Q4 2025 Howard Hughes Holdings Inc Earnings Call

February 20, 2026

Speaker #3: I'm sorry, it's not as easy as a widget company, where you look at how many widgets you made and what the incremental margin that you generate from each widget sale is, but we just think the ultimate long-term outcome will be one that you're happy about.

Speaker #3: I guess the last point I would make is we will spend some time on this topic at the upcoming next quarter meeting. I don't think maybe before the closing of Vantage, but just provide enough time for us to kind of help the market come up with some KPIs to think about kind of big business progress.

Speaker #3: But I'll turn it over to Ryan Israel. Go ahead, Ryan. Thanks, Phil. And as Bill touched on, I just wanted to really explain to people again why we're so excited to have the upcoming closing of Vantage as the first transaction to really help transform Howard Hughes into a diversified holding company.

Operator: Good day, and thank you for standing by. Welcome to the Howard Hughes Holdings Q4 2025 Earnings Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Saxon, VP Corporate Strategy. Please go ahead.

Speaker #3: And as we talked about in December, we think that the insurance business itself is a very good business, and we really think the platform that Vantage has created is incredibly valuable and will nurture Howard Hughes and Howard Hughes shareholders' benefits.

Speaker #3: Vantage itself is actually a very diversified insurance platform across its more than two dozen lines of business, both in the specialty insurance and the reinsurance segments. It's got a great and highly experienced management team.

Speaker #3: The CEO, Greg Hendrick, has been in the business for more than 30 years and has a very strong reputation. We also think one of the things that's unique about Vantage is that it has very limited risk to its existing reserves.

John Saxon: Good morning, and welcome to the Howard Hughes Q4 2025 earnings call. With me today are Bill Ackman, Executive Chairman, David O'Reilly, Chief Executive Officer, Ryan Israel, Chief Investment Officer, and Carlos Olea, Chief Financial Officer. Before we begin, I would like to direct you to our website, www.howardhughes.com, where you can download both our Q4 earnings press release and our supplemental package. The earnings release and supplemental package include reconciliations of non-GAAP financial measures that will be discussed today in relation to their most directly comparable GAAP financial measures. Certain statements made today that are not in the present tense or that discuss the company's expectations are forward-looking statements within the meaning of the federal securities laws. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that these expectations will be achieved.

Speaker #3: The company was founded in 2020, and so one of the nice benefits is that a lot of the problems in the insurance industry today in terms of reserving exist because companies wrote business in 2015 to 2019 timeframe for which they're effectively under-reserved.

Speaker #3: And so Vantage has really sidestepped any of these problems because of how recent it is. And that made it increase our confidence in doing diligence of the company's book value was very strong and its reserves were appropriate.

Speaker #3: Naturally, the company has the appropriate licenses and credit ratings that we think are great, and ultimately, we think what we're doing—the capital that we're putting in and the umbrella from Howard Hughes—will be able to enhance those credit ratings over time.

Speaker #3: And then, importantly for an insurer, one of the key components for insurers is writing profitably, as Bill mentioned. But the other side—and you could argue perhaps even the more important side for the highest-returning insurers over time—is actually the investment returns that they can earn on their portfolio.

John Saxon: Please see the forward-looking statement disclaimer in our Q4 earnings press release and the risk factors in our SEC filings for factors that could cause material differences between forward-looking statements and actual results. We are not under any duty to update forward-looking statements unless required by law. I will now turn the call over to our Executive Chairman, Bill Ackman.

Speaker #3: Every insurance company has float that they generate for claims—they're receiving cash in today for premiums, and then claims will be paid out later to generate float.

Speaker #3: At the same time, they have a large capital base, and so the combination of those two factors really leads to their overall invested asset portfolio.

Speaker #3: As Bill mentioned, Vantage has been invested in fixed income, which has a lower return, although we've outlined in December why we think fixed income products actually can have a fair amount of risk as well, in a variety of ways.

Bill Ackman: Thank you very much, John. And let me just add one addition to the room, Jill Chapman. Jill was formerly head of IR for Hilton, and we're very pleased to announce that we brought her on in a IR capacity at Pershing Square, and she's also going to help, of course, with our investment in Howard Hughes. While we're on the topic of IR, I just thought it would be useful as this business kind of transforms from a pure play real estate and real estate development company into a diversified holding company, you know, led by our recent announcement to acquire Vantage Holdings. Good question, and some question I've received from shareholders is: How should we think about this business? You know, what are the metrics that we should follow?

Speaker #3: What we plan to do is leverage the investment expertise of Pershing Square in order to really help improve the investment asset returns over time, and naturally then also the returns on equity, by allocating a meaningful portion of that investment portfolio towards common stocks. And based upon Pershing Square's more than two-decade track record, we think that could be very additive to Vantage's returns on equity and ultimately shareholder returns.

Speaker #3: And so the way that we think about Vantage overall is that this business can be a higher return and faster-growing business that we can ultimately use to meaningfully enhance Howard Hughes' overall growth profile while at the same time providing a very valuable diversification of its earnings streams as it provides a different type of profile than the real estate business.

Bill Ackman: I think Howard Hughes, over time, also suffered a bit from shareholders trying to figure out, how do I think about this business? And the conventional public company, there's usually a certain amount of GAAP earnings or an adjusted number or a free cash flow number, and, you know, people want a simple rubric for thinking about it. You know, what multiple do I put on this number? How do I track this number over time? And, you know, the multiples determined based on, you know, the persistency and the growth of those kind of earnings over time. And when you think about the Howard Hughes business, it's very challenging in our view, and actually it's hard to get to a proper indication of value using a conventional approach.

Speaker #3: As Bill mentioned earlier, and as David and Carlos will also touch on, we believe that Howard Hughes' real estate business is going to generate a meaningful amount of excess cash beyond what it needs for reinvestment, particularly over the coming next few years.

Speaker #3: And that provides a valuable source of opportunity to be reinvesting in Vantage first in order to pay down, ultimately, the financing, primarily the Pershing Square Holdings’ preferred stock, but also, over time, we think the ability to put in more capital into Vantage—which is earning a very high return according to the strategy we think we’ll be able to implement—could be a good use of capital, along with looking for other control-oriented businesses in different business lines over time.

Bill Ackman: I think you have to think about the business according to its sort of different components. So the easiest place to begin, of course, is with stabilized income-producing real estate assets, you know, apartments, office, retail, et cetera. You know, obviously, these are, you know, easy, relatively easy to manage. There are plenty of comparables you can look at, and I think the only complexity at Howard Hughes is thinking about, you know, as we lease up assets, right? You know, assets that are 95% rented, fully stabilized, it's easy, but we always have some amount of development, some amount of lease up in the portfolio. But still, I think that's a pretty easy place to begin. Then there's our condominium business, and, you know, we have kind of a pipeline of product under contract.

Speaker #3: And with that, I'll turn it over to David.

Speaker #2: Thank you, Ryan. Look, against that backdrop of the Pershing investment and our announced acquisition of Vantage, 2025 was both transformative strategically, but it was also one of the strongest operating years in our history.

Speaker #2: And in 2025, I think I just want to highlight that 100% of what I'm going to talk about in our earnings and cash flow were generated by the real estate platform.

Speaker #2: Our evolution into a diversified holding company is being funded by a real estate engine that continues to perform at a very high level. And I'm going to talk about each one of those segments now, starting with master planned communities.

Speaker #2: Our MPC EBT hit a record this year at $476 million, driven by selling 621 residential acres at an average price per acre of $890,000.

Bill Ackman: You know, get pretty good estimates of what the margins are on those sales. As those properties get delivered, you know, I think a DCF is a pretty straightforward way to think about, you know, what those assets are worth. And because we really don't start building until we have sold a substantial majority of the units in these projects, and we've got a very good track record for delivering them on time and on budget, it's a very low risk business compared to what people normally think about, an economy in business where you're highly speculative. You have to build as soon as you can because, you know, you levered up to buy a piece of property. You know, here, of course, we own the real estate outright.

Speaker #2: Demand was strong in both Summerlin and Bridgeland, where pricing and margin expectations really exceeded the levels that we had predicted at the beginning of the year.

Speaker #2: Excluding the bulk sale of undeveloped land in Summerlin, finished residential land sold at a record price of 1.7 million dollars per acre, really demonstrating the strength of our entitled and developed product and the embedded value within our communities.

Speaker #2: Strategically within our MPC segment, I'd like to think that we're not just selling land, but we're really harvesting scarcity. Our communities mature and remaining acreage declines

Bill Ackman: We can pick our moment, and we don't start construction until we know this is gonna be a successful product with a lot of demand. You know, today we've got, you know, how many million square feet left of product without, you know... Why don't we start there? Let's-- Hawaii.

Speaker #1: Pricing power , not acreage . Volume becomes a primary driver of long term profitability We make deliberate decisions each year regarding how much land to monetize versus hold based on supply , demand , dynamics and long term value creation We also reached a major milestone this year with the grand opening of Terra Vallis in Phoenix , West Valley , spanning 37,000 acres and entitled for up to 100,000 homes over time , Terra Vallis represents one of the most significant long duration growth engines in our portfolio , and remains in the early stages of monetization Shifting now to our operating assets within the operating asset portfolio , we also had a record year delivering full year NOI Now , under strategic development and specifically our condominium platform .

David O'Reilly: Well, just in Hawaii alone, we unlocked another 3 to 4 million of entitlements this past year.

Bill Ackman: Okay. So the $3 to 4 million plus-

David O'Reilly: Plus the existing pipeline that's in the portfolio today, that's largely presold, as you noted, Bill.

Bill Ackman: Okay. So you can think about that. It's a bit like drilling oil. There's a finite amount of it. However, we have an incredibly talented team in Hawaii. We've built a real franchise and brand in Hawaii. And if you're a major landowner in Hawaii and you want a partner to deliver, you know, turn that land into a valuable condominium product, there's no better place to turn than Howard Hughes. So I expect that what is today, a 3 to 4 million sq ft pipeline of new product, is gonna grow over time as we either buy other land or we joint venture other property in Hawaii because of the franchise we've built.

Bill Ackman: So there's an existing pipeline you can sort of value on a DCF basis, and there's an option on, you know, the franchise, if you will, and our ability to develop other assets. And of course, there's the MPC business. And I think, you know, again, people are looking to put a, you know, how do I come up with a metric? You know, what, you know, profits from MPCs and, you know, it's kind of grown over time, and so can I, can I, you know, what's the right multiple and how do I think about it? And that's where I would say, I don't think a multiple is the right way to look at it. We are, you know, stewards, if you will, for, you know, 21,000 acres of potential residential land.

Bill Ackman: And we set that land up to be sold by, you know, generally building out infrastructure so these lots can be sold, ultimately to home builders, who in turn will build homes and sell them, to customers. But we're very judicious in the way that we bring that property to market in that, you know, we have a finite supply. We want to sort of optimize between kind of price and volume. We want to make sure that our home builders never end up with, you know, too much inventory. And as a result, and the way we've managed it, we've been able to, if you look at the compound annual kind of growth rate in our residential land values on a per acre basis in, you know, our various MPCs, it's been, I would say, quite, extraordinary.

Speaker #1: You know, our condominium platform continues to serve as a powerful, internally generated capital engine. During 2025, we contracted $1.6 billion of future condo revenue.

Speaker #1: The strongest year in the company's history . Multiple projects remain substantially presold , including the park Ward village at 97% and Calli at 93% , while condominium earnings are tied to completion , timing and compare , you know , can be lumpy , particularly within Hawaii , where Ward village is home to our highest valued development's .

Bill Ackman: And we care, obviously, about, you know, the cash we generate from, any one year's lot sales, but we care more about making sure we do this in a manner where our remaining 21,000 acres continues to increase in value over time. And we help that value grow by being a good developer, by being good manager of these small cities or these large, you know, very large scale MPCs, making sure that we're delivering the right product, and we're doing it in a way where the market is never saturated with excess supply. And it, it's a really great business, but it's not one, where, you know, sometimes you're gonna be opportunistic.

Speaker #1: Our approach has evolved to significantly de-risk execution . We require substantial presales prior to vertical construction , utilize approximately 60% non-recourse loan to cost financing , buyer deposits in this financing make these projects largely self-financed , and our pre-sales materially reduce refinancing risk .

Speaker #1: These developments are expected to generate significant cash flow upon closing , providing capital that can be redeployed across our communities and increasingly across platforms We view this condo platform as not speculative development , but disciplined capital recycling Finally , last week we announced Toro District , an 83 acre sports and entertainment development in Bridgeland anchored by the Houston Texans new global headquarters and training facility .

Bill Ackman: A buyer comes along and wants to buy a large pad in Summerlin, and we make the economic decision that this is a smart thing for us to do today. And a year later, we could decide, you know what? We're not gonna do any such, you know, large sales. In that kind of world, I think trying to value the MPC business on a multiple of kind of any one year's profits is really not the right way to think about it. So how, how should one think about the real estate business? And I think the way we think about it is we come up with kind of an intrinsic, you know, NAV or other assessment of the value of the existing assets, and we look to grow that over time.

Speaker #1: Toro District exemplifies the value embedded in our land positions and our ability to activate them through thoughtful , public , private partnerships . This project enhances long term recurring revenue potential , increases the value of the surrounding land , and reinforces the power of our master plan community model Importantly , projects of this scale are strengthened , not constrained by our broader capital base .

Bill Ackman: Some amount of it, we convert into cash every year, NOI from the stabilized assets, you know, profit from our existing MPCs. As we sell off residential land, you know, it's, if you will, gone forever. But, you know, one of the things that we've been able to accomplish as a company is, while we have a finite supply of land, we've been able to drive price per acre on a very significant basis, which makes that finite supply on a present value basis, actually, you know, continue to grow in value. So I think the metrics you should think about when you're you know, trying to assess the value of a real estate company is, you know, some capitalized value for our stabilized income producing assets, maybe a present value calculation for our condominium development.

Speaker #1: As a holding company, overall, 2020 and 2025 have demonstrated both the durability of our real estate engine and the strategically planned evolution of our company. With that, I'm going to hand it off to Carlos to talk about 2026 guidance and our financial results.

Speaker #2: Thank you , David , and good morning , everyone 20 2025 results exceed our guidance . And as we look ahead to 2026 , we think it's important to provide a framework that reflects normalization and transition .

Speaker #2: As we transition into a diversified holding company . A reporting framework will evolve accordingly . As you heard Bill say However , because the vantage acquisition has not yet closed and because 2025 , including an outsized bulk land sale in Summerlin , we believe it is appropriate to provide 2026 guidance to help normalize expectations We expect adjusted operating cash flow in the range of 415 to 465 million .

Bill Ackman: And then I think a similar kind of present value metric for valuing the MPC business. You know, bearing in mind that if we choose not to sell land today, it's gonna be worth more in the future, and we're just making a decision, you know, is it better to monetize a piece of land, residential land today, or are we gonna, you know, do better holding it for the next year or two years and allowing it to kind of appreciate in value? So maybe not. You know, again, this is not a company that's gonna be a simple, you know, you get one number every quarter, and you can put a multiple on it or you can annualize it and get to a value.

Speaker #2: We believe this metric remains the most appropriate consolidated metric, as it captures the performance of our operating engines and aligns with how we evaluate capital generation for MPC.

Speaker #2: We expect it to be in the range of 343 to 391 million . Importantly , the expected year over year decline is almost entirely attributable to the absence of the Summerlin bulk sale .

Bill Ackman: It's a business where we're gonna do our best, and we'll work with Jill, we'll work with the team in coming up with some kind of good sort of KPIs you can track on a quarterly basis to see how much progress we're making. But the places where I would focus is the growth in NOI, the per acre value of the finished, you know, lots that we deliver on each of various communities, how quickly is that growing? That gives you some sense of the value of our remaining land assets, and then the progress we're making in terms of delivering condominiums and the margins that we're generating, and then our ability to continue to extend, you know, that franchise. So that's, that's real estate. We expect to close our Vantage Holdings transaction.

Speaker #2: Excluding that transaction, our 2026 guidance is essentially flat relative to 2025 on a comparable basis. MPC earnings will remain inherently lumpy due to acreage timing and monetization decisions. Longer term, we view profitability as driven by pricing power and capital discipline rather than linear acreage volume, while remaining acreage declines over time.

Speaker #2: We expect price per acre to increase as communities mature. Supply tightens and underlying land value appreciates. We believe 2026 guidance reflects a sustainable run rate level of MPC earnings, absent large one-time transactions.

Bill Ackman: We remain, you know, confident we can get it done by the upcoming quarter, let's say by June. That process requires certain regulatory approvals. We've had the various meetings, and sort of some more come in, in the relatively short term, but I see no reason why we won't meet kind of our expectations. Now, with the addition of a $2.1 billion insurance asset, you know, again, coming up with some kind of consolidated earnings number is really not the right way to think about this business going forward. And, you know, we're gonna want to point you to growth in the book value of the insurer and the returns that we're earning on that book value as kind of key indicators of our progress in building a valuable insurance company.

Speaker #2: Our objective in the MPC business is not to maximize any single year's MPC , but to optimize long term per acre value and reinvest internally generated capital at attractive , risk adjusted returns Moving on to operating assets , NOI expected to range between 279 and 290 million , including our share of NOI from our JV assets .

Speaker #2: This is an implied increase of 1 to 5% compared to our 25 results Longer term , we target annual NOI growth in the 3 to 5% range , driven by same store rent growth and development , stabilization .

Speaker #2: While individual years may fluctuate depending on timing of lease up and development deliveries , we believe the trajectory remains durable and predictable . Moving on to condominiums Condominiums under construction and improved development , which are substantially presold , represent approximately $5 billion of remaining expected gross revenue over their life , resulting in an estimated 1.3 billion in profits at a 25% margin .

Bill Ackman: I would say most insurance companies today are valued based on precisely that. If they can earn high returns on capital, they're deserving of a higher multiple of book value. If they earn low returns, they're deserving of a low multiple. You know, as we've kind of ramp up the investment portfolio from a pure play, you know, fixed income portfolio that's externally managed by BlackRock and Goldman Sachs, to one managed by Pershing Square, with a greater emphasis on kind of higher return, kind of common stock investments. And as we, you know, kind of grow the insurer with a focus on profitability, we expect to be able to build a very profitable, high ROE insurer kind of over time.

Speaker #2: We expect to recognize approximately 40% of this revenues between 2026 and 2027 , with the remaining 60% recognized between 2028 and 2030 . Our newest towers and ilima are expected to close in 2030 , and represent 41% of this future revenues , with margins exceeding 25% for 2026 .

Bill Ackman: You know, we'll do our best to give you metrics to kind of track or come up with your own assessment of intrinsic value of the overall company, you know, keeping you informed on the real estate side, keeping you obviously closely informed on the insurance side. But this is a business that you should think of based on kind of compound annual growth and intrinsic value, as opposed to any straightforward earnings metric. I'm sorry, it's not as easy as a widget company, where you look at how many widgets you made and what the incremental margin that you generate from each widget sale, but we do think the ultimate long-term outcome will be one that you're happy about.

Speaker #2: Specifically, we expect condominium gross revenue of approximately $700 million to $720 million, and $720 million to $750 million, with estimated profit of $108 million to $128 million at margins of 15% to 17%.

Speaker #2: This is even primarily by closing of the porque word village This margins were impacted by infrastructure work , primarily related to electrical work needed to support future development However , this cost will benefit our future towers and we expect to see cash margins in the mid 20s .

Speaker #2: Except, as I mentioned, for Mali and Lima, which we expect to be in the high 20s when they close in 2030.

Bill Ackman: I guess the last point I would make is we will spend some time on this topic at the upcoming next quarter meeting. I don't think, you know, maybe before the closing of Vantage, but just, and provide enough time for us to kind of help the market come up with some KPIs to, you know, think about kind of big business progress. With that, I'll turn it over to Ryan Israel. Go ahead, Ryan.

Speaker #2: This backlog provides meaningful visibility into near-term cash generation, which we expect to redeploy across our portfolio and increasingly across platforms. Turning to Ghana for 2026, we expect cash DNA to range between $82 million and $92 million, with a midpoint of approximately $87 million.

Ryan Israel: Thanks, Bill. As Bill touched on, I just wanted to really explain to people again why we're so excited to have the upcoming closing of Vantage as the first transaction to really help transform Howard Hughes into a diversified holding company. As we talked about in December, we think that the insurance business itself is a very good business, and we really think the platform that Vantage has created is incredibly valuable and will nerd a Howard Hughes and Howard Hughes shareholders benefits. Vantage itself is actually a very diversified insurance platform across its more than two dozen lines of business, both in the specialty insurance and the reinsurance segments. It's got a great and highly experienced management team. The CEO, Greg Hendrick, has been in the business for more than 30 years and has a very strong reputation.

Speaker #2: This includes assumed inflation growth compared to last year , as well as a shift in the mix of compensation from non-cash to cash Please note that this range includes the 15 million in annual base fees paid to Pershing Square , but excludes the variable fees , which are based on quarter end stock prices .

Speaker #2: That could be volatile and difficult to predict Looking forward , we view approximately 87 million as an approximate as an appropriate operating baseline for the current scale of the organization We would expect that baseline to grow modestly over time , generally in line with inflation and incremental scale excluding stock based compensation .

Speaker #2: Now, let me spend a moment on refinancing and capital structure. We recently refinanced and upsized our 2028 $750 million senior notes with $1 billion of new notes due in 2032 and 2034.

Ryan Israel: We also think one of the things that's unique about Vantage is that it has very limited risk to its existing reserves. The company was founded in 2020, and so one of the nice benefits is that a lot of the problems in the insurance industry today in terms of reserving exist because companies wrote business in 2015 to 2019 timeframe, for which they're effectively underreserved. And so Vantage has really sidestepped any of these problems because of how recent it is, and that made it, you know, increased our confidence in due diligence. The company's book value is very strong and its reserves were appropriate. Naturally, the company has the appropriate licenses and credit ratings that we think are great.

Speaker #2: This refinancing occurred following the announcement of the Vantage acquisition and provides an important external validation of our capital structure and strategy. Both tranches achieved the tightest credit spreads in the company's history.

Speaker #2: 191 basis points for the 6.25-year tranche and 198 basis points for the eight-year tranche, significantly tighter than the prior best spread of 295 basis points achieved in 2017.

Ryan Israel: Ultimately, we think what we're doing, the capital that we're putting in and the umbrella from Howard Hughes will be able to enhance those credit ratings over time. Then importantly, for an insurer, one of the key components for insurers is writing profitably, you know, as Bill mentioned. But the other side, and you could argue, perhaps even the more important side for the highest returning insurers over time, is actually the investment returns that they can earn on their portfolio. You know, every insurance company has float that they generate for claims that they're receiving cash in today for premiums, and then claims will be paid out later, which generate float. At the same time, they have a large capital base, and so the combination of those two factors really leads to their overall invested asset portfolio.

Speaker #2: Both branches traded at or slightly above par , following issuance , and continued to trade around par with active secondary participation , reflecting balanced execution and constructive market reception .

Speaker #2: We also received a modest upgrade from S&P , reinforcing third party recognition of our balance sheet strength , even as we expand the company's platform .

Speaker #2: With respect to the Vantage acquisition specifically, we approached the financing conservatively. We modeled cash flows under a range of downside scenarios to ensure that the transaction would not impair our ability to finance or the flexibility of our real estate operations.

Ryan Israel: As Bill mentioned, you know, Vantage has been invested in fixed income, which has a lower return, although we've outlined in December why we think fixed income products actually can have, you know, a fair amount of risk as well in a variety of ways. What we plan to do is leverage the investment expertise of Pershing Square in order to really help improve the investment asset returns over time, and naturally then also the returns on equity by allocating a meaningful portion of that investment portfolio towards the common stocks. And based upon Pershing Square's more than two-decade track record, we think that could be very additive to Vantage's returns on equity and ultimately shareholder returns.

Speaker #2: The additional Pershing preferred investment of up to 1 billion carries a 0% coupon and represents permanent capital with no fixed cash costs and provides the optionality to redeem when liquidity and capital allocation priorities make it appropriate .

Speaker #2: It adds meaningful equity support to the balance sheet without increasing fixed cash obligations. We believe this structure enhances flexibility and positions the company to grow while maintaining prudent leverage parameters. And speaking of leverage, let's spend a moment on our leverage philosophy. We do not manage the business to a fixed net debt to EBITDA target.

Ryan Israel: So the way that we think about Vantage overall is that this business can be a higher return and faster growing business that we can ultimately use to meaningfully enhance Howard Hughes's overall growth profile, while at the same time providing a very valuable diversification of its earnings streams as it provides a different type of profile than the real estate business. As sort of Bill mentioned earlier, and David and Carlos will also touch on, we believe that Howard Hughes' real estate business is going to generate a meaningful amount of excess cash beyond what it needs for reinvestment, particularly over the coming next few years. And that provides a valuable source of opportunity to be reinvesting in Vantage. First, in order to pay down ultimately the financing, primarily the Pershing Square Holdings preferred stock.

Speaker #2: Given the lumpiness of real estate earnings , that metric can be misleading Instead , we find we financed each segment based on asset characteristics while maintaining meaningful liquidity to complete projects and withstand severe downturn scenarios Operating assets typically carry 60 to 65% loan to value .

Speaker #2: Property level debt balance with a meaningful pool of unencumbered assets MPC remains unencumbered except for short term reimbursable infrastructure facilities . Condominium projects utilize approximately 60% non-recourse loan to cost financing and are substantially pre-sold , significantly reducing maturity risk .

Ryan Israel: Also over time, we think the ability to put in more capital into Vantage, which is earning a very high return according to the strategy we think we'll be able to implement, could be a good use of capital, along with looking for other control-oriented businesses, in different business lines over time. With that, I'll turn it over to David.

Speaker #2: We believe that our proforma leverage following vantage will be supported by incremental earnings capacity , enhance diversification and asset backing as operating assets grow and recurring NOI increases .

David O'Reilly: Thank you, Ryan. Look, against that backdrop of the Pershing investment and our announced acquisition of Vantage, 2025 was both transformative strategically, but it was also one of the strongest operating years in our history. In 2025, I think I just want to highlight that 100% of what I'm going to talk about in our earnings and cash flow were generated by the real estate platform. Our evolution into a diversified holding company is being funded by a real estate engine that continues to perform at a very high level. I want to talk about each one of those segments now, starting with master planned communities. Our MPC EBT hit a record this year of $476 million, driven by selling 621 residential acres at an average price per acre of $890,000.

Speaker #2: Leverage . My may rise modestly in parallel with asset value and cash flow , not through incremental development risk across all segments . Our objective remains a conservative , flexible balance sheet supporting long term value creation We are now ready to take questions Operator .

Speaker #2: Please open the line

Speaker #3: Thank you , ladies and gentlemen , if you have a question or a comment at this time , please press star one on your telephone .

Speaker #3: If your question has been answered, and you wish to remove yourself from the queue, please press star one one again. We'll pause for a moment while we compile our Q&A roster.

Speaker #4: And to be clear, we will take questions both from analysts and from individual investors. So, it's an open Q&A.

David O'Reilly: Demand was strong in both Summerlin and Bridgeland, where pricing and margin expectations really exceeded the levels that we had predicted at the beginning of the year. Excluding the bulk sale of undeveloped land in Summerlin, finished residential land sold at a record price of $1.7 million per acre, really demonstrating the strength of our entitled and developed product and the embedded value within our communities. Strategically, within our MPC segment, I'd like to think that we're not just selling land, but we're really harvesting scarcity. Our communities mature and remaining acreage declines. Pricing power, not acreage volume, becomes a primary driver of long-term profitability. We make deliberate decisions each year regarding how much land to monetize versus hold, based on supply-demand dynamics and long-term value creation. We also reached a major milestone this year with the grand opening of Teravalis in Phoenix West Valley.

Speaker #3: Our first question comes from John Kim with BMO Capital Markets. Your line is open.

Speaker #5: Thank you . I wanted to ask on the kind of margins at Parkwood Village related to infrastructure . Work . Was that unexpected ?

Speaker #5: Those costs. And maybe if you could talk about cost pressures overall in development. I think you mentioned mid-20s margins on the remaining towers, versus—I think it's a little bit lower than what you achieved at Victoria Place.

Speaker #1: Thanks , John . I appreciate the question . And it's one that we're focused on closely . Obviously the infrastructure costs that are going into Ward village , including the upgrade of water , sewer and electric that Carlos mentioned , in his prepared remarks .

Speaker #1: We're all anticipated , given the location of Park Ward village and the size of Park Ward village . It has a slightly disproportionate share allocated to it , but that will benefit future towers as they'll have a smaller amount allocated to it .

David O'Reilly: Spanning 37,000 acres and entitled for up to 100,000 homes over time, Teravalis represents one of the most significant long-duration growth engines in our portfolio and remains in the early stages of monetization. Shifting now to our operating assets. You know, within the operating asset portfolio, we also had a record year, delivering full year NOI of $276 million, up 8% year-over-year. I think this increase was highlighted by same-store office NOI increasing 11% and multifamily increasing 6%. This really reflects the strong leasing momentum and the disciplined asset management executed throughout the year. Occupancy across our stabilized portfolio remains healthy. Importantly, and as Bill highlighted earlier, this segment is our cash flow engine.

Speaker #1: And this is one of those rare towers where the gap margin that Carlos provide guidance on , and the cash margin are slightly disconnected as a result , a couple of other things that are impacting the the margin at Park Ward village one , it's the second row tower .

Speaker #1: So it clearly shouldn't have the same margins as Victoria Place , which was a front row tower . And two , it has a slightly greater amount of retail than most of the towers that we've built in the past .

Speaker #1: That retail square footage . Obviously , we don't sell , so the cost to build it is still there . And the revenue associated with it is future NOI , not sale price per square foot .

Speaker #1: You know , if you compare , you know , another comparable tower , the second row tower , like Anaha , which we sold about $1,100 a foot at a 25% margin versus the park Ward village at 1500 a foot and a 17 to 19% margin .

David O'Reilly: Unlike MPCs, which generate episodic quarterly earnings tied to land sales, operating assets produce durable, recurring cash flow that provides stability to the enterprise, supporting both development and capital allocation flexibility. In Q4, we completed One Riva Row along The Woodlands Waterway. Leasing has begun ahead of expectations, and we anticipate this asset will contribute meaningfully to NOI growth as it stabilizes. Over time, we expect the operating asset portfolio and the NOI associated with it to represent an increasing share of the recurring cash flow of the company. Now on to strategic developments and specifically our condominium platform. You know, our condominium platform continues to serve as a powerful, internally generated capital engine. During 2025, we contracted $1.6 billion of future condo revenue, the strongest year in the company's history.

Speaker #1: That price per foot profitability is almost on top of each other and does not take into account the incremental NOI we'll generate from 10,000 additional feet of retail space.

Speaker #5: Okay And my second question , maybe for Bill is you talked about how to value Howard Hughes going forward . It sounds like from your commentary you plan to maintain ownership of the commercial real estate portfolio .

Speaker #5: But given this is a high-margin but probably a lower return on invested capital business, would you consider changing your strategy and monetizing the commercial portfolio?

Speaker #5: And maybe if you can comment on the 30 acres sold on your commercial portfolio, on commercial land in The Woodlands.

David O'Reilly: Multiple projects remain substantially presold, including the Park Ward Village at 97% and Kalae at 93%. While condominium earnings are tied to completion timing and, you know, can be lumpy, particularly within Hawaii, where Ward Village is home to our highest value developments, our approach has evolved to significantly de-risk execution. We require substantial presales prior to vertical construction, utilize approximately 60% non-recourse loan-to-cost financing. Buyer deposits in this financing make these projects largely self-financed, and our presales materially reduce refinancing risk. These developments are expected to generate significant cash flow upon closing, providing capital that can be redeployed across our communities and increasingly across platforms. We view this condo platform as not speculative development, but disciplined capital recycling. Finally, last week, we announced Toro District, an 83-acre sports and entertainment development in Bridgeland, anchored by the Houston Texans' new global headquarters and training facility.

Speaker #4: So we take a very long term view with respect to commercial real estate holdings in , our kind of core NPCs . You know , we think that , you know , one of the things that's made the kept occupancy high and rental growth growing during very challenging periods , you know , like Covid and other sort of economic downturns is the fact that we don't have the same kind of competitive dynamics that you would if you had multiple kind of owners , you know , of your assets over time .

Speaker #4: We've considered , you know , do we bring in a partner , sell a 49% interest in certain assets ? You know , that is , of course , you know , something we could always consider in the future .

Speaker #4: But we do think there's a lot of value in taking the long-term view in controlling our destiny, and really limiting the competition.

Speaker #4: That would be afforded by having someone , you know , be a major owner of commercial assets within within our communities . And then with respect to the 30 acres , I mean , David can speak to it , but we generally don't like selling commercial land ever .

Speaker #4: But there are times when there's , for example , a user or an anchor that we think is going to bring a lot of value to the surrounding property .

David O'Reilly: Toro District exemplifies the value embedded in our land positions and our ability to activate them through thoughtful public-private partnerships. This project enhances long-term recurring revenue potential, increases the value of the surrounding land, and reinforces the power of our master planned community model. Importantly, projects of this scale are strengthened, not constrained by our broader capital base as a holding company. Overall, 2025 demonstrated both the durability of our real estate engine and the strategically planned evolution of our company. With that, I'm going to hand it off to Carlos to talk about 2026 guidance and our financial results.

Speaker #4: And they're sort of mandate is they have to be an owner because they're planning to be there forever . And we we struggle with that , but we ultimately have have made a some sales .

Speaker #4: Those were not driven by , you know , return on capital decisions . They were driven by the fact that the user insisted , you know , going to move to the Chevron headquarters , for example , to to our part of town , you know , they want to own the asset outright as opposed to have a lease .

Speaker #4: But, David, anything further there?

Speaker #1: Yeah . The only thing I would add is the 30 acres that were sold this year , this quarter were really on the edges of the woodlands .

Speaker #1: It wasn't the commercial land that we owned in the city center . We consider that land incredibly valuable . Some of this out on the periphery that was sold to educational and healthcare users are adding to the community .

Ryan Israel: Thank you, David, and good morning, everyone.

Carlos Olea: Thank you, David, and good morning, everyone.2020, 2025 results exceed our guidance. As we look ahead to 2026, we think it's important to provide a framework that reflects normalization and transition. As we transition into a diversified holding company, our reporting framework will evolve accordingly, as you heard Bill say. However, because the Vantage acquisition has not yet closed, and because 2025, including an outsized bulk land sale in Summerlin, we believe it is appropriate to provide 2026 guidance to help normalize expectations. We expect Adjusted Operating Cash Flow in the range of $415 to 465 million. We believe this metric remains the most appropriate consolidated metric, as it captures the performance of our operating engines and aligns with how we evaluate capital generation.

Carlos Olea: ... 2020, 2025 results exceed our guidance. As we look ahead to 2026, we think it's important to provide a framework that reflects normalization and transition. As we transition into a diversified holding company, our reporting framework will evolve accordingly, as you heard Bill say. However, because the Vantage acquisition has not yet closed, and because 2025, including an outsized bulk land sale in Summerlin, we believe it is appropriate to provide 2026 guidance to help normalize expectations. We expect Adjusted Operating Cash Flow in the range of $415 to 465 million. We believe this metric remains the most appropriate consolidated metric, as it captures the performance of our operating engines and aligns with how we evaluate capital generation.

Speaker #1: But it was not what we would consider some of our highest value commercial land for future development . That will create outsized , risk adjusted returns and recurring NOI .

Speaker #5: Great . Thank you

Speaker #3: One moment for our next question. Our next question comes from Alexander Goldfarb with Piper Sandler. Your line is open.

Speaker #6: Hey . Morning . Morning down there Bill , just following up on Vantage . You know , had a had a chance to touch base with our insurance analyst and just going over the combined ratio is real estate .

Speaker #6: Guy learns about property and casualty, and the combined ratio at Vantage seems a bit higher than where the peer average would be. And I believe last time on the call you spoke about the profitability improvements.

Carlos Olea: For MPC, we expect EBT to be in the range of $343 to 391 million. Importantly, the expected year-over-year decline is almost entirely attributable to the absence of the Summerlin bulk sale. Excluding that transaction, our 2026 guidance is essentially flat relative to 2025 on a comparable basis. MPC earnings will remain inherently lumpy due to acreage timing and monetization decisions. Longer term, we view profitability as driven by pricing power and capital discipline rather than linear acreage volume. While remaining acreage declines over time, we expect price per acre to increase as communities mature, supply tightens, and underlying land value appreciates. We believe 2026 guidance reflects a sustainable run rate level of MPC earnings, absent large one-time transactions.

Speaker #6: So as we look to that platform and Vantages overall profitability , what's the sort of timeline that you would think we would see that ?

Speaker #6: Is that a year ? Is that five years ? Is that two years ? Like , how should we think about profitability , improvement , advantage once you guys consummate the deal

Speaker #4: Sure . So I would start with by saying that vantage is a brand new insurer and they're really in the process of getting to scale .

Speaker #4: You know , they built the infrastructure for a much larger company . And as they grow their insurance business , they can sort of amortize those costs over , you know , a bigger base of of revenues , you know , 2026 is really the first , you know , starting to be more meaningfully profitable year for the company .

Speaker #4: And I think you should continue to see the benefits of , you know , just the scale , you know , scale economies , if you will , or the operating leverage inherent to , to growth .

Carlos Olea: Our objective in the MPC business is not to maximize any single year's MPC EBT, but to optimize long-term per acre value and reinvest internally generated capital at attractive risk-adjusted returns. Moving on to operating assets. NOI is expected to range between $279 and 290 million, including our share of NOI from our JV assets. This is an implied increase of 1% to 5% compared to our 2025 results. Longer term, we target annual NOI growth in the 3% to 5% range, driven by same-store rent growth and development stabilization. While individual years may fluctuate depending on timing of lease up and development deliveries, we believe the underlying trajectory remains durable and predictable. Moving on to condominiums.

Speaker #4: I think on top of that , you know , beginning , you know , later this year , we're going to be making changes to the way the portfolio is being managed .

Speaker #4: And , you know , if we do a good job , as I expect , we will , I expect we will be able to earn higher returns on on assets , which will lead to an overall kind of more profitable insurer .

Speaker #4: But it's not vantage is sort of going according to their original business plan . I would say . And you know , the , you know , the , the the owners took a long term view .

Speaker #4: They made the necessary investments , infrastructure , people and otherwise to for this to be a , you know , very successful multi-line specialty insurer .

Speaker #4: And as they get to scale , they'll naturally become more profitable .

Carlos Olea: Condominiums under construction and in pre-development, which are substantially pre-sold, represent approximately $5 billion of remaining expected gross revenue over their life, resulting in an estimated $1.3 billion in profits at a 25% margin. We expect to recognize approximately 40% of this revenues between 2026 and 2027, with the remaining 60% recognized between 2028 and 2030. Our newest towers, Milia and Ilima, are expected to close in 2030 and represent 41% of these future revenues, with margins exceeding 25%. For 2026 specifically, we expect condominium gross revenue of approximately $720 to 750 million, with an estimated profit of $108 to 128 million, at margins of 15% to 17%. This is driven primarily by closings of the Park Ward Village.

Speaker #1: Yeah . And I would just add two quick things to that . First of all , when you put out some materials on this over sort of the fall and winter last year , but I would say , well-run insurance companies have put in some of the lines that vantage participates in often have combined ratios that are in the low 90s .

Speaker #1: And the way we like to look at is you can disaggregate the combined ratio into two key components . One would be your loss ratio , which is just literally what is the profitability or the losses that you have on the insurance itself .

Speaker #1: And then one is your G&A ratio. And typically, an insurer that would be operating at sort of this lower 90s combined ratio would have a loss ratio on the insurance.

Speaker #1: It's something in the low 60s. And then they would typically have an SG&A ratio around 30%, maybe plus or minus a few points.

Speaker #1: And the way we think about it is vantage is very well on the path historically , already to having a loss ratio that's consistent with what you would want to see for a well-run insurer .

Carlos Olea: These margins were impacted by infrastructure work, primarily related to electrical work needed to support future development. However, this cost will benefit our future towers, and we expect to see cash margins in the mid-twenties, except, as I mentioned, for Milia and Ilima, which we expect to be in the high twenties when they close in 2030. This backlog provides meaningful visibility into near-term cash generation, which we expect to redeploy across our portfolio and increasingly across platforms. Turning to SG&A. For 2026, we expect cash SG&A to range between $82 million and $92 million, with a midpoint of approximately $87 million. This includes assumed inflation growth compared to last year, as well as a shift in the mix of compensation from non-cash to cash.

Speaker #1: It's really that the SG&A has been high because they had made a lot of investments to get the platform up to scale before the business had actually achieved the scale .

Speaker #1: So they were building ahead for the future . They have really grown the business now to a level at which we believe that they are going to be benefiting from all of the investments that they have made previously , and therefore , going forward , we think they're really going to be able to get that SG&A ratio down to something that we think would be more fitting for a company of its size and scale going forward .

Speaker #1: And that's one of the things we're excited by . So we like the fact that they have a good history of having what we think is a very strong loss ratio , given their lines of business , and that where we think the G&A ratio will have some embedded operating leverage , if you will , because they've really built this business going forward .

Speaker #1: So, I would say we feel very good about the path from here to getting Vantage in line with where we think a lot of well-run insurers will be, just naturally, based upon the business plan that the company has implemented and already achieved.

Carlos Olea: Please note that this range includes the $15 million in annual base fees paid to Pershing Square, but excludes the variable fees, which are based on quarter-end stock prices that could be volatile and difficult to predict. Looking forward, we view approximately $87 million as an appropriate operating baseline for the current scale of the organization. We would expect that baseline to grow modestly over time, generally in line with inflation and incremental scale, excluding stock-based compensation. Now, let me spend a moment on refinancing and capital structure. We recently refinanced and upsized our 2028 $750 million senior notes, with $1 billion of new notes due in 2032 and 2034. This refinancing occurred following the announcement of the Vantage acquisition and provides an important external validation of our capital structure and strategy.

Speaker #1: The second thing I would point out , though , is vantage actually is currently profitable , both in terms of the combined ratio that they're achieving today and what we think they will going forward .

Speaker #1: And then as Bill mentioned , you know , we think we'll further benefit sort of the growth in net income or book value based upon shifting the portfolio to what we think will be a higher return strategy going forward , as well .

Speaker #6: Okay . Thank you . Ryan . And then second question is housing affordability is clearly a big topic today . There's the whole SFR .

Speaker #6: Well , I don't want to say debate , but you know , executive order out there . But there's also a build to rent , you know , seems to be something that is looked favorably on .

Speaker #6: You guys have created a lot of value in terms of , you know , what people see in terms of living at your NPCs .

Carlos Olea: Both tranches achieved the tightest credit spreads in the company's history. 191 basis points for the 6.25-year tranche, and 198 basis points for the 8-year tranche, significantly tighter than the prior best spread of 295 basis points achieved in 2017. Both tranches traded at or slightly above par following issuance, and continued to trade around par with active secondary participation, reflecting balanced execution and constructive market reception. We also received a modest upgrade from S&P, reinforcing third-party recognition of our balance sheet strength, even as we expand the company's platform. With respect to the Vantage acquisition specifically, we approached the financing conservatively. We modeled cash flows under a range of downside scenarios to ensure that the transaction would not impair our ability to finance or the flexibility of our real estate operations.

Speaker #6: But is there more opportunity that you guys can do on the affordability front with build to Rent or other initiatives to sort of broaden out the number of people who can buy homes ?

Speaker #6: Or your view is, hey, when you look at the mix that your NPCs provide, you sort of are hitting all the different price points and all the different income levels.

Speaker #6: That would be appropriate for residential within your submarkets.

Speaker #7: A great question , Alex . Thanks . I would tell you that we focus intently across all of our NPCs because , as you know , when we sell land to homebuilders , we're dictating the size of the homes , the setback of the homes , the design of the homes and the implication is really the price of the homes .

Speaker #7: So, as we're selling dirt to homebuilders, we're trying to hit the broadest range of home prices out there so that we can attract the widest swath of buyers with the most diverse backgrounds and incomes.

Carlos Olea: The additional Berkshire preferred investment of up to $1 billion carries a 0% coupon and represents permanent capital with no fixed cash costs, and provides HHH the optionality to redeem when liquidity and capital allocation priorities make it appropriate. It adds meaningful equity support to the balance sheet without increasing fixed cash obligations. We believe this structure enhances flexibility and positions the company to grow while maintaining prudent leverage parameters. Speaking of leverage, let's spend a moment on our leverage philosophy. We do not manage the business to a fixed net debt to EBITDA target. Given the lumpiness of real estate earnings, that metric can be misleading. Instead, we finance, we finance each segment based on asset characteristics, while maintaining meaningful liquidity to complete projects and withstand severe downturn scenarios.

Speaker #7: Single family for rent has been a modest part of our portfolio. We've done one small community in Bridgeland, and it was really to fit a need that we saw within that community. And I think that our traditional, kind of more dense multifamily product hits part of that need as well.

Speaker #7: And as you know , we're always developing to meet the deepest pockets of demand within our communities . So I would tell you that we work hard to try to address the affordability , to try to hit price points at all , all places within the spectrum , to attract buyers and , you know , I think SFR is a strategy .

Speaker #7: I think it's a very small one for us , as there's a lot of existing inventory in communities like Summerlin , like Bridgeland , like The Woodlands where there is kind of that non institutionally owned .

Speaker #7: But shadow market of homes for rent.

Speaker #6: Thank you .

Speaker #3: One moment for our next question. Our next question comes from Eli, who's an individual investor. Your line is open.

Carlos Olea: Operating assets typically carry 60 to 65% loan-to-value property level debt, balanced with a meaningful pool of unencumbered assets. MPC land remains unencumbered, except for short-term reimbursable infrastructure facilities. Condominium projects utilize approximately 60% non-recourse loan-to-cost financing and are substantially presold, significantly reducing maturity risk. We believe that our pro forma leverage following Vantage will be supportive of incremental earnings capacity, enhanced diversification, and asset backing. As operating assets grow and recurring NOI increases, leverage may rise modestly in parallel with asset value and cash flow, not through incremental development risk. Across all segments, our objective remains a conservative, flexible balance sheet supporting long-term value creation. We are now ready to take questions. Operator, please open the line.

Speaker #8: Thank you for taking my question. As the company moves towards a diversified holding company model, how are you thinking about priorities for extra cash acquisitions?

Speaker #8: Paying down debt or buying back shares? Thank you.

Speaker #4: Sure . So we think our first priority for excess cash that's generated I define excess cash as cash not needed to be reinvested in our , you know , communities at Howard Hughes .

Speaker #4: And we expect, over the next several years, to generate a fair amount of excess cash, and that number to grow materially over time.

Speaker #4: But the first priority is , you know , when we close the vantage transaction , Howard Hughes will own a majority . Economically of the company , will own 100% of it legally .

Speaker #4: But as Pershing Square is providing a substantial portion of basically bridge equity to enable the transaction, I think the first priority should be for Howard Hughes to own 100% of the insurer.

Operator: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered, you wish to remove yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A roster.

Speaker #4: So depending upon that , how much of the preferred is outstanding ? As much as $1 billion . That will be the first use of excess cash once the insurer is 100% owned by Howard Hughes , then incremental excess cash would be used principally to make other operating investments .

Bill Ackman: To be clear, we will take questions both from analysts and from individual investors. It's an open Q&A.

Speaker #4: Investments in other operating companies. You know, potentially we could put more capital into the insurer, but we could also invest in other businesses.

Operator: Our first question comes from John Kim with BMO Capital Markets. Your line is open.

[Analyst] (BMO Capital Markets): Thank you. I wanted to ask on the, the condo margins at Park Ward Village, related to infrastructure work. Was that unexpected, those costs? And maybe if you could talk about cost pressures overall on development. I think you mentioned mid-twenties margins on the remaining towers versus, I think that's a little bit lower than what you achieved at Victoria Place.

John Kim: Thank you. I wanted to ask on the, the condo margins at Park Ward Village, related to infrastructure work. Was that unexpected, those costs? And maybe if you could talk about cost pressures overall on development. I think you mentioned mid-twenties margins on the remaining towers versus, I think that's a little bit lower than what you achieved at Victoria Place.

Speaker #3: And I'm not showing any further questions at this time. I'd like to turn the call back over to Bill Ackman for any further remarks.

Speaker #4: Sure . So look , I you know , our original thesis on helping transform Howard Hughes into a diversified holding company was based on the fact that while management has done an excellent job with the company , we've really built a focused , very successful MPC condominium business in the company It's not gotten the recognition we argue it's deserved .

David O'Reilly: Thanks, John. I appreciate the question, and it's one that we're focused on closely, obviously. The infrastructure costs that are going into Ward Village, including the upgrade of water, sewer, and electric that Carlos mentioned in his prepared remarks, were all anticipated. Given the location of Park Ward Village and the size of Park Ward Village, it has a slightly disproportionate share allocated to it, but that will benefit future towers as they'll have a smaller amount allocated to it. And this is one of those rare towers where the gap margin that Carlos provide guidance on and the cash margin are slightly disconnected as a result. A couple of other things are impacting the margin at Park Ward Village. One, it's a second-row tower, so it clearly shouldn't have the same margins as Victoria Place, which was a front-row tower.

Speaker #4: As a public company and a big part of that , in our view , was that the market assigns , you know , sort of too high a cost of capital to kind of the core , you know , real estate development and land ownership business .

Speaker #4: So I'm pleased in some sense that in a relatively short period of time , about 7 or 8 months , you know , I think there's pretty good evidence that our cost of capital is coming down .

Speaker #4: You know , a 120 basis point tighter execution on a bond issue , you know , is a very good . That's a massive you know , it's about a 40% reduction in our cost of debt capital on a spread basis .

David O'Reilly: And two, it has a slightly greater amount of retail than most of the towers that we've built in the past. That retail square footage, obviously, we don't sell, so the cost to build it is still there, and the revenue associated with it is future NOI, not sale price per square foot. You know, if you compare, you know, another comparable tower, a second row tower like Anaha, which we sold about $1,100 a foot at a 25% margin, versus the Park Ward Village at $1,500 a foot and a 17% to 19% margin, that price per foot profitability is almost on top of each other and does not take into account the incremental NOI we will generate from 10,000 additional feet of retail space.

Speaker #4: And our stock price is up about 20% or so, you know, from the time that the transaction was announced. I still think the stock is super cheap.

Speaker #4: You know, we'll have to—we've got more progress to make. I think we need to do a better job of helping investors understand the business.

Speaker #4: I there continues to be , you know , a some turnover in the shareholder base from , I would say more traditional pure play real estate investors to investors that are open to investing in a diversified holding company .

Speaker #4: And yes , while we've entered into a transaction to acquire vantage , we haven't closed . You know , that's that's kind of upcoming .

Speaker #4: But I'm very pleased with the progress we've made over the past seven or eight months. And the company itself, the real estate operation, is really running on all cylinders.

Speaker #4: And , you know , we are you know , we're in a world where I would say , unfortunately , some of the more blue states , particularly one that city I'm living in today is operating in a way to actually encourage people to move to places like Texas and and Arizona and Las Vegas and Hawaii and I guess I'm hedged because I live in New York .

[Analyst] (BMO Capital Markets): Okay, my second question, maybe for Bill, is you talked about how to value Howard Hughes going forward. It sounds like from your commentary, you plan to maintain ownership of the commercial real estate portfolio. But given this is a high margin, but probably a lower return on invested capital business, would you consider changing, changing your strategy and monetizing the commercial portfolio? And maybe if you can comment on the 30 acres sold on your commercial portfolio, on commercial land in The Woodlands.

John Kim: Okay, my second question, maybe for Bill, is you talked about how to value Howard Hughes going forward. It sounds like from your commentary, you plan to maintain ownership of the commercial real estate portfolio. But given this is a high margin, but probably a lower return on invested capital business, would you consider changing, changing your strategy and monetizing the commercial portfolio? And maybe if you can comment on the 30 acres sold on your commercial portfolio, on commercial land in The Woodlands.

Speaker #4: But we benefit as people leave the city and move to communities like the ones that are managed by Howard Hughes.

Speaker #4: But appreciate your participation on the call and look forward to getting back to you in a few months. Thanks so much.

Bill Ackman: So we take a very long-term view with respect to, commercial real estate, holdings, in, you know, our kind of core MPCs. We think that, you know, one of the things that's made the-- kept, you know, occupancy high and, and rental growth growing during very challenging periods, you know, like COVID and, and other sort of economic downturns, is the fact that we don't have the same, kind of competitive dynamics that you would if you had multiple kind of owners, you know, of your assets. Over time, we've considered, you know, do we bring in a partner, sell a 49% interest in certain assets? You know, that is, of course, you know, something we could always consider in the future, but we do think there's a lot of value...

Bill Ackman: So we take a very long-term view with respect to, commercial real estate, holdings, in, you know, our kind of core MPCs. We think that, you know, one of the things that's made the, kept, you know, occupancy high and, and rental growth growing during very challenging periods, you know, like COVID and, and other sort of economic downturns, is the fact that we don't have the same, kind of competitive dynamics that you would if you had multiple kind of owners, you know, of your assets. Over time, we've considered, you know, do we bring in a partner, sell a 49% interest in certain assets? You know, that is, of course, you know, something we could always consider in the future, but we do think there's a lot of value.

Bill Ackman: Taking the long-term view in controlling our destiny, and really limiting the competition that would be afforded by having someone, you know, be a major owner of commercial assets within our communities. And then with respect to the 30 acres, David can speak to it, but we generally don't like selling commercial land ever. But there are times when there's, for example, a user or an anchor that we think is going to bring a lot of value to the surrounding property, and their sort of mandate is they have to be owner because they're planning to be there forever. And we struggle with that, but we ultimately have made some sales. Those were not driven by, you know, return on capital decisions.

Bill Ackman: They were driven by the fact that the user insisted, you know, if they're going to move the Chevron headquarters, for example, to our part of town, you know, they want to own the asset outright as opposed to have a lease. But David, anything further there?

Ryan Israel: Yeah, the only thing I would add is the 30 acres that were sold this year, this quarter, were really on the edges of The Woodlands. It wasn't the commercial land that we own in the city center. We, we consider that land incredibly valuable. Some of this out on the periphery that was sold to educational and healthcare users, you know, are adding to the community, but it was not what we would consider some of our highest value commercial land for future development, that will create outsized risk-adjusted returns and recurring NOI.

David O'Reilly: Yeah, the only thing I would add is the 30 acres that were sold this year, this quarter, were really on the edges of The Woodlands. It wasn't the commercial land that we own in the city center. We, we consider that land incredibly valuable. Some of this out on the periphery that was sold to educational and healthcare users, you know, are adding to the community, but it was not what we would consider some of our highest value commercial land for future development, that will create outsized risk-adjusted returns and recurring NOI.

Operator: Great. Thank you. One moment for our next question. Our next question comes from Alexander Goldfarb with Piper Sandler. Your line is open.

John Kim: Great. Thank you.

Operator: One moment for our next question. Our next question comes from Alexander Goldfarb with Piper Sandler. Your line is open.

[Analyst] (Piper Sandler): Hey, morning, morning down there. Bill, just following up on Vantage, you know, had a chance to touch base with our insurance analyst and just going over the combined ratio as, you know, real estate guy learns about property and casualty. And the combined ratio at Vantage seems a bit higher than where the peer average would be. And I believe last time on the call, you spoke about, you know, the profitability improvements. So as we look to that platform and Vantage's overall profitability, what's the sort of timeline that you would think we would see that? Is that a year, or is that five years, is that two years? Like, how should we think about profitability improvement at Vantage, once you guys consummate the deal?

Alexander Goldfarb: Hey, morning, morning down there. Bill, just following up on Vantage, you know, had a chance to touch base with our insurance analyst and just going over the combined ratio as, you know, real estate guy learns about property and casualty. And the combined ratio at Vantage seems a bit higher than where the peer average would be. And I believe last time on the call, you spoke about, you know, the profitability improvements. So as we look to that platform and Vantage's overall profitability, what's the sort of timeline that you would think we would see that? Is that a year, or is that five years, is that two years? Like, how should we think about profitability improvement at Vantage, once you guys consummate the deal?

Bill Ackman: Sure. So I would start with by saying that, you know, Vantage is a brand-new insurer, and they're really in the process of getting to scale. You know, they built the infrastructure for a much larger company, and as they grow their insurance business, they can sort of amortize those costs over, you know, a bigger base of revenues. You know, 2026 is really the first, you know, starting to be more meaningfully profitable year for the company. And I think you should continue to see the benefits of, you know, just the scale, you know, scale economies, if you will, or the operating leverage inherent to growth. I think on top of that, you know, beginning later this year, we're going to be making changes to the way the portfolio is being managed.

Bill Ackman: And, you know, if we do a good job, as I expect we will, I expect we will be able to earn, you know, higher returns on assets, which will lead to an overall kind of more profitable insurer. But it's not Vantage is sort of going according to their original business plan, I would say. And, you know, the plan you know, the owners took a long-term view. They made the necessary investments, infrastructure, people, and otherwise, to, for this to be a, you know, very successful multi-line specialty insurer. And as they get to scale, they'll naturally become more profitable.

Ryan Israel: Yeah, and I would just add two quick things to that. First of all, we put out some materials on this, over sort of the fall and winter last year, but I would say well-run insurance companies in some of the lines that Vantage participates in, often have Combined Ratios that are in the low nineties. And the way we like to look at it is you can disaggregate the Combined Ratio into two key components. One would be your Loss Ratio, which is just literally what is the profitability or the losses that you have on the insurance itself, and then one is your SG&A ratio. And typically, an insurer that would be operating at sort of this lower nineties Combined Ratio, would have a Loss Ratio on the insurance at something in the low sixties.

Ryan Israel: Then they would typically have an SG&A ratio around 30%, maybe plus or minus a few points. The way we think about it is, Vantage is very well on the path, historically already, to having a loss ratio that's consistent with what you would want to see for a well-run insurer. It's really that the SG&A has been high because they had made a lot of investments to get the platform up to scale before the business had actually achieved the scale. So they were building ahead for the future.

Ryan Israel: They have really grown the business now to a level at which we believe that they are going to be benefiting from all of the investments that they have made previously, and therefore, going forward, we think they're really going to be able to get that SG&A ratio down to something that we think would be more fitting for a company of its size and scale going forward. That's one of the things we're excited by. We like the fact that they have a good history of having what we think is a very strong loss ratio, given their lines of business, and that where we think the SG&A ratio will have some embedded operating leverage, if you will, because they've really built this business going forward.

Ryan Israel: So I would say we feel very good about the path from here to getting Vantage in line with where we think a lot of well-run insurers will be, just naturally based upon the business plan that the company has implemented and already achieved. The second thing I would point out, though, is Vantage actually is currently profitable, both in terms of the combined ratio that they're achieving today, and you know, what we think they will going forward. And then, as Bill mentioned, you know, we think we'll further benefit sort of the growth in net income or book value based upon shifting the portfolio to what we think will be a higher return strategy going forward as well.

[Analyst] (Piper Sandler): ... Okay. Thank, thank you, Ryan. And then second question is, you know, housing affordability is clearly a big topic today. There's the whole, you know, SFR, well, I don't want to say debate, but, you know, executive order out there. But there's also a build to rent, you know, seems to be something that is looked favorably on. You guys have created a lot of value in terms of, you know, what people see in terms of living at your MPCs. But is there more opportunity that you guys can do on the affordability front with build to rent or other initiatives to sort of, you know, broaden out the number of people, you know, who can buy homes?

Alexander Goldfarb: Okay. Thank, thank you, Ryan. And then second question is, you know, housing affordability is clearly a big topic today. There's the whole, you know, SFR, well, I don't want to say debate, but, you know, executive order out there. But there's also a build to rent, you know, seems to be something that is looked favorably on. You guys have created a lot of value in terms of, you know, what people see in terms of living at your MPCs. But is there more opportunity that you guys can do on the affordability front with build to rent or other initiatives to sort of, you know, broaden out the number of people, you know, who can buy homes?

[Analyst] (Piper Sandler): Or your view is, hey, when you look at the mix that your MPCs provide, you sort of are hitting all the different price points and all the different income levels that would be appropriate for, you know, residential within your submarkets?

Alexander Goldfarb: Or your view is, hey, when you look at the mix that your MPCs provide, you sort of are hitting all the different price points and all the different income levels that would be appropriate for, you know, residential within your submarkets?

David O'Reilly: A great question, Alex. Thanks. I would tell you that we focus intently across all of our MPCs, because as you know, when we sell land to home builders, we're dictating the size of the homes, the setback of the homes, the design of the homes, and the implication is really the price of the homes. So as we're selling dirt to home builders, we're trying to hit the broadest range of home prices out there so that we can attract the widest swath of buyers with the most diverse backgrounds and incomes. Single family for rent has been a modest part of our portfolio. We've done one small community in Bridgeland, and it was really to fit a need that we saw within that community.

David O'Reilly: I think that our traditional, kind of, more dense multifamily product, hits part of that need as well. As you know, we're always developing to meet the deepest pockets of demand within our communities. So I would tell you that we work hard to try to address the affordability, to try to hit price points at all places within the spectrum to attract buyers. And, you know, I think SFR is a strategy. I think it's a very small one for us, as there's a lot of existing inventory in communities like Summerlin, like Bridgeland, like The Woodlands, where there is kind of that non-institutionally owned, but shadow market of homes for rent.

[Analyst] (Piper Sandler): Thank you.

Alexander Goldfarb: Thank you.

Operator: One moment for our next question. Our next question comes from Eli Dashef, who's an individual investor. Your line is open.

[Shareholder]: Thanks for taking my question. As the company moves towards a diversified holding company model, how are you thinking about priorities for extra cash, acquisitions, paying down debt, or buying back shares? Thank you.

[Shareholder] (Private Investor): Thanks for taking my question. As the company moves towards a diversified holding company model, how are you thinking about priorities for extra cash, acquisitions, paying down debt, or buying back shares? Thank you.

Bill Ackman: Sure. So we think, our first priority for excess cash that's generated, and I define excess cash as cash not needed to be reinvested in our, you know, communities at, at Howard Hughes. And we expect, you know, over the next several years to generate a fair amount of excess cash and that number to grow materially over time. But the first priority is, you know, when we close the Vantage transaction, Howard Hughes will own a majority, economically, of the company. We'll own 100% of it legally, but as Pershing Square is providing a substantial portion of basically bridge equity to enable the transaction, I think the first priority should be, for Howard Hughes to own 100% of the insurer.

Bill Ackman: So, depending upon that, how much of the preferred is outstanding, as much as $1 billion, that will be the first use of excess cash. Once the insurer is 100% owned by Howard Hughes, then incremental excess cash would be used principally to make other operating investments in other operating companies. You know, potentially, we could put more capital into the insurer, but we could also invest in other businesses.

Operator: I'm not showing any further questions at this time. I'd like to turn the call back over to Bill Ackman for any further remarks.

Bill Ackman: Sure. So look, I you know, our original thesis on helping transform Howard Hughes into a diversified holding company was based on the fact that, while management has done an excellent job with the company, we've really built a focused, very successful MPC condominium development business in the company. It's not gotten the recognition we argue it's deserved as a public company. And a big part of that, in our view, was that the market assigns, you know, sort of too high a cost of capital to kind of the core, you know, real estate development and land ownership business. So I'm pleased in some sense that in relatively short period of time, about seven or eight months, you know, I think there's pretty good evidence that our cost of capital is coming down.

Bill Ackman: You know, 120 basis point tighter execution on a bond issue, you know, is a very good, that's a massive. You know, it's about a 40% reduction in our cost of debt capital on a spread basis. And our stock price is up about 20% or so, you know, from the time that the transaction was announced. Still think the stock is super cheap. You know, we'll have to, we've got more progress to make. I think we need to do a better job, you know, helping investors understand the business. I think there continues to be, you know, some turnover in the shareholder base from, I would say, more traditional, pure play real estate investors to investors that are open to investing in a diversified holding company.

Bill Ackman: Yes, while we've entered into a transaction to acquire Vantage, we haven't closed. You know, that's kind of upcoming. But I'm very pleased with the progress we've made over the past 7, 8 months. And the company itself, the real estate operation is really running on all cylinders. You know, we're in a world where I would say, unfortunately, some of the more blue states, and particularly one, that city I'm living in today, is operating in a way to actually encourage people to move to places like Texas and... and Arizona and Las Vegas and the, and Hawaii.

Bill Ackman: I guess I'm hedged because I live in New York, but we benefit as people leave the city and move to communities like the ones that are managed by Howard Hughes. Appreciate your participation on the call, and look forward to being back to you in a few months. Thanks so much.

Operator: Thank you, ladies and gentlemen. This concludes today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.

Q4 2025 Howard Hughes Holdings Inc Earnings Call

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