Bill Ackman's Hidden Gem Is Finally Beginning To Shine

Last year, I had the opportunity to spend time with Bill Ackman shortly after I began covering Howard Hughes Holdings (HHH). As we discussed the company's evolution, I was reminded that some of Wall Street's greatest investments don't begin with flashy technology companies or rapidly growing software businesses. Sometimes they begin in bankruptcy court.

In 2008, as General Growth Properties (GGP) collapsed under the weight of nearly $30 billion in debt during the financial crisis, most investors saw a failed mall operator headed for liquidation. Bill Ackman saw something entirely different: extraordinary real estate trapped inside a broken capital structure.

Pershing Square accumulated roughly a 25% ownership stake while GGP was navigating bankruptcy, making one of the most successful contrarian real estate investments of the past generation. That investment ultimately became the foundation for Ackman's long-term vision of building Hughes into a permanent capital vehicle modeled after Berkshire Hathaway.

But an equally important part of that story often gets overlooked.

As General Growth emerged from bankruptcy, its master-planned communities and long-duration development assets were separated into Howard Hughes Corporation. Over the next decade, Hughes created billions of dollars in value through communities like Summerlin in Las Vegas and The Woodlands near Houston.

Then came another evolution.

As Ackman sought to simplify Hughes and focus it on becoming a long-term capital allocation platform, management recognized that a collection of entertainment, hospitality and experiential real estate assets no longer fit the company's strategic direction. Those assets weren't poor businesses; they were simply different businesses.

Restaurants, sports franchises, waterfront destinations and cultural attractions require a different operating philosophy than developing master-planned communities. Rather than bury those assets inside Hughes, management spun them into a separate publicly traded company in 2024: Seaport Entertainment Group (SEG).

That's where I believe investors have been missing the story.

Like Hughes before it, Seaport was born from a corporate restructuring that created investor confusion. Spin-offs frequently produce temporary pricing inefficiencies as shareholders sell businesses that no longer fit their mandates. In SEG's case, investors inherited an unconventional company that didn't fit neatly into any traditional category.

Instead, Seaport emerged owning one of America's most unique collections of experiential real estate, including the historic South Street Seaport in Lower Manhattan, the Las Vegas Ballpark and Aviators baseball franchise, valuable development rights above Fashion Show Las Vegas, and an ownership interest in the world-renowned Jean-Georges restaurant group.

When I first recommended SEG several weeks ago to the public (on Seeking Alpha), my thesis centered primarily on hidden asset value. I argued that the market was dramatically undervaluing an irreplaceable portfolio while overlooking one of Bill Ackman's most intriguing spin-offs.

After reviewing second-quarter results, I believe the story has become even more compelling.

The debate is no longer simply about what these assets are worth, it’s becoming about what they can earn.

When I first recommended Seaport Entertainment (to Wide Moat Confidential members), my investment thesis rested primarily on intrinsic value. I believed the market was dramatically undervaluing a collection of irreplaceable assets because investors remained focused almost exclusively on reported operating losses.

That thesis hasn't changed. What changed is the business itself.

Second-quarter results suggest management is beginning to demonstrate that its destination-based operating model actually works. Total operating EBITDA improved by $5.6 million year over year, swinging from a $1.1 million loss to positive $4.5 million, with all three operating segments generating positive results for the first time since the spin-off.

Adjusted earnings also crossed an important threshold. Non-GAAP adjusted net income improved by $7.7 million year over year to approximately $320,000, while adjusted earnings per share improved from a loss of $0.58 to positive $0.02. GAAP results still showed a $10.5 million net loss attributable to common shareholders, but the direction of travel is clearly improving.

There is an important caveat: management emphasized that the quarter benefited from accelerated economics tied to the early Nike lease termination and other favorable timing items. In other words, investors should not simply annualize the second quarter. Management still expects year-over-year improvement over the next three quarters, but seasonality and the timing of tenant openings, concerts, baseball games and events will create quarterly variability.

What I find more compelling is that the cost structure is becoming materially leaner at the same time. Trailing 12-month G&A has fallen from roughly $34 million in the third quarter of 2025 to less than $27 million in the second quarter of 2026, a reduction of more than 20% in nine months. Management also believes additional savings remain as legacy technology, consulting and service contracts expire or are renegotiated, with the full-year benefit becoming more visible in 2027.

That milestone is far more important than a single quarter's earnings beat. It demonstrates that SEG's ecosystem strategy is beginning to generate operating leverage. Unlike traditional retail landlords, Seaport isn't simply collecting rent checks, management is actively creating reasons for consumers to visit.

A rooftop concert brings thousands of visitors to Pier 17, and these concertgoers dine at SEG-operated restaurants. Many return for festivals, sporting events, immersive attractions, and cultural programming. And each event strengthens tenant sales, leasing demand, and ultimately, the value of the underlying real estate.

That is exactly how experiential real estate compounds value over time.

The second quarter provided several encouraging examples of that strategy taking hold.

Management recently opened Sadie's and Sadie's Garden Bar within the Seaport neighborhood, and the early economics are encouraging. Hospitality generated positive operating EBITDA of approximately $280,000 for the quarter, while Sadie's itself produced positive operating EBITDA in its first full quarter of operation. Sadie's Garden Bar also generated a remarkable 125% increase in revenue compared with the prior-year operation.

Rather than simply replacing tenants, SEG is curating concepts capable of producing materially higher returns.

The company also hosted Macy's Fourth of July Fireworks celebration as part of America's 250th anniversary festivities, further reinforcing the Seaport's position as one of New York City's premier entertainment destinations. The rooftop at Pier 17 hosted 22 concerts during the quarter, including 13 sellouts, and achieved a 91% sell-through rate. Leased or programmed occupancy across the neighborhood climbed to 89%, reflecting continued momentum despite a retail environment that remains challenging in many urban markets.

Meanwhile, management finalized the early termination of Nike's Pier 17 lease. The transaction produced a net $2.7 million year-over-year lift to rental revenue in the quarter and, more importantly, returned control of the space to SEG sooner than expected so construction can begin on the expanded Pier 17 Event Space.

Some investors may initially view the loss of a national retailer as a negative; however, I see something different. Retail can always be replaced; however, world-class event space overlooking the Brooklyn Bridge cannot.

If management successfully transforms that location into another high-demand entertainment venue, I believe the long-term economics could prove considerably stronger than those generated under the previous lease.

Perhaps the most exciting aspect of the investment story is that many of SEG's largest earnings drivers have yet to fully contribute.

The Balloon Museum is now one of the nearest-term catalysts. Management completed landlord work and delivered the Tin Building space in June; the museum opened on July 15. With rent now commencing, the conversion is especially meaningful, as the Tin Building’s former food hall had been one of the portfolio’s largest earnings drags.

More broadly, management now has more than 194,000 square feet of non-income-producing space scheduled to open with new concepts over roughly the next 18 months, including the Balloon Museum, Willett's, Flanker Kitchen and Sports Bar, Hidden Boot Saloon, the Pier 17 Event Space and Meow Wolf. Management estimates those projects represent more than $20 million of incremental annualized operating EBITDA that has yet to show up in reported results.

During the Q&A, management went a step further and said the current incremental earnings opportunity is just over $26 million on a pre-G&A basis. That figure will move as projects open and historical leases roll out of trailing results, but it provides a useful bridge between today's earnings and the company's targeted initial stabilization in 2028.

The Pier 17 Event Space may be the biggest swing factor within that bridge. SEG is designing three floors of flexible space for corporate offsites, conventions, product launches and consumer-facing events, all with waterfront and skyline views. Management called the ramp of this business the most volatile component of the pipeline, which means bookings and utilization will be especially important metrics to watch.

Meanwhile, Public Service is preparing to introduce a year-round arts, culture, and hospitality concept in the Seaport, Pier 17 continues expanding its event capabilities, and Meow Wolf remains scheduled to open its flagship New York experience at the property.

While much of the attention understandably focuses on Lower Manhattan, I continue to believe investors underestimate the value embedded within SEG's Las Vegas portfolio. The Aviators have already secured another Pacific Coast League playoff appearance, and Las Vegas operating EBITDA improved year over year despite hosting seven fewer Aviators home games.

Importantly, SEG owns both the team and the stadium, which allows management to monetize virtually every component of the entertainment experience, from sponsorships and premium seating to concerts, concessions and corporate events. This quarter offered a good example: sold-out Banana Ball and Athletics events produced record one-day food-and-beverage and merchandise sales, while Aviators retail sales excluding the Athletics games still increased 8% year over year despite the lighter home schedule.

Combined with the company's valuable development rights above Fashion Show Las Vegas, I believe these assets continue to receive very little recognition in today's valuation.

SEG possesses one of the strongest balance sheets in experiential real estate.

Following the sale of 250 Water Street earlier this year, the company ended the second quarter with approximately $127 million of cash, cash equivalents and restricted cash and a net cash position of $88.9 million. Its only outstanding debt is approximately $38.1 million tied to the Las Vegas Ballpark.

That level of financial flexibility gives management something many real estate companies currently lack: time. SEG expects roughly $50 million to $70 million of remaining capital expenditures over the next two years to complete already-announced projects and reach the targeted stabilization period.

Rather than being forced to refinance expensive debt or issue dilutive equity, SEG can continue investing patiently in projects capable of generating attractive long-term returns. Management said there is no imminent capital raise; the shelf registration and share repurchase authorization remain tools available for future capital allocation decisions. In today's commercial real estate environment, that flexibility is a meaningful competitive advantage.

When I first introduced Seaport Entertainment to readers, I argued that investors were effectively buying exceptional real estate at a substantial discount to private-market value and I continue to believe that.

However, I now think the investment case is becoming even stronger.

The original thesis was based primarily on asset values. However, today's thesis increasingly rests on operating execution. The market is beginning to recognize that these aren't simply trophy assets sitting on a balance sheet; they're becoming productive assets capable of generating recurring cash flow. The key question is increasingly how much of the roughly $26 million pre-G&A earnings pipeline materializes, how quickly the Pier 17 Event Space ramps, and where normalized corporate costs ultimately settle.

Bill Ackman's greatest investments have often shared one common characteristic. He identifies exceptional real estate long before the market fully appreciates its value.

That was true with General Growth Properties.

It helped shape Howard Hughes into one of America's premier real estate developers.

And I believe Seaport Entertainment represents the next chapter in that investing legacy.

Unlike most of Ackman's headline investments, however, this one continues to fly well beneath Wall Street's radar, and I don't expect that to remain the case forever.

As management continues executing, expanding attractions, improving operations, and demonstrating the earnings power of its experiential ecosystem, I believe the gap between public-market pricing and intrinsic value will continue to narrow.

For investors willing to look beyond quarterly GAAP losses and instead focus on irreplaceable real estate, disciplined capital allocation and improving operating momentum, Seaport Entertainment remains one of the most compelling hidden gems in Bill Ackman's investment universe.

Happy SWAN Investing!

PS: I plan to meet Bill Ackman again soon where I will be discussing Howard Hughes, along with Pershing Square.