Pershing Square Finds Bargain In Bid for General Growth Properties
Pershing's real estate arbitrage technique provides lucrative return on equity investment in General Growth.
By Imogen Rose-Smith
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Real estate is in hedge fund manager William Ackman’s DNA. His grandfather and great-uncle started a real estate investment firm in Manhattan in 1926. Today known as Ackman-Ziff Real Estate Group, it is chaired by Ackman’s father, Lawrence. As founder and CEO of $5.8 billion Pershing Square Capital Management (also based in Manhattan), Ackman, 44, often engages in real estate arbitrage: taking a position in a company whose stock price does not fully reflect the value of the underlying property.
This technique may turn out to be the source of the most lucrative trade in the history of Pershing Square — or that of any other firm. At the nub of it is General Growth Properties, the Chicago real estate concern that owns or manages some 200 shopping malls. Begun in 1954, General Growth filed for Chapter 11 in April of last year. After the ’08 market meltdown froze the commercial-mortgage-backed loan market, the company couldn’t refinance its debt.....