Howard Hughes CEO David Weinreb On Retail's Survival, Housing Affordability And Saving The Best For Last
A piece of undeveloped premium land may sit under The Howard Hughes Corp. umbrella for decades, but once the company sees density around it reach optimum levels, that prime site will be built into something fantastic.
This philosophy is left over from an era when real estate legends such as James Rouse master-planned communities. Howard Hughes CEO David Weinreb told Bisnow his company leans on past lessons like these to build not just projects, but the cities of the future.
The Howard Hughes legacy is one of knowing when to embrace technology and disruption in your industry, and when to lean into traditional development methods and embrace tried-and-true retail and restaurant concepts to densify the cities you construct, Weinreb said.
He said Howard Hughes sees itself as a city builder, not a developer of master-planned communities, and the success of its efforts master-developing sizable communities such as The Woodlands, Texas, and Summerlin, Nevada, support that assertion.
Each parcel of land acquired has a greater purpose, but that purpose will not be realized until many years later when housing is created, retail is established or offices are constructed, Weinreb said.
“One of Jim Rouse’s legacy decisions was he left his best land to be developed once a community was mature,” Weinreb said.
Rouse knew he could have sold the best land right away for profit, but he reasoned it would be even more valuable as the land around it developed, Weinreb said.
In his interview with Bisnow, Weinreb is careful to recognize the philosophies of real estate legends like Rouse, who established the boundaries for master-planned communities like those created by Howard Hughes.
Today, as markets like Houston, Las Vegas and Dallas grow in density and benefit from lower tax burdens on residents and escalating populations compared to other metros, Howard Hughes is exactly where it wants to be. Weinreb’s firm has major footprints in these no-income tax states with growing populations, though it also has delved into high-barrier-to-entry and expensive markets like NYC and Hawaii.
Howard Hughes Corp.’s creative endeavors in this space have led to the long-term build-out of The Woodlands and Bridgeland in the Houston area, Ward Village in Honolulu, Summerlin in Las Vegas, and Downtown Columbia, Maryland, among others.
It is working on the redevelopment of the 51-acre Landmark Mall in Alexandria, Virginia, which could add more than 5M SF of mixed-use about a 15-minute drive from Amazon HQ2.
Weinreb filled Bisnow in on some of his strategy and the latest on ongoing projects.
Bisnow: What role will technology play in your existing and future developments?
David Weinreb: Technology is evolving at such a rapid pace and continuing to disrupt, but interesting enough real estate is one of the areas where I think the industry as a whole has lagged behind. New technology is bringing real opportunity for development to create these smart cities. As we continue to evaluate how we best take advantage of these trends, we have a team that is focused on bringing everything that we are doing into the most current basis. Artificial intelligence and self-driving cars are going to play a big role, but it’s unclear how technology will play out.
What I will tell you is we don’t think brick-and-mortar stores are going away. We think that people are social creatures and that they like to be with other people and so what we do is we focus on experience.
Technology will continue to play a critical role in what we do — data, learning more about our consumer and what they want and how we can drive things to them on an immediate basis. People like Tim Armstrong, whom I admire so much who has a new company that is looking to disrupt in the retail space, was kind of responsible for the last generation turnaround at AOL. He is an interesting person to talk to about what we are doing here because we have just really begun the discussion on how we can disrupt together.
We are looking to get the smartest minds in a room and figure how you would collaborate to create spaces and communities — in our case small cities — that offer things that are just not offered in other places.
Bisnow: Where are you looking to acquire land now?
Weinreb: It’s an easy answer for us. We are studying market demand and supply on a daily basis to understand what people are doing right and wrong. And we have a lot of different developments that we admire in the country, but in our five core regions, because we have 50M SF of entitlements, there isn’t a given day that one of our five regional presidents isn’t calling looking for capital to build another office building, another apartment complex, another health center that is going to infill at risk-adjusted yields that are almost 100% of the time higher because [of] some land that we bought or acquired. The answer is we look at a lot of markets. And, on top of that, we have Las Vegas and Houston. Both of those major markets are in these tax-advantaged states where the growth trajectory is just outsized compared to most of the other parts of the country.
We are in really good shape, so our goal is to figure out how we can build out that 50M SF as quickly as we can.
Bisnow: Tell us about some of the projects that you have under construction or near completion.
Weinreb on the latest in Hawaii: Let me start with Ward Village, which is the community that we are building in the heart of Honolulu. There will be somewhere between 4,500 to 5,000 homes when we get done and about 1M SF of retail when we’re completed. This year, we are completing Ke Kilohana, our workforce housing building — [reserved housing units were] part of the development agreement requirements. That building is largely sold out, as are all of our other buildings.
We also broke ground on our first micro-luxury product, called ‘A’ali’i. And, I’m proud to say that that building when we broke ground last year was 80% pre-sold [as of Feb. 21, after launching sales in January].
We also launched sales on our newest building, Koula. I am proud to be associated now with Jeanne Gang, who was just named one of Time’s 100 most influential people in the world. It’s pretty unbelievable. She did the exterior work, and Yabu Pushelberg did the interiors. That building was 45% pre-sold.
We can’t get construction drawings completed as fast as people are buying these things. And what we are finally figuring out is that what we are delivering ’A’ali’i — I call it micro-luxury — is a smaller unit. We are able to offer a price that is nominally less, but we are able to make the profit margins.
So, in the case of A’ali’i, we actually have a turnkey package included and you’ll have the same option in Koula, where essentially everything down to the linens and silverware can be a part of that full solution. So, the day you close and get your key, you walk into your home and everything is in there: furniture, light fixtures … even a toothbrush and toothpaste.
Weinreb on Howard Hughes’ Las Vegas projects: Summerlin you know is a small city that is 9 miles west of the Las Vegas Strip. We just opened up our ballpark two weeks ago, called the Las Vegas Ballpark, for our Triple-A team, which is affiliated with the Oakland A’s. We are really excited about that. It’s right in the heart of Downtown Summerlin, and so our whole driver there, and quite frankly our whole driver in everything we do, is about creating experience.
We first did the hockey facility. Las Vegas got its first hockey team about two years ago now. Their practice facility is now in Summerlin, so we are very proud of that. So we’ve got a practice facility for a professional hockey team and right adjacent to it is our new ballpark, and there are all kinds of really neat economics associated with [the development of sports venues as urban anchors], the least of which is our sponsorship deal, which is a $4M a year sponsorship deal for 20 years.
Weinreb on Houston projects: Then, we hit Houston, which is a big market for us with both The Woodlands and Bridgeland. All of our office product [in The Woodlands] is essentially 100% leased [as of Feb. 11] as I understand it as of our last meeting with our senior team there.
[As for residential,] we don’t have as much land in The Woodlands; we have only about 250 sites left for homes there. But, Bridgeland, which is a younger community, had a very strong year — its best year yet.
And we also have our smallest master-planned community, which is called The Woodlands Hills, which is almost a tagalong to The Woodlands because we were out of lots there, and we wanted to bring in affordable product that was close enough to The Woodlands to enjoy the benefits of the small city that we built there. So that’s now selling and that’s kind of an entry-level point price [around $230K]. It’s about 16 or 18 minutes north of The Woodlands in Conroe, so we’re excited about that.
Bisnow: What’s your vision for Monarch City in Allen, Texas?
Weinreb: What we love is that obviously it’s in Allen, 26 miles north of Downtown [Dallas]. But it’s really one of the largest undeveloped parcels on the corner of two major highways in North Dallas. So we see that it represents a unique opportunity for us to bring our placemaking vision where we can really create a walkable 261-acre mixed-use development where we have an entitlement package of over 9M SF that will all be anchored by a central park. We think Monarch City is going to introduce not just the city of Allen, but quite frankly the whole region, to a new unique amenity-rich urban hub.
Weinreb: The 250 Water St. acquisition was an important one for us. It’s a gateway site to the seaport, and we have a little over 700,000 feet of development air rights that exist in and around the Seaport. We are working closely with the community and city leaders to be able to preserve the historic nature of the waterfront that is so important to the community.
Bisnow: Is housing affordability an issue, and how will this impact your existing and future developments?
Weinreb: We certainly think it is, and we are sensitive to it. And that’s why in Hawaii we have created these smaller units because we believe we can deliver just as rich an experience for a consumer buying a smaller home by building out amenities that they wouldn’t otherwise have. And in the case of The Woodlands Hills, that’s the same situation there. It’s really a starter market and we expect that to do very well.
The real important thing is that with higher debt and low growth in real incomes, many young people just don’t have the same affluence that they had in the past, and so we are really being thoughtful about that all over the [country].