Using Veritas to Construct the "Per…

29-04-2017 Hits:88553 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:82245 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:82138 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:86635 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:83068 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:85191 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:56292 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:84519 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:84229 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:84089 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:90575 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:88149 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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 In its press release on January 8, 2008, GGP released the following statement with respect to the financing of its debt liabilities due in 2008 and 2009 -

"The debt maturing in 2008 includes $1.816 billion of mortgage and other secured debt, $722 million of remaining bridge acquisition debt, and $83 million of notes. The Company estimates that property-level income, a measure used by lenders for financing purposes, will be approximately $365 million in the twelve months following the maturity date of the debt maturing in 2008. Using an average capitalization rate of 7.5% to determine loan capacity, the properties would have a value for financing purposes of $4.867 billion. Accordingly, the maturing 2008 mortgage debt of $1.816 billion represents approximately 37.3% of the financing value of the properties.

 The debt maturing in 2009 includes $2.744 billion of mortgage and other secured debt and $600 million of notes. The Company estimates that property-level income will be approximately $415 million in the twelve months following the maturity date of the debt maturing in 2009. Using an average capitalization rate of 7.5% to determine loan capacity, the properties would have a value for financing purposes of $5.533 billion. Accordingly, the maturing 2009 mortgage debt of $2.744 billion represents approximately 49.6% of the financing value of the properties"

We analyzed GGP's financial position and its expected funds from operations (FFO) to check the company's ability to meet its debt obligations -

With GGP's optimistic assumptions of a cap rate of 7.5% and NOI of $365 mn and $415 mn for 2008 and 2009, respectively, (based on its historical growth rate of 5%) valuation for GGP's specific properties (on which debt is due for repayment in 2008 and 2009) comes to around $4.9 bn and $5.5 bn for 2008 and 2009, respectively. Based on LTV of 50% (which looks quite reasonable amid the current turbulence in the global credit markets) GGP should be able to raise $2.4 bn and $2.8 bn in 2008 and 2009, respectively. However, GGP's debt due for repayment in 2008 and 2009, respectively, is approximately $2.6 bn and $3.3 bn, translating into respective short-falls of about $188 mn and $577 mn (as shown below), even under the over-optimistic case presented by the company. Surprisingly, the company's financing requirement (as included in its press release) totally ignores the funding requirement for capital improvement and redevelopment programs required for sustained and long-term growth.

$ million GGP's Assumptions Reggie's Assumptions      
  2008 2009 2008 2009      
Property specific NOI $365 $415 $244 $369      
Cap Rate 7.50% 7.50% 7.50% 7.50% Overly optimistic Cap Rate, but I'l give them this to prove a point
Value of Properties $4,867 $5,533 $4,589 $4,919
LTV 50% 50% 50% 50%      
Maximum re-fi available $2,433 $2,767 $2,294 $2,460      
Debt due at maturity $2,621 $3,344 $2,621 $3,344      
EMI on prior year financing     $861 $1,246      
Capital Improvements     $542 $195 GGP's press release failed to allocate any funds for growth, development, and expansion  
New Developments     $1,040 $466  
Total Financing Required $2,621 $3,344 $5,063 $5,251      
Shortfall from Re-financing $188 $577 $2,769 $2,792 Even using the extremely optimistic numbers of the press release, GGP falls short of the mark!!!
         

 
 However, we believe that GGP's assumption of NOI growth of 5% for 2008 and 2009 is unrealistic in view of the softness in the U.S commercial real estate market, which has already started to experience the ripple impacts of sub-prime crisis. The (now) highly probable US recession, along with deteriorating macro-economic conditions, would make operating environment extremely difficult for commercial real estate companies like GGP.

Based on our research and detailed analysis of macro economic factors like retail space demand, household and population growth, consumer spending, etc we expect rentals to decline 1.0% and 0.9% in 2008 and 2009. If we assume a 1% and 0.9% decline in rentals for 2008 and 2009, and capitalization rate of 7.5% (same as that assumed by the company), GGP's valuation for these properties comes to approximately $4.5 bn and $4.9 bn in 2008 and 2009, respectively. This would enable GGP to avail itself of a re-financing facility of $2.3 bn and $2.5 bn (based on 50% LTV) against $2.6 bn and $3.3 bn due for maturity, translating into a shortfall of $0.3 bn and $0.8 bn for 2008 and 2009. This excludes the financing that GGP would require for capital improvement and new developments programs. GGP's total funding requirement, including re-financing, capital improvement and development plans would be approximately $5.0 bn and $5.2 bn for 2008 and 2009, respectively, which would require additional financing of $2.8 bn in 2008 and 2009.