The Howard Hughes Corporation (HHC, Financial) has significant short-term exposure to the crisis. In particular, the decline in oil prices will negatively impact Houston, the location of the Woodlands and Bridgelands, two of HHC’s master-planned communities. HHC’s Summerlin master plan community will also be aff ected by the virus’ impact on the casino and conference business in Las Vegas. The company’s other assets will also be impacted to varying degrees. In order to mitigate these risks, on Friday, March 27th, HHC completed a $600 million equity off ering, the fi rst such equity off ering of any company since the crisis began. HHC was able to complete the off ering as a result of a $500 million investment from Pershing Square ($432 million from PSH) and $100 million from other long-term oriented shareholders.
The independent directors of HHC made a decision to raise capital to ensure the company would maintain a fortress balance sheet, now with more than $1 billion of cash, in light of the potential short- to intermediate-term impact of the crisis on the company’s business. We believe that HHC will continue to create substantial long-term value for its shareholders, and that its portfolio of small cities with large population infl ows will remain highly desirable places to live and work. We therefore viewed the opportunity to increase our investment to approximately 30% of the company to be highly attractive at the current share price.10 While there is more short-term risk to HHC’s business, we believe that this risk is more than compensated for by the opportunity to invest capital at the current valuation.
From Bill Ackman (Trades, Portfolio)'s Pershing Square 2019 annual letter to shareholders.
