In a presentation he gave in late December, William Ackman of Pershing Square Capital Management revealed that in his estimation, shares of the bankrupt Chicago-based mall operator General Growth Properties Inc. (OTC: GGWPQ) are drastically undervalued. Mr. Ackman is a founding partner at Pershing Square, which, according to the New York Times, owns 7.5% of General Growth’s common stock and holds a 25% economic interest in the operator. Since General Growth filed for bankruptcy in April of 2009, share prices have increased to over 20 times Pershing’s original purchase price. Mr. Ackman values General Growth between $24 and $43 a share, while it is currently trading around $12.00.
Pershing Square’s presentation was prompted by Hovde Capital Advisors’ recent and more negative report on the mall operator. Hovde, which holds short positions General Growth’s equity, argues that General Growth’s shares are overvalued, that rising unemployment and the housing market slump have discouraged American consumers from frequenting malls, and that the market position of the mall business itself has begun an irreversible decline. Pershing Square’s presentation takes issue with Hovde’s conclusions and assertions and offers a much more positive future for the operator. According to Mr. Ackman, G.G.P. shares are undervalued, not overvalued, and both the mall business and consumer confidence are growing as the economy improves. In his third-quarter investor report, Mr. Ackman additionally outlined his belief that G.G.P. will eventually extend a large part of its secured debts and become an independent company or, alternatively, be sold to another party.
William Ackman founded Pershing Square Capital Management in 2003. The deep value and shareholder activist-oriented hedge fund manager is well-known for its shareholder activist battles against Target Corp., Ceridian Corp., McDonald’s, Visa, and Wendy’s.
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