Now you too can value GGP's Equity

Everyone likes talking about GGP's equity these days. So I thought I would take my massive model that I have been working with for over a year now, and condense it to the bare essentials to value GGP's equity. Now you too can value GGP's equity.

Please follow this link to a quick model I brewed up: Value GGP's equity. The best thing to do, as I locked it so crazies can't play with this masterpiece, is download as an Excel and play around with the highlighted values.

Here are the listings of highlighted values, and the rationale behind them.
  1. The first highlighted value is the "Mall Value" of Rouse. You can see slightly above the input box a quick and dirty valuation matrix based on various cap rates and NOI.
  2. Further down the page, you will see the next assumption, which is the implied value of all non Rouse malls and properties. I.E. Malls at GGPLP, LLC etc. Again, you can see a quick and dirty valuation matrix to choose whichever value you like. You may notice that I am using slightly higher cap rates for the non-Rouse malls. It has been discussed by consultants and real estate professionals alike that the Rouse portfolio contains better malls on the whole than the GGP side of the fence.
  3. Next is cash. Now technically, you would not net out admin fees here because they would be spread around various entities, but I was not trying to be perfect here. You can look at GGP's most recent Monthly Operating Results (linked here), to see how much cash is on the balance sheet (remember not to double count Rouse's cash) and how much fees have been accrued.
  4. Finally is payables. This would also include any tax claims at the company. Again it is quite hard to pin down this number, so I will let you cook your own dinner on this one.
Note: The NOI numbers I am using are the CONSOLIDATED NOI. I.E. Ex unconsolidated entities.

Now, theoretically speaking, there are hundreds of other assumptions in this case. A big one I hear about touted is the value of the master plan communities. If you want to know how that business is doing, please check out GGP's 3rd quarter 2009 supplemental. I do not think it worth much at all.

Again, another assumption you have to make is how much leverage the judge will let the entity emerge with. Under this spreadsheet, all debt and preferred equity is reinstated at current terms. I doubt this happens. More likely, GGP will sell equity, or a creditor class will do a rights offering to raise cash and pay off some of the Rouse bonds or the 2006 credit facility. This obviously changes the dynamic of the spreadsheet (more shares outstanding for example). A big possible twist for equity holders would be if a strategic buyer backstopped an equity rights offering - maybe by being in the converts or another creditor class.

And finally, you may simply hate all the numbers I hard coded in there for value of ancillary assets. Well you know what? It doesn't really matter. According to my simple calculations, and you can play with this yourself, a 50 bps change in Rouse cap rates, moves the stock ~$2.00.

Again, this is a simple model. I know. But it gets to the point that whether you believe Hovde's analysis or Pershing/Tilson/Sullivan's analysis, the needle swings wildly on this one. Have fun valuing GGP's equity. And let me know any thoughts/suggested changes in the comments.



hunter [at] distressed-debt-investing [dot] com

About Me

I have spent the majority of my career as a value investor. For the past 8 years, I have worked on the buy side as a distressed debt and high yield investor.