The Howard Hughes Corporation (NYSE:HHC)
The Howard Hughes Corporation (NYSE:HHC) continues to make progress creating long-term value across its collection of unique and irreplaceable real estate assets.
In its Operating Asset segment, HHC increased its estimated stabilized net operating income (NOI) target to $309 million, which represents a compound annual growth rate of 29% over the past three years. The growth in NOI has come from organic development opportunities on HHC’s existing land assets. To date, HHC has only developed a fraction of its 50 million sq. ft. of vertical development entitlements, providing a development pipeline for decades to come. As a growing percentage of HHC’s enterprise value is represented by stabilized, cash-flow-generative real estate assets, it should become easier for investors to underwrite the value of its assets, which we believe will attract more traditional real estate-oriented investors to the HHC story.
In its Ward Village Hawaii 60-acre coastal development, HHC has nearly sold all of its condo inventory at its four existing condo towers. These four towers have a total projected cost of $1.5 billion and an estimated 30% profit margin. HHC launched pre-sales of its new 751-unit condo tower offering (A’ali’i) in January and has already pre-sold 67% of the units at July month end, highlighting the significant future opportunity at Ward Village as 75% of its entitlements remain.
At the South Street Seaport in NYC, HHC launched its summer 2018 concert series at its spectacular rooftop venue, which we believe will enhance the visibility of this unique and valuable asset to the community. In Summerlin Las Vegas, HHC continued its pace of strong land sales at its master planned community (MPC). HHC’s MPCs in Houston, Texas, and Columbia, Maryland, continue to perform well with ongoing commercial real estate development generating attractive yields on cost. Lastly, HHC celebrated the ground breaking of its 53-story, 1.4 million sq. ft. Class A office development at 110 North Wacker in Chicago. The total estimated cost of the project is over $750 million, more than $700 million of which is financed with third-party debt and equity, structured so that HHC retains the majority of the equity upside while minimizing risk.
From Bill Ackman (Trades, Portfolio)'s second quarter 2018 Pershing Square shareholder letter.
