Howard Hughes Holdings Inc. (HHH) Earnings Call Transcript & Summary

So I'm Bill Ackman, Executive Chair of Howard Hughes. To my right, we've got Ryan Israel, CIO of Howard Hughes; David O'Reilly, CEO of Howard Hughes; and Joe Valane, our General Counsel and Secretary of the meeting. We're going to have a fun morning. We're going to start with kind of the official annual meeting. I'm going to read a script. And then we're going to have a presentation on kind of our plans for the company. David O'Reilly will give a presentation about sort of an update on the real estate operations of the business. Then we're going to go to a Q&A open forum anything you want to ask. Okay. So good morning. Thank you for attending the 2025 Annual Shareholder Meeting. It's our 15th Annual Meeting. Thank you so much for joining us today. I met someone who came from Hong Kong, very grateful for people flying in, particularly 15 hours to come to the meeting. We'll have to make it worth your while. First item on the agenda is the election of directors, followed by 3 other proposals, an advisory vote on executive compensation, so-called say-on-pay, a vote to approve the 2025 equity incentive plan, a vote to ratify the appointment of KPMG as the company's independent registered public accounting firm for the fiscal year ending December 31, 2025. First, I want to recognize our Board and want to call them by name, if you don't mind standing up and facing the audience, David Eun, if you could, it's David. Among other responsibilities, he Chairs our Technology Committee of the Board. Ben Hakim. Ben is President of Pershing Square. Ryan, who I introduced already. Scot Sellers, who is attending virtually today, Marianne Tye. Mary Ann Tighe, Mary Ann has been on the Board for 15 years. Jean-Baptiste Wautier, Jean-Baptiste joined actually recently in the last few months and Tony Williams. Beth Kaplan and Steve Shepsman are not standing for reelection, and we're very grateful to them for their contributions to the company over many years. Thom Lachman and Susan Panuccio have been nominated to fill the vacancies. This is Thom and Susan and both are here, say hello. And of course, I've already introduced David, our CFO, Carlos Oleo. Carlos, where are you? This is Carlos, good person to ask CFO-related questions. Joe Valane, I've introduced. Tracy Oates from Broadridge. She's here, Tracy. She's Inspector of Election. Okay. Everyone has provided an agenda and rules of conduct on the registration site. Obviously, if you want to ask a question, raise your hand. And I'm going to turn it over to Joe for the proof of notice of meeting and quorum.

Thank you, Mr. Chairman. This meeting is held pursuant to the notice of meeting, proxy statement and proxy mailed on or about August 15, 2025. Broadridge has delivered an affidavit of mailing, establishing that notice of the meeting has been duly given. All shareholders of record at the close of business on August 4, 2025, are entitled to vote at this meeting. As of the record date, there are [59,398,914] shares of company common stock outstanding and entitled to vote at this meeting. We've been formed by Broadridge that they are represented in person or by proxy, approximately 86% of all shares entitled to vote at this meeting. Therefore, a quorum is present. Mr. Chairman?

Thank you. Because holders of majority of the shares entitled to vote at this meeting are present in person or by proxy, I declare this meeting to be duly convened for purposes of transacting such businesses may properly come before it. Proposal #1, election of directors, first proposal is election of 11 directors to serve until the 2021 Annual Shareholder Meeting until their successors are duly elected and qualified. The Board has nominated the flowing persons for election as directors of the company, an alphabetic order, myself, Bill Ackman, David Eun, Ben Hakim, Ryan Israel, Thom Lachma, David O'Reilly, Susan Panuccio, Scot Sellers, Mary Ann Tighe, Jean-Baptiste Wautier and Tony Williams. The company's bylaws require advance notice of proposed nominations. Since no notice of other nominations have been submitted in accordance with the bylaws, the nominations are closed. Proposal #2 say-on-pay The second proposal is the advisory nonbinding vote on executive compensation. The vote gives shareholders the opportunity to endorse or not endorse the company's executive compensation program by or against this proposal. The Board recommends the shareholders vote for the proposal. Proposal #3, approval of the 2025 equity incentive plan. The third proposal is to approve the material terms of the company's 2020 equity incentive plan. The purpose of the 2025 equity incentive plan has provided a means for the company to attract, retain and motivate officers, employees, non-employee directors and other individuals providing services to the company. The Board recommends that shareholders vote for this proposal. Proposal #4, ratification of the appointment of KPMG. The fourth proposal is the advisory vote to ratify the appointment of KPMG as the company's independent registered public accounting firm for the fiscal year ended December 31, 2025. The Board recommends that shareholders vote for this proposal. Voting. Okay, the polls are now open. If you desire a ballot, please raise your hand. So indicate it will be provided. Most people vote in advance. But if you have not yet voted, you'd like to vote. The Inspector of Election will provide ballots. To those who desire them. If you previously voted by proxy, you do not need to vote today unless you wish to change your vote. Anyone like a ballot? [Voting]

Okay. Does not look like that. It appears that no ballots have been requested. Okay. The polls are now closed. Mr. Secretary, have you received the votes of the balloting? My guess is yes.

I have Mr. Chairman.

Thank you.

According to the preliminary report of the Inspector of Election, the 11 persons nominated by the board have been elected. Over 95% of the votes cast have been voted for the election of each of them. On the advisory vote to approve executive compensation, over 98% of the shares cast were voted to approve the proposal. On the vote to approve the 2025 equity incentive plan or 98% of the shares cast were voted to approve the proposal. On the advisory vote to ratify the appointment of KPMG LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2025. Over 99% of shares cast were voted to approve the proposal. That concludes my report. The final voting results will be filed with the SEC within 4 business days. Before I turn the meeting back over to Bill Ryan and David for the part you actually came to see, I want to remind everyone that certain statements made today that are not in the present tense or that discuss the company's expectations are forward-looking statements within the meaning of the federal securities laws. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that these expectations will be achieved. Please see our forward-looking statement disclaimer in this presentation and the risk factors filed with the SEC for factors that could cause material differences between forward-looking statements and actual results. We are not under any duty to update forward statements. Thank you, Mr. Chairman.

Thank you. So this concludes the sort of first portion, the official part of the meeting. Now we're going to go to a presentation and I will begin. So just the context for kind of the change in Howard Hughes. We've been shareholders from the beginning of the company, major shareholders of the business through the Pershing Square funds. And while we felt great about the business progress the company has made, we've been, I would say, disappointed in the shareholder progress of the company over the last 15 years. And we attribute a lot of that to a business that we think, I would say, Wall Street doesn't love. Why? Because most real estate companies are REITs, they pay dividends. They're focused on 1 property type. Ours is a C corp. We don't pay dividends. We do a lot of development. We own a lot of land. And we have really every property type and multiple jurisdictions. And the complexity, a relatively small company has made this a challenging stock for people to own and very few kind of companies. And at the same time, it's a business that we are, I would say, enamored with certainly on a very long-term basis, the idea of owning a business which owns small cities in places where people want to live and when they're controlled by a private beneficent operator, who makes these very desirable places to live is a very good strategy. If you look at the kind of long-term trajectory of land values in great cities and real estate values, a lot of wealth has been created. And we think a lot of wealth will be created in these small cities, but the public markets kind of what I described as a very high discount rate to the company because of sort of key words like land, development, lack of a dividend and some of the complexity. So what we're doing in some sense is embracing the complexity by increasing our investment in the company. The $900 million we invested to buy stock at $100 a share came from not the Pershing Square funds but the Pershing Square management company. It's a business that's 90% owned by myself, Ryan, Ben and other members of our team. So it's a very meaningful. It's by far my largest personal investment in any company other than Pershing Square Holdings, which is our principal public security investment vehicle. We paid a 48% premium. I give credit to the special committee and the Board for negotiating the premium. This was sort of the one time where our interests were not perfectly aligned with Howard Hughes. We would want to pay a lower price. The Board, of course, wanted a higher price, and they ultimately won and they paid a higher price. But we were willing to do so because of our view of, one, the intrinsic value of the and two, the value of this as a potential platform to build what we describe as a diversified holding company. The incremental investment increased our overall stake in the company to just shy of 47%. We agreed to cap our [vote at] 40%. This was not intended to be a change of control transaction. The Board remains an independent Board with Ryan and I joining or returning, Ryan joining. So 3 of the 11 directors are from Pershing Square, David O'Reilly and then, of course, the other 7 independent directors, including 3 new terrific directors who were just getting to know even better last night at dinner. I joined as Executive Chair, Ron joins as CIO. These are, in some sense, new positions at the company. I was not in an executive role in my prior relationship of the business. And as part of the transaction, bring to bear not just Ryan, myself and Ben as directors and as in executive roles, but the full resource is Pershing Squares. And Pershing Squares today manage towards of assets in the public securities market. We've got a terrific track record, which I'll have the opportunity to share with you -- and we think we're trying to -- it's a bit like fitting a sort of a new engine into a car. -- quite didn't quite fit into the hood. So we had to keep the engine industry well external to the company. And we came up with an arrangement where I would not take a salary, we would not get any form option or equity compensation or would any of the other Pershing Square 40-odd other person care team members, but we would make the full resources of the firm available to the company for whatever the company needs with respect to investment decision-making advice of all kinds, everything, including business development, transaction execution, capital markets, et cetera. And we think the combination of these 2 teams creates the potential for a very interesting business over time. We didn't do it for free. We are in the investment management business. We did so on, I would say, the best terms we've ever offered an independent porfolio we charge our other funds, a 1.5% management fee cap or the net asset value, we charge an annual incentive fee anywhere between 16% and 20%. In the case of Howard Hughes, we charged a $15 million annual base management fee and then a 0 management fee on the increase in the value of the company in excess of inflation above the market cap at the time we made our investment based on a fixed share count, which means that the incentive management fee we call that only gets paid if the market cap increases in excess of inflation due to an increase in the share price over time. And that enables us to recover some of the costs associated with working for the company, but it does so on the basis is, we think, very attractive for shareholders. If you were to try to hire the management team directly, it could not be justified in the context of the business' size today. I mentioned 3 new directors. You met them caught side of them sort of a moment ago, but just a little bit of background, Jamus, I was Chairman of the Investment Committee and CIO of BC Partners, which is a $30 billion or so plus, maybe number of low private equity firm. And our expectation over time is for Howard Hughes to buy businesses outside of the real estate universe private transactions where jumped background is very, very relevant. Susan was CFO of News Corp, up until very recently, big complex organization brings obviously very valuable financial skills. Tom Lockman, significant career at P&G. And then when Berkshire acquired Duracell, he was brought on to lead that business now as a Berkshire subsidiary. He ran the Canadian business of Procter & Gamble beforehand. Tom was a -- Tom actually reached out to us, he sort of heard that we were, if you will, building a modern day Berkshire Hathaway. And he had mentioned to a colleague, actually a business school professor colleague of his, that he was looking for some incremental responsibilities is stepping down as of Duracell at the beginning of next year. And in business school professor I know said you should talk to Bill Ackman and that's how we end up paying a fee still to the search firm for the director. But we're very happy that Tom joins. The Howard Hughes leadership team led by David O'Reilly and Carlos CFO, remain unchanged. And we're quite -- we're excited about the Howard Hughes business. I feel like the business is performing at the best by every metric, and David will share some of those highlights with you. And we also think at a very interesting sort of point for the company. It took us -- it really took us 15 years to get Howard Hughes right. The genesis of this transaction began with an investment in November of 2008, we got a 25% stake and soon to be bankroll general growth. And 1 of the catalysts for the bankruptcy of the company is too much leverage and it was a bit complex. Some of the complexity came from assets unrelated to the Class A shopping mall business, and we try to make it look as close to signing proper is possible. And we did that by taking all the assets that were unrelated to malls out of the business, and that was the genesis of Howard Hughes. We had this sort of new company that came with a jumble of assets over the last 15 years, 2 management teams and very successfully executed over the last 5 years by this team, refine the assets to kind of a core of what we call the master plan communities business or they're really like small cities as opposed to communities. It does with hundreds, in some cases, 8,000 residents and over time, hopefully, millions. And that is really a terrific business, very profitable business, where some of the key metrics, what you want to do over time make these more and more desirable places to live by bringing in new residents and driving more demand for income-producing assets that you develop to meet the needs of the community. And then all of that development, the inflows of the enhancements to the community lead to appreciation in the land that you continue to own. So the metrics you should look at and valuing Howard Hughes include what's the value of the land sold. The only land we really sell is residential lots, so we can -- to homebuilders, so we can bring people into the community. We retain the commercial land and we develop it to meet the needs. So if you look at the progress of our net operating income, which is probably the best metric to think about our income-producing assets. If you look at the value of our land that we have not sold and you look at how much cash we generated from the lots we sold in any 1 year plus our condominium business, which David will talk about, you get a sense of the sort of progress of the enterprise. And by every measure, we're at the all-time highs in terms of land values in terms of cash flows from our -- from lot sales as well as and net operating income from our business. So we set up a holding company a couple of years ago on top of what was Howard Hughes Corporation. We did so to provide more flexible for the company. We had a little twinkle in our eye someday, we might do something along these lines. The way it exists today, the holding company, there's $900 million of cash there. Usually no operations today at the holding company. All the activity of the company takes place at the Howard Hughes communities or we call it Howard Hughes [indiscernible] officially now -- we do Okay. So that's the name of that subsidiary. That's the core business of the company. Our plan is to take sort of $900 million from the holding company, maybe some excess cash from the real estate sub potentially some resources from the issuance of debt to acquire insurance operation. We'll talk about that in more detail. Over time, you can envision a series of subsidiaries in different lines of businesses. likely these are companies where we own a controlling interest, likely businesses we own 80-plus percent of that will comprise the future of this diversified holding company. Let's talk about insurance. So our focus on insurance. Again, we talked about building a modern day Berkshire Hathway. -- a useful exercise is to go back and read the history of Berkshire beginning in the 1960s and a very efficient way to is there's a book called the financial history of Berkshire Hathaway. I think the author is Adam West. And he did a really remarkable job. It's a bit of a tone. I don't know that people read anymore. But if you're geeky enough to show up at this meeting, you might want this book. And it kind of walks through every transaction that Berkshire did over 60 years. And what's sort of notable as you read the book is you realize how important insurance has been to the progress and the profitability of Berkshire Hathway. Difficult to calculate the quantifiable impact, but it's definitely more than half the value created here, probably my guess is something like 70%, 75% of the value created has been through the operation, but not so much from the profitability of the insurance company, but from the flexibility that the way the insurance company was managed and enabling Buffet to invest in common stocks. And when you read an article at as Warren Buffett bought a $50 billion stake in Apple. It was really Berkshire's insurance subsidiary bought a $50 billion stake in Apple. And because Buffett has been a good investor in the stock market, because he's created sort of low-cost liabilities and insurance company, the combinations led to an insurance operation that's compounded its equity at north of 20% over a very long period of time and the power of compounding is such that driven a large amount of the value of the business. What Pershing Square brings to Howard Hughes, our track record today is principally in the public markets. We've got almost a 22-year track record, which I'll walk you through. but it's one we could bring to bear for an insurance operation if it's run in a similar manner to Burger Hathway. What we like about insurance as a kind of initial business is the business itself is inherently cash flow right? You write premium, i.e., you make a promise, you receive cash and then you have the opportunity to invest that cash. And it's a business that does not require us to constantly issue equity in order for that business to grow. So it's a self-financing kind of operation. It's -- the investment side of the insurance operations is something where we can bring real value. And as part of our arrangement with Howard Hughes, we're not charging anything to manage that insurance anything incremental to manage that insurance company's capital. So our record is held back by the fact that we charge fees to our clients. But the beauty of what we bring to Howard Hughes is a future insurance subsidiaries, we're not going to charge this insurance operation will have no cost associated with its investment operation, which is a significant competitive advantage. The third point is, as a holding company, that as we're structured as a holding company, that's for any insurance operation that we were to acquire. Insurance is a business where it makes sense to be opportunistic. You don't want to have any pressure, to grow your earnings every quarter, to grow your volues, grow your premiums that you write every quarter because it's a business that is episodically attractive in different segments of different lines of insurance are profitable at different times, depending upon what's going on in the world, whether there's been a natural disaster or not, whether they're new entrants of capital. And the best run insurers have been able to kind of navigate the sort of pricing environment over time. It's much harder to do that if you're a stand-alone public company and you have the pressure analysts and shareholders to generate earnings. One of the benefits that Berkshire's insurance operations have had is that Buffett owning half the company. It's a controlling shareholder, taking a long-term view, put no pressure on its insurance operations to write that enabled them to be kind of more profitable. As a 47% owner of Howard Hughes, we put whatever insurance operation we acquire in the same position. We can run the business intelligently without regard to outside pressures. The other thing we bring here is that we've been a very supportive shareholder of Howard Hughes beginning when the business was spun off from general growth. We back stop a rights offering at that time. We stepped in during COVID to invest in March of 2020, $500 million in the company and then equity offering the business did. And then most recently, when we spun off the Seaport, a company now called Seaport Entertainment Group, backstop rights offering there. So we've got kind of a long-term history of providing capital support to the company, which is helpful. Insurance is a business where the clients really care about worthy of the counterparty. And the fact that this is owned by a diversified holding company that in turn is owned by a well-capitalized owner we think gives it a significant competitive advantage. The components to the benefit company structure, our business plan of stealing a bit from Berkshire's model. So the holding company structure, Berkshire has run its insurance operations in a very sort of low leverage fashion but it's been more aggressive at least as the world thinks about it and how it's invested its assets and our plan is to do the same thing here. So kind of a quick little kind of summary on how to think about the profitability short 2 sides of the insurance business. There's the profits or losses made on the insurance operation that is writing -- making a promise in the future to in the event there is one. And then there's an investment side of the operation where you invest the equity capital and the float of the insurer. The profitability of an insurer and the returns that it earns on its are basically adding the profitability from the insurance operation to the extent there are profits, the profitability of the investment side of the operation. Why don't you jump in? I forgot -- I was going to let Ryan do this. Okay, you know what, -- you're a slide, you do it. This is Ryan Israel.

Thank you. Good morning. Thank you. As Bill was mentioning, when we look at insurance, the way that we think about it is ultimately the success of a business like insurance should be judged by its returns on equity through an insurance writing cycle. And as Bill was explaining, it's really 2 components, your underwriting return, which is the core insurance operations return on the equity capital. But at the same time, there's a second component, which is your investment return. And so if you break that down into the as Bill mentioned, your underwriting margin or how profitable the business that you're writing is per unit of risk is the first key component in the amount of premium leverage you have or the amount of business that you're writing relative to your base of equity capital is the second component combined that makes up the underwriting returns on equity. And then the second component is really your investment returns. And that's just a function of what is the percentage of returns that you're earning on all the assets that you gathered, As Bill mentioned previously, business is very cash generative, where when you write business, people pay you upfront over time when losses occur and you make good on the policies you've written, you pay out cash. That lag provides investment funds that are available to invest that you add to the equity capital that you have in the business and the combination of those factors is your investment assets, what return you get on that is very important. But it also creates financial leverage. So when we look at an insurance company, -- we look at the amount of invested assets relative to the amount of equity capital. So the combination of the investment performance, investment leverage, so it gives you a return on equity. And when you add those 2 together, you can assess what the total returns on equity are business. And I'll give you a little bit of a primer as to how we think about how the typical insurance company in the P&C space is run. So using kind of those 4 key metrics to get your overall return on equity, what we see is that, in general, most P&C companies write net premiums that are roughly equal to the amount of capital that they have. So no real investment leverage, kind of a one-to-one framework. Most businesses target a very modest underwriting profit margin. an industry parlance, that means that the combined ratio is less than 100%. The combined ratio is really just the total expenses that you have relative to the amount of premiums that you write. So the key point here is they target a modest underwriting margin, and they write about equal to the business equal to the capital they have. On the investment side, most insurers actually invest in fixed income instruments, a lot of government bonds, a lot of high-grade corporate credit. And then they lever that up 2 to 3x on average in order to get a little bit higher of an equity return than what they would otherwise receive for investing in this relatively low fixed to instrument investments. So what we've done here is really try to show you more graphically what the broad industries look through a cycle on each of those 4 components. So when you look at premium leverage, what you'll see here is the average company, which is the red bar, it's about 110% of the premiums that it writes each year on relative to the equity capital it has. And you can see there's some variations. So for example, when you take what's called a shorter tail line of business, which something like auto insurance represented by Progressive, where effectively, you're writing policies and repricing them every 6 months because you get losses very, very quickly. You're allowed to have a little bit more investment leverage typically than because you can reprice in case you got a mistake. But on the far end, you can see companies, for example, like RenaissanceRe and others who might write what they call longer business where you write business today, but you may not know for many years, exactly what you'll have to pay out, those companies typically write a little bit less than 100%. But on average, it's pretty close. The amount of premiums you're right, is equal to roughly equity capital base you have. The second component of the insurance underwriting and return on equity is really just your profitability. So what we look to hear at is over, again, roughly the last 10 years, the combined ratios, which is sort of the total expense ratio and the average is about 94%, which implies about a 6% underwriting profit margin. Some of the best companies like Chubb are doing about a 10% profit margin or just under a 90% combined ratio and some others are getting a little bit more modest for example, a 3% or 4% underwriting margin or a 97% or 96% combined ratio. What's interesting about the P&C space and our study of them is ensure nearly exclusively focused on the insurance side of the business. But as I mentioned before, a very important component of the overall return on equity for an insurer actually comes from the investment side of the business. But our study of the typical insurer landscape is they actually suboptimize their investment returns. What I mean by that is they are not pursuing the high return on equity strategies that we believe are available to a P&C insurer and if it has the right caliber of investors, and it has the institutional capacity in order to pursue this strategy. So it raises a question of why doesn't the typical P&C insurer do this if that's actually approach, which maximizes the return on equity of time. And our perspective is there's a couple of reasons. First, we don't think that the typical P&C insurance company is well suited to be able to attract the type of investment talent that will be able to pursue this high return on equity strategy because they're competing often with institutional investors and asset management firms which have the capability to compensate the best-in-class investment talent. And secondly, going to the holding company point that Bill made, the typical P&C company is a stand-alone public insurer that results every 90 days. And as a result, they don't have the support structure of being a subsidiary of a holding company that has a more diversified stream of earnings nor do they have typically the very well-capitalized owners such as a 47% Square being able to back and justify the longer-term nature of the business, which might create a little bit more volatility in the accounting results that are reported each quarter. And so as a result, they tend to look towards having fixed income securities, which an accounting basis, do not show much volatility. And that is an approach that helps them be able to smooth out their earnings over time and it's something that when combined with the lack of investment support leads to a shorter fixed income portfolio. So as a result, they tend to have much lower returns by investing in fixed income assets. Now while there's a lot of perceived stability and certainly, there's a lot less volatility in that strategy, quarterly basis, it doesn't mean that that's actually lower risk. For example, when you invest in fixed income instruments, you are taking on 2 types of risk. First is duration, which is really how the changes in interest rates in the future may affect the value of the you purchased and second is credit risk. The risk simply if people pay you back or not. And typically, because the P&C insurer would be investing in these lower return on assets they actually lever up the portfolio 2 to 3x. And so in order to get a more reasonable return on equity in the industry, they actually take on more financial leverage, which means to the extent you do have a problem with duration or credit risk that gets actually amplified in terms of they take as well. I think it's important to acknowledge that while typically most investment -- most P&C insurers don't really put a lot of focus on investments -- there have been a couple of examples over the last decade or 2 where there are some asset managers that have actually gone into the insurance space. And most of the time, the reason that those people are doing that is they are trying to come up with a way to increase their assets under on which they can charge fees. And the results of those companies on the whole have not been particularly attractive because we think that they're not putting enough focus on the insurance business, and they have some incentives that are not aligned to deliver the best returns on equity overall shareholders. Our structure and what we're managing with the Howard Hughes Insurance Company is that we would not suffer from those because our interest would be very well aligned with investors. We would be owning this business outright, which means we are sharing in the success of the business time and making sure that we limit the risk because we bear the ultimate returns. And secondly, as Bill mentioned, we would not be charging any incremental fees for managing the assets. So this will be truly and ensure that focuses on insurance, while also bringing to bear the investment resources of the Pershing Square organization. So in focusing a little bit more on the asset allocation and how the P&C insurers suboptimize the return, the chart here, if you look at the box that's circled really shows how much of the assets are invested in fixed in securities. So on average, if you take the dark blue line at 78% add-in the 7% blue line, that gets you your fixed income. So about 85% of assets across the industry are invested in fixed income, which leaves about 15% that could be split to equities or private equity. And I think what's important on this page to realize is those numbers are actually overstating what the typical company does because on the far left, Cincinnati Financial, has about 40% of its assets invested in common stocks because they're pursuing a little bit more of an equity-based strategy. The rest of the companies really have about 1% to 6% of their overall investment assets in common stocks even though over the longer term, typically results in common stock that have a much higher return on an asset basis than fixed income instruments would. So the second component is financial leverage. So as I mentioned, a lot of companies because they have a lower return on asset strategy, tend to have more financial leverage in their portfolios. The industry average over the last decade is about 3:1, meaning for every dollar of equity capital, you have about $3 invested in assets. Some are a little bit above and some are a little bit below based upon the duration of their float or the time lag between when they get investment funds and they have to pay them out. And based upon the overall strategies and the investment basis and the allocation that they have, but typically a roughly 2.5 to 3x expense leverage. So on this page, we really wanted to tie together qualitative points we made about how the returns on equity play out and explain, if you dissect them, how you can analyze a typical P&C. So to start with, typically, across the cycle, you see about a 12% return for most of these P&C companies average that have taken this insurance-led approach. And interestingly, only about 4% of that return of the 12% comes from the core insurance operations. So what we see here is, on average, the companies are writing a 95 combined ratio, which means about a 5% underwriting margin. They have to pay taxes, which gives you about 4%. And because they have premiums that are equal to their equity capital, that's about a 4% underwriting return just on the insurance. What's interesting is actually an extra 8% of their return comes from the investment side of it. And if you look at the typical balance sheet of an insurer, you see that about 5% is coming higher-yielding common stocks, but 95% is actually coming from very low-yielding fixed income investments. So they're getting about a 4% pretax return due to that mix assets after taxes, it's 3%, which is similar to what they earn from the insurance business, but they're able to lever it up about 2.5 or 31 to get something a little bit higher, about 8%. So on average, you get about a 12% return P&C industry with most of that coming from investments. Now Bill will come back up, and he'll be able to walk you through how Berkshire Hathaway has really created a differentiated approach that sort of turned the typical P&C insurer on its head with much more success and it's really aspirational model for how we'd like to build a Howard Hughes insurance company.

Thanks, Ryan. And sorry to steal your slides. But actually, let me just go back one. What I think is interesting if you think about it, if you talk about an insurance company, only 1/3 of the return on capital is coming from insurance, 2/3 is coming from investments. On the investment side, they're getting to return financial leverage and investing in pretty low, I would say, generally lower risk. People think of as lower-risk securities in the form of fixed income investments, but it's really an investment business, the insurance operation. So if you could optimize the investment side of the business, and I think an insight that Buffett must have had 60 years ago, you could build a much more profitable insurance company. So what's different about Berkshire is he takes a very low -- Buffett takes a very low-leverage approach to the way he runs this insurance operation instead of writing 100% premium relative to -- or an equal amount of premium relative to equity capital he writes somewhere between 20% and 40% each year relative to equity capital. So it's like an insurance company running at very low RPMs. If you think about it as a car, just coasting along. He also uses lower leverage on the investment portfolio. Ryan showed you kind of average for the industry is something approaching 3 times assets to equity as the financial leverage for insurers at 1.5 to 2x. So much less leverage on the investment side and a fraction of the leverage, if you will, on the insurance side. The other approach he takes is like a barbell approach. So with respect to the float, the sort of money received from premium to be paid potentially in future claims, invest that money in short-term treasuries and it takes no risk. However, he takes approaching 100% of the equity capital of his insurance operation and invest in common stocks. So it's super low risk with respect to the float, really taking no risk and a common stock approach to the investment to the bulk of the investments of the insurer. These insurance subsidiaries of today, a highly diversified, very creditworthy holding company. And again, as effectively controlled company and a long history with shareholders of not focusing on -- it's not important to the Berkshire shareholders to focus on quarterly results, something that Buffett has done very well in cultivating a shareholder base that he always talks about you get the shareholders you deserve the story he always told was to think kind of longer term, He was never under any pressure to run his insurance operation to achieve short-term growth, for example, in premiums. And the result is that the range of 20% to 40% premium to capital is really a function of the market. And so what Buffett has done over time, he's sort of constructed his insurance team to put pedal to the metal, so to speak, when business is pricing is good, but even pedals in the metal is a fraction of the writing relative to capital for a typical insurer and to kind of step away when the pricing is unattractive. And I think his recognition here is that the insurance business is not a particularly important part of the profitability of the company. So instead of 100% premium relative to equity, it's 20% to 40%, kind of a similar degree of profitability and again, at the scale that Berkshire operates, having a combined ratio of 95% in quite impressive and then a much lower leverage on the investment side of the house, which works out to a balance sheet, which instead of -- it's more liquid with respect float very small exposure to kind of longer-term fixed income instruments and about 14x the exposure to common stocks versus a typical insurance company. And this sort of overcapitalization of the insurer has some marketing benefits. Berkshire can always talk about being, by far, the best capital capitalized insurance company in the world and that over capitalization enables them to be much more nimble with respect to there's a major event that causes catastrophic losses for the industry. He is in a position to immediately write lots of additional business, but he's under no pressure, and therefore, can run the business profitably, taking no risk on the flow, it just seems like a sensible approach because if you expect to run a slightly profitable insurer if you take 100% of your flow to invest in treasuries that should cover your potential claims and that gives you the flexibility. And he invest in generally liquid common stocks, although he put his railroad 100% ownership of Burlington Northern, actually inside of the insurance company. And this sort of overcapitalization is a sleep at night approach. You never find yourself in a world where something catastrophic happens and it has a particularly material effect on your capital. And of course, the rating agencies have come to really appreciate the strategy that's given Berkshire. It was at 1 point of -- are today it's in the AA category, but clearly, one of the best capitalized places to go in a world where there are very few carriers that can write enormous risks. It gives a real competitive advantage in terms price the business they do. If you look at the investment side of the house over the last decade, Berkshire is actually slightly underperformed the S&P 500 on the common stock portfolio. What we've done using the financials of Berkshire kind of extracted his returns on -- from his equity portfolio? How do you put the funds in an index fund, he actually would have done better than how do you pick stocks. The last 5 years, he's fairly meaningfully underperformed the S&P. Obviously, the 60-year record is extraordinary. But what you're seeing here is what he complains about is some of the problems of scale as you get larger, Virtu has, whatever, several hundred billion dollar cash position today investment it's a trillion company. There are some limitations on his ability to earn excess returns as we had in the past. So Ryan took you through the typical P&C insurer, again, third of ability comes from insurance, 2/3 comes from the kind of levered fixed income portfolio, getting to about a 12.2% return on capital. Berkshire is able to run a somewhat more profitable insurance operation because he can pick his moment. He doesn't -- it's not as aggressive in terms of writing the business. But even so of the 15%, let's say, return on equity that Berkshire has earned in recent years, only about 15% or 14% of that has come from actually the insurance business and 85%, 86% of that has come from the investment side of the operation. So again, it's nominally an insurance company. but it's really an investment operation that happens to be in the insurance business. So when we get back to Howard Hughes, and we take a page from what Buffett has done, we have the benefit of his experience is that we think we have kind of a similar opportunity to build a profitable insurance company inside of Howard Hughes with a kind of diversified lines of business. The benefit of a diversified insurance operation is insurance is not all the same. They're different -- whether it's marine or there's some major event where there's a catastrophic loss that can affect the pricing in a particular insurance line and make it more favorable whereas other lines are less profitable. If you have exposure to different lines, you can be more aggressive in different segments in the market, taking advantage of sort of the nature of the market. And so what we like is one, if we can find a business that we think meets our criteria for being a well-run insurance operation with a good management team and kind of a diversified portfolio. You combine that with our investment track record -- and then within the context of Howard Hughes, this diversified holding company, starting at a much -- at a tiny scale relative to Berkshire, we think we can accomplish something very good for the company. touching on our track record. So these are our net returns. As I mentioned, we charge our clients anywhere between 1.5 and 16 and 15 and 20. If you look at Pershing over the last almost 22 years, we've compounded at 16.4% net 10.4% for the S&P index over that similar period, about a 600 basis point per annum outperformance over that period of time and the power of compounding, the difference between 16.4% return and a 10.4% return we'll show you that on chart. It's obviously it's quite meaningful. There have been several, I would say, stages in Pershing Square's development. We started out as a hedge fund type structure for the first really up until 2018 when we became what I would describe as a permanent capital firm, we're today 95% and soon to be effectively 100% of our assets are in permanent capital. One of the reasons why Buffett went from managing a hedge fund 15 years later to be taking control of a company and where we had permanent capital is it's a huge competitive advantage to not have to worry about capital coming in or capital coming out. Capital coming in dilutes your returns, capital leaving, can put pressure on you as a manager. Our results have improved dramatically. We've had about almost 1,000 basis points per annum outperformance versus a very strong S&P over the last now almost 8 years. And then just to do a 5-year comparison again, here, almost about a 770 basis point per annum outperform. Again, these are all sort of net returns. But again, for Howard Hughes, we're not going to be charging 1.5% in '20 or in '16 on the investment portfolio, we're going to charge nothing on the insurance operation. If you look at our results without fees, they look more attractive. So about 1,100 basis points per annum, excess return over the last 22 years. And then in the -- what we've described since we've had permanent capital, it's been almost 1,500 basis points per annum. These are pretty much off the chart. -- versus any other equity investor or kind of similar periods, a 28% return compounded for the last 8 years and a similar 28% return for the last 5. If you look at it in short form, you start to really realize the power of compounding. Let me just kind of walk you through the history of the firm because I'd like to say success, it's not a straight line up, but you learn from experiences about making mistakes them. The first, I would say, 1.5 years, we made very few mistakes. We had an extraordinary record. It was about a 21% plus compounded return net of fees over that period. In October 2014, we launched our first permanent capital vehicle, an entity called Pershing Square Holdings, which today trades in London. Unfortunately, a year or so, we're about 1.5 years later after launching that entity, actually a little more than a year. We made an investment in a company called Value Pharmaceuticals, which was a large past investment up to this point in time, we have made only, I would say, activist-type investments where we had a lot of over a company, turn into a disaster. We lost approaching 90% of our capital on what is pretty substantial investment, 1,200 to 1,300 basis points of a loss, which itself wasn't catastrophic. But the very negative press associated and the perception in the market that this big negative loss would lead to redemptions from our clients made it a bit of a fat comply. And we started -- these people started shorting relatively few positions we had. We owned about companies at the time, and they went long on stock, we were short, a company called Herbalife. There's a movie you want to learn more. And we found ourselves down fairly quickly to whatever another year or so, we were down 30-plus percent. And that wasn't -- you can see that little moment on the chart. I said to the team at the time, there's a how do I put this? Where is the point or part? -- green -- that's how you advance the slides. Okay. Anyway, you see that little thing. Well, that's down 35%. It's no fun. And the decision we made in 2017 was basically to get out of the business of managing assets that can leave. We had launched this vehicle called Pershing Square Holdings. We went public and had $6 billion of assets, $6 billion of capital at the bottom and had $3.9 billion of equity. And -- what we did -- what I did at the time, I was 50 years old, not a fun moment in my career, I looked at how much capital was Warren Buffett managing when he was 50. And Berkshire had when he was 50 years old, only $400 million of equity capital. So look at Buffett had $400 million, we have $3.9 billion. If the rest of our assets go away that we have managed for clients, then we're 10x ahead of Warren and I've got only 44 more years to catch him. So the other thing we did at the time is something I don't like generally doing, but it was sort of essential at the time. It borrowed $300 million. And I had redeemed some capital from the Pershing Square head funds, and I bought effective control of our European vehicle by buying along with other team members more than 25% of the shares of the company, which were trading at a double discount. Our stocks were cheap and it was trading at a discount to its net asset value. And that made this closed-end fund effectively permanent, and we can now invest for the long term wouldn't have to worry about investors redeeming capital. And so that's the history is 11.5 years of great -- everything worked well. This one big mistake that led to this kind of challenge to our business, a strategic decision to exit the open-end hedge fund business and then kind of a business plan. We're just going to manage permanent capital from this point going forward. And if you look at that outcome, if you put a $10,000 in Pershing Square at the beginning of time, it turned into a $660,000, if you didn't pay fees. If you paid fees, still was pretty good. You made about 26x your money, over the last nearly -- over that sort of period of time. But Howard Hughes now gets the benefit of 22 years of experience. And of course, an insurance company is effectively a permanent capital type vehicle, and it also has a benefit or not charging fees. So we think it's a very good setup for us to be a meaningful contributor to Howard Hughes. Like I touched on this before. What are our incentives here of the view that incent drive all human behavior. I more recently, I said, love drives all human behavior, but I was giving a toast to my wife. But in a financial context, I would say, what are our incentives. So today, the team owns stock directly in Howard Hughes through our stake through our ownership of the Berkshire management company. We also are major investors in the Pershing Square funds. So about 28% of the capital persons net is employee capital. So on a look-through basis, of the 47% of the company we own, about 25 percentage points of that is directly and directly owned by the team. So we've got a lot of skin in the game. We're charging a well below for us, management fee to the company to recover some of the incremental costs to manage this operation, and we're managing the assets of this, hopefully, future insurance subsidy at no cost, which we think gives this insurance operation a significant competitive advantage. And we're ambitious, motivated people. And we've, yes, saying we want to build a modern day Berkshire Hathaway always -- we're kind of putting a stake in the ground about what we're trying to accomplish. But we're very excited about what we want to do here. And it's evidenced by our confidence in our ability to do so, we paid about a 50% premium the market price for the stock of the company really for the opportunity to pursue this business plan. We're going to follow the Berkshire plan in terms of the way we've managed the insurance expect to write about 50% premium relative to our equity capital, and we'll put the pedal down or we'll step away, breaks on depending upon different -- the profitability of different segments the operation, and we're going to instruct the team that manages this company that they're under no pressure to do business. We just want to write profitable business. We expect to be levered similarly to Berkshire in terms of the way we manage the investment assets to 2x versus 3x for a typical insurer. We're going to take all of the float. We're going to invest the float in short-term U.S. treasuries, and then we're going to invest the equity capital that's ensure directly in common stocks that will be the insurance subsidiary. So we're not -- you see hedge funds. Greenlight did some created an entity. I think Dan low at 1 point created 1 where they basically took control of the insurance company and the insurance coming in capital invested in the hedge fund. -- insurance companies paying full fees to invest in hedge fund. It's a way for a hedge fund manager to get permanent capital. We are not doing that. What we're doing is the insurance company is going to run as a stand-alone operation. It's going to invest its assets directly in common stocks and U.S. treasuries. We're going to manage assets as an external manager for no cost. If you take -- we've got the typical insurance insurer, which we talked about, we talked about Berkshire, let's talk about Howard Hughes. So typical insurers generated a 95% combined ratio, Berkshire has been at 93%. We're going to pick 94%, which is a bit of picking a number out of the air, but we have, I would say, significant advantages versus the typical insurer we have no pressure to write business. And we have significant advantages versus Berkshire because of our size. We're tiny. We'll be tiny in the context of the insurance business. It should enable us to choose risk. So I think it's a reasonably conservative estimate if we can over time, achieve a combined ratio, not any 1 particular year, but over time, certainly at the kind of scale that we begin our operation. That means the insurance company has sort of a 6% profit margin. We assume a 21% and that in light of the amount of premiums we're writing relative to equity, that gets to about 2.4% of our return will come from -- return on equity will come from the insurer. We assume that all the float expected to about 40% of assets over time invested in short-term treasuries. Today, that's maybe a little higher than today's return, but we're assuming a 3% return, de minimis investment income, about, let's say, 60% of our assets invest in common stocks. And we're seeing, over time, can we generate a 20% return, assuming we pay no fees on a no fee on a gross basis, and we think not an unreasonable assumption. Historically, over the last 22 years, it's been 21.5%. Since we've had permanent capital, it's been 28%. And we think that is a reasonable estimate of what we can achieve with our investment strategy. take you adjust for the proportion of the capital that's invested in common stocks. You reduce taxes, it gets you to a after-tax about 10%. We're assuming the midpoint of the range, the amount of leverage we use and of assets relative to equity, that gets you to a 20% plus return on equity. Now if our returns on investment are higher, insurance companies more profitable. Obviously, these numbers kind of get better over time. And we've got a little matrix here. Pick your return on common stocks, choose your combined ratio, and you have an insurance operation that almost every cell on the page gets you to higher high teens to kind of mid-20s ROE. You do that over a period of time, the power of compounding, and this becomes a very profitable insurance operation of the scale. Again, part of a holding company structure, no pressure to generate to write business. We think that will enable this insurance company. And by the way, we are update you where we are in a moment, but we've had some conversations, obviously, with people in the industry over time and the opportunity to work for an insurance company that is run in this fashion is a very appealing opportunity. The choice is today, if you're an insurance executive is generally for a stand-alone public company, which has the pressures that I've talked about. You can partner with private equity, which arguably may have even more pressure because your -- you have capital that is being invested with an expectation of an IPO or an exit within a 5- or 7-year period of time. Here, we're taking a multi-decade approach, and it's a very -- much more interesting place to come work or if you like insurance and then you get the benefit of the asset side, the investment side is generally an afterthought for almost every insurance executive and having someone else with competency who can handle that, I think, is very appealing. And this would be a permanent holding of Howard Hughes. You don't have to worry about the business being sold to someone else in 7 years. which I think is very appealing in terms of our ability to recruit and retain talent. So just briefly on the holding company structure again, diversification because the real estate business really is unrelated to what we'll be doing in insurance. Over time, that holding the company becomes more diversified, but it's a nice base of today, the sort of market cap of the company. It's about $5 billion of capital of incremental support to the insurance company. If you take our closer to our estimate of intrinsic value for Howard Hughes. It's more like I would say, $5 billion plus of incremental credit support, that entity is owned by Pershing Square Holdings owns about 30% of Howard Hughes. It's an S&P A- rated company with $19 billion of assets, $6.5 billion of equity and owned 15% by Pershing Square the persons were a management company, which was valued a year ago about $10.5 billion in today's worth considerably more. So you've got 2 very strong owners that own diversified holding that in turn on the insurer, which is a very good backstop and something that we think the rating agencies will find appealing. That's effectively this slide here. So there's really $30 billion of equity backstop for this insurer beyond the capital that the insurer itself will hold. And we've been, as I mentioned before, a supportive long-term investor in Howard Hughes. In a world of short-term investors, we years in, we're just getting started. So we're planning to be around for a long time. This is just graphically what I just described. Okay. With that, I'm going to turn it over -- last comment. So where are we? The answer is we've executed an NDA. We've done, I would describe as detailed, but preliminary due diligence. -- on an insurance operation that is privately owned today. We've made an offer now in writing for that business. And we've gotten some -- we think we are in the zone with respect to the price looking for, and we're expecting to be afforded the opportunity to do a more deep dive on this particular business. It's probably a 90-day due diligence process if we -- so theoretically possible, we're in a position to announce a deal if the fact check out and we can come to an agreement on terms, I would say, by end of year or maybe early January, it's got a reasonable expectation. What we bring table to a private owner today is one, this is a very attractive opportunity for the management team. And two, we can afford to pay, I would say, more than what could be achieved if they were to take the business public tomorrow in terms of where P&C companies are curating generally. And because we bring value to the insurer by virtue of managing the assets effectively, we can justify paying a premium price to them. So it's a win for the seller, and I think it's a good setup for us and we're taking a very long-term view, so we can justify a premium. So I would say cautiously optimistic we will get a transaction done. With that, I'm going to turn it over to O'Reilly to talk about Howard Hughes, and then we'll be happy to answer your questions.

Thank you, Bill I'd share Bill Ryan's enthusiasm on building this diversified holding company and focusing on the insurance business. And one of the reasons why I do is we have the benefit, unlike Berkshire of building this business on the foundation of an incredibly successful and profitable real estate business. One of the hardest things I have to do in talking to our existing and new investors and talking about our real estate business is to convey the size, breadth, scope, scale, quality of the communities that we develop. And there's no picture in an annual report that can do it any justice. So please bear with me. We put together a very brief, but I think illustrative video that conveys just the quality of what we do at Howard Hughes communities. [Presentation]

All right. Hopefully, that video conveyed a lot of what we do at Howard Hughes Community. So I'm going to be brief in my remarks. I did want to highlight just a couple things around why we're different and why we have these unique competitive advantages? The first of which is this perpetual cycle value creation. We sell land to homebuilders residents move in. We take that capital to build great amenities in our community and therefore, more residents want to move in and our remaining land value goes up. And that goes on for decades and decades. The second around is the lack of competition we have. And most will characterize development is a relatively risky business, but why is it risky? You have entitlement risk, you have approval risk and you have competition. Sometimes 4 corners of an intersection with 4 office buildings going up at the same time. In Howard Hughes communities, we are fully entitled have our use approvals. And there is no competition because we're the dominant owner of both the existing properties and the undeveloped land. And then the final competitive advantage is our ability to self-fund this business our recurring NOI from rent collection almost covers entirely our interest in cash G&A, leaving the profitability from land sales to homebuilders, represented MPC EBT and profitability of selling condos to fund any future growth into -- and as Bill mentioned in his opening remarks, we're in a unique inflection point in the company today. I'm going to talk about that in a second. But first, the competitive advantage around the self-fulfilling cycle value creation that for a second. In 2017, we did an Investor Day, and I told our audience that we had about $3.7 billion of unsold land an appropriate discount rate and an average growth rate per year in terms of price appreciation of that land. Since then, we've been very successful in selling that land to homebuilders. We've sold $2.7 billion at an average margin of between 6 and -- so under the melting ice cube approach, we think, "Oh, today, you probably have $1 billion of land left. But what's happened to that remaining land is the price per acre has appreciated as we've improved these communities. As we provided great places to live, shop, dine, great places for businesses to thrive and families to grow at an incredible rate, 164% in Summerlin, 60% in Bridgeland and almost 50% in the Woodland Hills such that, that remaining land that mathematically may appear to be $1 billion is actually $4.8 billion today. That's the virtual cycle of value creation that goes on and on in these unique communities where we have built around tens of thousands of acres. And that is going to go on and on for the next several decades. The other area I want to highlight before I wrap up for Q&A is to talk about our free cash flow. This year, we've guided to $410 million of adjusted operating cash flow. Based on recurring NOI, land sales to homebuilders and 0 condo margin because we don't have a tower that closes this year at a profit. I'll explain that in a second. -- against our G&A and interest expense. But we're at a unique point. Within our rent collection business of our operating asset NOI were stabilizing recently completed developments that will add $73 million of incremental NOI. And finishing under construction projects that will add another $15 million of NOI. So over the next several years, that 267 can stabilize it up to million, increasing the free cash flow of the company. Within our land sales to homebuilders, we're selling at an all-time high this year, but not at an all-time high in terms of number of acres. -- that increased profitability is really driven by price per acre. And assuming we sell a similar number of acres and a similar number of -- similar price per acre over the next several years, that's a number that should remain in the $425 million to $450 million. Now I am cautiously optimistic that we'll see increased price appreciation, the way we've seen in these communities over the past 5 years, but we're not going to count those eggs until they hatch. Finally, in our condo business, right now, we're closing Ulana, which is a workforce tower in Hawaii. And that is part of the requirements of our entitlements there is to deliver 20% of our units as workforce. We deliver those at a 0% profit margin, which is why we have profit from condo this year. But going forward, we have 6 towers that are largely presold, some of which are in at 97%, 93% and 70%. And those that are still in the presales. We haven't even started construction at 67% and 50%. Those at their current sale levels today represent $4 billion of revenue. that historically speaking, have delivered at a 25% to 30% margin. That increased cash flow, if I add all 3 of those segments together with similar level of interest and overhead we'll take our adjusted operating free cash flow from $410 million to $690 million. Now as much as I love to reinvest into our communities, it's hard for me to imagine a situation where I need all $690 million to go back into the Woodlands into Summerlin. And that incremental free cash flow is what can get into Howard Hughes Holdings, the parent company that can be invested in insurance and other durable free cash flow business. And to me, that is what's incredibly exciting about this opportunity. So I'm going to stop there, and I'm going to turn it over to Bill if he has any closing remarks before we have Q&A?

Yes. Actually, if they can bring the house lights down a bit, so we can see the audience because we've got pretty good glare here. But I think what we'd like to do is just open it up for questions. I'd be happy to answer questions about anything that you find relevant and interesting and questions for the Board, including people not on the stage are also welcome. So maybe can I turn the house slides down a little bit? I'm sure you can still see us and that we can see the audience little better. Someone has been working on that. So with that, please feel free. Why don't you raise your hand...

Thanks, Bill and team for hosting this in person much appreciated, Ian Anderson from Calgary in Canada. If we look at sort of the publicly traded insurance companies that you presented on, what would be the closest analog to the type of company you're looking for? And some of the characteristics of an insurance company that you find attractive?

I think, one, it's got to be at a size that it's acquirable by us. So it's got to be a relatively modest size, a couple of billion dollar kind of scale -- it ideally is diversified in its operations and the business that it's written over time. So it's got experience experienced team, and it participates in a kind of a broader lines of business. But beyond that, we don't really need much more because we obviously wanted to come with a team, a very strong team that's got a good brand and record in credibility because we want them to be shown the best business. But those are kind of the key. I mean, unless Ryan, leave anything else?

No, I think that covers really well. I would just add in the public markets, I think a lot of the businesses in terms of insurance that we admire are at a vastly larger scale, as Bill pointed out. And so while we admire those businesses, those are probably not going to be the ones that be able to acquire just given the relative size differentials, but they've really given us some great learnings about what has inspired us in terms of trying to find a smaller insurer that kind of meets the size criteria that Bill pointed out. I think a lot of that is just fundamentally stand-alone public insurers for the most part, are understandably trying to appeal to their investor bases who generally want a steady level of growing premiums and do not want any volatility in the investment results. And we believe that, that ultimately leads to and ensure that through the cycle, we'll underperform its potential. On the insurance side, if you're constantly trying to grow your premiums, that may not be the right way to achieve long-term insurance success because insurance, as Bill mentioned, it's not a business where every day, it's the right decision to continue growing your book of business. Some lines of business are going to have very bad pricing, you should actually be reducing your premium other times, there may be a great way in which you want to accelerate the growth. So when we looked at some businesses who have gone a different way, I think we admired that. One company, again, a much larger $30-plus billion market cap that we studied in really admired capital -- they have done a great job, we believe, of really not trying to adhere to a constant strategy, but really looking at when is the market presenting opportunities. And then the second approach, as Bill mentioned, are companies where ultimately, they have a focus on achieving the best investment results. And I think you've seen Berkshire Hathaway is clearly the best example of that. And there's some smaller version of that, that over time, I think we believe we have a structure, although they haven't really matched the investment performance at Berkshire.

It's hard for us to see -- Yes, there's a hand here. If you can give the gentlemen in the microphone.

Jim Cohen from St. Petersburg, Florida. So I was wondering -- so let's say you closed on an insurance company tomorrow, would stock portfolio that you're buying, would it exactly mirror Pershing Square. Maybe I'm wrong, but it seems like maybe regulators would want you to be more diversified, have more or stocks? And if so, how much of a drag on your performance do you think that would be?

Sure. So today, we own 15 stocks in our portfolio. And I think that's an appropriate level of diversification. One of the things we have yet to do, but that's an important step. -- as we get closer to a potential transaction meeting with the kind of A.M. Best of the world and the rating agencies just to talk to them about what our plans are. But I think the nature of how we invest capital and generally kind of large cap, very liquid, very dominant durable growth companies that themselves are sort of investment-grade businesses. We think a portfolio of businesses like that is a very good fit the common stock portfolio but insurance operation. Will we be somewhat more diversified Possibly, but I don't think so in a manner that will meaningfully affect to generate attractive returns over time. We can also -- if you look at our record over 22 years, I would say 75% or so of the profits come from buying great companies at attractive prices. But about 25% of have been -- have realized gains have come from hedges that we've implemented over time. When we had concerns about, I would say, black swan type risks in the market. So going into the financial by the way, much better, we can actually see whoever made that change and should get a price. The -- and that hedging strategy we intend to bring to bear to the insurance operations. So we'll have all of the benefits in terms of how we select common stocks for Pershing Square. All the same resources. The portfolio will look likely very similar. -- perhaps we won't own Howard Hughes, obviously, in the insurance operations, we'll have to replace that commitment with something else. But the same hedging strategy. So can I tell you in advance which portfolio will do better than the other? I probably couldn't. But I will say one net of fees one gross of fees. I think the gross of fees, 1 will have a huge advantage.

If I could just add -- looking at some of the other insurers who do have a more investment-led approach. Just on analog is Berkshire Hathaway. And they have often throughout their history, had positions, which are approaching 25% to 30% of their total equity investments in there. So there is a model for concentration. And oftentimes, Berkshire has had the top 5 positions, anywhere between 60% and 2/3 percent of the total portfolio. So that would be a similar level of concentration in terms of how we might run for the average -- but certainly, his larger stocks have been much larger in terms of concentration. And while there could be some differences, but we do think that there are some public situations where concentration is not necessarily viewed as something that you would not be able to do.

And one request for the people doing audio. If you could leave my microphone on and not turn it down, turn it out and turn it down. I'll just keep it at the same level. I would appreciate it. Okay. Next question. How about whoever has got -- why don't we pass the -- whoever gets the mic gets to ask the question. So raise your hand if you want to ask a question. We have more than 1 microphone. I hope we do. So there's another microphone here. So why don't you get the microphone to this guy in the front and whoever runs the microphone first and ask their question. Is it on -- thank you. Great. Go ahead...

Sure. I'm Josh Rushing with a show called Thought Lines. And I'm curious how much...

You say where you're from? We got an award for a person who came to the farthest, but where are you from?

From -- It's a television show. And I'm curious how much money have you put towards the New York City mayor election -- and should your wealth give you more power in a democracy?

Okay. That's a good question. So I invested $500,000 with Andrew Cuomo and it was not a very successful investment, certainly in the primary. Look, I think the answer is, I'm not a huge fan of change in the laws that allow individuals and corporations to invest massive amounts of money and elections. So if that law were to be changed, I think it will be a good thing. -- where there were limits on -- it's crazy to me that there was a Senate election in Pennsylvania and people spent $550 million on that election. It seems like a huge kind of waste of money. But operating in a world where it's legal and the other side will do the same. I think it's very important to the future mayor of New York City is, I think it's less important for me personally. It's much more for the 10 million plus other people who live in the city. And I'm very concerned about a socialist Mayer, who believes in defunding the police and shutting down Rykers legalizing prostitution and a series of other initiatives, I think is going to be really bad for New York. And I think if New York becomes less safe place, and a less attractive place to do business, people -- it's a competitive country. People will move their businesses. The finance industry, for example, is a very portable industry. Ryan has a house in Miami. He would love for me to move Pershing Square to Florida. It's much more favorable from a tax perspective. It's much more the Mayor Miami would do backflips to have us and other people in our industry go there. And I think you want a mayor that is supportive of business, supportive of the financial industry because that is very important for the tax base of the city. It's very important for job growth here, and you want a mayor who believes in being prime because if people feel unsafe or something happens to their wife for their children or whatever, that take about a very short period of time before they decide to exit the city. I mean one of the reasons why Howard Hughes has been so successful and where it's real estate is located. Texas, Las Vegas, or Nevada, Texas or 0 or very Phoenix, very low tax states, very pro business. And that's why the country and people in our country are moving there. And that demand enables us to sell loss on build these are sort of successful businesses. But all of that growth is at the expense of places like California and New York and Chicago and other cities and states sort of anti-business. And I think if a socialist, a pronounced socialist, a proud socialist, someone would say communes based on some of his plans from a real estate perspective, we of New York, it would have very native signaling value for the city. Marianne, who's on our board is probably the most important corporate relocator in the country in terms of people looking to move businesses and would play a major role in moving businesses in and potentially moving businesses out of New York City. I mean I can ask her views on what the risk is to New York if you a Madame type me. Why don't I do that, I'm going to call you out, Mary Ann. If we can get Mary Ann a microphone.

You're going to be sorry, Bill press this button with me -- so let's start with the fact that just this morning that JPMorgan Chase now has more employees in Texas than it does in Manhattan. I have always been, at least in my career, the #1 private sector employer. So it just validates the point that Bill was making. But when we touch upon affordability, I think that, that is something that we need to peel back and understand why the city is unaffordable. And I would tell you that for you who are paying market rate rent, 1/3 of every dime you're paying is New York City real estate taxes. I can tell you that real estate provides 50% basically of all the tax money that we generate in the city, and we've leaned on it so heavily that we've made so much unaffordable as a result. I can also tell you that the desire for more affordable housing is a universal sentiment about who cares about this city. We thrive because we're going to attract people to live here at all different levels of economic success. And also that we want to be able to underpin the people who are challenged here -- but if we expect every affordable opportunity in this city to solve every social ill, we're not going to get the amount of affordable housing we need. And what do I mean by that? If you're designating a certain percentage has to be affordable, then you can't also expect that you're paying the highest level of union wage, you can't also that there's contributions being made to the community, et cetera, et cetera. Picker, make hard decisions, pick what you want to solve and go for that. And last but not least, I think we all believe that the city has some exceptional things that we need to preserve. And in order to preserve those things, the sanitation, we need the safety we need to develop processes so that people don't take forever to implement. Have you been following the casino projects now? I told you you'd be sorry. If you've been following the casino -- you can see that every Manhattan Casino, and I'm not, by the way, I'm not an enthusiast. Every Manhattan Casino was set up to fail. All you had to know is the politics, and you knew it was a joke. And we make the hurdle so high for everything that the execution, the intentions may be good, but the execution takes forever and costs way out of proportion. So perhaps this can be solved with a whole new perspective. But I do have to say this is a tough 1 to learn on the job. That's what I have -- I want to say.

Excellent. Let me just give a very specific example what Marianne is talking about. So Howard Hughes used to own the Seaport and a site in the Seaport where we could build, I don't know, 400, 500 unit apartment complex. And I don't know, 25% of that, 20% of that had to be affordable housing and the construction of this project contribute meaningfully. The building -- there were protests trying to hold up the development site, claiming that toxic stuff in the soil from a former factory would be released from the construction. And obviously, before we were build anything there, we were going to clean it up. In fact, we did and we dug out this oil. -- people protesting weren't protesting because they were concerned about a school that was located nearby and fume going into the world. They're protesting because they lived in the building just behind it that would be blocked and their view of the water with Block. The building behind it was, I think, a Michela low-income development that started out as an affordable housing development where people were able to buy apartments at for $20,000, very little money. And then after like a 20-odd year period of time, -- the building sort of went sort of market rate. And the people will pay $20,000 for their apartment ended up owning units that are now worth $1 million with views of the water and more than that. And they didn't like the idea of what it would do to the value of their units, if a new building was built in front of them. So there's a lot of fake protests in New York. Many of the same people supporting Madame are people who are protesting against development in New York. What keeps housing expensive in New York City is a lack of supply and how difficult it is to create supply in New York at a cost that's competitive. You want to bring rents down, open up the floodgates in terms of development. and make this an easier city to do business.

That was a good question why -- it's exactly why we're affordable in our communities. Because we're building the housing supply to keep up with demand. And when I meet the CEOs in New York or California or otherwise, I can give their employees twice the house for half the price, quality, low-cost college educations in Texas and Nevada.

And our communities, since they're not incorporated cities -- we don't have many of the problems, unfortunately, at the politics of a typical city. And so we go to the Woodlands, it's spotless, it's clean. It's safe. You can walk around at night. You don't have to worry about getting having an event like that. And that has become, obviously, very, very appealing for people. Next please? Go ahead.

This is for Mr. Reilly. -- our downtown property in Summerlin, the downtown core in the next 24 months because NOI is really the story for us going forward. Why can't we put for Tanager Echos stagger them 24 months and really kick up the development of NOI properties?

It's a great question, but it speaks to kind of how we'd like to pace our demand, how we like to pace our development really to meet demand, putting 4 Tanager Echos at the same time would be too much supply relative to the demand that's in the market. We like to build 1 multifamily property. The property of Virtu for the better of the audience is a multifamily apartment building that's done very well for us. It's almost entirely leased at some of the highest rates in Southern Navada. Now that, that's filled, we're in design and getting ready to start that next multifamily apartment building in downtown Summerlin. When that's filled, we'll start with the next one. always just building enough to meet demand, never building too much again over our skis in creating an event where we have excess vacancy and therefore, putting pressure on rates.

And just another one, if I could. Bill, you've said over 20 years, there's been many opportunities in private businesses that you've been approached to potentially buy. Can you -- even if you don't name them, give us some examples of things you've had to pass on that would have been a great fit for how other than insurance?

So I -- the way I've managed my personal investment, the way it works at Pershing Square is like if I want to invest in public securities, I do that through the Pershing Square funds -- the only other things I can do are private investments. So over time, I've made investments in a kind of broad array of different businesses generally as a minority investor in a deal. And I don't know that -- but I would -- well, the better way to answer your question is, first, we're going to focus on buying an insurance company. That's going to consume, I would say, the majority of our free capital, and we're going to invest the assets of that insurance company as we described. Over time, as the real estate operation generates excess cash, it gets paid the holding company, we're going to look for businesses that meet our standards for business quality. One of the benefits Pershing Square has is we're a very well-known investor in the public markets. personality in the investment world. And the result of that is just we get a lot of interesting deal flow. But the word has been private stuff. We're really not looking. We're going to let the world know precisely what we're looking for and people are going to be and that's going to lead to interesting transactions. So the question is, the incremental question would be, what's our competitive advantage in buying a $400 million enterprise value company versus a small private equity firm, which is really the other alternative. Today, if you built a business, your family built a business over 50 years and you're looking at this point to exit the kids may be less and running whatever the business is, and you want to sell it at that kind of scale, even $1 billion, $2 billion enterprise business is generally too small today to go public and going public is not an exit strategy. really the beginning of a journey where you get some potential liquidity maybe at the time of the IPO and over time. But so if you're 75 years old and it's time for you to kind of organize your fares for the next generation, to sort of sell to private equity where you have to sell to a strategic. If there isn't a strategic, your only choice today, I would say, is a private equity owner. And the private equity journey is not that appealing for many private business owners. Why? Because they buy your company, they can decide to create whatever synergies they want and then 5, 7 years from now, they're under pressure to sell it to someone else. And for someone who's built something over lifetime, maybe the business is in a community that's obviously important to you. It's not a very comfortable thing to sell your business to someone and not know who the ultimate owner is. We have the ability as a public enterprise with a large owner to commit to someone to be effectively a permanent owner of their company and not put a lot of leverage in the business and operate the way more typical private equity owner would operate a business that they intend to sell in 5 or 7 years. And I think that will make us an appealing potential owner for sellers. Next, The women here, if someone can give her a microphone.

Bill, we've received a number of questions from our online audience as well if you want to take.

Why don't we take one of those and then we'll take your question next.

Great. So there's a lot of private equity money flooding into insurance. And how will you ensure that underwriting discipline maintained. And are you willing to walk away from businesses if the premiums are wrong and do not access the risk -- excuse me, assess the risk properly -- and relatedly, how do you see AI impacting underwriting in the near to midterm?

Sure. Actually, Ryan, why don't you take that?

Sure. So that's a great question. And I would kind of take the first part of it in terms of the flood of private equity money coming in. I think what's really important to think about is most of the capital that's coming into insurance is not coming into P&C or property casual insurance. It's really coming into the life business, in more particular, it's coming into the annuities or the retirement product. . Those are vastly different value propositions for vastly different people. So what we're talking about in property casualty is really sort of the risks that a corporation or business might face when it's going to conduct any manner of things, whether, as Bill mentioned, give an example of Marine of protecting ships, it could actually be protecting the business infrastructure. It could be for directors and officers protecting. There's a whole range of dozens of categories in which businesses protection for anything core to their operations. What a lot of the private equity folks are doing is trying to build businesses where, ultimately, an annuity is nothing more than a guarantee to pay a retiree, a certain rate of interest over time for the rest of the life. And as a result, they get in a flow of funds that they can use to invest ultimately at a higher rate of credit than what they are giving the retirees in that annuity product. So that's really a financing type of transaction. And the reason so much money is floating in is you have a lot of private equity firms that are publicly traded that have market values in between $50 billion and $100 plus billion. And so they need an area in which they can put a huge amount of capital to work such that if they're successful, it moves the needle, for the publicly traded business is market values. What we're talking about is a different type of business that operates at a scale that is many, many multiples below that. So a lot of private equity money wouldn't even be interested in what we to do because it would not move the needle for them. So we think it's actually a very strong competitive advantage for us, participating in a different market than where they go at in a much, much lower scale. In terms of the pricing, I think the question is absolutely right. What you've heard from Bill and myself is we have no intention of getting into a business where we need to be constantly increasing the level of premiums that are written every year even if the pricing doesn't -- we think that's a core competitive advantage that Berkshire and other well-run insurers have done for many decades, and that's something that we think is really important. One of the reasons I think that we can say that is because of the holding company which removes some of those incentives where people have to have the only line of business that's public righting all the time. We have other lines of business that insulate it. But the second reason is because we're taking an investment-led approach. Bill talked about how in the typical P&C company, 1/3 of the overall return on equity is coming from the insurance, 2/3 is coming from the investments, even though the investment return is pretty we have the ability through our common stock selection approach to really lean into the investments. And that environment is based upon something that is entirely different than where the pricing for insurance policies are. So we have the luxury where by overcapitalizing focused on common stock investments, we can be earning a very strong return even if we never wrote a policy for an entire year, although the intention would be across a lot of different lines of business to try to fight insurance premiums that we could write.

The second part of the question is on AI.

Yes. And then for AI, we think AI is more likely going to be a benefit for the insurance companies, but it's going to take time. So if I kind of step back very broadly, what you see primarily in the insurance industry is companies that have been around for many decades, which tend to actually be the largest ones in the history of it, they're a little bit more analog where they are -- they've had processes that have been placed for decades. They're very reliant on human judgment. And they are just very much scratching the surface to see what's possible for even using technology to start -- there's another set of companies that have really been created, I would say, within the last 5 to 10 years that are starting to use not necessarily AI, but just much more technology infrastructure in order to really improve underwriting and to be able to help the underwriters actually have more data available to make a decision. From what we have seen, some of those companies, some of which are publicly traded, some of which are private, they are achieving pretty attractive results. And I think that could be a competitive advantage for some of those businesses because it's very hard to take an organization that has a decades-long history and as many, many multiples larger and completely infuse technology into that when it's very different in a historically. I think it's going to be a very long time, though, before AI is writing enough policies on its own without any human intervention or judgment such that the price of insurance comes down and that returns are -- so I think there's a window for particularly the types of companies that we're looking to acquire where technology and AI can be a real benefit in allowing them to underwrite more profitably by lowering the cost and better achieving risk -- but at the same time, it won't be broad enough for the industry where it's going to have a negative impact on pricing and returns.

I'm Stephanie from Dallas. I just wanted to ask, have you talked to Mr. Buffett directly on your plans with Howard Hughes? And if so, what did you say? And do you have any advice for you that you can share? And also, we love to have you all move down to Texas. So come on down.

Thanks for the invitation. And I do get the spend some time in Texas, and we have board meetings there as well. I have not spoken to Mr. Buffett. I had my last communication with Warren was actually I wrote a thank you note actually last week, and it was a thank you note because this is a person that's had a very significant influence on me over the course of my life. I got interested in this business, reading the Berkshire Hathaway reports, he came to speak at my business school my first sort of interaction with him. And I built a modest relationship with him over time, got to know them a little bit better through giving pledge and other meetings. And a very important influence my note to him was basically, other than my parents, no one has had a greater positive impact on me than you and so I wrote him a thank you note. But no, I haven't asked for his -- him about Howard Hughes. I hope as well. Whoever has got the mic, over here?

Scott from Atlanta. I'm just wondering why the focus only on P&C? And would you consider other types insurance in the future. And also when you get an acquisition opportunity you think could fit Howard Hughes, how would you figure out whether to do that or to go with the Spark option for an acquisition that...

Why don't you take the first and then I will take the second.

So it's a great question. We've really evaluated all different types of lines of business. Going back to a prior question, what we like about the P&C business first of we think that it best sets up for the investment approach that we've outlined. There's some a little more complicated regulations, but I think a very high-level way to think about it is we've talked about for P&C companies that they tend to be levered on average -- we obviously plan to be a little bit less. If you start getting outside of property casualty going into life or other retirement products, you could see leverage levels between 7 and 11x. And when you get leverage that high, it actually makes it virtually -- it's very difficult to be able to implement the type of common stock approach in a very safe manner that we want. So I would say those types of things outside of P&C are more complicated for our investment approach. But I also think there's a lot of competition because there are other people who will not be investing in stocks, we're investing in credit that really want to start playing in the life space because they think they can scale it up from a very small business to a very large business rapidly. So we think there's some competitive advantages in terms fewer dollars trying to do the strategies that we're implementing if we stay on the P&C. So that's why it's really been our potential focus for both of those reasons.

And your second question is for context for people who didn't appreciate the question. So -- and maybe a more general question about allocation -- so today at Pershing Square with Howard Hughes, you think of it as we have sort of 2 strategies. The biggest strategy we have today is we manage 3 funds, the largest of which is Pershing Squares Holdings. Now we have 2, I'd say, remnants of our hedge and invest in publicly traded securities that own -- we own minority stakes, generally in large cap and mega-cap companies. We're buying businesses at times where we feel like they're underappreciated by shareholders buying them at discounts. There are companies that we -- in many cases, can have a lot of influence on the company to the extent that it's a business that needs optimization or assistance think Chipotle, after a food safety crisis, think Canadian Pacific, a railroad that was really under managed. But it's a minority stake in a liquid large cap public company strategy. The -- with respect to Howard Hughes' investments, the investment portfolio of a future insurance operation will be managed very similarly to our public strategy, minority stakes and likely very similar companies to be owned that are owned by the manage. To the extent Howard Hughes invests in a private business, it's a controlling interest in the private business, and Howard Hughes would be our vehicle for acquiring controlling interest in private businesses of a scale that's appropriate in light of Howard Hughes. We created an entity a couple of years ago called Pershing Square [Spark] Holdings. It's an acquisition company. I think a better version -- there's a special purpose acquisition company, a SPAC. And then we created something called the SPARC, a special-purpose acquisition rights company. And what it is, is it's a much better version of a SPAC. The way it works is we gave rights to our previous net in our previous SPAC, an entity called Pershing Square Tontine. Those rights don't trade today. And we're looking for a company to take public that's of scale. The minimum investment we can make a Spark transaction is $1.5 billion and effectively scales to theoretically unlimited size. But where we be using that capital generally to buy a minority stake in a company that's private with a purpose public. So let's think a $10 billion business owned by private equity when they want to take it public. That would be a transaction that we could execute using Spark. We've got a couple of different structures and each of which is targeted to kind of a specific kind of transaction. And there really isn't a lot of overlap, which is why it makes sense. Okay. Go ahead.

Vincent from New Jersey. First, we would like to thank you and the team for having this in-person meeting. But I have 2 questions. Why and when did you choose Berkshire Hathaway as like your model to decide how the insurance company should run and also looking years and years ahead, what other company that Howard Hughes be open to acquiring.

Sure. So young men aren't you supposed to be in school. Yes. -- it is school. -- is in school. I agree. Good decision -- come -- come to the meeting. So the reason why Berkshire's model for insurance is the model we want to use here is because, we don't just want to buy a profitable like if you wanted to -- there are some really well-run profitable insurance companies. We had the resources to buy them, we probably wouldn't buy them. Why? Because we'd have to pay probably 2, 3x book value a very well-run profitable insurance company. And it would be hard for us to add meaningful value to that business because it's an insurer that's really making a lot of profits on its insurance operation and probably run in a traditional fashion with a fair amount of leverage in its insurance operation, not giving us the flexibility to take advantage of our competitive advantage with our ability to make investments in the stock market. So if you look at Berkshire has done, they really, in some sense, I think this is not well understood, but Buffett's really underemphasize the insurance operation of his insurance company, but really used a P&C business reinsurance operation as a platform to make common stock investments in a public company context. One of the things that I think is not well known. But today, if you want to have a public company investing in common stocks, it's called a mutual fund or a closed-end fund. And they're pretty tight regulations on how that entity is operated and think of all the various examples that you can give. And there's something called the 1940 Act, the investment company active 1940, which limits the amount of capital a public company could invest in minority stakes in public companies. But if you buy an insurance operation whose investment portfolios in common stock. So you can get exposure to common stocks without getting in trouble from an investment company perspective. So I think what Buffett did is he recognized by virtue of this at the time, 15-year track record investing in the stock market that buying minority stakes in public companies, you could earn very attractive returns. You want to continue that in a public company context, but do so within the confines of the rules led him to acquire an insurance business and manage that insurance business in such a fashion, but he didn't have to worry about sleeping at night based on the insurance operation, and it would give him the flexibility to invest in common stocks. And the same competitive advantage that Butten I think, recognized in himself in the 1960s is a competitive that we have at Pershing Square in terms of investing in common stocks. And we wanted to be able to continue that by investing in Howard Hughes.

What kind of business are we looking to buy ?

Kind of business are we looking to buy? We're looking -- it's less so a certain type of particular industry. It's a business that has certain economic characteristics. So we are looking -- our favorite kind of business is sort of a royalty collecting company. If you look at the Pershing Squares portfolio today. We own a company called Universal Music, Universal Music is the dominant company recorded music and a near #1 company in the music publishing business, and these are businesses that look like royalty collective mean if you stream [you to, you probably don't listen to you to, I might be here to listen to Taylor Swift. I'm not sure what you listen to], but [indiscernible] if you stream whatever it is, every time you listen a fraction of a penny is being paid to the artist and also being paid to Universal Music. We like businesses where other people put up the bulk of the capital build the distribution channel think Spotify, and we get every time where the company gets every time people listen a fraction of a penny. We own Hilton. Hilton is a company a bunch of entrepreneurs built and owned hotels and the Hilton brand brings a lot of customers and helps the profitability of the hotel. They also manage some assets. It's a business that doesn't a lot of capital, and they get a royalty on every dollar that's spent on rooms and food and amenities in a hotel. We own a company called Restaurant Brands, with Jones Burger King, which is Tim Hortons and Popeyes and other brands. And every time someone has a hamburger fries and a coke, we get 5% of the revenues off the top. So those are our sort of favorite kind of business, sort of a very dominant company in particular. -- industry and a sort of capital-light model, and we can envision kind of decades of growth at above -- nicely above the rate of inflation. Those are kind of our favorite businesses and businesses where their costs don't grow nearly as quickly as the revenues can grow. That's kind of our favorite. But generally, businesses that are in high returns and where we can predict with a pretty high degree of confidence that technological or other disruption is not going to interfere with the business. And that's the hardest thing to do today, particularly in a world with AI, which is going to lead to major changes in models and be very disruptive in the industry. So if you're going to invest in a company, most businesses pay out a relatively small amount of their earnings and dividends and some payout none. So to earn a very attractive return and do well over time, you have to be confident they're going to reinvest the cash they generate over time and they're an attractive returns. At the end of the day, the business is not going to be disrupted. If you buy a stock in the business and they invest capital and earn high returns over time over the next 20 years and then they get disrupted and it goes to 0, ultimately, you made nothing. So the key is predicting the risk of disruption and understanding the factors that protect the business. And those are the same approach we use for very large companies. We're investing in companies today that have, in some cases, multitrillion market caps. In some cases, multibillion market caps will be investing in businesses at Howard Hughes that are smaller than that, but we're going to want them to have similar kinds of characteristics.

If I could just add. I started reading Warren Buffett when I was 18-year years old, and I thought I started pretty early, but you're exactly how far ahead, but you're definitely ahead of where we all were. So I'm excited to see where you'll be in 20 years.

Yes, big advantage in investing is starting early. I'm 59. So that gives me some hopefully, multi-decade, hopefully, opportunity to compound from here. Getting back to my Warren Buffett example. His net worth was in the several hundred range when he was 50. He's created 99.6% or so of his net worth after 50. So there's still hope for the old people. Next question, who's got the mic. So you should just give the mic to someone who's hand is raised. And then here -- go ahead -- and by the way, the other mic should go to someone else who had their hand right in that way we keep it going faster. Okay.

[indiscernible] from New Brunswick, New Jersey. So my question is regards to investing in general. So the MAX has an concentration in the S&P I think about 35%. And the S&P is up 13% for the year. part, if you look at the equal weighted index, it's up about 8%. So where I'm going with this is companies have an incredibly high multiple even for the forward earnings. So how do you manage that? You don't want to overpay for the companies because the trading at Semearbig are big multiples, but you also don't want to underperform the market. So how do you start where, yes, you want to outperform the market, but also not want to overpay for the companies?

Sure. So the way we assemble a portfolio is unrelated to the market. We don't really care what the stock market is going to do over time. The benefit of being an investor with a permanent capital structure is we don't have to worry about being judged every quarter, every year against the competition. The vast majority of investors have people in asset management industry have money that can leave that day, I think a mutual fund or on a quarterly basis or annual basis, I think a hedge fund. And therefore, there are always at risk of people kind of pulling -- and when people underperform for a period, that's an opportunity for someone to make a decision to take their money way. When you have permanent capital, you can take kind of a longer-term view. So we're investing in we're buying the stock without any real view of where it's going to trade in 90 days or at the end of the year, but we're buying it at a price where we think our kind of discounted view of the future profitability of the company is such that it's a very attractive return. We don't make investments generally unless we expect to earn a 20% rate of return kind of over time. So we don't kind of construct a portfolio on the basis of how the stock market is constructed portfolio, so to speak, bottom up. We're buying businesses that we think offer very attractive returns relative to the risk. The other point I would make in terms of kind of the context of your question, simply because the stock trades at a high multiple does not mean it's expensive, right? The value of a business is the present value of the cash it generates over its life. There are many examples of companies on the basis of next year's earnings look expensive. But on the basis of the 10-, 20-, 30-year trajectory of the business look really cheap. And that's the job of the analyst to kind of figure out what the future trajectory. There are businesses that -- if you think about venture capital, there are many companies that are losing money, therefore, trading at an infinite multiple but could be very cheap based on their progress. One of the things that Jeff Bezos did exceptionally well as a CEO is one of the first kind of really significant examples I've seen of this. We kind of made a very significant decision at the time the business went public, it was going to spend effectively 100% of his profits on just enhancing the customer experience improving the technology, increasing the kind of creating more though on the business. So meaning like an infinite multiple. But if you had bought Amazon anytime in the last 25 years, you would have been cheap, right? So your job as an analyst is to say, yes, a P multiple is kind of a quick back of the envelope way to think about whether a stock is cheap or expensive. But it's just that it may be entirely misleading. And by the way, stock's trading at low multiples of earnings may be expensive, because their earnings are going to go away. The stock is trading at high multiples earnings could be cheap because the earnings are going to grow much faster than people expect.

I can just give one. We thought a lot about your question. I think it's a great one. A couple of interesting statistics. -- kind of dig into that. So generally, people think the MAG 7 is probably trading at 32 to 35x earnings. The S&P is probably trading about 23x kind of 12 months out earnings. Interestingly, 2 of those MAG7 companies Meta and Alphabet. So Google and Facebook basically. Facebook trades at 26x earnings and is going to grow its earnings probably 20-plus percent next year Alphabet or Google is trading at 24x earnings and it's going to grow its earnings probably 18%, 19% next year. What's interesting about that is those 2 companies are basically trading just a little bit more than the average stock. But the average stock next year is going to probably 1% to 2%. So even inside of the MAG 7, while overall, it's very expensive because of Tesla, NVIDIA, you can find if you -- to Bill's point, if you're going through very carefully, you can even find stocks that on a very back of the envelope calculation are trading at just slightly higher than the overall S&P multiples, but may be growing kind of double that level even inside of the MAG 7 itself. So I think to Bill's point, what we try to do is look very detailed at every single company that we think is of a size and subsequent that we could invest in and really try to think about it individually and then we also kind of look at where the general market statistics are as well. just for context more than anything else.

And Ryan and everyone on stage, David and Joe from Omaha, Nebraska. So made the trip make the trip down to Omaha, said, "Hey, we're going to make the trip, come down and see what's going on with House yes. So my -- I want to say thank you, first of all, for everything because.

I'm going to make you ask a question, but you...

I would ask the question, just the story of Heistad following your carrier and Ryan's carrier, grew up in Africa and had the opportunity to go to Asian Goncalo, I solve videos about cash flows and everything to follow what's going on and clears later, we're sitting down year-to-date. So I was going to ask a question in line with what the gentleman, the grown up key the ags in terms of if you never -- if insurance wasn't the route you want to go with these were the other alternatives. I mean look at Ciscanda, for instance, with other alternative you would have taken or produce the same results that you were looking we looking at producing in terms of insurance? .

Sure. So if you -- and by the way, thank you for attending me. Let's assume we have $1.4 billion of cash available for an acquisition, and let's assume we spent it on 1 business. After we spent that capital on 1 business, depending on the nature of the business, business that we expect to grow at a nice rate over time. Both businesses like that aren't able to spin off a lot of cash out of the business. So now we've made 1 acquisition. We own 1 business. Hopefully, we did a good job selecting that business -- but our ability to make an additional acquisition is going to require us to raise capital. We probably have some debt capacity, but not a tremendous -- but beyond that, we're going to have to issue shares. One of the secrets to Berkshire's success over time is that Buffett was able to grow the enterprise in a very dramatic way for a long period of time princially because he -- the kind of free cash flow generative nature of the insurance operation, grow the investment portfolio enormously over time without issuing stock. And when we took control of the company, I think there were 1 million shares outstanding at only at 1 point in like in the 2000s, did he issue a meaningful amount of stock when he bought genre. And then today, there's something like 1.5 million shares outstanding. -- of the company. And so the -- all of that asset value he created gets divided over a relatively small share count, and that's a big part of the reason. If instead what Buffett had done is bought it made a series of acquisitions by issuing common stock over time, one, it would be very sensitive to the price at which the shares traded because if you're -- if your stock is trading at a discount to intrinsic value and you're issuing equity to buy businesses, it's very hard to create value. The only examples of companies that have issued a lot of stock over time and bought businesses and that have been successful are ones that have been able to continually trade at very substantial premiums. And that's a hard game. And I think there's a lot of risk associated with it. So that's what's led us to adopt copy or intend to copy what Berkshire has done over time.

Bill, I think it's fair to say that outside of insurance for other things we might do in the future, what we could have done had we not gone down routes we're somewhat industry agnostic, but we're looking for specific economic characteristics of a business that we like. And Bill kind of described, we like royalties. We like businesses that have a very strong competitive position where it's hard to disrupt their moat, to use that have secular growth. Generally speaking, we would either like a management team that we think can execute well a business plan or where we think that we might be able to find a management team that can come in and execute well. And then it needs to meet certain criteria. But other than, I would say, ruling out certain industries where there is some first order impact on the business value that might come from a commodity or something where we would not be able to predict and would not be within the control of the business we buy, we're really looking for a set of economic criteria that meets our needs rather than looking at any type of specific industry. insurance was a little bit unique. It does have those characteristics, but a lot of it was the value we could add would be in the investment portfolio, which is something that we do on a daily basis already.

It's always helpful in making an acquisition to have a business where it's more valuable in your than it is to the person who's selling it to you because that gives you a benefit in terms of being able to buy it at a price that's interesting to the seller. Maybe a question from someone else? Who's next? Raise your hand, we can't see you.

My name is Paul. I'm from Chicago. Thanks for hosting us at this event. So Mr. Buffett has been intentional about cultivating a shareholder base long-term, low turnover, not overly concerned with quarterly results. I was curious for Urals perspective on what's the shareholder base that you're looking for Howard Hughes and what's the approach for cultivating it.

We'll consider this your cultivation, beginning of your cultivation. I think -- look, I think you get the shareholders you deserve. I think that's accurate. If you present yourself to the world as -- we give people guidance about next quarter's results or the next year's results. And the focus is on a very short-term basis, you're going to get shareholders and analysts that focus on attributes and how they measure the company. If you -- if you take the time to explain your business strategy at an annual meeting and do what you say you're going to do over time, you'll build a constituency of people that like the kind of policies that you adopt -- our goal here is to compound shares at a very nice rate over a long period of time. We really like the starting base of assets and the management team that we've had the opportunity to work with for David I know now a decade, I think, since he's joined the company and Carlos for not quite a decade but how long? 8 years. And then the team at the property level have an exceptional team that has been refined, polished and has learned a lot kind of over time. So we really like the starting base of assets. We think we've got a good shot of implementing the strategy that we've outlined here with insurance. And I think we create sort of a unique interesting company. This is a permanent holding for Pershing Square. And we want this -- we kind of like to do a good job for you. hopefully, we'll attract shareholders that understand that message, and it's important for us to be consistent about delivering that message.

Okay. The returns you showed would have been lower if the companies saddled with goodwill and intangibles, and I think you've alluded to that. How much goodwill are you guys willing to take on? Could you give us some idea of the private company you with what the price to tangible book of that company is? And then thirdly, did you at all look at Radian's acquisition of Inigo, which is trying to create another type of Arch, -- did you have the opportunity to Lloyd's company.

So no to the last question. With respect -- I would say we don't generally think about when we're buying insurance for a moment. We're generally not focused on the book value, intangible or otherwise a business we're investing in. What we're doing is we're trying to -- we're thinking about the price we're willing to pay for a business. We're predicting the future cashflows of business is going to generate over time. One of the factors we consider in sort of measuring the attractiveness of the businesses, what kind of returns it earns on its capital base. And that capital base can be affected by sort of its acquisition history and accounting for goodwill and some other factors. But we sort of ignore -- we, I would say, translate the GAAP earnings of a business and the GAAP measures of the company's balance sheet into sort of economic measures, and we use those economic measures to think about business. I'd rather not comment on price discussions with respect to insurance company that we intend to acquire. But our -- it would be hard for us -- we can't overpay. Otherwise, we're not going to -- it's not going to be an attractive proposition for us. And we're going to be very thoughtful about it. All that being said, as I mentioned, we can afford to pay a premium to where this particular company or other such examples were to trade if they were to take it public tomorrow. The trading price of relatively small P&C companies in today's market is they trade relatively modest premiums to book value. There was a recent privatization transaction something like 1.3x book value. We can be competitive with the public market trading prices, but we're not going to overpay because it would -- if you start at too high a price, it's not going to be a good outcome, for sure.

That's for you to go this way as opposed to go de novo, just hire a really top executive. And it's just going to take too long if you started on your own.

So we're open to starting from scratch and -- but if we can find an existing platform where the time and energy has been invested to actually begin -- even if it's at the relatively earlier stages, that's going to save us a fair bit of time. And we're willing to. Obviously, you start an insurance company, you pay book value for it, right? You buy an insurance company like we're talking about, we're going to pay a premium. And that premium reflects the benefits of getting a head start versus starting from scratch.

One additional point I'd add to that is what's interesting if you think about what we may buy over a...

I got one request for whoever is doing audio. Please leave my microphone on, please leave Ryan's microphone on. I don't like it when it's off and then it goes on.

So -- so what's interesting about insurance relative to most businesses is because a lot of the -- or substantially all the capital being retained by insurance company, even if you paid a premium to book value today for the insurance company. Over time, it will be retaining its earnings and all of those earnings would be deployed at book value. And so what's interesting is unlike most businesses where you may say company merges with company B and the vast majority of the capital that will ever go in is acquired at a premium to book value, and therefore, your returns would be lower than if you bought a book value. In insurance, you actually putting in more capital book value over time. So the starting base is important in getting ahead. And if you have to pay a little bit of a premium to do that, if you think about the capital you'll put in over the subsequent years at book value, you actually can very much bring down any you pay over time such that your returns over time become very similar to what they would be as if you started this with only a book value investment, which is going to be attributed to the insurance business, unlike other more cash flow-based business.

It's a very good point. And the fact that we're taking a long-term approach is what enables us to pay a premium. Here, go ahead.

I'm Steve from Queens. I was just curious if you were considering investing in TikTok -- and also, if you have any thoughts on the impact of tariffs on investing landscape.

Not thinking about investing in TikTok. -- not because -- I mean, it might be an interesting business, but this is a very large transaction would be for Howard Hughes will be a very small participation. I don't know what it would really do for us as a potential investment. I also think it's somewhat difficult to predict the future of TikTok. So I'm not sure it's something that we can know. The second question was?

Impact of tariffs in general for investing?

Ryan will you tak that?

So what's interesting about tariffs...

Maybe Daivd can comment on the impact.

Sure. Clearly, tariffs are having an impact on the construction cost of to the earlier question of why we're not building portultifamily, all at once. The returns of development have been squeezed as a result of construction cost increases in multifamily rents that haven't grown as fast those construction cost increases have been primarily driven by some of the impact of tariffs. We've had the benefit in most of our current projects that are underway, largely the condominiums in Hawaii, where we pre-bought out materials, signed GMP contracts. So we know where our profitability is and locked in place. It's slowed up developments over the past 12 months, but it's maintained the profitability of all those in-process developments that we started earlier.

In terms of tariffs more generally, what I would say looking kind of at the typical Pershing Square types of investments that making Howard Hughes or we have in our existing funds. We really try to select for businesses that have a degree of economic insularity from things like tariffs. So if you look at a lot of our positions, we think about something like Alphabet, really no impact at -- it's really tariffs are implying first order companies that are dealing with goods and a lot of our businesses don't deal with that. So we try to construct the portfolio in where it's less impactful specific businesses we own. More broadly for the markets and the economy in general, I would say, tariffs by and large, have had a much less impact than what just about anybody thought that they would, if you look at the estimates in April when we announced this for a liberation Day versus now. I think some of the reason for that is of the goods that get traded actually come from different parts around the world and actually are sold in lots of different places. There are some products where it's only being sold to U.S. consumer, but most goods actually are sold pretty much equally to people around the world we've seen and I don't think people expected is pricing has actually gone up for everybody who buys those goods. So instead of saying we need to meet a 15% or 20% tariff just for U.S. consumers on a good that sold globally that happens to come in the U.S. a lot of producers have said we're going to take a pricing 3% and make everybody who's not in the U.S. share as part of that burden. So to some extent, I'm not sure this was in tender not at the time, but we've actually done is increased pricing for the rest of the world -- at the same time, we've increased pricing for the U.S. But because we've spread it out, it's not been much of a price hike for anybody, and therefore, everybody is kind of shared in that burden, but it's been less impactful to U.S. businesses and the U.S. consumers over time, which I think was not a wide expected outcome. But I think that's 1 of the reasons why overall tariffs have been much less impactful to the economy and to most businesses that were affected by it.

Hello. I'm Scott from New Jersey. Thanks for I had a question in regards to the -- basically the split of income or revenue from Howard Hughes communities versus the insurance operation with the diversified portfolio, investing in mispriced assets, both publicly traded and potentially private. What do we see as like the split in revenue from the portfolio versus the real estate business versus some other type of work out deals as...

Yes. I don't think a revenue comparison would get you the answer for I think the way to think about it today is, let's say, the existing Howard Hughes business, something in order of $5 billion of equity invested in that business. We're talking about taking $1 billion of equity and putting it in an insurance operation. So at least initially, on the basis of equity or the capital invested, the company will still be 80-plus percent real estate and the balance of 15%, 20% in insurance. We do think the insurance operation over time can earn a higher return on capital than the real estate operation. So with the passage of time and with the real estate operation taking its excess capital the holding company, there will be a mix shift in where the company's equity is invested over time. And hopefully, we'll be shifting that equity into higher-return businesses like the insurance operation plus other companies that we're going to acquire. We don't intend to invest in real estate with the excess cash. We tend to invest in other businesses that will begin or increase the diversification of our portfolio and businesses that can grow faster and earn higher returns than real estate operation.

I'm Nick. I'm from Hong Kong as well. I was curious over the next couple of years, especially as you kind of get started with the acquisition move to this new structure. What do you think would be some of the bigger idiosyncratic challenges that you face? And what do you think the mitigants would be to those?

So I think that the real estate operation is in a really good place. if you look at the history of Howard Hughes as real estate operation other than the South Street Seaport, the company has really executed incredibly well in terms of -- from a development perspective, build things on time, on budget. They the way we expect to achieve the rents or the sale prices that we expect. And I think we've got a really strong team that has a lot of experience and a lot of tenure. So I feel very comfortable with the real estate operation. I would say insurance, while -- we've done a lot of work analyzing insurance companies at Pershing Square and -- but we've not been major investors in the space. It's sort of a new space for us. And we don't intend to run the business directly buy a business that comes with a very strong team. But insurance is an inherently volatile business, and you can be surprised or we're in a world of has a high degree of uncertainty geopolitically and otherwise, I don't know that people who wrote insurance in Ukraine thought that Russia was going to invade, for example. That obviously has not played out well if you were in the business insurance -- we had exposure to property in the Ukraine. So I would say those -- Buffett talks about investing in Insurance, you spent a lot of time watching the weather channel in September. So I would say there's that inherent volatility. The way we mitigate that is by running an insurance operation at a very low leverage. So even a bad outcome can not have a particular draconian effect on the capital of that business. We just make sure we don't get over our skis. When you are in the business of writing committing to things in the future and people take your signature, it can be dangerous. It's -- when you're -- I always think it's easier for a kid to pay with a credit card because it seems like -- or even worse now when you go doesn't seem like when you take actual cash out of your pocket, it seems much more tangible. The problem with insurance is you're making a promise with you're uncertain about when you're going to pay the claim and people accept your signature, you can get into a lot of trouble. And so having the right controls and discipline and oversight, I think is the biggest factor, and that's about having the right controls oversight and really ultimately the people. and making sure they have the right incentives. I think in the incentives is really, really important. Thanks who's got a mic? Go ahead. start talking and then we will turn on your mic.

I'm Avery Brooks from Orlando, Florida. From your perspective, why aren't there more clones of the Berkshire Hathaway insurance operation. You explained that a lot of the existing insurance business don't necessarily have the investment expertise that would be required. But why aren't there more groups that, let's say, do have the investment experience and expertise that have followed the Berkshire model. I think a lot of the information that you shared today that sort of differentiates Berkshire's investment. Our Berkshire's insurance operations is publicly available. So why aren't there more finance that sort of follow that model?

Sure. So I think you need a few ingredients, okay? One, you need a company with a near controlling shareholder that owns 47% or in our case. -- it helped to, I would say, the bigger answer is that if you're a really talented investor, you can get paid 2 in '20 to manage a hedge fund. And for you to give that up to go work I mean Buffett basically gave up ahead -- he was managing $100 million, $25 million of it was his. The hedge fund paid is expenses, which were very modest and you got 25% of the profits over return. That promote structure was very valuable. But he believed that -- and he would be happier and ultimately more successful if he gave that up to become CEO of a crappy textile company think $100,000 salary in those stock options. That turned out to be a good trade frame, right? Buffet would have been the wealth -- nearly the wealthiest person in the world, if you hadn't given away so much Berkshire stock over whatever period of time. So that was a pretty good -- if you believe you can compound it at 20% for -- and you're going to live a really long time, it really matters what kind of vehicle you're operating with. And he just didn't want the headache of dealing with investors, he didn't pulling money at the wrong time. And so we walked away from all of that. If you're a really talented investor today, you're going to go work for Fidelity investments, are you going to go work for a hedge fund, you're going to go for a private equity fund because the pay scales there are much better. You're not going to go work insurance companies like on your -- if you're a super talented investor, you don't go work for an insurance company. So I think they have a tough time kind of recruiting talent. They have a tough time paying the talent because it's the compensation you can earn managing a hedge fund is well above what you get paid as being an officer of an insurance company. And so I think the combination of the compensation issue, the fact that -- you have to take a very long-term approach, the fact that you sort of need to have to happen in the context of a controlled or a near controlled company, a certain -- it took us 15 years to get to this point. There was actually -- there was a in Forbes 10 years ago, I was on the cover and it said, Baby Berkshire baby buffet or something. And we thought about Howard Hughes as a platform for doing this, but the stars didn't align until more recently. So I think that's really the answer. And I think the good news about that is it means the competitive landscape for doing what we do is not going to be crowded.

My name is a [Amir Hani] I have a few questions related to the Howard Hughes communities, the real estate component. Maybe back in June or July, flew to Phoenix, I went to Terabalis. I want to see the model home we're starting to pop up, I think, around July. And at that time, a few of them were up, and when I went inside, what struck me was that the broker was really pitching that the project was Howard Hughes and indexing so hard on Howard Hughes as the brand. And did it really bring up the homebuilder who built the spec home that we walked in and which may be realize how important was the brand Howard Hughes. You bring up Summerlin, Bridgeland and all these successful products that the company has done in the past. And part of my thought going forward is we're going to have real estate operations within the Howard Hughes company. And real estate is a very capital-intensive operation, right? Every time it generates NOI, you'll find a hole to reinvest it. We're in the real estate development business ourselves, we know. And so if you could front-load the cash flow generation of these assets so that Ackman and Ryan and per invested, that will help with the value of Howard Hughes, right? Has there been thought put into whether we can utilize the Howard Hughes brand maybe partner with other institutional groups to develop some assets within the communities, maybe instead of certain multifamily product, maybe sort of certain office product or whatever it Colin Hoby hotel model, like the Hilton model, they've created a brand and they get other partners to come in, bringing all the capital and help to the development generate fees, do we see hard Hughes going towards any kind of like path that way where we could bring other developers to tag on the Hard Hughes name and help it tolerate creation of these communities?

It's a fascinating question, and I think some Bill knows and some of our directors knows we've looked at some other opportunities in the past where we would have a smaller capital investment bringing other partners put the Howard use umbrella on a potential community and think that we could increase its patina, if you will, and earn fees. It is really difficult to find the properties that we think should be associated with the name and the brand Howard Hughes. Right? Close major cities, close to major infrastructure, ability to build great schools, lower tax, warmer clients, business friendly, those type of properties that are of scale, and you were teras, 37,000 acres 3x the size of Manhattan, are very, very difficult to find. If we wanted to export our name to every 2,500 acre master plan community nice bedroom communities for another community where they may not build great parks and great schools. I think that's a dilution of what we've built to date, which is a 6-year track record in Columbia, 50-year track record in the Woodlands and 30 years in Summerlin, a building incredible loyalty and brand amongst our community, our residents and businesses that locate that.

Yes. I think I would add that this -- the reason why they're emphasizing the Howard Hughes brand is that if you're going to be the first buyers in a 36,000-acre community, we want to make sure that developer doesn't amount of money and that it actually gets built, otherwise you own a home in the nowhere, right, versus if it's Howard Hughes community and you're the first buyer and you're getting in really inexpensively because you're in that over time, as the community develops, your home is going to appreciate at a much more rapid than it will in a typical kind of development. But we can't just -- it's not like Trump and you can just put his name on economy -- it's really about building a city and committing to own it and oversee it for decades. And I think very few people can -- it'd be hard for us to partner with someone else who could make that kind of commitment. I think that's the issue. Go ahead.

With respect to the condo division within Howard Hughes. So we have the products that we're finishing in Hawaii. And that has another -- that has a long span remain. Do we envision continuing to take on master planned communities where we do these large-scale condo developments going forward? Or are you just planning on finishing up our current pipeline projects? And then maybe focusing more on strategic condos like the Ritz-Carlton projects that we've done, I believe, at Bridgeland.

I think that over the past 15 years has been public. One of the things that I'm most proud of is the incredible talent that's been built in our condo development and sales team. And I think they execute among the best that I've ever seen in my career and to leverage the skills that, that team possesses across our entire portfolio is what we're trying to do first and foremost. And you've seen that expand from Hawaii into the Woodlands with the Ritz-Carlton, where we an amazing amount of success. And I think that we can take that and expand it, not just in the Woodlands, but also some of our other communities like Summerlin, where there is demand for luxury lock and leave with a that's aging and children moving out of the home that want that lifestyle. And if we can build that at an incredibly profitable rate, the way we have historically, we should leverage the skills and expertise of our team to build those condominium towers our communities. If expanding that beyond our communities is harder because we don't have the competitive advantage of controlling the block across the street. We're down around and having that competitive nature down the street can impact margins and profitability and squeeze us and potentially have a branded product that Howard Dominum in some remote location that doesn't live up to our standards. So I think primarily, we're going to execute in Hawaii. We're going to build those towers that we have presales and those next set of entitlements that we just received. We're going to take the skills and expand the Woodlands and Summerlin and within the walls of the communities where we have a competitive advantage. And I think that's going to be an incredible pipeline that should keep our team busy for over a decade.

And the other thing I would say in Hawaii, there are some other major landowners come schools, et cetera. And I think Howard Hughes has really proven itself is an amazing developer there. So there, I think, is the potential for us to do perhaps joint ventures with other lenders in Hawaii as well. But actually, Bonnie who leads our sales efforts. I think she is here, Bonnie here. Right here. So you why don't you stand up -- why don't you give her a microphone, and have her explain the magic that she does. I think...

Just don't share too much magic.

I won't. I won't.

How do you do what you do? Explain what you do?

I think, first and foremost, condominiums, when you're selling condominiums, what makes them great is how they're embedded in, I guess, the orbit the plaza may or the walkability or the exciting area that you're in. You see that right here in New York. That is what we're doing really -- our condominiums are embedded within a lockable community that is engaging in -- that's the first thing. So I think product also, the product that the developer seeks out. We're looking for the best designers in the world who are compiling, I guess, a recipe 2 years in advance before for 2 years, we're working on what do people want? What are they looking for? And not just what are they looking for, but what can we anticipate, right? When the car came out, you asked people what you want to see horse, right, you can't do that. So you have to be sure you're anticipating that product. So those are the 2 really product things. And then the process. Howard Hughes has invested capital in platform, but also we play long. You mentioned during COVID when you invested into the company. That move allowed us in Hawaii, for instance, to wipe out any competition -- when we came out after that infusion, we kept developing and we kept going when we came back up for air, let's say, 2021, we crushed it with another launch that is actually closing next year. So a lot of the recipe is embedding ourselves in the master plan community exactly what David said and then supporting the process, which is long-term thinking. And third, I think condominiums are I guess, a self validating business, you have to -- you design them you put a certain amount of capital out and they have to sell before you build them. And that's good because then you know they're going to be -- so with everyone's support, I think it's been there. The last thing is we have an owner mentality. David mentioned our team, but our team is really entrepreneurial, and we all have -- the leadership team has facilitated an owner shipment. So when we're in it, we're playing the game to win.

Yes. Actually, Bonnie, thank you, Bonnie. There's like one consistent theme that I think applies to almost everything that we do. So the advantage of Pershing Square has investing in the stock market is we only deploy capital if we think we're going to have high rate of return over a long period of time. And our time frame is long term, much longer than the typical investor. The way we're going to run an insurance business is the same way. We're only going to deploy capital. We're only going to take on risk. We're only going to write premium if the risk makes sense. And if there's nothing to do, we're happy to pause and do nothing. The same thing is true how we build condominiums. We don't -- we take the very long-term view. The world was going to recover from COVID. We're going to keep investing. And the result is that we've really dominated that market now for approaching a decade. There really isn't material competition. And we take an approach. So one of the first towers we built, unfortunately, we had problems with the facade. It was a curved glass facade and based on the aerodynamics of the facade, it would squeak periodically. It cost, whatever, $40 million to replace the facade. Now again, we had a contractor and we had a claim and we can sue them and do whatever. But in the meantime, we had people living in units with a little [ churken ] sound. And so what do we do? We replace the facade without knowing whether we're going to make an insurance recovery from our insurers without knowing whether we were going to recover from our -- from the [ curtainwall ] contractor. And we did that. If we were a stand-alone developer of tower in Hawaii, one, we couldn't have afforded to do that. And two, we probably would have said, you know what, the next tower we' going to build, we're going to build somewhere far from Hawaii, we're doing it under a different name. But the brand actually really matters. And what gives condominium buyer confidence is, you know what, a lot of our buyers in our new towers actually bought in our old towers, and they made a lot of money because they were early. They got on Bonnie's whisper list and they got in early. They were able to pick out their unit and it appreciated over time. And they knew that if there was ever one that we're probably not going to have a problem because we're a very experienced developer, but there was a problem, we're going to fix it. And I think that brand and kind of a willingness to take a long-term approach really matters in a world in which the vast majority of people are either constrained by the capital they manage or their desire to get rich quick. And I think that is an enormous competitive advantage in every business.

[ Phil Ro ] from Dallas. You mentioned earlier that Buffett rarely issued stock. If you come across a transaction for Howard Hughes and you like the economics of predictable cash flows, but they'd say, Bill, for tax reasons, I need to do an all-stock deal, what are your thoughts on that? And then also to maintain control, what are your thoughts? Berkshire has been mentioned. What are your thoughts on like a Class B but no voting rights?

Yes. So I think we're going to be very, very reluctant to issue stock as a material amount of stock in order to do a transaction, and we're going to be that much more reluctant if our stock price is not trading reflective of our underlying value of our business. Today, where we sit, the stock, we think -- again, we paid $100 a share. We did so 6 months ago. The business is more valuable today 5 months ago than it was then. And so we're certainly not going to issue stock at today's share price to do something. So I would say, assume our goal is over time to have the same or fewer shares outstanding. All of that being said, if there's something important and strategic to do and we can issue stock at a price that is reflective of the value of the business, and we can use it to buy a business at a price that's very attractive, we could consider it. But it's not going to be our our -- business plan here is not to buy things, issue stock, buy something else, issue stock. But I would say it's more likely that the shares outstanding doesn't meaningfully grow from the current level.

To be clear also, I would add, if a seller needs stock in order to satisfy a tax consequence, as long as we have the cash on hand to be able to immediately buy back the same amount of stock that we would have issued to them such that it was from an economic perspective as if the shares were never issued or bought in cash, but it satisfied a tax need for a seller. That is an option that we have. I think to Bill's point, we don't expect to be issuing stock as a way to fund acquisitions over time, but I distinguish that slightly from our ability to meet a seller's need, assuming that we could have bought the business in cash and have that available to repurchase those shares immediately afterwards.

My name is Jacob Garlick from Abraham Trust from -- visiting from Los Angeles. Thanks for hosting such an intimate Q&A session and presentation. I was hoping you might be willing to expand on one of the points you made earlier. You shared one of the core attributes or principles you're using in making an acquisition is an effort to find businesses that won't be disrupted by technology in the future, bringing your investment initially to 0. What might you be able to expand on the lesser understood ways in which technology will disrupt businesses that you need to watch out for?

Well, I think technology creates opportunities and also creates risks. And look, there was a transaction announced yesterday to buy this entertainment gaming company. And biggest LBO of all time, pretty decent premium for a stock that's continued. It has gone up a lot. And my guess is that the business plan is basically to massively reduce the cost of the business by using AI to develop games and that their financial model, it's not business as usual. It's that the ability with AI in terms of ability to write software to do video, et cetera, has so dramatically changed the gaming business that this gaming franchise could be run at a fraction of the cost that it's currently being run. At the same time, there are businesses where AI is going to be enormously disruptive. The simplest example, of course, is kind of the traditional call center, right? That model you want to stay away from. Now how do you assess technology risk? For us, it's sort of like a thought experiment. And I don't know that there's a systematic way to really do so. A lot of it has to do with how strong is the company's position where it sits today. There's been a lot of debate about Uber, a large investment in Uber, maybe probably our largest investment. And we were able to buy the stock at an attractive price because the world has said, Elon is going to introduce this very low-cost Uber Tesla taxi and Tesla is going to get effectively 100% market share in the mobility. Our assessment was the customer wants a car -- a clean car at the lowest price with the least amount of wait time to get them safely from one place to another. And our view is that Tesla is going to be an important player over time, but it will be one of multiple players. And the customer won't want to go to the Tesla app. They'll prefer to be at the Uber app where they can access the full supply of autonomous vehicles as well as human-driven vehicles in addition to other things they might want to go to the app for, for example, getting food delivery or drugs from the pharmacy. And it's sort of a thought experiment and you kind of play out over time what the likely outcome is, you think about consumer behavior and you think about how much time it's going to take Tesla to be in the position that we've talked about and where the Uber platform will be over time. I don't know how you -- what would you say on that?

Yes, I agree with you. I don't think there's a hard and fast rule. One thought experiment that I think we apply pretty consistently whenever we're looking at businesses and trying to understand even the risk of not just existing technology about -- now it's very easy. You can ask yourself for every business you look at, how is AI going to be helpful or hurtful. But I would say, in general, one thing that we try to think about, which is actually much better than just for AI or technology, we always think about why is the customer, whether it's an individual or it's a business, why are they purchasing the product? What problem is it solving? Why is the reason why they're doing that? And is there any pressure point that would cause them to go a different direction? And I think when you start really thinking about the consumer, and again, that doesn't have to be a person, it could also be business in these types of business to business models. That often starts answering a lot of these questions. If you think about the history of technology, I would argue most of the reason, if you go back to the early 1900s, why did we go to cars versus horses? Well, people actually wanted a more efficient way to get around. The issue was that there wasn't something there until Henry Ford really created the engine automobile. And that allowed people to get something that they wanted. They didn't want to ride a horse. They just wanted to get from point A to point B the most quickly. Technology unlocks that. You go back to the late 1990s, ultimately, when you start thinking about the rise of Amazon, people would go to retail because they sold in the products they wanted. They didn't really care to go to the retail store and spend the time in the car to go buy it. What they wanted was to get the product there relatively quickly and have a wide selection. Amazon unlocked that. I think if you kind of apply those types of analogies to the AI, a lot of it comes down to what is the customer ultimately looking for? And is there some technological innovation that could solve that even if the company -- the technology doesn't exist and how would that change people's behaviors. That's sort of a little bit of a heuristic that we think about when we analyze businesses.

And one of the reasons why we like Howard Hughes as kind of a base to build our modern-day Berkshire Hathaway is if you think about what Buffett started with, he started with the textile business that he bought at basically a discount to working capital that he effectively liquidated over time and redeployed the capital into insurance, into banking into a diverse collection of businesses over time. What I like about our core business at Howard Hughes is I'm not concerned about AI disruption. People can still rent apartments. They're going to buy homes, they're going to buy condominiums. Land is going to be valuable. And in fact, in a world -- in a more virtual world, it's easier for people to live in lower tax environments that have -- so I think a lot of the forces in the world that are kind of encouraging people to leave cities like Chicago and hopefully not New York, but perhaps New York, if we have the wrong [indiscernible] and wrong governance, I think these communities are going to be really attractive regardless of what's going on with AI. So there are certain kinds of companies where you just can't figure it out and you just pass. And the beauty of the investment business is you don't have to have an answer. Not everyone has to be Jim Cramer and say, buy, sell or hold. I don't know how Jim actually does it. But with us, the -- I think there are many public companies that no one really knows what they're worth. It's kind of like a game. But there are certain businesses that you can predict with a pretty high degree of confidence what it looks like over time. So if you find yourself with something where you're concerned about technological disruption, but you're not sure, you just don't invest in it.

A couple of questions from the online audience. Would you consider investments outside of the U.S.? And what are your thoughts on digital assets? And would you acquire any kind of business related to them?

So I would say less likely we'd invest in something outside the U.S. because I think proximity to the company is certainly at the early stages of our business is going to be important. We're not going to be buying 100 businesses a year. And we want to almost co-locate with or have certainly near to us just for oversight reasons, an insurance operation and also any sort of initial business that we buy. In terms of digital assets, is this crypto we're talking about? Or is it something else?

Yes.

Yes. So I think the whole crypto space is sort of interesting, but not something that's relevant from an investment perspective for Howard Hughes. And no, we're not going to build a Bitcoin trust company. But interesting on Bitcoin trust companies. So I talked about the Investment Company Act of 1940. So in the 1920, Andrew Sorkin is coming out with a book called 1929, and I read one of the early drafts and it's a really good book. I encourage you to buy the book when it comes out, I think, in the next few weeks. But it's really interesting to read about the 1920s. In the 1920s, they were trust companies created by the likes of Goldman Sachs that would basically buy publicly traded securities using -- and the companies themselves would use leverage. So if you bought the stock, it was a way to own a levered interest, for example, in a portfolio of public companies. And then people would get margin loans where they buy the Goldman Sachs Trust company, which itself is levered and you get these sort of massive multiples. And when the market went straight up, you could make a fortune owning them. And then the crash happened and the Goldman Sachs one went from like $300 a share to $3 a share and people lost a lot of money. And then the Investment Company Act of 1940 came into existence, and it basically said that a public operating company has to have 60-plus percent of its assets in businesses in which it's the controlling shareholder, which is why Berkshire didn't buy common stocks in a public company. He bought an insurance operation that had a portfolio of -- where you could invest sort of indirectly in common stocks. This phenomenon of Bitcoin trust companies, which I'm not sure people are familiar with, the most famous of which is a company called Strategy, previously MicroStrategy. And the guy named Michael Saylor basically had this sort of not particularly a successful software company, and he used the excess cash of the business to start buying Bitcoin and it created a way for the average person on the street or even institutions to get indirect ownership of Bitcoin and use a little bit of leverage. And the stock would always trade at a big premium to the Bitcoin per share. And so we could issue equity, buy Bitcoin and aggregate what today is, I don't know, 3% or so of the total supply of Bitcoin and continue to trade at a significant premium. And it's like this money machine, right? If you can issue stock at a premium to the Bitcoin NAV and then use it to buy Bitcoin and continues to trade at a premium, you literally have like a perpetual motion money-making machine. Other people have noticed that. Now why can you do that with Bitcoin and you can't do that with common stocks like they did during the 1920s. Well, Bitcoin is deemed not to be a security. And so it doesn't fall afoul of this sort of 1940 Investment Company Act of 1940. At the same time, I believe it suffers from the same problems of some of these companies that you saw in the 1920s, where I don't think there's real economic value being created by these businesses, and they're highly dependent on them trading at premiums. In a world in which Bitcoin went down, the premium went away or went to a discount and companies had liabilities that they had to repay, you could see a world in which this phenomenon goes in reverse. And there are a lot of copycat entities. And I would say the strategy example -- it's large cap, it's liquid. He's been pretty thoughtful about the kind of securities he's issued, so he doesn't have like a big debt maturity. But some of the other ones, I think, are problematic and many of them are now starting to trade at discounts. And you could see a world in which they're forced to sell Bitcoin in order to meet their obligations. The good news is we don't have to worry about that at Howard Hughes. While we'll be happy to have a Bitcoin someone as our tenant, but we are not going to get into the business buying digital assets.

Yes. So this is Tassos Recachinas from Sophis Investments here in New York. Just a question, a relatively new shareholder to Howard Hughes and a couple of questions. One is what attracted us to this was some of the event-driven developments with spinning off Seaport being a pure play. It's still a very complex situation. But the other thing, of course, is having Pershing Square's involvement as a large shareholder. They've done extremely well. They're a super investor over 20-plus years, exceptional investment track record. So when you see Pershing Square step in and buy stock at $100 a share, you can deduce that they believe there's a 20% plus IRR from $100 a share, and you're still trading at a substantial discount to that price. So I guess the questions would be for Pershing as well as Howard Hughes, maybe if you could talk about your view, if possible, on what NAV is today and maybe what it looks like down the road as well as would you -- a slightly separate question is, would you entertain buying another REIT or buying a REIT? Or are REITs not in the picture for Howard Hughes because of potentially the lack of synergies or similarities. Howard Hughes is kind of an orphan company and there's not many REITs like you out there. So I know you're...

I understand the question. So what I would say is we're not going to buy a REIT simply because we want to -- our excess capital -- one, we want to build a diversified holding company. If we buy other real estate assets, we're not going to be diversified. We're going to be doubling down real estate. We also think that we can earn higher returns in other businesses, insurance, et cetera, than we can in real estate. And we already have our -- we've got a team we trust. We've got a much better business than your typical REIT because, again, David has talked about the competitive advantages of owning all of the commercial land, controlling the community, making sure that it doesn't get overbuilt. So we're not going to buy another REIT. In terms of intrinsic value of the company today, I think the best measure you can get is we would not have paid $100 a share if we thought the stock was worth $80. We paid $100 a share. We were prepared to pay $100 a share. By the way, I have not seen many examples of someone buy 15% of a company and pay $100 a share when the stock is at $66. I think it's the only example I can kind of think of. Now either we're stupid or we believed that the stock has been perennially sort of undervalued, which is the case. The last time management reported that net asset value calculation was like the $118 level, and that was how long ago?

Over a year, about 15, 16 months.

About 15 or 16 months ago, the company sort of -- if you look at their presentation, they did at Analyst Day, they have a reasonable way of thinking about value, $118. So $100, $118. But I think it's if the stock is $80, wherever it is today, I think it's a very comfortable starting base. And I think if we do a good job creating value from here, you'll be very happy, you own the stock over a long period of time. I guess that's my best answer to your question. All right. I'm sure some people are hungry. Why don't we do the following? Why don't we take -- how many more questions are there? We got 1, 2, 3, 4, 5. Okay. We're going to try to crank through 5 questions, and we'll let people go have lunch. Next year, maybe we'll have lunch served. Okay. Go ahead.

[indiscernible] coming from Nashville, not Hong Kong. And if we get the wrong mayor, I really hope everyone goes to Dallas and the Howard Hughes Corporation owned properties.

Howard Hughes out there.

My questions will be longer, but I'll try to make it as quick as possible. So outside of [indiscernible]

Hold the mic near you, so we can hear you.

You been my greatest role model. And right now, I work in the corporate development for [ Fortune 95 ] IT integrator. And I certainly don't think I'd be here without inspiration I've drawn you from the years. And my question really has to do with the timing of the investment. So Mr. [indiscernible], a lot of times he talks about it's important to the right asset, but also at the right time. So would you help us understand why right now would be the right time for us to be acquiring insurance asset. Also, to me, it seems like President Trump wants dollar to weaken a little bit to balance the trades. So it wouldn't be a prime time for us to be acquiring assets overseas, maybe Canada is fairly close, English speaking, Australia or even South Korea.

Sure. So with respect to investing outside of the U.S. today for the reasons I've talked -- first of all, I'm very bullish on America. And I think there are good reasons to believe that our economy is actually in a pretty good place. One, inflation is really coming -- is disappearing or coming way down. That's set up for the Fed to start lowering rates. And I think you're going to see a continued opportunity for the Federal Reserve to lower interest rates. That's obviously good for a real estate company. The value of anything is the present value of the future cash discounted at an appropriate discount rate. The discount rate goes down when rates go down. And I think inflation and somewhat weakening job growth, I think, creates the opportunity for the Federal Reserve to cut rates. You've got a very pro-business President. You've had a tax bill that was approved by the Congress, but that has very significant incentives including 100% depreciation. You have this massive, massive AI investment, which is really a U.S. -- principally a U.S. phenomenon, and you're going to see literally trillions of dollars invested in CapEx, building data centers. I think that's before you get to the kind of the productivity enhancements that come from AI. I think next on the agenda for the Treasury Secretary, the President from a business perspective is kind of a big deregulation kind of push, kind of more sensible kind of regulatory regime. If the war in Gaza is let's hope that's resolved by the President's recent initiative. I think this Russia-Ukraine war has not been very good to, obviously, Ukraine, but it's not been very helpful to Russia. I think that's getting closer to an end. So I think you can envision a world with where geopolitical risk starts coming down, Feds lowering rates, huge secular tailwinds. And I think U.S. preeminence more so than I can think of in a very long time has been demonstrated with everything from what happened taking out Iran's or setting back Iran's nuclear capability. So I'm very constructive on the United States. And then for the reason we talked about before, proximity is a reason why we want to be here. And if you invest in a very high-quality business, you don't really have to worry so much about the currency because the business can -- a great business can raise prices over time. And if the currency devalues, but there's a product people want, you can charge a global price and whatever the particular currency that you're selling your product or service. Now I forgot your first question. Timing. So look, I think the setup for investing in Howard Hughes is that I would say our real estate business is in the best place it's ever been. Our communities are as dominant as they've ever been. And the company itself is -- this was a cash flow negative business and we had to finance -- continually raise capital in order to build out our communities. And we started with $35 million of net operating income. Today, that number on a run rate basis is approaching $300 million of recurring cash flows from apartment rents and office and retail. Our land values are -- have been -- continued to compound at very nice rates. You've got huge supply-demand imbalance in terms of demand for homes and kind of a limited supply. The supply is even more limited in places where people really want to live like Texas, Nevada, particularly in communities like the ones we have, which are -- have good schools and are safe and clean and have really good kind of governance. So I think the core Howard Hughes business itself is in the best place it's ever been. And for the economic factors I talked about, I think we've got a very significant tailwind, including the benefit of reduced interest rates. And the business is at sort of this fulcrum point where it's going to become cash flow positive. If you think that Pershing Square is going to do a good job with the excess cash the company has, both the $900 million we put in and the cash the business will generate and you like our strategy, and you can buy it at a 20% discount to the price we paid in May, that seems like a pretty good setup. Okay. Next question.

Ryan from New York. Embedded in the sort of insurance plan...?

Mike, yes, embedded in insurance plan.

It seems like there's a presumption that you'll get Berkshire like regulatory treatment to invest -- to have investment flexibility. So what's sort of the plan if you don't -- like is there sort of jurisdictional things you could do? And then also, is that reflected in the premium you're willing to pay for an operation where if you have less investment flexibility, maybe you don't want to pay a premium that you're currently contemplating?

Sure. It's an excellent question. So there's a little bit of, I would say, a misunderstanding about Berkshire's sort of investment flexibility. I would say the investment flexibility he has, he sort of deserves because of the approach that he's taken, right? If his plan was to write 100% premium to total to equity and operate with 3x leverage, he would not be able to have 70% of his -- or 60-plus percent of his assets in common stocks. He's able to accomplish that objective because of how conservatively run the insurance operation is. If you think about it, if you take 100% of your float and you invest in short-term treasuries and the treasuries earn a 3% or 4% return, just that portfolio will cover your insurance losses at anything less than 103% kind of combined ratio. And then on top of that, you have liquid common stocks and a somewhat diversified portfolio that more than cover that kind of a loss. We expect if we adopt that kind of approach, we'll get something approaching what Berkshire has. And maybe in the earlier years, we've got to have maybe a little more treasuries and a little less common stocks, if that's what's necessary to kind of prove ourselves kind of over time. But long term, we think that doesn't make a huge difference. Where Berkshire has gotten sort of special treatment is when he bought Burlington Northern and put a private asset under the insurer, I would say that was a bit unusual. And Omaha, I think in Nebraska has pretty favorable because of the Buffett experience. So I think we have the -- we're going to bring a 22-year track record of investing in equities that's demonstrable. And we're hopefully going to come with a management team that has a demonstrable long-term track record, whether -- even if it's a business we're buying that has a shorter-term track record. And then we're going to explain what we have in mind. And I think we'll get pretty close to what we want. And over time, we'll get there. Okay. There were 3 more questions. Yes. This is a question dense area here on the left.

I think part of what you're saying here is that the current Howard Hughes real estate platform is a much better asset than a textile mill was in 1965 or whenever that was, and there's no real need to reallocate capital to other investments. If you were to acquire or start the insurance subsidiary and use the float to fund the development of the master planned communities, what do you think that would do for the return on equity of the company, all else equal?

Well, we would never use the float of an insurance company to invest in a real estate development business. The good news is the real estate subsidiary is well capitalized on a stand-alone basis. In fact, we expect we'll generate more capital than can be redeployed intelligently in -- the business model of Howard Hughes is we sell lots to homebuilders. We take that cash, and we've historically invested that cash as equity in, let's say, for example, a condominium development or an office building or an apartment, et cetera. But at a certain degree of maturity with the large amount of the several billion dollars of condominiums that we have under contract with 20% deposits. Is it $3 billion or $4 billion? $4 billion. $4 billion. $4 billion of condominiums we have under contract with 20% deposits -- that on top of the cash flows from the business as the communities mature, we're going to -- that business is going to generate more cash than we can intelligently invest as equity in these communities. And we're not going to buy any more master planned communities. We've got enough on our plate with Phoenix and just our existing assets. And the insurance sub will be operated separately, and it's likely to retain all of its capital because it should be able to reinvest that capital. Again, we're starting -- one of the big advantages we have versus Berkshire is this is a tiny company, relatively speaking, right? We've got 59 million shares. It's whatever, $4.8 billion market cap company, maybe it's $10 billion of total assets, including all of our real estate assets. It's a good starting base to grow. It's much easier to grow something into something significant if you start small. Okay. We have 2 last questions, one here and one there.

Gabriel Nardi Huffman with Tadpool Investments in Connecticut. I just had a quick one on timing, assuming there were no regulatory issues, if you could get a deal done in the next few months, how aggressive would you be of moving that portfolio over to equities? Would you be willing to sell fixed income securities even at losses? And just how quickly do you want the portfolios to align?

Yes. I think our plan, I would say, getting a transaction executed, I think the earliest would be 3 months, the more likely case, somewhere between 3 and 6 months to get just all the approvals, HSR, whatever is necessary. But getting something definitive signed, I think, could be accomplished theoretically by the end of the year. And I'm getting tired.

Investment portfolio. I think the good news when you look at most of these companies in general is they actually invest primarily in treasuries of some duration and then they invest in generally investment-grade bonds. They have very -- as I mentioned, very tiny allocations to private credit or funds where we take time. So the liquidity in those markets means you can almost -- I don't want to say overnight, but within a very short period of time, you can take back that capital and then you can redeploy it however you would see fit.

And we're also -- we need to operate on a less levered basis. So we would buy a company and likely put more capital into it to kind of deleverage the investment portfolio and the insurer. Okay. Last question.

5 All righty. So with 3 million square feet in the Ward Village, what does that look like for -- and what is the development potential for the West Village? Or what does it -- what development potential does it hold?

Right. So if you look at our most recent announcement where we sold $1.2 billion at Alima and Malia at north of $3,000 a foot for front row product, and I extrapolate that to West of Ward, which is primarily second row product. And if you thought about a sales price per foot times 3 million square feet of somewhere around $2,000 a foot, if we're still able to generate the 25% to 30% profit margin, that's a 5- to 8-year execution discounted back to today is a great amount of profit for us on a present value and on a future cash flow basis, even better in terms of what can be re-executed in terms of invested into other businesses in the future.

And also, I'd add to that, in Hawaii, the negative about a condominium business is that once you sold it, there's no recurring cash flows. But the base of all of those towers makes up 1 million square feet of retail with now a lot of density because of what's being built on top of it. One of the most valuable malls in the country you can walk to from our property, [indiscernible] and the rents are in the, what, $120, $150 a foot, I don't know what the number is.

The rents that we have on our older properties that we knocked down $25, $30 net we're replacing those with $80 rents.

You've got 1 million square feet at $80 -- right, that's $80 million of NOI -- and Ala Moana probably sold at one of the lowest cap rates, like 25x. So there's a very valuable recurring base of cash and a valuable asset underneath these towers once the development is fully completed. Anyway, everyone's been very gracious to spend a few hours with us and enjoyed our first shareholder meeting of the new Howard Hughes, and thank you so much for coming today.