Using Veritas to Construct the "Per…

29-04-2017 Hits:84703 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:79158 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:79001 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:83492 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:80050 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:82357 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:53331 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:81370 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:81361 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:81177 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:87036 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:85050 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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This is the General Growth Properties summary valuation under a mild US recession scenario. A much more in depth analysis and presentation is on its way next week. Please see the original summary analysis for the non-recessionary outlook and if you are not versed in commercial real estate, see my quick and dirty CRE valuation primer. Remember, it is my opinion that many in this space are underestimating the potential downside to be had here. This summary analysis is based on the following assumptions:

  1. We expect recession to impact GGP's NOI primarily in 2008 and 2009 post which we expect the US economy to drift back to recovery though gradually. Thus negative growth in rentals is estimated in 2008 and 2009 and near flat growth for 2010 and 2011. Thereafter, we expect conditions to start normalizing, and have hence built in long-term normalized growth in rentals. This is a conservative showing, and my gut (empirically calculated, but investors gut feeling) says that we are in for a much harder landing than presented here. I don't have the resources to run full macro scenarios, thus I stay on the conservative side unless extremely obvious that I should do otherwise. If you have been a regular reader of my blog from the days of typepad.com, you will probably realize that my conservative estimates are the equivalent of the consensus "doomsday" scenario. I believe that I am more realistic, but then again I would, wouldn't I? 
  2. We also expect interest rates in the recession scenario to be higher than in the base case as the company treads through highly difficult credit conditions in the next few years, particularly when that a large chunk of its debt is due for repayment/refinancing. I made it clear to the mod squad (my analytical team) that I wanted them to be conservative in their expectations. In my opinion, we are already several months into a recession, but we will not know for sure 'til the near future.
  3.  We have also lowered the occupancy rates in the recession version expecting lowering demand for shopping space in the wake of falling retail sales and consumer demand
    Giving effect to the above assumptions, we expect GGP’s consolidated valuation to be around $6.6 bn on CFAT basis converting into a share price of $27. This is a 25% downside to the current share price of $36. Please note (again) that we have taken a realistic/conservative approach while assuming the duration and extent of the recessionary conditions. However, if the recession were to prolong beyond 2009 or the economy were to take longer to normalize, the impact on GGP’s valuation could be worse (probably another 5-7% downside to the valuation could be expected in case the recession were to continue into 2010 or beyond).

Due to the extent of the research performed and the quantity and quality of data gathered and analyzed, the time lapse from analysis inception to completion has allowed for GGP’s share price to register a fall of 11% over the last week indicating a portion of the expected downside since we started building our analysis could already have been registered. This could also mean that given the high prospects of recession setting in over the next few months, GGP valuation could be expected to worsen going forward now that market has strongly reacted to the company's performance.

The team is hard at work consolidating the Base assumption files and I expect the valuation under that case could be nearly $6 per share or 17% down from the current share price of $36. I will probably post the Base case output together with a comparison of all the three scenarios tomorrow. Till I post it, I urge my blog readers to download and read a sample of the supporting calculations for the valuation model that is yet to come (caution: this stuff is probably only for hard core real estate junkies or someone with a real interest in GGP). It is also the methodology that will be used in future commercial real estate analysis and represents an awful lot of work. Keep in mind that this is the driver for 260 individual custom property valuation models, an aggregate portfolio valuation model, and a corporate model for the GGP entity itself. I may have found a few more companies that are deserving of my attention. See icon GGP advanced mini-sample (877.07 kB).

If I get the chance, I will continue my Brokers, Banks and Bullsh1+ series with numbers, my opinions and findings on Bear Stearns some time after the market closes.

Scenario analysis Assumptions
  Rental growth rates Interest rate Occupancy rate
  2007 2008 2009 2010 2011 2012
Worst Case (Recession )   6.3% 89.9%
 - California 1.1% -1.5% -1.3% -1.1% 0.2% 0.6%  
 - Florida 1.3% -1.8% -1.5% -1.3% 0.3% 0.7%  
  -Texas 1.5% -2.1% -1.8% -1.5% 0.3% 0.8%  
 Overall GGP    
                 


Valuation
PV (CFAT)  PV (NOI) Share Price (CFAT) Share Price (NOI) NOI ($ bn) Cash Flow before tax($ bn)
$ bn $ bn 2008 2009 2008 2009
$6.59 $7.28 $27.04 $29.85 $1,483 $1,528 ($2,325) ($1,685)


Summary of GGP Valuation (Base case assuming recession)
$
NOI Basis
Consolidated valuation as per Portfolio Valuation sheet  $28,886,725,819
less: Debt  $24,073,812,000
Estimated value using PV of NOI basis  $  4,812,913,819
Add: PV of other income  $  2,462,669,720
GGP's estimated market cap (NOI basis)  $  7,275,583,539
No of shares 243,775,000
Estimated share price ( PV NOI basis)  $                29.8
Current share price  $                36.0
Upward (Downward) - NOI basis               (17.07%)
Cash Flow After Tax basis
Estimated Value using Cash flow basis 4,129,853,902
Add: PV of other income 2,462,669,720
GGP's estimated market cap (CFAT basis) 6,592,523,622
No of shares 243,775,000
Estimated share price (PV CFAT basis)  $                27.0
Current share price  $                36.0
Upward (Downward) - CFAT basis               (24.86%)