GGP: Recap on recent news

I’ve been out of vacation last week, so I haven’t updated the blog in a while. There has been some interesting updates related to GGP.

Simon has been discussing with GGP its $15/share offer. The offer is similar to BAM’s offer but doesn’t have any of the warrants that BAM’s deal includes. The Simon offer is similar to BAM but has one major difference, any investment by Simon in GGP would create anti-trust issues. I’ve mentioned in the past that Simon could work around these anti-trust issues. Although it seems that Simon wants some say in GGP out of the investment, which will make it tough for anti-trust issues to be resolved. Simon has brought in 4 other investors into its offer for GGP, that is an attempt by Simon to allay the anti-trust issues. I think Simon still needs to offer something more to put aside the trust issues.

GGP also pushed back its court meeting from April 29th to May 4th. I think GGP is expecting better offers between now and May 4th. It wouldn’t be a shock is BAM/Pershing/Fairholme improved its offer, Simon got serious about buying GGP, or someone else comes to the game. In all, I think the delay in the court meeting is great thing for shareholders. I expect an interesting weekend.

2 responses to “GGP: Recap on recent news”

    • The short answer is yes (assuming your time horizon is at least 2-3 yrs).

      A lot of what happens w/ the share price depends on who wins the GGP bidding. I think BAM has the upper hand on Simon. If BAM wins, then I think the two split up companies will have an interesting future valuation. For GGP, the share prices will increase once the index funds, REITs, mutual funds, and other fund managers start buying up shares. Also, once you have some clean earnings reported you should see GGP getting cap rates similar to Simon. The other split up company, GGO, will start selling at $5. I think the prospects for GGO are very good and could be a multi-bagger in couple of years. You will have BAM running GGO. BAM is one of the best management team in real estate industry. I think the shares could hit the $30-range in a few years after GGP exists chapter 11.

      If Simon wins the GGP prize, then it is not clear what would happen. There are many uncertainties related to anti-trust, how Simon acts as an investor/controller of GGP. I think even if Simon wins the GGP bidding (the odds are currently stacked against this happening), I still think the odds are very good that you won’t lose anything if you buy GGP at current prices. It is the upside that I’m not sure of.

      So the long answer is that at current prices, the upside is double and the downside is your return is limited. I can’t see how you lose (now if the US and Global economy completely tanks then all bets are off).

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