$$GGP Report

I would expect more of these in the coming months. The report is long (45 pages) and detailed.

For those who do not want to read it all, here are the crib notes:

• Values combined entity at $16.50. GGP @$12.50 and Spinco @$4
• Admits estimates are “conservative”
• GGP valued at a 6.8% cap rate 40 bps above the peer group of 6.4%. Macerich trades at a 6.4% cap rate
• GGP SS income growth assumed @2% vs 7% for co.
• Spinco valuation up for debate
• CS values MDC land @ $69k per acre for Spinco. Summerline land just sold for $598k per acre. Implies considerable upside to $4 valuation based on BV.
• “Investors assuming Spinco is worthless are using the “New Math””:  Quote by CS

Clearly we disagree with the valuation. BUT, is is nice to see a VERY detailed and methodical reports that still leaves upside in shares. I have been saying 12months should see $17-$20 for the combined entity and this report backs my view.

If we take some of their conservative assumptions and tweak them over so slightly, we easily jump into that range.  Just having GGP trade at a cap to its peer group does it. If they trade above (we think the should) then we go right to the top end of it.  This assumes we keep all other estimates of their the same (again, we feel and they admit these are very conservative).

I can’t fault CS on this. It is a fair report based on their assumptions. It is too low and I they do allude to the “significant upside potential” should their estimates prove to conservative.

GGP Credit Suisse Report 9/14……(click to open .pdf)