Howard Hughes Names New Team, Sells Non-Core Assets and Moves HQ
Howard Hughes will execute a transformation plan led by new executive leadership, a $45 to $50 million annual reduction in overhead expenses, the sale of $2 billion of non-core assets and a headquarters move to The Woodlands.
DALLAS/HOUSTON—Following a thorough review of strategic alternatives, the Howard Hughes Corporation will execute a transformation plan led by new executive leadership, comprised of three pillars: a $45 to $50 million per annum reduction in overhead expenses, the sale of approximately $2 billion of non-core assets and accelerated growth in the company’s core MPC assets. Paul Layne, president of the central region, has been named chief executive officer, effective immediately.
Layne will replace David R. Weinreb on the board of directors. Weinreb and Grant Herlitz will step down from the company. David O’Reilly, chief financial officer, will have an enhanced role at the company partnering with Layne to execute on the new plan.
Layne has more than 35 years of diverse real estate operating and development experience. Since 2012, he has been a senior executive at Howard Hughes, most recently serving as president, central region, which includes The Woodlands, The Woodlands Hills and Bridgeland. During his eight-year tenure at Howard Hughes, Layne identified and led the development of more than $1.2 billion of office, retail, apartment, hotel and storage properties in The Woodlands, increasing The Woodlands NOI by nearly eight-fold to more than $104 million in 2019 (estimated NOI at stabilization of $150 million).
As part of the new plan, the company will eliminate its holding-company-type organizational structure and move to a decentralized regional management model supported by a lean corporate team. Howard Hughes Corporation will consolidate its Dallas corporate headquarters with its largest regional office in The Woodlands, driving substantial cost savings and increased synergies. These changes are estimated to reduce overhead expenses by $45 to $50 million per year, of which $40 to $45 million per year will result from a reduction in corporate G&A, and $5 million per annum will result from a reduction in overhead costs allocated to development properties and capitalized under GAAP. One-time charges associated with relocation expenses, retention and severance payments are expected to be approximately $38 to $40 million, and will be predominantly expensed in the fourth quarter of 2019.
The company has identified approximately $2 billion of non-core assets it expects to sell during the next 12 to 18 months. The estimated $600 million of net cash proceeds from the sale, after debt repayment and transaction costs, will be used for share repurchases and development opportunities in the core MPCs. These non-core assets generated $40 million of second quarter 2019 annualized NOI, and are expected to generate $66 million of stabilized NOI.