Howard Hughes (HHH) Q4 2025 Earnings Transcript

DATE

Friday, Feb. 20, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Executive Chairman — William Albert Ackman
• Chief Executive Officer — David R. O’Reilly
• Chief Financial Officer — Carlos A. Olea
• Director — Ryan Michael Israel

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TAKEAWAYS

• MPC EBT -- $476,000,000, a record driven by 621 residential acres sold at an average price of $890,000 per acre.
• Finished Residential Land Pricing -- Achieved a record $1,700,000 per acre excluding the Summerlin bulk sale, highlighting pricing power in entitled and developed products.
• Operating Asset NOI -- $276,000,000 for the year, up 8% year over year, led by same-store office NOI growth of 11% and multifamily NOI growth of 6%.
• 2026 Guidance: Adjusted Operating Cash Flow -- Expected in the range of $415,000,000 to $465,000,000, reflecting a normalized run rate after outsized land sales in 2025.
• 2026 Guidance: MPC EBT -- Projected between $343,000,000 and $391,000,000, noting the year-over-year decline stems primarily from the absence of the 2025 Summerlin bulk sale.
• 2026 Guidance: Operating Asset NOI -- Estimated between $279,000,000 and $290,000,000, indicating expected growth of 1%-5% versus the prior year.
• Condominium Platform Performance -- $1,600,000,000 of future contracted revenue for 2025, the highest in company history, with The Park Ward Village 97% presold and Kō’ula at 93% presold.
• Condominium Backlog -- Approximately $5,000,000,000 of expected future gross revenue and $1,300,000,000 in estimated profits at a 25% margin, with 40% of revenue expected to be recognized in 2026-2027 and 60% from 2028-2030.
• 2026 Condo Revenue & Margin Guidance -- Projected $700,000,000-$750,000,000 in gross revenue and $108,000,000-$128,000,000 in profit at 15%-17% margins, primarily from The Park Ward Village, with temporary lower margins due to infrastructure costs.
• 2026 Cash G&A Guidance -- Expected between $82,000,000 and $92,000,000, including $15,000,000 base fees to Pershing Square but excluding variable fees linked to quarterly share price.
• Teravalis Project Launch -- Inaugurated in Phoenix’s West Valley, covering 37,000 acres and positioned as a significant long-term growth asset, early in its monetization phase.
• Toro District Development -- Announced as an 83-acre sports and entertainment district in Bridgeland anchored by the Houston Texans’ new headquarters, intended to drive recurring revenue and surrounding land value.
• Vantage Holdings Acquisition -- Targeted closing by the upcoming quarter; will add a $2,100,000,000 insurance asset and diversify earnings streams away from solely real estate.
• Debt Refinancing -- Issued $1,000,000,000 in new senior notes due in 2030 and 2034, with record-low credit spreads of 191 and 198 basis points, supported by an S&P upgrade.
• Preferred Equity Structure for Vantage Financing -- Up to $1,000,000,000 in Pershing Square preferred, with a 0% coupon and no fixed cash cost, enhancing capital flexibility.

SUMMARY

The call outlined the transition of Howard Hughes Holdings Inc. (NYSE:HHH) from a pure real estate platform to a diversified holding company, supported by record operating results across its land, operating asset, and condominium segments. Management emphasized that value assessment will shift from a single earnings metric toward intrinsic and book value growth as diversification progresses, particularly after the closing of the Vantage Holdings acquisition. The company signaled continued capital discipline through targeted returns, long-term pricing power in master planned communities, and visible contracted cash flows from presold condominium developments. Debt refinance execution and the new preferred equity structure were highlighted as evidence of increased market confidence and enhanced balance sheet flexibility as the business model evolves.

• Chairman Ackman said, "We expect to close our Vantage Holdings transaction. We remain, you," identifying transformation to a holding company with insurance operations as imminent.
• Guidance reflected normalization in MPC and condominium results after an outsized 2025 bulk sale, with management stating the strategic intent is long-term price maximization, not yearly volume.
• New capital projects such as Teravalis and Toro District were presented as engines for sustained growth and monetization of embedded land value.
• Debt repricing and the S&P upgrade were directly linked by management to lower perceived cost of capital and external validation of the shifting corporate structure.
• Management asserted that excess cash flow post-acquisition will be prioritized to redeem preferred equity and fund new operating investments, supporting ongoing evolution in portfolio composition.

INDUSTRY GLOSSARY

• MPC (Master Planned Communities): Large-scale residential and commercial developments built over many years, featuring pre-planned infrastructure and amenities, managed by a single developer.
• EBT (Earnings Before Taxes): Profit generated before accounting for income taxes, often used to assess segment performance in real estate firms.
• NOI (Net Operating Income): Income from property operations after operating expenses, before interest, taxes, depreciation, and amortization, central in real estate asset valuation.
• Presold: Units under contract for sale prior to the official completion or delivery of a development project.
• SG&A Ratio: Selling, General, and Administrative expenses as a percentage of revenue, a measure of operating efficiency especially in insurance and real estate sectors.

Full Conference Call Transcript

John Saxon: Where you can download both our fourth quarter 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 that discuss the company 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.

Please see the forward-looking statement disclaimer in our fourth quarter 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, William 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 are very pleased to announce that we brought her on in an IR capacity at Pershing Square, and she is also going to help, of course, with our investment in Howard Hughes Holdings Inc. While we are 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 have received from shareholders is how should we think about this business, know, what are the metrics that we should follow?

And I think Howard Hughes Holdings Inc. over time also suffered a bit from shareholders trying to figure out how do I think about this business. In the conventional public company, there is usually a certain amount of GAAP earnings or a 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 multiple is 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 Holdings Inc. business, it is very challenging in our view.

And, actually, it is hard to get to a proper indication of value using a conventional approach. I think you have to think about the business according to its sort of different components. But the easiest place to begin, of course, is with stabilized income-producing real estate assets, you know, apartments, retail, etcetera. You know, obviously, these are relatively easy to manage. There are plenty of comparables you can look at, and I think the only complexity at Howard Hughes Holdings Inc. is thinking about, you know, as we lease up assets, right, you know, assets that are 95% rented, fully stabilized, it is easy, but we always have some amount of development, some amount of lease-up in the portfolio.

But still, that is a pretty easy place to begin. Then there is our condominium business, and, you know, we have, you know, kind of a pipeline of product under contract. You 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 do not start building until we have sold a substantial majority of the units in these projects, and we have got a very good track record delivering them on time and on budget, it is a very low-risk business.

Compared to what people normally think about in a condominium business where you are 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. We can pick our moment, and we do not start construction until we know this is going to be a successful product with a lot of demand. And, you know, today, we have got, you know, how many million square feet left of product without, you know, when we start there, just Hawaii. Well, just in Hawaii alone, we unlocked another 3 to 4 million of entitlements this past year. Okay.

So the pipe, so the 3 to 4 million plus? Plus the existing pipeline that is in the today that is largely presales as you noted, Bill. Okay. So you can think about that. It is a bit like drilling oil. There is a finite amount of it. However, we have an incredibly talented team in Hawaii. We have built a real franchise and brand in Hawaii, and you are a major landowner in Hawaii and you want a partner to deliver, you know, turn that land into valuable condominium product, there is no better place to turn than Howard Hughes Holdings Inc.

So I expect that what is today a 3 to 4 million square foot pipeline of new product is going to grow over time as we either buy other land or we joint venture other property in Hawaii because of the franchise we have built. So there is an existing pipeline you can sort of value on a DCF basis, and there is an option on, you know, the franchise, if you will, and our ability to develop other assets. And, of course, there is 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 is kind of grown over time. And so can I, you know, what is the right multiple and how do I think about it? And that is where I would say I do not 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. And we set that land up to be sold by, you know, generally building out infrastructure so these lots can be sold ultimately to homebuilders who in turn will build homes and sell them to customers.

But we are very judicious in the way that we bring that property to market in that we have a finite supply. We want to sort of optimize between kind price and volume. We want to make sure that our homebuilders never end up with, you know, too much inventory. And we, as a result, in the way we have managed it, we have 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 has been, I would say, quite extraordinary.

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 a good manager of these small cities or these large, you know, very large-scale MPCs, making sure that we are delivering the right product and we are doing it in a way where the market is never saturated with excess supply. And it is a really great business, but it is not one where, you know, sometimes you are going to be opportunistic.

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. A year later, we could decide, you know what, we are not going to 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 profit is really not the right way to think about it. So 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. Some amount of it convert into cash every year, NOI from the stabilized assets, you know, profit from our existing MPCs.

And as we sell off residential land, you know, it is, if you will, gone forever, but, you know, one of the things that we have been able to accomplish as a company is while we have a finite supply of land, we have been able to drive price per acre on a very significant basis, which makes that finite supply on a present value basis actually continue to grow in value.

So I think the metrics you should think about when you are, you know, trying to assess the value of your real estate company is, you know, some capitalized value for our stabilized income-producing assets, maybe a present value calculation for our condominium development, 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 is going to be worth more in the future.

We are just making a decision, you know, is it better to monetize a piece of land, residential land today, or are we going to, 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 the, you know, again, this is not a company that is going to be a simple, you know, you get one number every quarter and you can put a multiple on it or you can annualize and get to a value.

It is a business where we are going to do our best, and we will work with Jill, we will 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 are making. But the places where I would focus is the growth in the per-acre value of the finished, you know, lots that we deliver on each of those communities, how quickly is that growing?

That gives you some sense of the value of our remaining land assets and then the progress we are making in terms of delivering condominium and the margins that we are generating, and then our ability to continue to extend, you know, that franchise. So that is real estate. We expect to close our Vantage Holdings transaction. We remain, you know, confident we can get it done by the upcoming quarter, let us say by June. You know, that process requires certain approvals. We have had the various meetings and, sort of, some more to come in the relative short term, but I see no reason why we will not meet kind of our expectations.

Now with the addition of a $2,100,000,000 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 we are going to want to point you to growth in the book value of the insurer and the returns that we are earning on that book value as kind of key indicators of our progress in building a valuable insurance company. I would say most insurance companies today are valued based on precisely that. If they can earn high returns on capital, they are deserving of a higher multiple of book value. If they earn lower returns, they are deserving of a lower multiple.

You know, as we have kind of ramped up the investment portfolio from a pure-play, you know, fixed income portfolio that is externally managed by BlackRock and Goldman Sachs to one managed by Pershing Square with greater emphasis on kind of higher return, kind of common stock investments, and as we, you know, grow the insurer with a focus on profitability, we expect to be able to build a very profitable, high-ROE insurer over time.

And, you know, we will 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 in intrinsic value as opposed to any straightforward earnings metric. I am sorry. It is 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 are happy about. The, I guess the last point I would make is we will spend some time on this topic at the upcoming next quarter meeting. I do not 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 think about kind of big business progress. With that, I will turn it over to Ryan Michael Israel. Go ahead, Ryan. Thanks, Bill.

As and as Bill touched on, just wanted to really explain to people again why we are so excited to have the upcoming closing of Vantage as the first transaction to really help transform Howard Hughes Holdings Inc. into a diversified holding company. 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 Vantage has created is incredibly valuable and will nurture Howard Hughes Holdings Inc. and Howard Hughes Holdings Inc. 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 has got a great and highly experienced management team. CEO Greg Hendrick has been in the business for more than 30 years and has a very strong reputation. Also, I think one of the things that is 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 the 2015 to 2019 time frame for which they are effectively under-reserved. 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 doing diligence. The company’s book value is very strong, its reserves were appropriate. Naturally, the company has the appropriate licenses and credit ratings that we think are great, and, ultimately, we think what we are doing, that the capital that we are putting in and the umbrella from Howard Hughes Holdings Inc. will be able to enhance those credit ratings over time. And 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 are receiving cash in today for premiums and then claims will be paid out later, to 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.

As Bill mentioned, you know, Vantage has been invested in fixed income, which has a lower, although we have 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 common stocks. And based on 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.

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 Holdings Inc.’s overall growth profile while at the same time providing a very valuable diversification of its earnings streams as it provides a type of profile other than the real estate business. As Bill mentioned earlier, and David R. O’Reilly and Carlos A. Olea will also touch on, we believe that Howard Hughes Holdings Inc.’s 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 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 will 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. And with that, I will turn it over to David.

David R. O’Reilly: Thank you, Ryan. Look. Against that backdrop of the Pershing investment and our announced acquisition of Vantage, 2025 was both transformative strategically, it was also one of the strongest operating years in our history. And in 2025, I think I just want to highlight that 100% of what I am 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. And I want to talk about each one of those segments now, starting with master planned communities.

MPC EBT hit a record this year of $476,000,000 driven by selling 621 residential acres at an average price per acre of $890,000. 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 $1,700,000 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 would like to think that we are not just selling land. But we are really harvesting scarcity.

As 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’s West Valley. 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 portfolio, we also had a record year, delivering full-year NOI of $276,000,000, 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. 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 the fourth quarter, we completed One RebA 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 the strategic development and specifically our condominium platform, you know, our condominium platform continues to serve as a powerful internally generated capital engine. During 2025, we contracted $1,600,000,000 of future condo revenue, the strongest year in the company’s history. Multiple projects remain substantially presold, including The Park Ward Village at 97% and Kō’ula at 93%. While condominium earnings are tied to completion timing and 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 and 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. 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 am going to hand it off to Carlos to talk about 2026 guidance and our financial results.

Carlos A. Olea: Thank you, David, and good morning, everyone. 2025 results exceed our guidance. As we look ahead to 2026, I think it is 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, because 2025 included an outsized bulk land sale in Summerlin, we believe it is appropriate to provide 2026 guidance to help normalize expectations. Expect adjusted operating cash flow in the range of $415 to $465,000,000.

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, we expect EBT to be in the range of $343 to $391,000,000. 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 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. 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 is expected to range between $279 and $290,000,000, 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. Condominiums under construction and in predevelopment, which are substantially presold, represent approximately $5,000,000,000 of remaining expected gross revenue over their life, resulting in an estimated $1,300,000,000 in profits at a 25% margin. We expect to recognize approximately 40% of these revenues between 2026 and 2027, with the remaining 60% recognized between 2028 and 2030.

Our newest towers, Melia and Lima, 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 $700 to $750,000,000 with estimated profit of $108 to $128,000,000 at margins of 15% to 17%. This is driven primarily by closings at The Park Ward Village. 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 Melia and Lima, which we expect to be in the high twenties when they close in February.

This backlog provides meaningful visibility in near-term cash generation, which we expect to redeploy across our portfolio and increasingly across platforms. Turning to G&A. For 2026, we expect cash G&A to range between $82,000,000 and $92,000,000 with a midpoint of approximately $87,000,000. 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 $15,000,000 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 $87,000,000 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 $750,000,000 senior notes with $1,000,000,000 of new notes due in 2030 and 2034. 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, 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 model 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.

The additional Pershing preferred investment of up to $1,000,000,000 carries a 0% coupon and represents permanent capital with no fixed cash cost 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 cash obligations. We believe this structure enhances flexibility and positions the company to grow while maintaining prudent leverage parameters. And speaking of leverage, let us 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 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 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 supported by incremental earnings capacity, enhanced diversification, and asset backing. As operating assets grow and recurring NOI increases, leverage may rise modestly 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.

Operator: Thank you. And to be clear, we will take questions both from analysts and from individual investors. So it is an open Q&A. Our first question comes from John P. Kim with BMO Capital. Your line is open.

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

David R. O’Reilly: Thanks, John. I appreciate the question. And it is one that we are 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, all anticipated. Given the location of The Park Ward Village and the size of The Park Ward Village, it has a slightly disproportionate share allocated to it. But that will benefit future towers as they will have a smaller amount allocated to it. And this is one of those rare towers where the GAAP margin that Carlos provided guidance on and the cash margin are slightly disconnected as a result.

Couple of other things are impacting the margin at The Park Ward Village. One, it is the second-row tower, so it clearly should not 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 have built in the past. That retail square footage, obviously, we do not 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.

Alexander David Goldfarb: Okay. And my second question, maybe for Bill, is you talked about how to value Howard Hughes Holdings Inc. 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 your strategy and monetizing the commercial portfolio? Maybe if you can comment on the 30 acres sold on your commercial portfolio on commercial land in The Woodlands.

William Albert Ackman: So we take a very long-term view with respect to commercial real estate holdings in, you know, our kind of core MPCs. You know, we think that, you know, one of the things that has kept, you know, 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 do not have the same kind of competitive dynamics that you would if you had multiple kind of owners, you know, of your assets. You know, over time, we have 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 is a lot of value taking the long-term view in controlling our destiny and really limiting the competition that would be afforded by someone, you know, being a major owner of commercial assets within our communities. And then with respect to the 30 acres, David could speak to it, but we generally do not like selling commercial land ever.

But there are times when there is, 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 an owner because they are 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. They were driven by the fact that the user insisted, you know, if they are 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?

David R. 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 was not the commercial land that we own in the city center. We consider that land incredibly valuable. Some of this out on the periphery that was sold to educational and health care 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. Will create outsized risk-adjusted returns and recurring NOI.

Alexander David Goldfarb: Great. Thank you.

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

Alexander David Goldfarb: 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 improvement. So as we look to that platform and Vantage’s overall profitability, what is the sort of timeline that you would think we would see that? Is that a year? Is that five years? Is that two years?

Like, how should we think about profitability improvement at Vantage once you guys consummate the deal?

William Albert Ackman: Sure. So I would start by saying that, you know, Vantage is a brand-new insurer, and they are 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 of, you know, scale economies, if you will, or the operating leverage inherent to growth.

I think on top of that, you, you know, beginning, you know, later this year, we are going to be making changes to the way the portfolio is being managed 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 is 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, for this to be a, you know, very successful multiline specialty insurer. And as they get to scale, they will naturally become more profitable.

Ryan Michael Israel: Yeah. And I would just add two quick things to that. First of all, when we put out some materials on this over sort of the fall and winter last year, but I would say well-run insurance companies have, in some of the lines 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. And then they would typically have an SG&A ratio around 30%, maybe plus or minus a few points. And the way we think about it is Vantage is very well on the path historically already to having a loss ratio that is consistent with what you would want to see for a well-run insurer. It is 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 actually achieved the scale.

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 are 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. And that is one of the things we are 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 SG&A ratio will have some embedded operating leverage, if you will, because they have really built this business going forward. 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.

Second thing I would point out, though, is Vantage actually is currently profitable both in terms of the combined ratio that they are achieving today and, you know, what we think they will going forward. And then as Bill mentioned, you know, we think we will 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.

Ray Zhong: Okay. Thank you, Ryan. And then second question is, you know, affordability is clearly a big topic today. There is the whole, you know, SFR—well, I do not want to say debate—but, you know, executive order out there. But there is 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?

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 R. O’Reilly: 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 homebuilders, we are 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 are selling dirt to homebuilders, we are 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 have done one small community in Bridgeland, and it was really to fit a need that we saw within that community. I think that our traditional kind of more dense multifamily product, it is part of that need as well. And as you know, we are 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 is a very small one for us, as there is a lot of 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.

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

Eli Desha: 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.

William Albert Ackman: Sure. So we think our first priority for excess cash that is generated—I define excess cash as cash not needed to be reinvested in our communities at Howard Hughes Holdings Inc. We expect, 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 Holdings Inc. will own a majority economically of the company, we will 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 Holdings Inc. to own 100% of the insurer. So depending upon how much of the preferred is outstanding, as much as a billion dollars, that will be the first use of excess cash. Once the insurer is 100% owned by Howard Hughes Holdings Inc., then incremental excess cash would be used principally to make other operating investments, 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: And I am not showing any further questions at this time. I would like to turn the call back over to William Ackman for any further remarks.

William Albert Ackman: Sure. So, look, our original thesis on helping transform Howard Hughes Holdings Inc. into a diversified holding company was based on the fact that while management has done an excellent job with the company, we really built a focused, very successful MPC condominium business in the company. It has not gotten the recognition we argue it has 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 am pleased in some sense that in a relatively short period of time, about seven or eight months, you know, I think there is pretty good evidence that our cost of capital is coming down. You know, a 120 basis point tighter execution on a bond issue, you know, is a very good—that is a massive, it is about a 40% reduction in our cost of debt capital on a spread basis. 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. You know, we will have to—we have 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. And, yes, while we have entered into a transaction to acquire Vantage, we have not closed, you know, that is kind of upcoming. But I am very pleased with the progress we have made over the past seven, eight months. And the company itself, the real estate operation, is really running on all cylinders.

And, you know, we are up, you know, we are in a world where I would say, unfortunately, some of the more blue states, particularly one that the city I am living in today, is operating in a way to actually encourage people to move to places like Texas and Arizona and Las Vegas and Hawaii, and I guess I am 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 Holdings Inc. But appreciate your participation on the call. Look forward to being back to you in a few months. Thanks so much.

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

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