The Howard Hughes Society (NYSE: HHC) is one of the more interesting real estate companies in the stock market, and it’s a company that most investors are unfamiliar with. In a recent episode of “The Rank,” Fool.com contributor Matt Frankel had the chance to sit down with Howard Hughes CEO David O’Reilly, who was happy to share a brief overview of this. that the company does.
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Matt Frankel: For those who don’t know what Howard Hughes does, you have come to a unique place in real estate. You are not quite a REIT, you are not quite a real estate developer, can you give a quick overview of what you do?
David O’Reilly: Absolutely, and it is very unique and certainly unique in public procurement. But what we are is, we really are a large-scale planner. We have communities across the country where we are a dominant landowner.
These communities are the Woodlands and Bridgeland in Houston, which represent 28,000 and 11,000 acres. The Woodlands are about one and a half times the size of Manhattan Island. Downtown Colombia in Maryland, 22,000 acres known as Summerlin, just west of the Las Vegas Strip, Ward Village in Honolulu and New York Harbor. Basically what we do at the end of the day is play SimCity.
Within these blueprint communities, we decide where the mixed urban environments of tomorrow are to be built. We develop where there is housing, public infrastructure, fire stations, police, as well as offices, retail stores, hospitals, truly creating a place where people and businesses want to live, work and be. to entertain. This truly generates unique financial synergies for us, as the proceeds from the sale of residential land, home builders and recurring revenue from our rent collections are fully self-financing on over $ 1 billion in development. per year.
This development that we try to generate disproportionate risk-adjusted returns, it just further improves our communities, making them more attractive to live in. Since we established a public company 11 years ago, we have built this operating portfolio by developing commercial acres, in addition to 8 million square feet of office space, 3 million square feet of retail and more of 5,300 apartment units. We have a huge pipeline with 50 million square feet of rights that will allow us to grow not only for years, but for decades to come.
Frankel: What is most attractive about this type of business model? In other words, why not just develop office buildings, if that’s where you see an opportunity?
O’Reilly: Absoutely. I think what really sets us apart, what makes us unique and gives us competitive advantages, is the unique influence we have on such large tracts of land. If we only built an office building, we would make a large office building, but we wouldn’t have the impact or care for the environment.
At Howard Hughes, we take a look at the big picture. We develop the office, stores, hotels, we focus on parks and trails between the interstitial spaces that support large communities. Our business is really shaped around what we think is a virtuous circle of value creation, where we take land, sell it to home builders. We build houses, residents move in, these residents demand commercial amenities. We are building these commercial amenities, which in turn make residents’ homes more valuable, our remaining land more valuable, and keep rolling on and on.
I think one of the most rewarding aspects of working at Howard Hughes is when a Howard Hughes employee comes to work every day, we define our success by improving the lives of our residents, consumers and tenants. If we give them better schools, better trails, better access to nature, better places to work, better places to shop, that creates value for us, and that’s an incredibly rewarding aspect of our company and something that we are very proud of every day. .
Matthew Frankel, CFP owns shares of The Howard Hughes Corporation. The Motley Fool owns stock and recommends The Howard Hughes Corporation. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.