A few weeks ago I commented on my gathering of Armageddon Puts and Truly Busted CRE REITS [11]. Basically, I was looking to capitalize on both the potential mispricing of options and the actual mispricing of certain REIT shares. As recent history unfolds, and as the sell side of Wall Street continuously spews optimistically biased hype, the share prices of the primary REIT that we have targeted has been on a tear. Unfortunately, it has tore in the wrong direction! As a result, I will break rank with tradition here and post proprietary subscription content here that is still quite current and fresh. To put this in other words, I will use proprietary, paid for BoomBustBlog research to show that the emperor hath no clothes!!!
Since the research behind this was a massive undertaking, I will release certain pertinent research on a bit by bit basis. I learned back in 2008 that no matter how insolvent and essentially bankrupt a company may be, it can both kick the can down the road and maintain unrealistically rosy pretenses for a very long time- much longer than a long dated option expiry or the time it takes to add up untowardly expenses in one's margin account used for shorting. That is, unless someone actually takes it upon themselves to do something about the farce - as I did in 2007. Reference the following excerpt from GGP and the type of investigative analysis you will not get from your brokerage house [12] for a story that is eerily similar to the one I am presenting today. In addition, keep in mind that at the time of my initial analysis, GGP was the 2nd largest and one of the fastest growing REITs in the country, was rated investment grade by every rating agency that followed it, and had a buy rating by every brokerage house that followed it:
This missive is more than probably any outside investor in GGP knows about GGP, plus some. The accuracy of the contents below is not guaranteed nor warranteed in any form or fashion. I try my best to be accurate and exact, but things do happen - thus all contents in this post is based upon information and belief. Thus, I invite all to roll your sleeves up, and dig in to do some research for yourselves. This is the type of research that I expect to come from my local brokerage houses. It doesn't happen, thus I must do it myself. Please be aware that I have a bearish position in GGP stock. Read this complete missive, and it will be easy to understand why.
Table of Contents
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- Short summary of the 3 elements of this report
- Background Information on the founding Bucksbaum Family
- Background Description of General Growth Properties’ Business
- Item 1- Clear evidence that GGP is heading into a refinancing-induced liquidity crunch
- Item 2- One-time items are holding up deteriorating core operational performance
- Item 3- Evidence that GGP is potentially misrepresenting itself
I started shorting GGP in the high $60s in 2007 and it filed for bankruptcy (after swearing that my analysis was garbage and had no financial issues it couldn't handle) in 2009 with a share price of roughly $3. The company below is in a very similar pickle, and I simply don't see any way for them to get out of it - that is, other than the hard way! Check after the video break below for the first of several installments of the empirical truth in CRE analysis. These "truths" will include the most rigorous analysis you have every seen of PEI (hundreds of pages) including a property by property independent valuation and cashflow analysis.
I'm available to discuss the finer aspects of the analysis in the subscriber retail investor's discussion forum [13] and individual property valuation discussions and higher end questions will be answered in the professional/institutional discussion forums. I will also be available to chat there as well.
The complete REIT analysis referred to in the chart can be found here for subscribers [14] (the property by property valuations are for Professional/Institutional subscribers only):
Fire Sale Scenario Analysis
(Commercial Real Estate) [15]- Foreclosure Scenario Analysis
(Commercial Real Estate) [16] - Sample Property Valuation
(Commercial Real Estate) [17] - Cashflows and Debt Preliminary Analysis [18]
Our valuation is based upon the independent analysis of the key properties of the company, which together accounted 78% of the total portfolio in value terms. The actual valuation models are available (on an individual basis) upon request by institutional and pro subscribers.
The next installment of the PEI saga (24 hours from now on BoomBustBlog) will go into intricate detail as to the reasons this REIT is really BUST!
Related reading...
- We had a massive CRE bubble which bust - See The Commercial Real Estate Crash Cometh, and I know who is leading the way [19].
- The CRE bubble bust, even as disguised and manipulated as it was, claimed some serious retail casualties. See GGP and the type of investigative analysis you will not get from your brokerage house [20].
- A public-private partnership of misdirection allowed the popping bubble to be disguised. See The Conundrum of Commercial Real Estate Stocks: In a CRE "Near Depression", Why Are REIT Shares Still So High and Which Ones to Short? [21]
- Even with the "kicking the can down the road mentality", fundamental and macro realities are bound to rear their heads. See The True Cause Of The 2008 Market Crash Looks Like Its About To Rear Its Ugly Head Again, With A Vengeance [22] and then see Reggie Middleton ON CNBC's Fast Money Discussing Hopium in Real Estate [23]
- ... and will do so both in the US and abroad, see The "American Realist" Says: Past as Prologue - Re-blown Bubble to Pop Before the Previous Bubble Finishes Popping!!!! [24]
- Those who truly believe that the more conservative EU nations will skate past this are sorely mistaken. See "Are The Ultra Conservative Dutch Immune To Pan-European Pandemic Contagion? Are You Safe During An Earthquake Because You Keep Your Shoes Tied Snugly? [25]" Then see The First Major Real Estate Collapse In Europe? I've Found The EU Equivalent Of GGP, The Largest Real Estate Failure In US History [26]
