1:28: Nothing happening yet. Jazz is playing
1:31: Ackman in the house. "I'm supposed to say we have a 75 cash settled call position on Target...inside joke."
1:31: This is not "activist v company." We've had a wonderful dialogue. This is a great management team.
Where do we stand now? In May we made a presentation. We're trying to iterate a solution to a problem we've identified. The company has raised some concerns. We've made adjustments to the transaction
- Shout-out to advisors UBS and Sullivan & Cromwell
- Real estate side of Target = "superb assets." 95% of the buildings are owned. Own 84% of distribution centers. Known for keeping stores and parking lots clean.
- Target owns highest percentage of its real estate compared to other big box retailers.
- What if Target were to rent its real estate?
Objectives:
- Eliminate the stock market's ascribed discount to the intrinsic value of Target's real estate and allow the company to: retain control of buildings and brand (mentions again the cleanliness of parking lots), 100% flexibility with respect to construction etc, improve company's free cash flow and access to capital, increase company's ROIC ad lower its cost of capital, maintain investment grade credit rating, increase EPS growth rate, minimize tax leakage ("as much as we are patriotic Americans)
- "Pershing has solved the simultaneous equations that need to be solved"
- "What we've got will create tremendous shareholder value"
- Spin off a REIT that will own the land, Target maintains control of building for 75 years
- Target has a partner that will put up the money for land...there'll be a close working relationship
On the webcast, his lips aren't lining up to the words coming out of his mouth
- "Execution not impacted by current markets"
- "No question" that Target that will be able to make rent
- "TIP Reit" (the lessor) will be responsible for stuff like cleaning the parking lots
Jokes about his pointer not working
- Target today is trading around $40/share, do this deal, bam: $70/share. 12 months later: $83/share. Other benefits of doing what I say:
- Control over buildings and brand
- Improves T's access to capital, reduces capital needs moving forward
- Creates non-cash currency for tax-efficient real estate acquisitions
- Improves management focus on core operations
- Tax-free spin off
- Increases total free cash flow
- Improves stove-level ROIC and Target's EPS growth rate
- Maintains investment grade credit rating profile
- Increases total dividends from .60/share today to 1.86/share in 2009E
- Enormous value creation
"Today, only the most stable and unlevered (ick) businesses can freely access the debt and equity capital markets. TIP REIT will be one of the most stable companies in the world today."
"My dad asked me what he should do with his money. I said BUY TIP REIT!"
"Every business is like a bank. This transaction hugely increases return on assets, hugely decreases return on liability."
-High demand for liquid, inflation-protected, income-oriented securities that offer higher yields than TIPS
"I apologize for drinking so much but I need to lubricate the voice."
2:45 "I know you guys want to jump out of your seats and go buy the stock--that's why you have Blackberries."
"There's supposed to be Kleenex here. I don't see any." [spots 'em. blows nose into mic, apologizes to people listening in on the phone]
Posted by guest , Oct 29, 2008 1:30PM
just the tip, baby?
Posted by prgy , Oct 29, 2008 1:38PM
Hey @ 1 I couldn't agree more. Speaking of tips, I got so drunk last Halloween that I vomited all over my kids costumes while they were trick-or-treating.
Posted by guest , Oct 29, 2008 1:39PM
parking lots clean.
Since when?
Posted by HighYield , Oct 29, 2008 1:39PM
ALL YOUR BASE ARE BELONG TO US.
Posted by guest , Oct 29, 2008 1:41PM
#4????????????
Posted by guest , Oct 29, 2008 1:42PM
#4????????????
Posted by guest , Oct 29, 2008 1:46PM
wtf is the blockbuster news that's going to save us all!?
out with it already, ackman!
Posted by guest , Oct 29, 2008 1:47PM
you clever bitch.
Posted by guest , Oct 29, 2008 1:50PM
On the webcast, his lips aren't lining up to the words coming out of his mouth?
Are you using a Lehman modem?
No issues here.
Posted by guest , Oct 29, 2008 1:55PM
ALL YOUR WHITE BITCHES ARE BELONG TO US.
Posted by guest , Oct 29, 2008 1:58PM
Are they going to incorporate as a bank, making the govt the partner?
Posted by guest , Oct 29, 2008 1:58PM
CNBC just thew down this knowledge... they be late
Posted by guest , Oct 29, 2008 2:01PM
I havea Lehman modem.
Posted by guest , Oct 29, 2008 2:03PM
I have a Lehman merkin.
Posted by guest , Oct 29, 2008 2:06PM
Bills dad buys TIP REIT.
Posted by guest , Oct 29, 2008 2:07PM
UP REITs for all!!
Posted by guest , Oct 29, 2008 2:10PM
I wish I had a nickel for every time someone talks about a firm's "hidden real estate assets" and "unlocking value" - then they start selling, and realizing that the market value of these assets isn't so high (limited number of buyers for big boxes), and what buyers there are know there's a big seller out there.
Ackman - you can't talk the price of Target up. Nice try though - thanks for playing.
Posted by guest , Oct 29, 2008 2:12PM
@17. Ackman can do anything he wants.
Posted by guest , Oct 29, 2008 2:20PM
Slam on Cerberus!
Posted by guest , Oct 29, 2008 2:21PM
@18: Ackman would definitely agree with you there.
Posted by guest , Oct 29, 2008 2:21PM
is there a link to watch the whole webcast from the beginning? with slides would be preferable.
Posted by guest , Oct 29, 2008 2:24PM
ALL YOUR MODEM ARE BELONG TO US.
Posted by guest , Oct 29, 2008 2:28PM
Brooms need to merge with the proletariat to keep parking lots clean.
Posted by guest , Oct 29, 2008 2:36PM
what an arrogant butthole ackman is ... talking about TIPS as a great investment and "i told my dad to buy them before i started talking so he could get a better price" ... because, of course, ackman's words will move the market on TIPS
Posted by guest , Oct 29, 2008 2:38PM
@24 hahahah I fully agree.
Posted by guest , Oct 29, 2008 2:43PM
Ackman,
Just remember to send back my original powerpoint presentation when you're done. And, goddamn it, don't forget to change the Pershing Square logos back to ESL ones!!
-Eddie
Posted by guest , Oct 29, 2008 2:55PM
anyone have a link to the presentation
Posted by Bess Levin , Oct 29, 2008 3:01PM
@27- www.visualwebcaster.com/pstgt
Posted by guest , Oct 29, 2008 3:08PM
Did some other guy do something like this with a retailer? Thought I recall seeing something in the news about a venerable retailer's stock tanking.
Posted by guest , Oct 29, 2008 4:21PM
I think maybe Federated Stores did something similar in the past although not sure.
Anyways, how can you have a tax-free spin-off and have the parent (Target) retain control of SpinCo? Pretty sure this wouldn't normally be allowed without some interesting structuring.
Anyone know???
Posted by guest , Oct 29, 2008 4:33PM
@29
mervyns
Posted by guest , Oct 29, 2008 5:43PM
I tuned into this farce of a presentation today and got quite a laugh out of all this.
UBS cooked this one up to "build business" with Ackman- go see the JC Flowers SallieMae buyout and its results, on both parties. Well same crack pot team dreamt this one up.
I know this team, clever bunch but not too bright when it comes to markets or management concerns- again go see SLM deal.
TIP Reit, swell idea in theory but NO retailer in this business atmosphere will do anything to that would cause further seperation between said retailer and customer.
And for all the PowerPoint slides, neat graphs and catchy new paper rips, this is all this TIP Reit really does- seperate TGT from its stores so they can get this.. pay rent back to the TIP REIT- whoooaooaaaaaa!
One simple question for Square Fool, exactly who will be teh "outside" directors on that REIT board- you can't have proper governance stucture here- conflicts will ensue once biz contracts or capital gets scarce and TGT retail decides these rents are too high or even worse, the real estate has not been maintained compared to the competition. Fool slams current REITs and thier "wacky capex" but its that very same cap ex that keeps the clients in the real estate. Sever this check and balance na dtry to replicate on dual indpenedent boards and that 17% EPS pop will be more like a 71% eps drop.
Fool and his money.... fuck turd. "Go back to business school" billy and take your TGT losses with you.
deeznutz
Posted by guest , Oct 29, 2008 6:28PM
Walmart has been doing this for years. They sell all the real estate to a REIT and then it frees up more capital to build more stores. When the only or main tenant is Walmart is makes for a nice investment.
Posted by guest , Oct 29, 2008 10:31PM
Agree with you Deeznutz @32
I can't see how this TIP REIT can fly in the current environment. Ackman is just trying to monetise whatever asset is left in TGT to pay himself.
I think you summed it all up with you point that "NO retailer in this business atmosphere will do anything to that would cause further seperation between said retailer and customer."
Look at how much damage Ed Lampert has done to the Sear-K Mart business. After all the capital he's taken out of the business and closure of stores. I reckon my cupboard is better stocked than most K Mart stores.