HHC - Howard Hughes Corp

[Spekulatius]

Still watching, but boy are things starting to get interesting. I'm not going to be one of those who qualms about problems for a company sporting an already problem indicative valuation, but you'd have to think that OXY deal may have been a bad move. This one unfortunately nicks pretty much every box of everything everyone is afraid of right now, in a diversified way.

 

The way energy is going, the whole greater Houston area may have a lot of office vacancies soon.

[Castanza]

Still watching, but boy are things starting to get interesting. I'm not going to be one of those who qualms about problems for a company sporting an already problem indicative valuation, but you'd have to think that OXY deal may have been a bad move. This one unfortunately nicks pretty much every box of everything everyone is afraid of right now, in a diversified way.

 

The way energy is going, the whole greater Houston area may have a lot of office vacancies soon.

 

If they do what are the odds big tech pushes in like they did in Austin? Texas if fertile ground for California expansion.

[Gamecock-YT]

Still watching, but boy are things starting to get interesting. I'm not going to be one of those who qualms about problems for a company sporting an already problem indicative valuation, but you'd have to think that OXY deal may have been a bad move. This one unfortunately nicks pretty much every box of everything everyone is afraid of right now, in a diversified way.

 

The way energy is going, the whole greater Houston area may have a lot of office vacancies soon.

 

If they do what are the odds big tech pushes in like they did in Austin? Texas if fertile ground for California expansion.

 

Austin is way more trendy than Houston.

[Spekulatius]

Still watching, but boy are things starting to get interesting. I'm not going to be one of those who qualms about problems for a company sporting an already problem indicative valuation, but you'd have to think that OXY deal may have been a bad move. This one unfortunately nicks pretty much every box of everything everyone is afraid of right now, in a diversified way.

 

The way energy is going, the whole greater Houston area may have a lot of office vacancies soon.

 

If they do what are the odds big tech pushes in like they did in Austin? Texas if fertile ground for California expansion.

 

Austin is way more trendy than Houston.

 

Even DFW. Houston is just Texas’ armpit.

[Gregmal]

Anyone think we've come full cycle. Back while part of GGP, the HHC assets were long considered the rubbish. half decade later, 2015 or so, trophies. Now? Rubbish again.

[hyten1]

i am stunned where hhc is trading at now

[KJP]

i am stunned where hhc is trading at now

 

What do you think it is worth?

[Foreign Tuffett]

i am stunned where hhc is trading at now

 

I think the reason this can go from "hero to zero" and back so quickly is leverage + nearly all the major assets are quite procyclical and/or not stabilized. Think about what they own:

 

Las Vegas MPC (Las Vegas strip is shutdown, and Vegas has historically had a very cyclical economy)

 

Houston MPC (Houston the center of America's energy industry, and energy is in the mother of all downturns)

 

NYC Seaport (not anywhere close to being stabilized + NYC is epicenter of COVID-19 in US, so I'm assuming the whole complex is shutdown right now)

 

Huge luxury condo development in Honolulu

 

Big ass tower in Chicago that is still under construction

 

Lots of undeveloped assets. The NPVs of these go way down if they lay dormant for years instead of being developed or sold

 

 

[johnny]

No doubt this is super cheap, five years from now. But every diverse segment here is about to undergo such unprecedented stress, it's pretty hard to model how they get to 2025.

 

The "self-funding" model is now broken. Nobody is buying Summerlin plots right now. That market is still totally travel-based. We should expect the Summerlin land bank to be cash-consuming for the rest of the year. How much cash is going to be consumed?

 

The Texas market is going to be stressed like it hasn't been in our professional lifetimes. How confident are we feeling about NOI here?

 

Seaport has shifted to essentially a vertically-integrated retail operation. In the worst Corona state in the union. How much cash are we going to burn?

 

I'm not bearish on the stock; I'm buying. But I'm buying in cowardly amounts in an attempt to split the difference between my greed and my ignorance. If somebody is doing serious homework here, please share in the thread after you've maxed out your position.

[thepupil]

I would echo others that when leased up real estate falls so hard and so fast, it's tough to jump at HHC. I sold at $72 and bought VNO at $41 with the proceeds. Thus far that has added value in a terrible fashion (selling something that goes down another 50% to buy something that goes down 30% isn't the most pleasant of additive trades).

 

I also just bought some CUZ at about a 9 cap. When leased up trophy assets in Charlotte / Austin / Atlanta are available for a 9 cap with 4x ND to EBITDA, it's tough to get super excited about HHC.

 

Also eyeing JBGS which just a short while ago as the great "discount to NAV diversification" trade

 

That said, it's super cheap.

 

[KJP]

Interesting timing from a company that has always touted its liquidity:  https://investor.howardhughes.com/file/Index?KeyFile=403421077

 

Here's the prospectus:  https://www.sec.gov/Archives/edgar/data/1498828/000104746920001833/a2241059z424b5.htm

 

The Covid-19 impacts are right at the front.  The list is long.

[thepupil]

Ugghh, still own a small position for a family member and that’s just brutal. Validating of the switches I’ve made to more fully leased up and diversified REITs* after the big fall, but that sucks.

 

I would say this makes me more inclined to get back in (probably post wash sale) as it de-risks this balance sheet, also makes me like PSH more.

 

It seems like the lesser of evils to do this, but still sucks.

 

*invreasingly like a basket of high quality multi family (EQR,ESS, CPT, AVB) funding  with FRPH/EQC

[Gregmal]

I bought a position here a few days ago and am debating kicking it to the curb after this. It really just highlights how terrible that OXY deal was. All around. Sure there was a strategic rationale, but they also killed their credibility in my eyes after going through a strategic review, talking about asset sales and strengthening the core of the company, and then going and making an acquisition like that. Great assets here for sure, but there's so much cheap real estate everywhere right now I'd rather take my pick and stay with companies who dont need to be issuing stock after losing 60% of their value.

[Guest roark33]

This is so odd, either they have their eye on some great assets, or they know how bad it is going to get and need the liquidity. Really odd...

[KJP]

I bought a position here a few days ago and am debating kicking it to the curb after this. It really just highlights how terrible that OXY deal was. All around. Sure there was a strategic rationale, but they also killed their credibility in my eyes after going through a strategic review, talking about asset sales and strengthening the core of the company, and then going and making an acquisition like that. Great assets here for sure, but there's so much cheap real estate everywhere right now I'd rather take my pick and stay with companies who dont need to be issuing stock after losing 60% of their value.

 

I'm thinking through three options:

1) Get rid of it for various reasons

2) Sell, take capital loss, buy back in 30 days (as pupil suggested)

3) Buy more to avoid being diluted at these prices -- There must be many holders with a cost basis above $80 that are considering this option, a la Ackman (of course, most of them probably weren't protected most of the way down)

 

I haven't reviewed the full prospectus to see how Ackman's follow-on private placement would be structured.  I'm curious whether it's limited to the amount necessary to prevent dilution to him or whether he's going to get the right to take up more than his proportionate share.

[peridotcapital]

This is so odd, either they have their eye on some great assets, or they know how bad it is going to get and need the liquidity. Really odd...

 

The operating assets have never generated positive cash flow after interest expense. They got away with it from land sales and massive debt increases. If land sales go to zero and hotel revenue goes to zero, based on 2019 figures this company burns through $15M per month even if every tenant keeps paying rent. If rents drop by 50% that number doubles to $30M per month. The debt has been soaring and the lack of operational spending discipline has been awful. Hopefully they do a better job going forward. Its a frustrating one to own, but since I got out at 125 I guess I have to buy it back in the 40's. Or maybe I will just buy Seritage at 7 instead...

[dcollon]

The Howard Hughes Corporation® Announces Pricing Of Public Offering Of 2,000,000 Shares Of Common Stock And Private Placement Of 10,000,000 Shares Of Common Stock

 

DALLAS, March 27, 2020 /PRNewswire/ -- The Howard Hughes Corporation® (NYSE: HHC) (the "Company") today announced that it has priced an underwritten public offering of 2,000,000 shares of the Company's common stock (the "Offered Shares"), at a price per share to the public of $50, for estimated aggregate net proceeds (after deducting estimated underwriting discounts and commissions and estimated offering expenses) of $94,000,000. The Company also has granted the joint bookrunners an option to purchase an additional 300,000 shares of common stock at the same price.

 

In addition, the Company entered into a purchase agreement with Pershing Square Capital Management, L.P., a Delaware limited partnership, acting as investment advisor to funds that it manages, including Pershing Square Holdings, Ltd., Pershing Square International, Ltd., and Pershing Square, L.P. (collectively, the "Pershing Square Funds"), pursuant to which, the Pershing Square Funds will purchase, at the same price as the offering price, an aggregate of 10,000,000 shares of the Company's common stock, for estimated aggregate net proceeds of $488,000,000.

The Company expects to use the net proceeds of the offering and the net proceeds of the concurrent private placement for general corporate purposes, including to strengthen the balance sheet and provide liquidity.

BofA Securities, JPMorgan and Wells Fargo Securities acted as joint bookrunners for the offering. The offering is being made pursuant to an effective shelf registration statement, prospectus and prospectus supplement filed by the Company.

 

[KJP]

The Howard Hughes Corporation® Announces Pricing Of Public Offering Of 2,000,000 Shares Of Common Stock And Private Placement Of 10,000,000 Shares Of Common Stock

 

DALLAS, March 27, 2020 /PRNewswire/ -- The Howard Hughes Corporation® (NYSE: HHC) (the "Company") today announced that it has priced an underwritten public offering of 2,000,000 shares of the Company's common stock (the "Offered Shares"), at a price per share to the public of $50, for estimated aggregate net proceeds (after deducting estimated underwriting discounts and commissions and estimated offering expenses) of $94,000,000. The Company also has granted the joint bookrunners an option to purchase an additional 300,000 shares of common stock at the same price.

 

In addition, the Company entered into a purchase agreement with Pershing Square Capital Management, L.P., a Delaware limited partnership, acting as investment advisor to funds that it manages, including Pershing Square Holdings, Ltd., Pershing Square International, Ltd., and Pershing Square, L.P. (collectively, the "Pershing Square Funds"), pursuant to which, the Pershing Square Funds will purchase, at the same price as the offering price, an aggregate of 10,000,000 shares of the Company's common stock, for estimated aggregate net proceeds of $488,000,000.

The Company expects to use the net proceeds of the offering and the net proceeds of the concurrent private placement for general corporate purposes, including to strengthen the balance sheet and provide liquidity.

BofA Securities, JPMorgan and Wells Fargo Securities acted as joint bookrunners for the offering. The offering is being made pursuant to an effective shelf registration statement, prospectus and prospectus supplement filed by the Company.

 

As I suspected, Ackman saw an opportunity to take advantage of the low prices and dilute everyone else.  Alternatively, there was no interest in the public markets.

 

I'd love to know what the demand was and efforts to place were with respect to the public offering.

[Foreign Tuffett]

The Howard Hughes Corporation® Announces Pricing Of Public Offering Of 2,000,000 Shares Of Common Stock And Private Placement Of 10,000,000 Shares Of Common Stock

 

DALLAS, March 27, 2020 /PRNewswire/ -- The Howard Hughes Corporation® (NYSE: HHC) (the "Company") today announced that it has priced an underwritten public offering of 2,000,000 shares of the Company's common stock (the "Offered Shares"), at a price per share to the public of $50, for estimated aggregate net proceeds (after deducting estimated underwriting discounts and commissions and estimated offering expenses) of $94,000,000. The Company also has granted the joint bookrunners an option to purchase an additional 300,000 shares of common stock at the same price.

 

In addition, the Company entered into a purchase agreement with Pershing Square Capital Management, L.P., a Delaware limited partnership, acting as investment advisor to funds that it manages, including Pershing Square Holdings, Ltd., Pershing Square International, Ltd., and Pershing Square, L.P. (collectively, the "Pershing Square Funds"), pursuant to which, the Pershing Square Funds will purchase, at the same price as the offering price, an aggregate of 10,000,000 shares of the Company's common stock, for estimated aggregate net proceeds of $488,000,000.

The Company expects to use the net proceeds of the offering and the net proceeds of the concurrent private placement for general corporate purposes, including to strengthen the balance sheet and provide liquidity.

BofA Securities, JPMorgan and Wells Fargo Securities acted as joint bookrunners for the offering. The offering is being made pursuant to an effective shelf registration statement, prospectus and prospectus supplement filed by the Company.

 

As I suspected, Ackman saw an opportunity to take advantage of the low prices and dilute everyone else.  Alternatively, there was no interest in the public markets.

 

I'd love to know what the demand was and efforts to place were with respect to the public offering.

 

Yeah, seems fairly clear that Ackman just took advantage of all other shareholders. 

[KJP]

The Howard Hughes Corporation® Announces Pricing Of Public Offering Of 2,000,000 Shares Of Common Stock And Private Placement Of 10,000,000 Shares Of Common Stock

 

DALLAS, March 27, 2020 /PRNewswire/ -- The Howard Hughes Corporation® (NYSE: HHC) (the "Company") today announced that it has priced an underwritten public offering of 2,000,000 shares of the Company's common stock (the "Offered Shares"), at a price per share to the public of $50, for estimated aggregate net proceeds (after deducting estimated underwriting discounts and commissions and estimated offering expenses) of $94,000,000. The Company also has granted the joint bookrunners an option to purchase an additional 300,000 shares of common stock at the same price.

 

In addition, the Company entered into a purchase agreement with Pershing Square Capital Management, L.P., a Delaware limited partnership, acting as investment advisor to funds that it manages, including Pershing Square Holdings, Ltd., Pershing Square International, Ltd., and Pershing Square, L.P. (collectively, the "Pershing Square Funds"), pursuant to which, the Pershing Square Funds will purchase, at the same price as the offering price, an aggregate of 10,000,000 shares of the Company's common stock, for estimated aggregate net proceeds of $488,000,000.

The Company expects to use the net proceeds of the offering and the net proceeds of the concurrent private placement for general corporate purposes, including to strengthen the balance sheet and provide liquidity.

BofA Securities, JPMorgan and Wells Fargo Securities acted as joint bookrunners for the offering. The offering is being made pursuant to an effective shelf registration statement, prospectus and prospectus supplement filed by the Company.

 

As I suspected, Ackman saw an opportunity to take advantage of the low prices and dilute everyone else.  Alternatively, there was no interest in the public markets.

 

I'd love to know what the demand was and efforts to place were with respect to the public offering.

 

Yeah, seems fairly clear that Ackman just took advantage of all other shareholders.

 

It says alot about the state of securities regulation and fiduciary duty in this country that individuals with extensive inside information can benefit from offerings structured in this way.

 

In case anyone not familiar is curious about the size of this deal, I believe the company just sold 18% equity ownership in itself. 

 

[Gregmal]

Ackman is certainly showcasing how much of a scoundrel of a human being he is lately. Crying on TV about dire straits as he covered his hedges while then also lobbying Trump on pro market solutions. Now pick pocketing shareholders.... he is definitely a very smart guy and worth following in terms of what he a up to, but he is the embodiment of everything people hate about Wall Street folks.

[rb]

Boy am I glad I didn't pick up any of this.

[KJP]

Boy am I glad I didn't pick up any of this.

 

Now may be a good time to consider it. As Peridot mentioned, the expense control here has been poor, but they appear to be working on that.  The Seaport has also been a real mess -- nothing close to what it was touted to become a few years ago.  And, of course, in Houston we have a problem.  Easy to see the negatives right now. 

[thepupil]

I don't think Ackman screwed shareholders. Anyone is welcome to increase their share count by 20% at a slightly higher price (or lower price this morning). the company has a lot of near term issues and is prioritizing survival via an equity raise.

 

If NAV is $100, then this knocked off $10 or whatever of per share value.

If NAV is $200 in 7 years, this knocked off $30 per share.

 

It doesn't radically change the reward and decreases the risk.

 

Can we blame him for the company being in a position the company is/was in? Ackman backstopped the offering and provided certainty the to capital raise pricing. the deal priced at market and others were allowed to participate. it sucks to raise dilutive to per share value equity, but we shouldn't blame the anchor tenant in the offering providing sponsorship and certainty to the raise, even if he is an insider.

 

#teamackman

[johnny]

I agree with Pupil. BTW, something like this was telegraphed in The CNBC Interview--he mentioned that he was actively buying the companies in his portfolio and explicitly tagged "except for companies we're on the board on". Thought that was cute at the time. It really didn't make any sense that the position in his portfolio that had the steepest peak-to-now fall was also the one he was definitely not buying.

 

I think this thing dropped below $40 this last week, so it isn't quite like you're being shut out of some special billionaires-only opportunity. Since I've had too much coffee today, I'll go so far as to say that if this deal bothers you so much, you should have been organizing acts of terror against Warren Buffett over the BAC deal eight years ago.

 

Finally, there is such a shortage of American companies sucking it up and doing the self-sufficient responsible thing (raising capital in negotiated transactions with self-interested counterparties) that, even as the loser in this exchange, I'm somewhat proud to be involved in a company that doesn't appear to be holding itself hostage in order to protect the value of the CEO's equity value (Boeing).

 

Maybe this is all just bag-holder cognitive dissonance though. I have bought way more PSH than HHC recently, so that's actually what's going on, I bet.