Using Veritas to Construct the "Per…

29-04-2017 Hits:84585 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:79054 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:78906 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:83387 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:79953 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:82263 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:53240 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:81266 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:81274 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:81078 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:86928 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:84941 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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The GGP equity questions post generated some buzz amongst my blog readers. I will post some of the buzz and urge all to comment with any insight or expertise you may have on the topic. These observations and comments are not mine, and I have posted them anonomously to protect the innocent:-)


 

 ggp_ownership_structure.gif

I read your post on the redemption and share purchase with great interest. I reviewed the 13D filing and there seems to be an exhibit missing. The section summarizing the 500M loan facility, references the complete loan agreement as an exhibit.  It is no where to be found. Where is it?

 The prohibition of personal loans under section 402 of Sarbanes-Oxley amended section 13 of the 1934 SEC act, broadly prohibits public companies from making or arranging many types of personal loans, directly or indirectly, to their directors and executive officers.

 As you aptly note, there are a boatload of questions. Not the least of which is the question concerning the terms of the Citi loan. I think what you're alluding to as the real purpose of these transactions follows: GGP issues shares 22.8 m shares at $36 dollars a share (821M).  MBCP III takes 10% of the issue for $88M. MBCP III purchases division "B" interest from the Matthew Bucksbaum Trust and General Growth Corporation, paying for the "interest with GGP LP units the to Bucksbaum Trust.

 Citi releases John and Matthew's personal shares and MBCP III pledges the "division B" nterest as additional collateral. Is this right? It seems to me this transaction comes very close to the line. Clearly, the issuer induced Citi to make this loan. Furthermore, their clear intention was to make a show of the Bucksbaums purchase of 10% of the offering. http://www.ggp.com/Company/Pressreleases.aspx?prid=410

This is very same conduct by Bernie Ebbers at Worldcom that spawned this in this first place.


 From a different reader:
 

Main Takeaways

·         GGP's management is being aggressive at best and duplicitous at worst, borrowing money in their family trust to get someone else to buy stock.         

·         There may be extra layers of liability which we are unable to see on GGP's financials.    

·         The Chairman Emeritus of GGP has signaled it is possible his trust will blow up by redeeming part of his interest in MB Capital for underlying shares.           

·         Citigroup is also being aggressive at best and fraudulent at worst by loaning GGP's management team money at LIBOR+50bps just so that the management can buy stock in GGP.          

·         *Why is GGP not releasing who the big lender is???* Something is going on here.

What is Happening Here

·         John Bucksbaum knows that GGP has a leverage problem.  He would like to de-lever, but he needs entities to step up to the plate willing to buy large amounts of stock.          

·         JB finds someone who is averse to buying outright, but is willing to buy $734M of stock if JB buys a substantial amount of stock at the same price.        

·         JB goes to Citigroup and borrows $88M to "buy" stock.       

o   Citigroup is willing to loan the money b/c it has MB Capital's 67M shares ($2.6B in market value) as collateral - the stock needs to be above 9 for Citigroup to get fully paid off.

o   Citi loans money at an egregiously cheap rate (LIBOR+50bps) b/c Citi doesn't want GGP to go bust.  Citi gets big fees on its commercial banking relationship w/ GGP, plus transactional fees.

o   Citi must get repaid in November 2009 though, establishing a time limit on when things need to stabilize by.

o   JB is willing to borrow money b/c he knows he is getting an effective arbitrage - his "purchase" required no capital and is relatively small, but will create a much larger buyer of the stock.

·         With JB's purchase compete, the buyer is comfortable enough to move forward with his big purchase of stock [if he is comfortable with this arrangement]  

·         Matthew Bucksbaum, a little nervous about this whole structure, sells 1.5M shares worth of his stake in MB Capital so that he can have some portion of shares which is fairly secure.

Back in 2004 when GGP bought the Grand Shoppes from LVS, it committed to purchasing the Palazzo upon completion.  The Palazzo was pre-sold at that time, and has opened fairly recently.  As recently as January 2008, LVS was saying that they expect $500M as an initial payment.   On February 11 2008, GGP said in its 8-K release of the fiscal year results that it expected the initial payment to be $349M.  Suddenly today, it is announced that the initial payment will actually be $290M.  A "source" provided some information to 2 local newspapers, saying:


"We would have loved to see the mall open all at one time," the source said. "It is about construction, not about lack of tenants."

This very much sounds like a representative of GGP.  In fact, I am sure that it was GGP.  Why would anyone else love to see the mall open all at one time?  If LVS were to say that, it would be a non-statement -- of course LVS would love to get paid in full up front.  It was probably Bernie Friebaum.  It makes them sound bad to reveal this information anonymously, and note the strong emphasis on "this is not the underlying demand - it's construction delays".  Defensive.

Now, the number of payments will increase from 4 to 7, and the eventual total payment should be the same.  Previously, additional payments were to be made in months 12, 24 and 30.  Now, they will be made in months 4, 8, 12, 18, 24 and 30.

My belief is GGP is running low on cash in the short run, and is doing what it can to defer payments where possible.  This retooled agreement allows GGP to defer payment a bit longer, but once again does not allow them off the hook.  

Historical Ownership of General Trust Company    
             
  Massive spike in ownership in 2004, but has no explanation as to why.  I looked through every filing which says "general trust" in that time period.
             
             
  Year Ownership Partnership shares  
  2007 67.64   45.33    
  2006 59.55   45.33    
  2005 59.37   45.33    
  2004 59.58   45.33    
  2003 - A 53.97   45.33 [filed 4/5/2004] [200.9M shares outstanding as of 12/31/2003 - share count does not account for this increase.]
  2003 17.41   15.11 [filed 11/20/2003] [186.5M shares outstanding as of 12/31/2002]
  2002 16.30   15.11    
  2001 18.40   18.06    
  2000 15.04   14.71    
  1999 14.76   14.58    
  1998 9.91   9.39    
  1997 7.88   7.36    
 

Main Takeaways

·         GGP's management is being aggressive at best and XXXXXXXXXX at worst, borrowing money in their family trust to get someone else to buy stock.         

·         There may be extra layers of liability which we are unable to see on GGP's financials.    

·         The Chairman Emeritus of GGP has signaled it is possible his trust will blow up by redeeming part of his interest in MB Capital for underlying shares.           

·         Citigroup is also being aggressive at best and XXXXXXXXX at worst by loaning GGP's management team money at LIBOR+50bps just so that the management can buy stock in GGP.          

·         *Why is GGP not releasing who the big lender is???* Something is going on here.

 What is Happening Here

·         John Bucksbaum knows that GGP has a leverage problem.  He would like to de-lever, but he needs entities to step up to the plate willing to buy large amounts of stock.          

·         JB finds someone who is averse to buying outright, but is willing to buy $734M of stock if JB buys a substantial amount of stock at the same price.        

·         JB goes to Citigroup and borrows $88M to "buy" stock.       

o   Citigroup is willing to loan the money b/c it has MB Capital's 67M shares ($2.6B in market value) as collateral - the stock needs to be above 9 for Citigroup to get fully paid off.

o   Citi loans money at an egregiously cheap rate (LIBOR+50bps) b/c Citi doesn't want GGP to go bust.  Citi gets big fees on its commercial banking relationship w/ GGP, plus transactional fees.

o   Citi must get repaid in November 2009 though, establishing a time limit on when things need to stabilize by.

o   JB is willing to borrow money b/c he knows he is getting an effective arbitrage - his "purchase" required no capital and is relatively small, but will create a much larger buyer of the stock.

·         With JB's purchase compete, the buyer is comfortable enough to move forward with his big purchase of stock [if he is comfortable with this arrangement]  

·         Matthew Bucksbaum, a little nervous about this whole structure, sells 1.5M shares worth of his stake in MB Capital so that he can have some portion of shares which is fairly secure.