DALLAS, Oct. 21, 2019 /PRNewswire/ -- Following a
thorough review of strategic alternatives, The Howard Hughes
Corporation® (NYSE: HHC) today announced that it will execute a
Transformation Plan, led by new executive leadership, comprised of
three pillars: (1) a $45 -
$50 million per annum reduction in
overhead expenses, (2) the sale of approximately $2 billion of non-core assets, and (3)
accelerated growth in the Company's core MPC assets.
Paul Layne, President of HHC's
Central Region, has been named Chief Executive Officer, effective
immediately. Paul Layne will replace David R. Weinreb on the Board of
Directors. David R. Weinreb
and Grant Herlitz will step down
from the company.
"Having had the opportunity to observe Paul's successful
stewardship of The Woodlands® and the Company's Central Region over
the past eight years, the Board is extremely pleased that Paul will
be our new CEO," stated Bill Ackman,
Chairman of the Board. "Paul's extensive acquisition,
development, and operating experience coupled with his superb
leadership style has earned him the respect of the Board and the
entire Howard Hughes team. Paul's efficient operating
approach along with our headquarters move from Dallas to Houston will enable Howard Hughes to be a more
focused, profitable, and free-cash-flow-generative company."
Mr. Ackman continued: "I consider David
Weinreb and Grant Herlitz to
be the co-founders of The Howard Hughes Corporation. It is a
testimony to their superb vision and execution that nine years ago
34 disparate, largely ignored, development assets, spun off from a
bankrupt shopping mall company, have been transformed into one of
the largest and most successful real estate development companies
in the United States. The Board joins me in thanking David
and Grant for their enormous contributions to the Company."
"It has been a privilege to lead this exceptional company since
its inception. I am proud of the outstanding work and
financial results our team has accomplished over the last nine
years, and want to recognize the dedication and commitment of our
employees across the portfolio who made this possible," said
David R. Weinreb. "As the
company enters the next stage of its evolution, I wish Paul, David,
and the Board continued success in HHC's next chapter."
New Leadership
Mr. Layne has more than 35 years of
diverse real estate operating and development experience. Since
2012, he has been a senior executive at HHC, most recently serving
as President, Central Region, which includes The Woodlands, The Woodlands Hills® and
Bridgeland®. During his eight-year tenure at Howard Hughes,
Mr. Layne identified and led the development of more than
$1.2 billion of office, retail,
apartment, hotel and storage properties in The Woodlands, increasing The Woodlands NOI by
nearly eight-fold to more than $104
million in 2019 (estimated NOI at stabilization of
$150 million). Most recently,
Mr. Layne led the development of 110 North Wacker in Chicago, a Class AAA, 56-story office tower
which is currently 69% pre-leased and estimated to be completed in
October 2020. Prior to joining The Howard Hughes Corporation,
Mr. Layne was Executive Vice President at Brookfield Properties
Corporation, overseeing a 9.7 million square-foot portfolio in
Houston's Central Business
District.
David O'Reilly, Chief Financial
Officer, will have an enhanced role at the company partnering with
Mr. Layne to execute on the new plan.
"It will be a privilege to work alongside our Board, our
executive team, and our highly talented team members in executing
our Transformation Plan, and pursuing unexploited opportunities for
development in our MPCs," Mr. Layne said. "We are taking bold
and decisive actions to better position the company over the long
term. We believe a leaner, more focused and decentralized
approach dedicated to delivering high returns and delighting our
customers will generate enormous value for our shareholders, and
continue to greatly enhance the communities in which we
operate."
Streamlined Organizational Structure
As part of the
new plan, the company will eliminate its holding-company-type
organizational structure and move to a decentralized regional
management model supported by a lean corporate team. HHC will
consolidate its Dallas corporate
headquarters with its largest regional office in The Woodlands, driving substantial cost
savings and increased synergies. These changes are estimated
to reduce overhead expenses by $45 -
$50 million per annum, of which
$40 - $45
million per annum will result from a reduction in corporate
G&A, and $5 million per annum
will result from a reduction in overhead costs allocated to
development properties and capitalized under GAAP. One-time
charges associated with relocation expenses, retention and
severance payments are expected to be approximately $38 to $40 million,
and will be predominantly expensed in the fourth quarter of
2019.
Sale of Non-Core Assets
The Company has identified
approximately $2 billion of non-core
assets it expects to sell over the next 12 to 18 months. The
estimated $600 million of net cash
proceeds from the sale, after debt repayment and transaction costs,
will be used for share repurchases and development opportunities in
the core MPCs. These non-core assets generated $40 million of Q2 2019 annualized NOI, and are
expected to generate $66 million of
stabilized NOI. For the most part, these assets are located
outside of the MPCs, Ward Village
and the Seaport District, and have
limited competitive advantages under HHC ownership.
Accelerated Growth in Core MPC Business
The company
will refocus its investment and development activities in our core
MPCs, where it has extensive unexploited demand for near- to
intermediate-term developments.
Call information
The company will hold a conference
call on Monday, October 21, 2019 at
5:00 p.m. Eastern Time. An investor
presentation will be posted on the Investors section of the
Company's website prior to the conference call.
To participate in this conference call, please dial
1-877-883-0383 within the U.S., 1-877-885-0477 within Canada, or 1-412-902-6506 when dialing
internationally. All participants should dial in at least
five minutes prior to the scheduled start time, using 1600594 as
the passcode. A live audio webcast and presentation will also
be available on the Company's website (www.howardhughes.com).
About The Howard Hughes Corporation®
The Howard
Hughes Corporation owns, manages and develops commercial,
residential and mixed-use real estate throughout the U.S. Its
award-winning assets include the country's preeminent portfolio of
master planned cities and communities, as well as operating
properties and development opportunities including the Seaport
District in New York; Columbia, Maryland; The Woodlands®, The
Woodlands Hills®, and Bridgeland® in the Greater Houston, Texas area; Summerlin®,
Las Vegas; and Ward Village® in
Honolulu, Hawaiʻi. The
Howard Hughes Corporation's portfolio is strategically positioned
to meet and accelerate development based on market demand,
resulting in one of the strongest real estate platforms in the
country. Dedicated to innovative placemaking, the company is
recognized for its ongoing commitment to design excellence and to
the cultural life of its communities. The Howard Hughes
Corporation is traded on the New York Stock Exchange as HHC.
For additional information visit www.howardhughes.com.
Safe Harbor Statement
Statements made in this press
release that are not historical facts, including statements
accompanied by words such as "will," "believe," "expect,"
"enables," "realize", "plan," "intend," "assume," "transform" and
other words of similar expression, are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are based on management's
expectations, estimates, assumptions, and projections as of the
date of this release and are not guarantees of future performance.
Actual results may differ materially from those expressed or
implied in these statements. Factors that could cause actual
results to differ materially are set forth as risk factors in The
Howard Hughes Corporation's filings with the Securities and
Exchange Commission, including its Quarterly and Annual Reports.
The Howard Hughes Corporation cautions you not to place undue
reliance on the forward-looking statements contained in this
release.
The Howard Hughes Corporation does not undertake any obligation
to publicly update or revise any forward-looking statements to
reflect future events, information or circumstances that arise
after the date of this release.
Contacts:
For Media
Steve
Lipin / Lauren Odell
Gladstone Place Partners
212-230-5930
For Investor Relations
David O'Reilly
Chief Financial Officer
david.o'reilly@howardhughes.com
214-741-7744
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SOURCE The Howard Hughes Corporation