Hovde has issued a reply to Ackman’s second GGP presentation. These hedge funds put out more analysis than the bank analysts that follow GGP, SERIOUSLY! For those that need a recap: My responses to Ackman’s presenations are CRE 2010 Overview and It was bound to happen. Reggie Middleton vs Ackman vs Hovde on GGP!
Here are the Ackman reports: Ackman’s CRE presentation and 
ackman_ggp122209_0 29/12/2009,14:58 1.18 Mb
This is the most recent one by Hovde: General Growth Properties – 2.pdf.
I also noted that Hovde is short Macerich. See my opinion on that company: A Granular Look Into a $6 Billion REIT: Is This the Next GGP?
Tags: Asset Securitization Crisis, Commercial Real Estate, Heard on the Street, Research
After going through the latest presentation by Hovde Capital on GGP. The key arguments impacting valuation including those regarding a)adjustments to NOI, b)Leasing spreads and future NOI c) Cap rates concurs with our analysis. However, there are some additional points which Hovde has further elucidated:
•Hovde incorporates estimated annual debt amortization charge of $400 million in the adjusted interest coverage of 1.7x (based on our calculation) to calculate the debt service coverage of 1.2x.
•Further reinforces the inappropriateness of taking Simon Property as comparable peer by comparing the credit ratings, leverage levels and fixed charges coverage ratios of Simon with GGP.
•Lack of any possibility of strategic acquisition owing to very little value left for equity holders.
•Reinforces the lack of value left in MPC (Master planned community) segment and the possibility of contingent liability emerging to heirs of the Hughes estate in case there is any value left in these assets. For the valuation purpose, we have taken the value of this segment as nil.
also further illustrates just how aggressive (and inappropriate in my opinion) is Ackman’s cap rate.
Hey, I’ll give Ackman the high beta play. He made good money, but some people are confusing the beta from the market rally with the alpha of finding a truly undervalued opportunity.
There is a difference.
thanks for your input Reggie, if anyone knows GGP inside and out it would be you.
he did get a 20 bagger out of it, after all.