Master planned-community developer Howard Hughes Corporation (NYSE:HHC) just gave investors the biggest news since the company spun off from General Growth Properties a decade ago. In this Motley Fool Live video clip, recorded on Oct. 22, Fool.com contributors Matt Frankel, CFP® and Matt DiLallo discuss Howard Hughes' massive new community and what it could mean for investors.
Matt Frankel: Howard Hughes Corporation, one of my personal favorite real estate companies. Two weeks ago you heard me interview their CEO David O'Reilly on the show, who gave us some great insight. I wish I had waited a week or two until they announced this new story because I had a million questions to ask them about it. Howard Hughes Corporation just announced that they are expanding their portfolio of master plan communities. They develop these big, large-scale, almost cities from the ground up. It's essentially a real life version of the video game, SimCity, is how the CEO described it to me.
They just announced a 37,000 acre master plan community outside of Phoenix, all vacant land right now. They just paid $600 million for an investment group led by Jerry Colangelo, the basketball guy. I don't know if either of you are basketball fans and know that name. But he was one of the three partners that sold the land. This is their first real venture into the Sun Belt states and by far the biggest new master plan community since they've been a public company after they spun out of General Growth Properties about a decade ago. Matt DiLallo, what do you think of this move? Are you as excited as I am about it?
Matt DiLallo: Definitely I'm. I own Howard Hughes too, just a little small position. But I'm so vague on those Sun Belt migration trend. It's just so amazing to see the numbers and Phoenix is the top market. For them to get land position of this size, it's really impressive and they can build 100,000 homes there, which sounds like a lot. I was looking through their presentation, Phoenix is estimated to grow by 100,000 people per year for the next decade. The demand will be there. They're right in a direction of growth there. They have the opportunity, like you mentioned, from a ground-up to build basically cities from scratch.
They also mentioned that there's some different opportunities. Usually, they build amenities like office buildings and medical centers, schools, but they see industrial real estate, which is another red hot market as being a potential there because of the location. Then single-family rental homes is being another product that they can do there. That's another really, really fast-growing market. I really like this deal for them. This is such a different play from traditional real estate plays where REITs, you're all about the cash flow and the dividend. This is just long term. This is something that you have to buy and hold for decades and just believe in the management team. That's what this is. They've got a great position to monetize and you just have to believe that they can execute on that.