Author Topic: HHC - Howard Hughes Corp  (Read 61367 times)

BG2008

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Re: HHC - Howard Hughes Corp
« Reply #130 on: June 26, 2019, 10:45:15 PM »
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 cant 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


peridotcapital

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Re: HHC - Howard Hughes Corp
« Reply #131 on: June 27, 2019, 06:54:47 AM »
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.

peridotcapital

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Re: HHC - Howard Hughes Corp
« Reply #132 on: June 27, 2019, 06:56:44 AM »
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.

Saluki

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Re: HHC - Howard Hughes Corp
« Reply #133 on: June 27, 2019, 07:03:43 AM »
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! 
If it's important, do it every day. If it's not important, don't do it at all.  -Dan Gable

peridotcapital

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Re: HHC - Howard Hughes Corp
« Reply #134 on: June 27, 2019, 07:25:10 AM »
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?

adhital

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Re: HHC - Howard Hughes Corp
« Reply #135 on: June 27, 2019, 07:31:11 AM »
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

adhital

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Re: HHC - Howard Hughes Corp
« Reply #136 on: June 27, 2019, 07:35:08 AM »
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.

Im not an expert on this but I think, MPCs land price is vey hard to predict. The last remaining slots can command very very high valuation. I dont think current ebit multiple is the right way to value this.

mjm

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Re: HHC - Howard Hughes Corp
« Reply #137 on: June 27, 2019, 07:35:24 AM »
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

Sombunall

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Re: HHC - Howard Hughes Corp
« Reply #138 on: June 27, 2019, 07:56:05 AM »
 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 well see For me Id be disappointed if it was less than say $150 per share. Remember it was $145 last year, before the q4 sell off...

Sombunall

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Re: HHC - Howard Hughes Corp
« Reply #139 on: June 27, 2019, 07:59:06 AM »
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...