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 Bankruptcy
General 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 Recapitalization
Offer Supported By General Growth's Official Unsecured Creditor Committee
Acquisition 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 Advisors
Hovde 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
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)
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-pro...
Wednesday, 09 January 2008
Was
I right on my call on Commercial 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 ...
Tuesday, 12 February 2008
If
only more rich heiresses read my blog
(Reggie Middleton's Boom Bust Blog/MyBlog)
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 ...
Friday, 21 August 2009
Reggie
Middleton's 2010 CRE Outlook and 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 ...
Tuesday, 15 December 2009
It
was bound to happen. Reggie 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 ...
Saturday, 26 December 2009
The
next step in the GGP saga
(Reggie Middleton's Boom Bust Blog/MyBlog)
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 ...
Tuesday, 29 December 2009
Tweet
Author: Reggie Middleton
Reggie
Middleton
Reggie Middleton, LLC
Perpetual Interests, LLCTM
http://boombustblog.com/
Who am I?
Well, I fancy myself the personification of the free thinking maverick, the ultimate non-conformist as it applies to investment and analysis. I am definitively outside the box - not your typical or stereotypical Wall Street investor. I work out of my home, not a Manhattan office. I build my own technology and perform my own research - in lieu of buying it or following the crowd. I create and follow my own macro strategies and am by definition, a contrarian to the nth degree.
Since I use my research as a tool for my own investing to actually put food on my table, I can stand behind it as doing what it is supposed too - educate, illustrate and elucidate. I do not sell advice, I am not a reporter hence do not sell stories, and I do not sell research. I am an entrepreneur who exists just outside of mainstream corporate America and Wall Street. This allows me freedom to do things that many can not. For instance, I pride myself on developing some of the highest quality research available, regardless of price. No conflicts of interest, no corporate politics, no special favors. Just the hard truth as I have found it - and believe me, my team and I do find it! I welcome any and all to peruse my blog, use my custom hacked collaborative social tools, read the articles, download the files, and make a critical comparison of the opinion referencing the situation at hand and the time stamp on the blog post to the reality both at the time of the post and the present. Hopefully, you will be as impressed with the Boom Bust as I am and our constituency.
I pay for significant information and data, and am well aware of the value of quality research. I find most currently available research lacking, in both quality and quantity. The reason why I had to create my own research staff was due to my dissatisfaction with what was currently available - to both individuals and institutions.
So here I am, creating my own research for my own investment activity. What really sets my actions apart is that I offer much of what I produce to the public without charge - free to distribute and redistribute, as long as it is left unaltered and full attribution is given to the author and owner. Why would I do such a thing when others easily charge 5 and 6 digits annually for what some may consider a lesser product? It is akin to open source analysis! My ideas and implementations are actually improved and fine tuned when bounced off of the collective intellect of the many, in lieu of that of the few - no matter how smart those few may believe themselves to be.
Very recently, I have started charging for the forensics portion of my work, which has freed up the resources to develop the site to deliver even more research for free, particularly on the global macro and opinion front. This move has allowed me to serve an more diverse constituency, which now includes the institutional consumer (ie., investment turned consumer banks, hedge funds, pensions, etc,) as well as the newbie individual investor who is just getting started - basically the two polar opposites of the investing spectrum. I am proud to announce major banks as paying clients, and brand new investors who take my book recommendations and opinions on true wealth and success to heart.
So, this is how I use my background and knowledge in new media, distributed computing, risk management, insurance, financial engineering, real estate, corporate valuation and financial analysis to pursue, analyze and capitalize on global macroeconomic opportunities. I have included a more in depth bio at the bottom of the page for those who really, really need to know more about me.
Visit his blog Boom Bust Blog.
Copyright © 2007-2012 Reggie Middleton
Circle Us