HHC - Howard Hughes Corp

[thepupil]

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.

 

ha, that makes two of us.

[johnny]

I don't normally track this so I'm just going to ask in case anybody has the ratio offhand. Do we have a rough estimate on how many of the shares are likely to end up in PSH?

[peridotcapital]

I agree, I would rather Ackman buy the deal than not. Not only could we have bought sub-$50 this morning, but the odds are good that in the coming days the public price will go back to $50, so anyone is free to buy alongside the institutions. Does Ackman take some blame for being chairman and endorsing the business model of running a real estate development company day to day operationally in the red on a cash basis? Sure, but anyone paying attention knew this is what they were doing. The $175-$200 NAV figures out there all assumed that everything went right for 5-10 years (no recessions, financing issues, or delayed projects and consistent land sales). Of course that was unlikely, and here is your opportunity to buy low and sell once things are firing on all cylinders again a year or two from now.

[Foreign Tuffett]

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

 

I don't know if that was meant to be a rhetorical question, but yeah, shareholders definitely can. Ackman has been HHC's Chairman of the Board since the company was created over nine years ago.

[BG2008]

I have been radio silent on this name and I'll add some color here and hope that it will be helpful. 

 

1) What you think of the deal likely has a lot to do with your cost basis.  If you bought at $40, this is awesome.  It de-risk your investment with equity injection at $50.  If you bought at $100, you're likely pissed.  But then you gather yourself and think...

 

2) When this pattern of REITs issuing equity in 2009 emerged, it was really bullish for the stock price from that point onward.  Because it is obvious that those REITs were trading at a big discount to NAV, but the future is unknown because they may take the keys away from you.  But this deal takes that risk away.  So the NAV shrunk and is likely still in the mid $100s.  In the short term, shares likely go to 1/2 of NAV which is a 6 or 7 handle.  From a tactical trading perspective, you probably should be adding which I did with a 5% add today.  But I also bought in the mid $40s.  So I had quite a bit of exposure prior to this.

 

3) Objectively, I am less bullish on management team because they put themselves in this situation and the 5-10 year upside is lower.  More upside gets transfer to Billy Boy. 

 

4) The Oxy deal is terrible timing.  But there are good strategic timing behind it in that HHC enjoy great pricing power and artificially creates supply constraint in their MPCs.  If the Oxy tower went to another buyer, you can argue that their Woodlands real estate would be worth less as a whole.  Terrible timing.  If you have spent lots of time in The Woodlands, it will make a lot of sense.     

 

5) Let's talk about the situation they are in.  Oxy deal, not good, bad timing.  O&G not good.  One thing that is hard to fault them for is that retail and hospitality will go negative NOI.  Typically you underwrite retail to do 20% less and hospitality 50% less in a recession.  For those assets to be shut down and go NOI negative, that was unforeseen. 

 

6) I hedged with puts going into this storm and sold some shares at $60 and bought it back at mid $40s and bought a little more today.  All in, my cost basis is probably within $10 of the new offering price of $50.  I sold some of the April puts for upwards of $39 which I paid $0.90 for.  Emotionally, I am not cursing at Ackman.  But I acknowledge if you were long this at $120 without any hedging, you are likely throwing a wine bottle at your flat screen TV today. 

 

7) The sun will eventually rise again.  One day, the Seaport in New York City will be an amazing asset.  Unlike most traditional street level retail, it is actually a destination that you can go back again and again during the summer months.  It is also really really Instagram-Genic.  One day, people will still want to go to Vegas for the booze and parties.  One day, homebuilders will still want to buy a ton of residential lots from HHC.  One day, people will still want to go to Honolulu for the weather and the beach.  One day, people will still want to rent office space on the picturesque Lake Woodlands.  None of this matters at this moment as the passage of time slows to a crawl just like when I was doing 4 practice session during football camp during my senior year.  Days seems like weeks and months at that time.  But this too shall pass (especially now that they have $1bn of cash).  This is likely a "mini GGP" for Bill Ackman and he can probably brag about how he made a 5 bagger in a few years.  So what are you going to do?   

 

8) You can hate on the guy and say I don't want anything to do with Bill Ackman or you can look at the fact patterns here and say "maybe, I should own 2-3% of HHC."  I own a lot more than 2-3%. 

 

 

[KJP]

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

 

I don't know if that was meant to be a rhetorical question, but yeah, shareholders definitely can. Ackman has been HHC's Chairman of the Board since the company was created over nine years ago.

 

I was about to say the same thing. As Chairman, he owes HHC the same fiduciary duties he owes PSH and his LPs.  We know he saw all this coming (just ask him!), so what did he do in February and the first two weeks of March to protect HHC shareholders?  Obviously he has less authority and ability to act quickly with respect to HHC, and the company has a different mandate than PSH, but I would like to know the answer to that question. 

 

And that's just in the last month or so.  He's also the one who tolerated all the spending and private jets for years, and lauded the expertise of the people doing it, only to take pot shots at them after the fact.

[KJP]

 

 

3) Objectively, I am less bullish on management team because they put themselves in this situation and the 5-10 year upside is lower.  More upside gets transfer to Billy Boy. 

 

 

 

Given the level of his involvement, isn't Billy Boy part of management, at least with respect to strategic direction/capital allocation/overall liquidity risk?

[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

 

I don't know if that was meant to be a rhetorical question, but yeah, shareholders definitely can. Ackman has been HHC's Chairman of the Board since the company was created over nine years ago.

 

I was about to say the same thing. As Chairman, he owes HHC the same fiduciary duties he owes PSH and his LPs.  We know he saw all this coming (just ask him!), so what did he do in February and the first two weeks of March to protect HHC shareholders?  Obviously he has less authority and ability to act quickly with respect to HHC, and the company has a different mandate than PSH, but I would like to know the answer to that question. 

 

And that's just in the last month or so.  He's also the one who tolerated all the spending and private jets for years, and lauded the expertise of the people doing it, only to take pot shots at them after the fact.

 

fair points all around.  I genuinely think he acted in the best interest of the company, but agree that change at HHC could have and should have come far sooner, they could be better positioned and that does lay on him. I don't think he can be blamed for not anticipating a Saudi missile being aimed at the woodlands at the same time as retail came to a standstill though.

[Gregmal]

Good or bad, great or sketchy on Ackman's part, this is still a stunning 180. A few months ago we were talking about selling assets and buying back stock. Then we bought a half BILLION in assets, watched the stock decline 60%, and then issue $500M+ in stock....

 

Ive only ever made money in this name trading it. The assets are unquestionable, but there are certainly character/credibility issues here.

[thepupil]

If you thought Ackman got an unfair deal, Mr. Market is now syndicating an offering at a 7% discount to the Ackman round. I’m holding off for now, see lots of long term upside here but better risk reward elsewhere

[BG2008]

10 Corso Como to close in NYC

 

https://www.forbes.com/sites/oracle/2020/03/16/cfo-mandate-move-from-reporting-to-explaining-and-predicting/#65dd41ca7351

 

https://www.bisnow.com/new-york/news/capital-markets/howard-hughes-layoffs-coronavirus-103749

 

Seaport to lay off over 300 employees

 

Let the Ackman and HHC bashing begin!!!!

[thepupil]

If you thought Ackman got an unfair deal, Mr. Market is now syndicating an offering at a 7% discount to the Ackman round. I’m holding off for now, see lots of long term upside here but better risk reward elsewhere

 

If you thought Ackman got an unfair deal, Mr. Market is now syndicating an offering at a 7% 15% discount to the Ackman round. I’m holding off for now, see lots of long term upside here but better risk reward elsewhere

[Sunrider]

10 Corso Como to close in NYC

 

https://www.forbes.com/sites/oracle/2020/03/16/cfo-mandate-move-from-reporting-to-explaining-and-predicting/#65dd41ca7351

 

https://www.bisnow.com/new-york/news/capital-markets/howard-hughes-layoffs-coronavirus-103749

 

Seaport to lay off over 300 employees

 

Let the Ackman and HHC bashing begin!!!!

 

Thank god - that 10 corse Como seemed like something random the CEO fell in love with in Italy - anyone ever went to the store? Beyond me how that was supposed to pay for expensive real estate!

[adhital]

Today’s 13D/A HHC:

 

NAME OF REPORTING PERSON

 

Pershing Square Capital Management

 

Security and Issuer

Item 1 of the Original Schedule 13D is hereby amended and supplemented by replacing the second and third paragraphs therein with the following information:

“The Reporting Persons beneficially own 10,918,008 shares of Common Stock (the “Subject Shares”). On June 3, 2020, the Reporting Persons sold 6,925,000 in-the-money over-the-counter European-style put options referencing 6,925,000 shares of Common Stock (the “Put Options”). Pursuant to the Put Options, in the event the stock price of the Issuer is less than or equal to the Put Option strike prices at the time of their expiration (each expiration and strike price, as set forth in Exhibit 99.9), the Reporting Persons would be obligated to purchase 6,925,000 shares of Common Stock. In the case where all of the Put Options are exercised by the counterparties, the Reporting Persons would beneficially own 32.5% of the outstanding shares of the Common Stock of the Issuer.

The Subject Shares represent approximately 19.9% of the outstanding shares of Common Stock and the Put Options sold represent 12.6% of the outstanding shares of Common Stock, based on 54,929,674 shares of Common Stock outstanding as of May 7, 2020 as reported in the Issuer’s Form 10-Q filed on May 11, 2020 for the quarterly period ending March 31, 2020.”

 

Item 3.

Source and Amount of Funds or Other Consideration

Item 3 of the Schedule 13D is hereby amended and supplemented by adding the following information:

“The Reporting Persons, on behalf of PSH: (i) cash-settled certain forward purchase contracts referencing 3,719,755 shares of Common Stock paying an aggregate amount of $212,342,766; (ii) wrote Put Options referencing 6,925,000 shares of Common Stock receiving premium of $168,958,095, and (iii) sold 1,749,072 shares of Common Stock receiving proceeds of $102,598,296 (for a net receipt of $59,213,625).

In addition, the Reporting Persons, on behalf of PS International, acquired 469,691 shares of Common Stock through the physical settlement of certain forward purchase contracts paying an aggregate amount of $54,014,465. The source of funding for the physical settlement was derived from the capital of PS International.”

[BG2008]

10 Corso Como to close in NYC

 

https://www.forbes.com/sites/oracle/2020/03/16/cfo-mandate-move-from-reporting-to-explaining-and-predicting/#65dd41ca7351

 

https://www.bisnow.com/new-york/news/capital-markets/howard-hughes-layoffs-coronavirus-103749

 

Seaport to lay off over 300 employees

 

Let the Ackman and HHC bashing begin!!!!

 

Thank god - that 10 corse Como seemed like something random the CEO fell in love with in Italy - anyone ever went to the store? Beyond me how that was supposed to pay for expensive real estate!

 

I've been to 10 Corso Como and still don't understand why it was there.  Former CEO Weinreb got a divorce and was dating a young model.  He likely went to Milan, Italy and went to the 10 Corso Como there which is apparently a hopping place.  $3,000 leather jackets.  Who buys that?  They also had an art gallery there, I think you can buy the art. But you can also browse it which is kind of cool. 

 

The Chase lounge and the new book store are awesome. 

 

https://nypost.com/2018/01/03/howard-hughes-ceo-revealed-as-secret-38m-penthouse-buyer/

[BG2008]

Sometimes, I feel like my sleuthing borders on stalking.  But if the New York Post has an article on you, that's totally public information. 

[Foreign Tuffett]

CEO Paul Layne just "retired" at 62/63, effective four days ago. CFO is now interim CEO. Anyone have a clue what is going on here? Layne has only been CEO since last October.

 

 

https://investor.howardhughes.com/news-events/press-releases/news-details/2020/The-Howard-Hughes-Corporation-Appoints-David-OReilly-Interim-CEO/default.aspx

[BG2008]

Paul Layne, the former CEO, probably pushed to make the acquisition of that Occidental Tower in The Woodlands.  He was in charged of the Woodlands.  Markets seized up this and HHC did that equity offering.  Paul Layne was not as charismatic as the former CEO.  I always felt like David O'Reilly will be the CEO.  He knows his stuff or he's just really good at talking to investors. 

[BG2008]

Also, Bill Ackman is not up 100% on this investment this year.  So heads will roll.

[Saluki]

Ackman thought it was undervalued at ~$130 and did a big equity raise at $50 when the markets tanked.  I bought a little there with what little money I had that wasn't deployed but wished I had bought more at that time.  The market is puking up everything today so you may get another bite at that apple. 

[shamelesscloner]

Looks like Ackman added 17% to this position last week. Am I understanding correctly that he was put these shares, meaning there's not a lot to glean about his bullishness at $79?

[Saluki]

Looks like Ackman added 17% to this position last week. Am I understanding correctly that he was put these shares, meaning there's not a lot to glean about his bullishness at $79?

 

Looks like he bought 1/3 because of the put and 2/3 on his own. I wish I had backed the truck up at $50 instead of dipping my toe in.  Since this is probably still underpriced, and so is his closed end fund, I wish there were a way that he could buy most of it with his closed end fund, then merge it with his overpriced SPAC.  Kind of like the russian nesting dolls that Buffett used to do in the early days with Blue Chip Stamps.

 

https://www.fool.com/millionacres/real-estate-investing/articles/bill-ackman-just-bought-even-more-howard-hughes-corporation-stock/

[BG2008]

Anyone has an explanation for the recent strength in HHC?

 

[Saluki]

I think HHC is two companies (Master planned community and finished properties like South Street Seaport).  They think they get sell off the Chicago downtown office bldg and get another $100mm and the pandemic has probably helped by making communities like Houston and Las Vegas (where they have SF housing more spread out) more attractive.