General Growth Properties Inc. (GGP)

[millionflair]

Found this interesting, not so much for GGP, but gives some insight to Ackman. He's got a set on him that's for sure.
Thought it also interesting that Ackman's number is on the bottom of this letter. Anyone want to call him and ask him what his REAL plans are, i.e. taking over GGP/Rouse and adding Target REIT's to his portfolio which includes Borders, Barnes and Nobles, Sears, Wendy's... ? Target's board shot down him and his recommendations for new board members I see. Anyway, Ackman sure isn't afraid to put in his 2 cents worth when it comes to the big boys in the govt. (This is from Sept. 2008):

Pershing Square Capital Management Releases Letter to U.S. Treasury Department Regarding Fannie Mae and Freddie Mac

NEW YORK, Sept. 6 /PRNewswire/ -- Pershing Square Capital Management,
L.P. sent the following letter to the U.S. Treasury Department regarding
Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE):




September 5, 2008

The Honorable Henry M. Paulson, Jr.
Secretary United States Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220

Re: Fannie Mae/Freddie Mac Restructuring

Dear Secretary Paulson:
We understand that a Treasury plan for Fannie/Freddie ("the GSEs") may
be announced this weekend. We thought you might find useful some further
thoughts on potential GSE solutions.

As you are likely aware, we had previously distributed a proposed
restructuring plan for the GSEs. In that plan, under a prepackaged
conservatorship, equity interests would be extinguished, subordinated debt
would be exchanged for warrants, and senior debt would be exchanged for new
senior debt and common equity in the newly recapitalized entities. The
government would write a put to the new common equity holders which would
expire in three years.

It appears, however, that the GSEs may need help more quickly, and
conservatorship may not be triggered until the GSEs are formally determined
to be undercapitalized. As such, in the event the government needs to
inject capital immediately, we suggest you consider the following
transaction ("the Transaction").

In order to minimize risk to tax payers while being equitable to other
constituents, we suggest that the Treasury consider purchasing senior
subordinate debt in the two companies in an amount sufficient to address
their capital needs in the short to intermediate term. This senior sub debt
would be junior in right of payment to the outstanding senior unsecured
debt and senior to the outstanding sub debt, preferred stock, and common
equity. We refer to the outstanding sub debt, preferred and common stock as
"the Subordinate Securities."

The issuance of senior sub debt is permitted under the GSE legislation
and under the existing terms of the outstanding debt and equity securities
of the two entities (please see the attached memo for further details). As
a condition of Treasury's purchase of senior sub debt, the GSEs would defer
the interest payments on the outstanding sub debt (which can be deferred
for as much as five years), and the dividend payments on preferred and
common stock. All of the Subordinate Securities would continue to remain
outstanding according to their existing terms.

The new senior sub debt should have a market-based coupon and Treasury
should receive low-strike price warrants (penny warrants) for a substantial
portion, i.e., 49% of the two companies. The coupon and warrant structure
should be as close to fair-market-value terms as possible. The ultimate
determination of fairness would be the willingness of non-government
investors to purchase the Transaction securities on the same basis as
Treasury. As part of the Transaction, the GSEs would deleverage their
capital structures by paying down senior debt from the free cash flow
generated by their core businesses further improving the position of the
new senior sub debt.

The benefits of the Transaction are as follows:

-- The Transaction can be accomplished under the existing terms of the
outstanding GSE securities without any required consent other than from the
GSEs.

-- The new security would be senior in right of payment to the existing
sub debt and preferred stock minimizing the risk to tax payers while
providing substantial support to the outstanding senior debt that has been
deemed implicitly guaranteed by the government.

-- The new debt interest payments would be tax deductible, reducing the
after-tax cost of capital to the GSEs, particularly when compared with
preferred stock.

-- In the event the outlook and performance of the GSEs and their
assets were to improve dramatically, the senior sub debt could be redeemed,
distributions to the Subordinate Securities could resume, and their values
would increase accordingly.

-- In the event that the GSEs' fundamentals continued to deteriorate
and they became undercapitalized, the GSEs could be placed in
conservatorship. In conservatorship, their balance sheets could be
restructured along the lines of our original plan or another plan with the
Treasury's senior sub debt treated preferentially to the Subordinate
Securities, again minimizing risk to the tax payer.

-- The Transaction would be fundamentally fair to all constituents and
would respect the existing terms and corporate hierarchy of all outstanding
GSE securities.

-- The Transaction would minimize moral hazard issues for sub debt,
preferred, and common stock investors.

Most importantly, we believe there are serious negative implications
for other large financial institutions in the event the Treasury were to
bail out Subordinate Security holders. The Treasury and OFHEO have done
substantial research on the benefits to capital market discipline from
large financial institutions' issuance of subordinate debt, and the
destructiveness of the government implicitly or explicitly guaranteeing
such obligations.

See: Report to Congress "The Feasibility and Desirability of Mandatory
Subordinated Debt", Board of Governors of the Federal Reserve System and
United States Department of the Treasury (December 2000), available at:
http://www.federalreserve.gov/boarddocs/rptcongress/debt/subord_debt_2000.pdf

"Subordinated Debt Issuance by Fannie Mae and Freddie Mac", Valerie L.
Smith, Office of Federal Housing Enterprise Oversight, OFHEO WORKING
PAPERS, Working Paper 07 - 3 (June 2007), available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1000264;

"Signals from the Markets for Fannie Mae and Freddie Mac Subordinated
Debt", Robert N. Collender, Samantha Roberts, Valerie L. Smith, Office of
Federal Housing Enterprise Oversight, OFHEO WORKING PAPERS, Working Paper
07 - 4 (June 2007), available at:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1000240&rec=
1&srcabs=1000264 (due to length of the url, please copy and paste into
browser);

"Subordinated Debt and Bank Capital Reform", Douglas D. Evanoff,
Federal Reserve Bank of Chicago, Larry D. Wall, Federal Reserve Bank of
Atlanta, FRB Atlanta Working Paper No. 2000-24 (November 2000), available
at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=252754.

To the extent the Treasury were to bail out the GSEs' subordinate debt
- which was: (1) never implicitly guaranteed by the government, (2) always
rated below Triple A by the rating agencies, and (3) held by investors who
knowingly took on the risk of loss in exchange for a substantial credit
spread above the GSEs' senior debt - it would endanger the systemic
benefits from subordinate debt issuance for every highly leveraged banking
institution in the world and the capital markets at large.

Furthermore, we do not believe that the Treasury can purchase GSE sub
debt, preferred stock or common stock without incurring an immediate loss
to tax payers because of the enormous amount of existing debt senior to
these instruments. At a market coupon or dividend yield (to the extent that
one were to exist), any debt issued pari passu to the existing sub debt, or
preferred stock issued pari passu or even senior to the existing preferred
stock would require a yield that would be uneconomic for the GSEs. No
third- party investor would purchase these securities regardless of their
terms in light of their junior position in the GSEs' capital structure.

Please note that Pershing Square and affiliates own CDS on the
subordinate debt of the GSEs. We also note that nearly all participants in
the capital market debate on the GSEs are either long or short the
outstanding GSE securities.

We are contemporaneously releasing this letter to the public in the
interest of market transparency.




Respectfully,

William A. Ackman


CONTACT:
William A. Ackman
212-813-3700


SOURCE Pershing Square Capital Management, L.P.