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Equity

12 Months Ended

Dec. 31, 2024

Equity

Equity

12. Equity

Stock-Based Compensation

Prior to and in connection with the Separation, the Company established the Seaport Entertainment Group Inc. 2024 Equity Incentive Plan (the “Plan”) with the purpose of attracting, retaining and motivating officers, employees, non-employee directors, and consultants providing services to the Company and promoting the success of the Company’s business by providing the participants of the Plan with equity incentives. In addition, the Plan is intended to govern awards granted pursuant to or resulting from the adjustment and/or conversion of awards originally granted prior to the Separation under the Howard Hughes Corporation 2020 Equity Incentive Plan and under the Howard Hughes Corporation Amended and Restated 2010 Incentive Plan in accordance with the terms of the employee matters agreement entered into in connection with the Separation.

The Plan was approved prior to the Separation by HHH, at the time the Company’s sole stockholder, and is administered by the compensation committee of the board of directors (the “Committee”). The Plan authorizes the Committee to grant stock-based compensation awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards, to eligible participants. The Committee has the full power to interpret and administer the Plan and award agreements, subject to the limitations set forth in the Plan. A total of 6.8 million shares of Class A common stock were initially reserved for issuance under the Plan. At December 31, 2024, approximately 5.9 million shares remained available to be issued.

Restricted Shares and Restricted Stock Unit Awards

In connection with the Separation, shares of HHH restricted stock subject to time-based and performance-based vesting that were previously awarded to certain grantees under the Howard Hughes Corporation 2020 Equity Incentive Plan or the Howard Hughes Corporation Amended and Restated 2010 Incentive Plan were adjusted and converted into shares of restricted stock of the Company that vest in the same percentages, on the same dates and schedule as any shares of HHH restricted stock held by such grantees that were unvested and outstanding immediately prior to the Separation. This conversion resulted in the issuance of total restricted stock awards subject to time-based vesting of 69,997 to non-executive employees and 111,682 to executive officers with fair values of $2.0 million and $3.2 million, respectively.

In August 2024, the Company separately issued 76,641 restricted stock unit awards subject to time-based vesting to non-executive employees and a consultant and 168,660 restricted stock unit awards subject to time-based vesting to executive officers, with fair values of $2.0 million and $4.5 million, respectively. Each restricted stock unit award represents a contingent right to receive one share of the Company’s common stock at vesting. The restricted stock unit awards issued under the Plan generally vest over requisite service periods of one to three years, except for the award to one of the Company’s executive officers that cliff vests on August 1, 2029 subject to continued service through that date.

A summary of the activity related to the Company’s restricted stock and restricted stock unit awards are as follows:

​

​	​	​	​	​	​
​		​		Weighted-Average
​	​	Shares/Units	​	Grant Fair Value
Unvested at August 1, 2024	$	—	​	$	—
Granted	​	426,980	​	​	27.24
Vested	​	(39,407)	​	​	28.27
Forfeited	​	(8,158)	​	​	26.47
Unvested at December 31, 2024	$	379,415	​	$	27.14

​

Restricted stock and restricted stock unit awards issued during the year ended December 31, 2024 were valued at $11.6 million and the weighted average per share or unit value was $27.24. At December 31, 2024, unrecognized share-based compensation costs for restricted stock and restricted stock unit awards was $8.9 million which is expected to be recognized over a weighted average period of 2.8 years.

Non-Qualified Stock Options

Non-qualified stock option awards issued under the Plan generally cliff vest over a requisite service period of three to five years and have a term of ten years from the grant date.

The weighted average fair value of non-qualified stock options and the related assumptions used in the Black Scholes model to calculate grant date fair value of the awards are as follows:

​

​	​	​	​
​		December 31, 2024
Weighted-average fair value	​	$	14.46
Dividend yield	​	​	0%
Expected volatility of stock	​	​	55% to 58%
Risk-free interest rate	​	​	3.9% to 4.0%
Expected option life (in years)	​	​	6.5 to 7.5
Weighted-average exercise price per share	​	$	35.93

​

A summary of the activity related to the Company’s non-qualified stock options is as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​		​			Weighted-Average		​	​
​	​	​	Weighted-Average		​	Remaining Contractual	​	Aggregate Intrinsic
​	Options		Exercise Price			Life (years)		Value (in thousands)
Outstanding at August 1, 2024	—	​	$	—	​	—	​	$	—
Granted	478,419	​	​	35.93	​	9.33	​	​	489
Exercised	—	​	​	—	​	—	​	​	—
Forfeited or expired	—	​	​	—	​	—	​	​	—
Outstanding at December 31, 2024	478,419	​	$	35.93	​	9.33	​	$	489
Exercisable	14,964	​	​	119.60	​	1.41	​	​	—

​

Non-qualified stock option awards issued during the year ended December 31, 2024 were valued at $6.9 million. At December 31, 2024, unrecognized share-based compensation costs for non-qualified stock option awards was $6.3 million which is expected to be recognized over a weighted average period of 4.6 years.

Stock-based compensation expense for restricted stock, restricted stock units and non-qualified stock options is generally recognized straight-line over the vesting term of the award, which typically provides for graded or cliff vesting subject to continued employment with the Company. Stock-based compensation is classified in the same financial statement line items as cash compensation. The following table presents the location of stock-based compensation expense on the Consolidated and Combined Statements of Operations (amounts in thousands):

​

​	​	​	​	​	​	​	​	​	​
​	​	​
​	​	Year Ended December 31,
in thousands		2024			2023			2022
Expenses	​	​	​	​	​	​	​	​	​
Sponsorships, events, and entertainment costs	​	$	647	​	$	528	​	$	350
Hospitality costs	​	​	100	​	​	130	​	​	19
Operating costs	​	​	(504)	​	​	837	​	​	500
General and administrative	​	​	3,095	​	​	—	​	​	—
Total stock-based compensation expense	​	$	3,338	​	$	1,495	​	$	869

​

Earnings Per Share

Earnings per share is calculated by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares outstanding during the period. Stock-based payment awards are included in the calculation of diluted income using the treasury stock method if dilutive.

On the date of Separation, immediately prior to the Separation, there were 5,521,884 shares that were issued and outstanding. This share amount is being utilized for the calculation of basic earnings (loss) per share for 2023 and 2022 because the Company was not a standalone public company prior to the date of Separation and there was no stock trading information available to calculate earnings (loss) per share. In addition, for 2023 and 2022, the computation of diluted earnings per share equals the basic earnings (loss) per share calculation since there was no stock trading information available to compute dilutive effect of shares issuable under share-based compensation plans needed under the treasury method in accordance with ASC Topic 260 and since common stock equivalents were antidilutive due to losses from operations.

​

For the years ended December 31, 2024, 2023 and 2022, earnings (loss) per share is computed as follows (amounts in thousands, except per share amounts):  

​

​	​	​	​	​	​	​	​	​	​
​		Year Ended December 31,
in thousands, except per share data		2024			2023			2022
Numerator - Basic	​	​	​	​	​	​	​	​	​
Net loss	​	$	(152,625)	​	$	(838,065)	​	$	(111,277)
Preferred distributions to noncontrolling interest in subsidiary	​	​	(587)	​	​	—	​	​	—
Net loss attributable to common stockholders - basic and diluted	​	$	(153,212)	​	$	(838,065)	​	$	(111,277)
​	​	​	​	​	​	​	​	​	​
Denominator	​	​	​	​	​	​	​	​	​
Weighted average shares outstanding - basic	​	​	9,108	​	​	5,522	​	​	5,522
Effect of dilutive securities	​	​	—	​	​	—	​	​	—
Weighted average shares outstanding - diluted	​	​	9,108	​	​	5,522	​	​	5,522
​	​	​	​	​	​	​	​	​	​
Earnings (loss) per share - basic and dilutive	​	$	(16.82)	​	$	(151.77)	​	$	(20.15)

​

The calculation of diluted earnings per share excluded the following shares that could potentially dilute basic earnings per share in the future because their inclusion would have been antidilutive.  

​

​	​	​	​	​	​	​	​	​	​
​		Year Ended December 31,
​		2024			2023			2022
Shares issuable upon exercise of restricted stock and restricted stock units	​	​	209,790	​	​	35,101	​	​	35,101
Shares issuable upon exercise of stock options	​	​	16,437	​	​	8,501	​	​	8,501

​

Noncontrolling Interest in Subsidiary

On July 31, 2024, a subsidiary of HHH that became our subsidiary in connection with the Separation, issued 10,000 shares of 14.000% Series A preferred stock, par value $0.01 per share, with an aggregate liquidation preference of $10.0 million. The Series A Preferred Stock ranks senior to the Company’s interest in our subsidiary with respect to dividend rights and rights upon liquidation, dissolution and other considerations. The Series A Preferred Stock has no maturity date and will remain outstanding unless redeemed. The Series A Preferred Stock is not redeemable by the Company prior to July 11, 2029 except under limited circumstances intended to preserve certain tax benefits for HHH. Upon consolidation, the $10.0 million issued and outstanding preferred share interest is presented net of $0.1 million of equity issuance costs as Noncontrolling interest in subsidiary on our Consolidated Balance Sheet as of December 31, 2024 and the related dividends are reflected as Preferred share distributions in our Consolidated and Combined Statements of Operations during the year ended December 31, 2024.

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