Bill Ackman's Pershing Square Capital Management has struck a deal to up its stake in developer Howard Hughes Holdings, from 37.6 percent to 46.9 percent.
The $900 million agreement for nine million shares represents a 48 percent premium from Howard's closing stock price on Friday, May 2. The deal is for $100 a share. Along with the increased stake, Pershing will be restricted to 40 percent voting power in the real estate developer, which is involved in both the residential and commercial segments. Also, Howard will be responsible for paying Pershing a quarterly base fee of $3.75 million, along with a management fee that's based on its market capitalization.
As far as operations go, the plan, according to Pershing, is to transform Howard into a "diversified holding company." Howard will continue managing assets, building master-planned communities and making strategic developments.
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The differences now are that Pershing, under the leadership of CEO and billionaire Bill Ackman, can now provide advisory services, investments, ancillary services and identify "hedging macro-related risks," according to the statement. This will help with striking transactions and development. Also, Ackman will serve as Howard's new executive chairman.
The deal has already closed, with Howard's board approving the transaction.
“HHH has built substantial value for shareholders in recent years that has largely gone unrecognized due to the high cost of capital that the market assigns to the Company in light of its pure-play exposure to real estate development and community creation," Ackman said.
"We believe that HHH is a superb platform to build a faster-growing, high-returning holding company that will acquire control of companies that meet Pershing Square’s criteria for business quality and durable growth."
As tariffs and inflation fears fuel uncertainty across CRE, the first quarter for the industry as a whole was mixed, as highlighted in a recent Colliers report. For example, transactions were down 12 percent year-over-year while the dollar volume of $93.5 billion surged 17 percent.
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