Howard Hughes (HHH) Q3 2026 Earnings Call Transcript

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DATE

Friday, Nov. 6, 2026

CALL PARTICIPANTS

• General Counsel - Joseph Valane
• Executive Chairman - William Albert Ackman
• Vantage Executive Chair and Howard Hughes Holdings Director - Mark Grandison
• Chief Investment Officer - Ryan Michael Israel
• Chief Executive Officer - David R. O'Reilly
• Chief Financial Officer - Carlos Olea

TAKEAWAYS

• Net Loss Attributable to Common Stockholders -- $1.1 million, compared to a net income of $119.5 million last year, primarily due to a $105.4 million GAAP loss on the sale of municipal receivables and a non-cash adjustment related to the consolidation of the Floreo venture.
• Net Earned Insurance Premiums -- $315.8 million, reflecting the first full quarter of Vantage operations under the corporate structure.
• Insurance Combined Ratio -- 101.8% on a reported basis, including purchase accounting adjustments; the ratio was 94.9% when excluding those adjustments.
• Total Operating Assets Net Operating Income (NOI) -- $73 million, representing 8% growth driven by leasing activity in the office and multifamily portfolios.
• Same-Store NOI Growth -- 9%, which management stated was among the highest in the real estate industry for the period.
• Master Planned Communities (MPC) EBT -- $89.5 million, down from $205 million last year because the prior period included a $100 million bulk land sale in Summerlin.
• Residential Land Pricing -- $1.3 million per acre, reflecting an 18% increase over the trailing 12 months due to strong demand in Summerlin and Woodland Hills.
• Municipal Utility District (MUD) Receivable Sales -- $177.6 million in net cash proceeds, generated by selling zero-coupon instruments at a blended discount rate of approximately 6%.
• Condominium Revenue Pipeline -- $5 billion in expected future revenue, with $3.6 billion already under contract across the development portfolio.
• Mahana Tower Presales -- 15% of units presold within the first month of sales activity, despite higher interest rates and broader market headwinds.
• Vantage Historical GAAP Net Income -- $80 million, representing a 22% increase from the prior year quarter.
• Vantage G&A Expense Ratio -- 13.9%, improving from 15.8% last year as net earned premiums outpaced expense growth.
• Insurance Investment Results -- $77 million, driven by $55 million in unrealized gains on equities as the portfolio transitioned out of fixed income securities.
• Investment Portfolio Barbell Strategy -- $3.7 billion in total invested assets, with 65% allocated to cash or short-term U.S. treasuries and 35% allocated to common equities.
• AdVantage ILS Fee Income -- $13 million, resulting from positive outcomes on recent property-catastrophe business written for third-party partners.
• Gross Written Premium Growth -- 4% to $386 million, led by construction, casualty, and financial lines, while property and specialty reinsurance premiums were deliberately reduced.
• Total G&A Expense -- $51.6 million, an increase of $34 million year over year reflecting the inclusion of Vantage and $13 million of incremental interest expense.
• Home Sales Volume -- 11% increase in Summerlin and 5% increase in Woodland Hills, while Bridgeland sales declined 9% in the quarter but remain up 7% year to date.

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RISKS

• Grandison stated, "Property rates, particularly in the United States, continue to soften and a few short-tail lines are moving towards stage 4," indicating increased competition and pricing pressure in certain insurance markets.
• Ackman noted that "during periods of volatility, when rates spike up, you do see a short term pause in home sales" because buyers are sensitive to monthly payment changes.
• Grandison noted that reinsurance results were impacted by a "single large energy loss in our reinsurance specialty book" during the quarter.

SUMMARY

Howard Hughes Holdings Inc. (NYSE:HHH) reported a net loss of $1.1 million for the third quarter, a result primarily influenced by the transition of the Vantage insurance portfolio and a non-cash loss from the sale of municipal receivables. Management reported that the integration of the Vantage platform is complete, with the insurance segment now providing permanent capital to support the company’s real estate development. The company stated it is shifting toward an asset-light model for its real estate holdings, intending to use joint ventures and asset sales to unlock equity for redeployment into insurance operations or preferred stock redemption. Management noted that despite higher interest rates, demand for land in its master planned communities remains strong, supported by consistent homebuilder interest and increasing price per acre.

• The company is actively pursuing an asset-light strategy with a goal to generate significant liquidity by the end of 2027. Ackman stated the objective is "something on the order of potentially a couple billion of incremental proceeds."
• The insurance investment strategy focuses on long-term compounding in high-quality businesses. Israel stated that roughly 65% of invested assets are held in cash or short-term U.S. treasuries to avoid credit and duration risk.
• Vantage is shifting its focus away from property-catastrophe lines due to market softening. Grandison stated, "We grow where the margin of safety is there, and we step back where it is not."
• The Hawaii condominium market remains a significant cash flow driver, with the new Mahana tower seeing rapid early interest. O'Reilly stated, "15% in 30 days is a celebration" in the current interest rate environment.
• Management intends to use proceeds from real estate monetization to optimize the capital structure. Ackman indicated that the company would like to redeem preferred shares to increase its ownership of the "valuable business that Marc is really building."
• The company is transitioning its corporate identity to reflect its dual nature as an insurer and a developer. Ackman stated the goal is for the entity to look like an "insurance company that has a real estate subsidiary as opposed to a real estate company that has a Vantage subsidiary."

INDUSTRY GLOSSARY

• Master Planned Community (MPC): Large-scale residential developments that include integrated commercial, retail, and recreational components managed by a single developer.
• Net Operating Income (NOI): A financial metric used to evaluate the profitability of income-generating real estate, calculated as total revenue minus operating expenses.
• Combined Ratio: A measure of insurance underwriting profitability calculated by dividing the sum of incurred losses and expenses by earned premium; a ratio below 100% indicates profit.
• Municipal Utility District (MUD) Receivable: Reimbursements from local government entities to developers for infrastructure costs, typically funded by property tax revenues within the district.
• Insurance-Linked Securities (ILS): Financial instruments whose values are driven by insurance loss events, allowing investors to take on insurance risk in exchange for potential returns.
• Value of Business Acquired (VOBA): An intangible asset representing the present value of future profits from insurance contracts already in force at the time of an acquisition.
• Earnings Before Taxes (EBT): A measure of financial performance that calculates a company's profit before it has to pay corporate income tax.

Full Conference Call Transcript

Operator: Thank you for standing by, and welcome to Howard Hughes Third Quarter 2026 Earnings Conference Call. Currently, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *1 on your telephone. To remove yourself from the queue, you may press *1 again. I would now like to hand the call over to Joseph Valane, general counsel. Please go ahead.

Joseph Valane: Good morning, and welcome to the Howard Hughes Holdings Third Quarter 2026 Earnings Call. With me today are Bill Ackman, Executive Chairman Ryan Michael Israel, Chief Investment Officer; David O'Reilly, Chief Executive Officer Carlos Olea, Chief Financial Officer; and Mark Grandison, Vantage Executive Chair and Howard Hughes Holdings Director. Before we begin, I would like to direct you to our website, www.howardhughes.com, where you can download both our third quarter earnings press release and our supplemental package. The earnings release and supplemental package include reconciliations of non-GAAP financial 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 assumption, we can give no assurance that these expectations will be achieved. Please see the forward looking statement disclaimer in our third quarter earnings press release. And the risk factors in our SEC filings. 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.

William Albert Ackman: Thank you, Joe. I am just going to highlight a few significant developments during the quarter, then turn it over to Marc, who is going to walk through the insurance portfolio. Ryan will speak to the investment assets and David will update more detail on the real estate progress. With respect to Vantage, 76.6 million of net tax profit for insurance and reinsurance. Including gains from the investment portfolio, Economically, a $103 million operating profit were we are adding back purchase accounting adjustments relating to the purchase of Vantage at a premium to book value, that amortization, we believe, is a non-economic expense.

Terms of Vantage progress, the most significant during the quarter was Marc taking on the executive chair role, our recruiting David Gansberg as the CEO elect to join no later than June when his noncompete expires. And Mark continues to build out the senior leadership team, really taking advantage of his long time relationships and network in the industry. We will update you over time as we make more progress there. Real estate operation generated strong performance. Operating assets same store NOI growth of 9%. that is probably a industry wide top of the. top number. On land sale side, also very strong numbers. We would lapped a significant 100 million plus bulk lot sale.

But in terms of without the bulk lot sales, year on year, we showed good progress. Importantly, what we focus on is. Well, really, to a couple of metrics. 1 is what is the pace of home sales? Summerlin was up 11% year on year. Woodland Hills up 5% year on year. Bridgeland down 9%. On year, but year to date, up 7%. Over last year, lot sales are lumpy. It depends on our sort of auction process, etcetera, but we feel very good about that sort of leading indicator. And importantly, the land sales, price per acre. 1 of our important metrics when we look at is what is the value.

How much land did we sell over the last year? what is the value of our. The land that we have remaining based on current prices. We sold 398 acres over the last 12 months. 435 million of proceeds Meanwhile, our residual value of land based on the current market value went up from 5.62 billion to 5.7 billion. So in effect, we generated 435 million of proceeds plus an increase in our land values. The maintenance free cash flow was up slightly with, you know, very significant same store NOI growth.

If we will go into more detail there, we had a modest amount of condominium sales generating 800 or point 8 million of, excuse me, of profit And we did 2 municipal utility district receivable sales. Let me explain what this is. Basically, as we build out the infrastructure for our MPCs, we recover the cost of that infrastructure in the form of what is called the municipal utility district receivable, which is paid down from tax. Revenues. We get that receivable sits on the balance sheet at face value.

It gets paid out over 3, 4, 5, 6, years depending upon the pace of development and the generation of taxable income, what we have been doing in effect, think of that as a zero coupon instrument, and we have basically have sold that and received the present value of those receivables at about a 6% discount rate that causes us to generate a GAAP $105 million during the quarter, but what we are really doing is taking this zero-coupon, which is-- which we are not going to collect, or an instrument we are not going to collect for 4 or 5 years, much as 6 years and taking the cash today at a discount rate that we find attractive.

The other significant development with respect to real estate during the quarter, was our announcement in September at the annual meeting of a plan to go to an asset light model. We have made good progress in terms of recruiting the advisers and actually have already done discussions and received a number of significant offers for assets at the company. We will report our progress over time, but we are strongly of the view that we are gonna achieve our objectives in terms of generating material amounts of cash at what we believe to be very attractive valuations. A comment on the other metric to pay attention to, of course, is G&A.

This is the first quarter that we are fully including the results of Vantage. Our year on year increase $34 million of G&A to $51.6 million The components there basically $13 million of incremental interest expense, about $4 million to $5 million of G&A from Vantage. That is now in our results. Okay. With that, I am going to turn it over to Mark Grandison.

Mark Grandison: Thank you, Bill. Good morning, everyone. As Bill noted, this is our first full quarter as part of Howard Hughes, and I am pleased to report that Vantage delivered solid quarter, with earnings, underwriting income, and returns all generally moving in the right direction. A quick reminder, Bill alluded to it already, with respect to presentation, Howard Hughes consolidated results include purchase accounting adjustments, largely the amortization of the VOBA. On that basis, Vantage's third quarter combined ratio was 101.8% and the pretax income was $77 million.

As in the second quarter, everything I discussed today and the Vantage supplemental is on a historical GAAP basis excluding purchase accounting adjustments, which gives a clearer picture of how the business is actually performing consistent with historical reporting. On that basis, third quarter net income was approximately $80 million up 22% from the prior year quarter, and pretax income of $103 million was more than double last year. Year to date, net income $166 million, up 51%. In the quarter, the combined ratio was 94.9%, in line with 95% a year ago and 95.4% year to date versus 96% last year. Underwriting income grew 19% in the quarter to $16 million, and 38% year to date to $41 million.

Gross written premiums grew 4% to $386 million, and net earned premium grew 17% to $300 million. Dollars. Year to date, gross written premium is $1.4 billion up 11%. Insurance related gross written premiums grew 8% led by construction, casualty, and financial lines. Reinsurance related gross written premiums were down 9% as we deliberately wrote less property and specialty where pricing no longer meets our return hurdles. That is cycle management and practice. We grow where the margin of safety is there, and we step back where it is not. The G&A expense ratio improved to 13.9% from 15.8% a year ago and to 14.3% from 16.9% year to date, as net earned premiums continue to outpace expense growth.

As was mentioned at HHS's annual general meeting, we expect to invest more over the next several quarters and we expect the G&A ratio to be a little bit more volatile. Let me spend a moment on underwriting quality. The accident-year combined ratio excluding catastrophes was 96.2% versus 96.8% last year, and 92.5% year to date versus 94.8%. I do want to be transparent that the quarter is above the 91.4% we reported in the second quarter. The difference is a single large energy loss in our reinsurance specialty book. There were no significant catastrophe losses in the third quarter. Reinsurance also absorbed about 4 points of adverse prior development which we have addressed conservatively.

Excluding those items, reinsurance remains profitable, with a 92.2% accident year ratio ex cat in the quarter and 84.4% combined ratio year to date. Large losses are part of a specialty underwriter. And as I said last quarter, we expect some fluctuation from quarter to quarter. Insurance made real progress. Its combined ratio improved to 96% from 102.6%, and underwriting income was $7 million versus a loss of $4 million a year ago. With favorable prior-year development of 3 points. it is the trend we want to see, and we expect it to continue as the book scales.

Net fee income was $13 million in the quarter, up from $9 million, and is $47 million year to date versus a loss last year. This comes from our Advantage ILS structures and reflects strong outcomes on recent property-cat business we wrote for third party partners. Turning to investments. The transition of the portfolio is now largely complete. We hold $1.3 billion of common equities, $2.4 billion of cash and short term treasuries, and $11 million of fixed income securities. Next, net investment results were $77 million for the quarter, driven by $55 million of unrealized gain on equities, a reversal of the second quarter's mark to market loss.

Net investment income was $23 million versus $30 million last year, reflecting the move out of fixed income. Equity markets will move in both directions so please judge this portfolio over years, not quarters. We are investing for long term compounding with expert management by Pershing Square. That brings me to returns and capital. Trailing 12 months after tax return on equity was 16% compared to 15.9% for 2025, and 9.2% for 2024. That is consistent with our goal to deploy capital at a target return on equity at or above mid teens over the cycle. GAAP equity rose to $1.9 billion, up 44% year over year including the $300 million contribution from Howard Hughes, combined with earned profits.

Our capital remains strong, and AM Best continues to rate us A- with a positive outlook. On the market, our view is unchanged from last quarter. We remain primarily in stage 3 of the cycle, Property rates, particularly in the United States, continue to soften and a few short-tail lines are moving towards stage 4. Casualty remains more constructive. Though uncertainty around earlier years and loss trend, require a thoughtful approach. Broadly, competition has increased, but pockets of attractive returns remain in a diversified platform that lets us move quickly to them.

Our priorities are the same, underwriting profit over volume, conservative reserving, a margin of safety and pricing, disciplined management of aggregations, conservative prudential capital management, and investment in data and talent. In closing, we are still in the very early chapters of a multiyear story. The permanent capital is in place, the portfolio transition is behind us, and the underlying trend in underwriting expenses and returns is positive. I look forward to updating you on our progress in the future. With that, I will turn the call over to Ryan.

Ryan Michael Israel: Thanks, Marc. I thought this quarter what we could do is talk a little bit more about the investment portfolio and Pershing Square's overall philosophy on the management of that portfolio. And for those of you following along the slides, I will kind of be referencing page 23 as we go along. So to start with, our total invested assets grew to about $3.7 billion this quarter. As we have talked about before, we really employ a barbell strategy. So just over 65% of those invested assets will ultimately be in cash or short term US treasuries.

We are taking no credit risk, no duration risk, And then we will be investing the bulk of the excess beyond what we would be generating through float over time in our common equities. Today, we actually have a lot more of a cushion relative to the float that we have invested in short term treasuries Over time, we probably will have a little bit more matching between the short term investments and our float, and therefore, the percentage of our invested assets that would be in common equities would go up. The way we sort of think about that 65% of the portfolio today is invested in short term treasuries.

At current interest rates, that should be yielding around 4% based on the market rates for a 30 day US treasury to the extent that interest rates stay the same. For the roughly 35% of our portfolio that is invested in stocks, what we wanted to provide today, was really the investments that we make And at Pershing Square, and for those of you who follow us, we have really, written about this in our latest quarterly letters, 1 of which at PS Inc, we released earlier this week.

We really talk about we are looking for what we call durable growth businesses, some of the world's great businesses where we believe that through the strength of the secular trends they have, their competitive moats, the great decisions management is making in their capital allocation strategies, they can really be generating returns from these investments, that would be at least 20% a year over a kind of 3- to 5-year type holding period. And when we think about the way in which we are achieving or hope to achieve that 20%-plus return, it is really buying businesses that can grow their earnings I would say it is sort of a high teens to roughly 20% rate collectively.

Where we try to purchase these businesses at attractive multiples, such that over time, our investment return will be a little bit better than the underlying earnings growth of those businesses because investors will ultimately assign a higher multiple of earnings to these companies than what we have paid for them.

And so when we kind of take that framework overall, what we are looking for and we see that is represented very well in the portfolio where we have 12 to 15 investments in Vantage that really do represent these durable growth companies, some of the world's great businesses that are generally growing their earnings between 15% and 25% a year over time in our estimation, where we think there is upside from the multiple. Collectively, this portfolio, roughly the way we think about it as it is today, we expect should be growing its earnings about 20% a year over the next 3 to 5 years based upon our best estimates.

And what that sort of means is every quarter, if the multiple stayed the same that investors assigned to these companies, we would generally get about 1-fourth of that 20% growth or about 5% each quarter. And you can actually see this quarter in aggregate, that is exactly what happened. We had a 4.7% return on our common equities just under that 5% threshold. But I may wanna point to the page you are referring to. Yeah. Page 23. Exactly, for those who are following along. And the way we sort of think about that is that is at the portfolio in aggregate. But when you look at the specific holdings, obviously, there is a lot more volatility.

So to point out a couple of the companies that drove our results this quarter were really our investments in Microsoft. And Meta, which were our largest investments. And those collectively, returned about 35%. So 38% for Microsoft, 29% for Amazon. And while their earnings grow on the higher end, of that kind of 20% to 25% level, you know, these businesses also had a lot of multiple expansion this quarter as people became more excited about their prospects. And the rest of the portfolio, I would say there was a little bit of a different result where some of them had their earnings growth and their share price in line.

And some of them actually, for example, a company like Brookfield, or Uber actually had a share price declines even though they had very healthy earnings growth as investors assigned a lower multiple to those businesses. So wanted to give you a little bit of insight as to how we are thinking about the stock portfolio that we have. And going forward, you know, our goal is to continue, to provide some insights each quarter on how we think about the overall investment portfolio. With that, I will turn it over to David to talk about the real estate results.

David R. O'Reilly: Thank you, Ryan. Against the backdrop of national housing, facing real headwinds, higher mortgage rates, and affordability challenges, our real estate business is performing exceptionally well. Over the past 12 months, our annual residential land pricing in our commercial communities increased 18%. Operating assets NOI grew 8% this quarter, and our condominium pipeline now represents more than $5 billion in expected future revenue. Let's start with our MPCs. Land pricing, home sales, and the value of our remaining land are the indicators I focus on when evaluating the strength of this business So let's put the reported numbers in context. We reported $89.5 million of MPC EBT during the quarter, compared to $2.5 million a year ago.

2 items drove that comparison. First, last year's quarter included a 231-acre bulk land sale in Summerlin for more than $100 million. Those transactions are strategic, but they do not occur every quarter. Second, we recorded a $19.4 million remeasurement loss related to the consolidation of Florio in Arizona. This is a noncash accounting adjustment from taking control of the venture not a change in what we expect the project to be worth. Adjusting for the bulk sale and non. And the noncash loss MPC EBT would have been higher this quarter compared to last year. Demand and pricing in our communities are stronger than they were 12 months ago, not weaker.

Our average residential land price was approximately $1.3 million per acre this quarter, an 18% increase over the trailing 12 months. Bill mentioned during the quarter that net new home sales increased in Summerlin and Woodland Hills, Bridgeland was down in the quarter, but still up 7% for the year. What differentiates our communities is not that we own a large amount of land. it is what we have built on that land over decades. We are not developing residential neighborhoods. We are creating complete communities that attract employers, businesses, retailers, and residents. We have proven that strategy in The Woodlands, and we are following that same playbook in Bridgeland with projects like the Houston Texans anchored Toro District.

As these communities mature, the jobs, amenities, and commercial development create additional demand for housing. That demand, combined with our finite land supply, supports pricing and increases the value of our remaining land over time. Which is exactly what you see in our land bank. Updated pricing assumptions added $79 million of estimated value this quarter, replacing most of the value of the 100 acres we sold. Our estimated margin adjusted residual value for wholly owned land is within 1% of where it stood a quarter ago with fewer acres in it. That is long term value creation that does not always show up in quarterly earnings. We also completed the sale of 2 MUD district reimbursements in Texas.

Bill walked through the details of that But at the end of the day, we generated more than $177 million in net cash proceeds, but also generated a $105.4 million GAAP loss. The implied discount rate that we sold those receivables at on a blended basis is just over 6%. Accepting a discount today on cash that would otherwise have been collected for years. We expect to redeploy those proceeds of returns well above that rate, which is exactly why we did it. Turning to the operating assets. NOI increased 8% to $73 million with same store NOI growing at 9%.

This growth is primarily resulting from the leasing efforts across our office portfolio, which has increased NOI 15% compared to last year on a same store basis. Adjusted maintenance free cash flow increased 10% over the trailing 12 months to $96.6 million again, boosted by leasing of both the office and multifamily portfolios as we have reached stabilization across the majority of our assets. These results reflect years of investment commercial multifamily developments throughout our communities. Those assets provide growing, recurring cash flow and add value to the residential land around them. Our condominium business is another important source of future cash flow.

We contracted 82 units during the quarter, including 66 at Mahana, our newest Ward Village tower in predevelopment. As of September 30, Mahana was 15% presold after only about a month of sales. We have continued to see sales activity since quarter end despite a challenging market. Located at the base of Victoria Ward Mark, Mahana offers a distinct opportunity within Ward Village, and we are encouraged by the pricing and buyer interest we have seen. James remain in line with our expectations. Across the pipeline, we have 743 units under construction or in predevelopment. With 62% presold or under contract. that is more than $5 billion in expected future revenue. Including $3.6 billion already under contract.

What makes this business especially attractive is its capital structure. Buyer deposits and nonrecourse construction financing fund the majority of those development costs, allowing us to deliver these projects with relatively limited corporate equity. Which brings me to something fundamental about Howard Hughes. The cash flow we generate is not the end of our value creation. it is what funds the next generation of it. We reinvest a portion of that cash into projects like Malia and Aleem at Ward Village, 1 Riva Row in The Woodlands, and transformational developments like Toro District in Bridgeland.

Those investments drive shareholder returns, make our communities more attractive, increase long term net asset value, and create the next round of cash flow and the cycle repeats. Which brings me to the evolving asset management strategy. As discussed at the shareholder meeting in September, we are increasingly looking to third-party capital into our real estate platform through joint ventures and other structures. We do not need to own 100% of every office building. Apartment community, or commercial development to create value from those assets. By partnering with outside investors, we can unlock equity, grow our development and asset management fee business, and keep overseeing the communities we have spent the last 16 years building.

We are in active discussions on our first joint venture and expect to make more in the coming quarters. The capital we free up gives us real flexibility. It can be used to redeem the preferred shares, invest in Vantage, or fund our current growth opportunities in Howard Hughes communities. Our master plan communities remain the foundation of the real estate business, and long term control over their development remains central to the strategy. So when I look at the quarter, I see a real estate business performing exceptionally well in a challenging market. We are maintaining strong land pricing. Growing recurring cash flow, and building a substantial pipeline of future condominium revenue.

And as we evolve our capital structure, we have the opportunity to keep creating that value with significantly less capital tied up in individual assets. I could not be more proud of what our team has accomplished this quarter in a challenging environment And confident in the long term outlook for our communities. So with that, I will turn it over to Bill for closing remarks.

William Albert Ackman: My only remarks are that, the real estate team did a great job. Really great quarter. With that, operator, let's open it for questions.

Operator: As a reminder, to ask a question, you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again. Our first question comes from the line of Anthony Paolone of JPMorgan. Your line is open, Anthony.

Anthony Paolone: Great. Thanks. Good morning, everyone. Good morning. My first question relates to just the planned either joint venture sales of some of the real estate. Can you maybe give us a sense as to you know, any particular areas you want to sell? And maybe sizing of, like, how much you expect to receive in proceeds over I think, Bill, maybe on a prior call, you mentioned being done by the end of 2027.

William Albert Ackman: Yeah. I would say we are not gonna be likely done by the end of 2027. I think we are gonna make very significant progress by the end of 2027. The, you know, the goal is to. We think there is value. You know, our whole strategy about NPCs is about control. Why would we have 9% same store NOI growth? Because the competitive dynamics of controlling the real estate in your communities enables you to maintain pricing and, obviously, quality, and this enables us to generate you know, compound returns both in the value of commercial assets and the value of our kind of land holdings. So we wanna maintain control.

So we are bringing in more passive partners that like the team with Howard. I mean, this is a team with incredible track record capability resources financial reporting, public company. it is the ideal partner for pension fund family office that wants exposure to some of the best housing and real estate markets in the country. We have, you know, I would say some assets that are kind of non-core that we might sell outright but we have already been fielding offers on major assets that have come in the door since we announced this strategy. And I expect, you know, we will have you know, stuff to report on probably by the next time we have this call.

So I cannot tell you precisely the time frame. it is not. We are not in a rush to do it. But we are gonna. You know, we have hired advisers. They are engaged. They are incentivized. You know, I would say real estate transactions the earliest I would expect you to hear something would be over in a 3-month time frame. But you know, call it 6, 9 months from now, you should start to hear significant progress And I said by the end of next year, the goal of something on the order of potentially a couple billion of incremental proceeds. Would be a reasonable way to think about it. But that is an approximation.

It could be more. It could be less. Okay. And then if you think about as those proceeds come in, if we think about selling CRE, we think about sales cap rates and so losing some percentage of those assets as income. Do you think the re redeployment, should we think about that as going out at a higher return, or how do we think about just what that trade looks like on a shorter term basis as the money comes in and then know, what you do with it. Sure.

So I think know, real estate investors, you know, someone's buying an asset, a 6.5% return in a 5.5% financing market and putting up a third of the equity you know, it is it is not generally a high return. it is hard to generate very high return. I think people think of real estate as a you know, call it, I do not know, an 8% to 12% return on equity kind of business. I would say, in terms of for stabilized assets, maybe somewhat higher for development type assets. We think we can generate you know, Marc mentioned, in excess of a 15% ROE.

You know, our ambitions are actually to generate in excess of a 20% ROE, both with a combination of strong profitability from the insurance side of the business and from strong investment results, particularly as we get the investment portfolio more invested in common equities and less in treasuries. So going from a let's call it, a 10% ROE business to a 20% ROE business, we think inherently it is a good thing. Now our real estate operation, it takes place in a corporation where we have to pay corporate tax. You know, we have some depreciation shields, interest expense, etcetera. We still pay taxes. So by bringing in.

Taking out, call it 80%, let's say, of the equity we have invested in an asset and then getting paid fees for managing that asset that are paid by third parties, promotes, etcetera, we think we can take the ROE from our real estate portfolio from the maybe lower double digits to the high teens or potentially more. And so we think both the movement of the capital from real estate to insurance is a big step up in terms of ROE for the overall business.

But by doing so, by bringing in a partner and by becoming more of a asset manager than just a wholly owned real estate subsidiary operation, We you know, that transaction is extremely accretive to the entity both in real estate and insurance. K.

Anthony Paolone: Thank you.

Operator: Thank you. Thank you. Our next question comes from the line of Alexander Goldfarb of Piper Sandler. Your question, please, Alexander.

Alexander Goldfarb: Yes. Hey. Good morning. Good morning. And certainly congrats on having the first full period as a combined company. So a lot of work there. First, David, I am gonna go to Hawaii. I like to compliment you guys with how successful the presales go, but this latest project which I think was just 15 units is. or 15%, little. seems a little slower than historic. So just maybe a little bit more color if it is project specific or maybe just where interest rates are it is finally countering what normally is a really strong residential sale market out at Ward Village.

David R. O'Reilly: Good morning, Alexander. Thanks for the question. Look, I would say that over the past 5 years and Oahu and the condo market in general has been good. I would not say super strong. Like, over the past 5 years, we have built or have under construction 8 towers. The entire rest of Oahu has done 2. We are 80% of the island's luxury condominium supply and I think we have been spoiled, by Bonnie Wedemeyer and her team's incredible success of delivering 60% or 70% presold in 60 days. In a more normal market environment where we are today with higher interest rates, getting 15% in 30 days is a celebration. And I tip my cap to them.

They have done a great job. Obviously, the last 4 towers are a little bit different than this 1. They were all in the front row and right on the beach, and this is at the head of the park set back a little bit. So it was our expectation coming out of the gate that this would not have that type of sales velocity, that those front row towers did. And there is a little bit more headwinds with higher interest rates. With all that said, while 15% may be behind those other towers, for us, it is still an exceptional result.

Alexander Goldfarb: Okay. And then, Ryan, a question on the on the securities portfolio and obviously, we love the disclosure there in the supplemental. The markets have been crazy. We had the midterm. We have had some serious gyrations this week. As you guys think about your securities holdings and as we think about your seeking to outperform the market, should we expect your book to change meaningfully quarter to quarter? Or in general, when you guys make an investment, you are making it through. You look through, like, these type of gyrations that we have had recently, this sort of anti AI, anti data center pushback.

Like, just trying to understand when we look at your first person, how it is gonna look over time as you guys try to outperform and drive

Ryan Michael Israel: Earnings to the bottom line at Howard Hughes Yeah. Sure, Alexander. And thanks for the question. The way that we think about it is there are really only a few hundred businesses in the world that we think are of the quality that we would want to own them for the long term. And so when we buy those businesses, we really are thinking with a, you know, multiyear, sometimes multi decade perspective on where those businesses will develop.

And so the opportunities to buy them have these businesses that grow at such a rapid rate, and then to buy them at purchase prices where we can make you know, a return that meets our thresholds, which we talked about as being at least 20%. Those are not things that come up every day. So my expectation would be in our historical results at Pershing Square have suggested that we have, you know, multiyear holding periods, 4-plus years kind of on average, even though some stocks, you know, we have held for decades, at Pershing Square. And I think that is likely going to continue.

The 1 thing that is quite interesting about investments in an insurance company versus if you think about, you investments in your sort of typical manner outside of insurance is that insurance business is cash-generative, and it is cash-generative in 2 ways. 1, every time we have a combined below 90, we are gonna have profits. We have profits from the investment income we generate, whether it is off the cash portfolio or the common equities, Those are all things that are gonna be allocated every quarter. We have more cash coming in to be invested. And we get to decide how much of those investments will go to equities, how much are going to go into cash.

And so what is nice about market volatility, particularly inside of an insurance company like Vantage, is we can be leaning in and taking more advantage when we get more cash in to be buying additional securities in volatile market times. And so I think that is something that is going to allow us to hold our positions for a long period of time while also being able to buy, at moments when there is a lot of market volatility. Do not know if you wanna add anything.

William Albert Ackman: Just adding to what Ryan's saying, the big dynamic in markets that is sort of taken place over the last decade is increased sort of passive ownership of stocks. So index funds are now increasing percentage, maybe 25% to 30% of almost every public company. That has the effect as these are effectively permanent holders. At least for now, of taking room B float from the market.

And then much bigger amounts of capital controlled by the kind of shorter-term quantitatively driven investment firms that use a large amount of financial leverage you know, 8x, 10x, 12x, type leverage, and the huge moves you are seeing you know, midterms going up, whatever, and then going, you know, big down day yesterday, today. Who knows? I have to. If you do not look in the last hour, and you have no idea which direction the market's going. We are not trying to make money by figuring out which stock is gonna go up tomorrow or which stock's gonna go up in the next 3 months.

What we are doing is we are finding businesses that we are very happy to own for years. That earn very high returns on capital, that grow their earnings and revenues at very nice rates over time, and that we purchased at prices that we expect will generate you know, our ambitions are 20%-plus rates of return on that portfolio. And the portfolio that is constructed and that Ryan's walked through here is 1 that we think will achieve that objective. And we do not expect to make material changes to it, you know, absent a massive move in a stock price upward that would get to a place where we think the go-forward return is sort of less attractive.

We plus or minus, you know, as the businesses progress, we expect the stocks to progress. And I. Absent a change in our view of the business long term potential, we are likely to own it. So think of it as a long dated portfolio. That publicly compounds at a 20%-plus rate. And we will only make changes if we think on an after tax basis, it makes sense to sell, realize a gain, redeploy the capital, in a new investment on an attractive basis. Okay.

Alexander Goldfarb: And then just finally, question for Marc. Marc, if you have gotten under the hood and looked at the business of Vantage. Just sort of curious what your take is so far areas that you like, areas that you think could use some improvement, and maybe areas that you think should be exited. Just curious what your initial impressions are and how the business may evolve especially between the insurance and the reinsurance topic?

Mark Grandison: I think. Yeah. Thanks for that. I think at a high level, the company is extremely well positioned. The platform was purchased on that basis, and the thesis holds. You have to be present as many different, lines of business and including reinsurance to be able to deploy your, cycle management strategy through the cycle, and that is exactly what Vantage is all about. I would just only say that platform can actually grow and, you know, and hire more people and get more products to the overall suite of what we provide to the marketplace. To even be better.

What I like about what I hear from the team is that, all extremely caring individuals, a very, very seasoned underwriting team, knows what to do, what can get anybody in trouble. And really focusing on TrueNorth, which is to provide and create something very unique with excellence in underwriting at the center of everything. So I am really, really impressed by the whole team.

And 1 of the things that we have done over the last couple of months is to really transition from being a PE company to now where it is now with having strong support from parent company to really build for the long term top notch underwriting company, and the whole team is raring to go and very happy with this. I am very pleased with everything I am seeing and hearing from the team and the clients. The clients are really appreciative of what we provide to the marketplace. Okay. Thank you.

Operator: Thank you. Sure. Thank you. Our next question comes from the line of Elyse Greenspan of Wells Fargo. Fargo. Line is open, Eli.

Elyse Greenspan: Hi. Thanks. Good morning. My question's are going to be directed towards Marc on the insurance side. Marc, I was just hoping going back to some of your comments. Right? You were alluding to softness on the property side, right, both primary and reinsurances is really what we have heard across the board. I guess, how are you thinking about pricing, you know, trending there into 2027? And do you think. You know, what could you know, cause a bottoming of the property rates? Do you think it is just a matter of waiting until we see, you know, some really large cat events for the industry?

Or can you envision a scenario where kind of things hit a floor, you know, absent any significant losses?

Mark Grandison: I need to. Thank you, Eli. I think that the answer starts with where will the capital want to be. Right? And we also have opportunities in the marketplace that may change the whole thing. But frankly, people are sitting on, you know, good results for the last 2, 3 years. We have not had major CAT for a while, and people are sort of getting it ever more comfortable with it. So I would echo what the other exec. Chief executives have said on the call that properties, you know, is lining up to be know, fairly competitive. Where's the bottom? I do not know. that is the 1 thing that is always extremely difficult to pin down.

And of course, Eli, as you know, if there was a major event, a major loss, it would definitely change you know, what the market will think about. Our positioning right now is we were not, and we are still not a big property cat you know, specifically for that and focusing on that line of business. And it is not our interest or focus right now going forward because of the softening and where it is relative to where it should be to provide decent return or, you acceptable returns for our shareholders. So our focus is probably more to be on the sideline right now, frankly. And we did not see what happens.

On the on the other property, the non CAT property, I mean, you saw our announcement on the facultative side. Think there is always specialties in areas where we can play in property. That are largely non cat exposed where you can still make money. And this is where we are gonna be focusing our efforts going forward. So to have less volatility and still wait. You know, we still have the knowledge and the expertise and the market knowledge to engage in the market if and when that happens. On the property cat So how long is a piece of string at least? I do not know. Thanks. And then my second question.

You guys have spoken, right, to wanting to grow Vantage. How does inorganic growth come into play to supplement potentially what you guys are, doing on the organic side? I think we have a lot going on right now from an organic perspective and, you know, hiring teams and different individuals with different expertise. So this is really a primary focus as we speak. I mean, of course, if things come from the teams or smaller outfits or, different, you know, different. Maybe some companies even, we are always open for business. This is how we think about the world. But whatever comes to us will have to have to be special. Right? We will have to build.

Bring something that is specialized, that is different, distinct, and also help you know, diversify further what we have in terms of our insurance, you know, liability and insurance assets. So I think we are always open to hear and this So I am talking to the broad world right now. If there are people that wanna find a new home with an economically rational executive team, we are always open for business. But first and foremost right now is focusing on what we have and maximizing and optimizing what we do with the current team that we have. Thank you.

Operator: Thank you. Our next question comes from the line of Eric Borden of BMO Capital Markets. Your question, please, Eric.

Eric: Great. Thanks. Good morning, everyone. Marc, the construction business contributed to the insurance growth premium growth this quarter. I am just curious, within that business, where are pricing and in terms of keeping pace? And then just any thoughts on writing premiums for data centers? Specifically, how do you think about that asset class just given the fluid environment there?

Mark Grandison: So our construction play is really a professional liability led, which is a little bit unusual. So we do some definitely just general liability. Attached to it. it is not a property play at all. And the pricing is great. it is fine, actually. And it is really there is a close relationship. it is a relationship business by and large. You really get close to the to the builders and the and the developers, and you really get to know them very intimately. So it is a little bit stickier and not as open to the market vagaries that we see out there. Okay.

Eric: Thank you. And then on the real side, real estate side, as you look to unlock some capital there as proceeds arrive, you know, what is the pecking or the current thinking on between redeeming preferred, adding capital to Vantage, and then funding Howard Hughes developments in the condo section.

William Albert Ackman: Thank you. Yeah. I think the answer there is you know, I think we are gonna look at that you know, pretty carefully each time we have capital inflows into the business. Ultimately, because Pershing owns the preferred, it will be the board's decision as to whether they wanna redeem preferred or just reinvest more capital in the business. You know, I think on the margin, I think the company would like to redeem the preferred so that it owns more of this valuable business that Marc is really building. And, you know, we are very happy in that circumstance to have our preferred redeemed. We want the company to do whatever is in the best interest of the company.

We own 47% of the company, so our interests are very much aligned with that outcome. But they think the goal is to generate enough capital that we both redeem the preferred and have excess capital for the insurance operation. Alright. Thank you very much. I will leave it there.

Operator: Thank you. Once again, to ask a question, please press *11 on your telephone. that is 11 on your telephone to ask a question. Our next question comes from the line of Elyse Greenspan, Individual Investor. Your line is open, Eli.

Eli Desha: Hi. Good to be here. Marc, as you mentioned before, Vantage has an A- from AM Best. With a positive outlook. And previously, S&P downgraded Vantage and then withdraw its ratings at the company's request. What would it take to get upgraded by A.M. Best and then rerated by S&P? And then Bill and Ryan given Pershing's investment in S&P Global, do you see any potential or perceived conflict if Vantage seeks an S&P rating? Thanks.

Mark Grandison: So I will start with the rating agency question, and we were positive outlook A-, as you noted. You know, there is a plan to for an upgrade. We are working towards that. We have every confidence that it should happen, for the next several quarters. We are looked at upon favorably. This is where we have positive outlook. On the S&P, listen. it is also a very, you know, different structure that they are probably used to. there is a lot of discussions, a lot of trying to understand how everything fits together. So, you know, we are just talking with them. I have been there before.

It takes a while to get people to understand exactly what we are trying to do, and then what we are trying to do here is a little bit unusual. But, you know, over time, I am confident that we will get to where we need to get to with rating agencies.

William Albert Ackman: I will turn it over to Bill. Yeah. So, basically, S&P downgraded Vantage because of almost a formulaic approach that they take because a. Howard Hughes's rating, the S&P rating of Howard Hughes at the time of the transaction was BB, double B. And so when a BB company buys an A- company, you know, they have a formula, and on that basis, they downgraded. Now our view, is that our involvement or Howard Hughes' involvement here is actually meaningfully credit positive for Vantage. And we do not approach. We think substantively not formulaically here, and our job is to work with the rating agencies so they really understand the real credit story here.

I think the steps that we are taking to bring in third-party capital, bring in third-party capital, take capital out of the Howard Hughes business deploy it into the Vantage operation, then it is really gonna look like a Vantage insurance company that has a real estate subsidiary as opposed to a real estate company that has a Vantage subsidiary And I think as we make progress toward that goal, I think that is gonna be materially helpful in terms of improving both the actual and perceived creditworthiness of this insurer.

Obviously, putting more capital in and reducing our exposure to what is perceived to be a more volatile business, in real estate even though we think our real estate business is 1 of the lower volatility such businesses, is going to be helpful to the business. I do not think there is any. The fact that we own stock in S&P Global, I. They are not gonna give us a better rating or a worse rating, I think, on the basis of that. You know, completely separate parts of the business.

And, obviously, if someone could just buy stock in S&P to get a higher rating, that would actually be bad for their stock investment because the company would lose credibility in the ratings business, which is the majority of their of their profits. So with that, let's take the next question.

Operator: Once again, to ask a question, please press *11 on your touch tone telephone. As there appear to be no further questions in queue, I would now like to turn the call back over to Bill Ackman for closing remarks. Sir?

William Albert Ackman: I just wanna make 1 point, which is I think our stock price seems to be very much driven by the short term movements in rates. Just want to make a few points there. So Number 1, of the first things we did when we acquired Vantage was we sold it fixed income portfolio. It was not exposed to interest rates. We own short term treasuries.

If anything, short term rates were to go up, actually, it would increase the profitability of our, all things else staying the same, increase the profitability of our insurance company You know, Howard Hughes financed itself largely with fixed rate debt, although we have some floating rate debt in the condominium, you know, construction related obligations. But even with Howard Hughes, what we have experienced is over the long term, we. The pace of lot sales has been excellent. And it is driven by home sales. We have seen pretty steady home sales.

However, during periods of volatility, when rates spike up, you do see a short term pause in home sales because, you know, people lining up to sign a contract. They are pricing a home on the basis of a monthly payment. And if rates spike up and they cannot get the mortgage they want, they will pause until rates stabilize. And we have seen a pretty consistent you know, if you look over time, we have generated continued large amounts of home sales in our properties and continued demand from the homebuilders to buy our land at increasing prices per acre, and that is been the case for you know, well more than a decade. So I think.

I do not think of our business as particularly interest-rate sensitive. The stock I noticed is down something like 4.5% today on a move in rates. I do not think our business value has really meaningfully changed. And as we have, again, less exposure to. We have less equity invested in the real estate company, more fee income there, more in insurance operation. I think people you know, I think we still trade with the homebuilder kind of universe. And I think 1 of the other benefits of this strategy is that I think the market will look at us more in terms of the value of our insurance operations and our long term investment results.

So that was my sort of last comment. Grateful for your time, and thank you, and look forward to talking to you after the your results are reported. Thanks so much.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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