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Simon Properties Offers to Buy GGP for $10B, or Just Over $9 Per Share
From PR Newswire: Simon
Property Group Makes $10 Billion Offer to Acquire General Growth
Properties
Offer
Provides 100% Cash Recovery Plus Accrued Interest To All Unsecured
Creditors; Would Accelerate General Growth's Emergence From BankruptcyGeneral Growth Shareholders Would Receive Value Exceeding $9.00
Per Share, Including $6.00 Per Share In Cash Plus Assets Valued At More
Than $3.00 Per Share, While Avoiding Likely Dilution From Stand-Alone
RecapitalizationOffer Supported By General Growth's Official
Unsecured Creditor CommitteeAcquisition of General Growth
Portfolio By Best In Class Operator Offers Significant Value-Creation
Opportunity For Simon Shareholders
For those that don't follow me
regularly, I released bearish research and shorted GGP at around $57 in
2007. It was a very profitable trade since GGP filed for bankruptcy a
year later. Ackman from Pershing Square bought GGP shares/calls/swaps
between 50 cents and 2 dollars per share, resulting in what looks like a
home run deal.
He was confronted by Hovde Advisors, a DC asset
management firm who was short the stock, over valuation and the closest
thing to a hedge fund soap opera episode ensued.
While the SPG
offer is nowhere near where Ackman was forecasting, it has been a
profitable deal nonetheless.
I have made the subscription version
of the full analysis available to anyone who registers now that this
story has pretty much played its course. The full
comparative analysis with updated valuation is now freely available
upon free registration here: 
Middleton vs Ackman vs Hovde
on GGP - subscription edition w. updated valuation 2009-12-26
20:43:17 1.51 Mb.You may click here to subscribe to premium
research or to register for free. Readers should be
cognizant of the marketing component of investors publicly stated
valuations. To illustrate this, Let me post three paragraphs from the
aforementioned analysis that pretty much says it all (keep in mind that
SPG just offered $9 or so per share). I'll leave it up to the readers
to determine who was the most accurate regarding GGP both on the short
side going down (I think I was the only one declaring a position
publicly) and on the long side going up (I did not have a position):
GGP valuation analysis
Hovde
Capital AdvisorsHovde applies Q3 2009 annualized NOI
(adjusted for lease termination fees, tenant allowances, maintenance
capital expenditure and other non cash items) to Ackman's May 2009 GGP
valuation analysis, and estimates the implied equity value of
$5.73 per share at a 7.5% cap rate and negative $5.03 per share at an
8.5% cap rate. After incorporating the conversion of the unsecured debt
into equity at price of $6 per share, the implied equity value is
$5.94 per share at a 7.5% cap rate and $3.62 per share at an 8.5% cap
rate
Ackman's response
Based on cash NOI
(not adjusted for lease termination fees, tenant allowances,
maintenance capital expenditure) for LTM ending Sep 2009, Ackman
values GGP at $23.7, $32.0 and $41.6 per share at cap rate of 7.21%,
6.71% and 6.21%, respectively
Reggie Middleton's Boombustblog's view
Based on our observations about assumed NOI and cap rate for
valuation, we have revised Ackman's valuation analysis.We
computed cash NOI (adjusted for lease termination fees, tenant
allowances, maintenance capital expenditure and other non cash items)
for LTM ending Sep 2009. However, to factor in the impending rental
decline to be realized in the short term largely owing to lease
roll-overs, we estimated 2010 NOI assuming y-o-y decline of 7.5% against
5.4% y-o-y decline in 3Q09. We applied estimated 2010 NOI and more
realistic cap rate range of 7.0% to 8.0% to the Ackman's valuation
analysis. GGP's valuation is $6.8 per share under the
base case and $13.6 per share and $0.8 per share under the optimistic
case and adverse case, respectively.
It appears as if SPG offered a reasonable acquisition premium (in equity) over
what we feel is reasonable for GGP. The cash offer was accurate to within eighty cents! It looks like someone over at Simon Properties reads the BoomBust! Ackman's (publicy disseminated)
valuations were apparently in the stratosphere (and our analysis clearly
demonstrated this point) while Hovde was a little pessimistic. Of
course, the deal is not closed yet, so this is all just speculation for
right now. I recommend all interested parties register and choose a
free (or premium paid) subscription and download the full 11 page
analysis referenced above.
Below is a quick chronology of
events:
General Growth Properties & the
Commercial Real Estate Crash, pt III - The Story Gets Worse (Archived/Reggie
Middleton's Boom Bust Blog/MyBlog)
Commercial Real Estate Crash, pt III - The Story Gets Worse (Archived/Reggie
Middleton's Boom Bust Blog/MyBlog)
This is part III
of a IV part series on GGP. Reference parts
one and two for context. The majority of work on GGP is
now done, and I will (as my time permits) start disseminating the
non-propri
of a IV part series on GGP. Reference parts
one and two for context. The majority of work on GGP is
now done, and I will (as my time permits) start disseminating the
non-propri
Wednesday, 09 January 2008
Was I right on my call on Commercial
Real Estate Crashing?
(Archived/Reggie Middleton's Boom
Bust Blog/MyBlog)
Real Estate Crashing?
(Archived/Reggie Middleton's Boom
Bust Blog/MyBlog)
...Cometh, and I know who is
leading the way! Generally Negative Growth in General Growth
Properties - GGP Part II General
Growth Properties & the Commercial Real Estate Crash, pt III - The
Story G...
leading the way! Generally Negative Growth in General Growth
Properties - GGP Part II General
Growth Properties & the Commercial Real Estate Crash, pt III - The
Story G...
Tuesday, 12 February 2008
The GGP story seems to go
on forever. Hat tip to CK for pointing this one out to me. For those
that do not know, I shorted GGP in
late 2007, after exhaustive research and it took a year to
on forever. Hat tip to CK for pointing this one out to me. For those
that do not know, I shorted GGP in
late 2007, after exhaustive research and it took a year to
Friday,
21 August 2009
21 August 2009
Reggie Middleton's 2010 CRE Outlook and
Response to the Ackman/Pershing Square Presentation
(Reggie
Middleton's Boom Bust Blog/MyBlog)
Response to the Ackman/Pershing Square Presentation
(Reggie
Middleton's Boom Bust Blog/MyBlog)
...il CRE malls
(Ackman's CRE presentation). Several of my subscribers have commented
on his success with GGP as well
as the upward climb of REITs in general. I decided to go out of my way
to create a co...
(Ackman's CRE presentation). Several of my subscribers have commented
on his success with GGP as well
as the upward climb of REITs in general. I decided to go out of my way
to create a co...
Tuesday, 15 December 2009
It was bound to happen. Reggie
Middleton vs Ackman vs Hovde on GGP!
(Reggie Middleton's
Boom Bust Blog/MyBlog)
Middleton vs Ackman vs Hovde on GGP!
(Reggie Middleton's
Boom Bust Blog/MyBlog)
I am here to
weigh in on the increasingly popular marketing battle over GGP's
(General Growth Properties) value in, and out of bankruptcy. The
players in question are large buyside institutions who ow
weigh in on the increasingly popular marketing battle over GGP's
(General Growth Properties) value in, and out of bankruptcy. The
players in question are large buyside institutions who ow
Saturday,
26 December 2009
26 December 2009
Hovde has issued a
reply to Ackman's second GGP presentation.
These hedge funds put out more analysis than the bank analysts that
follow GGP, SERIOUSLY! For those that need a
recap: My responses to
reply to Ackman's second GGP presentation.
These hedge funds put out more analysis than the bank analysts that
follow GGP, SERIOUSLY! For those that need a
recap: My responses to
Tuesday, 29 December 2009
Impressive article! It's worth a read. Thank you for sharing so much information! prepaid cell phones
....and REJECTED!
Post fail.
Why do all you idiots bash Reggie, he backs up everything with data and solid research. You guys should do the same and we could all make a ton of money using the collective thought power of ZH, GEEZ Friggin Heck!!
Admit when you are right and admit when you are wrong...if you can't no problem as you won't last much longer trading, advising anyway. Nice, thinly-veiled plug for your site also...it's starting to rank right up there with the "gold bug" articles that are "posted" on here by penny stock hucksters.
I am at a loss here. Where was I wrong? I said GGP was overvalued and due for a fall - check. I said Ackman hit a homerun with GGP - check. I said GGP was worth $6.80, $13 optmistically, referencing the Simon bid - Check, I said Hovde was pessimistic and Ackman's numbers were wildly optimistic while I was the closest to the actual bid - check.
I had a bad 3 quarter run and I admitted it in public - check. Despite this there is nothing but negative rhetoric. And yes, I have no problem plugging my site. That's what pays for all of the free analysis that I give out. That stuff is not generated without a cost.
Good call for sure. My comments were not aimed directly at you. Your article here got top/center billing earlier today so I gave it a read and voiced my opinions...ZH wouldn't post my last comment as it alluded to the bias they had towards the short side of GGP + some.
FIX YOUR SITE!!....I'd like to know "Who is Reggie" but that part doesn't work..fairly critical part of your site I would think. Thanks
....Bulltards always get the last word, and long is always better than short. I get it.
i guess when u underperform the market by 70 percent in 2009 you feel obligated to let everyone know how great you are comstantly
Why don't you feel as verbose for those that outperform the market by an even greater percentage for a much longer period of time? Why are you anon guys so negative and biased?
If I am not mistaken, the same post that you got the "underperformed" inference from also showed that I outperformed the market by about 400% over the last three years and outperformed by another significant margin over the last 10 years. I normally wouldn't bother pulling historical stats (except for expressing my own discontent for having a bad year, but I am allowed to bash myself), but it does irk me when strangers pick a small minority period to say "you didn't do well".
Nice call when you made it. But that was then and this is now.
More recent articles ZH have relentlessly called for the demise of the common. Whoever took that position is quickly being proven wrong. The jist of the articles was apparently wrong as well as Hovde's analysis along with all the other GGP sandbaggers.
Theory is great...but it's been usurped by reality now...Simon, and likely others, thinks it's worth a lot more.
It was a nice call a couple of months ago as well, wasn't it?
So Ackman values GGP at $41 at a 6.21 CAP and $23 at a 7.21 CAP.
How much at an 8.21? Or a 9.21?
I dont see this working out
the fed is screwing us over: http://starturl.com/sfyzq
Take the money and run. This is worth a few bucks tops
I'm not confident of the upside, which is why I never went long. It is probably worth more than zero, but there are safer bets to be had then gambling on an already bankrupt REIT. this was one of the few opportunities where it was safer to short a stock than go long on it.
What?
I believe Ackman was long from $0.40.
And Hovde was short from $5/shr.
No question -- a bad short.
You guys don't seem to be following the history of the company. GGP was trading at $60 and fell down to $.40. Which was the most profitable and safe trade, long or short?
reggie not sure how u did in math class but .40 to 11 is much more profitable than 60 to .40.
Reggie --
We all get that EVERYTHING was a good short back in late 2007, mid 2008.
I have only seen your posts the last 6 months... and you've been short biased (not good).
Also, isnt this post-reorg GGP equity? The last equity was a zero... or fraction of this equity? I didnt follow.
-BBH
We aren't talking about everything though, we are talking about GGP. GGP was a good short not due to beta (in a falling market) but due to the fact that they overpaid for assets at the top of the market using excessive leverage. That's why the sector fell about 50% and GGP fell nearly 100%.
I have been short biased because I am a fundamental investor and the fundamentals don't support going long. I definitely see short term trading signals that look to be profitable darting in and out of long positions, but that is not my cup of tea.
The same fundamentals that cause GGP to go bankrupt are the ones that tell me that although the portfolio has value, that value is not very clear considering the current environment. If anyone can extract value from GGP, it would be an organization such as SPG.
As for the last 6 months, one should not look at investments or performance with a rear looking 6 month horizon, particularly now when it appears practically everything is trumping fundamentals. If I am not mistaken, nearly every major market move has seen a return to fundamentals. If one were to praise the last 6 months, one would give more credit to momentum trading over fundamental investors. Look how well that did during every other market crash, recession and major bull market. To accurately judge someone, you have to at least go back several years, at the minimum. In the three years running, a short account still outperformed a long account by a decent margin.
Disagree with this note on a number of levels:
First... going back 6-9 months on GGP it is one of the best longs ever. Makes up for many a mistake in 2008.
Going back 12-15 months... many good longs are up 200-1000%. Did you have any? This makes up for many losses in Q4 2008. GGP is up >25x. A 5% position creates +125% return from the single position alone.
Finally, average Q-ly purchasing of S&P500 with dividends is pretty close to UP over the last 3 years. No? Remember that divs are 2-3% annual.
You give away your "short bias". Having a good 2007/08 because of a short bias is not "good fundamental research". Its just "right place, right time"... and then 2009 happens. Sounds like you missed it?
I'll make this the last comment on the topic. I was at the "right place, right time" because I rode the real estate boom up for 6 years and saw the fundamentals deteriorating. I then applied the same analysis to the equity markets going down. Yes, I didn't participate in the 9 month rally, and lost 39% short, but I outperformed the broad market by multiples of a 100% on a cumulative basis. I am not making excuses of 2009, it was a bad year for me -period. It was also more of a market timing year than a stock picker's year as well. I am not a market timer.
I currently have a short bias because I believe things are not well fundamentally. I had a strong bull bias for 5 years straight. The bias changes with the fundamentals and the macro environment.
BTW making up for many of the losses is not nearly as good as avoiding the losses in the first place, and is much worse than profiting from the losses and then losing some of the profit. You are showing your "long" bias. I actually don't have a bias outside of the bias of trying to make some money :-)
Again Reggie?
- The Candy brothers "rode the real estate boom"... they borrowed 100k quid from their parents in the late nineties to buy a small flat in London. Today they live in the former Safra estate in Monaco, est $300M value.
- Staying short in 2009 could've given all gains back, right? While I competely agree with "avoiding losses" you have to do it without "giving up the upside".
Most of the biggest losses, come from "missing out". See point 1 on the Candy brothers.
Ackman was right and made lots of money. Hovde was wrong.
And I am certain no one at Simon reads BoomBust (really) -- understanding you are a huge self promoter.
or short covering?
Uh, that makes no sense.
Why cover your shorts at 11.50... if you feel the offer will close at $9?
Actually, shorts are very comfortable in buy-outs. The price will not double. I really like shorting M&A deals.
Reggie, you're such a genius. Where would the world be without your brilliance?
Just checked... stock trade up to $11/shr on the news. Classic "first offer".
-BBH
Hovde was "a little pessimistic" eh? Wasnt he short since $3-4-5/shr? Wasnt he saying, loundly -- "this is a zero"?
This offer will get revised up, and close around $12/shr.
-BBH