Behind Pershing Square’s $900M Acquisition of Howard Hughes
It likely escaped the attention of none of our readers that Monday’s announcement by Pershing Square that it will pay $900 million to acquire Howard Hughes Holdings Inc. included this prominent sentence: “Pershing Square’s investment will enable HHH to become a diversified holding company by acquiring controlling stakes in high-quality, durable growth public and private operating companies while continuing to invest in and grow the company’s core real estate development and master-planned communities business” [emphasis added].
Wall Street’s reaction has been positive but modest, with the stock price showing no undue gyration.
One of the reasons might be the relatively tame changes in the HHH C-suite. Pershing Square Chairman & CEO Bill Ackman will be HHH’s executive chairman. Pershing Square Chief Investment Officer Ryan Israel will take the same role at HHH, which will be a new position there.
Other than that, there reportedly will be no other changes in the HHH leadership team, which will still be headed by CEO David O’Reilly, though he will have “expanded roles and responsibilities.”
In a commentary issued Monday, Piper Sandler predicted that master-planned communities will “remain the mainstay but will slowly ebb as other investments grow. We don’t see any change to how HHH [Howard Hughes Holdings] manages, invests or operates its MPCs. In the near-term, the MPC’s will likely drive the valuation but as HHH deploys PS’ $900 million, will morph toward bottom-line earnings growth and reflect the aggregate business exposure.”
Among Piper Sandler’s takeaways from a conversation with Ackman on Monday was that “HHH will seek an investment grade rating to reduce the company’s cost of capital.”
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HHH made a couple of bread-and-butter office deals in metro Houston last summer.
In the first, the company secured $130 million to refinance 9950 Woodloch Forest Drive, a 601,000-square-foot Class A office building in The Woodlands, Texas. The non-recourse note has a five-year term and amortizes on a 30-year schedule, at a fixed rate of 7.07 percent. Wells Fargo and Argentic Real Estate Finance originated the loan.
And in the second, the company acquired Waterway Plaza II, a 142,400-square-foot, six-story office building in The Woodlands Town Center, for $19.2 million. The property was 55 percent occupied, which the company described as providing needed inventory to its office portfolio in The Woodlands MPC, which was then 96 percent leased.
A history in CRE
Alongside his numerous and often high-profile other investments, commercial real estate has been an important through line of the career of Pershing Square Chairman & CEO and now HHH Executive Chairman Bill Ackman.
He co-founded Pershing Square Capital Management in 2004, the same year that General Growth Properties purchased the original Howard Hughes Corp. Five years later, GGP went through the largest bankruptcy in the history of U.S. real estate.
After receiving $375 million in debtor-in-possession funding from Pershing Square, GGP exited bankruptcy in 2010. As part of its post-bankruptcy reorganization, the company spun off Howard Hughes Corp. as Howard Hughes Holdings. HHH was a long-time investment of Pershing’s from 2010 to 2024, during which Ackman was HHH’s chairman.
In yesterday’s announcement, Ackman declared himself “delighted to return to HHH as its executive chairman,” adding that the company “has built substantial value for shareholders in recent years that has largely gone unrecognized due to the high cost of capital that the market assigns to the company in light of its pure-play exposure to real estate development and community creation.”
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