HHC - Howard Hughes Corp

[peridotcapital]

Glad they are finally cutting G&A, as it was an obscene number relative to rental income.

Hard to see how investors come around to the story though, as NOI less G&A and interest expense will go from $5M to $60M after the transformation is completed. WHat kind of multiple is the street going to pay for that $60M? Even at $100 per share, is there really clear value here?

[KJP]

Glad they are finally cutting G&A, as it was an obscene number relative to rental income.

Hard to see how investors come around to the story though, as NOI less G&A and interest expense will go from $5M to $60M after the transformation is completed. WHat kind of multiple is the street going to pay for that $60M? Even at $100 per share, is there really clear value here?

I assume you're getting your numbers from Slide 9 of the presentation.  That NOI figure doesn't include any contrbution from the Seaport, which ought to be much higher than zero, though it's not clear what it ultimately will be.  But even adjusting for that, the current share price is presumably (and correctly) assigning some value to future land and condo sales at the MPCs and perhaps future value creation via additional investment in income-producing assets within the MPCs.  The difficulty in valuing that activity (lumpy condo/land sales and additional development activity) is the same now as it was before the non-core asset sales.  So, to the extent "really clear value" is a cap rate derived from existing (or even projected stabilized) NOI, the answer is likely "no." 

[BG2008]

Price Spike of 4% with heavy volume, any news? 

[thepupil]

indeed.

for perspective, 1.5mm shares traded today relative to the average of 250K. As many shares traded today as in the day following the "disappointing" announcement of no total sale.

Bloomberg shows no news, EDGAR has no filings.

kind of wild.

[BG2008]

Someone probably knows something about an asset sale, 110 N Wacker perhaps.  Totally speculating and no idea.  Trading volume just looks weird. 

[BG2008]

Still no news, that was a very weird trading session

[BG2008]

http://www.snl.com/IRWeblinkx/ShowFile.aspx?KeyFile=401392528&Output=XML&Format=XML

Anyone understands this structure? 

[BG2008]

Name

    
Trade Date

    
Buy/Sell/Exercise

    No. of Shares / Quantity           Unit Cost           Strike Price       Trade Amount       
Security

    
Expiration Date

Pershing Square, L.P.

    December 2, 2019       Sell           746,476               $115.00           N/A       $  85,844,740       Common Stock       N/A
Pershing Square International, Ltd.

    December 2, 2019       Sell           270,556               $115.00           N/A       N/A       Cash-Settled Total Return Swap       December 2, 2019
Pershing Square International, Ltd.

    December 2, 2019       Sell           120,645               $115.00           N/A       N/A       Cash-Settled Total Return Swap       December 2, 2019
Pershing Square International, Ltd.

    December 2, 2019       Sell           331,096               $115.00           N/A       N/A       Cash-Settled Total Return Swap       December 2, 2019
Pershing Square International, Ltd.

    December 2, 2019       Buy           270,556               $115.00           N/A       N/A       OTC Equity Forward       June 3, 2020
Pershing Square International, Ltd.

    December 2, 2019       Buy           120,645               $115.00           N/A       N/A       OTC Equity Forward       June 3, 2020
Pershing Square International, Ltd.

    December 2, 2019       Buy           78,490               $115.00           N/A       N/A       OTC Equity Forward       June 3, 2020
Pershing Square Holdings, Ltd.

    December 2, 2019       Buy           746,476               $115.00           N/A       $  85,844,740       Common Stock       N/A
Pershing Square Holdings, Ltd.

    December 2, 2019       Buy           1,000,000               $115.00           N/A       $115,000,000       Common Stock       N/A
Pershing Square Holdings, Ltd.

    December 2, 2019       Sell           868,687               $115.00           N/A       N/A       Cash-Settled Total Return Swap       December 2, 2019
Pershing Square Holdings, Ltd.

    December 2, 2019       Sell           1,351,415               $115.00           N/A       N/A       Cash-Settled Total Return Swap       December 2, 2019
Pershing Square Holdings, Ltd.

    December 2, 2019       Sell           497,047               $115.00           N/A       N/A       Cash-Settled Total Return Swap       December 2, 2019
Pershing Square Holdings, Ltd.

    December 2, 2019       Sell           750,000               $115.00           N/A       N/A       Cash-Settled Total Return Swap       December 2, 2019
Pershing Square Holdings, Ltd.

    December 2, 2019       Buy           868,687               $115.00           N/A       N/A       OTC Equity Forward       June 3, 2020
Pershing Square Holdings, Ltd.

    December 2, 2019       Buy           1,351,415               $115.00           N/A       N/A       OTC Equity Forward       June 3, 2020
Pershing Square Holdings, Ltd.

    December 2, 2019       Buy           1,247,047               $115.00           N/A       N/A       OTC Equity Forward       June 3, 2020
Pershing Square Holdings, Ltd.

    December 2, 2019       Buy           252,606               $115.00           N/A       N/A       OTC Equity Forward       June 3, 2020

[thepupil]

so there are 43mm HHC shares outstanding

Before the December 2nd transactions, Pershing square owned 1.1mm shares of HHC directly, but had larger economic exposure through a total return swap. Pershing Square previously sold its common shares and converted them to total return swap form, in part for regulatory reasons related to the  Foreign Investment in Real Property Tax Act

https://assets.pershingsquareholdings.com/media/2018/01/02163526/PSH-Announces-Proposed-Sale-of-Howard-Hughes-Corporation-Common-Stock-and-Potential-Tender-Offer-for-PSH-Shares-by-William-A.-Ackman-and-Affiliates.pdf

From how I read the form 4, the total return swap on 4.1mm shares expired on December 2nd. Pershing square rolled that into an OTC equity forward expiring in June 2020. So they kept their economic exposure the same. The 4.1mm share transaction does not represent any net buying/selling of HHC. It represents a rolling of existing exposure, but interestingly, because forward is not a swap. A forward is an agreement to purchase the actual asset at a certain date, Bloomberg is saying that Pershing just bought an additional 10% of the company, even thought they haven't increased/decreased their risk in the name.

There's an additional crossing transaction of 746K shares that is from "rebalancing between Pershing Funds". this is a sell by pershing square LP and a buy by Pershing Square Holdings.

Then finally there is a 1mm share purchase by Bill Ackman, personally. EDIT: I think its a net 1mm purchase by Pershing Square Holdings, not bill's PA.

I think the net effect of it all is BillPSH bought 1mm shares. the rest is a change in nature of ownership but not a net buy/sell.

[Gregmal]

So effectively the bump a few days ago was some derivative, down the line effect of the Ackman position? A counter party offsetting some of the OTC calls.

Billy likes his swaps. If I was a billionaire I would too.