Bill Ackman Comments on Howard Hughes

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Sydnee Gatewood
Mar 29, 2021
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The Howard Hughes Corporation (

HHC, Financial)

In 2019, HHC's Board of Directors announced a strategic transformation plan to streamline the company's organizational structure, sell $2 billion of non-core assets, and accelerate growth in its core master planned community ("MPC") business. In 2020, David O'Reilly, formerly HHC's CFO and President, became the company's new CEO, and Jay Cross, formerly President of Hudson Yards, became the new President. This transformation into a leaner and more focused organization allowed the company to successfully navigate the impact of COVID-19.

When the pandemic began, it was clear that it would have a draconian effect on the company's assets. Management acted quickly and decisively to stabilize the business by raising $600 million of equity in March 2020 to strengthen the company's balance sheet. The Pershing Square funds invested $500 million in that offering. Additionally, HHC's transition to a decentralized operating model significantly reduced overhead expenses and enabled each MPC to more nimbly react to challenging local market conditions.

Since the second quarter of 2020, the company has experienced a robust recovery across all of its assets, which we expect will continue into 2021. Despite the impact of the pandemic, new home sales across HHC's MPCs grew an impressive 10% in 2020. Demand for residential land in HHC's MPCs continues to accelerate, benefiting from out-of-state migration from higher cost-of-living and higher tax states. New homebuyers are drawn to HHC's walkable communities, expansive open spaces, and amenity-rich urban cores in Summerlin, Bridgeland and the Woodlands Hills, the three MPCs which own the substantial majority of HHC's remaining unsold land.

Within HHC's portfolio of income-producing commercial properties, office and multi-family assets have remained highly resilient. The company has collected 97% of office and 98% of multi-family rents from the beginning of Q2 2020 to year-end. Retail and hospitality fundamentals are steadily improving with phased re-openings and a gradual rebound in foot traffic. Highlighting management's conviction in the recovery, in February 2021, the company announced the acceleration of plans for approximately two million square feet of commercial development across the company's MPCs.

In Ward Village, the company experienced strong condo sales activity with the help of an innovative digital sales platform which provides homebuyers with a completely online experience, including virtual 3D condo tours and live chat capabilities. The company's latest luxury condo project, Victoria Place, is already 77% pre-sold after launching sales in December 2019. At the Seaport, which has begun to reopen after being impacted by New York City's stay-at-home orders, the company has found creative ways to activate the property with innovative new offerings like "The Greens," a rooftop dining venue.

We believe that the impact of the COVID-19 pandemic is largely transitory, and expect Howard Hughes's uniquely well positioned MPCs and portfolio of high-quality operating assets to deliver substantial growth for years to come.


Bill Ackman (Trades, Portfolio)'s Pershing Square 2020 annual shareholder letter.

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I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg