Bill Ackman on Investing, Politics, and Turning Howard Hughes into a Modern-Day Berkshire Hathaway

Episode Summary:

In this episode of The World According to Boyar, Jonathan Boyar sits down with Bill Ackman, the legendary hedge fund manager and founder of Pershing Square, to discuss his latest big move involving Howard Hughes, his unfiltered views on politics, and his growing role as an activist investor. Ackman shares his thoughts on the Trump administration, deregulation, and why he believes reducing government inefficiency could be a game changer for the U.S. economy.

On the investing front, he dives into his bid to increase his stake in Howard Hughes Corporation, his vision for transforming it into a "modern-day Berkshire Hathaway," and why he believes the market continues to misprice the company. He also addresses concerns about management fees, corporate governance, and what his long-term plans mean for shareholders.

Finally, Ackman opens up about his outspoken presence on X (formerly Twitter), why he’s been so vocal on antisemitism and media bias, and how he sees this as part of a larger battle over free speech, democracy, and American values.

This is a must-listen episode for investors, market watchers, and anyone interested in how one of the most well-known investors in finance connects the dots between business, politics, and activism.

Topics Discussed:

🔹 Ackman’s Take on the Trump Administration – Why he believes progress is being made, the risks of moving too fast, and how deregulation could impact everything from defense spending to healthcare.

🔹 The DOGE Initiative & Government Inefficiency – Why he believes slashing bureaucracy and eliminating waste could significantly boost economic growth.

🔹 Howard Hughes Corporation – His plan to increase his stake, take on a leadership role, and turn the company into a diversified investment powerhouse.

🔹 Activism & Media Bias – Why he’s taken a public stance on antisemitism, free speech, and how he believes media narratives are distorting public perception.

🔹 His Investing Philosophy – How he approaches capital allocation, business strategy, and why he thinks some of Berkshire Hathaway’s best days could still be ahead.

🔹 And much more!

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https://boyarresearch.substack.com/

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Biography:

Bill Ackman is the CEO of Pershing Square Capital Management, L.P. which he founded in 2003. He is a member of the board of Universal Music Group N.V. (NA:UMG). 

He serves as a member of the Investor Advisory Committee on Financial Markets for the Federal Reserve Bank of New York and as a member of the Board of Dean’s Advisors of the Harvard Business School. 

Mr. Ackman is co-trustee of The Pershing Square Foundation, part of Pershing Square Philanthropies, that bets on innovative leaders solving humanity’s big societal, environmental, and health challenges. 

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Chapters

• 5:00 Introduction to Investing with Bill Ackman
• 15:30 Activist Investing and the Howard Hughes Proposal
• 45:00 Bill Ackman on Politics and Economic Policy
• 1:10:00 The Importance of Diverse Perspectives
• 1:30:00 Insights on Investment Strategy and Market Trends
• 2:00:00 The Future of Howard Hughes Corporation

Transcript

Jonathan Boyar (00:05):
 
Welcome to the World According to Boyar, where we bring top investors, bestselling authors, and business leaders to show you the smartest ways to uncover value in the stock market. I'm your host, Jonathan Boyar. The following is provided by Boyar's intrinsic Value Research and is for general informational purposes only and should not be construed as investment advice. Any opinions expressed herein represent current opinions of Boyar Research only. Boyar Research assumes no obligation to update or revise such information. Investing in securities involves risk, including the possible loss of principle. Past performance does not guarantee future results. Employees of Boyar Research or clients of an affiliate may own shares in any company discussed. Bill Ackman joined the World According to Boyar to discuss the Howard Hughes transaction, but this conversation went far beyond just investing given his reputation as not only one of the most successful investors of our time, but also a vocal figure on a range of controversial issues and the social activists. I saw this as a great opportunity to not only discuss the deal but also explore his broader perspectives. I'm a firm believer in free speech and the value of hearing different viewpoints whether I agree with them or not because that's how real learning happens. You may strongly disagree with some of Bill's views or you may find them thought provoking either way. I believe understanding different perspectives is essential, especially when dealing with complex and emotionally charged topics. With that said, let's get to the episode. I hope you enjoy the conversation.

Jonathan Boyar (01:38)

Bill, welcome to the show. Thank you so much. Thanks for being here. I know you're here to discuss your proposal to increase your stake in Howard Hughes. That's the main part, but I'd love to spend some time just talking about some other issues that you've been quite vocal on that I think are really important. Of course, happy to. Let's start with something non-controversial politics. We're about a month into the Trump administration at this point. It feels like a year. What are your thoughts so far? 

Bill Ackman (02:07):

I would say as expected, and I think a lot is being accomplished very quickly. I've not seen more energy, speed of execution and evidence that what he campaigned on he's going to execute on, I think according to plan, maybe even to a greater degree than anyone could possibly have expected. Jonathan Boyar (02:24):
 
Is there anything that he's done in particular that you are, this is great. He's gotten it right. He's nailed it. 

Bill Ackman (02:30):
 
There's certainly things like getting hostages home, which began a week or two before he took office and his approach there. The results speak for itself. That's clearly something where a lot of time passes and with a few strong words from the president, the hostages started coming home. I think that's a major, major success story. I think sticking with Middle East and geopolitics, Iran was on the brink of launching a major attack on Israel. They were putting out campaign videos showing ballistic missiles soon to be launched against the country around. Went very, very quiet as soon as Trump won the election and things have been much, much quieter in the Middle East. I think the US has kind of reasserted its authority as a strong power globally. Trump, he said he would end it bit of hyperbole and end the war in Ukraine in a day, but I think he's going to end it and I think he'll end it on terms that work.

(03:19)

I doubt both parties will be happy or would certainly acknowledge that, but I think it's going to get resolved in a way that will save lives. It'll enable Ukraine to retain it sovereignty, so I'm very bullish on that. I think DOGE has been an incredible effort. It makes a lot of sense why the deep state is pushing back as aggressively as they are, but I think it's an absolutely necessary thing that needs to happen. Just to give you a crazy example, Musk, it is normal. Tell me what you've been up to for the last week and just send me five bullet points. The notion that government workers would protest that but or at least some subset of them as opposed to just running a little note back saying's what I've been up to for the last five days speaks to some of the dysfunction in Washington.

(03:55)

 I don't think the American people have a lot of tolerance for it. I think there's enormous support for DOGE. I think everyone knows there's enormous waste and I think DOGE is going to go beyond eliminating waste. It's also going to eliminate a lot of regulations that are holding back the economy, so I'm very enthusiastic about what's been accomplished so far. They'll make some mistakes working as quickly as they're working, but dismissing people who oversee the nuclear arsenal accidentally or whatever, they fix that pretty quickly. Okay. That's the risk of going quickly, but it's about time we fixed our air traffic control technology. I'm very common. It happens with oversight from our CTO and Chief Mr. Musk. 

Jonathan Boyar (04:32):
 
In terms of DOGE, do you think it can actually make a meaningful dent in the deficit? 

Bill Ackman (04:38):
 
Yes, 

Jonathan Boyar (04:38):
 
Enough to affect treasury prices? 

Bill Ackman (04:41):
 
A big part of it is we've been operating in administrations where there's been no regard for how much debt we put on the country. No one cares. This is the first time I ever sent any kind of cost effort of consequence. Actually, Clinton made some progress in this regard years ago, but this I think is an even better effort run by the best probably private sector person who could possibly run the effort and a crack technology team. I'm excited about it. 

Jonathan Boyar (05:08):
 
At the end of the day though, isn't it really just about entitlement reform, otherwise we're still in the same nets? 

Bill Ackman (05:13):
 
Look, I think there are intelligent entitlement reform things that could get done and should get done, but there's also a lot of waste and fraud and abuse. No one is opposed to that. If indeed there are people receiving social security checks that are dead, I guarantee there are. That is true, and Medicare talk about the healthcare system is ripe with fraud, waste and abuse and the government is the biggest buyer of healthcare, so it's being taken advantage of the Defense Department. I think the new defense secretary is also very focused on this issue and I'm sure we're not spending defense money intelligently. A lot of the way these programs are done, you build the F 35 and a portion of the plan comes from every state in the country and that's how these things get done, and by the way, producing a plane where one part comes from every part of the country is not the most efficient way to produce a plane and query whether we need as many manned. I'm sure the F 35 is an unbelievable plane and there's a place for it, but I think the future warfare is going to be much more like unmanned drones, much more andro and less Lockheed Martin. 

Jonathan Boyar (06:13):
 
If you were a pharmaceutical company now, would you be scared? The US has really been subsidizing the world for the last 30 years. 

Bill Ackman (06:21):
 
I would be scared if I was doing something wrong. I would be prepared to be agile and nimble in light of the changes that are coming. 

Jonathan Boyar (06:30):
 
Obviously he's done a lot of positive things. Anything he's gotten really wrong in your opinion? 

Bill Ackman (06:35):
 
It's sort of too early to say. Trump is sort of known for saying stuff that obviously gets headlines, scares the shit out of people, but there's generally a method to his madness. Recent comments about Ukraine I think really have scared people, but when the United States has invested a few hundred billion dollars in supporting Ukraine and the United States has said, Hey, you know what? There's a way that Ukraine can pay us back where it's a win-win and maybe there's a deal to be made and a joint venture on certain assets that are important to the United States government and he gets blown off publicly by the president of Ukraine. You can expect Trump to be angry and to say some words that scare the daylights out of these landscape regime and magically you wake up in the morning in the newspaper, there's a deal, so there's a method to the madness as I've figured out over time, and so you sort of ultimately judge Trump by not words so much as actions and outcomes. I think it's made a lot of progress. I'm very supportive. 

Jonathan Boyar (07:28):
 
Speaking of support, you've been a supporter with some hesitation of RFK Junior. I love what he's doing for nutrition. I think it's long overdue. That scene skepticism has me a bit concerned. How do you square those two things? 

Bill Ackman (07:42):
 
I'm an RFK fan. That doesn't mean I think that everything he believes is true. I'm a person who believes we need to very carefully reassess the approach that we've taken to vaccines, the exemption from liability that we've given to drug makers and what that has led to, which is a proliferation of the vaccine schedule for kids without any study of the cumulative impact of all of these vaccines, the age of which we give kids combining vaccine shops giving to an infant at the time of life, they receive it, the risk versus the reward. Having recently gone through this experience with a five quarter year old child, the day our daughter was born, the nurse injected her with hepatitis B vaccine. Hepatitis V is transmitted generally sexual transmission, intravenous drug users, not something that my daughter was likely to be exposed to. Why pick the first day of her life to administer this vaccine where there can be side effects?

(08:36)

They tested the mother, they would not have given her this vaccine, but my understanding is Merck was not successful when they rolled out this drug to the targeted population, so they convinced a bunch of regulators to make it mandated for children because that would reduce the impact of hepatitis B and the degree of safety study, the number of kids it was tried upon. If you read package label, it's frightening. It's something like 184 infants to 10 year olds were tested with the vaccine and they followed them for five days after administration and that was the extent of what was required before the FDA gave authorization and the whole thing seems crazy to me, so it's something you study carefully. Now, the risk when you raise any questions that a whole bunch of people decide they don't want the polio vaccine or the measles vaccine, that's just something he needs to manage very, very carefully. 

Jonathan Boyar (09:21):
 
In terms of managing, where do the Democrats feel from here? They really put themselves in a poll. 

Bill Ackman (09:27):
 
Democratic party needs a complete reboot. The problem is that leadership and people in power generally don't like to give up power, but this is a case where a lot of people need to resign in disgrace party needs a complete reboot. They continue to double down on all of the mistakes and policies that were made before. If I remember the Democratic Party, the leadership, I would be saying we love this effort to eliminate waste, fraud and use in our government. DOGE is great, we just want to make sure there's some checks and balances. Please keep us informed as opposed to marching and opposing and telling staff members not to respond to emails, stuff like that. That's just sort of one of many, I don't think of myself ever really as a member of a party. I don't think of myself as a member of the Republican party. I have had to check a box in order to vote in New York City on occasion, but I've always been kind of a centrist. I like to vote for people I think are the best candidates regardless of political affiliation, but Democratic Party has not done a self-service in the last four years and probably longer than that. 

Jonathan Boyar (10:26):
 
In terms of the best candidates, do you think the Democrats just missed a golden opportunity after Biden dropped out? Could they have nominated someone amazing. 

Bill Ackman (10:37):
 
The best opportunity they had was Jamie Dimon I think wanted to be president but didn't want to go through the rigamarole of running for office. I don't know if his family would've let him, but it was sort of an interesting moment where he could have ran a hundred day campaign, he would've had a real shot. Instead, they put up one of the worst candidates. We've had every decision lying to the American people about the health of the president, cognitive health in particular of the president, and then the coup over the weekend. They should have run a process, some kind of open primary process, some kind of debate thing where different candidates would have a shot to compete, but that was not done when people used to smoke. They called it smoke-filled rooms. You can't call it the Democratic Party anymore and people now call it the Democrat Party. I would say I call it the anti-Democratic party. That's really what it's became 

Jonathan Boyar (11:23):
 
In terms of politics. You hinted that you wouldn't serve if you were needed. Does Treasury Secretary Ackman have a good ring to it or 

Bill Ackman (11:32):
 
Not for a very long period of time? We'll segue at some point. The Howard Hughes transaction, my long-term ambition has always to been to have a better record than Buffett. It's what I said when I started in this business. He's 94. In order to be competitive, I got to be at this for another 36 years and I can't get distracted by stint the Treasury Secretary. The good news is there are a lot of other very talented candidates. 

Jonathan Boyar (11:53):
 
We're going to talk about HHH in one second. I just wanted to go through one more category that you've been a leader on. It's something I really appreciate. It's a tough subject, but you've been waging what I think is the most important activist campaign that you've ever done via x on what happened on October 7th and beyond. Jews are losing the PR war, big time tiktoks full of anti-Semitic propaganda. The newspapers have unfavorable coverage. What can be done to turn the tide in the PR war? 

Bill Ackman (12:26):
 
I'm a very big fan of X because it's an open platform. An antisemite could make their case, but so can someone who I think is on the right side of history. I try to be objectively on the right side of truth. You could say I'm biased because I'm Jewish, but I just look at the facts on the ground and try to be as objective about it as I can be. And I think there are other important voices out there. Doug Murray is an extremely important voice. He's not Jewish. Aaron Molen has been a very important voice on the subject. Also not. I think it's much more powerful when someone is supporting the Jewish people when they're not Jewish. I have a conflict. The problem with conventional media is that the stories you read are the ones the editors choose and edit and the editors are hired by people who control the publication.

(13:13)

 And one of the privileges of controlling a media publication is deciding what stories get printed and how they get printed and how they get edited and so on and so forth. And the result is that what you come to learn over time is the reason why you thought Biden was cognitively healthy is because the publications you read told you that even though it wasn't true. If that's not a moment for people to reassess how they're getting to the truth, I don't know what will be. My journey on Twitter probably started when I signed on seven, maybe eight years ago. I don't remember exactly when, but you can learn a lot by following people who agree with you and you can learn a lot by following people who disagree with you. And I try to do that on pretty much every issue that I'm involved in.

(13:49)

And then you see who've got the best evidence, who makes the best arguments, and that's how you get to the truth. And I think Jewish people are a tiny percentage of the world, 0.2% of the global population. Jewish people have made a major contribution of the world, whether you look at the percentage of Nobel laureates or the many very successful businesses that comprise the s and p 500 that employ millions and millions of people that have changed the world. Think of the founders of Google, think of the founders of Home Depot, think of the founders of other amazing businesses that have made important contributions. So I think Jewish people made an important contribution. I think Jewish people are extremely philanthropic relative to their means versus other people and we're kind of batting above our weight class. The good news is I think the majority, vast majority of the country is not antisemitic and believes in respecting people regardless of their ethnic or religious beliefs.

(14:41)

Those are American values and I think a lot of the anti-Semitic stuff actually when to dig deeper is really anti-American stuff. And I think people realize that people protesting on campus, the pro Hamas protestors are not just anti-Israel and not just anti-Jewish people, they're they're anti-democratic system, they're they're anti the values that our country stands for. I view this as a battle for America, the United States where Jews tend to be kind of an early indicator of a problem in the sense that when antisemitism blows up in a country, it's usually an early indicator of fundamental problems. And you can look at obviously many examples in history beginning in Germany 80 years ago, 

Jonathan Boyar (15:24):
 
There's probably more antisemitism than you're giving credit for. I mean today they've buried Theba family, obviously a horrible tragedy. When the world found out they were murdered, the silence on social media was deafening. When Israel does a legitimate military striking Gaza and civilians are killed front page news, does that go back to what you were saying before about the publishers? 

Bill Ackman (15:49):
 
It really relates to who controls which media publication you're reading. Our enemies have been funding protests on campus that is explicitly and empirically known today. Yes, it's in the best interest of our enemies to try to undermine our country. I think it should be illegal to pay people to protest. I've been protested on the DEI issue for example, and there are a bunch of protesters who come in front of my building every Thursday from 12 to two and they get paid to do it. And look, I'm happy they have jobs. They have no idea who I am. I've walked through the protest. They have no idea who I am. They're clearly not knowingly protest me. There's a quid pro quo if I want them to go away, I got to make a payment to this nominal NGO philanthropy and I'm just not going to do it. It's not the way I operate, but there's a lot of graft corruption propaganda to try to create a narrative which is funded by people whose interests are not in the best interests of America. 

Jonathan Boyar (16:41):
 
Now, main event, Howard Hughes, you're proposing increasing your stake in the company. It's a long involved saga dating back to the financial crisis. Can you just give us a quick overview of how we got here and what your proposal is?

Bill Ackman (16:57):
 
The background here is November, 2008. We're in the middle of financial crisis. Markets are blowing up and a company called General Growth Properties stock declines over a several month period from $63 a share to 34 cents, 99.5% or so decline. And this is the second largest shopping mall company in the country. They own Class A malls. These are the best and most beautiful modern malls. And interestingly, the net operating income, which is kind of a financial measure performance for real estate company, actually grew year on year between 2008 and 2009, and the occupancy percentage occupied of the mall increased over the year, but the stock price is down 9.5%. But that's sort of an interesting contradiction and the reason why the stock price declined so much is that the company was on the brink of bankruptcy because they couldn't pay their debts when they were coming due and they had financed themselves principally in the C MBS market.

(17:52)

These are mortgage backed securities. They had relatively short-term debt, were very aggressive in the way they financed themselves, and that debt was coming due within 18 months and something like two thirds of the 27 billion worth of debt was coming due within two years and the world knew they couldn't refinance it because that market is shut down. We said they're going to go bankrupt. Every other company went bankrupt. The shareholders lost everything and as a result, the stock trade or it did, what we did was we studied the bankruptcy code just to make sure, I said, well, why can't there be a recovery and a bankruptcy for shareholders? The assets are worth more than liabilities isn't the hierarchy of claims and bankruptcy is supposed to work that way even though it hadn't in the public markets before. I thought this was a perfect test case and with advice from some good lawyers who agreed with our understanding of the law, we bought 25% of the company in the open market started at 34 cents a share, probably paid up to a dollar.

(18:40)

Average cost was something like 60 cents. We paid 60 million for 25%, so 240 million for the equity of the company. It had 27 billion of debt, so 99% debt, 1% equity. That's the kind of leverage. If it works, it works. And then I lobbied to get on the board, eventually got on the board of directors after the company filed for bankruptcy, and then I let it restructuring for the benefit of not just the creditors but the shareholders, which just never happens because the distress funds by the debt trading at pennies on the dollar, 30 cents for the unsecured debt, 10 cents for the converts, and there was plenty of value to go around. Part of the way we unearthed value, it's one of the things that took general growth down was they had this master plan community business where they relied on cash from lot sales in part to cover their debt service.

(19:25)

And when the financial crisis happened, people stopped buying home builders stopped buying lots because they didn't have any money, people were stopped buying homes. The result of all of the above was I said, Hey, if we're going to make this company emerge, it will trade a lot better if we get rid of all the ancillary stuff. We took all the ancillary stuff, we stuffed it in a new corporation. General growth had purchased the Howard Hughes Corporation from the Rouse Company, or they had purchased the Rouse Company, which in turn owned Howard Hughes, which in turn owned downtown Summerland in Las Vegas. Howard Hughes was a noted real estate investor owner. This was sort of a sideshow to our general growth investment, general growth stock. If you had held it from the time we bought to the peak when we spun off Howard Hughes, it was almost a hundred fold return.

(20:05)

Howard Hughes became sort of this work in progress. We hired a very entrepreneurial management team and we owned a jumble of assets, took us years to figure out the right strategy. We bought out the Hughes, that owned half of the Summerland asset. We bought up Morgan Stanley real estate fund that owned half of the Woodlands. We bought a Blackstone Brookfield and Fair Home that were initial investors with us in the company, but again, it was a sideshow. We did this transaction and we made a ton on general growth, but in order to do that, we had to spin off the stuff. In the early days, people got excited about Howard Hughes stock stock went from 47 to like $150 a share. The story in the street was we're going to turn it into the next Berkshire Hathaway. And then when that didn't happen, the stock went back down.

(20:44)

It's always seemed to trade based on the worst performing asset we own. What's unusual about Howard Hughes is it owns open air retail, it owns office buildings, it owns apartments, it owns storage assets, but most significantly owns land two thirds 70% of the value of the company, at least the way that calculated by the management team is land, commercial land and residential land. And this land is not just scattered around the country, it's in what we call master plan communities. I call them at this point, the big ones master plan cities because they have high rise office buildings and they look like real cities. And the business of the company is being the benign manager of these small cities and office buildings when tenants need space and building apartments when people move in, selling lots to home builders. It's a very interesting business, but it's like a 50 year story and a public market that wants to know how you're going to do next quarter.

(21:37)

And actually the company's announcing earnings tonight. I think the earnings calls tomorrow, but the earnings for the quarter never really mattered for this company for the year. They don't really matter. There isn't an earnings per share metric that you can really rely on and think about the value of the business. So the company's really struggled to find a long-term shareholder constituency. The stock has always traded at a very deep discount to management's estimate of net asset value, 40% or so a discount. It's sort of been a bit of an outlier in our portfolio because we own, for the most part, mega cap and large cap companies were minority shareholder and influential minority. And we've sort of had this Howard Hughes thing and for years we'd tried to figure out what to do with it and finally we said, look, no one's going to care. We spun off the South Seaport assets.

(22:18)

We did the same thing to Howard Hughes that we did the general growth. We're like, okay, the overhang is we own this loss making part of New York City downtown. We own a baseball team modeling team. We own a baseball stadium, we own some air rights. No one's giving us value for this stuff. Let's spin it off on a new company. But as importantly, let's recruit a management team that's well served to maximize the value of these assets. And we hired a guy named Anton Emus, really from the Las Vegas casino world entertainment world, gaming world, and we think he's the right guy to fix our little company, but our assumption is once we responded off magically, this would be the last thing we needed to do to get people to focus on the Howard Hughes story. And Howard Hughes stock went down after he spun love.

(23:01)

 Why? Because interest rates have gone up, mortgage rates have gone up, people are concerned about what's going on. Home builders in a higher interest rate environment, there is some concern that some combination of tariffs, the volatility of the Trump administration will lead to an economic downturn and people worry about lot sales and environment like that. The company also has its biggest and income producing asset is office space or office assets and the work from home movement, hopefully it's starting to head bearish on work from home now, but still office assets are not the favored asset class and the stock has kind of languish was languishing in the low sixties and we said, look, maybe we should just take it private and own it for that very long term. And that's what started this journey. That was August 6th when we filed our 13 D and we hired Jefferies and we ran a process to raise enough capital to take the business private.

(23:53)

Ultimately after a several month process, we did not have anyone come forward to say, okay, I want to lead this thing. We had some people expressed interest in possibly participating depending on the terms. We struggled to raise the money we needed to do this transaction and we went to plan B. Plan B was, okay, well maybe we leave the company public and we buy a bigger stake. It's not going to make it as a pure real estate company. I've always had this ambition to build a rival, if you will, to Berkshire Hathaway. Let's create our own modern day version of Berkshire Hathaway and we'll make Howard Hughes the real estate assets, the base, and we'll build off there. And our transaction that we've proposed, which is a simpler version of the first one is simply we'll just buy more stock in the company. We'll buy another 10 million shares that will take us from 18.9 to 29.9 that will give us 48% of the shares. I'll take an executive role along with Ryan Israel and Ben Hakim, three of the key principles, three members of the Pershing Square investment team, and we'll use the cash that we put into the company to start acquiring non-real estate related operating companies and businesses that meet our criteria. And that's the basic idea. 

Jonathan Boyar (24:59):
 
Are you planning on buying minority stakes the way Buffet does where he'll buy X amount of Coke and just sit there? Or do you want to buy controlling interests or both 

Bill Ackman (25:09):
 
The nature of a USC corporation operating company in order to maintain that status and not be an investment company? The substantial majority of your assets have to be in controlling stakes or a hundred percent stakes in public and private companies. So that is our business plan on the margin could be owned a minority stake in something. It's possible, but it would more likely be a minority stake on a path to control. So Purchasing Square today has one strategy, which is we have a number of funds they all invest in the same companies, which is we buy minority stakes in Google, let's say, or an Uber. We're an important influential shareholder. We're not a controlling shareholder and we own those stakes for the long term, but liquid public stakes companies, the strategy of Howard Hughes if this transaction goes forward is for us to buy smaller, principally private companies or controlling interests in small cap companies. Certainly that's how we'll start. 

Jonathan Boyar (25:58):
 
So you're going to buy controlling interests in private businesses. One of the problems that HHH has now is people don't know how to value it. It's complicated. They have to do a ton of due diligence. Why is this time going to be different if you own a bunch of stakes in pretty much privately held businesses? 

Bill Ackman (26:19):
 
So one, we'll have very good disclosure and I think we'll do a good job explaining what we're up to. Two, I think our track record is public, but we've had an excellent track record in doing so. And most importantly, we think there's a large base of investors who want to invest alongside us and we'll trust our judgment. They'll trust but verify and they'll understand the strategy as we explain it to them. The problem with a pure play master plan community company, it has enormous exposure economically to interest rates home building and also it's not an investment grade company that has continuous access to low cost capital. I think Howard Hughes an amazing business, but it should be part of a portfolio of businesses. And again, there's precedent for what we want to do here. I said a modern day Berkshire Hathaway, but we could also throw in Acadian National Corp into the mix.

(27:05)

I'm a big Joe Steinberg fan, an incoming fan of Blessed memory. Joe is still with US Activities now shares Jefferies. They do a good job explaining their business to shareholders or they did when they ran it as Acadian National and the stock did very well over a very long period of time. The key is compounding intrinsic value of the business and the stock will trade plus or minus to that intrinsic value over time. And as the manager of that business, my job as Chief capital allocator will be to make sure that we take advantage of opportunities that present themselves. I do think there's a lot more hope for a diversified holding company that we just invest where a management team has come and invested 900 million of their own capital and put a stake in the ground that we're going to build this into something interesting and have a good track record for doing so. We have an amazing team whose background is actually doing precisely this private equity. If you look at the Persian Square team, it's Blackstone, KKR University, Helman Friedman work with Pincus Apollo. It's a team that was trained in private equity. We haven't been able to use those resources and now we will have a platform to do that. 

Jonathan Boyar (28:08):
 
So you're going to diversify it away from the master plan community business. Let's say 3, 5, 10 years from now, what percent of the value of the company would you envision being MPCs versus whatever it is you buy? 

Bill Ackman (28:23):
 
Well, I expect the MPC business to continue to compound at a nice rate over time, double digit rate over time. Our plan is to continue. The team there is excellent David O'Reilly. Carlos run that operation and as importantly, the presidents of our various MPCs have done a fabulous job as kind of chief developers. We love that business and that business was going to continue, so we're not like talking about liquidating that business and repurposing the capital elsewhere. So that business is going to grow. And then we have 900 million of capital that we're going to use as equity to invest in businesses that are probably more likely to grow at a faster rate than a real estate MPC business can grow at. And depending on how quickly we deploy that capital and what kind of businesses that will affect the mix 10 years from now, majority of the assets will probably be other than the core current MPC business. That's not to say we won't do other really interesting real estate transactions if they come around, but I do think the focus here is going to be on operating companies that generate recurring and growing cashflow streams that meet the Persian Square standards and we put out our investment principles pretty publicly that kind of meet our investment principles. 

Jonathan Boyar (29:30):
 
And you're going to be the CEO. Do you imagine yourself more Buffet or Greg Abel in terms of getting involved in the individual businesses? 

Bill Ackman (29:39):
 
The way we've approached investing companies today is we don't want to be in a position to have to run the day-to-day operations of any company in which we invest. What we want to do is make sure that the right person's running it. So Chipotle, Steve ELs needed help. We bought 10% of the stock. We joined that board. We recruited Brian Nichol to run that business. We brought Hunter Harrison, Canadian Pacific. We brought Cefi Kissemee to air products and I would say more recently we found companies that already had excellent management. We're big Dara fans at Uber. We really like really the management teams of all the companies that we are shareholders of today. The key for us is finding someone who can run the business. Our job is to oversee how's management doing, make sure they have the right incentives, make sure they make the right capital allocation decisions.

(30:25)

But we view our job as more chief capital allocator. Maybe we focus on designing compensation incentives and then making the hard decision sometimes to replace a leader, but we don't run the businesses date. So Greg Abel I think of is more of an operator now you're going to have more of an operator in charge of Berkshire and I think there's a lot of value that can be created at Berkshire with better operations. I mean Burlington Northern, for example, is the biggest railroad, but it's probably the least efficiently operated of all the railroads. I think Buffett is reluctant to in any way get involved in fixing companies and he has CEOs that he probably should have replaced years ago. I think the next generation of leadership will be a little more disciplined about making sure the right people run the companies. But we view our role as capital allocation, certainly beginning of life of this company, identifying transactions, executing on them after we do proper due diligence, making sure the right person's running them, giving them right incentives and letting them do their thing. 

Jonathan Boyar (31:19):
 
We'll be back with more in just a moment, but first, a quick break to tell you about the Boyar Value Group. Since 1975, the Boyar Value Group has been uncovering investment opportunities in the US stock market utilizing a private equity approach to public markets, whether it's through our institutional research product or money management services. Our goal remains the same. Finding value where others aren't looking, want to learn more, visit Boyar value group.com, check out our Substack or follow us on Twitter @boyarvalue. Now back to the show, going back in terms of the discount that we were talking about and conglomerates traded a discount. You have a European listed fund that's done quite well over time, but it trades at a perpetual discount. I mean a significant, I mean if you really wanted to buy Howard Hughes cheaply now you just buy part of your fund there and get it a 30% discount, you have a huge following on Twitter or X, whatever you want to call it. How come you haven't been able to close that gap and why is it going to be different this time? 

Bill Ackman (32:27):
 
Imagine theoretically, there's a closed-end fund that trades in Europe that's managed by a US investor that invests in US securities and therefore the principle market for that you would think absent it being offshore, would be US investors. But for regulatory reasons, that entity can't be in the United States. It has to be offshore. So that's one problem. But the bigger issue is that the tax consequences for a US investor investing in an offshore closed end fund, in fact one that has very low tax basis and its assets are very negative. For example, if an investor invests in an offshore closing fund and its basis in company ABC is $10 a share and the stock today is a hundred and they buy today and that stock ends up being sold by the manager of that closed-end fund, the new investor gets $90 of gain even though they didn't experience any of the appreciation in the stock.

(33:20)

So imagine there's a closed-in fund with the basis and the underlying assets is a fraction of where the stock trades on that issue alone. It makes it impossible for a US investor to own it. And then imagine the US regulator says, I don't like American investors, particularly retail to invest in offshore hedge funds. And so the regulator makes it very difficult for brokerage firms to allow their clients to buy it. And then imagine that entity does extremely well the last seven years and compounds at mid twenties and it grows to become the second largest close end fund of the world. So the supply has increased massively, but the principle source of demand has been eliminated due to tax and regulatory reasons. You would expect a discount to emerge and a wide one over that period. Compare that to a USC corp where anyone can own it.

(34:02)

You can buy one share or you can buy a fractional share through Robinhood or one of these other sites, but one share for $74 and anyone can own it really without restriction globally. The universe of investors that would like to find another Berkshire is much broader. Ryan and I gave a talk at Berkshire Hathaway meeting last year. We're going to go back this year and we opened it up. That was sponsored by UBS. We had 300 seats in the room and the Sikhs disappeared. Embarrassingly to say over Taylor Swift concert, we had to have security keeping people from banging down the door. So Sing Square has an unusual following among investors, among retail investors, among institutional investors, and I think that group would love the opportunity to invest alongside us, not in a hedge fund where they're restricted to invest or it's illiquid. You have to lock your money up.

(34:49)

But in a public vehicle where we offer a bargain arrangement from a compensation perspective for the first time, we don't charge a 20 or 16% incentive fee. We did a spaces, which I'm sure you listened to about this transaction and we had 2,500 or so principally retail. There are probably some institutions, hopefully many asking questions and making comments and it was like a Berkshire meeting in a way. And I think that is a likely base of shareholder demand for this entity and I think it's the base of that shareholder group. Retail is the largest base of demand for any company. Ultimately vastly overwhelms the very niche market of people who want to invest in a pure play master plan community company that has a very small market cap and public flow. 

Jonathan Boyar (35:34):
 
Have you ever done an analysis of let's say your Twitter followers or whatnot to see can they really buy a meaningful amount of shares? I don't know what kind of information Twitter would give you. 

Bill Ackman (35:44):
 
I think it's something they need to work on. I would love to know more about my followers. 

Jonathan Boyar (35:48):
 
Clearly 1.6 million, some of them will be able to buy lots. Others, maybe it's a share. 

Bill Ackman (35:55):
 
I think all of them can own it. I mean, well, here's one fun way to look at it. The public float of Howard Hughes, we own 18.9 million. I've call it 50 million shares or 31 million shares. So if each of my followers buys 20 shares, that accounts for the entire public float. 

Jonathan Boyar (36:10):
 
Last year, Pershing Square Capital Management, which is different than Pershing Square Holdings, you announced a sale for about 10% for a little over a billion dollars at the time you announced the proceeds were to be used for anchor investments fund launches. Did you have HHH in the back of your mind when you sold these shares? 

Bill Ackman (36:30):
 
We thought of it after that transaction close. 

Jonathan Boyar (36:33):
 
You don't seem like someone who would have trouble raising money. I know you had difficulties with the close end fund, but that's for other reasons. Why would you need to sell shares in your company in order to have anchor investors? It seems like you would've no problem attracting people on their own. 

Bill Ackman (36:49):
 
There were several reasons why I sold an interest in the management company. The principal one was in the world where Bill gets hit by a pie truck. Number one, I want Pershing Square to survive. And two, I didn't want my wife to own an interest in a private hedge fund as her principal asset. I thought the biggest proof point that Purchasing Square can survive bill getting hit by a pie truck. If I can convince a group of sophisticated investors that there was enormous depth to the purchasing square organization, that Ryan is a superb CIO, that business functions very differently today than it did 10, 15, 20 years ago. So I achieved that objective by bringing in a group of sophisticated investors, 20 odd family offices, six or so institutions. And from the moment that it came in, I've been running it as if it were a public company in terms of the nature of the disclosure, we're operating with an independent board of directors. Again, I'm hoping to live a very long time, but it's that kind of a plan. We didn't really want to take money off the table. I weren't looking at cash out. 

Jonathan Boyar (37:44):
 
I run a money management firm and a research firm. I speak to a lot of managers and we've written favorably about Howard Hughes for too long. 

Bill Ackman (37:53):

Too, huh? Bill Ackman (37:55):

Jonathan Boyar (37:55):

Hasn't been one of our better Bill Ackman (37:56):
 
Calls. Howard Hughes is like waiting for Gau if you saw the play.

Jonathan Boyar (38:00):
 
Yes. In terms of two complaints I'm hearing, and I'm not part of any group or any of that kind of stuff for my compliance people, but it's price and the management fee. And actually a third that emerged, I wrote a letter. I thought I did it in a respectful way. I guess I did because you appeared on the podcast voicing my displeasure on the deal. So there's two things. It's the price, it's the management fee, and now lack of a shareholder vote, which people are really upset with. I mean if you were in my shoes, how would you view 

Bill Ackman (38:38):
 
Them? The good news is the same three issues you've identified. We've heard 

Jonathan Boyar (38:42):
 
These are not new to you.

Bill Ackman (38:42):
 
The reason why I was late for your podcast is I was writing a letter to the special committee on exactly those three issues, which I should just post on your show. Let's talk about price number one, we're not taking the company private at $90 a share. To be really clear, we're buying an additional interest in the company at $90 a share. And what people say is, oh, well, management's estimate of net asset value is one 18. Why should the company sell stock at 90? That's the question. The answer is really several fold. So number one, let's talk about the management's estimate of NAB. So I think it's useful to track management's estimate of NAV for Howard Hughes because it's a measure. It's kind of a yardstick of measurement. I don't think it's ever been a yardstick of measurement where the stock's going to trade.

(39:22)

It's been a yardstick of measurement from where the stock has traded at a very significant discount and the discount's been about 40%. Management puts out an estimate, the stock's been around 38 to 40% discount to that measure. And I think what people are doing is they're conflating that measure of NAV for Howard Hughes with the same measure of NAV they use for all the other public real estate companies, which are basically real estate investment trusts. And in the case of the real estate investment trust, NAV is a very good measure of intrinsic value. Why the evidence, if you look at Green Street, is probably certainly the most respected analyst in the real estate space. And if you look at their estimates of NAV for whether office or retail or apartments, and you look at it over time, the Green Street estimate versus stock prices and the estimates is kind of moved around over time and there was sort of a band, sometimes the REITs trade above, sometimes the REITs trade up.

(40:15)

In fact, we did a chart in our presentation that showed how REITs have traded relative to Green Street and enemies over time. And it's almost like the value is tethered to entity. And the reason why that happens in the REIT space and with apartments and office and apartments is because if the discount gets wide enough, there's things you can do about it. Blackstone years ago, but something occasionally even now has been a big buyer of REITs when they trade a deep discount to vie there's a value in locking thing that can happen. Why? Because a Blackstone can buy a reit, they could liquidate it, they could sell off apartment complex by apartment clocks and get back NAV minus some transaction costs, which are relatively small unless there's a lot of debt at a bad price, or activists will come in or an unsolicited buyer can come in and if the discount is widened up, there's also no underlying tax in a REIT when you liquidate, there's no corporate tax that needs to be paid. So let's compare with without use. So as you mentioned, Howard Hug is not a simple entity. It owns every property type and it's a C corp. And by the way, we have very low basis and the vast majority of our assets relative to what those assets are worth if we were to sell them on the open market, which means that the tax friction here alone is a huge number. 

Jonathan Boyar (41:24):
 
On your Howard Hughes investment piece of the general growth property spin out, is your basis around 43 or is it 

Bill Ackman (41:31):
 
Significantly below that? I don't know about what the precise tax basis the underlying assets is, but real estate assets you'd depreciate over time. But I meant your cost basis. I don't know precisely what our cost basis is, but we did buy stock. Most of the stock we purchased, we bought on the rights offering at 47 25 per share. We sold some stock over time. We bought some stock over time. I would say today's basis ignoring time value of money is not materially lower than the current share price.

Jonathan Boyar (42:00):
 
So you're not getting general growth at 33 cents attributed to that.

Bill Ackman (42:04):
 
No, I'm not talking about the tax basis of the shareholders in this case. I'm talking about the tax basis of the company and the underlying assets. So if you were to adjust the management's 118 for NAV, you have to take off taxes. That would take the NAV number down materially. But more important than that, as I mentioned earlier, two thirds of the assets here are residential land developed and undeveloped lots and mostly undeveloped and commercial land. There is no market. You can't buy Howard Hughes and then turn around and sell the vacant land in Summerland for anything close to where we sold lots last quarter. There are buyers in a carefully managed auction every few months, buy Howard Hughes for lots to home builders. If you said to the home builders, we're going to put 2000 acres on the market, okay, instead of 50, there's no bid home.

(42:53)

Builders don't want to hold thousands of acres on balance sheet and the discount rates. I don't know that there actually is a buyer for bulk purchases of this kind of land. And if there is one, it's a fraction of what the company's using as the net asset value. You can't follow the same path you can in the REIT world. It's a reasonable yardstick to judge over time, but it's not like intrinsic value that can be realized 90 days after someone buys the company. And the company tried to sell itself in 2019 and effectively the company tried to sell itself by virtue the process we ran. And as you say, we're pretty good at raising money and we had a lot of people interested, but everyone wanted to know how they could get liquidity in five or seven or 10 years. And there isn't a path to liquidity for this company.

(43:33)

You have to find someone who's prepared to own it for 50 years and that really deterred the vast majority of investors. You approach sovereign wealth funds, trust me, 240 people contacted every sovereign wealth fund, every mega family office, every reit, private equity, Blackstone, Brookfield, Starwood. Make your list of who you would logically talk to. We talked to them or Jefferies did very few investors today want illiquid today? Everyone's stuck with all their private equity illiquid investments. So on NAV, I don't think it's a reasonable measure for where someone buys a minority stake in the company as they become the management of the company. In fact, I've never seen a new CEO of a company come in and say, I'm going to buy stock at a 46% premium to the last trade, let alone 900 million of that stock compared to where the stock was trading before we announced that we were considering a transaction.

(44:24)

So I think we're paying a massive price relative to where any third party would buy stock. The easy way to solve problem if people think we're getting a special deal buying stock at 90 is we'll do rights offering. We'll backstop the rights offering. We'll charge nothing to backstop the rights offering. We'll give everyone the right to buy their pro ratta share of stock in the company and we'll just buy what's left. We'll buy our pro ratta obviously, and we'll buy the balance of shares that are not taken up by other shareholders. And that's how you solve that problem. We need to put capital into the company to change the strategy. So then the question is what price? I would argue the price should be market. Market was 61, now market's 75. But you know what? We're going to set a high bar and we're going to build from that bar.

(45:07)

So we'll pay 90. When a company sells stock, it's about what do you get for what you give? The company's getting 900 million of cash and is giving away 10 million shares of stock in exchange. What really matters is what's going to happen to the company the day after? Will the stock trade better? Will people sign a higher value to the company and will we deploy the capital in a way that will create more value over time? I think the answer to those questions are yes in all case. And here's a simple way to think about it. First I would say I probably made a mistake calling it a management fee because no one likes management fees, particularly institutional money managers. Well, they like management fees, but they don't like to be perceived by their clients of charging two layers of management fees. So I think I made a mistake calling it a management fee.

(45:47)

But what we're trying to accomplish here is not to make some windfall off of a management fee. What we're trying to accomplish is to cover some of the costs associated with overseeing this entity. This is not a case where Bill's working in a garage picking stocks for Howard Hughes. It's a case where we're trying to transform a business by making a series of acquisitions and overseeing private businesses, which is a time consuming exercise that's going to require a lot of organizational time to identify transactions, to due diligence on transactions, to ultimately execute and acquire companies. It's work. Howard Hughes is going to represent a meaningful percentage of our assets today at whatever 16 billion of assets. This is adding another 10 billion of assets, it'll be 40% of assets. With the management fee we proposed it will be about 5% of our revenues. Why? Because we charge our other funds incentive fees, which are the bulk of our earnings, and we charge one point a half percent management here with only a management fee.

(46:41)

We're not going to come close to recouping the eligible share of costs. So it's not quite Warren Buffett working for a hundred thousand dollars beginning in 1962, although we have to got a future value that with all the inflation we've had, it's probably 20 million today. But the a hundred thousand is a lot of money in 1962. I guess the point here is I think if we showed up and we had base salaries and bonuses and options, no one would complain what they normally see. That's obviously impractical when you've got 40 people that you want to bring on in a company that's not of a scale that it can afford to hire us. And that's where we came up with a management fee construct way to think about this order of magnitude. First of all, to our investors, any management fees on Howard Hughes stock that they owned, they're not, if you will, paying twice.

(47:25)

We're not collecting any management fees on effectively the capital investing because earning a fee on your own capital isn't probably generating any real revenue. So we're only ultimately netting 52 cents on the dollar of whatever fees we collect. So if the company today has a market cap of post-transaction at 4 billion or something like this, it'll be about 60 million of management fee income, of which we get 30 million of it. We have basically 30 million shares post transaction. So it's about a dollar share of incremental fees. To us, that's a way to think about an order of magnitude. If the stock drops 10 bucks under our leadership, it's a disaster for us. And if it goes up, $10 management fee doesn't move the needle. So it's really about equitable share of costs. Now we're sensitive to what we've heard about the management fee. We've told the board we're open to a different construct and how we're able to cover our costs.

(48:19)

And people have said, look, we'd like it to be more incentive based. We have some ideas there, but we need the board to come to us and sit down and engage on that topic. But we're very, I would say, respectful and insensitive to this concern. We're not trying to make a lot of money here on a management fee. We're trying to build something of very significant long-term value. And by the way, we want it to be appealing. The retail community of received actually handwritten, typewritten letters, many emails, tweets of support, and they're like, bill, this is cheap. It's a bargain, it's a sideshow. I'm excited to be your investor. And the retail community doesn't really seem to be particularly concerned. But yes, I've heard specifically from one institution who I spent an hour on the phone with yesterday. This was a primary concern of theirs and so I think we can adjust this. Maybe it's some form of expense reimbursement plus some kind of incentive based compensation. There's a way to resolve this so it's not an issue that people focus on, but we need to engage with a company. 

Jonathan Boyar (49:16):
 
Lemme a couple of suggestions, proposals just to get your take on them. One of the things I'm worried about is HHH stock flat over the next 10 years. It'd be sending Pershing, I think about 700 million over that time. Would you be open to a clawback? 

Bill Ackman (49:32):
 
I think there are better ways to solve that problem. I get that problem if we don't create value here, we shouldn't be collecting hundreds of millions of, but I think there's a better way to solve that problem than what you described 

Jonathan Boyar (49:43):
 
To me. I have no problem purging, square profiting from this. I just want it to be equitable. I really think you should do an Elon type of situation. Obviously have better lawyers put it together. 

That Bill Ackman (49:54):
 
Hasn't gone so well. The only people that so far have been awarded anything here, like the lawyers are hundreds of millions dollars, 

Jonathan Boyar (50:00):
 
As I said, better drafting, but set huge targets and if we win, you win and vice versa. But as you said, it's a sides show to me it's price. I think you made your bid in somewhat opportune time. 

Bill Ackman (50:13):
 
Let me make the argument against that. Look at what the home builder stocks, real estate stocks have done since we made our bid for the company. That collective group, last I checked was down versus the $61 share price. And if you look at how Howard Hughes has traded over time, it's traded in a range with that group. So the index is down, Howard Hughes is up, and the only reason Howard Hughes is up is because there's our proposal outstanding and people are expecting us to do something. So if we disappear tomorrow, I think the stock is at best in the low sixties and at worse it's in the fifties. If this strategic transaction fails, people are going to view our stake rightly or wrongly as an overhang in the stock. It's not a core position for us today. It's a small cap, relatively illiquid, large stake in a company that's not really consistent.

(51:00)

If you look at the rest of the portfolio, we're trying to make it into an investment. What do we do for a living at Persian Square? We find companies that have either underperformed their potential and there we come in and we help make changes to governance and management or we find companies that are underappreciated by the market and then we do something similar. And that's what we're doing here. This is a company that we think has been underappreciated by the market as is and we think with a change in strategy for the company, we can create a lot of value here. A lot more than can be created as a standalone MPC company and much more rapidly I think could we attract a shareholder base that's excited to own it for the very long term And there's been enormous turnover in the shareholder base over the last really few weeks since our January 13th proposal to the company.

(51:44)

 17 million shares are traded. That's a third of the shares outstanding. When you take us out of the float, there are 31 million shares, index funds own, I dunno, we should check what the number is, but even if you ignore the index funds, 55% of the float has traded in a month or five or six weeks. And I think the buyers Jeffrey's looked at this are people buying under a thousand share lots, which they would describe as kind of retail and the sellers have been mostly dedicated real estate funds or people whose mandate does not include diversified holding company. So the shareholder base of the company is changing pretty dramatically. I talked to one of the analysts who told me that nearly all of his clients had sold stock and this is sort of a dedicated real estate investor. The good news is the sellers which are finite, the people principally who don't want to invest in a diversified holding company.

(52:38)

Actually we got a lot of very nice complimentary reward from this one asset manager we spoke to yesterday. But he said, look, I signed on for an NPC company and this is going to become something else and you guys have a great track record, but I signed on for an NPC company. Which gets to your second part of your question, which is should there be a shareholder vote? So one, this is a transaction does not require a shoulder vote and the way the rules work is if you're going to do something really transformational to a business, the measure of that is how much of the capital of the enterprise you're going to use to do that transformational, sort of like a hard line test. And so the rules say that if you sell the company uses or sells in a transaction or a series of steps that are part of one transaction, 20% or morbid stock, then you need a shareholder vote for a transaction.

(53:23)

This transaction, we're buying less 20% of the stock of the company. So we're squarely in the space where we don't need a shareholder vote. It sounds very democratic to have a shareholder vote, so why not have a shareholder vote? The answer is number one, it takes time. It's expensive and it increases litigation risk. Interestingly, what people get sued for in transactions is what you say in the proxy. And when you put out tens of thousands of Word document, there's a whole industry of lawyers that look through that and they try to come up with something that will appeal to a judge. Oh, your honor, they didn't say this. They didn't say that. It's just shareholders suing. It owns nine shares just like the Tessa thing. It's not really a real shareholder often why? Because the costs are absorbed by the company. It's an overhang of the company.

(54:05)

It can delay for months a shareholder meeting and that's months on a present value basis. We're not putting capital to work and it's legal fees and expense. So I would say the first point, the second point I would say is we own 38% of the company. Those shares are held by our clients in effect our investors and our funds. And we believe that this transaction is in the best interest of our shareholders, so our obligation to get this transaction done is probably as possible. So we're going to vote those shares in the transaction. We're going to have support from I hope of large percentage of the shareholders, but the probability that we get a majority of the shares that show up at the meeting that vote in favor of us approaches a hundred percent. It's just the math. When someone shows up at 38%, the typical quorum for a special meeting of this kind is 75 to 80% of the shares outstanding.

(54:54)

If someone owns 37.8% on our vote alone, we're likely to get the transaction approved. The vote I would say is performative to use a word that has become fair thumb. I've never heard of the word performative, but in the last I don't know how many years, it's like every other day people call things performative. We should make a list of all these sort of new words. And the other point I would make some people say, okay, well you're conflicted on this deal. We should just do a so-called majority of the minority vote, which you sometimes see in a going private transaction because it can cleanse the affiliate nature of the transaction and reduce litigation risk. The problem here is when you have someone who owns 38% of company and you compound that problem by having a large turnover in the shareholder base to retail investors and you consider the fact that retail investors unfortunately very rarely vote their shares.

(55:43)

What it means is that just again, the math 50 million shares we own 19, so there's 31 million shares that would be considered a majority of the minority, but typically only 75 to 80% of the shares show up in a meeting. So in this case, that would mean 50 million shares, 10 to 12 and a half million shares are not going to vote. So you take 31, let's take the midpoint of the range, 11 a quarter, take 31 million shares you respect 11 and a quarter, only 20 million shares that are going to vote to determine the outcome here, which means that 10 million shares plus one is a majority. And if you look at the shareholder registry, ignore us, the top three shareholders own 10 million shares. So three shareholders who own less than 20% of the stock of the overall company will be deciding on behalf of all of the shareholders. And to me that is vastly less democratic and letting all the shareholders vote. And why should my shareholders, my investors, be deprived of their vote in the deal? I think it sounds nice in practice, it sounds democratic in practice, but I think that creates litigation risk takes time and if we took the majority of the minority approach, you're handing control to people on less than 20% of the company, which I think is not good governance, 

Jonathan Boyar (56:54):
 
So you'll end up owning 48%. I'm a big fan of the outsiders. I think having big buybacks, I know it wouldn't be your first use of capital, but over time it could be extremely effective. But if you do a big buyback, then you're over 50. What kind of protections do shareholders have on that? 

Bill Ackman (57:12):
 
Number one, we said that this will be an independent board that will govern the company. And by the way, when you own 48% or even if you own 38%, you can have effective control of the company. Howard Hughes. It's a company with very large major shareholder and whether we own 38 or 48% or even 52%, I don't know that it matters that much. We're an important voice. We would contractually agree for the company to have an independent board. We believe in good governance. We believe in independent boards of directors. As we said in our proposal, we'd commit to all the relevant committees would be controlled by independent directors. While we'd have the right to run the company without these protections because controlled companies don't have to have these protections under the exchange rules, we would agree to them. 

Jonathan Boyar (57:52):
 
In some sense HHH seems like the wrong vehicle to do this. Public markets don't do a good job of valuing real estate as you have seen over the last decade or so. Have you thought of perhaps doing this with an insurance company, mark? Hell, the name we own seems pretty cheap and generates a ton of cash and easy for investors to understand. Is that something that you considered? 

Bill Ackman (58:15):
 
We haven't considered acquiring another insurance company, but we've absolutely considered and in fact have likely identified a leader who our plan would be to recruit into Howard Hughes behind which we would build an insurance operation. There's a reason why Buffett has used insurance to generate low cost float and as an investment vehicle and that's certainly in the cards for this company. 

Jonathan Boyar (58:37):

So what type of insurance do you do? Bill Ackman (58:40):
 
We haven't yet made a deal with this particular individual and it's a known individual. I'd rather not narrow the case even further to talk about what kind of insurance we'd likely pursue, but it is something that we're seriously considering. 

Jonathan Boyar (58:52):
 
No, I look forward to hearing more about it. I think the bottom line, obviously we can disagree. It seems like you're open to negotiation for a different type of incentive structure, but the sideshow to me at the end of the day, I don't think they would be thrilled. I think minority shareholders though, if you did something in the low hundreds, if you knew for certain it would go through and you could just have some sort of carry base of how the stock does for a long period of time. Would that be something Consider 

Bill Ackman (59:22):
 
I think we should save the negotiation for us and the board and the special committee. 

Jonathan Boyar (59:26):

I had to try. Bill Ackman (59:27):
 
Okay. As I said, we're open to having a discussion. I think we're paying extraordinary price to buy not control the company. Our influence in the company is not changing materially. If you go open 38, 40 8% tomorrow, we could run a proxy contest and we've replaced boards of directors. Canadian Pacific, we had 12% of the stock, we replaced the entire board and put in our candidate. Going from 38 to 48 is not a change of control transaction here. I think we're buying stock at a big premium. I think that's accretive to the current shareholders. I think it sends a very powerful message that we think we can create value beginning 46% above where the stock was before we proposed a transaction. The other thing that you should think about on behalf of the shareholders here is what happens if tomorrow, let's say the board was in Transend or whatever, we couldn't do this deal.

(01:00:15)

Where does the stock trade? It's not going to trade in a good place. The world is going to say, okay, Pershing tried everything. Company tried to sell itself in 2019. Pershing tried to take it private in the fall of last year. And now Pershing proposed a relatively straightforward deal where they would simply invest capital in the company didn't require shareholder vote, they were putting up 900 million in capital. They were open to negotiating, making their cost reimbursement charge more incentive based and that didn't get done either. I mean, where's the stock going to trade? It's going to trade into the sixties for sure and it could trade lower. 

Jonathan Boyar (01:00:49):
 
I don't know where a close date. Why is the stock trading at 75? If you're willing put money in at 90. What's the market telling us? 

Bill Ackman (01:00:56):
 
It's never precisely possible to tell you what the market's telling you. Number one, the sellers are people who don't want to invest in a diversified holding company because it's not their mandate or they're nervous about the clients not liking two layers of management fees and they're not hopeful. That gets resolved in some other way. The buyers I would say are retail who want to bet with Persing Square and like the idea of a modern day Berkshire Hathaway, that's the buy sell universe. And then the sideline people, which is I think a very significant base of demand are institutions that want to invest alongside Persing Square. And by the way, we know many institutions, the nature of our business is we've been managing money for sovereign wealth funds and family offices and people invest in hedge funds, et cetera for a very long time. But these are investors that don't take what I would describe as risk, arbitrage risk and the risk arbitrage risk here is real, but the stock is telling you is if this deal doesn't happen, the stock goes into the sixties, that's reflected somewhere in the expected value of 73.

(01:01:55)

And actually the more time that goes by without a deal happening, the more people are going to be nervous about that. In fact, the stock traded to as high as in the mid eighties when we first announced the deal and when a lot of time went by without an announcement, the stock was as low as 71 if we filed with 13 D about as high as 86. But when people got concerned that a deal might not happen, it was 71 the year when we announced our first proposal to the company. The more time that goes by without a transaction announced, the more people think there isn't a deal here and it's heading back into the sixties because the group has traded the group of which this is a part, although there's no perfect, comparable has traded lower and this at a minimum is going to go back to where it was. The offset to that are people who think the transaction is going to happen, but until a deal is done, we're not going to really see whether the stock's going to trade. 

Jonathan Boyar (01:02:41):
 
Listen, I'd love for a deal to happen, just obviously want it at terms that our shareholders and my research clients expect and I get what you're trying to do and hopefully they can come to some sort of resolution. 

Bill Ackman (01:02:52):
 
Excellent. Well hopefully this long form conversation will inform them in a way that gets us there and we look forward to the opportunity to sit down with a special committee and the board and get this done. 

Jonathan Boyar (01:03:04):
 
You're clearly a passionate person or an activist in every sense of the word. However you really seem dispassionate when it comes to investing. Decisions are entirely economically rational. First, is it my observation? Correct? 

Bill Ackman (01:03:20):

Yes. Jonathan Boyar (01:03:21):
 
How do you get to that? 

Bill Ackman (01:03:24):
 
Because it's really important. I'm passionate about the business. I love the business. I like companies and helping companies succeed and making investments, but if you are just passionate about buying stuff, you're going to make a lot more mistakes. But requires the dispassion is where you want to be in analyzing companies and making investment decisions. 

Jonathan Boyar (01:03:46):
 
One other thing on Berkshire and Buffett, you own Berkshire for a very short period of time via the fund. I don't know if you own it personally and sold it any particular reason 

Bill Ackman (01:03:57):
 
We bought Berkshire because we thought it was very cheap and we're Warren Buffett fans and even after Buffett passes and I hope he continues to live forever and he's doing a pretty good job on the forever, Bart, I think the next generation of leadership is very good and I think there'll be that much more disciplined. There's a lot of value to be extracted in running the businesses that Berkshire owns better. So that itself was a pretty good story. I actually reached out to Buffet in February of 2020 expressing my concern about Covid. He dismissed my concerns and when the prove real shit hit the fan, I thought Buffet would be taking advantage of this amazing opportunity to buy stocks. And he was frozen. The opportunities had expanded dramatically in March of 2020 and we said, you know what? We can sell Berkshire at a loss, which we did. We probably lost more money on Berkshire Way ironically than almost anyone else because of the scale of our investment. And we sold part of the stake back to Warren by the way. We wanted to at least contribute to Berkshire's intrinsic value. We could redeploy the capital in Hilton at $55 share and Lowe's at 70 and other businesses. And that turned into a very good decision. So the benefit of owning liquid Securities is you can sell a 70 cent dollars to buy 40 cent dollars. And that's what we did that maybe some $30. 

Jonathan Boyar (01:05:07):
 
That's what I was going to follow up on. Buffett's been unusually inactive since Covid and as a Buffett admirer. Is that disappointing? Do you think it's a function of age or 

Bill Ackman (01:05:17):
 
I don't know exactly. I mean, if you look, someone wrote a tweet where they looked at the last 10 deals that Berkshire has done. And other than Apple, it's been a pretty dry well in terms of private companies that Berkshire has purchased. Love the man. It's been an amazing inspiration. I think Berkshire owns some incredible businesses. Buffett probably doesn't like the overall level of stock market. They're also at a huge scale. I pitched Warren on a couple of what I thought amazing businesses, and he passed. And a big part of it is I was right on the business quality. I tried to convince Buffett to buy Hilton from Blackstone. I got permission from John Gray to offer it. When Blackstone's the control and share home Warren turned it down. It would've been an incredible home run from Berkshire. But Warren sort of has this price discipline where if it trades for more than 10 times operating income, no matter how good the business, he won't buy it. And that's worked really well for him for 60, 70 years. Why should he change? But we're in a world where there's some amazing businesses that have very long-term growth trajectories where you have to pay more than 10 times operating income to succeed in buying a stock or buying a business. And I think the market has gotten overpriced relative to what he's prepared to pay. 

Jonathan Boyar (01:06:22):
 
Bill, you've been unbelievably generous with your time. I look forward to seeing what happens with the special committee. Hopefully you've been come to a mutually agreeable conclusion with them and thank you so much for being on the show. 

Bill Ackman (01:06:34):
 
I really enjoyed it and I appreciate the questions. Thank 

Jonathan Boyar (01:06:36):
 
You. Thank you. I hope you enjoyed the show. To be sure you never miss another world according to Voer episode, please follow us on Twitter at voer value. Until next time.