Author Topic: HHC - Howard Hughes Corp  (Read 63440 times)

thepupil

  • Hero Member
  • *****
  • Posts: 1245
Re: HHC - Howard Hughes Corp
« Reply #170 on: October 21, 2019, 02:26:56 PM »
could you lay out some examples?

Public RE at prices below NAV comprises 25-50% of my portfolio and like 80% of my COBF posts and I think I follow the space a fair bit. Other than Forest City coming in at $24 later than expected when I thought it'd be $30 or FOR getting taken out for less initially (but then subsequently bumped significantly), I can't really think of ones that came in way below generally thought NAV levels.

In other words, I feel like as long as one hasn't been that aggressive, it's been a pretty profitable place to be.

What have been the major disappointments you've seen? NYRT?


Gregmal

  • Hero Member
  • *****
  • Posts: 2537
Re: HHC - Howard Hughes Corp
« Reply #171 on: October 21, 2019, 02:36:30 PM »
The first couple that come to mind were PICO, NYRT and CTO. After that there's a few others that escape me at the moment but with similar stories. Maybe Northstar at some point IIRC. FOR was rather unique but I dont think they really ran a process as much as they got one bid which led to another. It just seems that the public market overestimates the values of these things and the time it takes for things to play out.

EDIT: Forgot UCP as well, maybe lumped that with PICO, but that was supposed to go in excess of NAV and went maybe 5-8% below as well. But that also did get sold, whereas Im mainly referencing companies perceived to have high NAVs that then went on the block and didn't end up getting deals done.
« Last Edit: October 21, 2019, 02:41:06 PM by Gregmal »

johnny

  • Sr. Member
  • ****
  • Posts: 432
Re: HHC - Howard Hughes Corp
« Reply #172 on: October 21, 2019, 03:28:39 PM »

@$100 its interesting again, but just like a lot of other public RE, its cheap but so what? Now you have no catalyst

I'm not following all of the retail stories being passed around valueworld right now, but in the ones I have seen, a big difference is the story about reinvestment. A lot of situations you're buying at a nice discount to NAV, but it seems pretty clear that the cash-flow allocation strategy is to reinvest all cashflow into 5-6% assets that are basically commodity assets being purchased by commodity capital.

HHC still has a strong case that the assets they deploy into aren't commodity assets, and that they aren't commodity capital, so there should be a much stronger return on that re-investment. I haven't actually spot-checked the math here, but I would say that's where this catalyst-free, NAV discount RE story might differ from something like Macerich.

Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 1037
Re: HHC - Howard Hughes Corp
« Reply #173 on: October 21, 2019, 03:43:53 PM »
Page 11 of the presentation, "Non-Core Assets"

"2007 Gulfstream G450"


Yeah, definitely non-core. All the way, 100% non-core.


Edited: Page #11, not #17
« Last Edit: October 21, 2019, 03:46:16 PM by Foreign Tuffett »

Gregmal

  • Hero Member
  • *****
  • Posts: 2537
Re: HHC - Howard Hughes Corp
« Reply #174 on: October 21, 2019, 04:37:18 PM »
Page 11 of the presentation, "Non-Core Assets"

"2007 Gulfstream G450"


Yeah, definitely non-core. All the way, 100% non-core.


Edited: Page #11, not #17

Bro, its Howard Hughes, of course they gotta have planes!

More as this sets in, two things here stand out as questions and observations...

1) Cost cutting and noncore asset sales(such as toys like the Gulfstream) indicate there s been a lot of unnecessary spending going on. I haven't followed this super close, but Im surprised they had this much waste to purge from the system. Especially given the shareholder base. But I guess where there is a lot of value, theres people realizing it, in one form or another.

2) This thing is supposed to be gushing value, from all over. So kind of incorporating the above, its surprising that after running a process this is all they are able to do.~$2B in asset sales and some cost cutting against $9B or so EV is nice, but definitely not screaming theres so much value here they dont know what to do with it all(I suppose this is why we got the selloff).

A management shakeup also kind of implies a greater degree of uncertainty around what they'd previously been doing. I did not seem to think this was a concern. At the least, it didn't really seem to ever come up when talking with people about this name. Lastly, I love share buybacks, but given all the development and cash intensive activities here, question whether its the right use of capital at this point.

Spekulatius

  • Hero Member
  • *****
  • Posts: 3555
Re: HHC - Howard Hughes Corp
« Reply #175 on: October 21, 2019, 04:59:33 PM »
Page 11 of the presentation, "Non-Core Assets"

"2007 Gulfstream G450"


Yeah, definitely non-core. All the way, 100% non-core.


Edited: Page #11, not #17

Bro, its Howard Hughes, of course they gotta have planes!

More as this sets in, two things here stand out as questions and observations...

1) Cost cutting and noncore asset sales(such as toys like the Gulfstream) indicate there s been a lot of unnecessary spending going on. I haven't followed this super close, but Im surprised they had this much waste to purge from the system. Especially given the shareholder base. But I guess where there is a lot of value, theres people realizing it, in one form or another.

2) This thing is supposed to be gushing value, from all over. So kind of incorporating the above, its surprising that after running a process this is all they are able to do.~$2B in asset sales and some cost cutting against $9B or so EV is nice, but definitely not screaming theres so much value here they dont know what to do with it all(I suppose this is why we got the selloff).

A management shakeup also kind of implies a greater degree of uncertainty around what they'd previously been doing. I did not seem to think this was a concern. At the least, it didn't really seem to ever come up when talking with people about this name. Lastly, I love share buybacks, but given all the development and cash intensive activities here, question whether its the right use of capital at this point.

The assets are too much of an hodgepodge to be an easy sell. In a way I am not surprised that this process ended up a bit of a dud (hence sold into the pop after the news broke), but at $100 and change, I decided to buy back some shares. Looks like they had one only one potential buyer after the DD and this after contacting 35 different buyers, if this account is correct.
https://twitter.com/coredentaldds/status/1186391149000511495?s=21
Life is too short for cheap beer and wine.

Gregmal

  • Hero Member
  • *****
  • Posts: 2537
Re: HHC - Howard Hughes Corp
« Reply #176 on: October 21, 2019, 05:12:39 PM »
Page 11 of the presentation, "Non-Core Assets"

"2007 Gulfstream G450"


Yeah, definitely non-core. All the way, 100% non-core.


Edited: Page #11, not #17

Bro, its Howard Hughes, of course they gotta have planes!

More as this sets in, two things here stand out as questions and observations...

1) Cost cutting and noncore asset sales(such as toys like the Gulfstream) indicate there s been a lot of unnecessary spending going on. I haven't followed this super close, but Im surprised they had this much waste to purge from the system. Especially given the shareholder base. But I guess where there is a lot of value, theres people realizing it, in one form or another.

2) This thing is supposed to be gushing value, from all over. So kind of incorporating the above, its surprising that after running a process this is all they are able to do.~$2B in asset sales and some cost cutting against $9B or so EV is nice, but definitely not screaming theres so much value here they dont know what to do with it all(I suppose this is why we got the selloff).

A management shakeup also kind of implies a greater degree of uncertainty around what they'd previously been doing. I did not seem to think this was a concern. At the least, it didn't really seem to ever come up when talking with people about this name. Lastly, I love share buybacks, but given all the development and cash intensive activities here, question whether its the right use of capital at this point.

The assets are too much of an hodgepodge to be an easy sell. In a way I am not surprised that this process ended up a bit of a dud (hence sold into the pop after the news broke), but at $100 and change, I decided to buy back some shares. Looks like they had one only one potential buyer after the DD and this after contacting 35 different buyers, if this account is correct.
https://twitter.com/coredentaldds/status/1186391149000511495?s=21

Thanks. "multi decade opportunity"...thats a pretty long horizon lol. Its still a little odd they didn't find any takers for at least some of their regional assets though. I always thought these to be some pretty high quality and desirable pieces of "hodgepodge".

Guess there arent too many true "long term" investors out there, despite pretty much every fund or shop saying so. $10B or so isn't a small purchase, but it's also not really a ton of money in todays M&A world either. Funny to think, but BRK could have swiped this up and not even noticed their cash pile diminish. Given their do nothing approach to investing of late, its hard to justify why they didn't when you really think about it.

CorpRaider

  • Hero Member
  • *****
  • Posts: 2217
    • The Corpraider
Re: HHC - Howard Hughes Corp
« Reply #177 on: October 21, 2019, 05:17:04 PM »
He must like SRG better.

johnny

  • Sr. Member
  • ****
  • Posts: 432
Re: HHC - Howard Hughes Corp
« Reply #178 on: October 21, 2019, 05:30:32 PM »
Just a note on how absolutely passive-aggressive putting the Gulfstream down as a line-item is. Even against just their disposition plans, that's 0.5% of assets on the block, a rounding error. Seems to me like the entire purpose is to subtextually make arguments about the former CEO that cannot be explicitly made without inviting legal headaches.

Does anybody with experience in this space have any idea how deep/granular we can presume pre-offer diligence goes in situations like this? Does Brookfield basically know all of the numbers for each individual property now? Or is there sort of a graduated disclosure escalation dance as the flirting gets more serious?

Just wondering how heavily relatively uninformed shareholders should be weighting the passes that were just taken.

Spekulatius

  • Hero Member
  • *****
  • Posts: 3555
Re: HHC - Howard Hughes Corp
« Reply #179 on: October 21, 2019, 05:44:08 PM »
BRK is not in the real estate development business, so it makes no sense for them to acquire this. Brookfield may buy this, but probably would pay up, so selling it to them makes no sense either. I donít think there are too many buyers around that would pay full price for a hodgepodge of assets all over the US. I think they will need to complete the development and then sell them piecemeal to get full price for these assets.

I agree that selling the 11 year old Gulfstream was a cheap jab towards the former CEO.
Life is too short for cheap beer and wine.