felixmizioznikov/iStock Editorial via Getty Images
The following segment was excerpted from this fund letter.
Howard Hughes (NYSE:HHH) results through the first half of 2024 demonstrate solid business momentum across all segments of its portfolio, highlighting its uniquely advantaged business model of owning master planned communities (“MPC”).
In its land sales segment, the company is on track to generate nearly $300 million in full-year profits. New home sales, a leading indicator for future homebuilder demand for land, continues to be supported by limited supply of resale housing inventory and the highly desirable qualities of HHH’s amenity-rich MPCs, which are well-located in growth markets with favorable demographic trends. The strength of this demand is most clearly evident in the pricing the company is able to command for its residential land, with its average price per acre reaching an all-time high of $1.0 million in the most recent quarter.
In the company’s portfolio of stabilized income-producing operating assets, net operating income (“NOI”) grew 4% on a same-store basis during the first half of the year driven by strong leasing momentum and steady rental rate increases.
In its Ward Village development in Hawaii, HHH continues to experience robust sales momentum. The company has pre-sold 51% of inventory at its newest condominium tower, The Launiu, despite only having launched sales in February.
Outside of Ward Village, the company is developing its first condominium project in the Woodlands, the Ritz-Carlton Residences. As the first-of- its-kind luxury development in Houston, the Ritz-Carlton Residences has been met with tremendous demand and has already pre-sold 65% of its available units, representing future revenue of $313 million.
On August 1st, the company successfully completed its spin-off of Seaport Entertainment Group (SEG), which is comprised of the Seaport District in New York City, the Las Vegas Aviators minor league baseball team and certain other non- core entertainment assets. Under the leadership of CEO Anton Nikodemus, former President & COO of MGM CityCenter and an entertainment industry veteran with over 30 years of experience, we are optimistic that SEG will unlock the significant embedded upside potential in its unique collection of assets.
PSH is retaining its shares of SEG received from the spin-off and, along with the other Pershing Square funds, has entered into a standby purchase agreement to backstop a $175 million rights offering which SEG intends to launch shortly. Proceeds from the rights offering will provide SEG with the required liquidity to execute on its growth plan. Pershing Square is the largest shareholder of SEG. Anthony Massaro, a member of the investment team, has joined the Board of SEG.
We believe the separation of SEG further positions HHH as a streamlined, pure-play MPC company with a decades-long runway for growth.
On August 6th, we filed an amended 13D which can be found here the relevant portion of which says that:
“The Investment Manager intends to continue evaluating the possibility of various potential alternatives with respect to its investment in HHH, including a possible transaction in which the Investment Manager and/or one or more of its affiliates (either alone or together with one or more potential co-investors) may acquire all or substantially all of the shares of HHH not owned by them and their affiliates and in connection therewith take HHH private. In the event the Investment Manager explores such a potential transaction, there can be no guarantee that an agreement regarding such potential transaction can be reached and/or consummated.”
| DISCLAIMERS Limitations of Performance Data Past performance is not necessarily indicative of future results. All investments involve risk including the loss of principal. This report does not constitute a recommendation, an offer to sell or a solicitation of an offer to purchase any security or investment product. This report contains information and analyses relating to all publicly disclosed positions above 50 basis points in the Company’s portfolio from January 1, 2024 to June 30, 2024. Pershing Square may currently or in the future buy, sell, cover or otherwise change the form of its investment in the companies discussed in this report for any reason. Pershing Square hereby disclaims any duty to provide any updates or changes to the information contained here including, without limitation, the manner or type of any Pershing Square investment. Forward-Looking Statements This report also contains forward-looking statements, which reflect Pershing Square’s views. These forward-looking statements can be identified by reference to words such as “believe”, “expect”, potential”, “continue”, “may”, “will”, “should”, “seek”, “approximately”, “predict”, “intend”, “plan”, “estimate”, “anticipate” or other comparable words. These forward-looking statements are subject to various risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Should any assumptions underlying the forward-looking statements contained herein prove to be incorrect, the actual outcome or results may differ materially from outcomes or results projected in these statements. None of the Company, Pershing Square or any of their respective affiliates undertakes any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law or regulation. |
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
