Good day, and thank you for standing by. Welcome to the Howard Hughes Holdings Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star-11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-11 again. Please be advised, today's conference is being recorded. I want to like to hand the conference over to your speaker today. John Saxon, VP Corporate Strategy, please go ahead.

Good morning, and welcome to the Howard Hughes 4th Quarter 2025 Earnings Call. With me today are Bill Ackman, Executive Chairman, David O'Reilly, Chief Executive Officer, Ryan Israel, Chief Investment Officer, and Carlos Olea, Chief Financial Officer. Before we begin, I would like to direct you to our website, www.howardhughes.com, where you can download both our 4th 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 or that discuss the company's expectations 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, Bill Ackman.

Thank you very much, Sean. And let me just add one addition to the room, Jill Chapman. Jill was formerly head of IR for Hilton, and we're very pleased to announce that we brought her on in an IR capacity at Pershing Square. And she's also going to help, of course, with our investment in Howard Hughes. While we're 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've received from shareholders is how should we think about this business? You know, what are the metrics that we should follow? And I think Howard Hughes, over time, also suffered a bit from shareholders trying to figure out, how do I think about this business? And the conventional public company, there's usually a certain amount of gap earnings or an adjusted 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 multiples 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 business, it's very challenging in our view, and actually it's hard to get to a proper indication of value using a conventional approach. And I think you have to think about the business according to its sort of different components. The easiest place to begin, of course, is with stabilized income-producing real estate assets, you know, apartments, office, retail, et cetera. Obviously, these are, you know, easy, relatively easy to manage. There are plenty of comparables you can look at. And I think the only complexity at Howard Hughes is thinking about, you know, as we lease up assets, right, you know, assets that are 95% rented, fully stabilized, it's easy. But we always have some amount of development, some amount of lease up in the portfolio. But still, I think that's a pretty easy place to begin. Then there's our condominium business. And, you know, we have kind of a pipeline of product under contract. You, you know, 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 don't start building until we have sold a substantial majority of the units in these projects, and we've got a very good track record for delivering them on time and on budget, it's a very low-risk business compared to what people normally think about an economy and business where you're 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 don't start construction until we know this is going to be a successful product with a lot of demand. And, you know, today we've got, you know, how many million square feet left of a product without, you know, why don't we start there? Just Hawaii.

Well, just in Hawaii alone, we unlocked another $3 million to $4 million of entitlements this past year. Okay, so the $3 million to $4 million plus? plus the existing pipeline that's in the portfolio today that's largely pre-saled, as you noted, Bill.

Okay, so you can think about that. It's a bit like drilling oil. There's a finite amount of it. However, we have an incredibly talented team in Hawaii. We've built a real franchise and brand in Hawaii, and if you're a major landowner in Hawaii and you want a partner to deliver, you know, turn that land into a valuable condimenting product, there's no better place to turn than Howard Hughes. So I expect that what is today a three to four million square foot pipeline of new product is going to grow over time as we either buy other land or we join venture other property in Hawaii because of the franchise we've built. So there's an existing pipeline you can sort of value on a DCF basis, and there's an option on the franchise, if you will, and our ability to develop other assets. And of course, there's the MPC business. And I think, again, people are looking to put a – how do I come up with a metric? What profits from MPCs? And it's kind of grown over time, and so can I – what's the right multiple, and how do I think about it? And that's where I would say I don't think a multiple is the right way to look at it. We are stewards, if you will, for 21,000 acres of potential residential land, and we set that land up to be sold by generally building out infrastructure so these lots can be sold ultimately to home builders who, in turn, will build homes and sell them to customers. But we're very judicious in the way that we bring that property to market in that, you know, we have a finite supply. We want to sort of optimize between kind of price and volume. We want to make sure that our home builders never end up with, you know, too much inventory. And as a result, in the way we've managed it, we've 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's 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 very large-scale NBCs, making sure that we're delivering the right product and we're doing it in a way where the market is never saturated with excess supply. And it's a really great business, but it's not one where, you know, sometimes you're 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. And a year later, we could decide, you know what, we're 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 profits 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, NEV or other assessment of the value of the existing assets, and we look to grow that over time. Some amount of it we can burn into cash every year, NOI from the stabilized assets, you know, profit from our existing NPCs. And as we sell off residential land, you know, it's, if you will, gone forever. But, you know, one of the things that we've been able to accomplish as a company is while we have a finite supply of land, we've been able to drive price per acre on a very significant basis, which makes that finite supply on a present value basis actually, you know, continue to grow in value. So I think the metrics you should think about when you're trying to assess the value of a 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's going to be worth more in the future. And we're 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's 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 it and get to a value. It's a business where we're going to do our best, and we'll work with Jill, we'll work with the team, and coming up with some kind of good sort of KPIs you can track on a quarterly basis to see how much progress you're making. But the places where I would focus is the growth in NOI, 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're making in terms of delivering economy and the margins that we're generating and then our ability to continue to extend that franchise.

So that's real estate.

We expect to close our Vantage Holdings transaction. We remain confident we can get it done by the upcoming quarter, let's say by June. That process requires certain regulatory approvals. We've had the various meetings and some more has come in the relative short term, but I see no reason why we won't meet kind of our expectations. Now, with the addition of a $2.1 billion 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, you know, we're going to want to point you to growth in the book value of the insurer and the returns that we're earning on that book value as kind of key indicators of our progress in building a valuable insurance company. Most insurance companies today are valued based on precisely that. If they can earn high returns on capital, they're deserving of a higher multiple of book value. If they earn lower returns, they're deserving of a lower multiple. As we kind of ramp up the investment portfolio from a pure play fixed income portfolio that's 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 kind of grow the insurer with a focus on profitability, we expect to be able to build a very profitable, high ROE insurer kind of over time. And, you know, we'll 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 the business that you should think of based on kind of compound annual growth and intrinsic value as opposed to any straightforward earnings metric. I'm sorry it's 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 think the ultimate long-term outcome will be one that you're happy about. I guess the last point I would make is we will spend some time on this topic at the upcoming next quarter meeting. I don't think, you know, maybe before the closing of Vantage, but just provide enough time for us to kind of help the market come up with some KPIs to think about kind of big business progress. But that, I'll turn it over to Ryan Israel. Thanks, Bill.

And as Bill touched on, I just wanted to really explain to people again why we're so excited to have the upcoming closing Advantage as the first transaction to really help transform Howard Hughes 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 that Vantage has created is incredibly valuable and will nurture Howard Hughes and Howard Hughes shareholders' benefits. Advantage 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's got a great and highly experienced management team. The CEO, Greg Hendrick, has been in the business for more than 30 years and has a very strong reputation. We also think one of the things that's 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 2015 to 2019 timeframe for which they're 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 and it's reserved for appropriate. Naturally, the company has the appropriate licenses and credit ratings that we think are great, and ultimately we think what we're doing, the capital that we're putting in and the umbrella from Howard Hughes will be able to enhance those credit ratings over time. And then importantly, for an insurer, one of the key components for insurers is riding 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 flow that they generate for claims that they're 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 return, although we've outlined in December where 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 the common stocks. And based upon 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' overall growth profile while at the same time providing a very valuable diversification of its earning streams as it provides a different type of profile than the real estate business. As sort of Bill mentioned earlier, and David and Carlos will also touch on, we believe that Howard Hughes' 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 advantage first in order to pay down ultimately the financing, primarily the Pershing Square 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'll 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'll turn it over to David.

Thank you, Ryan.

Look, against that backdrop of the Pershing investment and our announced acquisition advantage, that 2025 was both transformative strategically, but it was also one of the strongest operating years in our history. And in 2025, I think I just wanna highlight that 100% of what I'm gonna 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 wanna talk about each one of those segments now, starting with master plan communities. Our MPC EBT hit a record this year of $476 million, driven by selling 621 residential acres and an average price per acre of $890,000. Demand was strong in both Summerlin and Brisbane, where pricing and margin expectations really exceeded the levels that we have 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 $1.7 million 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'd like to think that we're not just selling land, but we're really harvesting scarcity. 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 Terra Ballas in Phoenix, West Valley, spanning 37,000 acres and entitled for up to 100,000 homes over time. It's one of the most significant long-duration growth engines in our portfolio and remains in the early stages of monetization. You know, within the operating asset portfolio, we also had a record year, delivering full-year NOI of $276 million, 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 reeve of a row along the Woodlands Waterway. Leasing has begun ahead of expectations, and we anticipate this asset will contribute meaningfully to NOI growth as it's stabilized. 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 developments and specifically our condominium platform. Our condominium platform continues to serve as a powerful, internally generated capital engine. During 2025, we contracted $1.6 billion of future condo revenue, the strongest year in the company's history. Multiple projects remain substantially pre-sold, including the Park Ward Village at 97% and Kalai 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 pre-sales prior to vertical construction, utilize approximately 60% non-recourse loan-to-cost financing. Buyer deposits in this financing make these projects largely self-financed, and our pre-sales 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 plan 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'm going to hand it off to Carlos to talk about 2026 guidance and our financial results. Thank you, David, and good morning, everyone.

2025 results exceed our guidance, and as we look ahead to 2026 we think it's important to provide a framework that reflects normalization and transition as we transition into a diversified holding company a reporting framework will evolve accordingly as you heard Bill say however because the Vantage Acquisition has not yet closed and because 2025 including an outsized bulk landfill 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 million. 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. For MPC, we expect EBT to be in the range of $343 to $391 million. 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 discipline rather than linear acreage volume while the remaining acreage declines over time, we 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 EVT, 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 million, including our share of NOI from our JV assets. This is an implied increase of 1 to 5 percent compared to our 25 results. Longer term, we target annual NOI growth in the 3 to 5 percent range, driven by SEMS store rent growth and development stability. 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 pre-development, which are substantially pre-sold, represent approximately $5 billion of remaining expected gross revenue over their life, resulting in an estimated $1.3 billion 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 hours, Melia and Elima, are expected to close in 2030 and represent 41% of these future revenues with margins exceeding 25%. 2026 specifically, approximately $720 to $750 million, with estimated profit of $108 to $128 million at margins of 15 to 17%. This is even primarily by closings of the Porkward 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-20s, except, as I mentioned, formerly in Elyma, which we expect to be in the high 20s when they close in 2030. This backlog provides meaningful visibility into near-term cash generation, which we expect to redeploy across our portfolio and increasingly across our portfolio. Turning to GNA, for 2026, we expect cash GNA to range between $82 and $92 million, with a midpoint of approximately $87 million. This includes assumed inflation growth compared to last year, as well as a shift in the mix of compensation from non-cash to GNA. Please note that this range includes the $15 million in annual base fees paid to Pershing Square variable fees, which are based on quarter-end stock prices that could be volatile and difficult to predict. Looking forward, we view approximately $87 million as an approximate 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. Now let me spend a moment on refinancing and capital structure we recently refinanced and upsize our 2028 750 million senior notes with 1 billion of new notes due in 2032 and 2034 this refinancing occurred following the announcement of advantage acquisition and provides an important external validation of our capital structure and strategy 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 85 basis points achieved in 2017. Both tranches traded at or slightly above par following issuance and continue 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 modeled 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 billion 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 fixed cash obligations. We believe this structure enhances flexibility and positions the company to grow while maintaining prudent leverage parameters. And speaking of leverage, let's spend a moment on our leverage philosophy. We do not manage the business to affix 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 60-65% loan-to-value of property-level debt balanced with a meaningful pool of unencumbered assets. MPC land remains unencumbered except for short-term reimbursable infrastructure facilities. Convenient projects utilize approximately 60 percent non-recourse loan to cost financing and are substantially pre-sold, significantly reducing maturity risk. We believe that our pro forma leverage following Vantage will be supported by incremental earnings capacity, enhance diversification, and asset backing. As operating assets grow and recurring NOI increases, leverage may rise modestly in parallel with asset value and cash flow, not through incremental development risk. Flexible balance sheets supporting long-term value creation. We are ready to take questions.

Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A roster.

And to be clear, we will take questions both from analysts and from individual investors. So it's an open Q&A.

Our first question comes from John Kim with BMO Capital Markets. Your line is open.

Thank you. I wanted to ask on the kind of margins of Parkward 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-20s margins on the remaining towers versus I think that's a little bit lower than what you'd see at Victoria Place.

Thanks, John. I appreciate the question, and it's one that we're 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, were all anticipated. Given the location of Park Ward Village and the size of Park Ward Village, it has a slightly disproportionate share allocated to it, but that will benefit future towers as they'll have a smaller amount allocated to it. And this is one of those rare towers where the gap margin that Carlos provide guidance on and the cash margin are slightly disconnected as a result. A couple of other things are impacting the margin at Park Ward Village. One, it's a second-row tower, so it clearly shouldn't 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've built in the past. That retail square footage, obviously, we don't 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. But, you know, if you compare, you know, another comparable tower, a second row tower like Anahaw, 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 will generate from 10,000 additional feet of retail space.

And my second question, maybe for Bill, is you talked about how to value Howard Hughes 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 investment capital business, would you consider changing your strategy and monetizing the commercial portfolio? And maybe if you can comment on the 30 acres sold on your commercial portfolio, on commercial land in the woods.

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's made the – 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 don't have the same kind of competitive dynamics that you would if you had multiple kind of owners, you know, of your assets. Over time, we've considered, you know, do we bring in a partner, sell 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's a lot of value taking the long-term view in controlling our destiny and really limiting the competition that would be afforded by having someone, you know, be 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 don't like selling commercial land ever, but there are times when there's, 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're 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're 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. David, anything further there?

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 wasn't 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 that will create outsized risk-adjusted returns and recurring NOI.

Great.

One moment for our next question. Our next question comes from Alexander Goldfarb with Hypersandler. Your line is open.

Hey, morning down there. 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 a real estate guy learns about property and casualty. And the combined ratio advantage 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's 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 advantage once you guys consummate the deal?

Sure. So I would start with by saying that, you know, Vantage is a brand-new insurer, and they're 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 meaningful, profitable year for the company, and I think you should continue to see the benefits of, you know, just the scale economies, if you will, or the operating leverage inherent to growth. I think on top of that, you know, beginning, you know, later this year, we're 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's not – Vantage is sort of going according to their original business plan, I would say. And, 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 multi-line specialty insurer. And as they get to scale, they'll naturally become more profitable.

Yeah, and I would just add two quick things to that. First of all, we've put out some materials on this over sort of the fall and winter last year, but I would say well-run insurance companies in some of the lines Advantage participates in often have combined ratios that are in the low 90s, 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 90s combined ratio would have a loss ratio on the insurance. It's something in the low 60s. 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's consistent with what you would want to see for a well-run insurer. It's 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 had actually achieved this 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're 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's one of the things we're 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've 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. The second thing I would point out, though, is Vantage actually is currently profitable, both in terms of the combined ratio that they're achieving today and, you know, what we think they will going forward. And then, as Bill mentioned, you know, we think we'll 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.

Thank you, Ryan. And then second question is, you know, housing affordability is clearly a big topic today. There's the whole, you know, SFR, well, I don't want to say debate, but, you know, executive order out there. But there's 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?

Great question, Alex. I would tell you that we focus intently across all of our MPCs because, as you know, when we sell land to home builders, we're 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're selling dirt to home builders, we're 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've done one small community in Bridgeland, and it was really to fit a need that we saw within that community, and I think that our traditional kind of more dense, multi-family product, it's part of that need as well, and as you know, we're 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's a very small one for us as there's a lot of existing inventory in communities like Summerland, like Bridgeland, like the Woodlands, where there is kind of that non-institutionally owned but shadow market of homes for rent.

Thank you. One moment for our next question. Next question comes from Eli Deshef, who's an individual investor. Your line is open.

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.

So we think our first priority for excess cash that's generated, I define excess cash as cash not needed to be reinvested in our, you know, communities at Howard Hughes. And we expect, you know, 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 will own a majority economically of the company. We'll 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 to own 100% of the insurer. So depending upon that, 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, then incremental excess cash would be used principally to make other operating investments, investments in other operating companies. Potentially we could put more capital into the insurer, but we could also invest in other businesses.

And I'm not showing any further questions to stop. I'd like to turn the call back over to Bill Ackman for any further remarks.

Sure. So, look, our original thesis on helping transform Howard Hughes into a diversified holding company was based on the fact that, well, management has done an excellent job with the company. We've really built a focused, very successful MPC, condominium business in the company. It's not gotten the recognition we argue it's deserved as a public company. And a big part of that, in our view, was that the market assigns sort of too high a cost of capital to kind of the core real estate development and land ownership business. So I'm pleased in some sense that in a relatively short period of time, about seven or eight months, I think there's 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's a massive – you know, it's about a 40% reduction in our cost of debt capital on a spread basis. And 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'll have to – we've got more progress to make. I think we need to do a better job, you know, helping investors understand the business. There continues to be, you know, some turnover in the shareholder base from, I would say, more traditional sure-play real estate investors to investors that are open to investing in a diversified holding company. And, yes, while we've entered into a transaction to acquire our vantage, we haven't closed. You know, that's kind of upcoming. But I'm very pleased with the progress we've 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're in a world where I would say, unfortunately, some of the more blue states, particularly one that city I'm 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'm 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. But appreciate your participation on the call and look forward to being back to you in a few months.

Thanks so much. Thank you, ladies and gentlemen. That's going to conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.