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What Does Bill Ackman Know About The Future Of Commercial Real Estate?

Tyler Durden's picture




 

Bill Ackman helped rescue General Growth Properties (GGP) - the US 2nd largest shopping mall operator - from bankruptcy in 2009/10 as the company collapsed in the financial crisis. Ackman  "turned $60 million into $1.6 billion" in the process but, according to Bloomberg, has now exited his entire position, dumping his final 28 million share back to the company via a buyback.

The spin, of course, is that it's right to take profits and that GGP is now 'a much different company than it was then."

However, given Ackman's knowledge of JCP (and perhaps RSH), we can't help but wonder, given all the exuberance about Fed tapering must mean the recovery is here and sustainable - just why Ackman would unload it all at such a pivotal time in the US economy...?

 

Via Bloomberg,

Bill Ackman sold all of his shares in General Growth Properties Inc. (GGP), the second-largest U.S. shopping-mall owner, marking the end of one of the hedge-fund manager’s most profitable investments.

 

General Growth bought back about 28 million shares from Ackman’s Pershing Square Capital Management LP for $556 million, the Chicago-based real estate investment trust said yesterday in a statement. The hedge-fund firm, which in September sold 25 million shares for $500 million, no longer holds any common stock, the company said.

 

Ackman, 47, helped rescue General Growth from near-collapse by pushing it to file for bankruptcy in 2009, and was part of an investor group in its subsequent reorganization. The effort “turned $60 million into $1.6 billion,” the hedge-fund manager told Bloomberg News in 2011, and contributed to his flagship fund’s net return of 29 percent in 2010.

 

...

 

General Growth shares have climbed 3.2 percent in the past 12 months and are up about 60 percent since the company’s exit from bankruptcy.

 

The company used “available liquidity” to fund the purchase of Pershing Square’s shares, according to yesterday’s statement.

 

“It’s a good thing,” Alexander Goldfarb, an analyst with Sandler O’Neill & Partners LP in New York, said in an interview. “This settles up and neatly separates the turnaround from where the company is today.”

 

Yellen is confident of economic growth; Economists are confident of economic growth; so what does Ackman potentially know about 'anchor tenants' in malls that means commercial real estate exposure is not for him...

 

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Tue, 02/11/2014 - 15:56 | 4424819 LawsofPhysics
LawsofPhysics's picture

Nothing, he's talking his book (like all useless paper-pushing financial fucks do).  what did I win?

Tue, 02/11/2014 - 16:05 | 4424858 Divided States ...
Divided States of America's picture

Hes been waiting for a buyer at large, hes finally found one.

The Fed.

Keep buying everything in sight, Janet.

Tue, 02/11/2014 - 16:09 | 4424866 Say What Again
Say What Again's picture

Hasn't ZH been making fun of this guy for the last few years?  I thought we were supposed to do the opposite of whatever he does.

p.s. This market is acting stranger today than most days.

Tue, 02/11/2014 - 16:14 | 4424884 fonzannoon
fonzannoon's picture

yes according to the narrative on here with this Ackman, expect Carl Icahn to come out and announce he bought all commercial re on earth and 1/3 of the moon.

Tue, 02/11/2014 - 16:19 | 4424920 Doubleguns
Doubleguns's picture

Maybe he knows about the retail apocalypse that is coming. Saw this earlier by another post on SA.

 

http://newswatch.us/retail-apocalypse-major-chains-closing-hundreds-of-s...

Tue, 02/11/2014 - 16:34 | 4424975 BKbroiler
BKbroiler's picture

A CRE collapse makes a lot of sense but people have been calling that for 5 years and it hans't happened yet, at least in nyc.  Comm rents are up sharply, I just got hit with 10% on a renewal.

Tue, 02/11/2014 - 16:42 | 4424998 Say What Again
Say What Again's picture

Who needs shopping malls?  I have amazon (and their drones), priceline, netflix, I can watch everyone's vacations on Youtube, get Rx scripts, and watch other "entertainment" on the WWW.  I never need to leave my house.

Tue, 02/11/2014 - 19:53 | 4425830 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

Turned $60MM into $1,600MM?  That's a 27-bagger.

Trying to remember my last 27-bagger.   Hmmmmm.....

Tue, 02/11/2014 - 20:05 | 4425887 Freddie
Freddie's picture

Kardashian is a 27-ply bagger.

Tue, 02/11/2014 - 16:50 | 4425029 NotApplicable
NotApplicable's picture

That's because you're waaaay too close to the money, while still being too far away to obtain it from it's source.

Tue, 02/11/2014 - 17:08 | 4425096 Harbanger
Harbanger's picture

Most commercial leases now include property tax and water usage as additional rent, so if you're not paying for those additional costs in your current lease consider yourself lucky.

Tue, 02/11/2014 - 17:16 | 4425142 Freddie
Freddie's picture

Don't some commercial retail store rents include a cut of the store's sales? I am not kidding.

Malls are dead.  Dept stores are dying.  Hope and Change. 

 

Tue, 02/11/2014 - 17:20 | 4425160 Harbanger
Harbanger's picture

There are those situations but it's usually some form of partner.  It's one thing to pay a flat rent, it's another to have a person with an interest in your accounting and profits.

Tue, 02/11/2014 - 18:31 | 4425453 DeadFred
DeadFred's picture

I think Bill is just a big hearted fellow and wants to give others a chance to get in on the gravy train.

Tue, 02/11/2014 - 19:41 | 4425772 Omen IV
Omen IV's picture

Manhattan is an island in more than one way - what happens there from a retail standpoint has no application to the rest of the country.

unless you have a door man building internet purchases are much more complicated for delivery and you cant keep those packages in the hall. so participation rates are different - also Manhattan is a walkabout town unique in the usa for retail - most under 35 dont own a car who live there

The internet is no longer a cheaper source for purchasing motivation -  it is a much richer experience than retail from alternative solutions to the same problem whether hard goods or soft - that richness of experience is deadly for retail where inventory selection is thin especially in SKU's that have a shelf life for obsolence

game is set for massive change in property taxes / utility rates for suburban residential  - as the game winds down except for .......Manhattan

 

Tue, 02/11/2014 - 16:29 | 4424950 zaphod
zaphod's picture

The economy is going to have another SHTF moment, sometime before Obummer leaves. 

But this time it will happen when the FED is already printing tons paper money and the government is spending almost a trillion more than it takes in to "support" the economy.

What can the government do then. Print full retard and take on so much debt that no one wants it anymore are the only answers.

Tue, 02/11/2014 - 16:52 | 4425034 Jumbotron
Jumbotron's picture

The rat knows that the ship is sinking.

 

Tue, 02/11/2014 - 16:56 | 4425059 tempo
tempo's picture

Did Bill pay any taxes on his billions of profit?

Tue, 02/11/2014 - 18:05 | 4425348 Larry Dallas
Larry Dallas's picture

What to make of all this for real estate. Don’t expect inflation to be what you thought. It will remain low for awhile. Rates will bail us out for awhile by keeping the ten year below 3% for longer than we all had expected. Cap rates will remain where they are, but maybe they will rise in 2015. Very likely in my view. If the economy remains slow, and earnings of corporations remain lower than they might be, then rents are not likely to rise as you would have hoped. So maybe it is time to be a seller. Get out while rates are low and buyers can get cheap debt and mezz. Get out while cap rates are lower than they will be in a year or two. There is no way to predict what 2015 or 2016 will bring. Guessing is no better than dart throwing at this point.

Tue, 02/11/2014 - 18:29 | 4425445 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

LOL earnings LOL. As measured by EPS, where corps borrow free money to buy back shares. $1 trillion in the last 12 months. LOLOL

Wed, 02/12/2014 - 01:53 | 4427031 0z
0z's picture

What is useless about directing capital?

Tue, 02/11/2014 - 15:57 | 4424829 NOTaREALmerican
NOTaREALmerican's picture

Shopping malls that the top 20% shop at will be doing ok.   

The shopping malls infested with the bottom 70% trash-class won't be doing so well.

Tue, 02/11/2014 - 16:22 | 4424922 Pool Shark
Pool Shark's picture

 

 

You're close.

Malls for the top 2% will do well.

3rd world-style stores for the 50 million 'mericans on food stamps (which they MUST spend every month or become inelligible for further aid) will also do well.

Traditional middle-class retailers will get murdered...

 

Tue, 02/11/2014 - 16:01 | 4424847 ebworthen
ebworthen's picture

Well, I take walks in the local Mall and it's like the Mall in "Left for Dead 2"; nothing but zombies.

Tue, 02/11/2014 - 16:53 | 4425043 NotApplicable
NotApplicable's picture

I went walking around the local mall on the friday afternoon before Thanksgiving, and the place was empty.

Well, other than the handful of bored employees in every store. The only store with any life was Target.

Tue, 02/11/2014 - 17:19 | 4425155 Freddie
Freddie's picture

Zombie stores or Zombie 'Mericans or both?

Tue, 02/11/2014 - 16:01 | 4424850 Stoploss
Stoploss's picture

Now your cookin' Billy.

 

 

Carl? 

Tue, 02/11/2014 - 16:01 | 4424852 1835jackson
1835jackson's picture

CRE and all real estate = fooked.

Tue, 02/11/2014 - 16:26 | 4424940 WillyGroper
WillyGroper's picture

I hope Blum goes with it.

Tue, 02/11/2014 - 17:24 | 4425173 Freddie
Freddie's picture

I wish Silverstein would get nuked too.

Tue, 02/11/2014 - 18:00 | 4425314 andrewp111
andrewp111's picture

CRE will probably get slammered in the next recession. Of course we already know that here.

Tue, 02/11/2014 - 16:05 | 4424865 financialrealist
financialrealist's picture

The greater fool theory is alive and well. Retail is dead and he and everyone else, except GGP, knows it. He’s a genius for buying, holding and dumping.  The markets and all prevailing market valuations are broken and flawed.

  Asset valuations base assumption is the expectation of future  growth, and there is none.

Tue, 02/11/2014 - 16:07 | 4424867 fonzannoon
fonzannoon's picture

maybe he just wanted to take profits.

Tue, 02/11/2014 - 16:10 | 4424874 financialrealist
financialrealist's picture

they don’t take profits, they devour and leave the carcass 

Tue, 02/11/2014 - 16:47 | 4425011 rqb1
rqb1's picture

maybe.  say what you want about ackman, but on ggp, he was straight forward with the public and if you followed him you made alot of money.  fnma could be another ggp.

Tue, 02/11/2014 - 18:30 | 4425451 Gr8taters
Gr8taters's picture

As a GGP and GGWPQ investor, I made a boatload following Ackman. When the SPG rumor of a GGP buyout was coming sending the stock to $23, I sold into it, just as he did. Sold off its dog spinoff Rouse but still holding Ackman's baby, HHC.

I agree, he was on the up and up with investors during the GGP bk, affirmed through perusing bk proceedings via court documents.

 

 

 

Tue, 02/11/2014 - 16:09 | 4424873 larry david
larry david's picture

Needs the cash ahead of next week's HLF earnings report

Tue, 02/11/2014 - 16:11 | 4424885 Colonel Klink
Colonel Klink's picture

Sounds like he invested 60 million and bilked 1.6 billion in valuation via the bankrutcy process.  Par for a hedge fund IMO.

Tue, 02/11/2014 - 16:17 | 4424904 Divided States ...
Divided States of America's picture

Basically...well u know SOMEONE was on the hook for the other side of that 1.54 billion....and I know who it is.

Tue, 02/11/2014 - 16:13 | 4424892 fijisailor
fijisailor's picture

Maybe he reads ZH and doesn't believe the recovery lies

Tue, 02/11/2014 - 18:46 | 4425527 giggler321
giggler321's picture

I heard he was selling up to buy BTC but as he was sure it would leap, just unsure of direction.

Tue, 02/11/2014 - 16:18 | 4424910 Kirk2NCC1701
Kirk2NCC1701's picture

Seems like he's using the Buy Low, Sell High strategy.  As oppose to the Buy & Hold strategy.

Insiders in the CRE sector tell me that most of the rich guys have finished playing musical chairs with buying & selling and doing Refis.  At this point (of max Equity buildup) it's time to sell or hang on for a very long and very slow growth period.  For some this is fine (Preservation OF Capital), for others (Return On Investment) it is not.  Clearly Ackman is in the latter group.

[yawn]

Tue, 02/11/2014 - 17:06 | 4425098 Kirk2NCC1701
Kirk2NCC1701's picture

p.s.  What I want to know is:  What Jewish schools do I need to send my Goy kids to, so that they can make giga-fortunes and take over larger corporations in zero time flat?  Cause the Public, Private and even the Bible-thumping/Sunday Schools don't seem to work for the 98% of the population.  /sarc + truth

Clearly how you think and how you reason IS a competitive differentiators that Jews seem to have.  Beyond the "extreme team work" (i.e. "sticking & working together"), which 95% of Goy also lack. 

Team Work best the Lone Hero.  I swear that US Goys are drunk with the lone-hero myth of the Wild West, and seem to forget that (in reality) 10 decent shooters will kill the best gun slinger 10:10... In spite of the entertaining BS you see in the Western and Action movies. 

Come to think of it and if you want to get paranoid... maybe this "Western myth" is all part of the mindset that keeps the Goy from working together with the same dedication and organization as do the Jews?  One person can and does make a difference.  But... ONLY if his/her actions are amplified by the concerted actions of thousands of others.  This includes the likes of Moses, Jesus or the Buddha.  History and Personal Development teaches us that "If there's a persistent problem, the mirror is the best place to start".  Retooling Christianity seems to be in order.

BTW, one of my kids tells me that all her (3) friends at school are Jewish, because "they don't have the Loser or Sheep mentality of my Christian classmates."  Her words (more or less), not mine.  Clearly 'Christians' have a lot of house-cleaning to do, when it comes to "Turning the other cheek, blessed are the poor" and other BULLSHIT from the Sermon on the Mount.  In her case, she has opted for a modified Golden Rule:  "Treat others with courtesy and basic respect.  All else they have to EARN, including her Trust and Respect.  No 'persistent-freebies' of systematic charity.  Rather, RECIPROCITY is the rule, not Charity."  IOW, "This for that, quid pro quo, value for value" when it comes to dealing with people outside the family/Family.  Can't say I disagree with that.  Wish my other kids weren't so much a product of Modern Consumerism.

 

Tue, 02/11/2014 - 18:21 | 4425427 Tim_
Tim_'s picture

Encrypted E-Mail Company Hushmail Spills to Feds

"A September court document (.pdf) from a federal prosecution of alleged steroid dealers reveals the Canadian company turned over 12 CDs worth of e-mails from three Hushmail accounts, following a court order obtained through a mutual assistance treaty between the U.S. and Canada."

"So in 2006, Hushmail began offering a service more akin to traditional web mail. Users connect to the service via a SSL (https://) connection and Hushmail runs the Encryption Engine on their side. Users then tell the server-side engine what the right passphrase is and all the messages in the account can then be read as they would in any other web-based email account."

"The rub of that option is that Hushmail has — even if only for a brief moment — a copy of your passphrase. In the case of the alleged steroid dealer, the feds seemed to compel Hushmail to exploit this hole, store the suspects’ secret passphrase or decryption key, decrypt their messages and hand them over."

"But can the feds force Hushmail to modify the Java applet sent to a particular user, which could then capture and sends the user’s passphrase to Hushmail, then to the government?"

"Smith concurs and hints that Hushmail’s Java architecture doesn’t technically prohibit the company from being able to turn over unscrambled emails to cops with court orders."

"[Hushmail] is useful for avoiding general Carnivore-type government surveillance, and protecting your data from hackers, but definitely not suitable for protecting your data if you are engaging in illegal activity that could result in a Canadian court order."

Tue, 02/11/2014 - 16:20 | 4424912 free_as_in_beer
free_as_in_beer's picture

He knows "3.2 percent in the past 12 months" is not a high enough return for his investors.

Tue, 02/11/2014 - 16:31 | 4424960 Catullus
Catullus's picture

We'll never do business with GGP again. They eventually paid us, but as a supplier, you never want your customer to go bankrupt. What waste of so many internal resources. Then the internal controls set up in the wake of it, ugh.

I'd rather have growing customers than the largest customer.

Tue, 02/11/2014 - 16:31 | 4424961 Catullus
Catullus's picture

We'll never do business with GGP again. They eventually paid us, but as a supplier, you never want your customer to go bankrupt. What waste of so many internal resources. Then the internal controls set up in the wake of it, ugh.

I'd rather have growing customers than the largest customer.

Tue, 02/11/2014 - 16:32 | 4424973 TheFreeLance
TheFreeLance's picture

Have a strip center down the street from me in a good suburban zip (30062) that will soon have two vacant anchors and a vacant out parcel. A Party City and a Radio Shack are having on by their fingernails along with a couple mom-and-pop restaurants. Bottomline, the entire center could go tits up by the middle of year, depending. Even if your niche retail still works OK, the tipping point comes when drive-by traffic just tanks and it makes sense for the chains to close.

Tue, 02/11/2014 - 19:12 | 4425668 Freddie
Freddie's picture

My guess is that strip center starts going belly up in the summer.  People voted for this - twice.   They vote for it everytime they turn on their TV.   F em.

Tue, 02/11/2014 - 16:33 | 4424978 SillySalesmanQu...
SillySalesmanQuestion's picture

Bill obviously has been reading Tyler and Zero Hedge...

Tue, 02/11/2014 - 16:34 | 4424980 Jameson18
Jameson18's picture

PUMP AND DUMP BITCHES

 

//
Tue, 02/11/2014 - 16:42 | 4425006 vote_libertaria...
vote_libertarian_party's picture

Maybe he needs to raise margin call cash since he is probably being battered with losses from other positions.

Tue, 02/11/2014 - 16:52 | 4425030 colonial
colonial's picture

a few points...maybe he is concerned that the traditional "shopping mall" model is problematic.  He's not alone in that many developers now see outdoors "town centers" as the new favorite concept.  

then there's the issue about losses he's taking in other positions.  Have I not read on ZH that ackman may have a few losing positions to square?  

i wonder how many fully valued positions ack retains... 

Tue, 02/11/2014 - 17:20 | 4425149 I am a Man I am...
I am a Man I am Forty's picture

Ackman is a douche, but this investment/trade was pretty fucking spectacular.

Tue, 02/11/2014 - 17:29 | 4425199 Spungo
Spungo's picture

Maybe he's selling because he's not retarded? Look at GGP on Google Finance and tell me that company isn't total shit.
-assets have been shrinking since 2010 
-debt to asset ratio has been increasing since 2009
-net income was negative from 2009 to 2012; 2013 was the only profitable year since the crash

Tue, 02/11/2014 - 17:55 | 4425300 andrewp111
andrewp111's picture

If I made a ton of money in something that has no long term future, I would sell too. Ackman is not a fool.

Tue, 02/11/2014 - 20:15 | 4425333 Gr8taters
Gr8taters's picture

Having bought GGP during the 2008-2009 meltdown and following the bankruptcy proceedings closely, one would know that Brookfield stepped in and got a cherry deal. The deal was worked out that over time Brookfield would own more than 50% giving them full control. Ackman started a rumor last year that SPG was going to buy out GGP and sold a large portion near $23. There are no gains left in the stock - Brookfield has control as majority shareholder.

There you have it folks, the REAL REASON Ackman sold. If anything I've learned over the years is that one can never trust the media.

 

Tue, 02/11/2014 - 18:04 | 4425336 ElixirMixer
ElixirMixer's picture

The owner of the mall in my hometown just released a plan to raze a portion of the building with financial help from the city. Simon, which previously owned it, didn't put any money into the mall (although it would fit nicely into their new vehicle for dead and dying malls appropriately named Spinco). I had the pleasure of working in a department store in that mall a few years back. Depressing all around.

Tue, 02/11/2014 - 18:17 | 4425399 robertocarlos
robertocarlos's picture

The insiders are selling their skyscrapper in my city. It's only a few 100 of millions but you don't sell something like that that turns a profit in the middle of an economic upturn.

Wed, 02/12/2014 - 13:14 | 4428089 Amil Muzz
Amil Muzz's picture

Ackman knows the same thing Blackstone does... Prices are back to 2007 levels, time to exit the scene.

Exhibit A: Bixmor

Exhibit B: La Quinta, Hilton,  Extended Stay.

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