Our overarching goal is to drive the growth of our net asset value on a per share basis. As such, capital allocation is one of the most important levers for our growth and success. When we think about how to allocate our capital, we break down our options into three categories:
• Internal Investment Opportunities
• Investing in HHC through Share Buybacks
• External Acquisitions
Given the competitive advantages mentioned above, we are generally able to deliver the best results by investing in our deep pipeline of existing opportunities. While real estate development can be considered a potentially risky investment, we believe that our developments, especially those within our MPCs, have a substantially lower risk profile due to the following factors:
- Many of our projects are substantially pre-leased or pre-sold before we commence development. As of 2018 year end, our under construction office portfolio was 48.6% leased and our under construction condominiums in Ward Village were 86% pre-sold.
• As the master developer, we have almost no competition in our MPCs. We have control over much of the remaining commercial land and land-use restrictions on those commercial assets that we do not own.
Since inception, we have invested $1.8 billion into our internal developments, generating $170 million in NOI and a 9.6% return on cost. Because of our low-cost basis in the land relative to its market value, of the $1.8 billion, we only invested approximately $370 million of cash equity in these projects, which is projected to generate a 25.2% return on equity assuming a 5.5% cost of debt. These investments and returns are based on the book value of our land and exclusive of condominium development as well as projects under construction.
Another area where we explore investing our capital is in the acquisition of our shares. Over the last year, we have traded at a price that we believe represents a meaningful discount to NAV. As such, acquiring our shares represents a potential opportunity to create long-term value. In January of 2018, we purchased 475,920 shares of our common stock in a private transaction with an unaffiliated entity at a purchase price of $120.33 per share, or approximately $57.3 million in the aggregate. While we do not have a formal buyback program in place, we continue to be opportunistic in looking for meaningful blocks of shares that we can acquire at an appropriate price. However, we are also mindful of our balance sheet and the implications of all of our capital allocation decisions, including share repurchases.
Finally, while we spend time diligently searching for appropriate risk-adjusted return acquisition opportunities, most often, the opportunities that we analyze have lower returns and a higher risk profile than investing in our communities as these acquisition opportunities lack the same control characteristics. With that said, from time to time, we are able to find a diamond in the rough, most often in the form of an acquisition that can be tucked into one of our core assets. Our September acquisition in The Woodlands of Lake Front North for $53 million is a consummate example. The opportunity consisted of two vacant office buildings that total 258,742 square feet as well as approximately 3.4 acres of developable land. This transaction added to our already dominant office market ownership in The Woodlands at a price well below replacement cost. At the time, we had been anticipating a return in demand for office space and were considering building Four Hughes Landing for $321 per square foot. For context, we were able to acquire these two buildings for approximately $185 per square foot excluding the cost of tenant allowance and the value of the developable land. Given the quality of the buildings, we felt strongly that we could lease them at similar rates to what we would achieve on a new construction. As of March 1, 2019, these two buildings were 91% leased. We expect that these buildings will stabilize north of our targeted 8% yield on total acquisition costs. In addition, we recently signed leases at Lake Front North with energy giants Entergy and ExxonMobil.
Another item worth mentioning is that all our capital across the company is pooled and our executive management team, along with our Board of Directors, allocates that capital where we believe we can generate the highest risk-adjusted returns, whether holistically across our existing assets, for share repurchases or externally on acquisitions.