The Howard Hughes Corporation (“HHC”)(NYSE:HHC)
During 2018, HHC continued to make strong business progress. It recently reported the highest level of residential land sales in its master planned communities in HHC’s history. Sales of units in HHC’s Ward Village in Hawaii remained strong. Since the initial pre-sale launch of units in 2014, Ward Village has sold more than 1,900 condo units generating total proceeds of over $2.2 billion at projected 30% gross margins. In addition, HHC now has 50 million square feet of development entitlements within its existing portfolio and is nearing completion of the South Street Seaport development in downtown New York.
HHC’s share price decreased 26% in 2018 and rebounded 13% year-to-date in 2019. While HHC has now operated independently since 2010, it operated quietly, out of view from much of the investment community until 2017 when it had its first Investor Day. Despite HHC’s recent public facing efforts, the company is still not well followed or understood by the investment community which, in our view, is one of the reasons why the company’s stock declined in the fourth quarter. HHC tends to be grouped with homebuilding-related stocks, which declined in the fourth quarter as the market focused on potential housing headwinds.
Today, HHC owns a highly diversified portfolio of operating assets that generate consistent cash flows. We expect that over time, as other investors gain a better understanding of HHC’s business and appreciate that it has different and more favorable economic characteristics than a homebuilder, HHC will achieve a valuation that is more reflective of its intrinsic value that continues to grow at a rapid pace.
From Bill Ackman (Trades, Portfolio)'s Pershing Square 2018 annual shareholder letter.
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