Pershing Enters More Swaps in Howard Hughes

The bottom line here is that Pershing will either pay or receive the performance difference monthly on 5.3M shares of $HHC. With what he already owns in the common and warrants he received when $HHC was spun from $GGP, he now has a total economic exposure to 26% of $HHC’s shares. Many will ask why he just does not buy more shares. The answer is simple, each of the parties that aided in the spin transaction signed standstill agreements that prohibited them from increasing their ownership through the purchase of additional shares/warrants. Since there are no LEAPS in $HHC, this is the only remaining avenue to participate in what he obviously feels is share price appreciation over the next couple years

$HHC has increased all our ownership percentage through the repurchasing of outstanding warrants.

From the 13D/A

On December 31, 2013, certain of the Reporting Persons entered into swaps for the benefit of certain Pershing Square Funds. Under the terms of the swaps, (i) the relevant Pershing Square Funds will be obligated to pay to the bank counterparty any negative price performance of the 5,399,839 notional number of Common Shares subject to the swaps as of the expiration date of such swaps, plus interest rates set forth in the applicable contracts, and (ii) the bank counterparty will be obligated to pay the relevant Pershing Square Funds any positive price performance of the 5,399,839 notional number Common Shares subject to the swaps as of the expiration date of the swaps. During the term of the swaps, cash will be paid by the bank counterparty to the relevant Pershing Square Fund in an amount equal to the amount of notional distributions or dividends paid by the Issuer in respect of such notional number of Common Shares. All balances will be settled in cash. The Pershing Square Funds’ counterparties for the swaps include entities related to Citibank, Nomura, Société Générale and UBS. The swaps do not give the Reporting Persons direct or indirect voting, investment or dispositive control over any securities of the Issuer and do not require the counterparty thereto to acquire, hold, vote or dispose of any securities of the Issuer. Accordingly, the Reporting Persons disclaim any beneficial ownership of any Common Shares that may be referenced in the swap contracts or Common Shares or other securities or financial instruments that may be held from time to time by any counterparty to the contracts.

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