Good day, and welcome to The Howard Hughes Corporation Third Quarter Earnings Call. Please not that this event is being recorded. I would now like to turn the conference over to Eric Holcomb, SVP of Investor Relations. Please go ahead.

Good morning, and welcome to the Howard Hughes Corporation's third quarter 2022 earnings call. With me today are David O'Reilly, Chief Executive Officer; Jay Cross, President; Carlos Olea, Chief Financial Officer; Dave Striph, Head of Operations; and Peter Riley, General Counsel. Before we begin, I would like to direct you to our website howardhughes.com where you can download both our third quarter earnings press release and our supplemental package. The earnings release and supplemental package include reconciliations of non-GAAP financial measures that will be discussed today in relation to their most directly comparable GAAP financial measures. Certain statements made today that are not in the present tense or that discuss the company's expectations are forward-looking statements within the meaning of the federal securities laws. Although the company believes that the expectations reflect reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that these expectations will be achieved. Please see the forward-looking statement disclaimer in our third quarter earnings press release and the risk factors in our SEC filings for factors that could cause material differences between forward-looking statements and actual results. We are not under any duty to update forward-looking statements unless required by law.\ I will now turn the call over to our CEO, David O'Reilly.

Thank you, Eric. Good morning, everyone, and thank you for joining on our third quarter earnings call. To start off today's call, I'm going to provide a brief overview of our third quarter segment performance, highlight the results of our master plan communities in Seaport. Dave Striph will cover the performance of our operating assets, and then Jay Cross will provide an update on our development projects in Ward Village. Finally, Carlos Olea will provide a review of our financial results before we open up the lines for Q&A. Looking at the results for the quarter, each of our operating segments performed really well relative to the same period in 2021 despite these ongoing economic headwinds. And MPC EBT rose 39% and operating asset NOI remained elevated despite the impact of divested assets. At the Seaport, revenue increased 57% and generated a net operating profit before equity losses related to the start-up costs at the Tin Building. At Ward Village, we completed Ko'ula and closed on a total of 404 condominium units generating net revenue of $419 million, with a strong gross profit of 30%. In addition, we launched presales at Kalae, our tenth condo tower, at the end of September, which was met with exceptional demand, having already presold more than 40% of the units. Overall, our strong results, both this quarter and year-to-date are a testament to the resiliency of our business model and our one-of-a-kind portfolio, which continues to withstand economic volatility like we are experiencing today. Before I dive deeper into some of these results, I first want to congratulate who leads our ESG efforts and the entire Howard Hughes team on the progress made to further our sustainable and inclusive communities. whose assessments are a benchmark of sustainability performance and best practices for real estate…

Thank you, David. In the third quarter, our operating asset segment delivered $61 million of net operating income, which was a $2 million or 3% decline from the same period last year. This was primarily due to the sale of noncore assets, including the 3 Woodlands-based hotels and the Riverwalk outlet New Orleans. These assets generated $3 million in the prior year's quarter, excluding these divested assets, NOI was up $1 million or 2% year-over-year. The largest increase in our portfolio was seen in our multifamily assets, which produced quarterly NOI of $12 million, representing a 27% increase versus the prior year. This improvement was primarily the result of strong lease-up at our newest communities as well as strong performance at our stabilized properties. At the end of the quarter, these assets were all leased in the mid- to high 90% range despite market pressures, many multifamily properties across the U.S. are experiencing today due to rising rents and affordability. We believe this is a testament to the demographics of our MPCs as well as the attractiveness of our upscale, highly amenitized multifamily properties. With these robust leasing percentages and exceptional demand for rentals in our MPCs, we continue to see strong multifamily rent growth. In the third quarter, our in-place effective rent increased nearly 13% on average when compared to the same period last year, and we commanded some of the highest rents in our markets. During the quarter, we completed and began leasing units at our latest multifamily development, Starling at Bridgeland, which is experiencing strong initial demand. With additional multifamily projects under construction in Bridgeland, Summerlin and Downtown Columbia, we continue to see meaningful opportunities to drive incremental NOI growth as these new projects are completed in the coming quarters. Office NOI of $29 million increased 3%…

Thank you, Dave, and good morning. During the third quarter, we continued to make great progress with our development pipeline of multifamily office and medical office buildings in Houston, Las Vegas and Downtown Columbia. At Ward Village, we completed construction at Ko'ula, our sixth condo tower, and we launched presales at our latest condo development Kalae. Starting with Houston, we completed 3 projects during the quarter, the largest of which was Starling at Bridgeland, a 358-year multifamily development in Bridgeland Central, we welcomed our first residents in mid-September and experienced solid initial lease-up with the complex already 16% leased as of quarter end. In the Woodlands, we delivered a 20,000 square foot Memorial Hermann build-to-suit Medical Office Building ahead of schedule. And lastly, we completed construction of the Kirby Ice House, which is located in the heart of the Woodlands. This venue, which boasts the longest bar in Texas opened in late September with much acceleration. Elsewhere in Houston, we continue to make good progress with Creekside Park Medical Plaza in the Woodlands, which we expect will be completed in the fourth quarter. In (inaudible), our 263 single-family build-to-rent project, , also continues to advance with initial construction well underway. We expect to start welcoming residents in early 2024. Just last week, we announced our plans to develop Village Green at Vision Central. This 23-acre mixed-use site will be anchored by HEB Grocery store and will also include our first office project in vision, which will also be our first mass timber development. We will provide more information on these projects as construction begins in early 2023. In Las Vegas, we are nearing completion of 1700 Pavilion, our newest Class A office tower in Downtown Summerlin. This 267,000 square foot building has seen tremendous demand and was already 51% leased…

Thank you, Jay. Our results in the third quarter demonstrate the strength of our business model as we continue to benefit from strong demand throughout our communities despite headwinds in the real estate market. In summary, during the third quarter, reported net income of $108.1 million or $2.19 per diluted share compared to net income of $4.1 million or $0.07 per diluted share during the prior year period. Our MPC is generating strong EVP of (inaudible) million, an increase of 39% year-on-year, despite reduced super pad sales in Summerlin. This improvement was primarily driven by (inaudible) and Bridgeland, favorable builder price participation revenue, strong appreciation in the average price per residential acre sold and the equity contribution from the . Our operating assets delivered $61 million of NOI with improvements in multifamily and office. While this represented a 3% year-on-year reduction when excluding the impact of our (inaudible) hospitality assets and the audit collection of Riverwalk, operating assets NOI increased $1.2 million or 2%. At Ward Village, we call some 404 condo units, resulting in $123.3 million of condo profit at a 30% margin and continue the strong pace of presales for our projects in development. At the Seaport, we recorded a $9.5 million NOI loss primarily as a result of startup costs that we've been building. However, we have seen tremendous increase in foot traffic and sales for our managed restaurants, concerts and private events as evidenced by a 57% increase in revenue compared to the prior year period. Overall, we are very pleased with the performance of our business segments in the third quarter and year-to-date. Together with our favorable outlook for the fourth quarter, we have increased our 2022 full year guidance for the MPC and operating assets segment. In MPC, in spite of significant challenges in…

Thank you, Carlos. And with that, let's begin the Q&A portion of the call. We'll start by answering the first few questions that were generated by state technology and voted on by our shareholders. They're going to be read by Eric Holcomb. Eric, will you read the first question?

Sure, David. The first question is, can you give an update on the debt and covenant compliance? Carlos, do you want to take that one?

Sure. Thank you, Eric. In the third quarter, we did not need the debt service coverage ratio for one Hughes Landing, two Hughes Landing and four per square. So let me first say that none of them have a material impact on our liquidity or our ability to operate the assets because the consequence of that meeting the ratio is to trigger a cash trap, which means that the cash generated by the assets have to stay at the assets and cannot be sold up to corporate, but we can use them to run the assets. The first 2 - in the first 2 buildings, the issue is related to tenant move outs that we're actively working to re-lease while in the case of our Waterway is the result of an early renewal with re-rent, so that issue will cure as the pre-rent burns out.

Thanks, Carlos. The second question is with rates rising and now at 4%, what are the parameters for moving forward with a new development project? Does the 7% or 8% return on cost model still work? Jay?

Well, it's very much a project by project decision. I mean, like everyone else, we're being squeezed by higher cap rates and increased construction costs that we still benefit more than most by the strength of our master planned communities, which allows us to outperform in terms of revenue and also avoid overbuilding. So if we believe the project's economics are feasible and favorable in the long term, and it can add value to our portfolio, we'll continue to develop where possible, always based on current market factors and appropriate risk-adjusted economics. It's worth noting that each of these projects are important on their own, are also important in terms of how they combine to impact the rest of the community and drive greater value in our enviable land bank. So that drives a lot of our decisions.

Thanks, Jay. Third question is on your Investor Relations page, you have a set of key metrics. One of those is historical return on equity and its reported to be 25%. Could you provide some guidance on how this number could be verified? An example of numbers for an actual project would be great as well. Carlos?

Thanks, Eric. I - first, and then we'll move on to the example. We said it is very helpful. So this is the cash-on-cash return, essentially, the cash (inaudible) debt service divided by the equity in a project. And it's something that we update on a quarterly basis. So the number being quoted right now, 25% is what we had as of June 30. And again, it will be updated every quarter. And this is the result of the cash and cash returns were all assets developed by us over time, including those that have been sold. Now to get to the example, using One Lakes Edge, one of our multifamily projects in the Woodlands, one in such has a 42% cash-on-cash return, which is calculated by taking the stabilized NOI of $7.2 million, which you can find in the supplemental less the debt service of $3.3 million, which is not directly found, but we do publish the principal amount in the rate in the property level debt section of the supplemental. And that net $3.9 million of cash, $7.2 NOI minus $3.3 million of that service, $3.9 million of free cash, which is divided by the equity in the project of $9.3 million, and that's how we get to a 42% return for One Lakes Edge.

Great. Thanks, Carlos. Next question is, how should we think about the value of your 1 million square foot of retail in Hawaii after fully stabilized? Dave, do you want to take that one?

Sure. Well, given that I lived there for 7 years, I feel like I have a pretty good feel for it. The location in my mind is irreplaceable. It's across the street from a 100-acre beach park, at the base of our vertical MPC, just halfway between Downtown Honolulu and Waikiki. We currently have a mix of older legacy assets and then new retail assets. As we continue to develop the community, we demolish the older product and replace it with newer, better retail at the base of our condo buildings. When we do this, we increased rental rates from around $20 triple net on average to somewhere around $75 triple net. And as more people move into the neighborhood, we expect this retail performance just continue to increase.

Okay. Thanks, Dave. All right. We'll take one more question. Does the company maintain its position as a price maker and not a price taker regarding land sales? Do -- new economic conditions change who has the power in these negotiations.

Look, I think this past quarter's result, I can clearly demonstrate that we're still a price maker. We had a tough economic environment this past quarter, but we continue to experience increasing price per acre sold in all of our PCs. Clearly, as we said in our prepared remarks, we're going to only sell land to keep up with underlying home sales. And if we don't like the price that homebuilders are willing to pay, we won't sell. We have the precious limited resource, especially in an area like we're sitting in today in Summerlin, outside of Las Vegas, which is very much land constrained. And we're going to wait because we have that precious resource that will continue to appreciate if we don't like the price on any given quarter or any given year. With that said, we haven't seen deterioration. We've seen increases, and we're excited about what we'll see for the rest of this year.

Thanks, David. All right. Sarah, with that, we'll open the lines for Q&A. Can we have the first question, please?

Thank you. Our first question comes from Anthony Paolone with JPMorgan. Please go ahead.

Thank you. My first question just on builder price participations - like, I think, $52 million year-to-date. And I just want to try to get ahead of 2023. And as we think about where that could go, like does that kind of fade away because perhaps whatever the base pricing was for the stuff that might get sold next year is different? Or I guess how should we think about just the risk around that number looking ahead? Because it just seems to be running pretty high/

It's a great question, Tony, and I appreciate you asking. Look, it's a number that is in this year and last year, very high, outsized relative to our expectations. And I'm going to do my best to answer this question without giving you any sort of guidance on '23 because we're not in a position to do that on this call. But I do think that our expectations would be that, that would return to more normalized levels. This is clearly elevated over the past several quarters. And if we're really good at selling land at the absolute right price, that should be zero. Luckily for us, people continue to invest in upgrades in their homes, pay for view premiums, and we've seen price appreciation in the underlying home sales in each of our MPCs, which has driven a very favorable builder price participation over the past several quarters and years.

Okay. I understand. Thanks for that. And then just a question on the condo presales, 40% in a month in a tough market. Can you just talk about maybe where the demand is coming from and just comfort that kind of get the rest of that done?

Yes, absolutely. So the demand we've seen is largely consistent. It's half to 55% of buyers local to the island. It's still about 30% Asian buyers, primarily out of Japan, and we saw an increase compared to our past couple of towers, modest increase through our Tokyo sales gallery and we're still seeing strong demand for mainland U.S. buyers. It's a very consistent mix of what we've talked about and published in the past across our towers fluctuates a couple of percent here or there. In terms of our optimism for contracting and selling the remaining 60% of the building, we feel great. Look, there's always so many days you can contract, and it takes a while for those deposits to go hard. And we had a very short window this quarter, we feel very good that, that's a number that will continue to climb throughout the rest of this year.

Okay. Got it. And then just last one, if I could, on 250 Water Street, I understand how it's tied up in the lawsuit. But does that mean in December, we get an answer? Or can that just drag out a lot longer? And I know you have some debt that's on that. Just trying to understand what you do with that.

I really can't comment on the timing of the temporary training order, our ability to get it listed or what will happen in the court system. We strongly believe that this is a suit without merit, and we're going to fight it vigorously. And as we have an update on the timing, we will absolutely be sure to communicate it. The loan that we have on the asset, we feel is completely supported by the value that's there, especially given that -- since that loan was put in place, we've had the approval of the transfer of the rights, which has done nothing but increase the value. So we feel strong that we're going to be able to refinance that debt, whether or not we have the temporary restraining were lifted, which, again, like we said, we believe is without merit.

Okay, got it. Thank you.

Our next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Hey, good morning. David, I appreciate that you don't want to talk about 2023 guidance, and you know me well enough to know probably where I'm going. But my question is this, you guys took up your land sale -- land sales are not going to be down as much as you expected this year. We all know it's a mix quarter-to-quarter if some super pads or high-end land closes, that obviously impacts, appreciate your comments that the high end -- the bulk of your home sales prices continue to go up, the low end, which I'm going to guess is more Woodland Hills is more affected. But in general, it sounds like not that you're immune from the 7% mortgage world, but that your communities are far less impacted. So maybe you can just give some perspective because it sounds like the operations of the business are going well, the NOI, the land sales pricing is holding up better. So I'm just trying to see where the weaknesses are? And as we think about next year, should we plan -- are we thinking about major declines in land sales because you don't like pricing or what you're hearing now from the builders is they're willing to pay the prices per acre because they really want to be in your communities, and they don't really have a lot of inventory so they sort of need to be there because that's where the buyers are. I'm just trying to get a sense of how your communities are performing relative to the market and maybe you're increasing share because your communities offer more than the average MPC out there?

Alex, it's a great question, and it's one that I'll try and answer as best I can. Look, I think that our homebuilder partners and homebuyers want to be in our MPCs. We have an unmatched quality of life, incredible amenities, short commutes, improved work-life balance and just a lower cost of living that's driven so many home buyer decisions and, therefore, homebuilder demand for our land. Clearly, home sales are slow. We have higher interest rates. We have inflationary pressures, recession. It's having an impact. I believe we've been outperforming, and I believe we'll continue to outperform based on the quality of our communities. We're in a much different spot in this potential housing downturn than the last. Going into the last housing downturn, we had meaningfully (inaudible) built new homes ahead of household formation. And that trend is completely different today. And if you look at some of the data that comes out of and and national research, we estimate that we're short almost 4.5 million to 4.8 million homes today, couple that with record low vacant developed lot inventories in the hands of our homebuilders where I would argue 20 months of equilibrium. And in Phoenix, we're at 14, in Houston, we're at about 13, and here in Summerlin, we're 7 to 8 months of supply, which is record lows. So I think the strength that we saw this quarter and our confidence in being able to take up guidance for the remainder of this year is the result of the outperformance we've seen in our communities, the record low land inventories, homebuilders have and the continued demand for homes. And unlike the past cycle, Alex, where a home buyer coming into the market new have their choice of way too many resales on the market. We see fewer and fewer resale inventory as those people that are sitting in their home locked into a 3% mortgage aren't in a rush to trade out to a 7. So new buyers coming into this market have really left with new homes as their choice.

Okay. So David, let me ask you this. If you break out your portfolio, you said the low end is being impacted, what percent of your portfolio of land sales or however you want to mention it or break it out -- is it 80% of your land sales target the upper end that aren't really being impacted? Is it 50%? Just trying to get sort of a breakout as far as how much of your land goes towards the homes that aren't seeing an impact by 7% mortgages versus the lower-end homes, the starter homes that are seeing an impact?

Yes. So our land sale strategy is to meet the underlying home sales and to fill the deepest pocket of demand. So in any given quarter, our land sales could be directed to more higher-end homes or it could be directed to more starter homes. And our land sales will adjust to meet that demand quarter-over-quarter. And to that end, I think based on the results that we've seen that we mentioned in the prepared remarks, for the next several quarters, we'll see more lots sold to those that are still driving the home purchasing and less to the more starter homes. But it's incumbent on us, Alex, and we do this, and we've talked about this, I'm sure, that we push to make sure that we have all price points available on the ground to the best we can in all of our communities. It maximizes absorption and maximizes vibrancy of the community maximizes the diversity of the new families that we welcome into our communities. So our job is to make sure that we have lots on the ground to meet all those price points at all times.

Okay. Next question is this is probably a yes, no. It sounds like the condos in Hawaii, there's no impact there. Like they sell regardless -- they're sort of immune to mortgage rates, et cetera. Is that a fair assessment?

I would say based on the sales that we experienced this quarter, both closing out Ko'ula, continued absorption in A'ali'i continued presales at the Park Ward Village and Ulana as well as launching Kalae. So far, we haven't seen a meaningful impact or change or dampening of demand based on any of those other factors.

Okay. Final question. I appreciate you. The final question. The labor you mentioned around the Tin Building and obviously, labor in general at the Seaport. Does this delay -- does this push out by a few years, your planned stabilization because it doesn't seem like the labor market is going to get better anytime in the near term. So are you guys now assuming a longer stabilization to profitability? Or what's your view given what's gone on so far with labor?

Yes. It's tough for me to quantify what that delay has really changed in terms of the time line to stabilization, Alex, it's not years, it's months. As we said, we expect to be open fully at 7 days by the end of this year, early January, and we're chipping away at hiring every week, adding 15 to 25 new folks that are coming to join the team and learned from probably the best calling our expert in the world in my opinion and Jean-Georges and helping out with the Tin Building. So we're chipping away. We feel good that we're on a road map now to getting open to 7 days. We would have liked to have been open 7 days in September. But if that becomes January instead of September, sure, because the stabilization will be pushed off 3 to 4 months. Absolutely. I don't know that my crystal ball is accurate enough to say exactly the day that we expect it to be stabilized. So it's really hard to quantify what this could mean.

Thank you.

Our next question comes from Vahid Khorsand with BWS Financial. Please go ahead.

Good morning. First, a follow-up on the Ward Village. You sold a couple more units in Ko'ula in Q3. Are you seeing any feedback from these customers and from sales associates as to the sales process that you're seeing there?

Look, I think that our job is to constantly take the feedback throughout that process to try to improve it. And it's something that our sales team that led by Bonnie Wedemeyer on the ground there and Ward Village does an excellent job at. And I think that excellence has shown up in our results and our ability to continue to sell.

Okay. And there were some reports for the last few months some new homebuilders were seeking out investors buy homes in bulk for rental homes. Are you exploring ways to expand Howard Hughes footprint in single-family rental space?

Yes. I think the launch of our first single-family for rent community, Wingspan and Bridgeland is evidence of that. We very much make sure that as we sell land to homebuilders those homebuilders are selling homes. We don't typically allow spec building, and we're pretty maniacal about what we allow our homebuilding partners to do long term, and that's building homes. It's not flipping land or using it for another purpose. It's clearly the mark that this will be for this set purpose of these sized lots in these price homes. So we haven't seen that phenomenon in our community. But look, we're optimistic about our single-family for rent community, Wingspan and Bridgeland. We think there's tremendous demand, and we can't wait to get that project completed.

Okay. And the last question is regarding the maturities that are coming up. Any plans on how to deal with that? Do you want to refinance and add more debt -- higher interest rate? Or are you just going to divert cash flow from stock buybacks to the debt maturity? Anything you'd add there?

Our expectation is that all the near-term maturities, and we're always thinking about 2 years ahead will be refinanced at similar or either slightly higher, slightly lower proceeds than what currently standing.

But does the current environment actually allow that though? I mean, interest rates have gone up quite a bit since the maturities are coming up.

So far, so good. We feel comfortable with that comment.

Okay, Thank you.

It is similarly, the NOI and the rental rates that we're achieving on these assets have also gone up meaningfully over the past several years. So our ability to refinance its similar proceeds has not been impeded to date.

okay. that’s helpful. Thank you.

Our next question comes from John Kim with BMO Capital. Please go ahead.

Hey, good morning, guys, It's Eric on for John. Can you just thinking about the builder price participation segments. Can you just remind us of the dynamics and the drivers behind that?

Sure. Yes, absolutely. So when we sell land to homebuilders, whether that's in a super pad or a lot, the typical contract that we signed is based on a hard deposit, a take-down schedule, a price per acre and a residual participation known as builder price participation, which is typically between 16% and 20%. So illustratively, if we assume that builder price participation is 20%, and we sold land to a homebuilder where we thought the end home price would be $500,000. So our implied land value there based on 20% is $100,000. If, in fact, that home is sold for $600,000 as a result of new premium upgraded quality of finishes that the home buyer elects to put in their home or other areas that drive the price higher, just depreciation, for example. We're going to participate in 20% of that delta. So if the $500,000 home we sold for $600,000, we received a $20,000 check to builder price participation.

Okay. That's helpful. And then just based on the large super pads sold in the fourth quarter of last year and given the housing prices relatively strong in the upper end market. Is it kind of safe to assume that there's a potential upside in the buildup price participation when those houses do come online and are sold?

Eric, it's really hard for me to predict what the price of a home is going to be when they're sold, it could be 3, 6, 9 or 12 months from now. Sure, I'd love to think that they're going to continue to go up, and we'll see participation, but that's not something I'm willing to predict.

Okay. That's fair. Maybe switching to condos. On the margins, they came in a bit above expectation. Just kind of curious what were the drivers there? And how should we be thinking about? What was closed in the fourth quarter?

Look, I think it tends to bounce around a little bit. And what we've always said is that we're targeting a 30% margin on average across all of our towers. Some of those towers are front row, which typically have a higher margin, some are second row and third row, which are typically a slightly lower margin than the front row. In general, we expect to achieve about 30%. And this past quarter, we were able to get there, especially on Ko'ula. And I think some of the price appreciation and price increases that we've had as we've gone through the sales process of these towers has helped solidify strong margins.

That's helpful. And then last one, on the same-store that you guys provide in the breakout for the office segment, it seems like occupancy was up year-over-year, but same-store NOI ticked down just a little bit. I'm just curious, is there any lease termination fees embedded in the numbers there? Or kind of -- can you just walk me through the results?

In the office or overall?

In the office.

Yes. So in the office, we've seen positive absorption, as noted by the increase in occupancy. But with new leasing and positive absorption comes free rent. And our same-store results we published on a cash basis on a GAAP basis. I can't pay my bills with GAAP rent. I can only pay with cash rent, which is why that's what we published.

Okay. Thank you, guys.

The next question comes from Alex Barrón with Housing Research Center Please go ahead.

Hi, guys. Thanks for taking my questions. I wanted to focus a little bit on the new master plan in Phoenix. First of all, can you guys just talk about what was -- forget the fact that rates are going up or if we're thinking long term, what was sort of the expected run rate as far as how many lots would sell per year? And over how many years would this project eventually sell out?

Yes. No, it's a great question. And a 37,000 acres, it's the largest master plan community in our company and one that we projected to sell out in the 40- to 50-year time range. Clearly, when you're pushing projections out that far, it's very difficult to be entirely accurate, which is why I kind of gave you that range that you could drive a truck through. Look, we are anticipating that we're going to sell our first 1,000 lots to homebuilders this year. We were hopeful that we would be able to get it done in '22. I think that will actually happen in '23 now just based on some of the labor shortages, time constraints and ability to get dirt moving on the ground to get those lots into the hands of homebuilders. We still see demand. We still have great conversations with homebuilders. We see a need in Phoenix and undersupply that needs to be met but again, we're in this for the long game. And unless we're going to be able to sell that land at an appropriate price, we're not in a rush to get rid of anything at a discount.

Yes. And that's why I was -- I started off, I guess, my questions with the sort of long-term picture in mind because obviously, I think we all can agree that Phoenix is a good long-term attractive market. That said, short term, that market, I think, is under a lot of stress. So I'm curious, where do you guys see the range of prices starting off for those homes that you would anticipate selling lots to the builders in 2023? Like how low -- what the builders need to price those homes, I guess, for things to sort of work and get going on the right foot?

Look, our expectation is that we're going to be able to sell lots of $80,000 to $85,000 for a lot which based on lot sizing today, which is more modest, and we're talking about entry-level homes in that market translates to, call it, $300,000 to $325,000 per acre. Clearly, in the early stages of any new MPC, you're welcoming residents, residents that are typically new homebuyers, more moderately priced homes and over time, we believe, based on the quality of the master plan communities that we develop, we continue to diversify and command a premium from those areas around us. We've seen it time and time again. And even in the Woodland Hills, which is only really in its fourth year of selling, we're at a meaningful premium compared to the overall Northeastern market around us, and we expect to see similar performance in Teravalis. With that said, again, we're not in a desperate situation. We don't need to sell that land unless there's demand there from homebuilders unless, we're getting the appropriate price per lot and price per acre, and we're not going to sell that land because we very much value maintaining the quality standards, desirability and the amenities that we think make our community special.

Okay. Great. And so in terms of lot size, like what's the minimum lot size that a builder would be able to start an entry-level community?

It's the type of number that can be all over the board. I don't want to -- I mean, the range of what we're looking at right now in the first phase of (inaudible) and the lots that we're talking about, are across 10 to 12 different smaller subdivisions with varying lot sizes and varying prices of homes so that we don't have 10 different homebuilders building all the same size home at all the same price point. So our job is to maintain that diversity. Even if that diversity is in a tighter band of new homes and entry level versus the much wider band that we see here in summer.

Okay. But I'm saying like would they start at like 40-foot white lots? And is there going to be any attached communities as well? Or is it all expected to be more like single-family type launch?

Our expectation right now is that it will be all single-family. It will be detached. And yes, we can have lots -- as 40-foot front foot and going up from there.

Got it. Okay, thanks. And best of luck, guys. Thank you.

Thanks so much.

This concludes our question-and-answer session. I would like to turn the conference back over to David O'Reilly for any closing remarks.

Thank you all for joining us today. We look forward to seeing you in our Investor Relations event in the near future. If there's any follow-up or additional questions, we're always here to help. Please don't be shy, and thank you again for joining.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.