Master-planned community developer Howard Hughes Holdings Inc. rejected a revised offer from billionaire Bill Ackman's investment holding company Pershing Square and pressed for a better bid.
Howard Hughes, a real estate firm that owns large developments around the country, said Monday in a statement that Pershing Square's offer from last month is "not acceptable in its current form." Howard Hughes' special committee entered into a "standstill agreement" with Pershing Square to "explore potential alternatives" until March 13 unless it's extended, according to the statement.
Pershing Square Capital Management of New York City initially made a deal for Howard Hughes in mid-January when Ackman said he hoped to transform into a "modern day Berkshire Hathaway." The plan included forming a Pershing Square subsidiary to merge with Howard Hughes and acquire controlling interests in operating companies, much like Warren Buffett's Berkshire Hathaway. Ackman's company then made a revised proposal on Feb. 13, the company said in a Securities and Exchange Commission filing.
Howard Hughes' dismissal of the revised proposal comes as more investors are increasing their real estate holdings to sectors other than the traditional office, industrial, retail and multifamily properties. According to a Cushman & Wakefield report from November, alternative investments have grown into "a significant share" of U.S. commercial real estate deals from 2020 to 2023, up 79% to $289 billion in transaction volume.
Alternative real estate investments have been more resilient than conventional property types and "stand out as compelling arenas in the ever-evolving landscape of commercial real estate," the report said.
"Alternative investors have always been attracted to commercial real estate," said Susan Gwin Burks, a senior vice president at Avison Young's Dallas office, in an interview with CoStar News. "It's because there are times when the returns in commercial real estate perform better than other investment vehicles, like the stock market, they analyze.
"We know there's a lot of cash on the sidelines, with the market being so flat coming out of COVID and elevated interest rates paralyzing market moves," added Burks, who is not involved in the Pershing Square offer to Howard Hughes. "Folks who raise money have to do something with it and real estate will always get looks."
Representatives for Pershing Square declined to comment when reached by email Monday afternoon. Howard Hughes said the talks with Pershing Square might not result in any particular outcome, and the developer doesn't plan to comment further, according to the statement.
The rejected offer included Pershing Square investing $900 million to buy Howard Hughes' common stock at a price of $90 per share, representing a 46.4% premium to the price of common stock on Aug. 5 of $61.46 per share. The investment was expected to be funded by existing cash on the Pershing Square entity's balance sheet and not require any financing, the company said.
Pershing Square owns nearly 38% of Howard Hughes through various funds. Pershing Square considered taking the company private in August 2024.
Howard Hughes owns high-end master-planned developments in the greater Houston area, including in The Woodlands where it also has its headquarters, as well as Summerlin in Las Vegas, Ward Village in Honolulu and other markets.
Each master-planned project, some of which rank among the nation's top-selling developments, has millions of square feet of office and retail space, plus thousands of apartments and single-family homes. The firm, which also has a Dallas office, completed the spinoff of Seaport Entertainment Group last year.