The Howard Hughes Corp. — the developer behind local master-planned communities such as The Woodlands and Bridgeland — will consolidate its Dallas corporate headquarters into its Houston-area office in The Woodlands.
The move was announced as part of a transformation plan resulting from a review of strategic alternatives the company began a few months ago.
Along with the move, Howard Hughes (NYSE: HHC) has named a Houston-area executive as CEO. Paul Layne, previously president of HHC's Central Region, has been promoted to the role, effective immediately.
"Paul's extensive acquisition, development, and operating experience coupled with his superb leadership style has earned him the respect of the board and the entire Howard Hughes team," Chairman Bill Ackman said in an Oct. 21 press release. "Paul's efficient operating approach along with our headquarters move from Dallas to Houston will enable Howard Hughes to be a more focused, profitable, and free-cash-flow-generative company."
Layne replaces former CEO David R. Weinreb on the board of directors, and Weinreb and former Howard Hughes Corp. President Grant Herlitz will step down from the company. Layne has been with the company for eight years.
Under the new leadership structure, CFO David O'Reilly will have an enhanced role to help Layne execute the company's transformation plan.
"We are taking bold and decisive actions to better position the company over the long term," Layne said in the release. "We believe a leaner, more focused and decentralized approach dedicated to delivering high returns and delighting our customers will generate enormous value for our shareholders, and continue to greatly enhance the communities in which we operate."
In addition to the leadership changes, the transformational plan also includes changing the company's structure, selling non-core assets and accelerating growth in its core master-planned communities.
The company's structure will change from a holding company style to a "decentralized regional management model supported by a lean corporate team," per the release. The changes, including the headquarters move to The Woodlands, are expected to reduce overhead expenses by $45 million to $50 million per year. The company expects one-time charges associated with the relocation expenses, retention and severance payments to total approximately $38 million to $40 million, mostly in the fourth quarter.
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Additionally, Howard Hughes Corp. plans to sell $2 billion of noncore assets over the next 12 to 18 months. Those assets are mostly located outside of Howard Hughes' master-planned communities, Ward Village in Honolulu and the Seaport District in New York City. After debt repayment and transaction costs, the company expects net cash proceeds to total $600 million, which will be used for share repurchases and development opportunities in the core master-planned communities.
Howard Hughes owns, manages and develops commercial, residential and mixed-use real estate throughout the U.S. In the Houston area, it owns The Woodlands, Bridgeland in Cypress and The Woodlands Hills in Conroe and Willis. They span 28,505 acres, 11,470 acres and 2,055 acres, respectively.
The Woodlands is almost built out, with 157 acres of residential land and 753 acres of commercial land remaining as of Dec. 31, according to the company's 2018 annual financial report. The company started work this year to extend Bridgeland Creek Parkway west past the Grand Parkway for initial access to its new 6,000-acre phase, called Prairieland Village. The Woodlands Hills, the developer's newest community, just opened its 10,600-square-foot activity center in April.