Financial, Real Estate, Stock Markets Trends and Current Affairs

I will be looking into this and will offer my opinion next week. A
cursory glance at the press release doesn't reveal a cause for a 10%
pop in the share price, save the normal volatility in the market
accented by quad expiry date and the need for rebalancing of funds that
track the indexes (ex. S&P Index funds).

From AP:

...Late
Wednesday, the REIT said it closed on six mortgages totaling $1.3
billion. It used the $658 million in proceeds to buy a Las Vegas mall,
pay partners and retire some debt.

Additionally, General
Growth said it's working to close an additional $2.5 billion in other
mortgages and hopes to raise up to $1.75 billion through property
transactions.

The news came after Standard & Poor's
downgraded the REIT's corporate credit rating on concerns over its debt
and need for significant refinancing. However, the ratings agency
pointed out that the company's core business remains strong, buoyed by
its market position and high-quality portfolio.

At the beginning of the year, General Growth said nearly $5.61 billion of its short-term debt would come due in 2008 and 2009.

So,
they closed on just 23% (or less) of what they are going to need for the nest few
quarters, in a quickly worsening CMBS , CRE and credit market, and some
believe this is a good thing!!??? Do the math, they are AT LEAST $4.31 billion
short. I hear they are seeking private non-debt capital (read
expensive/dilutive) and their debt capital expenses have went up due to the
ratings downgrade.

From Yahoo:

...[GGP] announced today it
expects to close its sixth new mortgage loan since the beginning of
2008 next week. This sixth loan represents the final loan expected to
be completed in the first quarter. The total of these six new mortgage
loans for both the wholly-owned and joint venture properties was $1.3
billion. There was existing debt on four of the properties totaling
$550 million. Consequently, these new mortgage loans are expected to
generate excess proceeds of $750 million. The Company’s
share of the excess proceeds is expected to be approximately $658
million. The funds have been used in part to purchase The Shoppes at
Palazzo in Las Vegas, to make contributions to joint ventures and
payments to joint venture partners (this has raised significant red
flags in my KV study of the homebuilders - JV assets are devaluing
while debt service continues), to repay existing debt including the
last outstanding unsecured JP Realty Public Notes, and for general
working capital purposes...

During the second quarter of 2008, approximately $105 million of existing
property loans, including the Company’s 50% share of a
joint venture mortgage loan, will mature. As of today, the Company is in various
stages of discussions and/or due diligence with numerous lenders for new
mortgage loans aggregating more than $2.5 billion (this is a rough environement, the two largest CMBS writer just had a run on the bank! While GGP gets most of its loans from plain vanilla mortgages, CMBS provides the liquidity to the market.). These potential mortgage
loans are on income-producing properties that are currently unencumbered, as
well as on properties with existing mortgages that will mature throughout the
balance of 2008. Just in case you didn't pick up on this, they are encumbering their properties that don't have debt to raise capital. This is a bad thing. They are going further into debt at a time when their debt (LTV) is too high to begin with. I wonder if people even bother to read the press releases before they start buying the stock. Anyone who loses money can't say that GGP mislead them. It was stated clearly in black and white.

In addition, the Company is also in various stages of discussions and/or due
diligence with numerous parties regarding various types and forms of non-debt
capital. Currently, the aggregate amount of new non-debt capital generated if
all of the potential transactions close is expected to be approximately $1.75
billion (This may be quite/dilutive to current shareholders - driving value per share downward). None of the non-debt capital transactions currently being discussed
and/or pursued involve any public “capital markets”-type executions. All of the transactions, to the extent
closed, would be private. Even more expensive without the public market liquidity discount.

At this time, the Company cannot be absolutely certain that any of these
potential mortgage and non-debt transactions will in fact close during the
second quarter of 2008. However, the Company currently anticipates at least $1.5
billion of aggregate mortgage and/or non-debt transactions will in fact close
during the second quarter of 2008 and those transactions will produce at least
$1 billion of excess proceeds. The Company expects to apply the majority of
those proceeds to repay a $722 million acquisition loan and to use the balance
for working capital purposes. The company has significant development overhead that has not been accounted for.

I still don't see how they are going to pull off the funding requirements without selling shares or properties into a weak market or allowing foreclosure, but let me dig deeper and I will get back to you.GGP has been cut deeper into junk territory by S&P, with a negative outlook on top of it. This will make financing that much harder. Hey, even MBIA, AMBAC and subprime CDOs can get AAA ratings. Okay, I'll admit that was a low blow. I take that back...

From Marketwatch:

GGP corporate credit rating [cut] to BB+ from BBB-. The rating agency also cut
General Growth's unsecured debt rating to BB- from BB+. "The downgrades reflect
General Growth's weakened financial profile, given the company's
lower-than-anticipated total debt and dividend coverage metrics as well as
fairly significant refinancing and development funding needs over the next few
years," said Standard & Poor's credit analyst Linda Phelps. According to
S&P's rating system, companies rated at BB or below are categorized as
non-investment grade. The outlook on the ratings is negative.

Do you think these guys read my blog???

More news...

A director of General Growth Properties Inc. sold 10,000 shares of common stock,
according to a Securities and Exchange Commission filing Tuesday.

In a Form 4 filed with the SEC, Beth Stewart reported she sold the shares
Tuesday for $34.07 to $34.15 apiece.

For anybody who is new to the blog, I have done a lot of work on CRE and GGP. In addition, a snippet from a private conversation concerning their conference call .