Update on General Growth Properties – GGWPQ.PK
It has been a few weeks since the last post on the story of General Growth Companies and Pershing Square's Bill Ackman. By all accounts, everything is going as originally speculated.
After a brief run to $3 per share, the stock has pulled back down to $1.65. This is not due to any fundamental change, but just the fact the buzz wore off the stock, temporarily. If anything, the recent court rulings and general improvement in the economy and banking sector bode well for General Growth. The objective of Pershing Square and most likely the bankruptcy court, is to buy enough time for the credit markets to thaw sufficiently that financing can be extended for the properties in question.
This is the conclusion of the attached presentation. The judge appears to be leaning towards a series of "cram downs" whereby the court will force the lenders to each property to extend terms of the mortgages and loans in such a way that both the lender and the borrower are made whole. This would be the ideal situation for General Growth and its shareholders as there might not be any dilution at all under this circumstance and no property liquidation.
I purchased more shares last week and will continue to add periodically as the story plays out and the prospects become clearer.
Here is a lengthy presentation on the status of GGP (now GGWPQ.PK as it trades OTC as a pink sheet) from Pershing Square in late May. Special attention should be paid to the financial models in the middle of the presentation. Ackman is using these same arguments in bankruptcy court in his role as largest individual shareholder and board director:
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good posting, nice job!
Around the current price GGWPQ.PK represents a truly incredible”special situation” investment (especially in today’s environment, providing savvy investors with potentially enormous returns with very little risk.
Interesting blog. I wonder what the effects of a return to mark to market for asset prices will have on it later this year?
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Amy, I am not sure that “Mark to Market” accounting rule changes will have anything to do with the future prospects of GGP. Indirectly, the change of “market-to-market” from the traditional “mark-to-model” is one of the primary inputs to the global credit crisis. The worse the economy got, the worse the marks on credit in a credit market that had no bids (there was no market). This caused any business with a lot of short term debt that matured during the crisis, most prominently including GGP, to be unable to roll over their debt as it matured, regardless of the credit quality. Not being able to pay off or refinance maturing debt put GGP into a technical default and so they sought and received bankruptcy protection.
And now that GGP is in bankruptcy, the court can order the creditors to extend the maturities of the debt. And this is what is happening. So long as the quality of the properties remains high and GGP pays interest and principal on its debt, the court is not going to force a liquidation which would do much damage to the entire commercial RE market.
I think the economy will continue to gradually improve and GGP will be able to negotiate with its creditors within bankruptcy protection and will come out in very good shape.
Thank’s, Great Share !
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The economy is certainly on the improve. All the signs are pointing to continued growth in 2010 , albeit with a few ups and downs. 2011 is certain to be much better
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Totally agree with you ETF, seems things are looking up, it is such a shame so many businesses have died but hopefully things will pick back up and people will grow the confidence to start up again eventually! Fingers crossed!
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