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I have previously looked at Howard Hughes Holdings (HHH) but very quickly determined I wanted no exposure.
I now have a different perspective because the historical HHH will not resemble HHH of the future.
So what has changed?
In this May 2025 interview, Bill Ackman (the founder and CEO of Pershing Square Capital Management) provides an excellent explanation of why Pershing Square Holdco, L.P. and its wholly owned subsidiary, Pershing Square Capital Management, L.P. plan to invest $0.9B in HHH.
Business Overview
The historical HHH will differ significantly from HHH of the future. The existing HHH, however, is to remain a key component. It would, therefore, be wise to review the company's website and Part 1 Item 1 in the FY2024 Form 10-K to understand the current nature of HHH's business operations.
A series of videos on the HHH website provide a good overview of HHH's current operations.
Pershing Square's comprehensive presentation pertaining to the increase in its HHH investment is accessible here.
HHH To Be Transformed Into a Diversified Holding Company
In a May 5, 2025 News Release, HHH and Pershing Square Holdco, L.P. and its wholly owned subsidiary, Pershing Square Capital Management, L.P. announce an agreement pursuant to which Pershing Square will invest $0.9B to acquire 9,000,000 newly issued HHH shares.
The plan is to transform HHH, which is been a real estate development company over its 14 year history, into 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 HHH's core real estate development and Master Planned Communities business.
Pershing Square’s acquisition of $0.9B of newly issued shares of HHH common stock for $100.00/share is a 48% premium to HHH’s May 2, 2025 closing share. With this purchase, Pershing Square’s stake in HHH is in excess of $1B when we include all Pershing affiliates, various Pershing funds, and Pershing Square team members. All these parties now own ~46.9% of HHH’s outstanding shares yet Pershing Square has agreed to limit its voting power to 40%.
Pershing Square’s Chairman and Chief Executive Officer, Bill Ackman, is now the Executive Chairman of the HHH Board of Directors. Ryan Israel, Pershing Square’s Chief Investment Officer, is HHH’s Chief Investment Officer, a new senior leadership role at HHH. The HHH leadership team, led by CEO David O’Reilly, will remain unchanged with expanded roles and responsibilities.
Is HHH Becoming A Mini-Berkshire Hathaway?
Some investors may view the recent changes as an effort to transform HHH into another Berkshire Hathaway (BRK). Ackman, however, is adamant that HHH differs from BRK.
In the case of BRK, Buffett started out with a business with not particularly attractive long term prospects. HHH is starting out with a business that has attractive long term prospects. It is not a business, however, to which Wall Street assigns a real value.
Ackman states that HHH as it stands, is positioned to generate an enormous amount of cash over many decades. The recent $0.9B investment and the excess cash creation over time at the real estate subsidiary will be invested in high quality growth companies in the world.
BRK has demonstrated that insurance float is a very low cost form of leverage. This leads to significant advantages in terms of increasing the flexibility of how float can be invested. The plan, therefore, is for HHH to pursue a model in which it will have access to low cost capital. This will start with the recruitment of a CEO and a team to build an insurance business either from scratch or from a very small scale.
Financials
There is little point in reviewing HHH's historical results. HHH is undergoing a radical transformation that historical results will not be indicative of future performance.
Furthermore, the historical financial results exclude the recent $0.9B capital injection.
Should you have any desire to review the historical financial results, however, the SEC Filings are accessible here.
Risk Assessment
S&P Global last reviewed HHH on May 29, 2025 and affirmed its B rating with a stable outlook. This is the middle tier of the highly speculative non-investment grade ratings.
Fitch last reviewed HHH on March 20, 2025 and affirmed its BB rating. This is the middle tier of the non-investment grade speculative non-investment grade ratings.
Moody's continues to reflect a Ba3 rating for The Howard Hughes Corporation; this rating was downgraded from Ba2 on April 25, 2023. This is the bottom tier of the non-investment grade speculative non-investment grade ratings. On August 11, 2023, however, Howard Hughes Holdings Inc., a new holding company, replaced The Howard Hughes Corporation (HHC) as the public company trading on the New York Stock Exchange. Existing shares of common stock of HHC were automatically converted, on a one-for-one basis, into shares of common stock of HHH, with the same designations, rights, powers, and preferences, and the same qualifications, limitations, and restrictions, as the shares of HHC common stock immediately prior to the reorganization.
These ratings, however, do not appear to reflect the recent significant equity infusion. It is possible the 3 rating agencies are adopting a 'wait and see' attitude.
Dividend and Dividend Yield
HHH distributes no dividend and it is unlikely a dividend will be distributed in the foreseeable future.
The vision is to transform HHH into 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. Investors should not anticipate share repurchases in the foreseeable future.
Valuation
There is little point in trying to determine HHH's value since the current form of HHH will differ significantly from that in the future. It is, however, reassuring that Pershing Square’s acquisition of $0.9B of newly issued HHH common stock for $100.00/share was for a ~48% premium of HHH’s closing share price on Friday, May 2, 2025.
Final Thoughts
I hold positions in Blackstone (BX), BlackRock (BLK), Brookfield Asset Management (BAM.to), and Brookfield Corporation (BN.to). Exposure to some of the world's largest asset managers provides me with exposure to large private companies. For various reasons, however, have NO exposure to small- and mid-cap companies.
Some may propose that I have exposure to small- and mid-cap companies by way of exchange traded funds (ETFs). I avoid ETFs, however, because they generally include companies to which I want no exposure.
As I finalize this post, Forbes ranks Bill Ackman at #330 on its list of billionaires with a real-time net worth of $9.3B. I do not know the accuracy of this net worth but even if it is overstated by 50%, Bill Ackman is doing something right.
In several previous posts I recommend we 'follow the money'. My decision to acquire 500 HHH shares @ $68.074 on June 3, 2025 in one of the 'Core' accounts in the FFJ Portfolio is in keeping with this suggestion.
I have several multi-baggers where the current value of my holding is as much as 14x my initial cost. In prior posts, however, I touch upon my errors of commission and omission over the decades. The errors of commission are not that significant from a monetary standpoint. The errors of omission, however, are very costly!
I think HHH has the potential to be far more valuable in the future. Were I to pass on this investment opportunity, I think a decade or two from now I would be wondering 'What was I thinking!?'.
If you decide to invest in HHH, I caution you that the risk is higher than the companies I typically cover. I always encourage investors to remain a long-term shareholder but the vary nature of HHH's 'new' business model requires investor to have at least a decade investment time horizon.
Short-sighted investors who fixate on dividend metrics should also avoid HHH. Just like BRK, HHH is unlikely to institute a dividend policy.
I wish you much success on your journey to financial freedom!
Note: Please send any feedback, corrections, or questions to [email protected].
Disclosure: I am long HHH.
Disclaimer: I do not know your circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your research and due diligence. Consult your financial advisor about your specific situation.
I wrote this article myself and it expresses my own opinions. I do not receive compensation for it and have no business relationship with any company mentioned in this article.
