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The General Growth Properties Valuation Fight Escalates - Hovde v. Ackman Round 2
The last time we provided Hovde Capital's contrarian perspective to the prevailing opinion on GGP's valuation, there were some stock price fireworks. Is it time for round 2? Over 70 pages recapitulating the short thesis are attached.
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Tyler,
Wile I am EXTREMELY grateful for the resource you provide here, I recently read a quote that makes me fear for the future of all who dwell in your midst: "tragically and ironically, those who become experts in explaining the faults of the system and in predicting the course of its demise are very much part of the system. When the system disappears, so does their area of expertise, and their audience. People stop intellectualizing their predicament and start trying to escape it - through drink or drugs or creativity or cunning - but they have no time for pondering the larger context."
I think the idea is to figure out how to profit from its "demise." Post-demise, it will be easier and nicer to "ponder the larger context" from a position of strength than from a position of weakness.
Or just maybe shit won't 'demise' that much... You know, like always...
What's wrong Tyler is your ego so small that you won't create a title like;
"It was bound to happen. Tyler Durden v. Hovde v. Ackman"??
Get with the program my brotha.
Need a copy of this asap, please contact.
There's a copy right in front of your face!!
"For purposes of calculating the company's leverage, Pershing Square assumes unsecured debt converts to equity."
"For purposes of caculating the valuation of the equity, Pershing Square does not assume the conversion of unsecured debt to equity."
Everyone else on Wall Street gets to have their cake and eat it too. Why not Pershing Square?
I think Hovde is looking like the winner here.
+1
Hovde's first presentation left a lot to be desired, but this one is a big improvement. There were a few things I disagreed with, but nothing central to the thesis. Needless to say, both of Hackman's presentations were crap.
Please send me a copy of the pdf as well.
I'm turning myself into a mini vulture fund and I'm demanding a 10% Cap Rate -- using current rents ... not excel sheet wishful thinking.
Where it says "Attachment", click on "General Growth Properties - 2.pdf 4.94 MB".
It's a relatively easy-to-use website, though I'm sure Marla's lurking about in here somewhere to send everyone a copy of their requested documents.
You guys are too funny.
Hovde's analysis is deeply flawed and based on poor analytical work. They are desperately trying to get themselves out of a disastrous short position before year-end and it's not working (despite two separate published short reports, one of which was published 2 days before year-end...funny timing no?)
The way Ackman calculates NOI is the way all of Wall Street calculates it (including ISI btw - they use Ackman's version of NOI for determining valuation, and Hovde knows this).
Based on where the other mall REITs trade (SPG, TCO, MAC), GGP is worth $30/share. Simple math. Hovde and others can talk all day long about where they think REITs should trade. Problem is that's not where they trade - and where they do actually trade implies GGP is worth $30/share.
They also don't understand what bankruptcy has done for this company - it's been a huge positive - it enabled them to extend all of their first lien debt without pricing any of it, which gives GGP the lowest cost and longest duration first lien capital structure of any REIT.
They should just cover their short and move on.
+1000. I second everything.
At first its like I'm talking to myself, right down to the "ISI" reference and the high-quality references to bankruptcy restructuring and comps.
But then, after I buried my gold in the backyard and opened a can of spam I started to clean my shotgun and thought -- wait! -- GGP must be a short. Its all bullshit except this gun and this fork with the spam on it. What do any of these companies do anyway? (Apple? Goldman? Google? I mean, WHAT DO THEY REALLY DO?) They dont make spam. And they dont mine gold. And they dont make shotguns! Do you think Hovde is eating spam tonight?
Nah, but next year maybe at the rate this GGP position is going against him.
Wasn't Reggie on this long before the public hashing?
Yeah, I was.
I don't want to take sides on this, but from a fundamental/macro perspective Ackman's analysis is wanting. This is my take that I released over the weekend comparing both Hovde's and Ackmans analyses: Middleton vs Ackman vs Hovde on GGP - public edition. I also released a macro piece to put Ackman's first presentation into perspectiv for my clients: CRE 2010 Overview.
I don't have a position in the company (and actually like Ackman from what I know of him), but released the comparative analysis because a couple of my institutional subscribers wanted me to weigh in on it being that I was percieved to be more objective than the long and short guys, and I had a track record on GGP.
I also noticed that Hovde is short Macerich too. See my take on this company: A Granular Look Into a $6 Billion REIT: Is This the Next GGP?
Either the man reads my work or he must be a genius:-)
After reading through about half of Hovde's latest report, I see he has pretty much covered all of the issues that I had with Ackman's analysis, plus a bit more.
Listen, Ackman performed an admiral trade, but I think many are confusing the beta from the biggest bear market rally of our time with Alpha from picking a truly undervalued play. The man made good money, kudos and I'm happy for him (would have been happier if it was me though:-), but the numbers and assumptions that he is putting out to justify the stock at this price (not to mention signficantly higher) just don't pan out.
I'm totally objective on this and have no problem saying Ackman was right, if he was right, that is...
So Reggie... what longs have you liked in the space the last 6 months? what longs did you like 2 years ago in the REIT space?
Its easy to be a pessimist and always short valuations (then you naturally got things right in 2008 on REITS) the hard part is to pick longs that out-perform and shorts that under-perform. This is the def of ALPHA.
Since GGP is up some 50x coming out of bankruptcy that is almost all alpha... versus say 100% "beta" in a basket of similar names since march.
If Pershing liked their long position they would just quietly acquire more equity and thank Hovde for driving the price down.
@11 , @11 (ok, $11-12 @ 10:54-11:00 am)
http://finance.yahoo.com/echarts?s=GGWPQ.PK#symbol=GGWPQ.PK;range=1d
how do you know that they haven't been buying more. I don't believe they have to report holdings on this....
He can't buy any more - he's on the board and leading the negotiations (i.e. he's an insider). Also he owns 1/4 of the company already, that's a pretty full position
Hey Tyler, any prediction on MAC?
About 2 weeks ago Reggie Middleton called for the demise of MAC. The stock was trading at 27 and change on the day that ZH published Reggie's article. Today, about 2 weeks after publishing Reggie's `morceau de sucré` MAC traded north of $38!!... Ouch my brotha!
Reggie called for the demise of GGP and a full 1.5 years passed before it broke down. Given Reggie's research and most real market STOPS, you would have to exit all of his trades with huge losses. Unless you had ZERO discipline as a trader.
Why the fanfair? What am I missing?
Sounds like MAC will run up to $65 or so, then turn slightly to the downside. When it does we'll hear RM crow "I told you so"....
RM, keep your day job at Burger King. Please.
What is it with you guys and your negativity? To begin with I didn't call for the "demise" of MAC. Second, if you are going to trade on the fundamentals in a volatile market, you have to be ready for a rough ride. There are ways to protect yourself against pops if you're short and dips if your long without getting popped out. If you were such a good trader, I'm sure you would know that. Third, if you look at the chart, you can see that although there were some drawdowns, the GGP trade was quite profitable, and profitable within months.
Now you're bitching about MAC after just 2 weeks of one being in a position??? Come on. Give me a break. If I am wrong on MAC, I would have no problem admitting it, but neither you nor I would know if I am right or wrong in two weeks time, now would we? The price went up - and the price will go down, and I'm sure it will probably go up again. Short term gyrations are not what I am after, and is not what I do. We'll see how accurate I am in a few quarters. In the meantime, stop being a child and stop pretending I'm a daytrader. Practically every homerun I ever hit took several months. Here's a list of about 60 that all took a few months to hit at a minumum: http://boombustblog.com/20090108749/BoomBustBlog-Research-Performance-for-2008.html
Is a little patience and research worth it?
Granted, the last 3 quarters of '09 were quite disappointing for me, but nobody's perfect. At least I don't anonymously attack people on blogs...
I respect Reggie because he uses his real name and works hard at his research.
to the above who criticized him on his work, specifically MAC, are you aware of his time frame? seems to me he looks over a longer horizon vs a day trading or short term swing trading approach. to each his own and it seems to me Reggie has a good track record and solid fundamental analysis in terms of his work on banks and reits.
He is downright correct in my view and others that our larger banks are near insolvent. He made the call on many of these banks well in advance of what happened as did some others. All of them were mocked and laughed at by the prevailing majority.
At least Reggie puts out volumes of words and numbers to express his opinion versus a couple of 2 sentence paragraphs.
Reggie's work is valuable to this reader and he calls 'em like he sees 'em with his name and reputation on the line.
So deadhead, you actually believe Reggie made a 500% return on his own money in 2008 AND stayed solvent through 2009 with a similar investment approach (options, leverage) using his own research?
Wow how'd ya know? I just started trading 2 weeks ago so I'm not "good" yet. I'm learnin'. Another good call from Reggie.
"Profitable within months." Nice to see you don't use discipline. We call traders like you Goldman-bate. You define the squeeze and maximum pain.
A big strong handed trader like you don't need no stinkin' stops, huh Reggie. What's your lot size? 1 or 2?
Maybe if you do the math $27 --> $38 in 2 weeks (in terms of percentage) you'd open your eyes. (I'm jus startin so i tink that's 'bout a 30% increase in 2 weeks, errr but wat i know?)
I was asking Tyler his opinion on MAC, my friend.
You do realize this reply makes you look like a douchebag, right?
You do realize that Tyler is completely ignoring a very important question about MAC. I'm guessing he is overwhelmed by the conflict; should I respond honestly to the question and disappoint one of ZH's few paying advertisers, or should I reiterate Reginald's verbal diarrhea.
Name that tune.
"The market will not solve this. And the great risk for us is we do too little, not that we do too much".
Reggie...take a look at the recent unloading of MAC shares by the Coppola brothers; significant......
Hey Reggie, if you really made 500% on your portfolio in 2008 (a nice round number), why are you peddling your research via the internet instead of just managing your own money or running a hedge fund or living on a beach?
Of course, your alleged returns are unaudited and you don't even leave a trail of recommendations that tie to them. Funny that a guy who says he doesn't give buy or sell recommendations would then talk about returns for his subscribers as if they could be calculated honestly.
If you were a Registered Investment Advisor trying to peddle that alleged track record and we actually had a functioning SEC they'd put you in jail.
When will you publish your 2009 "investment results" based on your recommendations and the same "methodology"? Given that the 2008 results you claim could have only been achieved via leverage and options and given that you've been bearish through all of 2009 while companies and sectors you've been most bearish on have gone up by 2X, 5X, even 10X, with shorts and put options consistent with what you claim for 2008 you should be about wiped out by now.