Inside Bill Ackman’s Deal to Increase Stake at Howard Hughes

Three days after reaching a $900 million deal to increase his stake in Howard Hughes, investor Bill Ackman took to his favorite social media platform to field questions from fans, investors and curious X users about what’s next for the master-planned community developer.

Ackman’s Pershing Square weighed taking the company private, initially offering $85 per share in January. Investors landed on a deal where Pershing Square will acquire 9 million newly issued shares for $100 apiece, increasing its stake to 47 percent and keeping the company public.

Ackman will become executive chair of Howard Hughes’ board, Pershing Square chief investment officer Ryan Israel will take on the same role at Howard Hughes, and Howard Hughes CEO David O’Reilly will stay on.

Ackman’s inspiration is Warren Buffet’s transformation of Berkshire Hathaway. He’ll turn Howard Hughes, the company behind communities like the Woodlands in Houston and Summerlin in Las Vegas, into a diversified holding company, including buying or building an insurance company.

He hosted a Q&A on X Thursday. Here’s what Ackman’s peek behind the curtain revealed.

Why not 51 percent?

Coming to a deal that the board would sign off on required a “delicate balance,” Ackman said.

The deal provides Pershing Square a “sufficient amount of influence” while ensuring that “the principles by which this company is run will continue, effectively, forever.”

Looking for permanence

When it comes to companies Ackman intends to buy through Howard Hughes, he’s not targeting specific industries, but rather companies with certain economic conditions that he can own permanently. That includes companies with long runways for growth and that are “protected by events outside of our control,” he said, like tariffs and pandemics.

For example, “insurance is timeless,” Israel said.

“We like businesses which effectively could be considered a royalty on an asset where a third party puts up the capital.”

Data centers won’t start popping up in The Woodlands

Commercial development is key to the success of Howard Hughes’ master-planned communities, but that likely won’t involve Texas’ hottest asset class, data centers. That’s because a lot of land is required to build a data center, and they don’t produce very many jobs, CEO David O’Reilly said.

Don’t expect Ackman to shut up on X

Ackman was asked whether he’ll start playing it safe on social media now that he’s executive chairman of Howard Hughes. The answer is no.

He’s vocal about politics on X, where he shares his support for the State of Israel and crusades against wokeness in higher education.

The self-described “big free speech advocate” doesn’t think opining on X will harm Howard Hughes. In fact, he said he thinks his outspokenness will help put the company on the map.

The deal comes in the form of a 10-year contract

The contract can be cancelled at the end of 10 years, but it would require a unanimous vote of the independent directors and approval by 70 percent of non-Pershing Square shareholders.

The ultimate goal

With this transaction, Ackman’s goal is to make Howard Hughes an investment grade company. S&P Global downgraded the company’s credit rating from B+ to B in 2023, citing its weak performance and debt. By diversifying the company’s exposure to the risks inherent to real estate, Ackman aims to shrink the margin between the company’s market value and intrinsic value.