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General Growth Properties, Inc Message Board

  • dabqs dabqs Jan 17, 2012 3:13 PM Flag

    Hawk, Foxyxi, SKlein, others review this

    Can you all google "GGP SEC form S-11 for Rouse" or "Rouse form S-11" or bring up the SEC Form S-11 which was filed by GGP for the Rouse spinoff in some other manner?

    Maybe you can find it on the GGP website or Rouse website, if you cannot Gooogle it. I think it is important to look at.

    I have tried to post it but it is not getting on the message board.

    I'd like you to see pages 40, 44 and 46 of the S-11 filing.

    I will try to post again the basics of what I am seeing in another post.

    Dabqs

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    • punchcard,

      You can back out the cash if you wish. That is a very, very aggressive way to look at a company's valuation, however.

      REIT's are valued on a cap rate or FFO per share multiple. Cash is typically included, not backed out.

      I don't agree with your thinking on backing out the cash. If anything-- and even this is agressive-- just less aggressive than your suggestion, but, if anything, you could think about netting the cash from the existing debtload, which would make the company marginally more valuable as compared to peers since all of the B mall peers have very similar debt to sales leverage at this point, and I should add, to compare directly, you would need to go through each peer B mall REIT I have listed and net their cash from their debtloads as well to compare correctly to Rouse.

      I do think that with the rights offering cash, Rouse will have more cash per share than others, but, as I mentioned, I think backing this cash out is far too aggressive of a way to value Rouse, and I don't think the market will be valuing Rouse in this manner.

      I think the market will use the traditional cap rate/FFO per share multiple valuation, and the average sales per square foot for Rouse compared to peers will be highly important as to what multiple is assigned Rouse by the market.

      The offsetting positive for Rouse, is that I do think that Rouse will grow FFO per share and SPF faster than peers through the next few years, using the rights offering cash to refurbish/reposition existing malls.

      This is just my opinion. You must decide for yourself what you think the correct value for Rouse is.

      Dabqs

    • Okay, maybe my thinking is way off, here goes:

      As I understand it, the FFO multiple is the price/shr. divided by FFO/shr. or simply mkt. cap / FFO. Today, this equals $10.77/$1.40 or $383M/$50M, which equal 7.7X.

      On a look-through basis accounting for the rights offering, it would be: $10.77/$1.00 or $539M/$50M, which equal 10.7X, but does not account for the excess cash implied in that market cap. If we subtracted the $191.5M out, or $348M/$50M, this equals a FFO multiple of 6.9X.

      Thoughts? I greatly appreciate the feedback.

    • punchcard,

      No, backing out the 191.5M in cash would only impact book value per share. It would not impact the FFO per share multiple.

      Hope that helps you.

      Dabqs

    • Dabqs - To make RSE's FFO multiple comparable, would it make sense to back out the $191.5M in cash? (~$3.90/shr. post-rights offering)

      Maybe I'm way off in my thinking, but this would put RSE's FFO multiple at around 6.8X... If I'm out of touch with reality I'd appreciate some enlightenment, thanks in advance.

    • Hawk, Foxyxi, SKLein, Biff and others,

      I posted this on the RSE message board a few minutes ago since Foxyxi asked about it.

      Since it has been discussed at length on the GGP message board, I thought I would post it here as well. See Below--

      Foxyxi,

      True, historical carried value can be both understated or overstated because it is historical, but, using the NOI/cap rate methodology has its weakness, too, as you are making a range estimate for value.

      Additionally, regardless of differing book value per share among peers due to differences in historical cost for each REIT, book value per share comparisons are still a very valid and oft used tool in the comparative valuation process.

      That said, I used it as an adjunct in evaluating Rouse--as another tool to think about comparative value, but I mostly made my decision about Rouse through FFO per share mutiple comps and sales per square foot(spf) comps to other B mall REIT's.

      As such, and since you asked, Foxyxi, here are the FFO comps:

      Glimcher (GRT), sales per square foot (spf) $396, FFO multiple 12.22

      Penn Reit (PEI), spf $362, FFO multiple 6.95

      CBL & Assoc. (CBL) spf $329, FFO multiple 8.02

      Rouse (RSE) spf $279, FFO multiple (on estimate of $1.00 FFO per share for 2012) 11.03

      I think it is worth noting that GGP's rationale for spinning out RSE was primarily to boost spf at the remaining GGP portfolio of malls to obtain a higher valuation in the market--more toward that of SPG and TCO. Debt reduction as also helps GGP as it has off loaded 1B+ in debt onto Rouse.

      On the debt side of things in my comps, for example, in looking at debt to sales for GRT, PEI, and CBL,--Rouse, with its new debt load, is very similar in debt to sales leverage as compared to its peer B mall REIT's (so there is no valuation benefit coming to Rouse due to possibly having less leverage as compared to peers).

      So, in sum, looking at RSE's $279 psf, and comparing that to GRT, PEI, and CBL, you have to ask yourself what type of FFO mutiple RSE deserves in comparison to its peers.

      In Rouse's favor is that, as indicated in the S-11 (I think I saw it there, if not than another filing), GGP and Rouse feel that with the money from the rights offering, RSE can improve FFO and SPF about 25% between now and 2015. So you would have to think that that would be better than peers in terms of growth, but you still have too get comfortable with the FFO mutiple disparity.

      In my opinion, I think PEI and CBL are better comps for RSE, especially since GRT has the higher spf of all four and all have similar debt leverage to sales.

      I think GGP, if I recall correctly, understandably (!)focuses more on Glimcher (GRT) to put RSE in the best position for the highest potential valuation, but, frankly, I do think PEI and CBL are truer comps.

      I hope this helps as you think through the situation in regard to Rouse.

      Dabqs

    • Hawk, I believe you work in commercial real estate and if you do I hope you spend more time learning the business and less time on message boards, because either your knowledge of the real estate industry clouds your judgment or "you don't understand all that you know."

      It's too bad because you could have made millions in GGP,
      HHC and now RSE and so much money in dividends you would have a hard time spending it!

      Now does this look anything like one of Sammy's posts? No it is more like what an English teacher would do if he copied it.

      ;-)

      Biff

    • Now that makes a lot of sense.

      I just realized that "llyoyd-lond", better known as "Sammy", is now biffiesbrot.

      Hilarious that I got sucked into this discussion.

    • <For about a year now you have been a minority partner of BAM in GGP.>

      Hawk, I wasn't forced to give up my shares or trade them for the more fully valued shares of SPG. So it worked out just the way I wanted it to, and I bet Ackman would say the same thing.

      You were afraid to buy GGWPQ shares at just about any price and so I win and you lose!

      Biff

    • sklein

      I hate to be drawn into this discussion since I have already made my decision on RSE, but I when trying to understand BAM's financial support of the rights offering remember that BAM is conflicted here.

      It is in BAM's (and GGP's) best interest that this spinoff goes well. There are many benefits to GGP if they rid themselves of these B malls. Their important sales psf and occupancy stats immediately increase and the value of the shares (which we may already be seeing) will improve. In order to divest these malls they have to have a succesful spinoff and BAM's support of the rights offering insures that.

      I am not saying there isn't value in RSE to justify a $15 share price. I do not know. But I think I do know that BAM has determined whatever it costs them to support the RSE rights offering, they will more than make up in the appreciation of GGP stock price.

      Now some on this Board will immediately accuse me of bashing RSE, but I am not. I am admitting that I do not know if it is fairly valued or not, and thus I am not willing to invest in it.

    • That's my thinking as well.

      I would like to see some more financial statements from RSE before I make a decision.

      Obviously BAM has seen these and done a far more thorough analysis, they have agreed to pay $15 a share.

      I don't have any value for NAV, but I am assuming it is currently around what it was transferred to us for, so about 11.50

      If they are paying 15 a share for the new shares, that's some pretty massive accretion for current share-holders.

      At the very least I am going to wait around for that.

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