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GuruFocus Financial Strength Rank measures how strong a company’s financial situation is. It is based on these factors

1. The debt burden that the company has as measured by its Interest coverage (current year).
2. Debt to revenue ratio. The lower, the better
3. Altman Z-score.

A company ranks high with financial strength is likely to withstand any business slowdowns and recessions.

Financial Strength : 5/10

vs
industry
vs
history
Cash-to-Debt 0.22
HHC's Cash-to-Debt is ranked lower than
53% of the 1667 Companies
in the Global Real Estate - General industry.

( Industry Median: 0.34 vs. HHC: 0.22 )
Ranked among companies with meaningful Cash-to-Debt only.
HHC' s Cash-to-Debt Range Over the Past 10 Years
Min: 0.01  Med: 0.3 Max: 0.9
Current: 0.22
0.01
0.9
Equity-to-Asset 0.46
HHC's Equity-to-Asset is ranked higher than
54% of the 1598 Companies
in the Global Real Estate - General industry.

( Industry Median: 0.45 vs. HHC: 0.46 )
Ranked among companies with meaningful Equity-to-Asset only.
HHC' s Equity-to-Asset Range Over the Past 10 Years
Min: 0.39  Med: 0.47 Max: 0.72
Current: 0.46
0.39
0.72
Debt-to-Equity 0.94
HHC's Debt-to-Equity is ranked lower than
55% of the 1328 Companies
in the Global Real Estate - General industry.

( Industry Median: 0.79 vs. HHC: 0.94 )
Ranked among companies with meaningful Debt-to-Equity only.
HHC' s Debt-to-Equity Range Over the Past 10 Years
Min: 0.14  Med: 0.74 Max: 1.13
Current: 0.94
0.14
1.13
Debt-to-EBITDA 9.46
HHC's Debt-to-EBITDA is ranked lower than
72% of the 1283 Companies
in the Global Real Estate - General industry.

( Industry Median: 5.22 vs. HHC: 9.46 )
Ranked among companies with meaningful Debt-to-EBITDA only.
HHC' s Debt-to-EBITDA Range Over the Past 10 Years
Min: -74.58  Med: 4.12 Max: 14.69
Current: 9.46
-74.58
14.69
Interest Coverage 2.11
HHC's Interest Coverage is ranked lower than
75% of the 1507 Companies
in the Global Real Estate - General industry.

( Industry Median: 10.91 vs. HHC: 2.11 )
Ranked among companies with meaningful Interest Coverage only.
HHC' s Interest Coverage Range Over the Past 10 Years
Min: 1.97  Med: 3.19 Max: 72.97
Current: 2.11
1.97
72.97
Piotroski F-Score: 6
Altman Z-Score: 1.23
Beneish M-Score: 18.36
WACC vs ROIC
7.85%
2.30%
WACC
ROIC
GuruFocus Profitability Rank ranks how profitable a company is and how likely the company’s business will stay that way. It is based on these factors:

1. Operating Margin
2. Trend of the Operating Margin (5-year average). The company with an uptrend profit margin has a higher rank.
••3. Consistency of the profitability
4. Piotroski F-Score
5. Predictability Rank•

The maximum rank is 10. A rank of 7 or higher means a higher profitability and may stay that way. A rank of 3 or lower indicates that the company has had trouble to make a profit.

Profitability Rank is not directly related to the Financial Strength Rank. But if a company is consistently profitable, its financial strength will be stronger.

Profitability & Growth : 8/10

vs
industry
vs
history
Operating Margin % 12.14
HHC's Operating Margin % is ranked higher than
52% of the 1635 Companies
in the Global Real Estate - General industry.

( Industry Median: 18.40 vs. HHC: 12.14 )
Ranked among companies with meaningful Operating Margin % only.
HHC' s Operating Margin % Range Over the Past 10 Years
Min: -508.02  Med: 15.19 Max: 21.63
Current: 12.14
-508.02
21.63
Net Margin % 15.94
HHC's Net Margin % is ranked higher than
57% of the 1635 Companies
in the Global Real Estate - General industry.

( Industry Median: 11.99 vs. HHC: 15.94 )
Ranked among companies with meaningful Net Margin % only.
HHC' s Net Margin % Range Over the Past 10 Years
Min: -516.04  Med: -3.71 Max: 53.39
Current: 15.94
-516.04
53.39
ROE % 5.53
HHC's ROE % is ranked lower than
55% of the 1650 Companies
in the Global Real Estate - General industry.

( Industry Median: 7.02 vs. HHC: 5.53 )
Ranked among companies with meaningful ROE % only.
HHC' s ROE % Range Over the Past 10 Years
Min: -46.83  Med: -1.05 Max: 8.21
Current: 5.53
-46.83
8.21
ROA % 2.47
HHC's ROA % is ranked lower than
52% of the 1694 Companies
in the Global Real Estate - General industry.

( Industry Median: 2.77 vs. HHC: 2.47 )
Ranked among companies with meaningful ROA % only.
HHC' s ROA % Range Over the Past 10 Years
Min: -24.22  Med: -0.49 Max: 4.58
Current: 2.47
-24.22
4.58
ROC (Joel Greenblatt) % 5.63
HHC's ROC (Joel Greenblatt) % is ranked lower than
76% of the 1662 Companies
in the Global Real Estate - General industry.

( Industry Median: 16.29 vs. HHC: 5.63 )
Ranked among companies with meaningful ROC (Joel Greenblatt) % only.
HHC' s ROC (Joel Greenblatt) % Range Over the Past 10 Years
Min: -880.22  Med: 2.26 Max: 1074.38
Current: 5.63
-880.22
1074.38
3-Year Revenue Growth Rate 16.70
HHC's 3-Year Revenue Growth Rate is ranked higher than
75% of the 1430 Companies
in the Global Real Estate - General industry.

( Industry Median: 3.00 vs. HHC: 16.70 )
Ranked among companies with meaningful 3-Year Revenue Growth Rate only.
HHC' s 3-Year Revenue Growth Rate Range Over the Past 10 Years
Min: 16.7  Med: 29.1 Max: 46.5
Current: 16.7
16.7
46.5
3-Year EBITDA Growth Rate 29.30
HHC's 3-Year EBITDA Growth Rate is ranked higher than
81% of the 1261 Companies
in the Global Real Estate - General industry.

( Industry Median: 5.40 vs. HHC: 29.30 )
Ranked among companies with meaningful 3-Year EBITDA Growth Rate only.
HHC' s 3-Year EBITDA Growth Rate Range Over the Past 10 Years
Min: 0  Med: 13 Max: 68.6
Current: 29.3
0
68.6
GuruFocus has detected 7 Warning Signs with The Howard Hughes Corp HHC.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.
» HHC's 30-Y Financials

Financials (Next Earnings Date: 2018-08-07)


Revenue & Net Income
Cash & Debt
Operating Cash Flow & Free Cash Flow
Operating Cash Flow & Net Income

» Details

Guru Trades

Q2 2017

HHC Guru Trades in Q2 2017

Bill Ackman 4,704,534 sh (+31.85%)
David Dreman 1,780 sh (unchged)
Joel Greenblatt Sold Out
Murray Stahl 2,577,243 sh (-8.81%)
Louis Moore Bacon 23,049 sh (-31.52%)
» More
Q3 2017

HHC Guru Trades in Q3 2017

Jim Simons 12,400 sh (New)
Louis Moore Bacon 24,920 sh (+8.12%)
David Dreman 1,780 sh (unchged)
Bill Ackman 4,704,534 sh (unchged)
Murray Stahl 2,530,401 sh (-1.82%)
» More
Q4 2017

HHC Guru Trades in Q4 2017

Chuck Royce 5,000 sh (New)
Jim Simons 31,771 sh (+156.22%)
Louis Moore Bacon 25,018 sh (+0.39%)
Bill Ackman 4,704,534 sh (unchged)
David Dreman 1,780 sh (unchged)
Murray Stahl 2,453,042 sh (-3.06%)
» More
Q1 2018

HHC Guru Trades in Q1 2018

Ken Heebner 130,000 sh (New)
David Dreman 1,780 sh (unchged)
Chuck Royce 5,000 sh (unchged)
Louis Moore Bacon Sold Out
Murray Stahl 2,215,426 sh (-9.69%)
Bill Ackman 2,204,534 sh (-53.14%)
Jim Simons 2,200 sh (-93.08%)
» More
» Details

Insider Trades

Latest Guru Trades with HHC

(List those with share number changes of more than 20%, or impact to portfolio more than 0.1%)

GuruDate Trades Impact to Portfolio Price Range * (?) Current Price Change from Average Current Shares
Bill Ackman 2018-03-31 Reduce -53.14%5.59%$118.95 - $139.13 $ 129.931%2,204,534
Ken Heebner 2018-03-31 New Buy0.8%$118.95 - $139.13 $ 129.931%130,000
Bill Ackman 2018-01-02 Reduce -53.14%5.65%Premium Member Access $132.84 $ 129.93-2%2,204,534
Bill Ackman 2017-06-30 Add 31.85%2.26%Premium Member Access $121.25 $ 129.937%4,704,534
Bill Ackman 2017-06-30 Add 31.85%2.32%$115.24 - $130 $ 129.935%4,704,534
Joel Greenblatt 2017-06-30 Sold Out $115.24 - $130 $ 129.935%0
Premium More recent guru trades are included for Premium Members only!!
Premium More recent guru trades are included for USA Subscribe Members only!!
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Business Description

Industry: Real Estate Services » Real Estate - General    NAICS: 531190    SIC: 6798
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Traded in other countries:HHE.Germany,
Headquarter Location:USA
The Howard Hughes Corp is a real estate company. It is in the development of master planned communities and other strategic real estate development opportunities across the United States.

The Howard Hughes Corp is a real estate company and is in the development of master planned communities and other strategic real estate development opportunities across the United States. Its mission is to be the preeminent developer and operator of Master Planned Communities (MPCs) and mixed-use properties. The company specialize in the development of master planned communities, the development of residential condominiums, and the ownership, management and development or repositioning of real estate assets currently generating revenues, also called operating assets, as well as other strategic real estate opportunities in the form of entitled and unentitled land and other development rights, also called strategic developments.

Guru Investment Theses on The Howard Hughes Corp

Bill Ackman Comments on The Howard Hughes Corp - May 17, 2018

The Howard Hughes Corporation (NYSE:HHC)

During the quarter, HHC adopted a new revenue recognition standard that significantly reduced GAAP revenue and earnings for the quarter, but had no impact on the company’s intrinsic value or cash flows. Up until this quarter, HHC recognized revenue for its condominium projects using percentage of completion accounting where units under contract to be sold were recognized into revenue as the corresponding condominium tower was constructed. The new accounting requirement better matches cash flows as condo sales are recognized only when unit sales are completed and title is transferred to the buyer. We believe some analysts and investors were confused by the change as HHC’s stock declined despite strong demonstrated value creation during the quarter. During the quarter, the company opportunistically acquired about 1% of its shares outstanding for $120.33 per share as each of HHC’s core master planned communities (MPCs) showed continued growth and business progress as we describe in detail below.

Ninety-five percent of the 1,381 available condo units in HHC’s Hawaii Ward Village’s four existing towers under construction are now under contract or have been sold. HHC began pre-sales of its new 751 unit condo tower offering (A’ali’i) in January. In four months, the tower is already 39% pre-sold, highlighting the continued demand for high quality, differentiated, Ward Village for-sale product. With only 25% of its entitlements utilized, Ward Village offers substantial continued value creation for HHC over the next decade. The company’s outright ownership of its land allows it to carefully control the pace of deliveries, enabling HHC to meet market demand while substantially reducing the risk of oversupply.

In Summerlin, Las Vegas, continued strong land sales and increasing home prices generated continued strong cash flows. HHC began construction of the ballpark for its wholly owned Las Vegas 51s Triple A baseball team, which is expected to cost approximately $115 million and is estimated to produce approximately $7 million of cash flow. This is an attractive expected return from an amenity principally designed to increase the value of Downtown Summerlin and the surrounding property owned by HHC.

At the South Street Seaport, HHC finalized new leases (ESPN, Malibu Farms) and new sponsorship agreements (Lincoln Motor, Heineken). The Seaport is not just a real estate asset that will generate rental income, but an operating business that will have sustained sponsorship and business income in addition to rental income. Live Nation recently announced a summer 2018 rooftop concert series at the Seaport which will further enhance the visibility and attractiveness of the Seaport to the community, and increase demand for remaining space and more corporate sponsorships.

In Chicago, HHC began construction on a 53-story, 1.4 million sq. ft. Class A office development at 110 North Wacker. The total estimated cost of the project is $761 million with an estimated 7.9% unlevered yield on cost. HHC arranged third-party debt and preferred and common equity commitments, which reduce HHC’s cash investment to the project to just $49 million. HHC will retain a significant portion of the profit on the project with its share of stabilized cash flow estimated to be over $19 million. To date, we believe that few HHC shareholders have assigned significant value to this non-core asset.

In its Operating Asset segment, HHC increased its projected stabilized net operating income target from $255 million to $291 million as a result of the addition of three new developments to its pipeline. As a growing percentage of HHC 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 and HHC’s intrinsic value, which we believe is substantially greater than the current share price.

From Bill Ackman (Trades, Portfolio)'s first-quarter 2018 shareholder letter.



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Bill Ackman Comments on Howard Hughes - Nov 16, 2017

Howard Hughes (NYSE:HHC) continues to show solid and steady progress across its entire collection of trophy real estate assets. Unlike many real estate investment trusts that rely on access to the equity markets in order to grow, the equity for HHC’s development program is provided by cash generated from existing income producing assets and residential lot sales, as the company is not required to distribute its profits to shareholders. Furthermore, HHC’s large land ownership and entitlements provide decades of high-return investment opportunities without the need to acquire any new assets.

In Ward Village (Hawaii) where HHC has four large condo towers in various stages of construction, the company achieved its highest volume of sales, 52 condo units, without the launch of a new building. In Q4 2017, HHC will launch its fifth residential project, A'ali'i which will have 751 homes. The company still has a long runway ahead as it has begun development of only 25% of its Ward Village entitlements.

Despite Hurricane Harvey, HHC’s Houston master planned communities (MPCs) remained stable and resilient with strong residential land sales at Bridgeland and The Woodlands. During the quarter, HHC initiated development of a new MPC at Woodland Hills. The first phase consists of 192 single-family homes and will start to sell lots in Q4 2017.

At the South Street Seaport, HHC announced a 19,000 sq.ft. long-term lease with ESPN where it will broadcast its high profile daily shows. This lease will generate attractive cash flows at top-of-the-market rents and provide great visibility for the Seaport as ESPN will feature the Seaport in its broadcasts much the same way NBC has created on-air exposure for Rockefeller Center.

In Summerlin Las Vegas, HHC is on track to generate over $100 million in land sales for the fifth year in a row. During the quarter, HHC announced the development of a ballpark for its wholly owned Las Vegas 51s Triple A baseball team, and signed a 20-year, $80 million naming rights agreement with the Las Vegas Convention and Visitor’s Authority.

In its Operating Asset segment, HHC announced three new development projects within its MPCs that will generate over $15 million of stabilized net operating income (NOI), increasing HHC’s projected stabilized NOI target to $261 million. Because a growing percentage of HHC enterprise value is represented by stabilized cash-flow-generative real estate assets, it should become easier for investors to determine that HHC is trading at a substantial discount to intrinsic value.

During the quarter, David Weinreb and Grant Herlitz, HHC’s CEO and President, entered into 10-year employment agreements. As part of these agreements, David and Grant completed their respective purchases of $50 million and $2 million of warrants from the company, which they are restricted from selling or hedging for the next five years. This represents one of the largest investment commitments that we have seen by a management team, highlighting the strong shareholder alignment and long-term focus of HHC’s seasoned management team.

Howard Hughes is a US-only taxpayer. As such, we expect it would be a large beneficiary of a reduction in corporate tax rates.

From Bill Ackman (Trades, Portfolio)'s third quarter 2017 shareholder letter.

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Bill Ackman Comments on Howard Hughes - Aug 18, 2017

Howard Hughes (NYSE:HHC) initiated an effort this year to increase visibility and transparency into its business. HHC started conducting quarterly conference calls and releasing a quarterly supplemental information package, which provides investors and analysts with additional detailed data about its business. HHC conducted its first ever Investor Day on May 17, 2017 at the South Street Seaport in New York City. Pershing Square also presented Howard Hughes at the Sohn Conference on May 8, 2017 in a presentation entitled SimCities. We believe that the increased transparency will showcase the significant underlying value at HHC over time.

HHC continues to make steady progress across its three business lines – Operating Assets, Strategic Developments and Master Planned Communities (MPCs). In its Operating Asset portfolio, Howard Hughes has steadily increased its projected stabilized net operating income target to $245 million. In its Strategic Development segment, Howard Hughes sold an additional 65 condo units at Ward Village in Hawaii during the first half of the year, increasing the percentage of total units closed or under contract at its four condo towers to 85%, with three towers at more than 93% sold, and the fourth at 69%. The South Street Seaport is on track to open in New York City in summer 2018. In its MPCs, HHC will likely generate over $100 million in land sales at Summerlin (Las Vegas) for the fifth year in a row. Land sales are increasing in Houston as that market is showing signs of a rebound as crude prices have stabilized.

HHC refinanced its existing bonds with a new $800 million bond issuance in a positive net present value transaction, saving 150 basis points in interest and extending the maturity date by 3.5 years. It then subsequently closed on an incremental $200 million bond add-on at a yield-to-worst of less than 5%. HHC now has $660 million of cash on its balance sheet, which will allow it to finance its remaining development projects without the need to raise additional equity capital.

David Weinreb, HHC’s CEO, sold some of his expiring warrants, exercised warrants to purchase $50 million of common stock and agreed to purchase $50 million in new warrants from the company which he is restricted from selling or hedging for the next five years. Along with a smaller purchase by Grant Herlitz, HHC’s President, this is one of the largest investment commitments that we have seen by a management team.

During the quarter we net settled our HHC warrants shortly before their expiration according to their terms (the warrants were not exercisable). By doing so we slightly reduced our notional exposure to HHC, disposed of the only Level 3 asset that we owned, and now own only HHC common stock and total return swaps.

From Bill Ackman (Trades, Portfolio)'s second quarter 2017 shareholder letter.

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Keeley Funds Comments on Howard Hughes Corp - Aug 14, 2017

Howard Hughes Corp. (NYSE:HHC) is a real estate development company that was a spinoff from General Growth Properties. The company has benefitted from growing excitement as they become more shareholder friendly under the leadership of new CFO, David O’Reilly. Showcasing one of their major developments, they held their inaugural investor day at South Street Seaport in New York City. This followed their first earnings conference call earlier in the quarter. Finally, the company has also begun to travel and proactively meet with investors. Operationally, HHC is continuing to progress on developing their five main projects and they remain focused on increasing the Net Operating Income (NOI) as the developments mature.



From Keeley All Cap Value Fund second quarter 2017 shareholder commentary.



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Bill Ackman Comments on Howard Hughes Corp - May 12, 2017

Pershing Square presented the Howard Hughes Corporation (NYSE:HHC) at the Sohn Conference on May 8th . Here is a link to the powerpoint presentation. HHC held its second quarterly conference call on May 4th and intends to conduct its first ever Investor Day on May 17th at the South Street Seaport. It also released detailed Supplemental Information for the first time, in an effort to provide the market with increased transparency into its business.

HHC continues to make strong progress across its three business lines – Operating Assets, Strategic Developments and Master Planned Communities (MPCs). In its Operating Asset portfolio, Howard Hughes continued to lease up its existing operating portfolio, increased the stabilized net operating income (NOI) target to $240 million, and grew NOI in Q1 2017 by 42.4% to $44.7 million, as compared to the prior year. MPC segment revenue was $68.7 million, an increase of $19 million as compared to the first quarter of last year.

In its Strategic Development segment, Howard Hughes sold an additional 34 condo units at Ward Village in Hawaii, increasing the percentage of total units closed or under contract at its four condo towers to nearly 83%, with three towers at more than 93% sold and the fourth at 62%. The South Street Seaport is expected to open in New York City in Summer 2018.

During the quarter, Howard Hughes refinanced its existing bonds with a new $800 million bond issuance in a positive net present value transaction, saving 150 basis points in interest and extending the maturity date by 3.5 years.



From Bill Ackman (Trades, Portfolio)'s first quarter 2017 shareholder letter.


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Bill Ackman Comments on Howard Hughes Corp - May 08, 2017

The Howard Hughes Corporation (NYSE:HHC) was formed in November 2010 as a tax-free spinoff from General Growth Properties, with a collection of disparate real estate holdings designed to receive appropriate management attention and recognition in the public markets. Pershing Square helped orchestrate the spinoff, hired the management team, and has been the largest investor in HHC since its inception. Management has done a superb job growing asset value, yet, the company has not received the recognition it deserves, i.e., an appropriate valuation in the public markets. Despite a more than three-fold increase over the last six years, it remains undervalued in our view.

HHC’s mission is to be the preeminent developer and operator of master planned communities (“MPCs”) and mixed-use properties. HHC’s management team has transformed the company’s disparate assets into a collection of high-quality core trophy assets. The majority of HHC’s value is now represented by the South Street Seaport, Ward Village in Hawaii and master planned communities in Houston, Las Vegas and Maryland. These assets are comprised of steady cash-flow generating properties and longer-term development opportunities that encompass more than 50 million square feet of real estate development potential.

HHC continued to make meaningful progress in 2016 to enhance the value of its key assets. In its operating asset segment, HHC grew net operating income (“NOI”) in 2016 to $135 million or $156 million annualizing Q4 NOI, from $118 million in 2015 (all excluding the Seaport, which is undergoing redevelopment). HHC management increased its projected stabilized 2020 NOI estimate to $232 million from $219 million.

In Hawaii, at its 60-acre coastal Ward Village property in the heart of Honolulu, HHC has four condo towers with nearly 1,400 units in various stages of completion. These towers have an estimated total cost of $1.5 billion on which the company expects to generate net margins of approximately 25% to 30%. These towers are over 80% sold with one tower projected to be delivered each year from now until 2019 (generating meaningful cash proceeds for the company). In total, HHC has entitlements to build more than 9 million square feet of mixed-use development with over 4,000 residences and 1 million square feet of retail upon completion of its plan at Ward Village.

At the Seaport, HHC owns more than 400,000 square feet of highly valuable real estate (along with 700,000 square feet of future development rights). Construction on the 170,000 square foot Pier 17 building is expected to be substantially completed by the end of 2017, with a grand opening in summer 2018. This architecturally significant building on the East River will have a unique group of tenants and a 1.5 acre rooftop year-round entertainment venue with iconic views. HHC advanced the revitalization of the Seaport with the approval for its Pier 17 Minor Modification, which will allow HHC to move and reconstruct the 53,000 square foot Tin Building. In Q1 2016, HHC sold an assemblage of properties it had acquired in 2014 and 2015 at the Seaport for $390 million generating a $140 million profit, which demonstrates the market appeal of the Seaport and management’s ability to create value.

While HHC’s share price performance (and intrinsic valuation creation) since its spinoff have been impressive, the share price has been flat over the last three years. Although management has done a superb job growing intrinsic value, the HHC story is largely unknown in the investment community. The HHC story and value proposition is complicated by the vast development potential that cannot be estimated by simply applying a multiple to existing cash flows. To address this concern, HHC recently started conducting quarterly earning conference calls and taking a more proactive approach to investor and analyst outreach. We believe HHC is undervalued and that further progress on asset stabilization and clarity around some of its bigger projects (e.g., Seaport and Ward Village) will help drive stock appreciation.

Howard Hughes’ total shareholder return was 0.8% in 2016.

From 2016 annual letter to shareholders of Pershing Square by Bill Ackman (Trades, Portfolio).

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Bill Ackman Comments on The Howard Hughes Corporation - Mar 30, 2017

The Howard Hughes Corporation (NYSE:HHC) was formed in November 2010 as a tax-free spinoff from General Growth Properties, with a collection of disparate real estate holdings designed to receive appropriate management attention and recognition in the public markets. Pershing Square helped orchestrate the spinoff, hired the management team, and has been the largest investor in HHC since its inception. Management has done a superb job growing asset value, yet, the company has not received the recognition it deserves, i.e., an appropriate valuation in the public markets. Despite a more than three-fold increase over the last six years, it remains undervalued in our view.

HHC’s mission is to be the preeminent developer and operator of master planned communities (“MPCs”) and mixed-use properties. HHC’s management team has transformed the company’s disparate assets into a collection of high-quality core trophy assets. The majority of HHC’s value is now represented by the South Street Seaport, Ward Village in Hawaii and master planned communities in Houston, Las Vegas and Maryland. These assets are comprised of steady cash-flow generating properties and longer-term development opportunities that encompass more than 50 million square feet of real estate development potential.

HHC continued to make meaningful progress in 2016 to enhance the value of its key assets. In its operating asset segment, HHC grew net operating income (“NOI”) in 2016 to $135 million or $156 million annualizing Q4 NOI, from $118 million in 2015 (all excluding the Seaport, which is undergoing redevelopment). HHC management increased its projected stabilized 2020 NOI estimate to $232 million from $219 million.

In Hawaii, at its 60-acre coastal Ward Village property in the heart of Honolulu, HHC has four condo towers with nearly 1,400 units in various stages of completion. These towers have an estimated total cost of $1.5 billion on which the company expects to generate net margins of approximately 25% to 30%. These towers are over 80% sold with one tower projected to be delivered each year from now until 2019 (generating meaningful cash proceeds for the company). In total, HHC has entitlements to build more than 9 million square feet of mixed-use development with over 4,000 residences and 1 million square feet of retail upon completion of its plan at Ward Village.

At the Seaport, HHC owns more than 400,000 square feet of highly valuable real estate (along with 700,000 square feet of future development rights). Construction on the 170,000 square foot Pier 17 building is expected to be substantially completed by the end of 2017, with a grand opening in summer 2018. This architecturally significant building on the East River will have a unique group of tenants and a 1.5 acre rooftop year-round entertainment venue with iconic views. HHC advanced the revitalization of the Seaport with the approval for its Pier 17 Minor Modification, which will allow HHC to move and reconstruct the 53,000 square foot Tin Building. In Q1 2016, HHC sold an assemblage of properties it had acquired in 2014 and 2015 at the Seaport for $390 million generating a $140 million profit, which demonstrates the market appeal of the Seaport and management’s ability to create value.

While HHC’s share price performance (and intrinsic valuation creation) since its spinoff have been impressive, the share price has been flat over the last three years. Although management has done a superb job growing intrinsic value, the HHC story is largely unknown in the investment community. The HHC story and value proposition is complicated by the vast development potential that cannot be estimated by simply applying a multiple to existing cash flows. To address this concern, HHC recently started conducting quarterly earning conference calls and taking a more proactive approach to investor and analyst outreach. We believe HHC is undervalued and that further progress on asset stabilization and clarity around some of its bigger projects (e.g., Seaport and Ward Village) will help drive stock appreciation.

Howard Hughes’ total shareholder return was 0.8% in 2016.



From Bill Ackman (Trades, Portfolio)'s Pershing Square 2016 annual report.


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Bill Ackman Comments on The Howard Hughes Corp - Dec 09, 2016

Net Operating Income (NOI) from HHC (NYSE:HHC)’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

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.

Houston

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.

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

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Bill Ackman Comments on Howard Hughes Corp - Aug 29, 2016

HHC's second quarter report highlighted the continued progress it is making across all of its initiatives and business segments.

Net operating income ("NOT") from HHC (NYSE:HHC)'s operating assets increased from $28.5 million to $36 3 million year-over-year as recently developed properties continue to stabilize. HHC held steady its projected annual stabilized NOT estimate (excluding the South Street Seaport) of $215 million after increasing it from $203 million at year-end. Land sales closed in its Master Planned Communities ("MPC") segment decreased from $47 million to $34 million year-over-year in Q2 due to weakness at Woodlands in Houston and timing of superpad sales. The housing market in Summerlin remains strong as demonstrated by $48 million in land sales at The Summit, which is HHC's luxury golf course joint venture development within Summerlin. The Woodlands, which develops and sells lots at the upper end of the Houston residential market continues to experience a slowdown in housing activity. HHC saw increased activity, land sale closings and absorption rates at Bridgeland due to stronger demand for more affordable lots in Houston.

At the Ward Village in Honolulu, construction of the Waiea and Anaha condo towers continues on plan. Over 85% of the total square feet available for sale is now under contract at both the Waiea and Anaha condos. The 174-unit Waiea condo is expected to be completed by year-end, at which point HHC will begin to generate a significant amount of cash flow from condo closings. Anaha, a 317-unit project, is expected to be completed by the second quarter of 2017. In February 2016, HHC began construction of Ae'o, the third of four mixed-use residential towers planned for the first phase of the Ward Village development. Whole Foods has pre-leased a substantial portion of the retail space at the base of this tower, which is scheduled for completion in late 2018. Pre-sales are ongoing at the 466-unit Ae'o tower with 45% of the total residential square feet available for sale under contract. The fourth condo tower, the 424-unit Ke Kilohana, sold 90% of its units in five days (in April 2016). Ke Kilohana is a workforce residential tower with 375 of its units designated for local residents. Total construction costs for all four towers are expected to be $1.45 billion of which HHC has incurred $523 million

While HHC did not announce any new material developments at the South Street Seaport in Q2, we are optimistic about the potential for significant value creation at the Seaport.

From Bill Ackman (Trades, Portfolio)'s mid-year 2016 letter.

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Ratios

vs
industry
vs
history
PE Ratio 34.19
HHC's PE Ratio is ranked lower than
83% of the 1321 Companies
in the Global Real Estate - General industry.

( Industry Median: 12.80 vs. HHC: 34.19 )
Ranked among companies with meaningful PE Ratio only.
HHC' s PE Ratio Range Over the Past 10 Years
Min: 23.5  Med: 32.58 Max: 91.03
Current: 34.19
23.5
91.03
PE Ratio without NRI 34.19
HHC's PE Ratio without NRI is ranked lower than
82% of the 1320 Companies
in the Global Real Estate - General industry.

( Industry Median: 13.05 vs. HHC: 34.19 )
Ranked among companies with meaningful PE Ratio without NRI only.
HHC' s PE Ratio without NRI Range Over the Past 10 Years
Min: 23.5  Med: 32.58 Max: 91.03
Current: 34.19
23.5
91.03
Price-to-Owner-Earnings 14.70
HHC's Price-to-Owner-Earnings is ranked lower than
57% of the 771 Companies
in the Global Real Estate - General industry.

( Industry Median: 11.88 vs. HHC: 14.70 )
Ranked among companies with meaningful Price-to-Owner-Earnings only.
HHC' s Price-to-Owner-Earnings Range Over the Past 10 Years
Min: 9.3  Med: 24 Max: 116.64
Current: 14.7
9.3
116.64
PB Ratio 1.81
HHC's PB Ratio is ranked lower than
74% of the 1647 Companies
in the Global Real Estate - General industry.

( Industry Median: 1.10 vs. HHC: 1.81 )
Ranked among companies with meaningful PB Ratio only.
HHC' s PB Ratio Range Over the Past 10 Years
Min: 0.66  Med: 1.78 Max: 2.95
Current: 1.81
0.66
2.95
PS Ratio 5.46
HHC's PS Ratio is ranked lower than
66% of the 1572 Companies
in the Global Real Estate - General industry.

( Industry Median: 3.00 vs. HHC: 5.46 )
Ranked among companies with meaningful PS Ratio only.
HHC' s PS Ratio Range Over the Past 10 Years
Min: 4.37  Med: 7.67 Max: 16.86
Current: 5.46
4.37
16.86
Price-to-Operating-Cash-Flow 16.88
HHC's Price-to-Operating-Cash-Flow is ranked lower than
67% of the 783 Companies
in the Global Real Estate - General industry.

( Industry Median: 12.35 vs. HHC: 16.88 )
Ranked among companies with meaningful Price-to-Operating-Cash-Flow only.
HHC' s Price-to-Operating-Cash-Flow Range Over the Past 10 Years
Min: 16.13  Med: 34.15 Max: 1723.02
Current: 16.88
16.13
1723.02
EV-to-EBIT 45.97
HHC's EV-to-EBIT is ranked lower than
87% of the 1403 Companies
in the Global Real Estate - General industry.

( Industry Median: 13.28 vs. HHC: 45.97 )
Ranked among companies with meaningful EV-to-EBIT only.
HHC' s EV-to-EBIT Range Over the Past 10 Years
Min: -1154.3  Med: 17.6 Max: 197
Current: 45.97
-1154.3
197
EV-to-EBITDA 25.64
HHC's EV-to-EBITDA is ranked lower than
78% of the 1422 Companies
in the Global Real Estate - General industry.

( Industry Median: 12.44 vs. HHC: 25.64 )
Ranked among companies with meaningful EV-to-EBITDA only.
HHC' s EV-to-EBITDA Range Over the Past 10 Years
Min: -795.5  Med: 15.2 Max: 195.5
Current: 25.64
-795.5
195.5
EV-to-Revenue 7.65
HHC's EV-to-Revenue is ranked lower than
62% of the 1617 Companies
in the Global Real Estate - General industry.

( Industry Median: 4.97 vs. HHC: 7.65 )
Ranked among companies with meaningful EV-to-Revenue only.
HHC' s EV-to-Revenue Range Over the Past 10 Years
Min: 6.3  Med: 9.2 Max: 17.1
Current: 7.65
6.3
17.1
Current Ratio 1.86
HHC's Current Ratio is ranked higher than
75% of the 1561 Companies
in the Global Real Estate - General industry.

( Industry Median: 1.78 vs. HHC: 1.86 )
Ranked among companies with meaningful Current Ratio only.
HHC' s Current Ratio Range Over the Past 10 Years
Min: 0.52  Med: 3.17 Max: 12.07
Current: 1.86
0.52
12.07
Quick Ratio 1.86
HHC's Quick Ratio is ranked higher than
82% of the 1560 Companies
in the Global Real Estate - General industry.

( Industry Median: 1.17 vs. HHC: 1.86 )
Ranked among companies with meaningful Quick Ratio only.
HHC' s Quick Ratio Range Over the Past 10 Years
Min: 0.52  Med: 3.17 Max: 12.07
Current: 1.86
0.52
12.07
Days Sales Outstanding 77.19
HHC's Days Sales Outstanding is ranked higher than
81% of the 1116 Companies
in the Global Real Estate - General industry.

( Industry Median: 27.99 vs. HHC: 77.19 )
Ranked among companies with meaningful Days Sales Outstanding only.
HHC' s Days Sales Outstanding Range Over the Past 10 Years
Min: 4.56  Med: 20.85 Max: 77.19
Current: 77.19
4.56
77.19
Days Payable 14.93
HHC's Days Payable is ranked lower than
79% of the 928 Companies
in the Global Real Estate - General industry.

( Industry Median: 70.10 vs. HHC: 14.93 )
Ranked among companies with meaningful Days Payable only.
HHC' s Days Payable Range Over the Past 10 Years
Min: 14.93  Med: 221.12 Max: 379.03
Current: 14.93
14.93
379.03

Buy Back

vs
industry
vs
history
3-Year Average Share Buyback Ratio -3.00
HHC's 3-Year Average Share Buyback Ratio is ranked higher than
58% of the 878 Companies
in the Global Real Estate - General industry.

( Industry Median: -4.80 vs. HHC: -3.00 )
Ranked among companies with meaningful 3-Year Average Share Buyback Ratio only.
HHC' s 3-Year Average Share Buyback Ratio Range Over the Past 10 Years
Min: -3  Med: -1.5 Max: -0.2
Current: -3
-3
-0.2

Valuation & Return

vs
industry
vs
history
Price-to-Tangible-Book 1.84
HHC's Price-to-Tangible-Book is ranked lower than
72% of the 1616 Companies
in the Global Real Estate - General industry.

( Industry Median: 1.13 vs. HHC: 1.84 )
Ranked among companies with meaningful Price-to-Tangible-Book only.
HHC' s Price-to-Tangible-Book Range Over the Past 10 Years
Min: 0.7  Med: 1.82 Max: 2.92
Current: 1.84
0.7
2.92
Price-to-Median-PS-Value 0.71
HHC's Price-to-Median-PS-Value is ranked higher than
79% of the 1208 Companies
in the Global Real Estate - General industry.

( Industry Median: 1.03 vs. HHC: 0.71 )
Ranked among companies with meaningful Price-to-Median-PS-Value only.
HHC' s Price-to-Median-PS-Value Range Over the Past 10 Years
Min: 0.61  Med: 1 Max: 2.08
Current: 0.71
0.61
2.08
Price-to-Graham-Number 1.67
HHC's Price-to-Graham-Number is ranked lower than
82% of the 1129 Companies
in the Global Real Estate - General industry.

( Industry Median: 0.81 vs. HHC: 1.67 )
Ranked among companies with meaningful Price-to-Graham-Number only.
HHC' s Price-to-Graham-Number Range Over the Past 10 Years
Min: 1.37  Med: 1.64 Max: 2.66
Current: 1.67
1.37
2.66
Earnings Yield (Greenblatt) % 2.17
HHC's Earnings Yield (Greenblatt) % is ranked lower than
72% of the 1692 Companies
in the Global Real Estate - General industry.

( Industry Median: 6.05 vs. HHC: 2.17 )
Ranked among companies with meaningful Earnings Yield (Greenblatt) % only.
HHC' s Earnings Yield (Greenblatt) % Range Over the Past 10 Years
Min: -37.9  Med: 1.2 Max: 8.7
Current: 2.17
-37.9
8.7

More Statistics

Revenue (TTM) (Mil) $1,030.04
EPS (TTM) $ 3.80
Beta1.26
Volatility17.65%
52-Week Range $114.28 - 140.38
Shares Outstanding (Mil)43.02

Analyst Estimate

Dec18
Revenue (Mil $)
EBIT (Mil $)
EBITDA (Mil $)
EPS ($) -0.37
EPS without NRI ($) -0.37
EPS Growth Rate
(Future 3Y To 5Y Estimate)
N/A
Dividends per Share ($)

Piotroski F-Score Details

Piotroski F-Score: 66
Positive ROAY
Positive CFROAY
Higher ROA yoyY
CFROA > ROAY
Lower Leverage yoyY
Higher Current Ratio yoyY
Less Shares Outstanding yoyN
Higher Gross Margin yoyN
Higher Asset Turnover yoyN

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