Howard Hughes Corp hires Centerview Partners to explore alternatives, including a sale: Sources

The Howard Hughes Corporation, an owner, manager and developer of different types of real estate throughout the U.S., has hired bankers at Centerview Partners to explore strategic alternatives that include a sale of the company, according to people familiar with the situation.

The company, a one time spin-off from General Growth Properties, has struggled as of late to command a valuation that the board, led by its Chairman Bill Ackman, feels is appropriate for a company with its collection of assets and performance metrics.

People familiar with the board’s thinking say it is unclear the company is well suited to the public markets because — unlike most other real estate companies — it is not a REIT, but a C-Corp and has a diverse collection of assets that does not lend itself to the recurring and predictable cash flows real estate investors may be looking for.

The company is both an owner of land, such as 60 acres of beach front in Honolulu, and a developer of residential communities, such as the Woodlands in Houston and commercial developments such as the South Street Seaport, only a few blocks east of the New York Stock Exchange in downtown Manhattan.

With vacant land, planned communities, shopping developments, self storage facilities and a longer-term outlook to profit off those holdings, Howard Hughes may be not be best for the public markets, at least judging from the stock’s performance over the last three years.

It is down 14%, while both builders and REITS are far higher. That has led management and the board to explore a sale, though its bankers are also exploring joint ventures or spin-offs as part of their mandate, according to people familiar with the situation. The bankers hope to complete the review process by the end of the summer.

Ackman, who controls 4% to 5% of the company including stock and derivatives, is said to be fully supportive of the plan to review alternatives. The Pershing Square Capital Management manager did not return calls for comment, nor did representatives of Howard Hughes Corporation.

Potential buyers for Howard Hughes are likely to include giant real estate holders such as Blackstone Group or Brookfield Property Partners, but may also include some of the largest family offices or sovereign wealth funds that are willing to patiently try to harvest a net asset value that analysts whom follow the company mark as between $130 to $170 per share.

In a bullish note out just this morning, analysts at Citi note the stock’s underperformance and tie it in part to a slower-than-anticipated lease up of space at the South Street Seaport.

Howard Hughes shares jumped more than 9% following the first publication of this report.