Bill Ackman could be making a big real estate move

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Following failed plans for an IPO for a new investment fund, billionaire investor and Pershing Square CEO Bill Ackman has signaled his next move, involving a company he’s already very familiar with.

Ackman has filed documents with the Securities and Exchange Commission that show he may be interested in taking Howard Hughes Corporation (NYSE:HHH) private. The documents indicate that Ackman hired Jeffries LLC as an adviser on the potential deal. Pershing Square already owns a 37.5% stake, making it the largest shareholder.

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Howard Hughes Holdings Inc. manages and develops master-planned communities, including large developments such as The Woodlands in Houston, Texas; Summerlin in Las Vegas; and Ward Village in Honolulu. The original ownership of land in the Las Vegas area dates back to the 1950s, when Howard Hughes himself bought 30,000 acres in southern Nevada. Some of that land later became part of the Summerlin community. Howard Hughes makes its money using land sales, condominiums and net operating income to fuel future development.

In the second quarter, the company reported net income per diluted share of $0.42, compared with a loss of $3.39 a year ago. This was driven by a resurgence in its real estate sales. It saw a 315% year-on-year increase in residential land sales. The company doesn’t pay a dividend, and the stock is down more than 45% over the past five years.

While Ackman is known for being a bit of an activist investor, that’s not the case with Howard Hughes. He has held shares since joining General Growth Properties in 2008. He has steadily grown his stake over time. Ackman has been the company’s chairman since it was founded as Howard Hughes Holdings in 2010. He stepped down from the board in April and was replaced by longtime board member Scott Sellers. Ben Hakim, president of Pershing Square Capital Management, joined the board at that time.

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In early August, Howard Hughes Holdings completed the spin-off of Seaport Entertainment Group as an independent company. Seaport Entertainment Group owns some of the assets previously associated with Howard Hughes Holdings, with a focus on entertainment and hospitality. Its assets include the Seaport NYC complex in New York City, the Las Vegas Ballpark and the Aviators minor league baseball team; part of the Fashion Show Mall on the Las Vegas Strip, plus most of the air rights above it. Seaport also owns Jean-Georges Management, a company built around the restaurants of celebrity chef Jean-Georges Vongerichten. The spin-off means Howard Hughes Holdings is now a master-planned community company.

Howard Hughes Holdings responded to Ackman’s move with a press release saying it has formed a committee of independent directors to evaluate any proposals that may come, but is not issuing any further statements at this time. Shares rose after Ackman’s interest was announced, although no terms were announced and the situation is highly speculative at this point. Many announcements like this don’t lead to a takeover, but given Ackman’s track record in the company and significant stake, this is a move worth paying attention to.

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