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“ Billionaire investor Bill Ackman's Pershing Square said on Monday it has offered to buy the remaining stake it does not already own in real estate developer Howard Hughes Holdings for $85 per share.

Shares of Texas-based Howard Hughes, one of Pershing Square's longest-held investments, jumped over 13% in premarket trading.” https://ca.finance.yahoo.com/news/billionaire-ackm...

Follow the Buffett model...by buying a real estate developer?

" Follow the Buffett model...by buying a real estate developer?"

good morning, do any of you watch Bloomberg, CNBC, fox business, in the morning? Several observers are opining that Ackman hopes to follow the Buffett business plan of acquiring companies within this entity. Tuff crowd.

good morning, do any of you watch Bloomberg, CNBC, fox business, in the morning? Several observers are opining that Ackman hopes to follow the Buffett business plan of acquiring companies within this entity. Tuff crowd.

You didn't say any of that in your OP. We were left guessing, as usual.

Here's Dealbook from NYT:

Ackman’s latest plan to build a new Berkshire Hathaway
Bill Ackman cannot be accused of thinking small. His latest big deal shows why.

The billionaire hedge fund manager said today that his Pershing Square would bid to buy the roughly 62 percent of Howard Hughes Holdings, a real estate company, that it doesn’t own for $85 a share. But the bigger news is that if a deal is reached, Ackman wants to turn Howard Hughes into a publicly traded vehicle for buying other companies — and turn himself into a Warren Buffett-esque investor.

“With apologies to Mr. Buffett, HHH would become a modern-day Berkshire Hathaway,” Ackman wrote in a public letter to Howard Hughes shareholders. Here’s how it would work:

Pershing Square Holdco, the parent company of Ackman’s hedge fund, would create a new subsidiary to buy and hold Howard Hughes, whose assets include office buildings and planned communities. Pershing plans to own the real estate business “forever.”
Ackman believes that Howard Hughes will soon begin generating “substantial excess cash resources.” That money, coupled with Pershing’s ability to scout out profitable investments, could then be used to buy entire companies and other assets, much as Berkshire Hathaway uses the enormous stockpile of cash from its insurance arms to do deals.
Ackman sees the deal as setting up Pershing’s next era. He shot to fame and riches as a prominent activist investor, and minted billions more with profitable bets on hedging against the pandemic and inflation.

Since then, he has focused on raising what he calls “permanent capital” via a closed-end fund that trades on the London Stock Exchange. Last year, he tried but then called off plans to raise an even bigger fund in New York, which he had hoped to use to make the kinds of big bets that Buffett has made.

One question: What does Ackman see in Howard Hughes? He orchestrated its creation via a spinoff from the bankrupt real estate giant General Growth Properties 15 years ago.

But Howard Hughes’s stock has been hugely volatile since then, and has fallen 10 percent over the past 12 months alone amid choppy financial performance. Unusually, Ackman said he didn’t plan to change the company’s management or business plans.

" You didn't say any of that in your OP. We were left guessing, as usual.'

thanks, now go watch the Rogan interview with Zuckerberg if you have any interest in what's happening with apple. Off to the park, have a grand day all!

I have been an investor in HHH for more than 8 years (and my total return is probably 0% to -5% over that period)

https://assets.pershingsquareholdings.com/2025/01/... has the details

Bill is putting serious money in this company.


In that I own 44% of Pershing Square Holdco, other employees own 46%, and our strategic investors own 10%, our $1 billion investment in HHH represents a ‘look-through’ cash investment by me of $440 million, $460 million by other Pershing Square employees, and $100 million from a group of institutions, family offices, and CEOs and founders of other alternative investment managers who purchased their 10% stake in Pershing Square Holdco in June of last year for $1.05 billion

He goes on to say
Put simply, we are all in, and we intend for Pershing Square Holdco’s investment in HHH to be a permanent holding. In other words, we intend to hold HHH stock forever.

There is clear intention of buying company cheap($85/share) and then using this vehicle to put additional bets on other public company or macro bets or other alternative assets

Based on our analysis, we believe that HHC is on the path to soon begin to generate substantial
excess cash resources above and beyond investments in new property developments and
amenities, including the capital expenditures and other investments necessary and desirable to
maintain and enhance the continued growth, quality of life, and overall attraction of HHC’s
nationally recognized, perennially award-winning Master Planned Communities.

HHH would invest the excess cash resources of its HHC subsidiary – with additional resources
including potential cash from the Transaction and the financial resources generated from HHH’s
access to public company capital – in new companies and assets with the long-term goal of
growing HHH’s per-share intrinsic value at a high compound rate of return.


I think the company does have lot of momentum with community development in Houston, Hawaii and Vegas doing very well and selling at record prices and now Arizona project has gotten off really good. The New York holding (Seaport) has been spun off so what remains is much higher quality assets.

I will convert my shares to the holdco subsidiary as I think this company will go on to do very well with Pershing Squares help.I don't want to take the buyout as I feel I will be leaving lot of money on the table.

This ain't no "Modern Day Berkshire" with its 1.5% management fees to be paid to Ackman's management company.

“This ain't no "Modern Day Berkshire" with its 1.5% management fees to be paid to Ackman's management company.”

Interesting story, but I’ll pass based on their fees, their inconsistency of returns, and it’s a helluva lot harder to build a modern day Berkshire. I did invest a small amount into the Pershing SPAC when it was hyped to have a sizable interest in Universal Music but it never materialized. Would rather keep Berkshire any day given the proven structure, track record and Zero fees.

yes you are right. 1.5% fees

HHH will benefit from Pershing Square’s entire organizational team, resources, and bestin-class advisory and management capabilities through an evergreen services agreement,
subject to termination for cause with customary cure rights.6
In consideration for services
rendered, Pershing Square Holdco will receive a fee of 1.5 percent per annum of the
equity market capitalization of the Company, paid quarterly.

As I reflect on this further, the only asset the holding company (HoldCo) will initially possess is 100% ownership of a subsidiary. Essentially, the currently listed HHH will transition into its subsidiary and be renamed HHC.

However, the subsidiary isn't generating significant cash flow; in fact, it requires every bit of available funding for development purposes. This limits the holding company's opportunities to take any substantial action. It makes me question what value the holding company will provide over the next 2 to 5 years, beyond merely holding and managing the subsidiary's shares.

Damn!! just when I thought I made my decision - not quite. Will have to think more about it.

The Berkshire comparison is both laughable and insulting.
It’s the Fisher Investments model. Proven and highly successful:


“Our fees are based only on the value of the assets we manage for you. We structure our fees so we do better when you do better. And when you do poorly, we still do very well”.

it's only been 6 months since [h]ackman had to drop his u.s. pershing fund ipo, since he could not convince anyone to pay 10X fees for buying the most liquid and scrutinized public american largecaps.

however, in the golden age of MAGA grift, its not how many time you fail, but the cumulative scale of the scam.

Damn!! just when I thought I made my decision - not quite. Will have to think more about it.

WEB (on making investment decisions) at 2008 Berkshire Hathaway annual meeting: "If we can't make a decision in five minutes, we can't make it in five months.”

abromber

Hey...no political comments allowed here I thought?

no political comments allowed here I thought?

The rule is not uniformly applied. If you deviated from the politically correct electoral choice last autumn, as Mr Ackman did, then
you are fair game, especially if you are an apostate (previously presumed to be on the D team).

i am not one to stand in the way of MAGA-on-MAGA grift.
this was a caution for the fiscally skeptical, capable of examining what was on offer.

i am not one to stand in the way of MAGA-on-MAGA grift.
this was a caution for the fiscally skeptical, capable of examining what was on offer.


This is a good example - Ackman, a lifelong Democrat, finally couldn't take the sheer incompetence and lunacy of his party, and supported the (also somewhat lunatic) Republican alternative. For this sin, anything he does will now be called 'MAGA grift'.

But before dismissing Ackman's proposal based on the 1.5% fees, people should look at his spectacular track record. I guess I'm in the '-on-MAGA' part of the expression, but I've taken a small stake because I think there is a high probability that HHH works out really well, but if it doesn't, I'll add to the schadenfreude for the skeptics on the left. They deserve a little consolation, after taking such a beating.

dtb

thanks DTB for taking childish digs on politics. but please take it to the political asylum board. we are here for Berkshire.

weatherman started it. Not DTB.

MAGA or not, doesn't seem worth investing when simpler and cheaper alternatives exist. Berkshire being one.

weatherman started it. Not DTB.

MAGA or not, doesn't seem worth investing when simpler and cheaper alternatives exist. Berkshire being one.


It's just another example of a double standard, though. No push-back for smurffdog saying that what Ackman is proposing is 'MAGA grift', but if I suggest that not everyone who voted against Harris is crazy or involved in MAGA-grift, then I'm told to take it to the political asylum, not here.

As for Berkshire, it is arguably over-valued and towards the end of its run of generating huge excess returns over and above the general markets. It is simple, and reliable, but not really cheap. I think someone like Ackman has demonstrated the ability to take advantage of big disruptions (GFC, Covid, etc.) in a way that Buffett has not. Nothing against Buffett, his job #1 is to make sure that rich people stay rich. If that fits the bill, I agree there is no point in taking on extra risk and paying 1.5% fees.

For people that are somewhere between 'stay rich' (Buffett) and 'make big contrarian bets' (Ackman), an alternative worth considering is Fairfax, which has many of the characteristics of an early Berkshire. Like Berkshire, Fairfax is an insurance company at the core, invests float in fixed income but also substantial investments in wholly owned companies and publicly traded shares, has no fees, management compensation is reasonable (no share dilution from stock options, $600k salary, etc), and tends to invest in boring industries with solid long-term prospects. It also has much more exposure to international markets and trades at a much lower valuation.

DTB

'make big contrarian bets' (Ackman), ...

Pershing Square holds a few big cap stocks in concentrated positions, similar to Buffett.
I don't know if Bill Ackman picks good stocks or bad, but if you wanted to get his returns, you can buy those eight or 10 positions yourself with no expense pressure.

BN HLT CMG QSR HHH NKR CP GOOG in roughly equal proportion will cover > 90% of his portfolio.

I find one of the hardest things in investing is keeping tabs on the relative attractiveness of perennially 'pretty good' ideas (e.g. Fairfax vs. Berkshire).

I like Fairfax and own a bit, but I'm not sure it trades at a much cheaper valuation than Berkshire. I show it as around 1.4x book as against 1.55 or 1.6x for BRK. Not that long ago you could get it for just over book, and it was a real bargain. Markel -- which hasn't executed very well recently -- is in the same neighborhood, right around 1.4x. White Mountains (WTM) doesn't get much attention. I bought a chunk around .8/book in 2022 -- and I should have bought a lot more. It's still currently just a little over reported book value, and still in the process of transforming from a vanilla insurer to more of a "Berkshire-like" entity. The insurance brokers like Chubb, Kinsale, Brown and Brown are interesting as well: in some ways better businesses than reinsurance. The company I work for uses Brown and Brown, has done forever, and doesn't seem inclined to shop around. But I don't think any are cheap at the moment.

For those really looking to crawl out along the risk/reward curve, it might be worth keeping an eye on Fairfax India, which is publicly traded on the Toronto stock exchange and advised by Fairfax's India team (Fairbridge, whatever). They're trying to run the same playbook: use insurance float to make investments in publicly traded and non-public companies.

https://www.fairfaxindia.ca/investors/#financials

It's hard for me to value their holdings, but I apply a good-sized haircut on the basis that Indian markets look overvalued. Long-term, however, I hope they'll find some good opportunities. Watsa's team knows India pretty well. I own a dink.

Part of the appeal of HHH is the flywheel driving the increase in value of the assets, which become more valuable as some proportion are sold and developed. Assigning any reasonable per-acre price to the land holdings, it's undervalued on a sum-of-the-parts analysis. Assuming Ackman is successful in his bid for control, I intend to hold on and watch how it develops. Ingles markets is sort of a similar situation, with real estate holdings equivalent to something like half the company's market cap, carried on the books at a much lower valuation.

I don't know if Bill Ackman picks good stocks or bad, but if you wanted to get his returns, you can buy those eight or 10 positions yourself with no expense pressure.

BN HLT CMG QSR HHH NKR CP GOOG in roughly equal proportion will cover > 90% of his portfolio.


Yes, certainly, but it's a moving target. I actually don't think there's anything so great about those picks, but once every couple of years, Ackman pulls a rabbit out of his hat and makes a few billion for his shareholders with some well-placed derivative bet or buying something that he can fix, and whose stock price jumps once we know he has bought it. Definitely NOT the Buffett model, by the way, but there's more than one way to skin a cat.

I’m think a 50.4% fee for the entire industry gains sounds fine. Ackman and his hedge friend friends serve an important societal role: They’ve collectively done more to reduce America’s wealth disparity than any individual, political movement, or industry I know of. I salute them.



https://www.bloomberg.com/news/articles/2025-01-20...

I’m think a 50.4% fee for the entire industry gains sounds fine. Ackman and his hedge friend friends serve an important societal role: They’ve collectively done more to reduce America’s wealth disparity than any individual, political movement, or industry I know of. I salute them.


While the clients are usually relatively rich, the managers who siphon off all this money are even richer, so it's not really helping.

The typical fees are 2% management and 20% performance fees; Pershing is high, but not quite that high, with 1.5% and 16%. More importantly, the client who has had the very high returns that Pershing has obtained is unlikely to complain about going from 20% to 15%, but if the pre-fee return is much lower than 20%, as is typical for the hedge funds analysed, that fixed 2% management fee really kills. The 50.4% overall fee is what was observed for the whole industry; the number for the top-20 hedge funds was 34.3% (for the smaller hedge funds, it was 55.7%.) For Pershing, with 256% returns over the last 10 years even after fees, compared to 113% for the S&P (both without dividends), it's a bit easier to live with the high fees than for the average HF which underperforms the S&P after fees.

Good points. But there are more clients getting scalped—compared to the number of hedge fund managers doing the screwing.

So while the incredibly wealthy managers do, to your point, individually widen the wealth gap—there are too few of them to move the societal needle.

Far more “very wealthy” individual clients are transformed into simply “modestly wealthy” through the Hedge Fund industry. Thus serving a net wealth disparity benefit to society.

ok, first, weatherman did not start anything, as this ackman thread was put on a BERKSHIRE board, and already labeled as offtopic.

second, this info is not for MAGA grifters or thin-skinned willing targets, but others that may want to look more holistically. (especially on a berkshire board cultishly proud of moral rectitude, and even more wary of who handles their money)

below is a line from a (politically conservative) fund manager that seems surprisingly shocked that they may happen to also be in the pool of ackman targets, and hoping a teary letter will save him :
"..are writing to express our significant concerns regarding the acquisition proposal submitted by Mr. William Ackman and Pershing Square Holdings on January 13,2025. We believe the proposal falls significantly short of fairly compensating the shareholders for both the Company’s current asset value and its growth potential. While we hold Mr. Ackman in high regard as an investor and appreciate his long-standing commitment to HHH, the terms of this proposal are wholly inadequate and must be rejected..."

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