Why Howard Hughes Corporation Stock Soared 42% Today

The landowner believes its shares are worth more than what's currently reflected in the public markets.

Joe Tenebruso
Joe Tenebruso
Jun 27, 2019 at 4:30PM
Financials

What happened

Shares of real estate developer Howard Hughes Corporation (NYSE:HHC) surged more than 40% on Thursday, following news that the company may put itself up for sale.

So what

After CNBC reported that Hughes had hired investment bank Centerview Partners to explore a possible sale, the company released a statement confirming that its board is conducting a "broad review of potential strategic alternatives to maximize shareholder value."

These options include a spin-off of a portion of its assets, changes in its corporate structure, or a sale of the company.

CEO David Weinreb said: "Our business continues to perform extremely well across our three core segments, with price per acre of land sold, net operating income, and condo sales all exceeding our expectations; however, our stock continues to languish below its net asset value per share. The Board and management are determined to close the significant gap between our share price and the company's underlying net asset value."

A person pointing to an upwardly sloping stock chart above a flat stock chart

Image source: Getty Images.

Now what

According to CNBC, the board believes that the company may not be well suited for the public markets, since its real estate assets do not produce the type of predictable and recurring cash flows typically found in other real estate investments such as REITs. The stock has struggled in recent years, while other investments within the real estate sector have generally performed well.

As such, Hughes is exploring a sale to private investors and other asset holders who would be willing to pay a price more in line with what the company says it's worth.

The company said that it has not set a timetable for the conclusion of its strategic review and that it will update investors when appropriate. CNBC, however, reported that Centerview Partners hopes to complete its review by the end of the summer.