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

Okay. Welcome. So the plan is the kind of formal shareholder meeting we'll do first. We'll close the shareholder meeting once we cover the materials. Then we're going to have Q&A with team. We've got Ryan Israel, CIO of the company; Marc Grandisson, who's Executive Chair of Vantage. Yes. That's it. And David O'Reilly, CEO of Howard Hughes. And I'm Bill Ackman, Executive Chair of Howard Hughes. Okay. Good morning. Today, we're going to vote on the election of directors, an advisory vote on executive compensation. By the way, I can't see our directors. Where are our directors. They're hiding here somewhere. There we go. And ratification of KPMG as our independent auditor for 2026. As with the record date, August 17, 2026, there were 59,719,462 shares of common stock -- by the way, if we could end the house music, I think there's music. Okay. Apologies for that. We've informed that -- we've been informed that approximately 82% of those shares are represented here in pertinent or by proxy, so a quorum is present, and the meeting has been duly convened. If you'd like to ask a question or comment, please raise your hand and wait to be recognized. Questions will be with respect to just the annual meeting. Afterwards, we'll have open Q&A on the company or any topics that you have. First proposal is election of directors. The Board has nominated 11 directors to serve until next year's annual meeting. myself, David Eun, Marc Grandisson, Ryan Israel, Tom Lachman. Maybe we can ask directors just. We get house lights, and then we can introduce our directors to shareholders. Just want to see how we're doing here. How lights. Okay. Who's virtual, who's in person? Okay, who's here. We got Mary. I can barely see you. Please rise, Mary Ann Tighe. Where are the lights. We need the houselights, please. Houselights, here they're coming up. Okay. So I see Mary Ann. I see Mary Ann Tighe. Who else do we have? David Eun, over here. which directors are present does Mary Ann, Marc, David, Ryan, myself. Okay. We're going to do this again. So David Eun, Marc Grandisson, Ryan Israel, Thom Lachman; David O'Reilly, Susan Panuccio, Scott Sellers, Mary Ann Tighe, Jean-Baptiste Wautier, and Anthony Williams. Other backgrounds are included in the proxy statement. We recommend a vote in favor, even though some are here sale. On say on pay, this is our annual advisory vote. The Board has recommended to vote for, and on KPMG, we've also recommended the vote for. Any questions on the items of the shareholder meeting? Okay. Seeing no questions. The polls are now open. If you'd like a ballot, please raise your hand. If you voted already by proxy, you won't need a ballot unless you need to change your vote, okay? The polls are now closed. I see no one needs a ballot. And based on the preliminary results, all 11 directors have been elected with each receiving over 96% of the votes. Sam Pay has passed with approximately 99% in favor and the ratification of KPMG passed with 99%. Final results will be filed with the SEC within 4 business days. So that very efficient shareholder meeting, we're going to adjourn. And then we're going to go to Q&A. With respect to Q&A, please note that today's remarks presentation and Q&A will include forward-looking statements, including statements about our strategy, Vantage, our plans for our real estate business. These statements reflect our current expectations and are not guarantees of future performance. Actual results may differ materially due to a number of risks and uncertainties. Those risks are described in the cautionary statements shown on the screen in our annual report on Form 10-K for 2025, our quarterly report on Form 10-Q for the second quarter of 2026, which are available on our website at sec.gov. We undertake no obligation to update these statements, except as required by law. We'll also refer to certain non-GAAP financial measures, definitions and reconciliations to the most directly comparable GAAP measures are included in the appendix to the presentation. Okay. I don't like reading stuff. So. Okay, we're going to go to presentation. I've got maybe 10 minutes, give you an overview of our plans and then we look forward to your questions. Okay. Let's begin on Vantage. I would say the most significant event since we announced plan to transform Howard Hughes into a diversified holding company was our acquisition Vantage. Last year at this meeting, we said, here's why we're pursuing insurance. We think it leverages Pershing Square's public markets. Investment expertise. It's a cash-generative business, and we think it's a bit allows for prudent but rapid growth, and it generates significant investment funds, and we believe that our holding company structure was ideal for owning an insurance company and the fact that we purchase crore owns 47% gives us the ability to take a long-term view. And we set out to acquire an insurance company that met our goals. And we were fortunate in being able to identify, a company that actually was a very good platform for our plans going forward. A company called Vantage. It had been launched in 2020 by 2 well-regarded private equity firms. Business was probably several years away from potential monetization. A lot of private equity firms are under a fair amount of pressure to return capital to shareholders, and we were able to pay a full and fair price, and close the transaction just this June. But what's great about Vantage is its scale, the right size, a business we -- of significant scale, but not too large that we could fit in the context of how our shots. Both a specialty insurance and reinsurance company. And in that business created in '19 -- sorry, in 2020, a business that did not come with significant concerning legacy reserving issues. We are fortunate in acquiring a company with a very good management team. Our approach to purchasing is always if there's an opportunity to find the best senior team in the world. We're going to pursue it, and we've really been fortunate Marcus here today. He's considered by many of the best insurance executive of his generation, so to speak, began his career early part of his career Berkshire Hathway under Ajit Jain, very good initial training. And then over 5 years, nearly 25 years, I guess, at Arch Capital last 8 at CE. We've been cultivating mark, if you will, seducing cultivating for 1.5 years. And we really got lucky here in the sense that Mark Protege, David Gannett became available Mark was a little reluctant to step into the CEO seat, but we inspired become Executive Chair of Vantage once his prog became available, we recruited David Gansberg. David, at some point, bought some Howard shares. We allowed him to attend today's meeting. David if you don't mind standing up, I know you're here somewhere, David Gansberg. There he is. So David is CEO in waiting. Waiting is until about June 3 and he's been having a nice relaxing time off. I hope you're not getting too out of shape during this period. You're going to do come June. But very excited to have David in place. And Marc stepped in as Executive Chair. He's really -- he's an icon in the industry. The phone started ringing off the hook. And lots of interesting people have kind of put their hat in the ring and Marc is continuing to build out the company with superb talent, we'll have some announcements about additional talent coming to the company. One of the first things we did when we acquired Vantage was we sold their entire fixed income portfolio. They had a traditional kind of laddered maturity fixed income portfolio managed by, I guess, BlackRock and Goldman Sachs. We were able to sell all those investments immediately. People think of fixed income as a low-risk strategy for insurance companies had we held that portfolio over the last several months, it would have a material amount of value in light of the, obviously, significant move in interest rates. What we like about Vantage, a highly diversified business. There's been some softening in the P&C business, but it's a business that will tell you has -- there are hard markets within softening markets. There are soft markets within hard markets, and you want having a platform that's broad enables you to pursue the most profitable opportunities. As I mentioned, we're not -- we don't have to worry about pre 2020 reserving issues. We pick up a company that has all the relevant regulatory licenses and a strong credit rating, a very good balance sheet and at a skill that's large enough to recruit an executive of David and Marc's quality, but not too big for us not to be able to acquire it. I pretty bit about Marc and David, Lucy is here as well. Lucy Fato, if you can just where are you Sean. Lucy was formerly her insurance credentials. He was Vice Chair and General Counsel at AIG. And she was actually working interestingly at the Howard -- former Howard Hughes Seaport spin-off business and she became available to step in here as well. Marc can speak a bit more about obviously, progress here. But among his first assignments, a large degree of due diligence when we acquired this company, but we did this with the assistance of excellent insurance consultants. We are not domain experts in insurance reserving and underwriting. So 1 of the first things Mark is doing is doing a deep dive on the existing book of business, looking for opportunities for growth, looking for pockets of opportunity that have not been pursued by the company and setting the company up to be able to pursue those opportunities going forward. Mark will speak about how important data is in data analytics. And interesting to hear some thoughts on how AI is going to help insurance companies analyze do better at underwriting and maybe there's some risks associated with AI that are worth talking about. But I think, Mark, you've been in the chair set a few months now. Since July. So a couple of months in. And good news is no surprises to the negative. And in fact, actually, one of the things Marc has mentioned surprises to the positive in terms of the strength of the team, strength of the organization, which is obviously. I think we identified as part of our due diligence, but Marc has had really a real opportunity to get to know the team and I speak very highly of the team. As I mentioned, one of the first things we did is we position the portfolio. At the time of acquisition, it was a $3.1 billion portfolio, about 16% in kind of cash, short-term investments, 84% fixed income. We sold the kind of longer dated fixed income, invested that capital in short term comprising about 62% of the portfolio. 37% of the portfolio is in common stocks, portfolio that Pershing Square manages, it's kind of this barbell approach, take no risk on float, the insurance float plus a cushion and the balance in a common stock portfolio. So the theory behind this investment approach, we took a page from Mr. Buffett and Berkshire Hathaway, what Berkshire has been run historically. Buffet has taken 100% of their -- the float and invested in short-term treasuries. And when you read Berkshire has a several hundred billion dollar treasury portfolio that principally that the treasury -- short-term treasury portfolio that sits in the insurance company, and then he's invested the surplus of the insurer in common stocks. And that's something beginning really in the 1960s. In the early days of Berkshire, Buffett didn't know I think much about insurance and had years with very big losses in the insurance company. but the investment side of the portfolio really drove the value of that company over time. When you compare the approach we're taking that Berkshire is taken over time with that of the typical P&C insurer, if you look at the page, typical insurer has a largely almost entirely fixed income portfolio, kind of some short-term investments, a fixed a portfolio that looks a bit like Vantage, perhaps a small modest 5% of the portfolio in common stocks, generating kind of a consolidated weighted average return of, let's say, 5% in today's market, take off taxes. Really a 4% return on an investment portfolio, it's really the leverage of the insurer, investing a fair amount of assets relative to equity. 2.5 turns of leverage that enables a 10% investment return on the asset side of the balance sheet. Really, the focus is on the underwriting part of the business, typical insurer, let's say, a 95% combined ratio after tax generating an incremental 4% return on equity. So most of the return comes from the asset side of the balance sheet, leveraging a fixed income portfolio with some profits from the insurance side, getting to kind of a mid-teens return on total. Now if you think about risk, 2.5 turns of leverage on an intermediate to longer-term fixed income portfolio that worked well in a world where rates have come down really since the 1980s. We're now in a world where rates are moving up. It's a very different risk profile. I would say the risk profile is the same, but I think the risk of loss becomes much greater in a world in which rates are rising. If you look at the approach that we're taking, we take 100% of the assets and put them in short-term treasuries. We take no risk with respect to term structure of interest rates, you take 100% and then we invest the common -- we invest the common stock portion of the portfolio in a reasonably concentrated 14, 15 name portfolio of large cap what we call durable, high-quality growth companies, the kind of companies that Pershing Square has invested in historically. We've managed this portfolio as part of our arrangement for Howard Hughes, we charge nothing to the insurer in this part of the business. And we do so with much less leverage than a typical cure. So instead of 2.5 turns the asset side of the balance sheet being 2.5x the equity, we keep leverage below 2 turns something between us let's call it, 1.6 to 1.8x. So lower leverage, much more liquid in our view, lower risk on a combined basis but a much higher potential returning portfolio. On the insurance side, we write less premium relative to the typical insurer. The typical insurer writing typically 100% premium ratio of 100% premium to equity will be somewhat less than that, generating what we expect will be a meaningfully higher return on equity. If you look at Pershing Square over 23 years, we've had about 1/3 of the time, years with returns on a gross basis in excess of 40%. We've generated a return -- a gross return on over the last 23 years in the 19% range. I think we're better today than we were in the kind of in the earlier years. So there is the potential for very significant upside in a world in which we generate meaningfully above market returns. Okay. We acquired Vantage, Howard Hughes used, injected $900 million of capital into the company. We took $300 million on the balance sheet. And the balance of the capital was provided by Pershing. So today, Howard Hughes own slightly more than half of Vantage and economically Pershing Square through this preferred instrument owns the balance. Howard Hughes has the ability to acquire that preferred instrument and purchase 100% of business. But what we're focused on as we sit here today, is we want to get as much of our capital as possible, invested insurance business because we now have a team in place. We've got the platform. We have the ability to grow. And the bulk of our capital today is sitting in our real estate operation. A typical real estate investor. Real estate is the President would talk about real estate being a no money down business. Howard Hughes has operated with a business model of 100% of our money down, where we financed really pretty much every acquisition without the benefit of any third-party capital. And that is a pretty significant change that we're about to make. When you look at the stock on the market value of the company at a significant discount to would the market -- the after-tax value of our real estate portfolio with Vantage valued approximately cost. We believe that discount exists because the market assigns a very high discount rate to real estate development, land ownership and condominium development. These are businesses that people think of as kind of higher risk, and as a result, we're really at a significant discount over time. So what are we doing? The business naturally generates a lot of cash, about $2.5 billion to $3 billion of cash will be generated by the sale of condominiums, the sale of lots, cash generated by our income-producing assets. That's money that comes over 5 years. And our goal is to put that capital into the insurance company as quickly as possible. So how are we going to do that? We're going to do what most real estate investors do. We're going to become a much more asset capital-light real estate investor by bringing in partners. We are in the process of engaging advisers to bring in joint venture partners so we can monetize about 80% of the equity we have invested in our income-producing asset portfolio. We also have a number of assets that are sort of noncore to our MPC strategy. Those assets are in the process of being sold. We're going to form joint ventures with our master plan community business. Again, instead of funding this business effectively 100% of the equity coming from Howard Hughes, we're going to bring in partners. And if you think of what's been built at Howard Hughes over the last really 15 years is we built a machine that has been able to compound -- grow the value of our land assets over a long period of time, build out these kind of beautiful communities that rank year after year is best places to live in America. We have a development team that knows how to build projects on time, on budget. We have land holdings with development opportunities out for decades. This is the -- if you think about other people in the alternative real estate asset management business, they've got to find deals. They generally don't have their own operating talent. Here, we have a company that has deals as far as the eye can see in markets that we effectively are the dominant and controlling owner -- and we have a long-term track record for deploying that capital. So we're the ideal partner for a pension fund for a family office, for investors who want exposure to very high-quality real estate, and we're going to continue to have very significant skin in the game, but we're going to go from being a 100% equity owner to being 20% or so skin in the game, but getting paid for our IP. This has the benefit of taking a real estate company and making it a much higher ROE business, one that we think the market will give much more credit to. It also gives us the ability to take out large amounts of capital from the business. And instead of waiting 3 to 5 years, our expectation is over some -- by some time next year, we'll make very material progress in extracting capital from our real estate business. Importantly, this is also a great opportunity for our employees. With public company capital and the high cost that comes with it, it's sort of limited to some extent, our ability to pursue certain kinds of real estate opportunities. Real estate developers like to build by bringing in third-party capital and increasing the returns in our business, it's going to create more opportunities to deploy capital, which will be great for our real estate team members. So it's strategically great for the company. It's great for the team, and we're going to be able to give Marc a lot more capital and a lot more quickly. We believe the after-tax value of our real estate assets is something in order of $5 billion. expect we keep $1 billion or so of skin in the game, that creates the potential for $4 billion of capital to be extracted from our real estate assets and redeployed into our insurance operations. So today, we have basically on effectively all of our real estate. We fund all of our development ourselves other than obviously, bank financing, and our returns are limited to just the return -- after-tax returns we generate from our real estate. Fast-forward completion of this process, we remain a meaningful equity owner in each of our assets. Think of us as a plus or minus 20% owner, and we fund our growth and the balance of the capital needed in our business with third-party capital, investors that want exposure assets in the best markets in the country managed by a team with an excellent track record with more skin in the game than really any other real estate manager. And we turn this into a business that really generates no third-party fee income to one that generates very significant third-party fee income. What this does for Howard Hughes business is it takes out a lot of capital, we can redeploy elsewhere and the capital we leave in the business earns a much higher rate of return, we generate more cash, less exposure. Howard Hughes seems to trade sort of inversely with rates because of how much perceived exposure we have in the real estate operation to rates. We think the reality of that exposure is much more limited than the market suggests. As you've seen, even with mortgage rates, again, at 7%, we continue to see enormous demand from people who want to move into our communities. We continue to sell land at higher and higher interest rates. And the market, of course, will pay a much higher multiple for a real estate business that's an asset -- effectively an asset management business as opposed to an asset-heavy real estate operation in C Corporation. This was not an ingenious idea. There are good examples of other real estate companies that became asset management firms, Brookfield really being the best example. Blackstone, obviously, and these are other examples of real estate operations that operate on an asset-light basis, and the market assigns very nice multiples to their business operations. So pro forma for what we're accomplishing here. Vantage becomes the principal subsidiary of Howard Hughes over the next, I'd say, a couple of years and then the Howard Hughes Communities business. will grow its asset base, probably continue to grow its asset base pretty significantly. But by using third-party capital, we've got an asset management business that creates significant fee income and then we continue to be a minority owner of the assets in our portfolio and the controlling owner, which is important for that portfolio. Graphically, today, we're real estate asset equity heavy, pro forma for this transaction, we become an insurance-led holding company with a high-return real estate operation. a pause there, and we'd be delighted to take questions.

So there are 3 mics in the audience. We're also going to take questions online. I'll turn on the mic in the front. Go ahead.

Hello. You can enter questions online in the chat, and we'll read them out. And Bill, would you like to start with 1 from online? .

Sure. Let's do that.

Okay. Great. Since the success of the Berkshire Hathaway model relies heavily on both risk management, especially saying no to writing some policies and skillful investment of the flow generated by the insurance business, could you give us a progress before on your efforts to clone Ajit Jain.

Well, I think he's even more handsome than Ajit, but -- so Marc, why don't you speak to maybe what was Arch's approach when you were CEO in kind of cycle management? And how does that carry over to Vantage?

Yes. So you can hear me -- it's good to be here, by the way, this morning. I think the playbook has been -- this is what I'm used to. I learn about the hard and soft cycle and having the ability and the willingness write more, right, less depending on the market conditions since was 26, 27 years. So I've learned from tremendously strong and intelligent people Energy certainly was one of them. . I've seen this play in the beauty of how we use. This is what also attracted me is that it's not a private company, but it's really well geared towards letting go top line volatility and being okay with it, which I've said to Bill and Bryan and Brian so many times that top line volatility leads to bottom line stability this is what it's all about. And it's really easier in a way if you think of a broader organization like Berkshire Hathaway or in this case, how would use. When you're a public company doing all the business and is the sole thing you do and you don't have the ability to invest and deploy capital at higher returns when the insurance industry is not giving you the opportunity, it just makes you do things that otherwise you may not want to do or you may not wish you could do what you know are not really good to do and you just buying one more quarter or buying one more year. to see it through to carry yourself through the soft cycle to get to the hard cycle, and we'll deal with it when we get there. And when you see it throughout the cycle. And that's something that we won't do here. if we don't have to. And that's a really, really wonderful luxury to have. That doesn't mean you work out in markets. That doesn't mean you just drop your clients. It's far from it. It really means that you're a very sensible and very smart provider of capital through the cycle. And at Argand certainly at Berkshire, that was the case as well. people understand that brokers and clients understand that stands. And I've said more than once to brokers on deals and David will be my witness. When the deal is too good for the clients, and it's a really transaction, a really good price. We would tell them, "Well, maybe you should go with that. And that's the willingness to let go if not a bad transaction for a transaction that doesn't meet your person or your company's hurdle. And having that luxury is what makes for a much more stable and valuable growth and book value overtime. Is that sort of what you want me to answer.

Look, I think what I would add to what Marc said is this is a company that's not -- does not have to generate a return by a certain quarter or growth rate by the end of the year. We're taking a Pershing Square views, our stake in the company is effectively a permanent one. Our goal is to compound the value over a very long period of time. The bulk of the profits from a well-run insurance company in this model will come from the asset side of the balance. So there really isn't pressure on the insurance team to put capital at risk. So more can really kind of take and choose the risk, and that's really the key. And versus -- no, interesting question would be, Marc, at Arch, Arch was a stand-alone insurance company. How did Arch manage to follow this philosophy without the pressures normally imposed on a stand-alone insurance business?

Well, a lot of talking to our investors, making sure they're -- and they understand that book and what we're trying to do and convince them that over time that the book value will grow at a better clip and much more stable than the other companies. But it's not without its challenges. We -- I've been in conversations where people didn't really believe anymore in the story. I mean you just come out of favor, like the same way warned at a favor in 1999 when the NASDAQ was going pretty. So you also have to be -- to have the willingness to be contrarian. So that was really -- the Board was strong as well and really being behind this. At the beginning, a private equity led who understood that playbook -- and it carried on well, because a couple of times, we were pushed and we were told to do more things, take more risk in certain areas. And I was saying, well, I'm not going to do it because if we do this, we're going to lose it never fails a year or two after losses happen and everybody else has that loss, and we didn't have one or at least not as high, not as big. So it creates a credibility you. That was one thing I will say. The second thing I will tell you is going to be the same here. Our -- one of my main missions and the same for Dinos was to broaden whatever we can do as a company in terms of products and geography. With David, we were instrumental in establishing a reinsurance company in Europe. We didn't have this before, right? We also established tutti units. So you can -- along the way, you're able to find new ways areas and deploy capital, mortgage insurance is also a good example. So being on the lookout and being ready to seize the opportunity and you increase what I talk about all the time is if you have like many ponds to fish from you don't need to rely on 1 or 2 of them. We have multiple then gives you that much more and that's better flexibility. I like what you just said, Bill, which is in a hard market, there are soft spots and vice versa soft in soft markets, there are hard parts as well. And so the more you have the ability to participate in the market, the breadth of it is what creates that opportunistic, I would say, ability to go through.

So actually, I want to ask you another question. So how many pounds do we have to fish in Vantage? And are there new ponds that you're seeking to bring to the story? And what's -- where is your progress in that regard?

Yes, there are more on the return. I don't want to say a whole lot because it's still in development, and we still like talking to people to see maybe joining us to do some of those things. But -- if you look at the things that we've done at Arch, it's a good place to look at really to see what we've done because it's worked out very, very well. And and I'm used to it and something I was also doing prior to Berkshire like evaluating different lines of business. Geographically, we're probably underweight in Europe, in London, for instance, which will be a more natural marketplace for us because of the specialty nature of what we do. We have to figure out how to get there and who's going to do it with us and also making sure that we have a solid plan of action. And we'll start small and build and build from this. That's a good -- that's a really first shot, first good example. There are other lines of business that we could actually -- we're doing as we speak. We had a 2-day business review about a month ago. And we identified lines of business where we could do a lot more. And that's really better, right, because it's something you know we understand already, you have the team in place. So it's pretty beef up that team to really seize more of this opportunity. There are other lines that we're not really involved in, like we're not in workers' comp, for instance, that's a huge market. I'm not saying we're going to rush to do it, but it's an example of things we could do. On the reinsurance side, there's a few things that I'm thinking on the side that we could do a fair amount of more of a building through. So probably more -- a lot of it on the reinsurance side. The insurance, we're careful. We have a really very good platform we're really trying to improve and augment what we have in terms of capability within each of those lines of business with London that's going to be really expanding that much further and that's going to take us -- it's going to be a while for us to digest and really work through it. And I think on the reinsurance side, we also have a lot of other things that we can do. There were some lines of business liability, for instance, is a good example, that was not part of their initial plan Vantage, which and I'm very familiar with it and so is David, obviously, this we started working together at Arch. So that's certainly a line of business, for instance, we'll do a bit more of fits very nicely with the strategy that Ryan is trying to do on the float base at the lower cost of capital. And then what I can tell the shareholders that uses that are for our shareholders is that I don't know what the company is going to look like exactly in 6 months, a year or 2 years from now. We're going to have a baseline of what we do on the insurance side and reinsurance, but we might find ourselves being overweight in certain areas compared to what we would expect a company of our size to be because of the opportunities that are there at that point in time. And that's something that is very, very key and very important for us to share with the shareholders of the company.

One thing, if I can, I think is fascinating, having worked closely with Mark now for several months, it's been just a wonderful education for all of us at Bursting Square, is the similarities of what we do on a day-to-day basis on the investment side, where there's a large number of opportunities. We talk a lot about how there maybe 300 to 400 different stocks that we could buy at any 1 time that really meet our traditional business principles. And we're sort of waiting for the right setup. So that requires the right facts to be in place. At the same time, it requires the right price to be there, and then we can move quickly. So we're constantly scanning the universe we're really understanding these businesses and then we're waiting for just the right moment. insurance business is actually incredibly similar to what Mac is saying, we couldn't tell you at Pershing Square exactly what our portfolio is going to look like 5 years from now, although we can talk a lot about what are the high-level characteristics of the business that we'll seek to own but we don't know exactly what the mix will be because we have to see what opportunities the market gives us. It's the exact same thing with the insurance business that Marc is talking about. And so I think that harmony both from a high-level business perspective of having a great insurance business where we can generate ongoing profitable float, but not having to constantly be in every market at every time based upon whether it's a hard market or soft market and doing the same thing on the investment side. But the underlying logic is very, very similar as well.

You speak to you're recruiting a bunch of people to the company Obviously, there's front-loading, certain costs associated with that as you build the team and then grow. How should shareholders think about the development of a combined ratio at the company over time? When do we get to kind of -- you built a team and you kind of grow into -- start deploying capital. When does the company start to stabilize and start generating an appropriate profit?

Yesterday. It's not an or, it's an and, right? You need to develop the business that is going to be profitable at the same time investing for the long term. And a great conversation this week last this week, this week, you and I about -- I mean, economically rational guide, all about economics. It's all about investing not dollar now where it's going to give us in the future. And again, because of our structure, there's a willingness to consider those things and thinking through not having to worry about the next quarter's earnings, this is a huge freeing as a management as management. So our game plan is going to be to do both. It's really to invest, hire the people. And then I know -- I've done this before. We've hired teams, cost us a lot of money in the first year or -- and if we look at the return that's been giving us 5, 6, 10 years after we got these people on board. I mean, it's tremendous. We'll do that trade any day of the week. And that's what we're trying to do right now. That's what we could do I'm asking people for business plan, but I'm not expecting them to live up to it. I just want to make sure that they have a big sense for what they're trying to do once they come on board, but our platform. And I think we have solid people that really focus on bottom line. And I think we have a portfolio. So it's not like we have to rebuild from scratch. We have a portfolio. We've been talking to the team and are ways for us to massage it or maneuver or navigate and realign a few things within each portfolio to improve it. But that goes for -- this is going to be annoying conversations, right? It's hiring the right team, are we doing all the lines of business we should be doing more or less of that one or this one. At the same time, how do we improve the underwriting, which leads to one of the things that you mentioned in the presentation about the data and having conviction behind data and where you're getting conviction as to what you're trying to do. So I think what the shareholders would be expecting is a keen eye on the results always. But if we can find some way to invest to really grow platform over the next 5 or 10 years, we also want to do this. We're going to do both. And I think the best thing for us to do is to explain to our shareholders is what we're doing. This is what's going on, this is what's happening. This is why the numbers may be a bit perhaps higher than you would have expected in your modeling. But there's a reason for it. And if the reason is, again, backed by economic rationality, it should work out, it has worked out in the past.

One of the things I think is really important to what you just said, Mark, is in the insurance business, arguably like the investment business, talent is probably the most precious asset that you can have. And a lot of businesses around corporate America, if you think about the best person you could hire versus the second best. The gap might be -- maybe the best person does I don't know, 25%, 40% better. A lot of people would say then the second best person. Steve Jobs, when he was in Apple used to use this analogy though, that in certain businesses, and he was talking about is product designers, or is best engineers, the productivity of that gap isn't 25% or 50%, it could be 50 or 100x. And so there are certain businesses where hiring the best people lead you to a result that is orders of magnitude better than what you would get for the second best person. I think the investment businesses like that. I think the insurance business is another one. And so when we talk about hiring people, I think the business attributes are uniquely such that bring in the best Executive Chairman, the best future CEO, and then on down the line, you can really get these amazing effects by hiring the best people. And so I think the investments that we make in our people are even more important in insurance than they might be for the average business in Corporate America.

Great. Okay. With that, let's take some questions from the audience. This gentleman right here. if we can bring a mic to him. Where are the microphones. [Operator Instructions]

Guy Baron with Spring Capital. I guess Marc you address some of this already, but when you joined and go down the park, it was a very hard market post 9/11 and clearly, the environment right now is quite different than as apartments, but really, the insurance market has been softening and continues to soften. And so there's a certain tension there where power use is going to give you $3 billion to $4 billion of capital on the 1 hand, on the other hand, if you order ARC, you'd be potentially shrinking a lot of the business. So I guess the question is, how do you handle that attention with all that capital coming in? And the question for more Bill and Ryan, would you then look to inorganic opportunities in M&A to grow Vantage to the extent that there are insurers trading cheaply because of the market backdrop.

I'll start. It's an easy answer. We're such a small company. We don't have to do a whole lot more. There's a lot of opportunities out there given our size to grow the platform. And you're right, it is not the hard market of 2001 and 2002. And we also had higher requirements of capital. I think that even though we have an amazing amount of capital in the industry time high historically, we still have markets hardening. We still have price increases in many markets. And I would say that we've been underrepresented in some of these markets where the returns are really, really interesting. So when we started Arch, there was nothing. We had to build the whole thing in all lines of business, insurance and reinsurance. You probably need a harder market to do that, right, get the ground running and doing all that stuff. Now we have a solid book of business already. And we sort of incrementally, we're going to be able to augment incrementally improve it. And there are some lines of business that are not as hardening and softening as you might think. There's a lot more stability to them. When we talk about hard and soft and going in out of the market, like I said before, you don't go out altogether, like when the market is soft, not every single insurance policy money, right? There's always a segmentation that can occur within a certain line of business or a -- and that's certainly something that we'll be spending a lot of our efforts on. It's already being done, but we're going to be a lot more of that advantage, it's easier, right, a smaller footprint. So I'm not concerned about this. If you told me, wherever we are right now to go to 10x this I think it's a very, very different animal altogether. I think once you're bigger, I think you have to start shaping your things because you say you have such a big presence in the marketplace, but we don't. And we have -- we're underrepresented. So we have a lot of room to Grow.

One analogy I would make to the investment management business. The way we think about Marc and team is recruiting a team that's used to managing $50 billion to a fund that's managing $1.5 billion. So as Buffett would say, with Berkshire, the scale creates challenges that if you were managing a lot more money, you would be able to be a lot more nimble, we can be incredibly nimble. -- as a small company, but we have a team with the ability of managing a lot more assets. And I think that's a very good combination. And with respect to acquisitions, maybe you can make a comment on...

I can. Yes, briefly I think nothing should be off the table about everything. I think if you look at the history of what my experience is, it depends. It all depends on the economics, owe understand the risk. Is the balance sheet making sense. It may be an asset purchase. I think in terms of priority, if you look at some of the noses called and my calls historically, we prefer to hire talent and then team second and then because it's better because you integrate them into your culture and the way you look at the business. Having said this, we've made some acquisitions Dave and I worked on one big acquisition we did at Arch and that worked out pretty well. So I think it depends. I guess I would say. But I think we are open to grow the platform when and if it makes sense.

And the last thing I would add to that is when we put capital into Vantage, we also have, as Marc talked about, organic opportunities, inorganic M&A opportunities. The third opportunity though is we Pershing Square can help manage the additional capital in terms of investing in stocks. And so I think what's really nice about that one of the reasons Berkshire has been so successful is the more arrows that you have in your quiver, the better you can calibrate looking at the environment, not just what can we do in terms of expanding the portfolio organically by bringing new people in or writing new business. You could also the market giving us opportunity to acquire entirely new platform. But lastly, we can do something that very few insurers historically have the ability to do, which is we can also look and see should we increase the allocation to equities with that additional capital. And so I think the blend of all 3 because it's not an either or necessarily gives us a much wider remit to be able to figure out how we can look at what is the highest return at a given moment in the cycle.

I'm David Samra from Artisan Partners. Bill, as you try to reduce the capital intensity of the real estate portfolio, is there an order of priority in terms of the use of that capital between buying in the ownership of Vantage and putting capital, incremental capital into Vantage itself. If you could help us understand that a little bit. In addition to that, in one of your pro forma slides, you showed capital to premiums of less than 100%, and I'm just curious of the buildup of that number where it comes from because it has -- have to do with the way that you're using a lot of the shareholders' equity to invest in the stock market? Or is that a reflection of the type of premiums that will be written inside Vantage.

Sure. So the company has the option to use the capital either -- the preferred has a 7-year term. And it effectively represents the economics of owning purchaser owning stock in Vantage with the company having the option to redeem the preferred at 1.5x book value. So what -- this is 1 instance where the decision on the use of the capital to redeem the preferred versus reinvest in the business. Ultimately, at the end of the day, while we'll have some points of view on it. It's going to be one that the Board and Marc we'll decide because of a potential conflict. Obviously, we're -- as a preferred shareholder. Now we don't view it as a conflict because we want the company to invest the capital in the manner in which increases the value of Howard Hughes over time. So think of the world in which some incredible opportunity appeared to, let's say, an acquisition that would advance Vantage in a pretty dramatic way, but it's only available at this moment. And we have a finite amount of capital. That could be an example of, let's take $500 million and do that acquisition as opposed to redeem. The option to redeem the preferred will it for 7 years. So the company can make the decision over time. Is there a better use of this capital. Now the good news about buying back the preferred is we're buying something we already know, a business we have perfect information about -- and the price we designed the preferred and ultimately in negotiation with the company in a manner that will be very favorable to the company. We believe over time, a well-run insurer that earns putting a 20% or greater than 20% ROE is a business that's worth a lot more than 1.5x book value. redemption price of the preferred is fixed at 1.5x. But that will be a decision that we'll make on the relative opportunity set. You might envision in a world where, let's say, the market is weaker, perhaps we're just going to spend our capital buying more Vantage as opposed to deploying more capital. in the insurance business.

Capital release?

So the pace of capital that we generate, so we think the most straightforward thing for the real estate operation the real estate company to do is selling a -- bringing in a partner, a joint venture partner, capital partner into an income-producing real estate portfolio is a very straightforward transaction that happens effectively every day in real estate markets. We're hiring advisers. What's the status of that?

There will be out in the market by the end of the year with the information for potential third parties to evaluate becoming our partners. .

So we'll begin a process with materials, we'll go out to the marketplace. I would -- and we have at least a couple of billion of equity in our income-producing assets at least at least. What's a better number?

Well, I think in your presentation, you showed a total equity of around $5 billion. .

Just to income...

Income producing is about $2 billion, $2.2 billion.

I would say the first $1.6 billion that we can create from a partner. That could be a pretty straightforward transaction that could happen in the first half of next year. The more open question is the MPC business.

The residential land component, which represents another over $3 billion, depending on how much of terabase included in that -- it's a more difficult transaction to bring in an institutional partner into land. I think our long-term track record of generating hundreds of millions of dollars of free cash flow, selling DIRTT at a 65% margin. gives us an opportunity to do things that others have not in the past.

So what I would say there is it's less certain on the timing. But I would guess, I would be surprised if we haven't generated plus billion of capital by some time comfortably into next year. I would say maybe 3 to 4 by the end of the year is a reasonable goal for that business. Remind me your second.

Premium to equity. I -- we can to address that? Yes. So the way we sort of thought about that slide at a very high level is really using Berkshire's inspiration relative to the traditional insurer. And so whereas the traditional insurer tends to write premiums that are roughly equal to the capital, which is effectively as much as it can relative to the capital based upon the regulatory requirements. Berkshire has really gone at about 30% recently relative to capital. So it's been writing very little premium relative to the amount of capital it has and uses that capital ultimately to invest primarily in common stocks.

We're actually today, primarily in U.S. treasuries.

Yes. Berkshire suffers from scale and both on the investment side and on the premium running side, which is why they are at the lowest leverage in any insurer in the world.

Yes. They still have a pretty big equity book retainers, but they have shifted that a little bit more towards treasuries over the last several years. What I would very high level is that when we acquired Vantage with the team that we had in place, we thought that they were a relatively strong team, but there was probably a little bit of an underlying bias as we started working with them to maybe think about having a little bit of extra capital relative to premiums because we know how to do the investing in an we felt very confident in our ability to generate strong returns and therefore, maybe having smaller premiums relative to equity was more attractive. I think while we're ultimately figuring that out with Marc, and it will be a decision collectively so that pages in a commitment to exactly where we'll be you may have noticed if you compare that to what we had said a year ago, actually are slightly -- we're increasing the amount of premiums that are writing relative to equity. I think that really reflects the superstar team that we've attracted and the people that Mark is already attracting a thing the better the team is, the more opportunities that will likely be, I would expect, over time, you'd actually see that number to be continuing to increase. It's not a commitment. It was really just more of a conceptual understanding. So differently, the numbers on the page even higher in terms of the returns, if we actually decided to calibrate the premiums higher relative to the capital in the business. Next question. There's one up there. You could pass the mic.

Meyer Shields, KBW. Marc. Two questions for you. One, leading off that. Would you have any interest in buying standard commercial operations that would allow for a higher premium to equity ratio. And second, I was hoping you could talk about how your experience in reinsurance would allow you to evaluate MGAs as that model proliferates? .

Okay. So reinsurance is -- you're right, Meyer, really nice place to know to be able to evaluate MGAs and MGUs. -- yes it's also a cycle as MGA. And we are partnering with a few of them. Many of them right coinsure going to have we partner with the ones that we like, the people that do things that we want them to do and our responsive and working with us. has been working out well. So there's more partner at this point in time. We also have the same analysis on the underwriting structure, the cash and everything and the underwriting guidelines to make sure that they're okay. So I think it's interesting because Nicole is doing it for us Vantage. And it really feels like a reinsurance portfolio very much so. It has to be a nice obviously, renting capital of sort. That's certainly something that's been central that's actually also helped from the leverage perspective, operating leverage perspective. And so far, I would underwrite that reinsurance alongside with the call so far. So it's been pretty good. What was the first question again, would you just remind me what the one is...

Whether you'd be interested in standard commercial lines with a high.

So that 1 is always a possibility right for everything. I mean it's a large marketplace, but it's a different game, right? It's an agency, it's a lot of connective tissues within all the distributors distribution network that's kind of hard to dislodge. I think that our focus for -- I mean, yes, if it comes to us, it's a good price, a good structure. We like what they do. They have a nice book of what they do, and we find a way to house them with inventors. Of course, we we'd look at it. But right now, our priority is really focusing on developing and growing. As I mentioned, we're a bit underweight, the specialty lines of business. We have some -- we'll do some of that. But right now, most of our focus is to push forward a little bit on the specialty side, which is, as Ryan mentioned, a bit more talent intensive and probably do a bit more with it than you would otherwise in the standard commercial marketplace. So it's not a no. It's just it would probably have a little bit higher hurdle at this point in our history in 15 years, 20 years.

Maybe take an online question.

Sure. The Vantage acquisition demonstrated Howard Hughes' intention to build a diversified Berkshire style portfolio, durable cash flowing businesses. Can you share whether Howard Hughes has identified additional nonreal estate opportunities and whether the future expansion is more likely to come through minority equity stakes or full acquisitions.

So our focus for the foreseeable future is building the capital of the insurance company, redeeming the preferred if we can generate $3 billion of capital from the real estate assets over the course of the next year, figure $1 billion or so will go to redeem the preferred and the balance will be invested in the insurance company. And the insurance company itself, the assets will be minority stakes in public companies, common stock portfolio. There will come a day, I expect where the insurance company is kind of very well capitalized, and we have excess capital that we can think about deploying a whole company acquisitions. But that day is, I would say, not for the -- certainly near term to intermediate term. Maybe upfront here.

On a related note to David's question over there. Can the insurance platform manage third-party capital. If so, is there a pace for that as well? And what safeguards would be necessary so that fee generation does take excessive priority over, say, policyholder alignment? Marc?

Yes. So the platform, again, we haven't filled our boots with everything we would want. So for us to get third party, it's interesting in and of itself to get the returns. But I'm also very -- I also like to underwrite, and I also like to do the underwriting results and really having sticking to our balance sheet. Also, I'm always cognizant, -- over time, I think we'll develop it as the platform grows. And if we have more than we probably want to in certain areas that we could buy reinsurance, which sort of third-party capital way. You can reimburse some kind of commission. So it's already existing as it is with a more broader third-party capital. We have one already at Vantage. We are managing a fair amount of that. We're evaluating what we're going to do and what's going to happen with that over time. I think our first order will be more developing underwriting income to our balance sheet. Optimizing the reinsurance purchase perhaps as well to make it as optimal as possible. And I think when we get to be much broader, which I've seen that experience through Arch when you start at the beginning and you move time, then you come to a point where your size and the market presence is such that you're able to have those kinds of discussions. So I would say probably a bit longer term, certainly something that we would evaluate. And also, we have to demonstrate consistency of returns, right? We need to be able to demonstrate that we're really, really good toward third-party capital as well. So that's something that will demonstrate to the market once we've demonstrated, I think we'll be able to have good partnerships that developing.

In the middle here.

So Jim Cohen. 10 years from now, how do you expect the market caps to compare between Howard Hughes, Pershing Square U.S.A. and Pershing Square Asset Management. And do you and Ryan agree on that? And how do you compare the risk profiles? And Ryan, you should have mentioned before about people that Howard Hughes going after the best Chief Investment Officer, too.

Well, I hope they didn't overpay. .

Go ahead, Ryan, why don't you take that one?

So I think what's interesting about all of them, maybe you hinted this a little bit in your question is if you sort of start at the top, Pershing Square, the management company, the Bill and I worked for that effectively is getting fees, which are directly related to the growth of each of the various entities that we manage, of which Howard Hughes and Pershing Square USA are 2 important parts of that. And so ultimately, the returns on those assets are going to very directly relate to the returns that the managed company gets. And so what I like about our strategy at a very high level is while there could be some differences based upon the starting valuations of those business and you think over a very long period of time, ultimately, the better that Howard used us, the better that Pershing Square USA does, the better the manager is going to and there's going to be a very direct mathematical relationship between the growth and the value of those businesses. So I would say that over time, they should generally be relatively similar. Now what I think you need to look at is you need to look at the starting valuations of all of them. One of the interesting things about Howard Hughes that we talked about here is that we believe the starting base of a is significantly undervalued, right? We talked a little bit about the market price, let's say, kind of mid-70s as of yesterday relative to something, the base value of the business, we believe, is at least $100, I would argue that, that is, in my view, a relatively conservative valuation because that really assumes that the price that we paid for Vantage is close to what the value is. And I think Hopefully, you've seen already with the team that we've hired, the plans that we have in the future and just the enormous opportunity we have to create a lot of value, which is why we're really wanting to put as much capital as we get our hands on into Vantage. I would argue that business is worth a lot more today on what we paid for it. And therefore, you could argue that just the existing value today is significantly in excess of the share price. Well, obviously, we believe the same is true for the other assets that we manage, if we do a really good job. I think here, there may be even more of a disparity where we've kind of talked about the share price being significantly above. And that's before you think about all the changes that we're going to make, where we're going to take -- it's a great real estate platform today, but one that's very capital intensive, and it's actually, I would argue, hampered our growth to something that's very asset-light with a great team that we can use to really now go to capital sources that are multiples of size of what we have internally, that transform into an asset-light business should mean that, that business is a lot more valuable than I think people believe it is today. And then we get to put that capital into advantage in rough order of magnitude, every dollar that we take out of Howard Hughes should be worth at least $2 of value because the returns that we can get on that capital in the insurance business are so great that the market should be willing to sign more than book, books or something like 2%. So I think the value creation story there is going to be really, really great. So I think Howard use our expectation and our hope if we do a good job, is that, that should accrete at an incredibly rapid rate because of the high rate of return that ultimately vantage and then the asset-light real estate portfolio deliver over time, and the starting valuation is incredibly low. That said, our expectations are also incredibly high between the other 2 vehicles. And so I think all 3 of them will do really well.

Just to add to what we're saying. One way to think about Howard use today, if you pay $75 a share, basically buying -- think of it as buying a future insurance-dominated holding company at about a 25% discount to book value that has the potential to trade at a turn or greater multiple of book value. So if we're successful in deploying capital from real estate into insurance and Marc is successful at doing what he does best. If we do a good job on the asset side of the balance sheet, we've taken the company trading at a discount to effectively book value or, in this case, market value of the after-tax market value real estate portfolio plus the kind of our cost basis advantage and turning it to an operating insurance company that deserves a 2-turn multiple. And then on the Howard Hughes side, real estate asset management companies trade at multiples of book value, right, because these are very high return on capital businesses. So the market is kind of ding the company because our ability to generate returns on capital and equity heavy real estate operation in a C corporation is limited in the discount rate the market assigns to that business is high. We're moving into businesses where the discount rate is going to come down meaningfully and the returns we can earn on these -- both insurance and a real estate asset management business are much higher and that should lead to a re-rating of the company from a discount to book value to -- we expect over time, a meaningful premium. A good example of how asset managers can trade at premiums to book value if you just look at Pershing Square Inc. trades out of -- I don't even know what book value is, but it's probably a couple of dollars a share and the stock trades in the $50s, probably 25x book value. So asset management businesses can trade at very high values. I'll give one little plug for Pershing Square USA. It's trading today at a 24% discount to its net asset value -- net asset value is comprised of the most liquid marketable securities in the world. And in each of those cases, those companies we think are trading very deep discounts to what they're worth, you get kind of a double discount. So like Pershing Square USA as well. Maybe another question online.

Sure. There were a few to this effect based on your belief that Howard Hughes stock is significantly undervalued, Doesn't it make sense to use some excess capital to repurchase shares along with growing the insurance business? .

Actually, in this case, I don't think so. I think the highest return we can generate today is every marginal dollar of capital and put it into the insurance company. The most effective use of a buyback here would be to buy back the portion of Vantage that's held by Pershing Square as opposed to buying in our outstanding shares at this stage. There may come a day someday where we have so much excess capital, that's a better use of the money. Another -- yes, right here in the middle.

Mondo Lee from Armada Capital based in Western Mexico. I have a question regarding the real estate subsidiaries or the new asset-light model. where you keep 20% of whatever you guys are developing? And then the remaining 80% shall we think it has being that equity? Or can we -- can you highlight a portion of debt et cetera? Just because I want to say we have to continuously think of you owning only 20%? Or has it the possibility to go for your ownership to go upwards. And then just this ability of making the model more asset light, does it accelerate the development that you guys have? So the current pipeline, you had like -- if you fund it with 100% equity, it's going to be on a slower pace. Does it accelerate? Because as of my understanding, your thesis is to develop at a very moderate pace the lots, the lot value is maximized.

Absolutely. So to answer your first question, when we think about selling 80% of the equity in the buildings, most of the operating assets have property level debt on them already. When we talk about selling 80% of the residential land that is an unlevered asset today. And it's an asset that really shouldn't have a lot of leverage on it anyway because it's land doesn't generate recurring income. To get to your second question, our development pipeline has always been sized to meet demand. We sell just enough residential lots to keep up with underlying home sales. So I don't know that, that business goes faster because third-party capital comes in. On the vertical development side, we're building to meet demand. And today, we have opportunities to build on the vertical side, retail centers in Summerlin, more condominiums that we're not executing on because the risk-adjusted returns of those assets are not as high as redeploying that capital into insurance. I think that if we're able to execute on this asset-light strategy, we'll have plenty of capital money. There's no ways more, enough capital to redeem the preferred, invest in insurance and potentially in one of the slides that Bill went through eventually raise third-party funds that can do that real estate development pipeline at great risk-adjusted returns for real estate investors, but maybe not for a diversified holding company when our capital allocation decisions are between insurance and real estate development. So I think this strategy has both the opportunity to increase the capital to insurance as well as increase the vertical development pipeline across the communities business.

The other way to think about what David is saying, when you bring a partner into a real estate -- when you have real estate in a corporation that has to pay corporate taxes and is in a public context and has to operate with public company leverage, and there's also overhead expenses associated with it. It's hard to get to a return on equity that's substantially above what the market has historically assigned to this business. When you have a stand-alone asset, where you bring in a partner into that asset and you finance that asset in the context of a private transaction, you can achieve much higher -- the pretax returns or what are relevant to the third-party investor, it's not embedded in a C corporation. And we have at Howard Hughes, all the ingredients that a real estate investor looks for. What does a pension fund that wants to allocate capital to real estate look forward? One, they want to have a very talented operator. Two, they want someone with very good development capability. Three, they want someone that has an institutional credibility and accountability and reporting, and then ideally, they like a deal pipeline that for years of ability to put capital to work. It's very hard to find that in the asset management business. You can find some very capable people who are good at deploying capital. But the vast majority of firms, even the Blackstones of the world rely on third-party developers, third-party managers. And we have the -- all of those capabilities in-house that we've used now for 15 years. to build and manage a portfolio, which we have an incredible real estate development track record. And we've got a land bank that basically tees up a series of transactions. We don't need to compete with all the other real estate asset managers when an acquisition opportunity years. And we have to bid for an asset, we've got to buy a piece of land. Here, we have a land bank, which is just a series of future transactions. So it's a very compelling story to a third-party real estate investor. And as a result, we expect we should be able to bring in very good partners in very good terms. Okay. Another we'll go up top there, we're sort of in the middle. And then we'll take this lady here in third row next. So maybe we get the mic to the next person so that we can avoid a pause. So we're learning. Okay. Go ahead.

Thank you. Daniel [indiscernible] Capital. Well, this all sounds great in Deny, this is a 45 from the 9 years ago at some competence where you presented this tremendous opportunity at the time, sold a lot of people on the upgraded scheme of digital estate and massive land community operation in South Seaport real estate, what I would say there is a little bit of discipline opportunity cost loss, time value lots that's immeasurable, especially with what's happened in the past 9 years. What can you speak to the investors about renewing that confidence in this new opportunity, new direction is cited to be in very confident.

Great question. So I didn't realize it was 9 years ago, but that's -- it's amazing how time passes. I think we executed on everything we said we would do 9 years ago, which is we were going to refine the portfolio, we were going to focus on building out this, what we think is a great business. What we were unable to achieve is to garner a low enough cost of capital so that we can earn a return in excess of our cost of capital. And so while we made, I would say, meaningful progress. If you look at 9 years ago, what our land values were 9 years ago and what they've become over time. 9 years ago, when we were selling acres and Summerlin for, what?

$450,000.

And our most recent press...

We've $1.8 million. over the past 2 quarters.

Nine years ago, we didn't have much in the way of a development business in Hawaii and today...

We've had over $10 billion of closed or contracted condominium sales at Ward Village. .

Our net operating income was what, a decade ago. .

A decade ago, we were sub-$100 million. And today, our guidance is in the high $200s, $270 million. .

Right. So on every measure that you would measure a typical real estate company -- the business has made meaningful progress. And actually, before the issuance of shares to us in connection with this transaction, the share count has basically been relatively stable over that period. But when you have a cost of capital as high as this business, you can work as hard as you want, you're not going to make much share price progress. So the pivot, as we describe it addresses the problems that have cost caused the underperformance of the stock price, which is we go from a much lower return business to a much higher return business. We turn the real estate operation into a much more capital-light higher-return business, and we expect to see the benefits of that. And I think you'll be able to judge our progress. If you -- in May of last year, we did the initial transaction. We announced a transformation. We set a goal, a September meeting, we said, look, we're going to buy an insure. And we feel very good about the assets we've acquired, the team that came with that asset. We've enhanced the team with Marc and now with David, with Lucy, with other members. We immediately sold the assets of the fixed income assets the insurer, and we deployed the capital and we think very attractive prices and a very high-quality collection of assets of common stocks, and we're beginning the process of converting the real estate operation from capital to capital light. Now should we have done this sooner, sure. I would say that could be a reasonable criticism. But I think we thought of Howard Hughes and the Board, I think, collectively thought of the company as a pure-play real estate developed company. And our thesis always was as we simplify the business, we focused the business. We did a better job telling our story. We did a good job recruiting David to become CEO as we executed, we expected over time, we'd garner a value that made sense. And we were ultimately unsuccessful, which is why we're changing the plan. There was a question in the front.

My name is Lee Jing. I'm coming from Long River. We're very long-term investors. I have two questions. The first one is on the insurance side. So insurance is a business where when you do the business, you don't know the cost of goods sold. What if there is a catastrophic event, it looks like you're still settling the ground, hiring a good team right now. What if there's a catastrophic event happening in the next couple of years, how does that capital movements among your different businesses, real estate, insurance, do you see more capital injection into your insurance business in that scenario? That will be the question. The second question is on real estate...

Let's just take one at a time. Good question for Marc. How much exposure this Vantage have to sort of catastrophic risk?

It's a very small exposure, probably underweight versus most other companies I would expect -- it's also the way to calculate it's somewhat conservative. So I would even say that we could probably put a bit more capital to work if we -- if the returns are there. The other thing that we did similar conversation last week, it's about earnings event versus capital events, right? In the insurance world, 1 of our mission at the interest group is to make sure that we don't have a capital event significantly capital because of exposures. You're trying to rightsize your exposure within a reasonable 1 year, maybe 2 quarters, maybe 6 quarters earnings so that you can replenish the capital to trade through because when there was kind of events happen, you're able to receive the opportunity and your ticket to advance is the amount of capital you have, and that's because it's related to the rating agencies, winning give the opportunity to participate. So it's -- we put a lot of risk on balance sheet. We do an insurance carrier, right, across all lines of business. We measure 2530 different exposure that we could have. We can think of spend on nights thinking about the worst case enters about everything we don't want to share with here, but what did this happen, what does that happen? And then we go and report on a quarterly basis to make sure that we're within guidelines, and we're not overexposing the capital. That's really...

Marc, with a couple of dozen lines of insurance, how much correlation do you believe there is among the different lines? Is there a way to think about the exposures -- we're not a super cat company, for example. -- how would you...

Correlation is interesting because it's hard to describe. I know it sounds crazy from most of you here, but -- what I prefer in terms of PML and this is a term we use in insurance, probable maximum loss is you don't try to do mathematically, you actually go a bit more simple that's a bit more conservative. We say, "Hey, if I'm going to be exposed to a titanic kind of event, let's say, right, you don't sugar co or you don't like granularly go through everything to find out the fine-tune you just assume that limit is exposed. And you just cross all that exposure across your portfolio. So you tend to be a bit more on a conservative side to make sure you're not missing it on what the exposure could be. Sort of the idea behind risk management.

I mean I think the short answer at the current stage of Vantage -- this is not an insurance company to worry about massive catastrophic risk, and Marc's going to do a very careful job to make sure that doesn't...

Yes. They only have -- so I think at a very high level, when you think about catastrophic risk, there's sort of kind of 2 broad level risks, I think insurers taken is any individual event if it were to happen, people always think about this as a natural event disaster, earthquake, flood, powerful storm, you are generally right in certain lines of business, for example, property, where you know that you have a property that might be exposed, you got to have a house that gets wiped out or something like that or a massive business insurance interruption risk. And that would generally be for an event that could happen, that's probably the precise event somebody is trying to protect against. There's a lot of history going back over several hundred years where you could sort of think about how much exposure would you have with the policies are there. And so that's kind of 1 is just in any individual event that's oftentimes what people talk about when they think about capital events or catastrophic loss. That is something that when we did the diligence was really around just under 1% of the business, what Vantage is writing. It doesn't mean that it can't be more capital, but we felt like that was a very small risk and something we spend a lot of time diligence on. Second risk is really where no individual event that has happened before, and you get a lot of history on this as well, should be causing a huge loss in any other book of business. Now you get the pricing wrong on the business or there could be things, for example, tort law, our judgments that ultimately caused those things to be worse. But the nice part about those is that doesn't happen from 1 individual event. It happens a series of events over time. Mr. Buffett called that social inflation, but that's not actually something that would be causing any particular catastrophic risk at once. It's a decision that our as you build a book of business over many, many years that you can kind of see developing, you could decide to try to price that or not. But I think for what you're asking, that is a very small portion of the portfolio. And I think now with Marc and the team that we're hiring, we have an even better insight as to how to really make sure that we're not accidentally taking risks that we don't think we're getting paid for.

Just a second question on this side. I was wondering how much more you're planning to do on the land banks? Are you in any plan to acquire that very long-term big parcels of land for future development.