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I have been receiving a decent amount of unsolicited interest in my work on GGP ( GGP and the type of investigative analysis you will not get from your brokerage house). This interest is ranging from law firms to banks to media. It is a text book case of how investigative analysis can uncover a significant mispricing of value, despite management's and the markets short term proclamations of said value. For those pundits and know-it-alls who feel that short sellers are bad for the US markets, I suggest you bring your argument to the small business men and women, pensioners, retail investors and taxpayers who were shafted by GGP as its share price collapsed from over $70 to near zero and into bankruptcy. I made it quite clear this was a probable, no actually an unavoidable scenario (firesale or foreclosure).

I went short short GGP at $60 in November of 2007 and released research shortly thereafter. I want to state again for those that follow me, this is a process that takes time to unfold and the markets are now as volatile and probably as manipulated as they have ever been. Since I cannot predict the markets or short term share price movements, you should anticipate (if not actually expect) prices to move against you (and sometime violently) in the short term. Look at the GGP chart above and you can see where I suffered several drawdowns that would have given cause to pop out of the position.

As I stated in my previous posting, "GGP has finally filed Bankruptcy, Proving My Analysis to be On Point Over the Course of 18 Months", this was not a one off event either. I also called  Bear Stearns (Is this the Breaking of the Bear? [Sunday, 27 January 2008]), Lehman Brothers CRE implosion connection (Is Lehman really a lemming in disguise? [Thursday, 21 February 2008]), Countrywide and Washington Mutual (Yeah, Countrywide is pretty bad, but it ain’t the only one at the subprime party… Comparing Countrywide with its peer), nearly all of the failed or failing regional banks of significant size (As I see it, these 32 banks and thrifts are in deep doo-doo!), MBIA (A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton) and Ambac (Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion Market Cap and Follow up to the Ambac Analysis), among others - well in advance.

 Why am I bringing all of this up again? Well its definitely not to boast or brag. After all we are all wrong sometimes, and even I doubt my findings on occasion. Recently many of my research subjects have skyrocketed in price giving short term bulls the fuzzy warm feeling in the mid section while giving those that are bearish diarrhea. I want to make clear, again, that short term movements do not condemn nor vindicate my research. It is just short term movement, often accurately considered noise. Positions must be taken carefully though, with hedges, stops or small sizes. Every home run that I hit above (nearly all of the companies above are either close to or in bankruptcy/insolvency or are no longer going concerns) has been far from a smooth ride down. As a matter of fact, Bill Ackman, who provided the orginal idea for the monolines, was short MBIA for 5 years before it finally collapsed from near $100 to about $7. Patience and steady hands must accompany strong research or market volatility will always shake you out before you have a chance to profit.

I have recently found what could be the most horrendous cover up(s) and accounting shenanigans that have come across my desk in some time. There are some big, brand name banks that are pushing numbers and false concepts around their earnings statements in a fashion that seems to make GGP 's management look like choir boys. Despite this, their share prices are doubling. Either I am wrong and will lose a lot of money shorting these guys, or I am right (like I was in the 39 examples above) and will make a killing. I will bring the issues to light for subscribers shortly if they bear out by the end of my analysis. Either way though, I think it is obvious how important it is for short sellers to have their say in the markets. A lot of pain could have been avoided by creditors and investors if they would have heeded my warnings back in 2007 and early 2008 regarding GGP - or any of the other 38 other companies mentioned above. 


Mall operator files for bankruptcy protection

Teetering retail real estate giant General Growth Properties finally collapsed under nearly $27.3 billion in debt, much of it heaped on during a Las Vegas buying spree.

The Chicago-based real estate investment trust, or REIT, Thursday filed for Chapter 11 bankruptcy protection in federal court in New York, leaving judges, lawyers and creditors to unravel holdings in about 200 complex properties in 44 states. The malls will continue to operate during bankruptcy proceedings, which experts said could drag on for years.

The federal bankruptcy filing in the Southern District of New York included pending cases for 360 separate entities, including at least 16 with connections to Las Vegas.

It listed nearly $29.6 billion dollars in assets nationally, although the bulk of the assets are retail real estate holdings which face significant downward pressure on their value thanks to the recession that’s finally caught up with General Growth management’s buy-now, pay-later strategy.

In Las Vegas, General Growth and its subsidiaries own three high-profile malls on the Strip, retail, residential and office real estate in Summerlin and two regional malls for locals, Meadows and Boulevard malls.

“It is a doozy,” Nancy Rappaport, a bankruptcy expert at the University of Nevada, Las Vegas, abou the filing.

The Strip properties include Fashion Show Mall, Grand Canal Shoppes and Shoppes at Palazzo. Its Summerlin holdings include The Hughes Corp., which owns the stalled-in-construction Summerlin Centre retail, office and residential development.

One local representative of the company referred questions to General Growth’s home office in Chicago. A spokesman there did not return calls for comment.

Tom Warden, spokesman for The Hughes Corp., did not return calls for comment.

The company was a joint venture partner with Boyd Gaming in the gaming company’s stalled Echelon resort. But Boyd bought out General Growth’s stake in October for $9.7 million.

Among the top 100 creditors listed in the filing, several have Las Vegas connections.

Mandalay Bay is the largest local creditor listed with General Growth owing the resort $1.1 million. It owes The Venetian, home to Grand Canal Shoppes, $531,444.

Southern Nevada Paving is listed as being owed $178,296 and LVI Environmental is listed as being owed $99,533, although an LVI official says General Growth paid its tab to the company.

“They paid us last Friday. We just made it right under the wire,” said LVI President Joe Catania.

General Growth’s extensive holdings and massive debt load mean the list of local creditors will likely grow as lawyers for the renown mega-bankruptcy firm Weil, Gotshal & Manges of New York sort through the paperwork and file cases for every entity that falls under the General Growth umbrella, Rappaport said.

“They are going to try and unwind some of that in bankruptcy,” she said. “It is really going to depend on each individual business and whether the business plan for each company makes sense.”

Companies that have a business-to-business trade relationship with General Growth or a subsidiary are likely to be unsecured creditors, meaning their bills aren’t secured by a piece of General Growth’s property the way a mortgage is secured by a house.

The largest unsecured creditors will organize an unsecured creditors committee, which will itemize all of General Growth’s unsecured debt.

Smaller creditors, however, won’t be overlooked in court, Rappaport says.

That’s because in bankruptcy the lawyers working on behalf of the unsecured creditors committee have a legal and fiduciary responsibility to act in the best interest of all unsecured creditors.

That said, there’s no way yet for creditors to know just how much debt they’ll recoup from the hobbled titan.

“It is too early to say whether they are going to get screwed,” Rappaport said.

Founded in 1954, the company was primarily a regional player that in recent years used aggressive leverage to become the nation’s second-largest REIT after Simon Property Group.

The buying binge peaked in 2004 with the leveraged purchase of The Rouse Co., in a $14 billion deal that included Fashion Show and the Summerlin holdings.

It also included marquee properties such as Boston’s Faneuil Hall Marketplace, South Street Seaport in lower Manhattan and Baltimore’s Inner Harbor.

It committed more than $1 billion in separate transactions to buy Grand Canal Shoppes in 2004 and the Shoppes at Palazzo in 2008.

Management maintained complex fiscal arrangements by continually rolling debt over into new debt, a strategy that unraveled when the credit markets went sour last year.

“Their problem is they paid too much for it and they used too much debt to get it,” said investor Reggie Middleton who in January 2008 was among the first people to publicly state the company was in danger on his Web site,

Middleton, who was indirectly ridiculed for his skepticism by General Growth management, published an in-depth analysis of the company’s complicated finances that included a property-by-property look at the firm’s holdings.

He says the Las Vegas properties are moneymakers under the right conditions.

“Most of (General Growth’s) Las Vegas stuff looks good anecdotally, it is just a matter of what price it looks good at,” Middleton said.

Had General Growth not overpaid for holdings in Las Vegas or elsewhere or if had bought the properties with cash instead of debt it could have ridden out the recession, Middleton said.

With both the Las Vegas economy and nation’s retail sector in doubt, it is tough to say how General Growth’s Las Vegas properties will be valued.

Their Strip properties are well located and do well compared to other retail properties. But they are one-trick ponies compared to the resorts, which get money from gambling, room rentals, retail and food.

“The retail malls have one source of revenue, that is rent,” Middleton said.

Although the value of General Growth’s Las Vegas holdings is murky, Middleton says lessons for investors from the company’s downfall are clear.

“When everyone wants to buy you should be selling,” he said. “When everyone wants to sell you should be buying.”

Contact reporter Benjamin Spillman at This email address is being protected from spambots. You need JavaScript enabled to view it. or 702-477-3861.