Howard Hughes (HHH): The SimCity Stock
1. Executive Summary
Howard Hughes is not a typical REIT; it is a Master Planned Community (MPC) developer. They own thousands of acres of land in premium locations (Summerlin, NV; The Woodlands, TX) and control the entire supply chain of development, selling land to homebuilders while retaining commercial assets to generate recurring NOI (Net Operating Income).
Key Thesis Points
- Virtuous Cycle: HHH controls supply. By limiting land sales, they prop up home prices, which increases the population density, which makes their owned commercial assets (malls/offices) more valuable.
- Ackman Control: Bill Ackman (Pershing Square) owns ~38% of the company and chairs the board. His stewardship ensures capital allocation is rational (aggressive buybacks when trading below NAV).
- Inflation Hedge: With vast land holdings, HHH is a pristine inflation hedge. Land supply is finite; fiat currency is not.
2. Business Overview
- MPCs: Selling residential land to homebuilders (drastically high margin).
- Strategic Developments: Building condos/offices (higher risk/reward).
- Operating Assets: Collecting rent from retail/office/multi-family properties (stabilized cash flow).
- Seaport: The "wildcard" entertainment district in NYC (historically a cash incinerator, potential upside).
3. Valuation
- NAV (Net Asset Value): The thesis relies on the belief that the stock trades at a ~30-50% discount to its liquidation value.
- Sum of Parts: If you value the assets individually, the share price should be significantly higher.