Friday, November 5, 2010

Bruce Flatt's comments on GGP

 
General Growth Properties
 
Next week, General Growth Properties will emerge from bankruptcy and be split into two companies. Upon separation, we will own approximately 27% of General Growth (“GGP”) and approximately 14% of The Howard Hughes Corporation (“HHC”) on a fully diluted basis. Our overall investment will be approximately $2.5 billion, of which approximately $1 billion will be from our balance sheet and the remainder from our clients. GGP, the second largest U.S. mall owner, will complete an equity offering prior to year end to redeem some of the capital committed by other shareholders to the recapitalization and at that time, our three year involvement with GGP will result in the company being re-launched with a strong balance sheet, as it becomes a major investment for Brookfield.
 
From an economic standpoint, like most of our other businesses, we are seeing retail sales slowly recovering. With this recovery in front of us, and with some targeted strategic initiatives as well as capital investment, we believe we can remake GGP into the best retail shopping mall company in America. Recently, three of our officers were elected as board members of GGP, with me as chairman, and in addition we provided the company with a chief financial officer from our management team in order to assist in implementing its plans. GGP also last week announced the hiring of a CEO with extensive retail property experience, who we are very excited about working with. With these management additions, and in conjunction with the balance sheet strength coming out of recapitalization, we believe that GGP has substantial room to grow cash flows over the next five years.
 
In addition, as a result of the court reorganization, there are no make-whole costs to redeem the majority of the $18 billion of mortgages in place in the company and given current interest levels, the opportunity to refinance these mortgages is a benefit not envisaged two years ago. As a result, GGP is rapidly moving to lengthen the overall term of its financings, reduce interest costs, and eliminate much of the substantial amortization which was embedded into the mortgages currently in place.
 
We believe that with a concerted effort, GGP could be one of our more successful investments in the fullness of time, and we are excited to have an opportunity to be involved in this great company.
 
Full Disclosure: Long GGP / HHC

Thursday, November 4, 2010

Standard Financial

Just picked up some shares of Standard Financial, which is a recent mutual-to-stock conversion selling well below book value.  Furthermore, activist investor Joseph Stilwell owns 8% of the company. Item 4 of his 13D filing states the following:

"We hope to work with existing management and the board of the Issuer to maximize shareholder value.  We will encourage management and the board to pay dividends to shareholders and repurchase shares of outstanding Common Stock with excess capital, and will support them if they do so.  We oppose using excess capital to "bulk up" on securities or to rapidly increase the loan portfolio.  We will support only a gradual increase in the branch network.  If the Issuer pursues any action that dilutes tangible book value per share, we will aggressively seek board representation."

Disclosure: Long Standard Financial (STND)