Q&A Video: An Interview with John Saxon, Chief of Staff at the Howard Hughes Corporation
July 28, 2023
Josh Herrenkohl, Senior Managing Director in FTI Consulting’s Real Estate Solutions practice, sat down with John Saxon, Chief of Staff at the Howard Hughes Corporation for a Q&A session. Their conversation unpacked the work that the Howard Hughes Corporation has been focused on, as well as the movement of people within the United States post-COVID.
There has been an increase in demand for master planned communities across the country, as more people are looking to move away from city living. Companies have seen this trend amongst their employees and have sought to become an integral part of these communities to accommodate their workforce. This trend has begun to change the definition of success for those who are looking beyond living in major U.S. cities to advance their careers and companies like the Howard Hughes Corporation understand how to develop a new sense of community that will embrace these changes.
Full Interview Transcript
(00:05-01:30) Josh Herrenkohl: Hi, I’m Josh Herrenkohl. I'm a Senior Managing Director in the Real Estate Group at FTI Consulting. I'm joined today by John Saxon, who is the Chief of Staff for the Howard Hughes Corporation and I'm here to talk about several highly relevant topics to today's commercial real estate environment. John, I've been a big, big fan of yours as it relates to some of the thought leadership that you’ve published. A lot of it is focused on the intersection between housing and interest rates, but you’ve also put a lot of thought around the migration of people over the last decade and there's been a lot of media attention just around post-COVID as it relates to remote work. I think what’s lesser known is just a lot of those trends were taking place prior to COVID. Thank you for spending some time with me to share your view today.
The Effects of Population Movement from 2020 and Beyond? (First Question)
Why don't we go ahead and dive in? My first question, John, is around just the movement of people and what's clear is that over the last several years, there's been a lot of population movement between a number of the U.S. states. States such as Nevada, Arizona, Texas, all these states, I should note, the Howard Hughes Corporation, has master planned communities, and these states have been the beneficiary of population inflows. What have you seen, John, just as it relates to these communities and what's been the impact to these communities in terms of these population movements?
(01:30-05:10) John Saxon: Josh, it's a great question and you're absolutely right. I think over the last two years, with COVID especially, these out of state migration from these coastal cities to more the Sunbelt and particularly to Nevada, Arizona, and Texas as you mentioned, has been very prevalent and you see it in news headlines everywhere and still do today. Like you said, these trends have been going on for years even before the pandemic, and really what we've seen happen is when 2020 came into play and COVID showed its face, it only accelerated this trend that was already occurring. If you go back to 2020, you had this full shutdown and people are confined to their homes, they're confined to the four walls where they are. They're not going into the office anymore. They're not going to even eat at restaurants. That pause allowed people to rethink their current living situation, their current working environment, and really what it came down to was ultimately they wanted a better quality of life. These people realized that if they could move to the states like Texas, like Nevada, they could get a bigger home with more space for a lower cost while still having access to all these great opportunities. We've seen that acceleration especially over the last two years and as you mentioned, Howard Hughes, we have these master planned communities particularly located in Houston, TX. We have three large scale communities there with The Woodlands, The Woodland Hills and Bridgeland. Then over in Las Vegas, we have our other community of Summerlin, which is just 7 miles off the Strip. At the end of the day, what people want is a better quality of life, so the traction that we've been able to gain even more so over the last two years is a huge surprise to us because providing that better quality of life is the essence of what we do. I think for some of your listeners who may be a little unfamiliar with the Howard Hughes Corporation, I'd like to take a quick step back and just give a 50,000-foot view of the Howard Hughes Corporation and what we do. We're a community builder. We develop these large-scale master planned communities that aren't 500 or 1000 acres, they're 10,000 20,000 acres and it brings in residents to the tune of 100,000 plus. We're a thriving job hub and we see employers coming into the community, and we like to think of it as the game SIM City. We're playing SIM City every day and as the master developer, we get to decide where the road goes, where the hospital goes, and the schools and from the commercial side and where's the next office building going? Even from the residential side, where are the homes going and we take our land, if you can imagine, 20,000 acres, and we segment it between residential and commercial. We're able to put infrastructure into the ground and get land ready to sell to home builders. Those home builders will build homes and sell them to who will become residents and that creates a spark for commercial demand. We use the proceeds from these land sales, that's the equity contribution for commercial development. As we build that up, we lease it and then we operate it ourselves, that creates more demand from the residential side. It's what we call the virtuous cycle of value creation and especially over the last two years, we've seen that virtuous cycle really accelerate.
(05:10-05:19) Josh Herrenkohl: You’re making this sound pretty good, John, as a guy who has lived in New York for the last two decades, I may want to make a move to one of your communities.
(05:19-05:23) John Saxon: Come on down to The Woodlands.
Corporations Following Employees and the Changing of the Definition of Success (Second Question)
(05:23-05:48) Josh Herrenkohl: Well, it's interesting, right? As you talk about just what's enticing people to move, one of the things that's kind of the interesting concept is around, which comes first, right? Is it the people who are moving to a location to follow a job or to follow work or is it the other way around, are corporates following people? What are your thoughts on that question?
(05:48-08:50) John Saxon: Yeah, I guess it's, the chicken, or the egg, what's coming first? I would say is what we've noticed is, pre-pandemic, employers were setting the pace and establishing where they wanted to be and if they were in one of these coastal cities and they had their corporate office there, the employees would follow, and if you want a well-paying job and a great place that's where they were going. The pandemic hits and people's idea of success changed. So, what was typically the idea of success pre-COVID, let's say having that corner office in a big city, a lot of that change to more so what's my quality of life? Yes, my job is important, but I also want to spend more time with my family, with my friends while still having that job, and the pandemic allowed people to go into the areas where we're located, Houston and Las Vegas and Phoenix, and really plant roots there and corporations really took notice. What we've seen, Howard Hughes, we have a 7 million square foot office portfolio. Just in 2022 we executed over 500,000 square feet of new or expanded leases, a great portion of which were from tenants that were out of state. A great example is a tenant that leased space here in The Woodlands, actually in the office where I'm sitting at today, this company, Obagi, they are a cosmetic company. They were based out of San Diego, and they relocated their headquarters to The Woodlands and when asked to their CEO, why did you decide to relocate? What was the draw from California to The Woodlands? She said, I polled my employees who were in their 40s and 60% said that living in California they felt that home ownership was really out of reach, they couldn't afford it, and they were also concerned that their kids didn't have access to quality education without paying an arm and a leg. Coming over to The Woodlands, it allows her employees to have access to affordable housing, their kids have K-12 and even higher education opportunities that are affordable. What's interesting with the communities that we create, we cast a wide net, and we have price points for homes that vary to the starter home to the mega mansions. Anyone from the associate starting out all the way to the CEO can live in the same community. They come to the same office building and they're going to the restaurants and dining at similar areas. The kids are going to school together and that's what creates that community aspect of having, what we say time and again, this live, work, play environment where people want to live and thrive.
The Graying of America? (Third Question)
(08:50-09:44) Josh Herrenkohl: Yeah, that's interesting John. As you talk about just the people that are sort of in the middle of their career and having families and so forth, I mean the other demographic are the retirees, right? So, you look at the percentage of Americans that today are over 65 years that's going to grow in the coming years. I saw a statistic that in 2016, 15% of the population was over 65. In 2030 it's predicted that 20% of population will be over 65. So how will this sort of concept, I'll call it the graying of America right now, how will it impact population movements in the US and how will you see this dynamic impacting the Howard Hughes Corporation’s current business?
(09:44-13:25) John Saxon: I know it's interesting and I think that stats like this, and just broader macro trends or something that we're always paying attention to, these markets can change on a dime, and we have to remain flexible, ready to execute and deliver products and build communities that people want, as preferences change. We look at broader macro trends across the country. How those trends are displaying in our metro regions and then take it a step further and say well how are our communities comparing to all this? Are we keeping up with trends, are we lagging, do we need to pivot somewhere? The stat that that you mentioned Josh, about this graying of America, is something that we actually have a pretty keen eye on it, and we've paid attention to it. I think what's interesting is you see about 1 million to 1.5 million people a year that are hitting the 65 or older mark, they're hitting this retirement phase, but on the flip side, we only see about 500,000 folks that are entering the labor pool and forecast expect that to largely remain. So, it implies that you have this contraction in the labor market and it's slimming at the same time we look at the number of jobs that are open today and the job openings, on LinkedIn and other sources, there's over 4 million more job openings than there are of people that are unemployed looking for work. That again creates this disparity that started when the pandemic occurred and it's still this outstanding amount that we haven't really closed. Then the third factor on the labor is we've seen labor participation decline since the 2000s and it really dipped off obviously when COVID hit, but we still haven't recovered to where we were pre-pandemic. I think you couple all of that and say well that's the state of the labor market, you layer in this wave of net migration over that same time period, and these coastal cities are struggling to find talent, and this is where a lot of the major corporations are located. So now we've seen that flip where employees are setting the pace, employers are following through two avenues. It's either corporate relocations or they're adapting to this relatively new business model of creating this hub and spoke region where they're maintaining their corporate presence, but they're adding a regional arm so they can have access to that pool. We're seeing a lot of that, but I think an interesting stat that we have and that we look at is we do a lot of data scrapes and we're always looking at the demographics of our communities in particular. The Woodlands, where I'm sitting here today, we're just north of Houston, over the last 12 years the average age has remained flat. Meanwhile, the broader America and Houston are aging. When our team presented that stat and I was like okay, well, my first thought is people in The Woodlands are just having a lot of kids. But then we looked and said, well, what's the average family size? And that hadn't moved either. So that implies that younger people are moving into our communities. That's more attractive to employers and that's why they want to be here, which is what we're seeing become more prevalent today.
Howard Hughes and the South Street Seaport (Fourth Question)
(13:25-14:01) Josh Herrenkohl: Interesting, yeah. You certainly spent a lot of time with the data, you've got some interesting insights around just sort of what's happening. One of the Howard Hughes Corporation developments that you haven't talked about, which is near and dear to my heart, as a New Yorker, is The Seaport, and you guys have done a phenomenal job at The Seaport. You partner with Jean-Georges, and I'll say that the Tin Building is one of my favorite spots in in New York. What's next in The Seaport and how does that sort of the tie in with the overall strategy of the company?
(14:02-18:22) John Saxon: I mean I tend to say the Tin Building is my favorite thing too, but I just don't want to be biased. What's next for The Seaport? We have a lot going on, a lot of exciting things. The Seaport is this dynamic neighborhood, historic neighborhood and Howard Hughes, our goal since the onset has been to really revitalize this historic district, and we've had a lot of opportunities to add development, add vibrancy to the community. As you mentioned, Jean-Georges, we've had a partnership with him in place for quite a while. He's a renowned chef in New York City, has several locations in New York, throughout America and really across the world. We have a restaurant at The Seaport, The Fulton, that we own in partnership with him, and he also has this creative culinary management that helps manage all of our other restaurants around the area. Having the opportunity, last year, to invest $45 million for a 25% stake in his company makes complete sense to us. At first glance you might say well, you're a real estate company, why are you getting into the restaurant business? But for us it makes complete sense because restaurants bring a sense of community and ties things in together and while our partnership with him and his restaurants are predominantly in New York, we have the opportunity to introduce those concepts into our communities like The Woodlands, like Summerlin, and to bring these new experiences and something like the partnership with Jean-Georges, that was already underway, was the Tin Building. It's sort of revitalizing the old Fulton Fish Market and last year we finally had our grand opening. It's created a lot of vibrancy and added a lot of foot traffic to The Seaport and it's really unique, probably one of the more unique assets in all of New York City. It's 53,000 square feet, 21 different restaurant experiences, all curated by Jean-Georges. We've seen locals and tourists; everybody really come and have this unique experience. When we talk about more broadly, at Howard Hughes, this live, work, play environment, something like the Tin Building ties into the rest of what we have at The Seaport. If you walk across the street from the Tin Building, you have Pier 17, and Pier 17 has that restaurant, The Fulton, that I spoke about, and several others. Then in the middle we have office space. It's leased to tenants like Nike's design studio, ESPN. If you watch Get Up in the morning with Stephen A. Smith, that's where they're broadcasting from. Then you go to the top and we have this rooftop. Right now, we have our summer concert series that's going on. We have a variety of artists, and again you can do all this right next to each other. It's really unique. I'm going to go experience that myself next week. My wife and I were going. We're spending a few days in New York and on Saturday we're going to spend the afternoon at the Tin Building, grab a bite to eat. That evening we're going to go to Pier 17 to the rooftop and there's a concert that we're going to go see, and I have reservations for us to go eat at The Fulton downstairs after the concert. I think that's the exciting thing about Howard Hughes is a lot of us get to live and do what we say and we’re creating every day, it's really unique. But I'd say, what's next for the Seaport? I think of a lot of attention is really on the Tin Building right now. It's a big project. We've hired 500 people now at this point to run and operate and work within the Tin Building. We're now operating seven days a week, which is great and it's creating a lot of traction. We want to make sure we continue to fire on all cylinders, especially as we're heading into the summer months. I mean this place we have high expectations and hopefully it's going to create a big attraction for everybody to come see and check it out.
Building Communities (Fifth Question)
(18:44-19:11) Josh Herrenkohl: That's awesome. I live downtown and I've been there for over 20 years. I remember the days when you’d walk over to The Seaport and the whole place just smelled of the seafood market. You think about the transformation that you guys have taken that area through over the course of the last decade and it's been really phenomenal. I’ve eaten at The Fulton, that's great. There's the steakhouse, there's the Chinese restaurant that's in The Seaport, they’re all phenomenal restaurants and kudos to you and the Howard Hughes Corporation in terms of the partnership with Jean-Georges which is I think it's been really phenomenal. What else, just in the pipeline, any other notable projects that you guys have coming up, things that you're able to talk about a bit?
(19:12-23:07) John Saxon: We always keep a very robust pipeline, and we have really strong development teams across all of our regions, and we always like to keep a dense pipeline of a variety of different projects on the commercial side so that when demand is there, we're ready to go. We've got the predevelopment underway; we've got the numbers refined, and it pencils out to the yields and returns that we expect. It's really just a waiting game and we're always launching new projects. Right now, we have well over 1 million feet under construction. Even in this environment we're still finding attractive opportunities. I would say more broadly in each of our communities, the master planning communities, each of them really sits in a different phase of their maturity cycle. These communities take decades up to 50 plus years to build out. A good example of probably one of these commercial hubs that we're looking at really creating, that we're on the cusp of is in Bridgeland. The Bridgeland is on the west side of Houston. It's 11,500 acres. Today there's 15,000 residents and at full build out we'll have close to 70,000 people living there. Like I said earlier, the residents drive commercial demand. So, we've carved out right smack dab in the center of this community, 900 acres of what we're calling Bridgeland Central. Bridgeland Central is going to be this mixed-use, walkable, commercial hub where we just launched our first single-family build to rent project there, we have multifamily, we just signed a lease with an anchor grocer that'll be surrounded by retail, and soon to come after that will be some office space. That's just at the beginning and so we have a lot of runway there to really ramp up commercial and it accelerates as more people move in. Columbia, which I haven't talked much about, Columbia was really the first master planned community started back in the 60s by this gentleman Jim Rouse, and it's located between Baltimore and Washington, D.C., it's located right between there, and a lot of the residential's built out. We're redeveloping the Lakefront district and the Merriweather district which is incorporated in what's called Downtown Columbia. There we just broke ground on a medical office building with preleasing underway. We're working on bringing to market a library for the community, on top of it is senior housing, so really unique assets. Something that we really have our hands full on, it’s really exciting, is this new master planned community that we purchased a couple years ago. It's 37,000 acres in West Phoenix. The community is called Teravalis and its entitled already for 55 million square feet of commercial space, 100,000 homes, that implies 300,000 potential residents and when you put that on a sense of scale, 300,000 residents equates to the City of Saint Louis. Today it's population 0, so we've got a 50-year runway there. We have a lot of opportunities. We broke ground on that this past year. We're excited to close on our first thousand lots and get people moving in and really taking all the best practices from all of our other communities and incorporating that into what we think will be one of the top master planned communities in the country.
Building a Strategic Framework (Sixth Question)
(23:07-23:38) Josh Herrenkohl: Interesting. I used to live in Saint Louis. It's amazing that the population is going to be equivalent, right? You've got a really interesting job. I think you're kind of at the crux of all that's happening within the organization. You're working with your board, you're working with your CEO, and really in the entire organization. Can you talk a little bit about your role and what does it entail on a day-to-day basis?
(23:38-27:43) John Saxon: Yeah, day-to-day, is very, very different. No day is the same, which is exciting. The role chief of staff is relatively new in the corporate setting. Typically, when I talk to people, they're like, chief of staff, is it a political role, is it legal, is it HR? And my answer is, well it's none of the above, but it's also not a one sentence answer. For me, it's more of a strategic focused role and I think of myself and where I sit today is kind of the Swiss army knife, working across all company verticals. We have 8 regions, 8 regional presidents, and everything ultimately rolls up to corporate. We have all of our regions do a little bit of a different thing, but at the end of the day, we have one goal in mind from a strategic lens. Part of my job is to make sure that we're homing in on that and we're pushing forward all of our strategic initiatives. I report to our CEO, David O'Reilly, and I also work with the entire executive team, working on a variety of strategic and finance related initiatives, it's a broad scope. I thought it'd be helpful just to provide you know a few examples. It could be working with our Board of Directors and maybe it's picking a time to do a one-to-two-day strategy session. I'll go and aggregate all of our data and put a ton of a variety of different presentations together that looks at where have we been over the 12 years that we've been a publicly traded company, what have we done right, what are ways that we can improve. It's kind of where we've been, where do we want to go and then we are a publicly traded company, so, looking at valuation and seeing what's the net asset value of our company relative to where we're trading at, where's our stock trading. That allows us to put more attention on capital allocation, where are we investing those dollars, are we picking the right projects to move forward with from a commercial development perspective? Last year we decided to buy back a lot of our stock, we thought we were heavily discounted so, just trying to maneuver around that and looking at various ways to deploy capital is something that I help out with as well. Then there’s a more interesting set of things that I work on or work with our nontraditional real estate team. We'd already talked about Jeans-Georges and the team there, more recently I've been getting involved with them and putting together a reporting framework, how should we look at things financially and see how are we performing, what are the KPI's of the business, what's the broader restaurant industry doing, and are we ahead, are we behind or what do we need to do to make sure we're firing on all cylinders? To the same extent, we also own a Minor League Baseball team in Las Vegas, the Las Vegas Aviators. We own the ballpark as well, which is in our Summerlin community. The Aviators are a triple-A team affiliated with the Oakland A’s; well, I guess they're looking to come to Vegas as well. I just spent a week in Vegas last week I was over in our Summerlin community working with the team and then again just instilling a framework to say how do we want to look at the business and how can we make sure that we're extracting the most value. Are there things that we can do and leverage, we can pull to make sure that we can do even more? So, each day is very different. But I mean, I love the job. I love working for this company. I think because it's challenging, it's unique and it truly is meaningful work.
(27:43-27:49) Josh Herrenkohl: Yeah, interesting. I think some might say that you've got the most interesting job in the real estate, right?
(27:49-27:52) John Saxon: Yeah, I might use that quote.
Giving Back to Communities with Project Destined (Seventh Question)
(27:52-28:42) Josh Herrenkohl: I was going to ask you about the Aviators. That was one of the surprises for me as I was learning more about the company because you guys really have invested in communities where you're developing these communities, not just the company, but a lot of the things that you get involved in. One of the other things that I’ve really been interested in is just the fact that the Howard Hughes Corporation has really given back right in the communities where you operate. You’ve been involved, as many of your colleagues have been within the company, in Project Destined. I know it's an organization that means a lot to you and your colleagues. Can you talk a little bit about Project Destined and how the Howard Hughes Corporation is involved with the organization?
(28:42-32:11) John Saxon: Project Destined, it's a program where college students can volunteer to go into this program and what they do is they allow the opportunity for underrepresented students to get their foot in the door into the real estate industry. There are opportunities through internship programs, mentorships, and really allowing them to get the experience and to talk to the right people so that when they do ultimately graduate from college, they're going to have a really nice resume and they can go in and find a great job. At Howard Hughes, we partnered with Project Destined I guess about two years ago now and we were the company that brought Project Destined into the Houston market. It's really been a great experience. We've hired, we brought in summer interns, there's a spring session as well, there are mentorship opportunities and there's even times where they can talk to our C-Suite and other executives in the industry ask them for advice. It's really been great. I myself, I've been able to get involved a lot more really over the last year and it's really been great and I think what I like about it is I tend to think that I resonate with a lot of these students, because the students that are in the program, they want to get a great job and they don't want to get just the standard job out of college, they want to work for a really reputable company and get hands on experience. They may not have gone to an Ivy League school and it’s tougher to get your foot in the door. I was in the same spot when I was in college. I'm born and raised in South Louisiana, I went to a College in Louisiana, and it was a smaller school, it was a good school, but it was a smaller school, and my goal was a little bit more daunting to go work in investment banking in New York City. When I started out trying to get internships and then trying to get a full time role, it was really overwhelming because I'm competing against the people who, I'm out of their league, and with the right mentorships, the right guidance and the ability to put my head down and get the work that I needed to get done, ultimately, I landed that job with Goldman Sachs and was able to be an analyst for a couple years. That instilled the foundation of what I felt like has been able to get me here today. Working with these students, giving them some advice, and saying here's what's worked for me, I think having any sort of influence is great. Even this last spring session I've had a few students that would ping me on LinkedIn or e-mail me hey can we set up some time to chat and I can pick your brain? Having any sort of influence on what we think will be the future leaders of this industry really has been very rewarding. We have our summer interns that we just got lined up for the summer session, they're going to be coming in a couple weeks. Looking forward to helping out again and helping out in any way I can.
(32:11-32:26) Josh Herrenkohl: That's really interesting and phenomenal. You guys are really making a difference which is really obvious. John, you have a lot of really great insights and perspectives. Thank you so much for spending time with me today and I really enjoyed the conversation.
(32:26-32:32) John Saxon: Absolutely, Josh. Thanks for inviting me and I really enjoyed it. Hope we can do it again soon.