thepupil Posted June 26, 2019 Share Posted June 26, 2019 Its funny though, all the talk of a bubble... real estate investors would die for even fair valuations on their holdings...Like seriously? how can we be in a bubble if you can't even get NAV minus 10% for some of the best companies in the sector? amen. At parties, I have started to introduce myself as a real estate investor via the stock market, rather than a hobbyist stock investor. Link to comment Share on other sites More sharing options...
NBL0303 Posted June 26, 2019 Share Posted June 26, 2019 Just curious, does Bill Ackman still own Howard Hughes shares? Please believe me when I say that I do not take any information whatsoever from Ackman/Pershing buying or selling - and I am literally zero more or less interested in buying something because of him - but I'm just curious if he is still selling shares - because I remember he was selling a significant amount a year or so ago. Just wondering if this has added to the effective float. Link to comment Share on other sites More sharing options...
SHDL Posted June 26, 2019 Share Posted June 26, 2019 Its funny though, all the talk of a bubble... real estate investors would die for even fair valuations on their holdings...Like seriously? how can we be in a bubble if you can't even get NAV minus 10% for some of the best companies in the sector? IIRC there was a story somewhere about how REITs as an asset class got really cheap relative to the general stock market in the late 1990s and how Charlie Munger used it as a place to hide out for a while. I've been thinking about doing something similar but it will likely take a while as real estate isn't an area that I'm really familiar with... Link to comment Share on other sites More sharing options...
adhital Posted June 26, 2019 Share Posted June 26, 2019 Its funny though, all the talk of a bubble... real estate investors would die for even fair valuations on their holdings...Like seriously? how can we be in a bubble if you can't even get NAV minus 10% for some of the best companies in the sector? amen. At parties, I have started to introduce myself as a real estate investor via the stock market, rather than a hobbyist stock investor. I think this sector is depressed because of the recent bond-yield plunge, late in the housing and credit cycle etc. etc. Or, its just that FANG’s of the world is taking mr.market's attention. but he will be back! I once owned KW when it was on sale, ~$16 for no real reason, and took capital out when it was $23 within few months. I think KW is worth $28+ in private. For now, I take HHC as a gift and to hold it for a very long time. If the world goes south, at least I know I own the hard and income producing assets managed by good mangers and an optionality for one of the MPC or projects to be like Irvine ranch or MSG.. Link to comment Share on other sites More sharing options...
Spekulatius Posted June 27, 2019 Share Posted June 27, 2019 Real estate is doing fine, Real estate packaged as and equity security not so much. It is easy to buy real estate of decent to good quality for 20-40% discounts. Management can’t rely on PP presentation showing NAV, they need to act, sell assets and buy back stock. My guess however is that they are not incentivized to shrink the company they run, even if it is accretive to NAV. Link to comment Share on other sites More sharing options...
BG2008 Posted June 27, 2019 Share Posted June 27, 2019 Real estate is doing fine, Real estate packaged as and equity security not so much. It is easy to buy real estate of decent to good quality for 20-40% discounts. Management can’t rely on PP presentation showing NAV, they need to act, sell assets and buy back stock. My guess however is that they are not incentivized to shrink the company they run, even if it is accretive to NAV. Tell that to the SL Green shareholders, it's been tough for them as well Link to comment Share on other sites More sharing options...
peridotcapital Posted June 27, 2019 Share Posted June 27, 2019 Quick Back of the envelop valuation. Please correct me if I'm way off here.. MPC : land undiscounted value $5 Billion. land value increase as MPC matures, so we may not need to discount this. However, for margin, lets discount by 30%. MPC value $3.5Billion. Operating asset $321mm NOI stabilized in the next 5 years. $200mm as of 2019 and $121mm in the next 5 years (or ~$100mm discounted @ 10% based on company's yearly projection). $1.7 Billion debt. with 6% CAP = OP asset equals $3.1 Billion net. Bill said they deserve higher CAP, perhaps 4/5? corporate -$757mm debt North waker $0 Sea port $0 hawaii condo $0 Share outstanding 43MM BV/share = 3500+3100-757 = $135/share I don't know why anyone needs to really care about seaport for what it is selling for today. $3.5B for the present value of the MPC land seems very, very high. The NPV of $200M of land sale profit annually for each of the next 20 years comes out to $1.75B (using a 10% discount rate). And obviously the economic cycle will make for some very low years during recessions. Link to comment Share on other sites More sharing options...
peridotcapital Posted June 27, 2019 Share Posted June 27, 2019 CNBC's David Faber reports HHC has hired bankers to explore strategic alternatives. Unless they can get a great price, I hope they don't sell the whole business, which leaves us public investors out of the long run plans completely. Stock up 15% on the news initially. Link to comment Share on other sites More sharing options...
Saluki Posted June 27, 2019 Share Posted June 27, 2019 https://www.cnbc.com/2019/06/27/david-faber-howard-hughes-corp-hires-centerview-to-explore-sale.html Ack! I bought some yesterday but I didn't want to sell anything to buy a lot more. That's my stupid tax for the day! Link to comment Share on other sites More sharing options...
peridotcapital Posted June 27, 2019 Share Posted June 27, 2019 The more I think about the idea of the board considering a sale of the entire company, the more I wonder if maybe they should wait a little longer for the market to come around (though some kind of separation/spin/partial sale could make sense). I think a big reason why the market price has been weak (vs NAV) lately is because many would have hoped that at this size (2018 operating asset revenue of $400M) the company would be turning a profit on those assets, such that further land/condo sales would fund construction projects to grow earnings in a fairly predictable straight line. And yet, on that $400M of revenue last year, the operating assets posted FFO of NEGATIVE $31 million. Compared to other public real estate plays, that is not going to get much attention. I don't know if the high cost structure is temporary or not ($100M of annual G&A plus $85M of annual interest expense with about 7 million SF of space leased), but if their profit margins will look far different in 2-3 years, as a public shareholder I would want them to wait and see how the market would react to that. Or maybe they could focus on the cost side too because that G&A number is huge. What do others think about the idea of selling the whole business? At what price would you be happy to sell today? Link to comment Share on other sites More sharing options...
adhital Posted June 27, 2019 Share Posted June 27, 2019 The more I think about the idea of the board considering a sale of the entire company, the more I wonder if maybe they should wait a little longer for the market to come around (though some kind of separation/spin/partial sale could make sense). I think a big reason why the market price has been weak (vs NAV) lately is because many would have hoped that at this size (2018 operating asset revenue of $400M) the company would be turning a profit on those assets, such that further land/condo sales would fund construction projects to grow earnings in a fairly predictable straight line. And yet, on that $400M of revenue last year, the operating assets posted FFO of NEGATIVE $31 million. Compared to other public real estate plays, that is not going to get much attention. I don't know if the high cost structure is temporary or not ($100M of annual G&A plus $85M of annual interest expense with about 7 million SF of space leased), but if their profit margins will look far different in 2-3 years, as a public shareholder I would want them to wait and see how the market would react to that. Or maybe they could focus on the cost side too because that G&A number is huge. What do others think about the idea of selling the whole business? At what price would you be happy to sell today? Close to $200/share Link to comment Share on other sites More sharing options...
adhital Posted June 27, 2019 Share Posted June 27, 2019 Quick Back of the envelop valuation. Please correct me if I'm way off here.. MPC : land undiscounted value $5 Billion. land value increase as MPC matures, so we may not need to discount this. However, for margin, lets discount by 30%. MPC value $3.5Billion. Operating asset $321mm NOI stabilized in the next 5 years. $200mm as of 2019 and $121mm in the next 5 years (or ~$100mm discounted @ 10% based on company's yearly projection). $1.7 Billion debt. with 6% CAP = OP asset equals $3.1 Billion net. Bill said they deserve higher CAP, perhaps 4/5? corporate -$757mm debt North waker $0 Sea port $0 hawaii condo $0 Share outstanding 43MM BV/share = 3500+3100-757 = $135/share I don't know why anyone needs to really care about seaport for what it is selling for today. $3.5B for the present value of the MPC land seems very, very high. The NPV of $200M of land sale profit annually for each of the next 20 years comes out to $1.75B (using a 10% discount rate). And obviously the economic cycle will make for some very low years during recessions. I’m not an expert on this but I think, MPC’s land price is vey hard to predict. The last remaining slots can command very very high valuation. I don’t think current ebit multiple is the right way to value this. Link to comment Share on other sites More sharing options...
mjm Posted June 27, 2019 Share Posted June 27, 2019 I personally would rather own Beyond Meat than HHC. At least Beyond Meat is working. What's HHC done in the last 5-6 years? Here is the answer: https://youtu.be/Y7tvauOJMHo Bought a few today. The selling seems a bit too much. congrads Link to comment Share on other sites More sharing options...
Sombunall Posted June 27, 2019 Share Posted June 27, 2019 I find it hard to believe they will sell the whole company. The more and more I think about it, the more and more a partial sale seems a more likely option. I guess there is a price for everything so we’ll see… For me I’d be disappointed if it was less than say $150 per share. Remember it was $145 last year, before the q4 sell off... Link to comment Share on other sites More sharing options...
Sombunall Posted June 27, 2019 Share Posted June 27, 2019 Check that, $142 last summer... And I agree expenses are high, but maybe not so high if you consider so much of their activity is development. I would expect expenses to moderate as their properties mature... Link to comment Share on other sites More sharing options...
BG2008 Posted June 27, 2019 Share Posted June 27, 2019 I'm sticking to my position in Beyond Meat, it is the future. This move in HHC is Ackman trying to window dress just before quarter end. Short HHC!! Link to comment Share on other sites More sharing options...
Gamecock-YT Posted June 27, 2019 Share Posted June 27, 2019 I'm sticking to my position in Beyond Meat, it is the future. This move in HHC is Ackman trying to window dress just before quarter end. Short HHC!! This was my thoughts as well, a position of strength to liquidate into. He’s gradually been selling the past few quarters. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted June 27, 2019 Share Posted June 27, 2019 I'm sticking to my position in Beyond Meat, it is the future. This move in HHC is Ackman trying to window dress just before quarter end. Short HHC!! This was my thoughts as well, a position of strength to liquidate into. He’s gradually been selling the past few quarters. I think BG2008 was being sarcastic, but I do think there's something to this line of thinking. As you mention, Ackman (who is still Chairman of the BOD) has been selling. Presumably he would welcome the opportunity to sell the rest of his position at higher prices. Link to comment Share on other sites More sharing options...
Gregmal Posted June 27, 2019 Share Posted June 27, 2019 Yea lets not forget the stunt Billy Boy pulled with AGN. Certainly not out of the question, and IMO more likely than not his own interests figured into this. This has nothing to do with HHC fundamentally though. Outside of the fact shareholder just got their next 3 years worth of returns in one day. Link to comment Share on other sites More sharing options...
peridotcapital Posted June 27, 2019 Share Posted June 27, 2019 Fortunately for us, Ackman has minimal financial incentive to get cute with this in the short term... it was just 2% of his disclosed 13F positions at last quarter-end. I am paring back the position and will see what happens. Decent chance nothing big comes of this and I can buy it all back 20% lower... Link to comment Share on other sites More sharing options...
BG2008 Posted June 27, 2019 Share Posted June 27, 2019 Yea lets not forget the stunt Billy Boy pulled with AGN. Certainly not out of the question, and IMO more likely than not his own interests figured into this. This has nothing to do with HHC fundamentally though. Outside of the fact shareholder just got their next 3 years worth of returns in one day. I didn't really pay much attention to AGN, what did Billy Boy do? Link to comment Share on other sites More sharing options...
BG2008 Posted June 27, 2019 Share Posted June 27, 2019 Ackman's got a 5% position with derivatives and what not I think NAV is $180-220. Best buyer likely pension funds like CALPER and can hold for 30 years. That or Jeff Bezos if he wants to build an Amazon utopia in Summerlin Vegas. Pay code monkeys $200k and they can live like kings in $500k houses. This applies in The Woodlands as well. Link to comment Share on other sites More sharing options...
Gregmal Posted June 27, 2019 Share Posted June 27, 2019 Yea lets not forget the stunt Billy Boy pulled with AGN. Certainly not out of the question, and IMO more likely than not his own interests figured into this. This has nothing to do with HHC fundamentally though. Outside of the fact shareholder just got their next 3 years worth of returns in one day. I didn't really pay much attention to AGN, what did Billy Boy do? I don’t recall exactly every detail, but more or less...He pitched Mike Pearson on having VRX buy AGN, with the agreement that he would first go out and buy a 10% position(along with having VRX buy some time too which I believe he finagled a profit share agreement on). He then built the entire position using OTC calls so his capital outlay to acquire 10% of a $60B company was only like a couple hundred million. Upon announcing the deal he more or less made 100% on his money in a few weeks. Until of course he had to give it all back in an SEC settlement. Well, “supposedly” he did those things. One of the ballsiest things I’ve ever seen. Link to comment Share on other sites More sharing options...
BG2008 Posted June 28, 2019 Share Posted June 28, 2019 I'm sticking to my position in Beyond Meat, it is the future. This move in HHC is Ackman trying to window dress just before quarter end. Short HHC!! See, I told you, this was a short yesterday. Down $8 since yesterday's close. [sarcasm intended] Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted June 28, 2019 Share Posted June 28, 2019 I'm sticking to my position in Beyond Meat, it is the future. This move in HHC is Ackman trying to window dress just before quarter end. Short HHC!! Are you really long BYND? Link to comment Share on other sites More sharing options...
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