TLDR:
- Bill Ackman’s Pershing Square is considering taking Howard Hughes Holdings private
- Howard Hughes develops major master-planned communities like The Woodlands in Houston
- Pershing Square already owns 37.5% of Howard Hughes, making it the largest shareholder
- Howard Hughes reported improved financial results in Q2, with a 315% increase in land sales
- Ackman has been involved with Howard Hughes since 2008 and was chairman until April 2024
Bill Ackman, the billionaire investor and CEO of Pershing Square Capital Management, is considering a bid to take Howard Hughes Holdings Inc. private. This potential move comes shortly after Ackman’s plans for a new investment fund IPO fell through.
Howard Hughes Holdings, a real estate development company, manages and develops large master-planned communities across the United States. These include The Woodlands in Houston, Summerlin in Las Vegas, and Ward Village in Honolulu.
The company’s land ownership in Las Vegas dates back to the 1950s when Howard Hughes himself purchased 30,000 acres in Southern Nevada.
Pershing Square already owns a 37.5% stake in Howard Hughes, making it the largest shareholder. Ackman has been involved with the company since 2008 when it was part of General Growth Properties.
He served as chairman of Howard Hughes from its creation in 2010 until April 2024, when he stepped down from the board.
In a recent filing with the Securities and Exchange Commission, Ackman indicated his interest in potentially taking Howard Hughes private. Pershing Square has hired Jeffries LLC as an advisor for the possible deal. Howard Hughes has formed a committee to review Pershing Square’s plan, but the company stated that there is no guarantee of any particular outcome.
Howard Hughes’ business model involves using sales of land, condominiums, and net operating income to fund future development. In the second quarter of 2024, the company reported improved financial results, with net income per diluted share of $0.42 compared to a loss of $3.39 a year ago.
This improvement was driven by a significant increase in real estate sales, particularly a 315% year-over-year jump in residential land sales.
Despite these positive results, Howard Hughes’ stock has fallen by over 45% in the past five years, and the company does not pay a dividend. This underperformance may be a factor in Ackman’s consideration of taking the company private.
The potential privatization of Howard Hughes is not a new idea. In 2019, the company considered going private through a sale but instead opted to sell $2 billion in assets and focus on its master-planned communities.
Some analysts are cautious about the prospect of privatization. Alexander Goldfarb, a senior REIT analyst at Piper, Sandler & Co., noted that Ackman owned just 13% of the company in 2019, so he would have had to raise significantly more capital to take the firm private then. Goldfarb estimated that independent investors might seek about $100 per share in such a deal now.
Other analysts, like John P. Kim from BMO Capital Markets, believe that Ackman’s interest is not in liquidating assets but in capitalizing on the long-term value of Howard Hughes’ land holdings and master-planned communities.
Kim suggested that the difficulty in obtaining attractive land and its potential for appreciation could make Howard Hughes an appealing investment at this time.
As of August 21, 2024, Howard Hughes has not commented further on the potential deal, stating that additional disclosure will only be made when appropriate or required by law.
The company’s shares have seen an increase since the announcement of Ackman’s potential move, opening at $72.48 on August 20, up from about $62 before the news broke.
