Contrarian Corpus
activist full deck initial thesis
2009-05-27 · 68 pages

General Growth Properties GGWPQ

N 5 Narrative
V 3 Visual
C 3 Craft
Original source ↗

The three reasons

  1. 1

    GGP's assets materially exceed liabilities — this is a liquidity bankruptcy, not insolvency

  2. 2

    Simon cap rate implies GGP REIT alone is worth $9-$22/share vs. $1.19 market price

  3. 3

    Historical precedent (Amerco, Alexander's) shows solvent-debtor equity can appreciate 358-456% in Chapter 11

Primary demands

  • Extend all secured and unsecured debt maturities by seven years at existing interest rates to enable deleveraging via operating cash flow
  • Preserve equity value through a 'fair and equitable' reorganization plan consistent with Bankruptcy Code §1129
  • Avoid fire-sale liquidation that would destroy the GGP franchise and depress broader REIT real estate values
  • Suspend cash dividend through year-end 2009, then 10% cash / 90% stock to accelerate balance-sheet repair

KPIs cited

Market price vs. intrinsic value per share
Stock at $1.19 vs. SOTP value $10.40 low / $30.08 high
Simon Property Group implied cap rate
8.4% — anchor for GGP REIT valuation at 7.5%-8.5%
Historical mall cap rate (since 1986)
7.6% average across much higher long-term rate environments
Top-50 mall sales per square foot
~$648, representing ~50% of total mall NOI (per Bucksbaum Jul 2008)
A-quality mall share of NOI
~75% of NOI from 'A' assets; at 7.0% cap rate those alone exceed total liabilities
Lease expiration profile
>75% of leases do not expire until 2012 or later; embedded rent step-up to $56 average
Fixed-rate debt share
~82% of GGP's debt is fixed rate — inflation-protected
Tenant concentration
Largest tenant (Gap) only 2.7% of revenue; >24,000 tenants
Peer REIT total leverage
GGWPQ 100% of assets; peer average 75% — industry-wide issue, not idiosyncratic
Unsecured debt equity dilution
Unsecureds would need ~45-46% of post-reorg equity to be made whole
Break-even ownership
Equity needs only 5.5% of post-reorg company at 9.4% cap to break even at $1.19

Pattern membership

Where this document fits across the library's 12 rhetorical / structural patterns.

Notable slides (8)

Notes

Seminal Ackman long-equity-in-bankruptcy thesis presented a month after GGP's April 2009 Chapter 11 filing. Unusual posture: Pershing Square is not attacking management — they are proposing a reorganization path that preserves the equity residual. Heavy 'Bankruptcy 101' educational content (§1129 cram-down, Till v. SCS Credit Corp, Amerco/Alexander's historical precedents) because the core argument hinges on a legal-structural claim non-specialist investors would miss. Management quotes (Bucksbaum, Freibaum) used supportively to reinforce asset-quality argument, not adversarially. Post-bankruptcy ticker GGWPQ. Visual production is typical Pershing Square house style — clean blue header bar, yellow callout boxes, functional but not editorial-grade; photos of marquee malls (Ala Moana, Grand Canal Shoppes) used as section dividers. Page count 68 includes several deliberately sparse 'idea' slides (pp. 33, 38, 39, 52).