|
|
Message Boards Settings General Growth Properties (GGP) - Quote Info
Search : in Advanced Search
Within fields: Subject Message Body
Matching: Topics only Topics and Messages
Sentiment:
Authored by:
Anyone
Myself:
Posted on:
Any date
Within the range:
Start date:
End date:
Yahoo! Message Boards > Business & Finance > Investments > Stocks (A to Z) > Stocks G > General Growth Properties (GGP)
View all Topics | View all Messages < Newer Topic | Older Topic >
NAV and bankruptcy 11-Mar-09 11:28 pm
I've been reading comments on this message board since late last year. There appears to be a number of astute investors that may benefit from the following analysis.
(I should prefice this by mentioning that I do own GGP common stock in my PA).
I had noticed some attempts to determine the equity value of GGP using a sales per square foot analysis (i.e. 200M sq. ft. x $200 per sq. ft.). In the case of regional malls, some anchors own their space which artificially inflates values. A more acceptable exercise to ascertain equity value is using a Net Asset Value (NAV) approach derived from a portfolio level cap rate estimate.
Admittingly, given the dearth of regional mall (or any real estate product type for that matter) transactions, determining an appropriate cap rate may appear to be a fool's errand in this environment.
Two years ago, at argueably peak real estate values, most buy-side and sell-side REIT analysts applied a cap rate assumption of 6.25% to GGP. By comparison, Taubman was 5.50%, Simon 6.00% and Macerich 6.25%. Those familiar with regional malls will notice the relationship of cap rates to sales productivity i.e. higher portfolio sales productivity implies a greater ability to grow NOI which is reflected in a lower cap rate under the following relationship:
IRR requirement - NOI growth = cap rate
Anyway, assuming cap rates for class A regional malls increased over 200bps (as most industry veterans assume), this NAV analysis will assume the following scenarios:
Best case = 8.00%
Average case = 8.50%
Worst case = 9.00%
Examining the most recent supplemental and 10K, we find 2008 total NOI of $2,576.51M. Assuming a 2.5% decline in NOI in 2009, our NOI estimate is $2,512.10M. For those that are interested, NOI is an unlevered metric and applying GGP's levered multiplier, this NOI decline translates into an over 6.5% drop in 2009 earnings or FFO. Let me explain. . .GGP's fixed charge coverage ratio is 1.6x. From this, every $1 goes to the debtholders and the equity holders are left with $0.60. As such, its true debt ratio - not influenced by movements in its common equity price - is 62.5% debt (1/1.6) and 37.5% equity (0.6/1.6). Its true levered multiplier is 2.67x or 1/(1-0.625) and the FFO growth estimate is -2.5% NOI growth x 2.67 or -6.67%.
As a result, here are values under our cap rate assumptions:
At 8.00% = $31,401.25M
At 8.50% = $29,554.12M
At 9.00% = $27,912.22M
To this we will add only the tangible assets from their balance sheet:
Community development land @ 75% value = $1,367.52M (I've adjusted its 2004 book value by 25%)
Developments in progess = $1,076.68M
Cash = $168.99M
Accounts receivable = $385.33M
Prepaid expenses & other assets = $835.46M
Total Assets = $3,833.98M
And, deduct all liabilities and minority interests:
Mortgages, notes & loans = $27,826.63M
Preferred debt = $121.23M
Deferred taxes = $868.98M
Accounts payable = $1,539.15M
Total Liabilities = $30,355.99M
As such, with 319.5M common shares outstanding, the NAV estimate is:
At 8.00% = $15.27 per share
At 8.50% = $ 9.49 per share
At 9.00% = $ 4.35 per share
It is only at cap rates above 10.55% where the equity value is zero.
So what's my point?
There's value in the common stock. . .it may just take time until the credit markets become more conducive to transactions to realize. Perhaps this is why the creditors have not forced the company into default.
In fact, GGP is essentially operating under a pseudo-Chapter 11 scenario. But instead of relinguishing oversight to a bankruptcy judge, the lenders maintain strict control over GGP's strategic activities that are designed to reduce debt (property sales, joint ventures. . .etc).
Hope that this was helpful. Good luck to all the longs. |
|
狗仔卡
发表于 2009-3-21 01:30 AM
提升卡
置顶卡
沉默卡
喧嚣卡
变色卡
发表于 2009-3-21 02:38 AM
