Reggie's researchWednesday, 12 December 2007 | Reggie MiddletonI have decided to keep pumping as much of my preliminary research as possible to the blog for free. Please read and accept the disclaimer below. In addition to the disclaimer, I want to add that this... + Full Story
The next GGP??? A timely actionable noteFriday, 14 November 2008 | Reggie Middleton The hard core fundamental anlalysis of this blog has been paying off in spades for many subscribers - creating real wealth, preseving significant wealth, and actually creating bonuses for Wall... + Full Story
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The initial quote that was attributed to me sounds a bit callous, and that was not my intention. I truly believe that GGP has some serious issues, but I did not intent to make light of them or belittle them. Just want to make my perspective clear.
General shrinking? Critics warn Seaport firm has no dough
The
stock of General Growth Properties fell nearly 50 percent in the past
year, and the company has $18.4 billion in debt coming due in the next
3½ years, according to the Wall Street Journal. Earlier this month, Bob
Michaels, G.G.P.’s president and C.O.O., was forced to sell half his
shares in the company because of the dropping stock price, the Journal
reported...
General Growth hopes to demolish the
touristy mall on Pier 17 and replace it with low-rise retail, a
boutique hotel and a public plaza. They also hope to build a 495-foot
condo-hotel tower just north of the pier (Hey New Yorkers, that's just what our dear city has been lacking, more condo towers - talk about massive demand and no supply in a strong macro environment!), and they want to move the
landmarked Tin Building to the pier’s tip...
“They’re
dead broke and in extreme financial hardship,” said Reggie Middleton... “I
can’t see them doing [a new project]…. They definitely can’t afford a
redevelopment of this size.” This doesn't quite read how I intended, but the gist is accurate. They are currently paying a dividend that has been funded through stock sales and mortgage refinancing in a slowing equity, debt and CRE market while they have massive amounts of debt to refi that is looking to be quite troublesome. I think its fair to say they have problems. See
GGP and the type of investigative analysis you will not get from your brokerage house for more on thier trials and tribulations.
Middleton traced
General Growth’s expansion over the last decade, in which the company
aggressively acquired property around the country, riding the top of
the credit bubble. In 2004, General Growth bought the Rouse Company,
the former owner of the Seaport mall. Then the credit bubble popped,
and Middleton thinks General Growth won’t be able to refinance its debt
and will have to either sell off properties or foreclose on them.
Earlier
this month, the Las Vegas Review-Journal reported (I was quoted in that article as well) that General Growth
is backing out of a deal to co-develop a $4.8 billion resort on the
strip, called Echelon. General Growth is also delaying development of a
1.4 million-square-foot mixed-use project in Las Vegas called the Shops
at Summerlin Centre, the Review-Journal reported.
Middleton sees these Las Vegas delays as an indication of what could happen at the Seaport.
General
Growth executives declined interview requests for this article (But, of course they did), but the
firm released a statement defending its ability to complete the Seaport
project and indirectly addressing the Las Vegas delays.
“G.G.P.
conducts business throughout the nation,” a General Growth spokesperson
wrote in an e-mail to Downtown Express. “Our decisions in any
individual market have no bearing whatsoever on our plan for the
Seaport.”
The statement continued, “General Growth
Properties has a 50-year track record of successful developments. This
is a long-term project and G.G.P. remains 100 percent committed to
realizing its vision for the Seaport’s future. We are moving forward
without hesitation in our mission to reconnect the Seaport to the Lower
Manhattan community and to bring important benefits to the
neighborhood.”
Middleton said the statement sounded
like public relations “fluff” and he would want to know how General
Growth planned to pull itself out of its financial straits. Even when
the market improves, which could take years, Middleton does not think
General Growth will fully recover.
“They’re not going to come out of this the same company they went in,” Middleton said.
General
Growth is working closely with the city Economic Development
Corporation on the project, since the city owns the waterfront land
G.G.P. wants to develop..
General Growth has a history of
requesting — and receiving — government subsidies and tax abatements,
according to Good Jobs First, a group that researches development
subsidies. Good Jobs First released a report last year called “Growing
At Whose Expense?” which calls G.G.P. “one of the biggest drains on
local government revenues in the United States.” The report looked at
50 of General Growth’s other malls, about a quarter of its U.S.
properties. Fourteen of the 50 malls have received a total of $200
million in government subsidies and $9 million in tax savings from
assessment appeals...
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If they dont have any money then why did they buy all of Rouses assets?
+0
... written by a b,
August 22, 2008
Reggie:
Your candor is refreshing. Your comments are colorful and the mainstream press gives these companies an easy ride. If you ruffle a few feathers big deal. We still have a First Amendment last I checked. Democracy is supposed to be noisy and occasionally rancorous.
+0
Banking covenants written by Chris Marshall,
August 23, 2008
Reggie,
Any idea on when GGP will breach their banking covenants, from memory their LTV was close to 70% last year (which tends to be the upper limit).
PS: screen is now all in view, no scrolling required ( thanks )
+0
... written by Reggie Middleton,
August 23, 2008
I'm glad its fixed. GGP has a lot of stuff going on, so I wiould have to check my notes. What you shuold be expecting is massive margin calls to upper management if the stock breaches 23 dollars. Remember how highly leveraged they are and at how high a price.
+0
... written by Gerry Nally,
August 23, 2008
As I recall GGP just absorbed Rouse debt of 5 -7 Billion as part of the deal. Rouse execs were inflating their Mall sales over the last few years before the sale to pump the stock to 68 before sticking GGP with the overblown company.
Chabay
+0
... written by Quincy K,
August 23, 2008
"you should be expecting massive margin calls"
If what you say is true, I would expect massive buyout offers in the future to squeeze the shorts and for mangement to unload their positions.
After all, this is Wall Street.
+0
... written by Reggie Middleton,
August 23, 2008
Professional short investors are not very easily squeezed. They usually have strategies to deal with price pops, and usually just double down (up?) on a position if it pops. That short squeeze things are weak handed players that either don't believe in, or don't have, their own intelliegence and research. It's a CNBC media thing. GGP has popped several times (a very high percentage price gain) since I took my short position almost a year ago, and I didn't even think of letting it go.
Weak handed players are needed to enrich those who truly do their research and enable proper risk management and trading strategies.
As for management, with the amount of leverage they have and their average buy in prices, they will not get a chance to break even or even come close to it for several years. Margin costs will eat them way before this happens. The will be forced to fold.
+0
... written by Quincy K,
August 23, 2008
Well said. I still woud be very surprised if some sort of buyout rumor where not to be announced in the next four or five trading sessions.
By the way, are you still bearish on PACW?
+0
... written by Donald Ruffkin,
August 24, 2008
Quincy, why didn't they do that before the Chief Operating Officer and the SVP of Business Development faced margin calls that forced the two to liquidate?
Depending on how you look at it, their constantly overstating what they will do on the financing side has artificially propped up their stock price thus far.
+0
... written by Bill Quinn,
August 24, 2008
Large number of layoffs this week...sneak preview of things to come?
+0
... written by David Leamon,
August 25, 2008
rambus: ..."Large number of layoffs this week...sneak preview of things to come?"
A good friend of mine, a Construction Manager, just got sacked. Top notch individual, which tells me that if they're laying off people of his calibre, things are pretty bad, like a starving body eating its own muscle...
+0
... written by Reggie Middleton,
August 25, 2008
I just got two additional confirmations of layoffs. I will expect to see the public manifestation of the internal problems soon.
+0
Will layoffs be considered management's remedies? written by Jason Bohmann,
August 26, 2008
Be wary. The street makes illogical assumptions based on the same information that you and I see are slam-dunk confirmations of our short view. Job cuts can be seen as mngt "doing the things they need to do". Just like MER selling assets for 22cents and that being seen as a positive. Long term, you're right indicative for further and continued weakness, but in the short-term look out for the whip saw. Just saying, be defensive.
+0
... written by Donald Ruffkin,
August 27, 2008
Maybe if they actually were not so mum about it, I'd be more defensive.
They fired 100 and didn't say a damn thing. Awfully quiet! I would not read too much into daily price moves, personally.
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