Monday, February 21, 2011

Howard Who-se?

We're catching up a bit here, and one of the things we've been very curious about is what the Rouse Co., er, General Gro, er, Howard Hughes Corp. plan to do with its Columbia holdings.

So far the newly spun off company is as reclusive as its billionaire namesake in his later life. But the company did post this Reuters story on its web site, which offers some insight as to who is running the show and what their interests might be.

The Howard Hughes Corp may bear the name of a legendary U.S. industrialist of yesteryear, but it is the names of  the people now leading the company -- primarily hedge fund manager William Ackman -- that are pushing the shares higher, said JMP Securities analyst Jim Wilson. 

"I don't think it's any more than that," he said.

Ackman, who heads Pershing Square Capital Management, is the chairman of Howard Hughes Corp, which owns a  collection of land, undeveloped malls, a master-planned community business, mixed-use projects, and even General Growth's headquarters.

Although some of its properties produce income, the bulk of the assets are land and development projects, which are risky and difficult to value. 

"It would appear to me that you have a whole series of smart investors in here, and other investors are just following  where the smart investors go," Wilson said.

Pershing's pre-bankruptcy investment in General Growth of less than $200 million is now worth more than $1 billion. Through its holdings of shares, warrants and stock, Ackman's hedge fund controls about 28 percent of Howard  Hughes.

Like Ackman, Howard Hughes' other top officers have stakes in the company -- 7-year warrants paid out of their own  pockets. CEO David Weinreb put down $15 million and President Grant Herlitz, $2 million.

....T2 Partners, part of Tilson Funds, was among those receiving Howard Hughes shares when General Growth  emerged from bankruptcy, Tilson managing partner Glenn Tongue said, declining to say whether the firm still owned  the Howard Hughes shares because it hasn't filed its disclosure statement.

Tongue said the stock's value is still unknown because management has yet to present to investors its long range  plans.

"There's lots and lots of assets, and lots of things to do with the assets. But you still need someone to articulate what that vision is before a firm like ours is going to try to estimate intrinsic value," Tongue said. 

The company's leaders are working on that, said Weinreb, who grew up with Ackman in Chappaqua, New York. The two rekindled their friendship about 13 years ago.

"We have set our sights on getting our hands around the many opportunities that exist within our dynamic portfolio and evaluating and prioritizing those opportunities," he said. 

In terms of compensation, the company appears to want its new leadership to stick around a while. Here's a press release from late last year when Weinreb was named chief executive:

The Howard Hughes Corporation (NYSE: HHC) announced today that its Board of Directors has named David R. Weinreb to serve as the company's Chief Executive Officer. Concurrently, Grant Herlitz was named President of the company. Weinreb and Herlitz have been working for the company on a contract basis since August 2010.

William A. Ackman, Chairman of the Board of Directors of The Howard Hughes Corporation, stated "The Board of Directors unanimously elected David as CEO based on his proven track record and his performance over the past several months."
Mr. Ackman added, "David assembled an exceptional team of real estate professionals who quickly evaluated our assets and prepared the company to emerge as an independent entity. David and Grant form an entrepreneurial leadership team that is tailor made for our needs. Bringing them on board gives us the benefit of their knowledge of our portfolio and allows the company to focus on maximizing the value of its assets for the benefit of our shareholders."
Weinreb currently serves as Chairman and CEO of TPMC Realty Corporation, a real estate investment firm headquartered in Dallas, Texas. During his 17-year career as CEO of TPMC, Weinreb specialized in acquiring and repositioning underperforming real estate assets.
Herlitz has served as Chief Financial Officer, and more recently as President of TPMC Realty Corporation, where he managed various aspects of the company's finance, investment, accounting, and leasing operations over his ten-year tenure with company.
Weinreb said, "In light of the company's world class collection of assets with extraordinary potential, I am honored to accept the leadership of The Howard Hughes Corporation. I am most excited about the birth of a new entrepreneurial organization with over 200 highly skilled and incredibly motivated employees who are committed to making The Howard Hughes Corporation ascend to its full potential. The Howard Hughes name is synonymous with a relentless pursuit of achievement. We are inspired by that legacy and are systematically assessing and strategically positioning our portfolio."
Prior to their election, Weinreb and Herlitz entered into agreements to purchase seven-year warrants for $17 million on approximately 2.7 million HHC common shares at $42.23 per share, the closing sales price for HHC common stock on November 19, 2010, the last full trading day prior to agreement on the terms of the warrants.
The warrants are designed to be illiquid and are not exercisable for six years except in the event of a change of control, termination of the executive without cause, or the separation of the executive from the company for good reason. In addition, for the first six years of the warrants' term, each executive is prohibited from selling, hedging, or otherwise reducing his net long exposure to the shares underlying the warrants.
"I have known both David and Grant for many years, and I share the confidence they have expressed in the future of the company as demonstrated by their substantial, long-term personal capital commitments," said Ackman.
Weinreb and Herlitz will assume their positions effective immediately.

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