Target Not Biting? Why Not Buy GGP?

After proposing that Target’s real estate gets folded into a REIT and getting rejected, Pershing Square Capital Management has now turned its sights to General Growth Properties.

The website-less fund, managed by William Ackman, has now apparently acquired a 20% interest in the mall owner. In a Bloomberg article, Merrill Lynch analysts say it “is the first sign that any investor has expressed a strong interest in the company or sees significant value beyond the mountain of debt.”

We’re certainly not investment experts by any means, but doesn’t it seem kind of funky? Kind of like reaching for straws? Or does it just make sense to buy up shares of a company trading under $1 that has real estate theoretically valued in the many billions?

We were recently in Boston, staying near GGP’s Faneuil Hall Market Place, and even though the weather was akin to Antarctica’s, plenty of people were milling about and filling the restaurants on weekday evenings. It’s probably not the most scientific example, but it made us think that this portfolio has to be worth something to someone.

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5 Responses to “Target Not Biting? Why Not Buy GGP?”


  1. 1 History November 26, 2008 at 11:30 am

    Buying GGP would be like buying the Randolph Hearst empire in 1940, there are assets there, but they’ll all wind up at auction at Christie’s.

    • 2 Robert F. Matthews October 4, 2009 at 12:40 pm

      The value of Hughes Propertries in Vegas is billions and billions that is why it doesnt matter when is sold!!Thank you Mr Ackman for the helpp GGP should go to hell the deal with the Hughesd heirs and Rouse does not subbordinate the deal deal with debt!!Not only was i born Vegas i also have built some of the infrastructure with Las Vegas Paving Corp!HrH would be so proud he is the reason it has grown !!Long live Howard Robard hughes !!

  2. 3 James December 1, 2008 at 9:46 am

    Buy the notes at a steep discount and conduct the auction yourself.

  3. 4 Jonathan December 2, 2008 at 9:02 am

    If GGP’s assets were worth anywhere close to what they are leveraged for, the REIT wouldn’t be in their current situation.

    Once the lenders are willing to admit that they made huge underwriting errors when lending on 6% cap rate acquisitions, they’ll be forced to take back the properties. This will probably occur in Q1 2009 when it becomes clear that no buyer will emerge who can buy the GGP Vegas properties at a price that satisfies the encumberances.

  4. 5 David L December 3, 2008 at 3:15 pm

    The fact that the stock had to sink all the way down to $ .40 per share before the wolves (Pershing Square Capital, Morgan Stanley) felt it was safe to jump in speaks volumes about Equity value above and beyond the mountain of debt. Yes GGP has some wonderful properties that clearly have Equity value, the problem is they can’t
    sell the Great properties at a high enough price (and fast enough) to bail out the other properties which are drowning in too much debt.

    Selectively buying up mortgage debt attached to the more attractive assets at some sort of discount is probably the way to go, and since that is usually not done in public, I am sure negotiations are underway. As long as the stock stays above $ 1.00 per share Pershing Square has a profit. That profit however is only on paper. If GGP can’t “buy more time” to resolve their lender issues then that paper profit could disappear fast.


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