Tag: ggp

I am buying shares of General Growth Properties (GGP) today as I feel there is deep value in them.

Where is the value? General Growth is a U.S. based, publicly traded Real Estate Investment Trust. The Company currently has an ownership interest in or management responsibility for a portfolio of more than 200 regional shopping malls in 44 states, as well as ownership in master planned community developments and commercial office buildings. The Company portfolio totals approximately 200 million square feet of retail space and includes over 24,000 retail stores nationwide. The Company is listed on the New York Stock Exchange under the symbol “GGP”. For more information, visit the Company Web site at www.ggp.com.

GGP carries it’s real state holding at cost and according to its 2007 annual report, the total is $28 billion. If we take the 200 million sq. feet of retail space they have, the cost basis is $140 a sq. foot.

Now, let’s look at the MIT Transaction based cost index for the 2008 year. This matters because it takes into account what sold for what, not an estimated value.

Retail Current Cost

Using the $195 a sq. foot price from MIT, we get a real estate value for GGP of $39 billion. GGP has a current market cap of $115 million meaning it sells for .3% of its real estate value, that is point 3% not 3%. With $27 billion of debt outstanding and due in 4 years, if we subtract that from the current property value there is still $12 billion or $36 a share of value left in the properties (based on 331 million shares outstanding as of last 8K). Now, of course the actual amount will vary depending on what properties are sold where but we have a good indication by using national numbers because GGP does have holdings nationally.

To further boost a valuation, we can look at the age of the properties. Starting on F-61 of the above linked annual report we see that only $3 billion of the $28 billion total has been acquired since 2007. These properties one could argue were purchased at inflated prices and perhaps worth only equal too or slightly below carrying cost. The majority of the properties are 2002 and earlier giving a large boost to the “carry coast being far less than market value” theory.

Perhaps this is why Bill Ackman has taken a stake in 25% of the company.

The Loans:

On Feb. 12th GGP said:

On February 13, 2009, General Growth Properties, Inc. (the “Company”) and certain of its subsidiaries, including Oakwood Shopping Center Limited Partnership (collectively with the Company, the “Company Parties”), Citicorp North America, Inc., as a lender and as administrative agent for the other lenders party thereto, and certain additional lenders (collectively, the “Lenders”), entered into a First Amendment to Loan Agreement (the “Amendment”) which amended the Loan Agreement dated as of January 30, 2006 by and among the Company Parties and the Lenders for the mortgage loan secured by the Company’s Oakwood Shopping Center located in Gretna Louisiana (the “Loan”). Pursuant and subject to the terms of the Amendment, the maturity date of the Loan was extended to March 16, 2009. The Loan’s original maturity date of February 9, 2009 had previously been extended pursuant to agreements between the Company Parties and the Lenders.

The Company is currently in default under certain of its loans. As previously announced, the Company has entered into forbearance agreements with certain of its lenders pursuant to which such lenders have agreed to forbear from exercising certain of their default related rights and remedies under such loans. However, the forbearance agreements related to mortgage loans secured by the Company’s Fashion Show and Palazzo shopping centers located in Las Vegas, Nevada expired on February 12, 2009. The expiration of these forbearance agreements permitted the lenders under the Company’s 2006 Credit Facility and 2008 secured portfolio facility to terminate the previously announced forbearance agreements related to these loan facilities. However, the Company has not received notice of any such termination, as required by the terms of such forbearance agreements. In addition, the Company has also been unable to enter into or extend forbearance or similar agreements for its other mature secured mortgage loans, and there can be no assurance that it will be able to do so. The Company continues to work with its lenders with respect to loans under which it is in default or may be in default in the near future.

What does it all mean. Simply, even if GGP were forced into bankruptcy, the actual value of it exceeds the debt meaning there is still large value for shareholders. At $.43 cents a share, the upside is stunning and the downside is limited to your investment, $.43 cents.

What will the lenders do? Think about it. Do the lenders really want to start writing down commercial real estate loans for one of the largest property owners in the US by forcing it into bankruptcy? No. Why? In our “mark to market” world we now live in, this would mean that debt on other strapped REIT’s would then have to be “marked down” also causing more billion dollar losses for banks. Not good.

This is the reason for the various debt extensions for GGP.

Earnings come out today after being delayed for two weeks. One has to expect some news to accompany them. I am buying shares ahead of it

Disclosure (“none” means no position):Long GGP

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No more AIG (AIG), Lowes (LOW) or Mastercard (MA). Ackman did not take Wells Fargo (WFC) shares in the Wachobia (WB) buyout, he added REIT’s General Growth Properties (GGP) and Alexanders (ALX) 

So, what is the “back to the beginning” stuff? Remember a young college student Bill Ackman? He paid half his tuition as a student by snapping up shares in Alexander’s Inc. at $8.50, days before the retailer went bankrupt. As he suspected, the real estate proved so valuable the shares now trade at nearly $57 (in 1993 when it was reported). Alexanders now trades at $157,down from $425 in September.

For those wondering, the General Growth Properties investment is an identical bet by Ackman (read more about it here).

November 2008 Filing:

Feb. 2009 Filing

Disclosure (“none” means no position):

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Barron’s talks about Ackman’s purchases of General Growth (GGP) and Gates’s of Otter Tail (OTTR)

Disclosure (“none” means no position):Long GGP, none

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Ackman now has an interest in nearly 25% of General Growth Properties (GGP) shares

On 12/8 Ackman disclosed a 18% economic interest.

In today’s filing he has boosted that to 24%

“This Amendment No. 2 (this “Amendment No. 2”) amends and supplements the statement on Schedule 13D, as previously amended to date (the “Schedule 13D”) by (i) Pershing Square Capital Management, L.P., a Delaware limited partnership (“Pershing Square”), (ii) PS Management GP, LLC, a Delaware limited liability company (“PS Management”), (iii) Pershing Square GP, LLC, a Delaware limited liability company (“Pershing Square GP”), and (iv) William A. Ackman, a citizen of the United States of America (collectively, the “Reporting Persons”), relating to the common stock, par value $.01 per share (the “Common Shares”), of General Growth Properties, Inc., a Delaware corporation (the “Issuer”). Capitalized terms used herein but not defined herein shall have the meaning set forth in the Original 13D.

As of January 9, 2009, the Reporting Persons beneficially owned an aggregate of 22,901,194 Common Shares (the “Subject Shares”), representing approximately 7.4% of the outstanding Common Shares. The Reporting Persons also have additional economic exposure to approximately 52,000,000 Common Shares under certain cash-settled total return swaps (“Swaps”), bringing their total aggregate economic exposure to 74,901,194 Common Shares (approximately 24.1% of the outstanding Common Shares). Although this Schedule 13D filing reflects additional purchases of Common Shares and Swaps, the Reporting Persons total beneficial ownership percentage and aggregate economic exposure has decreased due to the dilutive effects arising from the conversion of 42,350,000 common partnership units held in the Issuer’s operating partnership into 42,350,000 Common Shares, as announced by the Issuer on January 5, 2009.”

Here is the trading data:

Disclosure (“none” means no position):None
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What is the plan here? We know General Growth (GGP) is in a tight spot. But, with Citi (C) taking a 5% stake, the debt is all but assured to be refinanced. Some thoughts at the end, does it have to do with Target?

Hedge fund manager William Ackman’s Pershing Square Capital Management LP disclosed that it owns a 7.5 percent stake in General Growth Properties. Pershing Square directly owns a total of 20 million shares in the REIT.

The company also said it owned 48.5 million shares through total return swaps, bringing its economic interest in the company to 68.6 million shares (over 18%).

SEC Filing

“The Subject Shares are beneficially owned by the Reporting Persons. Furthermore, the Reporting Persons entered into Swaps for the benefit of Pershing Square, L.P. (the “PSLP Swaps”), Pershing Square II, L.P. (the “PSII Swaps”) and Pershing Square International, Ltd (the “PSIL Swaps”, collectively with the PSLP Swaps and PSII Swaps, the “Pershing Square Swaps”) on the dates described on Exhibit 99.1. The Pershing Square Swaps constitute economic exposure to approximately 18.1% notional outstanding Common Shares in the aggregate, have reference prices ranging from $0.49 to $1.58 and expire on the dates described on Exhibit 99.1.

Under the terms of the Pershing Square Swaps (i) the applicable Pershing Square Fund will be obligated to pay to the counterparty any negative price performance of the notional number of Common Shares subject to the applicable Pershing Square Swap as of the expiration date of such Swap, plus interest at the rates set forth in the applicable contracts, and (ii) the counterparty will be obligated to pay to the applicable Pershing Square Fund any positive price performance of the notional number of Common Shares subject to the applicable Pershing Square Swap as of the expiration date of the Swaps. With regard to the Pershing Square Swaps, any dividends received by the counterparty on such notional Common Shares will be paid to the applicable Pershing Square Fund during the term of the Swap. All balances will be cash settled at the expiration date of the Swaps. The Pershing Square Funds’ third party counterparties for the Pershing Square Swaps include entities related to BNP Paribas, Citibank, Morgan Stanley and UBS. “

Here is the trading data:

Now, if we really want to go further with this we could look at Target (TGT). The buying here coincided with Target’s lukewarm response to Ackman’s Target REIT plan. It picked up heavily after his second proposal to the company.

After Target dismissed it, Ackman added over 25 million share directly and another 30 million through the swaps. I rarely find too much pure coincidence in timing like this.

What then? Perhaps he could offer up GGP to Target (TIP REIT) to expand it presence? Perhaps off to have GGP run TIP REIT to take the burden of running it off Target execs hands? After all, it was one of the objections Target put forward, albeit a very weak one.

Perhaps placing them into a JV to share the running and vastly expand the footprint of them…it would also give Target access to cheap land to expand.

Who knows…….something is up though…

Disclosure (“none” means no position):None
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Now, is it just a coincidence with the Target (TGT) situation? Ackman now has a 12.5% total interest in General Growth Properties (GGP).

From the SEC Filing:
Item 5. Interest in Securities of the Issuer
(a), (b) Based upon the Issuer’s quarterly report on 9/30/08 10-Q, 268,314,510 Common Shares were outstanding as of November 10, 2008. Based on the foregoing, the Subject Shares represented approximately 7.5% of the Common Shares issued and outstanding as of such date.
Pershing Square, as the investment adviser to the Pershing Square Funds, may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Subject Shares. As the general partner of Pershing Square, PS Management may be deemed to have the shared power to vote or to direct the vote of (and the shared power to dispose of or direct the disposition of) the Subject Shares. As the general partner of Pershing Square, L.P. and Pershing Square II, L.P., Pershing Square GP may be deemed to have the shared power to vote or to direct the vote of (and the shared power to dispose or direct the disposition of) the Common Shares held for the benefit of Pershing Square, L.P. and Pershing Square II, L.P. By virtue of William A. Ackman’s position as managing member of each of PS Management and Pershing Square GP, William A. Ackman may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the Subject Shares and, therefore, William A. Ackman may be deemed to be the beneficial owner of the Subject Shares for purposes of this Schedule 13D.
(c) Exhibit 99.2, which is incorporated by reference into this Item 5(c) as if restated in full herein, describes all of the transactions in Common Shares and Swaps that were effected during the past sixty days by the Reporting Persons for the benefit of the Pershing Square Funds.
(d) No other person is known to the Reporting Persons to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Common Shares covered by this Schedule 13D, except that dividends from, and proceeds from the sale of, the Common Shares held by the accounts managed by Pershing Square may be delivered to such accounts.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
The Subject Shares are beneficially owned by the Reporting Persons. Furthermore, the Reporting Persons entered into Swaps for the benefit of Pershing Square, L.P. (the “PSLP Swaps”), Pershing Square II, L.P. (the “PSII Swaps”) and Pershing Square International, Ltd (the “PSIL Swaps”, collectively with the PSLP Swaps and PSII Swaps, the “Pershing Square Swaps”) on the dates described on Exhibit 99.2. The Pershing Square Swaps constitute economic exposure to approximately 12.5% notional outstanding Common Shares in the aggregate, have reference prices ranging from $0.49 to $0.70 and expire on the dates described on Exhibit 99.1.
Under the terms of the Pershing Square Swaps (i) the applicable Pershing Square Fund will be obligated to pay to the counterparty any negative price performance of the notional number of Common Shares subject to the applicable Pershing Square Swap as of the expiration date of such Swap, plus interest at the rates set forth in the applicable contracts, and (ii) the counterparty will be obligated to pay to the applicable Pershing Square Fund any positive price performance of the notional number of Common Shares subject to the applicable Pershing Square Swap as of the expiration date of the Swaps. With regard to certain of the Pershing Square Swaps, any dividends received by the counterparty on such notional Common Shares will be paid to the applicable Pershing Square Fund during the term of the Swap. With regard to the balance of the Pershing Square Swaps, any dividends received by the counterparty on such notional Common Shares during the term of the Swaps will be paid to the applicable Pershing Square Fund at maturity. All balances will be cash settled at the expiration date of the Swaps. The Pershing Square Funds’ third party counterparties for the Pershing Square Swaps include entities related to Citibank, Morgan Stanley and UBS.
The Pershing Square 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 such contracts or Common Shares or other securities or financial instruments that may be held from time to time by any counterparty to the contracts.
In addition to the agreements referenced above, the Reporting Persons from time to time, may enter into and dispose of additional cash-settled total return swaps or other similar derivative transactions with one or more counterparties that are based upon the value of Common Shares, which transactions could be significant in amount. The profit, loss and/or return on such additional contracts may be wholly or partially dependent on the market value of the Common Shares, relative value of the Common Shares in comparison to one or more other financial instruments, indexes or securities, a basket or group of securities in which the Common Shares may be included or a combination of any of the foregoing.

Full Filing

Now, General Growth Properties recently expressed doubts it could keep operating due to looming near-term debt.

The Chicago-based retail property company has $1.13 billion in debt coming due, including $900 million in secured mortgage debt due November 28 on two of its Las Vegas shopping centers and $58 million of corporate debt on December 1, the company said in a Securities and Exchange Commission filing.

It also faces another $3.07 billion due next year, according to the SEC filing.

“In the event that we are unable to extend or refinance our debt or obtain additional capital on a timely basis and on acceptable terms, we will be required to take further steps to acquire the funds necessary to satisfy our short term cash needs, including seeking legal protection from our creditors,” the real estate investment trust said in the filing.

“Our potential inability to address our 2008 or 2009 debt maturities in a satisfactory fashion raises substantial doubts as to our ability to continue as a going concern.”

Will Ackman provide some financing?

This is going to be good…..

If nothing else..the words Ford (F) or GM (GM) will not enter the vocabulary..

Disclosure (“none” means no position):None
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