like Ward Centers, South Street Seaport and Landmark Mall constrains our ability to execute long-term leases and is causing these properties to perform below their potential. In the face of these constraints, we still managed to deliver $51.1 million of NOI in 2011 from our operating assets. This was accomplished with hard work from our asset management, leasing and operations teams who preserved income by aggressively managing costs and increasing specialty income revenues. COLUMBIA PARCEL D, COLUMBIA, MD

112 113 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014 underserved southeast corner of the Charlotte metropolitan area. Partnering with Childress Klein enables us to build from their knowledge in the local market, joins two properties that each company separately owned, aligns our interests and positions the project to be the most attractive retail development site in the Charlotte area. Childress Klein Properties is one of the largest real estate development, investment and management companies in the Southeastern U.S. with owned real estate assets in excess of $1 billion.

During 2011, we leveraged the resources of the company by entering into these joint ventures. We expect that we will continue to use these arrangements where appropriate. Before making this decision, each development is viewed by assessing our available resources, the regulatory THE SEAPORT, NEW YORK, NY environment in that market, the leverage required to move forward and our experience with that product type. Joint venture structures provide the following advantages. First, the partners we geographically diverse, but concentrated in some of the nation’s most desirable markets. We also choose will be able to navigate the local markets with expediency. Second, we mitigate our risk own a broad range of property types and an unmatched pipeline with over 20 million square feet and preserve cash by essentially selling our land at the fair market value and contributing it to the of vertical development opportunities not including the millions of square feet of potential vertical venture. Third, the debt that is taken on by the joint venture insulates the balance sheet of the opportunities in our MPC’s. This diversity of location and asset class affords us valuable flexibility company. By doing all of this, we reduce risk, accelerate the business plan and still maintain upside to focus on those market and product specific opportunities that make sense at any given time in potential. Granted, we no longer have all of the pie. However, in such cases we believe the gain on an economic cycle. the upside is not worth the risk for continuing to go it alone. As opportunities materialize, we expect capital requirements to be substantial. Where appropriate, While classified as operating properties, Ward Centers and the South Street Seaport represent we will seek joint venture capital or operating partners. In my experience there is no shortage of substantial redevelopment opportunities that are at the top of our priority list. At Ward Centers, capital for a great opportunity, and our portfolio is full of unique real estate opportunities in the we continue to make progress with our master plan strategy. The opportunity for residential and best markets in the country. retail development at Ward is the most exciting development opportunity in the state of Hawaii. However, developing over 9 million square feet of potential mixed-use development requires In the year ahead, you can expect us to balance the need for thoughtful planning with a sense of thoughtful planning to maximize the long-term value of this asset while preserving in-place income urgency to move projects forward as fast as possible. We are driven and inspired by our belief in a that supports the company today. We expect to make substantial progress in 2012 as details of our common purpose to create timeless places and memorable experiences. Delivering superior results phasing strategy crystallize and we begin implementing our plan to commence the redevelopment. in this regard will maximize long-term value for our shareholders.

At South Street Seaport, in lower Manhattan, we reached a critical milestone in December 2011 The Howard Hughes name is synonymous with the relentless pursuit of achievement. We are when we executed a non-binding Letter of Intent with the New York City Economic Development inspired by that legacy and are systematically and strategically positioning our portfolio. While we Corporation that will enable us to pursue redevelopment plans. The letter of intent describes the are at the start of a long journey together, we look forward to continuing to earn your trust as we terms of future amendments to the lease, which must be finalized by June 30, 2012. We believe confront the many challenges ahead. I stated this in last year’s shareholder letter, and I believe that the redevelopment of Pier 17 holds significant potential to create a dynamic destination in lower it is still an authentic description of the character of our growing organization. With exceptional Manhattan for both local residents and tourists that will reshape the identity of the area and people, irreplaceable assets, and a collective commitment to excellence, The Howard Hughes significantly enhance the value of this currently underutilized property. Corporation is well positioned for success.

THE FUTURE OF HOWARD HUGHES In assessing the potential of each property, it is clear that a majority of the company’s value lies in a handful of assets. Accordingly, our team is sharply focused on maximizing the potential value of these key assets while monitoring opportunities to selectively monetize those less impactful assets at appropriate timing and pricing. DAVID R. WEINREB CHIEF EXECUTIVE OFFICER We recognize that we will never be able to fully predict what might go wrong or when another recession might strike. We also recognize that down markets don’t last forever. Our asset base is

114 115 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014

APRIL 7, 2011 TO THE SHAREHOLDERS OF THE HOWARD HUGHES CORPORATION FROM THE CHIEF EXECUTIVE OFFICER:

When Howard Hughes assumed control of the family business in 1924, he was well-positioned for success with a nearly debt-free portfolio of assets. While Howard Hughes’ passions for aviation and the silver screen are legendary, it was his visionary investments in real estate that form the bedrock of our company today. With the benefit of his acumen and vision, he created one of the great American empires of the Twentieth Century. As we publicly launch The Howard Hughes Corporation, the story is much the same. We are well capitalized and own some of the most sought after properties in the nation.

The Howard Hughes Corporation was re-born on November 9, 2010 as an independent, publicly traded real estate company with an irreplaceable collection of assets and a talented team of professionals. Our assets span 18 states from New York to Hawaii. They include best-in-class master planned communities, operating properties with tremendous potential, and a diverse pipeline of strategic development opportunities in some of the country’s most desirable locations. I am honored to have the opportunity to lead a team of more than 175 employees who are committed to making this company a top performing owner and developer of real estate in our industry.

Because I strongly believe in the quality of our people and assets, I have made a substantial personal investment in the company. Throughout my career in real estate, I have always invested my own capital. This commitment to having “skin in the game” is at the core of my investment philosophy and has been critical to my past success. Grant Herlitz, our President, shares this philosophy. It was clear to Grant and me that the only way we could properly lead this company was to make substantial, long-term personal investments. In doing so, we affirmed our belief in the business and our commitment to creating long-term stockholder value. You can be certain that Grant and I will treat your money as if it is our own.

This culture of ownership is further augmented by our board of directors, many of whom have made personal investments in the company. The directors and the companies they represent, along with senior management have invested a combined $269 million of new capital. On a fully diluted basis, this group owns over 43.5% of the company. We are fortunate to have a board of directors with the passion, good judgment, and substantial real estate expertise that will contribute materially to our success.

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The Howard Hughes name is synonymous with the relentless pursuit of achievement. We are inspired by that legacy and are systematically assessing and strategically positioning our portfolio. While we Recently, Andrew Richardson joined HHC as CFO. Andy has also made a substantial, long-term are at the start of a long journey together, we look forward to earning your trust as we confront the personal investment in the company. I believe our continued practice of substantial investments by many challenges ahead. corporate officers further strengthens our commitment to the company’s long-term success

PRE-EMERGENCE PREPARATION MASTER PLANNED COMMUNITIES While Grant and I were not appointed as President and Chief Executive Officer until November 22, With over 14,000 acres of land remaining to be sold in some of the country’s most dynamic markets, 2010, we gained considerable experience while serving as the company’s interim management. Since our master planned communities (“MPC’s”) are the core of our current business. This business consists early August 2010, our team has tirelessly focused on preparing the company to emerge from the of the ownership, development and sale of property at four communities including three wholly owned bankruptcy of our parent as an independent entity. We methodically worked to understand all operational MPC’s: Summerlin in Las Vegas, Bridgeland in Houston, and the Maryland region, based in Columbia. facets of the organization, assessed the current and potential value of the assets, and established the The company also owns a substantial ownership interest in The Woodlands in Houston. infrastructure necessary for future success. The collapse of the national housing market had a significant impact on land sales in our MPC’s. As Through this “total immersion” process, we gained a deep knowledge of the assets and the infrastructure, the market recovers, our communities are well positioned to capitalize. Excessive leverage and lower and positioned ourselves to successfully transition the company. I am proud of what our team accomplished quality offerings caused many of our competitors to suffer during the downturn. Both the quality of our and grateful to everyone who helped to make the spin-off a success. Spin-off related initiatives included product and the strength of our balance sheet put our MPC’s in a position to benefit when demand for negotiating the agreements required for a successful separation from GGP; assuming control of new homes begins returning to historical norms. development, leasing and asset management; assembling teams in key functions including accounting, human resources, legal and information technology; engaging in an open dialogue with cities, partners Although the recession has hit the Las Vegas market particularly hard, we are confident that growth and consultants to assess the status of each project; and creating a strong brand identity. will return and absorption will accelerate. To the casual observer, Las Vegas appears to have unlimited land available. In reality, this market is supply constrained due to the topography of the surrounding Successfully completing these initiatives made it possible for us to be here today. However, we also Summerlin understand that these accomplishments are in the past and significant work remains. Since the spin-off, Total Revenue vs. Home Closings 1996-2010 our team has embraced new objectives and is sharply focused on the future. 400,000 3,500 350,000 3,000 TEAM HOWARD 300,000 2,500 250,000 2,000 Ninety-four members of our 177 person 200,000 1,500 Thousands 150,000 team are dedicated to the company’s master $ 100,000 1,000 Home Closings planned community business, 51 work with 50,000 500 our operating assets, and 32 are at corporate. 0 0

Those employees dedicated to the master 1996 1998 2000 2002 2004 2006 2008 2010 Year Summerlin Revenues planned community and operating assets Summerlin Closings have significant tenure. Their history and understanding of the assets have allowed us to mountains, land set aside for conservation and recreational purposes, and the federal government’s achieve a seamless transition. ownership of the majority of the land surrounding the city. With over 7,000 acres of land remaining, Summerlin is the dominant land owner in the market. Going forward we are well positioned to capture Our executive team comes from an additional market share. Even a modest increase in pricing could result in large increases in revenue entrepreneurial culture. While focused compared to historical performance. on creating value for the company as quickly as possible, we also recognize the Long-term, the MPC’s have the potential to generate the cash flow necessary to accelerate the importance of process and systems required growth of the company’s strategic development segment. Furthermore, each community possesses to efficiently manage the company. Our additional opportunities for vertical development. We will not only focus on selling land, but will goal is to balance these disciplines while also look for opportunities to joint venture retail, residential and commercial developments with the staying flexible enough to take advantage potential to create recurring income. of opportunities as they arise.

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OPERATING ASSETS assured that we are being thorough in our due diligence and thoughtful in our analysis so that those The company’s operating assets are primarily retail properties including South Street Seaport (Manhattan, projects that are prioritized for development will be structured and financed to maximize value for the NY), Ward Centers (Honolulu, HI), various properties in Columbia Town Center (Columbia, MD), Landmark company and minimize our risk. Mall (Alexandria, VA), Riverwalk Marketplace (New Orleans, LA), Rio West Mall (Gallup, NM), Cottonwood Square (Holladay, UT) and Park West (Peoria, AZ). THE FUTURE OF HOWARD HUGHES As we look to the future of The Howard Hughes We are focused on the operational performance of each of these assets, and have hired an experienced Corporation, there are two simple maxims that and passionate group of leasing professionals to drive income. To date, we have seen significant interest apply to our portfolio. First, we recognize across the portfolio from many national and local retailers for both operating properties and our strategic the importance of location and quality. South developments. We are working with our tenants and their customers to ensure that they are receiving the best Street Seaport is one of the top five most experience possible when they visit a Howard Hughes property. We are in the process of reducing costs visited sites in New York City, Ward Centers by re-bidding every vendor contract and reviewing every line item in the budget in addition to appealing is 60 acres of fee simple oceanfront land in the property tax value of each asset. These appeals have achieved positive results with reductions to date the heart of Honolulu, and Summerlin Centre is totaling over $100 million in assessed value. arguably one of the best regional mall sites in the country. When the US economy recovers, STRATEGIC DEVELOPMENTS those assets that are best located will be primed for development. Second, we understand that down Our Company has a substantial portfolio cycles don’t last forever. Current revenue from our Summerlin MPC is well below its long-term average. of large and small-scale developments in Even a gradual return to this long-term average will generate significant cash flow for the company. our pipeline. These strategic developments provide opportunities for near, mid and long- As a largely unlevered company we have the time and resources to maximize the value of our portfolio. As term value creation. Senior management and of December 31, 2010, we held over $285 million in cash versus approximately $318 million of asset- the development team are currently assessing specific, limited recourse debt excluding our proportionate share of The Woodlands debt. With over $3 the feasibility of each strategic development, billion in total assets, the health of our balance sheet allows for flexibility in making investment decisions. and as this occurs, we are beginning to Therefore, we will be pragmatic in pursuing only those investments that meet our high return thresholds. prioritize those opportunities with the greatest development potential. Ward Centers and While we are only in our fifth month of existence as a company, we possess a powerful brand, an South Street Seaport are operating properties, but also represent substantial redevelopment opportunities. irreplaceable collection of assets and a sound corporate infrastructure. We have implemented the Notable strategic developments include projects such as Summerlin Centre in Las Vegas, Cottonwood in backbone that has allowed the company to immediately focus on the continued development and Salt Lake City, and Ala Moana Tower in Honolulu. execution of its strategic plan.

Ward Centers is just one example of the untapped value within our portfolio. Today, this 60-acre property As we pursue our goal of becoming the preeminent developer of master planned communities and mixed- contains 1.1 million square feet of retail, office and industrial space in the heart of urban Honolulu. The use properties in the country, we acknowledge that many challenges lie ahead. As with any great endeavor, company has land use approvals to redevelop the property with up to 9.3 million square feet of mixed- we know that achieving our goal will take significant time and effort. I am grateful for the hard work and use development. This future development has the potential to expand upon and materially enhance the steadfast dedication our team has given thus far. property’s retail presence. With exceptional people, irreplaceable assets, and a collective commitment to excellence, The Howard It also presents an opportunity to develop thousands of residential units with unobstructed ocean views in Hughes Corporation is well positioned for success. one of the market’s most desirable residential locations.

The Columbia Town Center master plan is another important example of the potential for value creation within the portfolio. While currently a part of our MPC segment, Columbia Town Center has an approved master plan to develop up to 5,500 new residential units, approximately one million square feet of retail, approximately five million square feet of commercial office space and 640 hotel rooms. Columbia Town Center, located in Howard County, Maryland between Baltimore and Washington D.C., has over 261,000 people living within a seven-mile radius with an average annual household income exceeding $120,000.

Depending on the scale, complexity and capital requirements of each asset, we will either develop David R. Weinreb assets internally or seek joint venture capital or operating partners. We recognize that development projects Chief Executive Officer of significant scale have long-lead times and require a substantial investment of both time and capital. Rest

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APRIL 7, 2011 TO THE SHAREHOLDERS OF THE HOWARD HUGHES CORPORATION FROM THE CHAIRMAN OF THE BOARD:

The Howard Hughes Corporation (‘HHC’) began its existence as a public company when it was spun off from General Growth Properties Inc. (‘GGP’) when it emerged from bankruptcy on November 9th of last year. Having joined the board of GGP shortly after the company filed for bankruptcy, my first priority was to work with the other directors of GGP to stabilize the company, extend the maturity of its debts and raise sufficient capital to emerge from bankruptcy as an independent publicly traded real estate investment trust. During that process, as I learned more about the disparate assets of GGP, I considered the idea of creating a new company to own certain assets hidden within GGP whose value would not likely be realized while these properties remained at GGP.

While the REIT structure is an excellent corporate form with which to own stabilized income producing assets like GGP’s mall properties, it is less than ideal for owning development assets, master planned communities (‘MPCs’), and other assets whose current cash flows are not reflective of their long-term potential. This is due to REIT ownership limitations on assets held for sale in the ordinary course of business, the large amount of capital and time required for development assets, and the fact that investors principally value REITs based on their distributable free cash flow.

We decided to set up a new company to own these assets so we could realize their long-term potential while maximizing the value of GGP in the short term. While the short term is not usually a time period that most public company executives are willing to acknowledge that they even consider, in this case it was critical for GGP shareholders to create value in the short term so we could participate in value creation over the long term. GGP was subject to a series of takeover bids from Simon Properties that undervalued the company and had material risk of transaction failure because of antitrust issues. By creating and then committing to spin off HHC, we were able to create about $7 per share in value for GGP shareholders for a total combined value of approximately $22 per pre-bankruptcy GGP share.

Once we had selected the assets that were to be contributed to HHC and negotiated the separation arrangements with GGP, our highest priority was identifying the senior management team that would run the

122 123 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014 company. Typically, such a process involves hiring a search firm, which then attempts to recruit executives at To date, David, Grant, competitors with relevant experience. In this case, there are few truly comparable companies to HHC and and our new CFO Andy a less than obvious pool of candidates to select from. While there are a number of publicly traded non-REIT Richardson have committed real estate corporations (so-called C corporations) that own development assets in some cases that are $19 million of their own similar to HHC, their track records in creating shareholder value leave much to be desired. capital to purchase long- While I believed that so-called real estate opportunity fund managers had the experience to oversee HHC’s term warrants on HHC at assets, I had no interest in hiring an external manager on a 2% and 20% basis to run the company, particularly their fair value at the time of in light of the ongoing conflicts they would have with other investments in their portfolios. The key criteria we purchase. Under the terms used to find senior management were: character, energy, intelligence, and experience profitably investing in a of the warrants, they cannot diverse collection of real estate assets. In addition, I wanted someone who had made money already, without be sold or hedged for the having lost any of the passion and drive to succeed, and without significant outside interests and assets that first six years of their seven- would compete for his or her attention. year life, a provision which meaningfully reduces their We found our leader in David Weinreb, a Dallas-based real estate entrepreneur, whom I had known (but not value compared with warrants without liquidity or hedging restrictions. In light of the long-term nature well) since high school, but only in recent years gotten to know in a business and personal context. David of the company’s assets, I cannot think of a better way to align the interests of and incentivize our had contacted me a year or so ago for advice on raising a real estate opportunity fund about which we had management team to create value for shareholders. If the stock price stays flat from the time they joined an ongoing dialogue. He had been investing and developing real estate assets largely on his own since leaving the company, they will lose their entire investment in the warrants. If the stock price makes a sustained college (just like Bill Gates but in real estate) more than 25 years ago and had sold or monetized the vast increase in value over the next seven years, management will participate to a leveraged extent in the majority of his assets before the recent downturn in the markets. increase in the stock price. Other than the warrants, our senior management receives relatively modest cash compensation particularly when compared with real estate private equity compensation levels. While over the last 10 or so years he had largely been investing his own While on the subject of compensation and alignment of incentives, I thought it worth mentioning that the capital in real estate and investment funds that I manage currently own a 23.6% fully diluted economic interest in HHC including stock, total securities with his partner, Grant return swaps, and seven-year warrants that we received in exchange for our backstop commitment to HHC. Herlitz, and a team based in Dallas, I receive no salary for serving as your chairman, and I have waived all board compensation. As a result, you Houston and Los Angeles, David was can be comfortable that my interests are aligned with yours. That is not a guarantee of success, but rather it considering raising a larger pool of will ensure that we will succeed or fail together. In a partnership, getting the right team in place with the right capital to participate in opportunities incentives puts you on good footing for future success. On this basis, we are off to a good start. created by the credit crisis. It was in this context that I mentioned the Now you might ask how one should calculate the value of HHC and judge our future progress. While these assets that would become HHC, are two critical questions for any investor, in the case of HHC, the answers are not nearly as straightforward and David and Grant were intrigued. as in a more typical real estate or other public company. They spent the next 30 or so days inspecting the properties that would be contributed to HHC. They then worked on spec to assist Pershing With respect to the valuation of HHC, Square in negotiating the best possible deal for old GGP shareholders in setting up HHC. the easy answer is that you should calculate the value of our assets – As we worked together on the HHC portfolio and negotiated arrangements for the company’s eventual cash, real estate, and tax attributes – spinoff, it became clear to us that these were the right partners to oversee the company going forward. subtract our liabilities and then divide David and Grant are moneymakers with a clear understanding of risk and reward. While there are real estate by fully diluted shares outstanding. executives with more public company experience, more master planned community experience, and/or The difficulty is that the real estate more development experience, we were principally interested in selecting a management team we trusted assets owned by HHC are notoriously with relevant experience, who would think of the corporation’s capital as their own, and who were willing to difficult to value. First, you should invest a meaningful amount of their own money alongside shareholders. consider that their long-term value –

124 125 PAST LETTERS TO SHAREHOLDERS ANNUAL REVIEW 2014 the value that can be achieved by a long-term owner – is, in my opinion, materially higher than their liquidation value. from sales of assets and the book value of those assets on our balance sheet. We could generate large amounts Some, albeit not ideal, evidence of this is to compare the value of GGP just before the spinoff of HHC to the value of income for example by selling South Street Seaport and other assets for which book value is less than of the combined companies today. Approximately $7 per GGP share in value has been created by the contribution of market value. While this would generate material accounting gains and require us to pay large amounts the properties to an entity that has the capability to hold these assets forever. of taxes, we might be destroying long-term shareholder value by doing so, particularly if we believe materially more value can be created through redeveloping and releasing these assets over time. We For our MPC assets, one can make assumptions about the timing and number of future lot sales and then discount will also generate larger profits from our Summerlin MPC as a result of the more than $300 million back these cash flows over the 30-or-so-year life of the project at a discount rate you deem appropriate. The problem write down the company recognized at year end, but this should not make you feel richer as a result. with such an approach is that small changes in assumptions on discount rates, lot pricing and selling velocity, inflation, etc. can have an enormous impact on fair value. Simply put, I will judge our progress based on our management’s ability to move each of our assets closer to the point at which it can generate its maximum potential cash as an operating asset, and For our development assets, one needs to make assumptions about what will be built, when it will it be built, to whom to manage our MPCs to once again begin to generate material amounts of cash from sales of lots to it will be leased, what rents it will achieve, what expenses it will incur, and what multiple an investor will place on these builders and the development or sale of their commercial parcels. cash flows. Again, even highly sophisticated real estate investors will assign substantially divergent values to the same assets when using their own assumptions. Because of (1) the large number of Some investors look at book value, but book values, particularly for HHC are in most cases largely unreliable measures assets we own, (2) of value. For example, South Street Seaport, one of our more valuable assets, is carried on the books of HHC at the large amounts $3.1 million. Last year, it generated more than $5 million in cash net operating income, and this number meaningfully of capital required understates the potential future cash generating potential of this property as GGP generally discontinued granting to redevelop these long-term leases to tenants as it prepared the property for a major redevelopment. Even using the $5 million NOI properties to enable number, one can get to values approaching $100 million using cap rates appropriate for New York City retail assets, them to achieve their and we would likely leave a lot of money on the table if we sold it for this price. full potential, (3) our relatively limited cash We could attempt to calculate net asset value and publish a number as some public real estate companies have resources, (4) our done. I am not a huge fan of this approach because of the widely diverging estimate of values that even the most aversion to the use informed, best-intentioned evaluators will generate. So therefore, the best we can do is to give you as much of large amounts of information as we can provide (bearing in mind that there is some information that we will elect to withhold for recourse leverage, (5) our high return requirements for our own capital, and (6) the availability of large competitive reasons) so that you can form your own conclusion. While we have just begun the public reporting amounts of lower-cost real estate equity capital for developments like the ones owned by HHC, you process and we are still learning that art, you can expect over time that we will release more information to assist should expect that we will raise outside capital and/or joint venture many of our properties with other you in forming your own assessment. investors, operators, and/or developers. This approach should enable us to manage risk and increase our return on invested capital. With respect to judging our business progress going forward, the usual We will do our best to keep you informed as to our progress with each asset in the portfolio as metrics like net income, operating we obtain necessary approvals, design and build projects, lease space, and generate cash flows. Over cash flow, EBITDA, AFFO, earnings per time, our goal will be to turn each of our non- or modestly income-producing assets into an income- share, etc. are not going to offer much generating property, while selectively monetizing assets when we believe a sale will generate more help. (By the way, when you read value for HHC on a present value basis than holding the asset for the long term. this sentence in the annual letter of a typical company, you should usually In light of the complexity of our asset base and the inadequacy of GAAP accounting to track our take your money elsewhere.) Our progress, you should now understand how important it is to get the right management team in reported net income and cash flows place with the right incentives. Furthermore, while most public company boards are comprised of will largely depend on gains and losses experienced executives with typically minimal expertise in the business of the company on whose

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board they sit, HHC’s board is largely comprised of real estate experts with broad expertise in MPC and retail development, residential and office ownership and development, institutional investment in real estate, and other real estate disciplines relevant to HHC.

Importantly, our directors do not need their director fees to pay their rent, and have chosen to participate for the experience, reputational benefits, and camaraderie from working to create value for our shareholders. We will act in your best interests to the best of our ability and look forward to the opportunity to impress you with HHC’s success over the coming years.

Lastly, in a world where investors are concerned about the future value of paper money and inflation that have caused many investors to turn to gold to hedge that risk, I am quite comforted by the assets of HHC. We own the gold and blue white diamonds of the real estate business, assets that have traditionally performed well in inflationary environments.

Welcome aboard. Sincerely,

WILLIAM A. ACKMAN CHAIRMAN

128 129 PROJECT HIGHLIGHTS BOARD OF DIRECTORS

WILLIAM ACKMAN, CHAIRMAN OF THE BOARD William Ackman is the Founder and Managing Member of the General Partner of Pershing Square Capital Management, L.P., a registered investment adviser founded in 2003. Pershing Square is a concentrated, research-intensive, fundamental value investor in long and occasionally short investments in the public markets, typically focusing on large-cap and mid-cap companies. Mr. Ackman is a member of the Board of Dean’s Advisors of the Harvard Business School, a Trustee of the Pershing Square Foundation and on the Board of Directors at Canadian Pacific Railway. ADAM FLATTO Adam Flatto is the President and Chief Executive Officer of the Georgetown Company, a privately-held real estate investment and development company based in New York City. He has been with The Georgetown Company since 1990, and since that time has been involved with the development, acquisition and ownership of over 20 million square feet of commercial real estate projects throughout the United States. JEFFREY FURBER Jeffrey Furber is the Chief Executive Officer of AEW Capital Management, L.P. (“AEW”) and Chairman of AEW Europe. AEW provides real estate investment management services to investors worldwide. As of early 2015, AEW and its affiliates managed over $53 billion of real estate assets and securities on behalf of many of the world’s leading institutional and private investors. GARY KROW Gary Krow currently serves as Director of Electronic Fund Source (EFS) and Cadec Global. Prior to that he was the President, CEO and Director of GiftCertificates.com, a leading eCommerce provider of B2B incentive management solutions, from July 2008 until its sale in 2010. Mr. Krow was also a consultant for Light Year Capital, a diversified private equity company, from January 2008 to June 2008. Prior to his position with Light Year Capital in 1990, Mr. Krow joined Comdata Corporation, a global electronic issuer and processor of payments and served as its President from 1999 to May 2007. ALLEN MODEL Allen Model is the Co-Founder of Overseas Strategic Consulting, Ltd. (“OSC”), and has been Treasurer and Managing Director since 1992. OSC is an international consulting firm that provides public information services to a number of clients worldwide, including the United States Agency for International Development, The World Bank, The Asian Development Bank and host governments. SCOT SELLERS Scot Sellers served as Chief Executive Officer of Archstone, one of the world’s largest apartment companies, from January 1997 until his retirement in February 2013. Prior to that, he was Archstone’s Chief Investment Officer from 1995 to 1997. Under his leadership, Archstone moved from being a mid-sized owner of apartments in secondary and tertiary cities to becoming the largest publicly traded owner of urban high rise apartments in the nation’s premier cities. During his 32-plus year career in the apartment business, Mr. Sellers has been responsible for the development, acquisition and operation of over $40 billion of apartment communities in over 50 different cities across the United States. Mr. Sellers served as the Chairman of the National Association of Real Estate Investment Trusts from November 2005 to November 2006. STEVEN SHEPSMAN Steven Shepsman is an Executive Managing Director and Founder of New World Realty Advisors, a real estate investment and advisory firm specializing in real estate restructurings, development and finance. Earlier in his career, Mr. Shepsman, a CPA, was a Managing Partner of Kenneth Leventhal and Company and of Ernst & Young’s Real Estate Practice. BURT TANSKY Burton M. Tansky is a luxury retail veteran who served as Non-Executive Chairman of the Board of Directors of the Neiman Marcus Group, Inc. from 2010 to 2013. He was the Chief Executive Officer of Neiman Marcus Group from 2004 to 2010, Chief Executive Officer of Neiman Marcus Stores from 1994 to 2007 and Chief Executive Officer of Bergdorf Goodman from 1990 to 1994. Prior to that, he was the President and Chief Operating Officer of SAKS Fifth Avenue from 1980 to 1990. MARY ANN TIGHE Mary Ann Tighe has been credited with transforming New York’s skyline during her nearly 30 years in the real estate industry. She has been responsible for over 90 million square feet of commercial transactions and her deals have anchored more than 13.7 million square feet of new construction in the New York region. Ms. Tighe has been CEO of CBRE’s New York Tri-State region since 2002, a region of approximately 2,300 employees. In January 2010, Ms. Tighe was named Chairman of the Real Estate Board of New York, the first woman to hold this position in REBNY’s 114-year history and the first broker in 30 years. DAVID R. WEINREB See corporate officers.

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