Thank you for the positive comments. I appreciate the addition of 33 Peck Slip, which could (hopefully) add additional value for HHC. As you mentioned, HHC won this auction for $38.3 million - which is a Best Western Seaport Inn with 72 keys - following the Ch.11 bankruptcy of 33 Peck Slip Acquisition LLC.
In regards to your other questions, I think management is pretty solid. They were handpicked by Bill Ackman, these guys ran their own capital and investments in RE prior to joining HHC, they invested ~ $20m in warrants, stock that could not be hedged in any way prior to 2016/17. The purchase of the remaining ownership from Morgan Stanley in 2011 was perfect timing, and what it did was genius - created a monopoly of any future development (commercial or residential) in The Woodlands. As I mentioned that there is currently about 8.0m SF of office under construction in Houston, there is zero in The Woodlands now that 1725/35 Hughes Landing and 3 HL is complete. HHC chooses the supply capacity going forward, and for a community and asset like The Woodlands, it was a fantastic move. This leads me to your question on the REIT topic. I've talked to HHC plenty of times, have met with some of their management multiple times. The benefit of the REIT conversion is obvious. What is overlooked is that they still have a pipeline of potential development assets that could add tremendous value over the next 5, 10, 15 years. Becoming a REIT and moving the other assets to another company would diminish their competitive position in their geographies. Imagine having to all of the sudden have to compete with another developer in The Woodlands in their build out of potential 7-8.0m SF, or Columbia of potential 13m SF. My take, and after talking to them, is they may wait to become a REIT until more has been developed in their areas in which they have a strong position.
Love this company and appreciate your commentary and insights! I spoke to HHC at ICSC Vegas and super friendly and willing to talk with me.
33 Peck Slip is going to be converted to Mr. C's, a boutique hotel owned by Cipriani family (one in Beverly Hills and Miami I believe).
No REIT for a while - you may have mentioned but they need the operating NOI to fund development. Plus they have $255mm NOL's to offset income
Elk Grove had recent news about casino development so hopefully that drives more leasing.
Targeting coverage by 2 bulge firms this year, one down w/ Citi!
I thought the CFO retirement was a big deal, but they didn't act like it was anything but him moving on to do other things. I think he's still pretty tied to the company with his warrants so I was surprised he wouldn't at least stay until he was able to cash those in.
I would love a mgmt buyback but as discussed I think they are long-term focused and need cash for all the strategic developments. Interesting point about Ackman - I don't think his HHC stake is big enough to save Pershing if Valeant goes down though.
Thank you for the positive comments. I appreciate the addition of 33 Peck Slip, which could (hopefully) add additional value for HHC. As you mentioned, HHC won this auction for $38.3 million - which is a Best Western Seaport Inn with 72 keys - following the Ch.11 bankruptcy of 33 Peck Slip Acquisition LLC.
ReplyDeleteIn regards to your other questions, I think management is pretty solid. They were handpicked by Bill Ackman, these guys ran their own capital and investments in RE prior to joining HHC, they invested ~ $20m in warrants, stock that could not be hedged in any way prior to 2016/17. The purchase of the remaining ownership from Morgan Stanley in 2011 was perfect timing, and what it did was genius - created a monopoly of any future development (commercial or residential) in The Woodlands. As I mentioned that there is currently about 8.0m SF of office under construction in Houston, there is zero in The Woodlands now that 1725/35 Hughes Landing and 3 HL is complete. HHC chooses the supply capacity going forward, and for a community and asset like The Woodlands, it was a fantastic move. This leads me to your question on the REIT topic. I've talked to HHC plenty of times, have met with some of their management multiple times. The benefit of the REIT conversion is obvious. What is overlooked is that they still have a pipeline of potential development assets that could add tremendous value over the next 5, 10, 15 years. Becoming a REIT and moving the other assets to another company would diminish their competitive position in their geographies. Imagine having to all of the sudden have to compete with another developer in The Woodlands in their build out of potential 7-8.0m SF, or Columbia of potential 13m SF. My take, and after talking to them, is they may wait to become a REIT until more has been developed in their areas in which they have a strong position.
Love this company and appreciate your commentary and insights! I spoke to HHC at ICSC Vegas and super friendly and willing to talk with me.
ReplyDelete33 Peck Slip is going to be converted to Mr. C's, a boutique hotel owned by Cipriani family (one in Beverly Hills and Miami I believe).
No REIT for a while - you may have mentioned but they need the operating NOI to fund development. Plus they have $255mm NOL's to offset income
Elk Grove had recent news about casino development so hopefully that drives more leasing.
Targeting coverage by 2 bulge firms this year, one down w/ Citi!
I thought the CFO retirement was a big deal, but they didn't act like it was anything but him moving on to do other things. I think he's still pretty tied to the company with his warrants so I was surprised he wouldn't at least stay until he was able to cash those in.
I would love a mgmt buyback but as discussed I think they are long-term focused and need cash for all the strategic developments. Interesting point about Ackman - I don't think his HHC stake is big enough to save Pershing if Valeant goes down though.
Thanks again for the great presentation!
Good luck all and long HHC!
Zach