Bill Ackman Sees Value In American Real Estate

Bill Ackman of Pershing Square Capital is speaking at the Bloomberg 2010 Hedge Fund Conference and he is saying that Pershing is effectively a private equity firm, but Pershing doesn't buy control. It earns control of a company. He is saying that he has more sway because of turning a company around, as he did with General Growth Properties GGP, he has more sway with other investors which will help with companies like Fortune Brands FO. Regarding GGP, he is saying that bankruptcy investors looking for equity type returns usually hold the debt. GGP filed Chapter 11 not because it couldn't cover interest expense, but because it couldn't refinance its debt. What attracted him to GGP, Ackman said is that its market cap in September 2009 was around $10 billion. 60 days later, after Lehman filed, it fell to $100 million. Pershing and Ackman bought as many shares as they could. The plan all along for GGP was Ch. 11. GGP was solvent despite its filing for Ch. 11. During the restructuring, GGP hired Adam Metz, who Ackman says is a very talented advisor. Brookfield Asset Management BAM became interested in the company and was going to do a take under, which Pershing didn't like, so Pershing brought along Fairholme Funds to help out with the recapitalization of the company. Ackman said GGP has much less competition today than in previous years because of credit conditions. After the bankruptcy, the company took its hidden assets and turned it into Howard Hughes HHC. HHC holds 650 acres in Princeton, NJ, which is some of the most valuable land in the country. Ackman said he didn't actually know that. His total investment is now worth over $1 billion in profits. Ackman is saying that he sees no risk in not being diversified, because he picks the investments very carefully. He has 10 investments, which represents 90% of Pershing's capital.