Bill Ackman Comments on The Howard Hughes Corp

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Dec 09, 2016
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Net Operating Income (NOI) from HHC (

HHC, Financial)’s operating assets (consolidated and owned) decreased sequentially from $35.2 million to $31.3 million (and year-over-year from $31.9 million), largely due to headwinds in Houston that continue to negatively impact HHC’s owned hotels in Houston ($3.5 million sequential decline in hospitality NOI). HHC held steady its projected stabilized annual NOI estimate (which excludes the South Street Seaport) of $215 million and kept constant its estimated stabilized hospitality NOI levels. Land sales in its Master Planned Community (MPC) segment decreased from $59 million to $32 million year-over-year in Q3 and sequentially from $34 million due primarily to a $27 million reduction in commercial sales from Q3 2015.

In Hawaii, at its Ward Village property, construction of the Waiea, HHC’s first residential tower, is nearing completion. HHC has started collecting the proceeds from the sale of these units. HHC’s second tower (Anaha) recently topped out and is on schedule to be completed by mid-summer 2017. The company now has five condominium projects for sale, four of which are under construction (see status of each one below). HHC executed 35 new sales contracts since the end of Q2, representing 11% of the remaining inventory under construction (reducing the number of unsold units to 280 from a total inventory of 1400 units).



Summerlin’s residential land sale market remains strong with $16.5 million in closings. HHC has contracted 21 custom lots totaling $94 million at The Summit, HHC’s luxury golf course JV development within Summerlin. HHC signed a 20-year ground lease for a two-rink practice facility for the newly awarded NHL franchise in Las Vegas in Downtown Summerlin. The facility is expected to be completed in August 2017.


While the broader Houston market remains negatively impacted by lower oil prices (especially in the higher-end market), HHC continued to see increased activity at Bridgeland due to demand for mid-priced homes. Bridgeland had 12.2 acres of residential land sales, which represented an increase of 110% year-over-year (and flat sequentially). Sequentially, Woodlands land sale closings increased from $1.4 million to $10.6 million, but at a reduced price per lot of $532,000 per acre compared to $603,000 per acre in the second quarter. The recent increase in oil prices are likely to contribute to greater business confidence and demand for real estate in Houston.

South Street Seaport

On October 19, 2016, HHC obtained approval for the Seaport’s Pier 17 and Tin Building Minor Modification, which will allow HHC to move and reconstruct the Tin Building, among other changes to the Seaport. 10 Corso Como, an iconic Italian fashion retailer, signed a 13,000 square foot lease in the historic district where it will open its only North American location. Finally, iPic had its grand opening at the Seaport, which represents Manhattan’s first new commercial multiplex movie theater opening in over a decade.

HHC named David O’Reilly as its new CFO replacing Andy Richardson. David was previously the CFO of Parkway Properties, a publicly listed REIT.

In summary, HHC continues its highly successful strategy of converting land and other non-income development assets into cash and stabilized cash flows. This has had the effect of increasing HHC’s intrinsic value and should assist investors in valuing the company.


Bill Ackman (Trades, Portfolio)'s Pershing Square third-quarter shareholder letter.

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