ChrisWebPub

The Logic Behind Bill Ackman's Purchase of General Growth Properties

See CBL, they're like GGP but without the same degree of debt problems (ie a smaller load and thus-far financing success). They're also still paying their dividend (albeit at a reduced rate, still the yield is above 20% right now).

As for GGP, the key thing as I see it is the positive cash flow. I cannot see commercial real estate values falling that much, because they tend to be based on rents, and rents are still there. Unlike residential real estate which is valued based on some esoteric need to live in a certain place with certain amenities, commercial real estate is valued based on how much money it brings in on a monthly basis.

Even with added mall vacancies, the cash flow puts a floor on the property value, like a dividend does with an equity.

GGP's business model is in fine condition, they can afford to service a normal monthly payment on their debt, and have cash left over to pay a dividend. The only thing they can't afford is a one time balloon payment at the end of a short term loan. So because they can't refinance commercial real estate values are going to plummet and no one is going to want properties that bring in hundreds of millions of dollars in rent? I find that reasoning suspect.