general growth properties - 2 - hovde

8/14/2019 General Growth Properties - 2 - Hovde

1/73

GeneralGrowthProperties

SettingtheRecordStraight

December29,2009

1HovdeCapitalAdvisorsLLCDecember29,2009


2/73

TableofContents

OurGoals (p.3 4) CalculationofNOI (p.5 14)

RentalRatesandLeasingSpreads (p.15 18)

Leverage,CashFlow,andDebtService (p.19 24) CapitalizationRates (p.25 33) ReviewofPershingSquareAssumptions (p.34 37) MasterPlannedCommunitySegment (p.38 43)

GeneralGrowth

Management

Inc.

(p.44

46)

NetAssetValueCalculation (p.47 50) StrategicAcquisitionPotential (p.51 55) RetailStoreClosures (p.56 61)

Analysisof

T2

Partners

Commentary

(p.62

63)

PortfolioRisks (p.64 69) Summary (p.70 72) Disclosures (p.73)

HovdeCapitalAdvisorsLLC 2December29,2009


3/73

OurGoals



4/73

OurGoals Weareaddressingahostoffeedbackandquestionswehavereceivedfollowing

ourDecember15th presentation(1) onGeneralGrowthProperties.

Webelievetherehavebeennumerousmisleadingcharacterizationsofour

presentationand

attribution

of

statements

that

are

erroneous

and/or

inaccurate.

Wepresentourforthrightviewsderivedfromfactbasedanalysisratherthanspeculativeconjecture.

Wethinkinvestorsbenefitfromhavingmoreanalysisandintelligent,informed

debateavailable

in

the

public

domain.

Wewouldencourageinvestorstoconducttheirownanalysisbasedontheextensivedataavailableinthepublicrealmandthirdpartyindependentdata,as

opposedtorelyingontheopinionofanyone,letaloneananalysisperformedby

PershingSquare

that

relies

upon

pro

forma

figures,

undisclosed

calculations,

andspeculationsastothefuturedirectionorperceivedlevelofcaprates.

4HovdeCapitalAdvisorsLLC

(1)GeneralGrowthProperties,FoolsGold,HovdeCapitalAdvisors,LLC,December15,2009.

NOTE:FUNDSADVISEDBYHOVDECAPITALADVISORS,LLCANDONEOFITSPRINCIPALSHAVESHORTPOSITIONSINGGWPQASWELL

ASANOTHERCOMPANYMENTIONEDINTHISPRESENTATION. SEEADDITIONALIMPORTANTDISCLOSURESATPAGE73.

December29,2009


5/73

Calculationof

NOI



6/73

CalculationofNOI WeBelieve

PershingSquare

Is

Out

of

Touch

HovdeCapitalAdvisorsLLC 6

FromGeneralGrowthsQ309

supplemental:Reflectsonly

tenantallowancesoncurrently

operatingpropertiesorprojects;allowancesthatrelatetonewand

redevelopmentprojectsare

excluded(seeExpansions,

Redevelopmentsand

New

DevelopmentsSection).

TenantAllowances&LeasingCosts

thesearenonrevenuegenerating

recurringoperatingexpensesand

shouldbe

deducted.

*PershingSquareCapitalManagement,L.P.LLCADetailedResponsetoHovdesShortThesisonGeneralGrowthPropertiesDecember22,2009,page6.

PershingSquareAnalysis*

December29,2009


7/73


PershingSquare

Is

Out

of

Touch


FromGeneralGrowthsQ309

supplemental:Reflectsonlynon

tenantoperatingcapital

expenditures;tenantallowances(per(a)above)andcapital

expendituresthatrelatetonew

and

redevelopment/renovation

projectsareexcluded.

RecurringCapitalExpenditures

thesearenonrevenuegenerating

recurringmaintenanceoperating

expensesand

should

be

deducted.

*PershingSquareCapitalManagement,L.P.LLCADetailedResponsetoHovdesShortThesisonGeneralGrowthPropertiesDecember22,2009.,page6


December29,2009


8/73


PershingSquare

Is

Out

of

Touch


Thisis

acircular

argument,

since,

ifthereweremorestore

closures,therewouldbehigher

vacancyandlessrentalincome

asaresult.

We

believe

these

feesareconsideredtobenon

recurringandshouldbe

deducted.

LeaseTerminationFees theseare

non

recurring

and

portend

higher

vacancyand,thus,lowerfutureNOI;

thus,wefeelthesearenot

representativeoftheongoingcore

business.

*PershingSquareCapitalManagement,L.P.LLCADetailedResponsetoHovdesShortThesisonGeneralGrowthPropertiesDecember22,2009.,page6


December29,2009


9/73


PershingSquare

Is

Out

of

Touch


This is a contradiction

if tenant allowances are notdeducted from NOI (per Pershing Squares view), then

there is no benefit to NOI of lower tenant allowances. You

cant have your cake and eat it too you either have to

include them along with the benefit of higher rents, or you

have to exclude them and assume that rental rates would

be lower without them.


PershingSquareCommentary*

December29,2009


10/73


PershingSquare

Is

Out

of

Touch


While lower tenant allowances may be an offset in the short term,

these expenditures are incurred at the beginning of a lease and do not

offset the impact of lower lease rates, which persist through the

entirety of the multiyear lease term as illustrated below.



A $20/Sf. tenant allowance amortized over a 10year lease is only $2/Sf.

compared to a $20/Sf. reduction in face rent. Clearly the benefit of lower tenant

allowances is only a shortterm benefit compared to the reduction of face rents

which persists over the long term.

December29,2009


11/73

ISIGroupsCalculationofNOI


DoesPershingSquarebelievethe#1

ranked

Institutional

Investor

sell

side

analystiscalculatingNOIincorrectly?

*Updateto

General

Growth

NAV,

ISI

Group,

11/17/09.

*

December29,2009


12/73

CalculationofNOI Seasonalityand

NonCash

Items

Weagreethatmallownersgenerallyrecognizemorerentinthefourthquarterinagivenyear,giventherecognitionofpercentage(orsometimescalledoverage)rents.

Percentagerentsarerentspaidasapercentageofaretailerssalesabovecertainpredetermined

breakpoints. Giventhisyearislikelytobeasecondyearofdecliningsalesformanymallbasedretailers,and

significantlysoforsome(seep.10ofourpresentation(1)),wedonotbelievemanywillachievesalesmuchabovetheirthresholdsaleslevelthatwouldtriggerpaymentofpercentagerentsthatarematerialinamount.

Theimpactofpercentagerentshasbeenoverstatedinrecentyearsduetothetimingofacquisitionsanddevelopmentprojectscomingonlineaswellasleaseterminationfeeincome.

Giventhecurrentdeclineinrentalratesandincreasingvacancy,itappearsverylikelytousthatfutureNOIwilldeclinesignificantly sowebelieveourestimatetobeconservative.

WedeductnoncashrevenueandcostitemsfromreportedNOItoderiveacashNOIfigureandadjustforrecurringmaintenancecapitalexpendituresandreleasingcosts. Webelievethis

conformswith

industry

convention

and

is

consistent

with

the

methodology

used

in

the

sell

side

analysisthatwehaveseenaswellasconventionintherealestateindustry.

WebelieveourNOIestimateisgeneroustothecompanysvaluationandasaccurateaswecanbewithoutmorespecificdatafromthecompany,andisconsistentwiththemethodologyusedinsellsideanalystreports.


(1)GeneralGrowthProperties,FoolsGold,HovdeCapitalAdvisors,LLC,December15,2009.

December29,2009


13/73

Q4ImpactofPercentageRentsHas

BeenOverstated

and

Is

Declining


GeneralGrowthPropertiesQ3&Q4NOIExcludingtheImpact

ofLeaseTerminationFeesandNonComparablePeriodIncome

528

573

544

619605

689

616

654

0

100

200

300

400

500

600

700

800

Q3:05 Q4:05 Q3:06 Q4:06 Q3:07 Q4:07 Q3:08 Q4:08

Chg.=+$75 Chg.=+$84 Chg.=+$38Chg.=+$45 Thistrend

suggeststous

thatQ409

percentagerents

arelikelytobe

immaterialand

percentagerents

arenotlikelyto

haveas

significantan

impactonQ4

resultsuntilretail

salesreturn

to

2007levels,

whichdoesnot

appeartobe

likelyinthe

foreseeable

future.

Source:GeneralGrowthPropertiesSupplementalreports.

December29,2009


14/73

Q4ImpactofPercentageRentsHas

BeenOverstated


*Source:GeneralGrowthPropertiesSupplementalreports.

(1)Hovdecommentary:AcquisitionofJVinterestinHomartoccurredinJuly2007:therefore,thefullquarterrunratewasnotreflectedinQ307reportedresults.

(figuresinmillions)* Development/

Redevelopment/

ExpansionProjects Acquisitions

Q4:2005 $ 112 $ 85

Q4:2006 $ 232 $

Q4:2007 $ 372 $ 2,000 (1)

Q4:2008 $ 245 $

FourthQuarterDevelopment/Redevelopment/ExpansionProjects

andAcquisitionsHaveInflatedQ4IncomeinRecentYears

December29,2009


15/73

RentalRates

and

Leasing

Spreads



16/73

RentalRatesAreSeasonal ButStill

DecliningSignificantly

Year

Over

Year


Source:GeneralGrowthPropertiesQ309Supplementalreport.

PershingSquarecitessequentialimprovementsinnewleaserates,contendingthisisevidenceof

improvingfundamentals. Thisignoreswhatisaseasonalpatterntorentalratesthroughoutthe

course

of

the

year.

As

seen

in

the

chart

below,

rates

often

are

higher

in

the

second

half

of

the

year

versusthefirsthalf. Thisisnotindicativeofimprovingfundamentalsinourview. Ayearoveryear

comparisonismoreuseful,whichinQ3showedan18%declineversustheprioryear,effectively

unchangedfromthe19%declineinQ2.

$0

$10

$20

$30

$40

$50

Q1:05

Q2:05

Q3:05

Q4:05

Q1:06

Q2:06

Q3:06

Q4:06

Q1:07

Q2:07

Q3:07

Q4:07

Q1:08

Q2:08

Q3:08

Q4:08

Q1:09

Q2:09

Q3:09

YTDRentalRatesonNew/Renewal

Leases

40%

30%20%

10%

0%

10%

20%

Q1:05

Q2:05

Q3:05

Q4:05

Q1:06

Q2:06

Q3:06

Q4:06

Q1:07

Q2:07

Q3:07

Q4:07

Q1:08

Q2:08

Q3:08

Q4:08

Q1:09

Q2:09

Q3:09

Yr/YrChangeinYTDRentalRates

onNew/Renewal

Leases

December29,2009


17/73

LeasingSpreadsAreIncreasinglyNegative PershingSquarecontendsGGPscurrentnegativeleasingspreadsareonlydown11%incomparison

toexpiringrents(whichweresigned510yearsago),whichisnotasbadasthe33%declineincomparisontotheportfolioaverage. Webelievethisviewislargelyirrelevantwhenviewedinthecontextoffutureleaseexpirations.

Unlessrentsbegintoincreasedramatically,andwebelievethattherearenoindicationsthiswill

happenanytime

soon,

the

company

will

be

facing

accelerating

declines

on

new

rents

versus

expiringleasesasseenintheexpirationschedulebelow,whichwillcontinuetodriveNOIlower.


*GeneralGrowthPropertiesQ309Supplementalreport.

-36%

-32%

-34%

-40%

-43%

-43%

-50%-54%

-54%

-58%

-54%

%ChangeVersusQ3

YTDRentson

New/RenewalLeases

*

December29,2009


18/73

HowCanNOIGrow?

In light of the data on the previous twopages, how could a reasonable analyst

project flat, much less growing, NOI for thiscompany over the foreseeable future?



19/73

Leverage,Cash

Flow,

and

Debt

Service



20/73

DebtServiceIsNotJustInterestPershingSquareIgnoresAmortizationandUnsecured

DebtInterest


Source: PershingSquareCapitalManagement,L.P.LLCADetailedResponsetoHovdesShortThesisonGeneralGrowthPropertiesDecember 22,2009,page10.

PershingSquarecontradicts

itself

Principal amortization in

accordance with the terms ofrestructuring for the secured

debt will add nearly $400

million of annual principal

amortization in addition to

annual interest on the

unsecured debt, which is

roughly $400 million (assumes30year amortization on $12

billion in secured debt included

in the plan of emergence(1)),

therefore debt service coverage

will be far less than most REITS.

Even using Pershing Squaresinflated cash flow number, debt

service coverage would be 1.2x

after factoring principal

amortization and interest on

the unsecured bonds.

Thisisnotevenremotely

accurateasseenonthe

followingpages

This

ignores

recurring

maintenance

capex

and

tenant

allowances

(1)Source:

General

Growth

Judge

Approves

Plan

for

Restructuring

Debt

Bloomberg,

12/16/09.

Calculation:

$1.9

billion

of

amortization

over

6years

=~$300

million/year,

divide

this

by

$10.25

billion

indebt=3%/year,addthistotheallininterestrateof5.5%=8.5%. Assumesincremental$1.7billionofsecuredloansincludedintheplanofemergence source:BusinessWire,GeneralGrowth

PropertiesAnnouncesBankruptcyCourtConfirmationofPlansofReorganizationforapproximately$10.25BillionofSecuredMortgage12/15/09.

December29,2009


21/73

DebtServiceIsNotJustInterestPershingSquareIgnoresAmortizationandUnsecured

DebtInterest


LTMAdjustedProRataEBITDA* $2,390

RecurringMaintenanceCapex&TenantAllowances(LTM)(1) ($108)

InterestExpense(LTM)(1) $1,488

PrincipalAmortization

(2) $400

DebtServiceCoverage 1.21x


FactoringinAmortization,RecurringCapex,and

TenantAllowances


(1)Source:GeneralGrowthQ309andQ408Supplementalpackages.

(2)Source:GeneralGrowthJudgeApprovesPlanforRestructuringDebtBloomberg,12/16/09. Calculation:$1.9billionofamortizationover6years=~$300million/year,dividethisby

$10.25billion

in

debt

=3%/year,

add

this

to

the

all

in

interest

rate

of

5.5%

=8.5%.

Assumes

incremental

$1.7

billion

of

secured

loans

included

in

the

plan

of

emergence

source:

Business

Wire,GeneralGrowthPropertiesAnnouncesBankruptcyCourtConfirmationofPlansofReorganizationforapproximately$10.25BillionofSecuredMortgage12/15/09.

Even

assuming

the

unsecured

bonds

converted

to

equity,

debt

service

coverage

would

stillonlybe1.5xandtheworstofanypublicmallREIT.

HovdeAnalysis

December29,2009


22/73

SimonPropertyGroupisinvestmentgraderatedandhalfas

leveragedasGGP TosuggestGGPshouldtradeataLOWER

caprate

than

SPG

is

LAUGHABLE

in

our

view


OuranalysisisnottheonlyonethatshowsGeneralGrowthsportingadoubledigitleverageratio

andlowestinclassfixedchargecoverage(priortorestructuringthatrequiresamortization).

Source:REIT2010Outlook,JPMorgan,12/07/09.

December29,2009


23/73

SimonPropertyGroupisinvestmentgraderatedandhalfas

leveragedasGGP TosuggestGGPshouldtradeataLOWER

caprate

than

SPG

is

LAUGHABLE

in

our

view


Credit Debt/

Fixed

Charge

Rating(1)

EBITDA(2)

Coverage(2)

Simon Property Group A- 6.8x 2.4x

Taubman Centers NR 7.5x 2.3x

Macerich NR 11.2x 1.8x

CBL & Associates NR 8.6x 2.2x

Pennsylvania Real Estate Investment Trust NR 10.5x 1.7x

General Growth Properties (5) NR 12.2x 1.5x

(1) Source:Bloomberg.

(2) Source:REITValuationChartbookMorganStanley,11/9/09.

(3) Source:REIT2010Outlook,JPMorgan,12/07/09.

WhoInTheirRightMindWouldCompareBaaYieldstoMallREIT

impliedcaprates?

December29,2009


24/73

CashFlowBarelyServicestheDebt


PerGGPsbankruptcyfilings,projected2010debtservice

coverageon

the

$10.25

billion

of

secured

debt

included

in

theplanofemergenceisexpectedtobeonly1.0x.

*GeneralGrowthbankruptcyfiling12/7/09,exhibit3.

*

December29,2009


25/73

CapitalizationRates



26/73

CapitalizationRates Quitefrankly,weweresurprisedattheamountofdebatesurroundingcaprates. Wedonot

presumetoknowwherecaprateswillgointhefutureandthatisnotpartofouranalysis;norhaveweeverclaimedsuchprescientability.

Thecapitalizationratesweuseinouranalysisarebasedonobservedactualtransactionsasopposed

to

hypothetical

speculations.

The

comps

are

the

only

private

market

comps

we

believetobeavailableintheassetclass;thus,webelievetheyarevalidandnotoutofdate,sincethemostrecentofthecitedtransactionsclosedlessthanthreemonthsago.

ThereisachartthatisreferencedinaDecember7,2009PershingSquarepresentation(1)that

implies

cap

rates

will

move

lower.

This

chart

does

not

specify

the

source

of

its

data

or

specify

whatisincludedintheunderlyingdata. WesurmisethechartisattemptingtoillustrateimpliedcapratesforpubliclytradedequitiesofregionalmallREITs. Ifso,webelievethispicturewouldbeverymisleadingsinceitwouldbesignificantlyinfluencedbytheexceptionallylowimpliedcapitalizationratederivedbythestockpriceofSimonPropertiesGroup(NYSE:SPG),whichistheonlyinvestmentgraderatedregionalmallREIT.

WeshowinouranalysisthattheimpliedcapitalizationrateofpubliclytradedequitiesofregionalmallREITsisdirectlycorrelatedwiththeamountoffinancialleverage. Asouranalysisindicatesonthefollowingpage,thelevelofleveragelikelyatGeneralGrowth,evenassumingtheconversionofunsecureddebt,wouldbeindicativeofacapitalizationratehigherthan8%.


(1) PershingSquareCapitalManagement,L.P.LLC,IfYouWaitForTheRobins,SpringWillBeOver*,December7,2009.

December29,2009


27/73

LeverageIsaSignificantValuationFactor

SPGIs

Not

the

Right

Comp

In

Our

View

*Source:2010TheYearAhead:DealornodealBankofAmericaMerrillLynch,12/15/09.

December29,2009 27HovdeCapitalAdvisorsLLC

(1)REIT2010OutlookJPMorgan,12/07/09.

Leverage and Valuation Comparison*

Implied Leverage

Cap Rate (Debt/EBITDA)

Average Average

CBL & Associates 8.9% 9.0x

Macerich 7.9% 8.2xPennsylvania Real Estate Investment Trust 9.6% 10.8x

Simon Property Group 7.3% 7.3x

Taubman Centers 7.4% 7.3x

Average 8.2% 8.5x

General Growth Properties ? 12.2x(1)


28/73

DespiteSpeculationtotheContrary,CapRatesforAll

Property

Types

Are

Moving

Higher,

Not

Lower

December29,2009 HovdeCapitalAdvisorsLLC 28

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

Jan01

Apr01

Jul01

Oct01

Jan02

Apr02

Jul02

Oct02

Jan03

Apr03

Jul03

Oct03

Jan04

Apr04

Jul04

Oct04

Jan05

Apr05

Jul05

Oct05

Jan06

Apr06

Jul06

Oct06

Jan07

Apr07

Jul07

Oct07

Jan08

Apr08

Jul08

Oct08

Jan09

Apr09

Jul09

Oct09

Capitalization

Rates

Apartment Industrial Office

CBD Office

Sub Strip All

Core

Source:RealCapitalAnalytics.

DoesPershingSquareBelieveTheseTransactionsDidNotHappen?


29/73

BarclaysViewonGGP

InGeneralGrowthsinstance,currentequity

levelsimply

acap

rate

of

7.9%,

potentially

arichvaluationinourviewgiventhe

uncertaintyofanequitycramdownbythe

unsecuredholders.

Barclays,GGPandSPG:AnUpdate12/22/09



30/73

ISIGroupsViewonGGP

BasedonGGPsmostrecentquarterlydata,

theaverage

sales

productivity

of

its

malls

is

$410/sfvs.$438/sfforSPG,$497/sfforTCO

and$317/sfforCBL. Basedonthesemost

recentcomps,

we

assumed

arange

of

cap

ratesforGGPsassetsfrom7.5%to8.0%.

ISIGroup,UpdatetoGeneralGrowthNAV,11/17/09



31/73

GGPisinBankruptcy



Wewould

remind

investors

that

GGP

is

in

bankruptcy;

weareawareofnogreaterindicationofdistress.

*PershingSquareCapitalManagement,L.P.LLCADetailedResponsetoHovdesShortThesisonGeneralGrowthPropertiesDecember22,

2009,page17.

December29,2009


32/73

BasedonObservedTransactionalDataWe

Believe

Current

Cap

Rates

Are

Higher

Than

PershingSquareArgues

Theacquisition

of

Prime

Outlets

by

Simon

PropertyGroup(NYSE:SPG),announcedon

December8th,wasestimatedtobepricedat

an8.0%8.4%caprateoninplaceNOIbasedonsomeWallStreetestimates.(1)


(1)DeutscheBankestimate8.4%(reportdated12/8/09,titledSPGAcquiringPrimeOutlets). SandlerONeilestimates~8%caprate(reportdated12/8/09,titledSPG:StockingUpBeforetheHolidays;SPGtoAcquirePrimeOutlets.

Thisisthemostrecentcomparableforalarge,highqualityportfoliotransaction

December29,2009

C i l R l E t t V l H D d


33/73

CommercialRealEstateValuesHaveDropped

43%SincethePeak,andHaveNotStopped

Declining

December29,2009 HovdeCapitalAdvisorsLLC 33

Source:Moodys/REALCommercialPropertyIndex,RealCapitalAnalytics.

DoesPershing

Squarebelieve

regionalmallcap

ratesandasset

valueshave

divergedfromall

othercommercial

realestate

property

types?


34/73

ReviewofPershingSquare

Assumptions



35/73

PershingSquareDoesNotUse

ConsistentAssumptions

Forpurposesofcalculatingthecompanys

leverage,Pershing

Square

assumes

unsecured

debtconvertstoequity.(1)

Forpurposesofcalculatingthevaluationoftheequity,PershingSquaredoesnotassumetheconversionofunsecureddebttoequity.(2)


(1)Source:PershingSquareCapitalManagement,L.P.LLCADetailedResponsetoHovdesShortThesisonGeneralGrowthPropertiesDecember22,2009,page.25

(2)Source:PershingSquareCapitalManagement,L.P.LLCADetailedResponsetoHovdesShortThesisonGeneralGrowthPropertiesDecember22,2009,page.26

December29,2009


36/73


PershingSquare

Is

Out

of

Touch

GeneralGrowthProperties EstimatedNOI

ISIGroup(1) $2.0billion

Hovde $2.2billion

Barclays(2) $2.3billion

PershingSquare

(3)

$2.5billion


(1) Source:UpdatetoGeneralGrowthNAVISIGroup,11/17/09.

(2) Source:GGP

and

SPG:

An

Update

Barclays

Capital,

12/22/09.

(3) Source:ADetailedResponsetoHovdesShortThesisonGeneralGrowthPropertiesPershingSquareCapitalManagement,L.P.LLC,December22,2009,p.26.

December29,2009


37/73

AssumedCapRate WeBelieve

PershingSquare

Is

Out

of

Touch

GeneralGrowthProperties EstimatedCapRates

ISIGroup(1) 7.5%8.0%

Hovde 7.5%8.5%

Barclays(2) 7.5%

PershingSquare

(3)

6.21%7.21%


(1) Source:UpdatetoGeneralGrowthNAVISIGroup,11/17/09.

(2) Source:GGPandSPG:AnUpdateBarclaysCapital,12/22/09.

(3) Source:ADetailedResponsetoHovdesShortThesisonGeneralGrowthPropertiesPershingSquareCapitalManagement,L.P.LLC,December22,2009,p.26.

December29,2009


38/73

Master

Planned

Community

Segment



39/73

MasterPlannedCommunitySegment

Westate(p.14ofourpresentation(1))thatwebelievethereislittle,ifanyvalue,inthemasterplannedcommunity

businessgiven

the

purchase

of

these

assets

was

near

what

weviewaspeakpricesandthesubsequentdeclineinlandprices.

Thisisourviewandwewelcomeempiricaldatawhich

challengesus

to

reconsider

our

view.

TheheirsoftheHughesestateholdacontingentclaimrelatedtothevaluationoftheseassets. Ifthereissignificantvalueintheseassets,theresolutionofthisclaimcould

result

in

asubstantial

unfunded

liability,

which

PershingSquarehasfailedtoincludeinitsanalysis(2).


(1) GeneralGrowth

Properties,

Fools

Gold,

Hovde

Capital

Advisors,

LLC,

December

15,

2009.

(2) Source:companySECfilings. 200810K,p.53:PursuanttotheCSAandbasedonthecurrentmarketpriceofourcommonstock,thefinaldistribution

wouldresult intheBeneficiariesholdingsubstantiallyallofourcommonstock.

December29,2009


40/73



Wedont

believe

arational

person

would

find

it

reasonable

to

make

comparisons

tocashflowlevelsgeneratedduringtheheightofoneofthegreatesthousing

bubblesinthehistoryoftheUnitedStates,particularlygiventhatLasVegasis

oneofweakestmarketsinthecountry.

*PershingSquareCapitalManagement,L.P.LLCADetailedResponsetoHovdesShortThesisonGeneralGrowthPropertiesDecember22,

2009,page

11.

PershingSquarecommentary*

December29,2009


41/73


LasVegas

Single

Family

Median

Home

Prices

Have

Collapsed


Source:S&PCaseShillerHomePriceIndex,dataisasofSeptemberpertheNovember24th release.

0.00

50.00

100.00

150.00

200.00

250.00

Jan87

Oct87

Jul88

Apr89

Jan90

Oct90

Jul91

Apr92

Jan93

Oct93

Jul94

Apr95

Jan96

Oct96

Jul97

Apr98

Jan99

Oct99

Jul00

Apr01

Jan02

Oct02

Jul03

Apr04

Jan05

Oct05

Jul06

Apr07

Jan08

Oct08

Jul09

Rouseacquisition(November2004)

CaseShiller

Home

Price

Index

(Las

Vegas)

December29,2009


42/73


LasVegashadthehighestU.S.foreclosureratein

thethirdquarter,followedbycitiesinCaliforniaandFlorida,asunemploymentleftmoreborrowers

unable

to

make

their

mortgage

payments,

RealtyTrac

Inc.said.

LasVegasLeadsU.S.WithHighestForeclosureRate Bloomberg,10/28/09.

http://www.realtytrac.com/http://www.realtytrac.com/http://www.realtytrac.com/http://www.realtytrac.com/http://www.realtytrac.com/


43/73



LasVegas %ofHomesinForeclosure

Source:Zillow.com,dataasof12/1/09.

December29,2009


44/73

General

Growth

Management

Inc.



45/73

GeneralGrowthManagementInc.

PershingSquarebasestheirvaluationofthemanagementbusinessonaninternalprofitabilityestimatethatisnot

explainedor

justified

and

assumes

what

we

consider

to

be

a

veryhighvaluationmultiple.

BasedonfinancialdataprovidedbyGeneralGrowth

Propertiesshown

on

the

following

slide,

it

is

not

clear

to

us

thatthecompanyspropertymanagementoperationsare

evenprofitableandappeartobelossgenerating(see

highlightedline

items

on

following

page). As

such,

we

believe

thevalueofthisbusinessislikelynotmaterialinestimating

avaluefortheoverallenterprise.


Source:TheBucksReboundBeginsHeredatedMay27,2009 PershingSquareCapitalManagement,L.P.(p.59).

December29,2009


46/73

GeneralGrowthManagementInc.

Source:GeneralGrowthPropertiesQ309Supplementalreport.46HovdeCapitalAdvisorsLLCDecember29,2009


47/73

Net

Asset

Value


W B li O A l i I G T d h C


48/73

WeBelieveOurAnalysisIsGenerousTowardstheCompany

andThatItIsQuestionableWhetherThereIsEquityfor

CurrentShareholders

Thisisfrom

2008

ThisisQ3annualizedNOI,andrents

arerollingdownsharply(33%),

whichwilldrivelowerNOI.Pershing Square Analysis Framework*

More Realistic Hovde Scenario

($ in millions, except per share data) Low High

LTM Cash NOI $ 2,524 $ 2,524 $ 2,200 (1) $ 2,200 (1)

Cap Rate 8.5% 7.5% 8.5% 7.5%

Implied Value of GGP's REIT 29,694 33,653 25,882 29,333

Pro Rata for JVs:

Less: Total Debt (28,174) (28,174) (28,174) (28,174)

Less: Preferred Debt (121) (121) (121) (121)

Less: Other Liabilities (1,585) (1,585) (1,585) (1,585)

Plus: Cash 722 722 0 0

Plus: Other Assets 1,777 1,777 1,777 1,777

Plus: Development Pipeline 603 603 603 603

Implied Equity Value $ 2,916 $ 6,875 $ (1,618) $ 1,833

Per Share $ 9.11 $ 21.50 $ (5.06) $ 5.73

Cashwillbe

paidto

creditorsin

feesand

recovery

of

legalexpenses.

(1)See

calculation

of

NOI

on

page

30

of

General

Growth

Properties,

Fools

Gold,

Hovde

Capital

Advisors,

LLC,

December

15,

2009.


*TheBucksReboundBeginsHeredatedMay27,2009 PershingSquareCapitalManagement,L.P.(p.56)andHovdeCapitalAdvisorsanalysis.

W B li O A l i I G T d th C


49/73



CurrentShareholders


Worst Case Scenario - Assumes 10% Decline From Hovde Base Case NOI (1)

Pershing Square Analysis Framework (2)

($ in millions, except per share data) Low High

Cash NOI(3) $ 2,000 $ 2,000

Cap Rate 8.5% 7.5%

Implied Value of GGP's REIT 23,529 26,667

Pro Rata for JVs:

Less: Total Debt (28,174) (28,174)

Less: Preferred Debt (121) (121)

Less: Other Liabilities (1,585) (1,585)

Plus: Cash (3) - -

Plus: Other Assets 1,777 1,777

Plus: Development Pipeline 603 603Implied Equity Value $ (3,971) $ (833)

Per Share $ (12.42) $ (2.61)

(1)SeecalculationofNOIonpage30ofGeneralGrowthProperties,FoolsGold,HovdeCapitalAdvisors,LLC,December15,2009.

(2)Analysis

taken

from

The

Bucks

Rebound

Begins

Here

dated

May

27,

2009

Pershing

Square

Capital

Management,

L.P.

(p.

56).

(3)HovdeCapitalAdvisorsanalysisassumes cashNOIof$2.0billion,andunlikePershingSquare,assumescashispaidoutinfeestosecuredandunsecuredcreditors.

December29,2009


50/73



CurrentShareholders

BestCase RealisticCase


Best Case - Assuming Conversion

($ in millions, except per share data) Conversion Price Range $5-$8

Annualized Cash NOI (1) $ 2,200 $ 2,200 $ 2,200 $ 2,200

Cap Rate 7.5% 7.5% 7.5% 7.5%

Implied Value of GGP's REIT 29,333 29,333 29,333 29,333

Pro Rata for JVs:

Less: Total Debt (21,174) (21,174) (21,174) (21,174)

Less: Preferred Debt (121) (121) (121) (121)

Less: Other Liabilities (1,585) (1,585) (1,585) (1,585)

Plus: Cash (2) - - - -

Plus: Other Assets 1,777 1,777 1,777 1,777

Plus: Development Pipeline 603 603 603 603

Implied Equity Value $ 8,833 $ 8,833 $ 8,833 $ 8,833

Per Share $ 5.14 $ 5.94 $ 6.69 $ 7.39

Assumedconversionprice: $ 5.00 $ 6.00 $ 7.00 $ 8.00 $ 3.00 $ 4.00 $ 5.00 $ 6.00

Realistic Scenario - Assuming Conversion

Conversion Price Range $3-$6

$ 2,200 $ 2,200 $ 2,200 $ 2,200

8.5% 8.5% 8.5% 8.5%

25,882 25,882 25,882 25,882

(21,174) (21,174) (21,174) (21,174)

(121) (121) (121) (121)

(1,585) (1,585) (1,585) (1,585)

- - - -

1,777 1,777 1,777 1,777

603 603 603 603

$ 5,382 $ 5,382 $ 5,382 $ 5,382

$ 2.03 $ 2.60 $ 3.13 $ 3.62

(1) Seecalculation

on

page

24

of

General

Growth

Properties,

Fools

Gold,

Hovde

Capital

Advisors,

LLC,

December

15,

2009. Assumes

unsecured

debt

would

require

amoderate

discount

to

convert,

although

it

isquestionableinourviewwhethertherewillbeanyvalueforexistingshareholdersgiventhatwebelievethevalueofthedebtexceedsthatoftheassets.

(2) Assumes cash is paid out to creditors in forbearance fees and reimbursement of legal expenses.


51/73

Strategic

Acquisition

Potential



52/73


53/73

StrategicAcquisitionPotential?

Giventhespreadbetweenprivatemarketvalues,webelieveitisunlikelyreal

estateinvestors

would

choose

to

pay

apremium

for

apublic

company

while

assets

canbepurchasedintheprivatemarketatsubstantiallymorefavorableprices.

PublicREITsaretradingnearhistoricalextremehighvaluationswhileprivatemarketassetvaluesaredecliningprecipitously(seesectiononcaprates).


St t i A i iti P t ti l?


54/73

StrategicAcquisitionPotential?WhyWouldaBuyerPayaPremiumforanOverLeveragedCapitalStructure

WhenThere

Is

So

Much

Inventory

of

Distressed

Assets

to

Choose

From?


Source:RealCapitalAnalytics,bothchartsrepresentdatafrom1/0811/09.

December29,2009


55/73

BarclaysViewonGGP&SPG

WhileweagreethatSimonwillbeanindustryconsolidatorgoingforward,wecontinuetobelievethattransactionswillbechallengingandthatanoutrightacquisitionofGeneralGrowthisunlikely.Totheextent

Simoncan

work

out

ameans

to

acquire

some

of

General

Growths

better

assetsoutofbankruptcy,webelievethatitwouldprovidelongtermvalueforthecompany.Overall,webelievethatgivenmanagementstrackrecordthatwhenSimondoesexecuteonadeal,itwillbeeconomicforthecompanyandshareholders.

Barclays,GGPandSPG:AnUpdate12/22/09.


Weagree,andbelievethatSimonisasophisticatedinvestorandallocatorof

capital,andwouldnotlikelyhaveinterestinacquiringGGPanywherenear

currentlevels.

HovdeCommentary

December29,2009


56/73

Retail

Store

Closures



57/73

HolidaySalesContinuetoStruggle

Followingarelativelysubduedlastminuteshoppingrushbefore

Christmas,retailers

were

hoping

to

entice

consumers

to

keep

on

buying

aftertheholiday. MoreretailersplannedInternetsalesthisyearinan

attempttocashinonthegrowthofecommerce,oneofthefewbright

spotsinanotherwiselacklusterholidayshoppingseason.

RetailersTurn

to

Internet

to

Spur

Postholiday

Business

Wall

Street

Journal

12/28/09



58/73

RetailStoreClosuresContinuetoSurge


Source:ISIGroup

December29,2009


59/73

ConsumersContinuetoSave

Therecessionhascausedaseismicshiftintheconsumerculture,

convertingdie

hard

spenders

into

savers.

A

growing

number

of

people,

eithersmartingfromajoblossorspookedbythefinancialcrisesofothers,

arescramblingtogetoutofdebt,establishemergencyfunds,andaddto

theirretirementandsavingsaccounts.

Afterhaving

taken

the

first

plunge

by

cutting

holiday

spending,

many

are

seekingmoresubstantialideasonhowtosustaintheirfrugality.

WeakeconomymotivatesAmericanstosavemore WashingtonPost 12/27/09


We Believe Pershing Square Is


60/73

WeBelievePershingSquareIs

Outof

Touch


Thiscompanyhad61locations,sothis

means48godark.

Thiscompanyhad30locations,sothis

means24godark.

Thiscompanyhad175locations,so

thismeans129godark.

Howis201storesgoingdarkinthis

examplegoingtodriveincreased

traffic?


Hovdewondershow?*

December29,2009


61/73

TheStateofRetail

DoesPershingSquarenotthinkthegreatesteconomicdownturnsincethegreatdepression,theimplosionofperhapsthegreatestconsumercreditbubbleinhistory,andoneofthegreatestperiodsof

wealth

destruction

in

United

States

history

has

not

impaired

consumerspendinghabitsfortheforeseeablefuture?

DoesPershingSquarenotbelievetheinternetisamorecosteffectiveretaildistributionchannelthatcontinuestogainshare

awayfrom

traditional

physical

retail?

DoesPershingSquarereallybelievediscountbigbox,nonmallretailersarenotmorepricecompetitivethanspecialty,mallbasedretailersandaregainingmarketshare?

Wewould

encourage

investors

to

perform

their

own

diligence

and

walktheirlocalmalls. Wewouldencourageinvestorstohavediscussionswithmallbasedretailerstofindoutwhatishappeningwithsalestrendsaswellasleasenegotiationswithlandlords.



62/73

Analysis

of

T2

Partners

Commentary



63/73

T2PartnersCashFlowAnalysisFlaws

WewanttohighlightwhatwebelieveisanerrorinananalysispublishedbyT2Partnersthatderiveda$22persharevaluefortheequityofGeneralGrowth.

Thisanalysisusedthefollowingcalculation: NOI:$2.4billion(aswehavestated,webelievethisistoohighand$2.2billionisamoreaccurate

projection) DebtService:$1.1billion webelievethisisanerrorbecause: Thecompanysannualdebtserviceis$1.5billion(preplanofemergence)andnowanadditional$1.9billion

ofprincipalamortizationwillbeaddedover6years,orapproximately$300millionperyear,whichbringsthedebtservicefigureto$1.8billionandtheresultingcashflowestimateto$300millionasopposedtothe$1.0billioncitedbyT2Partners.

Notonlyisthedebtservicefigureinaccurateinthecashflowcalculation,butthecomparablemultipleisbased

on

an

FFO

multiple,

which

is

after

general

and

administrative

and

other

expenses,

which

we

believe

wouldconservativelyrepresent$100millionannuallybasedonprebankruptcylevelsofG&A(percompanysupplementalfinancialreportsfor2007and2008).

Usesa14xmultiple,referencingSimonPropertiesasthecomparablebenchmark,butwewouldarguethat,basedonleveragelevels,Macerich(NYSE:MAC),whichtradesat11x, isamoreappropriatecomparison.

Usingthecorrectdebtservicefigure,thisanalysiswouldleadyoutoanegativevalueforthecompanysequity:$300mmx14=$4.2billion,less$7billioninunsecureddebt=NEGATIVE$2.8billion.

Basedonthepointsabove,webelievetheT2Partnersanalysisisflawed.


(1)T2PartnersGeneralGrowthProperties:RebuttingtheBearsSeekingAlpha,12/16/09.

December29,2009


64/73

Portfolio

Risks


A Few Diamonds But Theres An Awful


65/73

AFewDiamonds,ButThere sAnAwful

Lotof

Hair

Too

Over58millionsquarefeetofvacantanchortenantspace.

29%ofportfolioisinmarketswithsignificantlyaboveaverageunemployment(CA,FL,GA,MI,

NV). $273millionofunfundeddevelopmentand

redevelopmentprojects.

HughesEstate

heirs

contingent

payment

this

couldrepresentansubstantialunfundedliability(seep.4).


Source:GeneralGrowthSECfilings:,USBureauofLaborStatistics.

December29,2009


66/73

TheUnemployedDontShopMuch


%ofGGP Unemp.

State GLA(1) Rate

CA 9.1% 14.7%

MI 6.0% 12.3%

FL 5.9% 11.5%

GA 4.5% 10.2%

NV 3.8% 12.3%

US

10.0%

Source:USBureauofLaborStatistics,asofNovember2009.

(1)GeneralGrowthSECfilings.December29,2009


67/73

LasVegas(3.8%ofGGPGLA)

HovdeCapitalAdvisorsLLC 67Source:CBRichardEllis.

Retail

December29,2009


68/73

LasVegas(3.8%ofGGPGLA)

HovdeCapitalAdvisorsLLC 68Source:CBRichardEllis.

December29,2009

Dont Take Our Word Use


69/73

Don tTakeOurWord Use

IndependentThird

Party

Data

Sources

Wewouldencourageinvestorstoconducttheirownresearchoncommercialrealestateandregionalmall

fundamentalsto

better

understand

what

is

happening

inprivatemarkets.

Inadditiontovastamountsofdataavailablefrompubliccompanies,therearenumeroussourcesofindependent

third

party

data

providers

that

track

demographicandemploymenttrendsaswellastrendsinrealestatefundamentals(occupancy,rents,

transactionaldata,

etc.),

such

as

CB

Richard

Ellis,

Jones

LangLaSalle,Reis,andRealCapitalAnalytics tonameafew.



70/73

Summary


S


71/73

Summary We

would

encourage

investors

to

conduct

their

own

analysis

based

on

the

extensive

data

availableinthepublicrealmandthirdpartyindependentdata,asopposedtorelyingontheopinionofanyone,letaloneananalysisperformedbyPershingSquarethatreliesuponproformafigures,undisclosedcalculations,andspeculationsastothefuturedirectionorperceivedlevelofcaprates. Webelievewheninvestorsdotheirownhomework,theywillarriveataconclusionsimilartoours.

WebelieveourcalculationofNOIisaccurateandinlinewithconsensusestimatesbysellsideanalystsandthatPershingSquaresestimateisnotconsistentwiththemethodologyusedbymostWallStreetanalysts,andinouropinion,isnotbasedonreasonableassumptions.

ContinuedsignificantdeclinesinrentalratesandleasingspreadsarelikelytodrivesubstantiallylowerNOIfortheforeseeablefuture,makingourNOIestimategenerousinour

view.

Giventhatthepurchaseofthemasterplannedcommunitysegmentassetswasnearwhatweviewaspeakpricesandthesubsequentdeclineinlandprices,wethinkthereislittle,ifany,valueintheseassets. Furthermore,theheirsoftheHughesestateholdacontingentclaimrelatedtothevaluationoftheseassets,and,ifthereissignificantvalueintheseassets,the

resolutionof

this

claim

could

result

in

asubstantial

unfunded

liability,

which

Pershing

Square

hasfailedtoincludeinitsanalysis

Aswehavedemonstrated,webelievethevalueoftheGeneralGrowthManagementInc.businesssegmentisimmaterialtotheanalysisoftheGeneralGrowthenterprisegivenitsapparentnegativeoperatingearnings.



72/73

Summary(Continued)

DespitethecommentaryofPershingSquare,webelievethatmarketbased,observabledatapointsandcomparableanalysissuggestthatcapitalizationratesforGeneralGrowthassetsarenotbelow8%inourview.

LeverageatGeneralGrowthisnotsustainableinourviewanddebtservicecoverageappearsminimal

based

on

the

companys

own

projections,

suggesting

deleveraging

is

required

and

thatlowerportionsofthecapitalstructuremaybeatriskofsignificantdilutionoftheirclaims. Wewouldencourageequityinvestorstothoroughlyresearchtheextentofnonequityclaimstounderstandthepotentialriskofdilution.

Thepotentialforthecompanytobeacquiredbyastrategicsuitorseemsuncertain,thoughthelikelihoodofatransactionatcurrentequitypricelevelsappearsremoteinourview,given

thatthe

parties

that

are

purported

to

be

the

acquirers

of

the

company

have

acquired

the

unsecureddebtbutapparentlylackinterestintheequityatmuchlowerprices.

RetailstoreclosuresarecontinuingtoaccelerateandpoorholidaysalesarelikelytoleadtofurthertenantdistressandstoreclosuresthatwillpressuretheoperatingfundamentalsofGeneralGrowthandmallsingeneral.

Westand

by

our

original

analysis

and

believe

it

is

questionable

whether

there

will

be

any

valueforcurrentshareholdersinGGPcommonstock. Wehavenointerestincontinuingapublicdialogueonthiscompanyandwouldagainencourageinvestorstoperformtheirowninvestigationintothefacts.



73/73

Disclosures

FundsadvisedbyHovdeCapitalAdvisors,LLCandoneofitsprincipalshaveestablishedshortpositionsinthecommonstockofGeneralGrowthProperties(OTC:GGWPQ)andinthe

commonstockofMacerich(NYSE:MAC).Theirpositionsinthesestocksandothersmay

changewithout

further

notice.

NeitherthefundsadvisedbyoranyaffiliatesofHovdeCapitalAdvisors,LLCholdpositionsinanycompaniesmentionedinthisdocumentotherthanthosementionedabove.

TheopinionsandviewsexpressedinthisdocumentandtheanalysissetforthhereinmaychangeandHovdeCapitalAdvisors,LLCisnotundertakingtoupdateitsopinions,viewsor

analysis.

Althoughthefactualinformationcontainedinthisdocumentisbelievedtobeaccurate,HovdeCapitalAdvisors,LLCdoesnotwarrantitsaccuracyorcompleteness.

Thisdocumentisnotintendedtobe,andshouldnotbeconstruedas,investmentadviceora

recommendationto

buy

or

to

sell

any

security.

general growth properties - 2 - hovde

Documents