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

1. 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.
2. 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).
3. 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.

4. Risks

• Interest Rates: High rates crush mortgage demand (slowing land sales) and increase cap rates (lowering commercial asset value). It is a "double whammy."
• Office Exposure: The Woodlands has significant office space exposure, a secularly challenged asset class.