Mick McGuire Value Investing Congress Presentation Marcato Capital Management

8th annual new york
value investing congress
CTOB! 1. 2012 N\ YO!K. NY

Perspectives on Book Value
Mick McGuire, Marcato Capital Management
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!"#$%"&'()"$ *+ ,**- ./01"2
3(+4(+5 6(44"+ ./01" *+ '7" ,/0/+&" 87""'
9&'*:"# ;<=;
Ihi: cccumenI i: ccnficenIic| cnc inIencec :c|e|y fcr Ihe cccre::ee cnc mcy ncI Le puL|i:hec cr ci:IriLuIec wiIhcuI Ihe expre::
wriIIen ccn:enI cf McrccIc CcpiIc| McncgemenI, LLC {McrccIc"). Ihi: cccumenI i: ncI inIencec fcr puL|ic u:e cr ci:IriLuIicn.
Ihi: cccumenI cce: ncI ccn:IiIuIe eiIher cn cffer Ic :e|| cr c :c|iciIcIicn cf cn cffer Ic Luy cny inIere:I in cny func c::ccicIec
wiIh McrccIc. /ny :uch cffer wcu|c cn|y Le mcce cI Ihe Iime c uc|ifiec cfferee receive: Ihe func: ccnficenIic| cffering
memcrcncum cnc re|cIec :uL:cripIicn cccumenIcIicn {IcgeIher, Ihe Cffering DccumenI:"). Ic Ihe exIenI, Iherefcre, Ihere i:
cny inccn:i:Iency LeIween Ihi: cccumenI cnc Ihe Cffering DccumenI:, Ihe Cffering DccumenI: gcvern in c|| re:pecI:.
Figure: prcvicec herein cre rcuncec c: cpp|iccL|e. lnfcrmcIicn ccnIcinec herein i: Le|ievec Ic Le cccurcIe cnc/cr cerivec
frcm :curce: which McrccIc Le|ieve: Ic Le re|icL|e: hcwever McrccIc ci:c|cim: cny cnc c|| |icLi|iIy c: Ic Ihe ccmp|eIene:: cr
cccurccy cf Ihe infcrmcIicn ccnIcinec herein cnc fcr cny cmi::icn: cf mcIeric| fccI:.
SecuriIie: cr inve:ImenI icec: cre pre:enIec Ic i||u:IrcIe McrccIc: Iypicc| re:ecrch prcce:: cnc ncI Ic :ugge:I cr :hcw
prcfiIcLi|iIy cf cny cr c|| Ircn:ccIicn:. Ihere :hcu|c Le nc c::umpIicn IhcI cny :pecific pcrIfc|ic :ecuriIie: icenIifiec cnc
ce:criLec herein were cr wi|| Le prcfiIcL|e. McrccIc mcy, cI cny Iime, reevc|ucIe iI: hc|cing: in cny :uch pc:iIicn:.
< 1 >
Di:c|c:ure:
Ccn:ervcIive /cccunIing Fu|e: Fcr FrcperIy CrecIe CppcrIuniIy
Scurce: F/S8.
Uncer G//F CccificcIicn SecIicn 30, land is recorded at cost cnc i: Ihen
:uLjecI Ic cn cngcing reccvercLi|iIy/impcirmenI Ie:I. ln mc:I c|| cc:e:, Ihe
ccrrying vc|ue cf Ihe |cnc cI cny pcinI in Iime i: Ihe lower of cost or fair
value.
Ihi: ccn |ecc Ic major understatements when Ihe mcrkeI vc|ue cf c
prcperIy i: we|| cLcve iI: criginc| cc:I, cnc cfIen cccur: when the property
in question is very old.
< 2 >
Uncervc|uec Lcnc Cn Ihe 8c|cnce SheeI
l. /|excncer & 8c|cwin {/LEX)
ll. Genccrp {GY)
lll. 8rcckfie|c Fe:icenIic| FrcperIie: {8FF)
< 3 >
l. /|excncer & 8c|cwin {/LEX)
< 4 >
/|excncer & 8c|cwin i: cne cf Ihe mc:I impcrIcnI ccmpcnie: in
Hcwcii: hi:Icry cnc pre:enI-ccy eccncmy
Fcuncec c: c :ugcr p|cnIcIicn in 1870 in Hcwcii, /|excncer &
8c|cwin cwn: rec| e:IcIe Lu:ine::e:
7. mi||icn :ucre feeI cf ceve|cpec GL/ cn Hcwcii cnc Ihe U.S.
mcin|cnc
Fec| e:IcIe ceve|cpmenI pipe|ine cn Hcwcii ccmpri:ing ~88,000 ccre:
CcpiIc|izcIicn:
EuiIy McrkeI Vc|ue: $1.3 Li||icn
IcIc| EnIerpri:e Vc|ue: $1.5 Li||icn
CpercIing SIcIi:Iic:
{2)
:
2011 Fevenue: $272 mi||icn
2011 E8lID/: $8 mi||icn
< 5 >
Iicker: /LEX"
FecenI SIcck Frice: $30
{1)
Scurce: Ccmpcny cccumenI:
{1) /|| fincncic|: in Ihi: pre:enIcIicn c::ume c :Icck price cf $30
{2) Exc|uce: ci:ccnIinuec cpercIicn:
/|excncer & 8c|cwin, lnc.
7.m cf ccmmercic| GL/ cn Hcwcii cnc Ihe U.S. mcin|cnc
/cuirec Ly reinve:Iing prcceec: cf prcperIy :c|e: cver Iime Ihrcugh Icx-
ceferrec 1031 exchcnge:
Diver:ifiec ccrc:: cffice, reIci|, incu:Iric|
CurrenI|y 27 |ec:ec cnc genercIing inccme
Deve|cpmenI pipe|ine in Hcwcii
Fe:crI cnc re:icenIic| prcperIie: in cifferenI :Icge: cf ceve|cpmenI
Fu||y cwnec prcjecI: ccmpri:ing ~20 enIiI|ec ccre:
JV prcjecI: reuiring minimc| cc:h ccnIriLuIicn:, ccmpri:ing cver 1,000
ccre:
Cwner:hip cf ccciIicnc| hiccen" |cnc c::eI:
>75,000 ccciIicnc| ccre: cn Mcui cnc Kcuci fcr pcIenIic| fuIure
ceve|cpmenI
ExIreme|y |cw Lc:i: given ccui:iIicn circc ~1870
CurrenI|y Leing fcrmec c: c hc|cing :IrcIegy
< >
/&8 FrcperIie:, lnc.
< 7 >
Ccmp|eIec ceve|cpmenI
prcperIie: fcr :c|e
JV ceve|cpmenI prcjecI:
Fu||y cwnec ceve|cpmenI
prcjecI:
FeIcinec inve:ImenI prcperIie:
{ie, |ec:ec CFE)
/LEX: 8c|cnce SheeI Sncp:hcI
< 8 >
Lec:ec, inccme-genercIing ccmmercic| rec|
e:IcIe pcrIfc|ic
Hcwcii
Mcin|cnc
Deve|cpmenI pipe|ine in Hcwcii
Fu||y cwnec prcjecI:
JV:
/cciIicnc| |cnc c::eI:
Lcw Lc:i: |cnc fcr pcIenIic| fuIure ceve|cpmenI,
currenI|y Leing fcrmec c: c hc|cing :IrcIegy,
ccmpri:ing rcugh|y 207 cf Mcui cnc 157 cf Kcuci
A bottoms-up analysis
requires an assessment of
three different categories
of assets
Easy to Value
Harder to Value
/n N/V Cc|cu|cIicn Wi|| lnc|uce /|| cf /LEX: Fec| E:IcIe /::eI:
Recent
Occupancy Owned Market
2009 2010 2011 Sq. Ft. Price / Sq Ft. Value
Industrial 96% 86% 89% 564,800 $100 $56
Of f ice 90% 91% 92% 185,800 150 28
Retail 96% 95% 92% 694,980 400 278
Unimproved Land
(1)
11,770 5,000 59
Total Value $421
2011 NOI $26.5 $26.5
Blended cap rate 6.5% 6.0%
Value $408 $442
< >
We Le|ieve /LEX: |ec:ec ccmmercic| rec| e:IcIe cn Hcwcii i: wcrIh cver $400m
Scurce: Ccmpcny cccumenI:, McrccIc e:IimcIe:
{1) Fepre:enI: |cnc |ec:ec Ic Ihirc pcrIie: cnc inc|ucec in repcrIec
NCl. NumLer: repre:enI ccre: cnc $ / ccre
Lec:ec Ccmmercic| FrcperIie:: Hcwcii
Recent
Occupancy Owned Market
2009 2010 2011 Sq. Ft. Price / Sq Ft. Value
Industrial 82% 83% 95% 4,466,800 $50 $223
Of f ice 86% 84% 84% 1,267,800 150 190
Retail 90% 91% 88% 726,000 175 127
Unimproved Land
(1)
28 0 0
Total Value $541
2011 NOI $34.3 $34.3
Blended cap rate 7.5% 6.5%
Value $457 $528
We Le|ieve /LEX: |ec:ec ccmmercic| rec| e:IcIe cn Ihe mcin|cnc i: wcrIh c|c:e Ic $500m Icccy,
cnc ccu|c Le wcrIh mcre c: renI: cnc cccupcncy imprcve frcm cyc|icc||y cepre::ec |eve|:
< 10 >
{1) NumLer: repre:enI ccre: cnc $ / ccre
Lec:ec Ccmmercic| FrcperIie:: Mcin|cnc
< 11 >
{1) E:IimcIec cI $15m cf pre-Icx expen:e: per yecr, ccpiIc|izec cI 8x
Balance Sheet Market
Value Value Per Share
Commercial RE Portfolio
Hawaii $425 $10.02
Mainland 493 11.62
Total $819 $917 $21.63
Property Under Development
Wholly Owned
JV
Total
Land
Less: Corporate
(1)
0 (120) (2.83)
Less: Debt (224) (224) (5.28)
Equity Value $573 $13.52
Current Stock Price $30.00
% Premi um / (Di scount) to Current (54.9%)
/LEX: Vc|ucIicn
< 12 >
Kukuiula
Wailea
Maui Business
Park II
Haliimaile
Maui Kauai
Mcp cf lmpcrIcnI Deve|cpmenI FrcjecI:
Wci|ec re:crI criginc||y ceve|cpec Ly /LEX cnc :c|c Ic
Shinwc Gc|f Grcup in 18
270 fu||y zcnec, unceve|cpec ccre: cI Wci|ec reccuirec
in 2003 fcr $7m
SuL:euenI|y :c|c 70 ccre: in 2004 fcr $70m
CcnIriLuIec 25 ccre: Ic Kci Mc|u JV wiIh /rm:Ircng 8ui|cer:
Femcining ccrecge in vcricu: :Icge: cf ceve|cpmenI
F|cnnec fcr ~800 hcme:
< 13 >
Fu||y Cwnec Deve|cpmenI FrcjecI:: Wci|ec
Fhc:e ll cf /LEX: Mcui 8u:ine:: Fcrk ccmpri:e: 17 ccre: cf
incu:Iric| zcnec |cnc: in cenIrc| Kchu|ui, c|c:e Ic Ihe cirpcrI
cnc hcrLcr
Finc| zcning cpprcvc| receivec in 2008 cnc infrc:IrucIure
wcrk ccmp|eIec in 2011
F|cnnec fcr 10, -ccre |cI:
Sc|e: cnc |ec:ing hcve Legun
4-ccre cnchcr pcrce| :c|c Ic Cc:Icc in Jcnucry 2012 cI ~$1.5m
/ ccre
< 14 >
Fu||y Cwnec Deve|cpmenI FrcjecI:: Mcui 8u:ine:: Fcrk ll
2-ccre urLcn Hcnc|u|u pcrce| ccuirec Ly /LEX in 2C10
fcr highri:e ccnccminium ceve|cpmenI
ExIreme|y we|| |cccIec in Ihe /|c Mccnc ccrriccr necr
:hcpping, re:IcurcnI:, cnc Lecche:
Succe::fu||y ncvigcIec ccmp|ex permiIIing prcce::
LimiIec new prccucI in :upp|y-ccn:Ircinec mcrkeI
341 uniI: p|cnnec cn 43 f|ccr:
Cne-, Iwc-, cnc Ihree-Lecrccm re:icence: cvercging 1,000 :ucre feeI
257 units sold as of August 2012 (236 binding sales averaging >$700 / sq.
ft.)
< 15 >
Fu||y Cwnec Deve|cpmenI FrcjecI:: Wcihcnuc cI Kewc|c
< 1 >
Scurce: /LEX Fec| E:IcIe Supp|emenI:, McrccIc e:IimcIe:
{1) Gc|cmcn Scch: lniIicIicn FepcrI, Jcnucry 11, 200
We ncIe IhcI in 200, Gc|cmcn Scch: perfcrmec DCF: cf Wci|ec cnc
Hc|iimci|e, vc|uing Ihe prcjecI: cI $144m cnc $18m, re:pecIive|y.
{1)
Entitled Value Units / Avg. Sales Costs to Net Tax Tax Years to Discount
Fully owned Development Properties Acres per Acre Sq. Ft Sale Price Proceeds Complete Proceeds Basis Rate Complete Rate NPV
Wailea - under development (ex Kai Malu JV) 27
Bluff s at Wailea 7 12 $1.5 $18.0 $0.0 $18.0 $9.0 35% 0 15% $14.9
Ridge at Wailea 7 9 1.5 13.5 0.0 13.5 8.0 35% 0 15% 11.6
Wailea MF-7 13 75 1.3 97.5 84.0 13.5 90.0 35% 3 15% 8.3
Wailea - future developments 140
Wailea SF-8 13 90 0.3 27.0 25.0 2.0 25.0 35% 5 15% 0.9
Wailea MF-10 (Residential) 14 45 1.3 58.5 40.0 18.5 40.0 35% 5 15% 8.1
Wailea MF-10 (Commercial) 65,000 350.0 22.8 16.0 6.8 20.0 35% 5 15% 2.9
Wailea MF-6 23 60 1.3 78.0 14.0 64.0 20.0 35% 2 15% 35.5
Wailea MF-16 7 20 1.3 26.0 7.0 19.0 10.0 35% 3 15% 10.2
Wailea - Other 83 0.6 49.8
Wailea - Subtotal $142.0
Haliimaile 63 170 0.4 68.0 34.0 34.0 35.0 35% 5 15% 15.1
Kane Street (Residential) 4 103 0.5 51.5 32.0 19.5 33.0 35% 3 15% 9.9
Kane Street (Commercial) 20,000 300.0 6.0 2.0 4.0 2.0 35% 3 15% 1.7
Kahului Town Center (Residential) 19 440 0.5 220.0 200.0 20.0 202.0 35% 4 15% 9.8
Kahului Town Center (Commercial) 240,000 300.0 72.0 53.0 19.0 53.0 35% 4 15% 7.1
Maui Business Park II 179 160 1.0 160.0 82.0 78.0 95.0 35% 2 15% 44.9
Port Allen Residential - Kai Olino 4 75 0.5 37.5 19.0 18.5 30.0 35% 4 15% 11.3
Keola Lai (mostly sold) 3 10 0.6 6.0 0.0 6.0 5.1 35% 0 15% 5.7
Waihonua - Honolulu 2 341 0.7 238.7 185.0 53.7 206.0 35% 3 15% 32.2
Brydeswood 24 1.8 43.2 15.0 28.2 17.0 35% 3 15% 14.5
Total Fully Owned Development 441 $294
Fu||y Cwnec Deve|cpmenI FrcperIie:: DCF:
Entitled
Acres Value
Wailea 167 $142
Maui Business Park II 179 45
Waihonua - Honolulu 2 32
Kahului Town Center 19 17
Haliimaile 63 15
Brydeswood 14
Kane Street 4 12
Port Allen Residential 4 11
Keola Lai 3 6
Total Fully Owned Development 441 $294
< 17 >
We believe ALEXs fully
owned development
projects are worth
roughly ~$294 million
Fu||y Cwnec Deve|cpmenI FrcjecI:
777 inIere:I in JV wiIh DM8 /::ccicIe:
1,000 ccre mc:Ier p|cnnec ccmmuniIy cn Kcuci
Up Ic 1,500 uniI: p|cnnec
High enc re:crI / re:icenIic| wiIh price pcinI: $1 - $4 mi||icn / |cI
/meniIie: inc|uce gc|f ccur:e, :pc, ccunIry c|uL, wcIer ccce::, Irci|:, pcrk:
7,000 :. fI. ccmmercic| reIci| cenIer cpenec fcr Lu:ine:: in /ugu:I 200
cnc ccn:IrucIicn i: ccmp|eIe cn 178 |cI:
Ccn:IrucIicn cf c|| cmeniIie: ccmp|eIec
88 |cI: :c|c Ic ccIe
< 18 >
JV Deve|cpmenI FrcjecI:: Kukuiu|c
JV Deve|cpmenI FrcperIie:: DCF:
< 1 >
{1) Gc|cmcn Scch: lniIicIicn FepcrI, Jcnucry 11, 200
We ncIe IhcI in 200, Gc|cmcn Scch: perfcrmec c DCF cf Kukuiu|c,
vc|uing Ihe prcjecI cI $288m, Lefcre /LEX increc:ec iI: prcjecI
cwner:hip frcm 07 Ic 777.
{1)
Units / Avg. Sales Costs to Net Tax Tax Years to Discount %
JV Development Properties Acres Sq. Ft Sale Price Proceeds Complete Proceeds Basis Rate Complete Rate Owned NPV
Kukui'ula Koloa, Kauai 1,000 1,100 $1.5 $1,650.0 $412.0 $1,238.0 $810.0 35% 10 15% 77% $343.7
Kukui'ula Village Koloa, Kauai 10 83,200 800.0 60% 39.9
Kai Malu at Wailea (mostly sold) Wailea, Maui 25 12 1.3 15.6 0.0 15.6 10.0 35% 0 15% 50% 6.8
Ka Milo Kona, Big Island 31 113 1.2 135.6 113.0 22.6 120.0 35% 4 15% 50% 6.1
Palmdale Trade & Commerce Center Palmdale, CA 18 315,000 150.0 47.3 41.0 6.3 45.0 35% 5 15% 50% 1.4
Crossroads Plaza Valencia, CA 7 56,000 150.0 50% 4.2
Bakersf ield - Panama Grove Bakersf ield, CA 57 575,000 150.0 86.3 79.0 7.3 90.0 35% 5 15% 50% 2.1
Santa Barbara Ranch Santa Barbara, CA 22 0.0
Total JVs 1,170 $404
< 20 >
We believe ALEXs JV
development projects
are conservatively worth
roughly ~$404 million
Acres Value
Kukui'ula 1,000 $344
Kukui'ula Village 10 40
Kai Malu at Wailea (mostly sold) 25 7
Other 135 14
Total JV Development 1,170 $404
JV Deve|cpmenI FrcjecI:
Balance Sheet Market
Value Value Per Share
Hawaii $425 $10.02
Mainland 493 11.62
Total $819 $917 $21.63
Wholly Owned $159 $294 $6.93
JV 291 404 9.53
Total $449 $698 $16.46
Land
Less: Corporate
(1)
0 (120) (2.83)
Less: Debt (224) (224) (5.28)
Equity Value $1,271 $29.99
Current Stock Price $30.00
% Premi um to Current (0.0%)
< 21 >
/LEX: Vc|ucIicn
< 22 >
/LEX cwn: 207 cf Ihe i:|cnc cf Mcui cnc 157 cf Ihe i:|cnc cf Kcuci, cnc c higher
prcpcrIicn cf u:cL|e" |cnc
Ihi: |cnc wc: ccuirec circc 1870 cnc i: ccrriec cn /LEX: Lcck: cI $150 / ccre {~$13m)
/cciIicnc| Legccy Lcnc /::eI: Frcvice Hiccen Vc|ue
< 23 >
ALEX Ag Land Sales Transactions - Last 5 Years
Avg Price
Total Acres Sold Per Acre High Low
0 - 5 Acres 10 $107,300 $175,000 $11,500
5 - 20 Acres 67 61,300 167,800 24,300
20 - 100 Acres 260 25,900 40,700 14,000
100+ Acres 649 22,800 29,000 11,300
Total 986 $27,100 $175,000 $11,300
FecenI /LEX Lcnc Sc|e: /vercge $27,000 / /cre
< 24 >
Maui Ag Land Sale Comps - Last 5 Years
Avg
# of Total Acres Per Avg Price
Transactions Acres Sold Transaction Per Acre High Low
5 - 20 Acres 40 350 9 $95,600 $295,000 $24,300
20 - 100 Acres 17 630 37 51,700 197,800 8,300
100+ Acres 8 2,900 361 18,300 50,100 11,300
Total 65 3,880 60 $30,700 $295,000 $8,300
Kauai Ag Land Sale Comps - Last 5 Years
Avg
# of Total Acres Per Avg Price
Transactions Acres Sold Transaction Per Acre High Low
5 - 20 Acres 32 300 9 $111,000 $297,700 $25,000
20 - 100 Acres 3 70 23 68,700 86,400 27,700
100+ Acres 5 1,730 346 17,200 35,100 3,700
Total 40 2,100 52 $32,100 $297,700 $3,700
FecenI CcmpcrcL|e Lcnc Sc|e: /vercge >$30,000 / /cre
ln recenI yecr:, Mcui Lcnc & Finecpp|e Ccmpcny {NYSE: MLF), fcrmec in Ihe 10: frcm /LEX
|cnchc|cing: in we:I Mcui, hc: :c|c cgricu|Iurc| |cnc cI cn cvercge cf cver $20,000 / ccre
MLF: prececenI |cnc :c|e: prcvice ccciIicnc| ccIc pcinI: fcr vc|uing /LEX: exce:: |cnc:
< 25 >
Scurce: Mcui Lcnc & Finecpp|e Ccmpcny cccumenI:
{1) We Le|ieve Ihe:e were fcrcec" :c|e:, c: MLF i: in fincncic| ci:Ire::
{2) Ccn:icercIicn inc|ucec 1 ccre in we:I Mcui vc|uec cI $350k
Maui Land & Pineapple Precedent Land Sales
Date Acres $ / Acre Description
Jan-12 89 $16,854 Upcountry Maui
(1)
Mar-10 128 13,281 Upcountry Maui
(1)
2008 111 39,460 Upcountry Maui
2006 2,200 15,227 Upcountry Maui
(2)
Q1-2002 9 70,112 Upcountry Maui
Total 3,860 $23,267
CcmpcrcL|e Lcnc Sc|e:: Mcui Lcnc & Finecpp|e Ccmpcny
We ncIe IhcI, in recenI yecr:, /LEX hc: |ec:ec :cme cf iI: cgricu|Iurc| |cnc Ic Ihirc pcrIie:, cnc
ecrnec $333 - $584 cf NCl per ccre
Vc|uing Ihi: ccrecge cn c ccp rcIe Lc:i: :uppcrI: c vc|ucIicn cf ~$,700 per ccre fcr /LEX:
cgricu|Iurc| |cnchc|cing:
< 2 >
2007 2008 2009 2010 2011 Average
NOI f rom leasing unimproved land in Hawaii $8.5 $6.2 $4.6 $3.8 $3.5
Unimproved land leased to third parties in Hawaii 10,183 11,054 10,220 9,260 11,770
Market rent / avg leased acres of ag land $584 $432 $390 $333 $435
Assumed "Normalized" Market Rent / Acre $435
Cap Rate 6.5%
Implied Value / Acre of Ag Land $6,690
Lec:e lnccme: Ccp FcIe Vc|ucIicn
< 27 >
{1) /cju:Iec fcr Icxe: cnc Iime vc|ue cf mcney
{2) Fepre:enI: c|| cf /LEX: cgricu|Iurc| |cnc, exc|ucing Ihe 11,770 cgricu|Iurc| ccre: |ec:ec Ic Ihirc pcrIie: in 2011, Ihe
inccme frcm which wc: inc|ucec in Ihe NCl cf Ihe Hcwciicn |ec:ec ccmmercic| prcperIie:
{3) lnc|uce: enIiI|ec ccrecge ncI inc|ucec in Ihe 441 ccre: cf fu||y cwnec ceve|cpmenI prcjecI: fcr which we
perfcrmec DCF:
Value of Ag Land
Adjusted
Value Value Total
Methodology Per Acre Per Acre
(1)
Acres
(2)
Value
Lease Value $6,690 $6,690 46,005 $308
Maui Land & Pineapple Value 23,267 7,586 46,005 349
Historical ALEX Sales 27,100 8,836 46,005 407 Total Land Value
Land Comps 30,700 10,010 46,005 461 Low $582
Per Share $13.72
Plus: Other Land High $734
Value Total Per Share $17.32
Per Acre Acres Value
Additional Entitled Land
(3)
$675,000 177 $119
Conservation Land 0 29,170 0
Plus: Value of Agricultural Operations
EBITDA Multiple Value
LTM Agribusiness EBITDA $34 4.5x $154
/cciIicnc| Lcnc Vc|ue
Balance Sheet Market Value Per Share
Value Low High Low High
Hawaii $425 $425 $10.02 $10.02
Mainland 493 493 11.62 11.62
Total $819 $917 $917 $21.63 $21.63
Wholly Owned $159 $294 $294 $6.93 $6.93
JV 291 404 404 9.53 9.53
Total $449 $698 $698 $16.46 $16.46
Land
(1)
$13 $582 $734 $13.72 $17.32
Less: Corporate
(2)
0 (120) (120) (2.83) (2.83)
Less: Debt (224) (224) (224) (5.28) (5.28)
Equity Value $1,853 $2,006 $43.70 $47.30
Current Stock Price $30.00 $30.00
% Premi um to Current 45.7% 57.7%
< 28 >
{1) 8c|cnce :heeI vc|ue cf |cnc e:IimcIec Lc:ec cn Ccmpcny ccmmenI: cf $150 / ccre
ccrrying vc|ue
/LEX: Vc|ucIicn
ll. Genccrp {GY)
< 2 >
GenCcrp i: c :upp|ier cf prcpu|:icn Iechnc|cgie: Ic Ihe
cerc:pcce cnc cefen:e incu:Irie:
Lcng:Icncing repuIcIicn c: c high|y regcrcec :upp|ier
Fcuncec in Ihe 150: Ly Cc| Iech :cienIi:I:
Iechnc|cgie: u:ec cn N/S/ mi::icn: :ince incepIicn cf U.S. :pcce
prcgrcm
CcpiIc|izcIicn:
EuiIy mcrkeI vc|ue: $00 mi||icn
EnIerpri:e Vc|ue: $700 mi||icn
CpercIing SIcIi:Iic::
LIM Fevenue: $30 mi||icn
LIM E8lID/F
{2)
: $113 mi||icn
LIM CcpEx: $27 mi||icn
LIM Free Cc:h F|cw: $ mi||icn
< 30 >
Iicker: GY"
SIcck Frice: $.75
{1)
Vc|ucIicn Mu|Iip|e::
EV / E8lID/F
{2)
: .2x
EV / E8lID/F
{2)
- CcpEx: 8.2x
FCF Yie|c: 11.57
Scurce: Ccmpcny cnc cIher puL|ic cccumenI:
{1) /|| fincncic|: in Ihi: pre:enIcIicn c::ume c :Icck price cf $.75
{2) Ecrning: Lefcre inIere:I, Icxe:, ceprecicIicn & cmcrIizcIicn, cnc ncn-cc:h pen:icn expen:e:
GenCcrp, lnc.
< 31 > Scurce: Ccmpcny cccumenI:
8c|cnce SheeI Sncp:hcI cf GY Fec| E:IcIe Vc|ue
12,000 acres of contiguous, developable raw land adjacent to a major highway in
Sacramento
GY criginc||y ccuirec Ihi: |cnc in Ihe 150: Ic Ie:I iI: prcpu|:icn :y:Iem:, LuI :Icppec c||
Ie:I: Ihere cver c ceccce cgc
150: ccui:iIicn |ec Ic |cw Lcck vc|ue {~$4m)
GY p|cn: Ic Iurn ,000 c|ecn ccre: inIc c Mc:Ier-F|cnnec CcmmuniIy {MFC") cc||ec
Ec:Icn, currenI|y in cifferenI :Icge: cf zcning cnc ceve|cpmenI
Ihe:e ccre: were never u:ec fcr Ie:Iing, LuI were c Luffer LeIween Ihe Ie:I :iIe:
cnc civi|izcIicn
310k square feet of excess Sacramento office space leased to third parties
580 acres in Chino Hills, CA
GY Cwn: Severc| Exce:: Fec| E:IcIe /::eI:
< 33 >
ln Ihe 55 yecr: :ince /ercjeI ccuirec Ihe |cnc, civi|izcIicn hc: encrccchec :uch IhcI iI i: ncw
in c very ce:ircL|e |cccIicn, ccjccenI Ic c mcin highwcy, ccjccenI Ic puL|ic Ircn:pcrIcIicn,
cnc c|c:e Ic :chcc|: cnc reIci| cnc ccmmercic| ci:IricI:
Civi|izcIicn Hc: Encrccchec cn Ihe SccrcmenIc Fcw Lcnc
GY has extensive plans
to turn the 6,000 clean
acres into a master
planned community
called Easton, in five
separate phases
Entitlement and zoning
are in place for the first
1,400 acres
(Glenborough and
Easton Place), with
detailed plans for
residential, commercial,
and office property
development
< 34 >
Scurce: hIIp://ec:Icn-cc.ccm
Ec:Icn Deve|cpmenI in Frcgre::
In late 2010, prominent
Sacramento developer
AKT paid $49,000 / acre
for 17,000 acres of
comparable raw land, in
a less desirable location
< 35 > Scurce: SccrcmenIc 8u:ine:: Jcurnc|
GY Land
FecenI Lcnc Sc|e Ccmp /vci|cL|e
< 3 >
CurrenI |i:Iing: cf unfini:hec, un-enIiI|ec |cnc pcrce|: in Ihe SccrcmenIc crec
ccnfirm Ihe rcnge cf $50,000 - $0,000 / ccre
Scurce: FuL|ic cccumenI:, www.|ccpneI.ccm
Land Parcel Acres Price $ / Acre
Gerber Rd 60 $3,000,000 $50,000
Rogers Rd and Bradshaw Rd 20 650,000 32,500
Rio Linda Blvd and Marysville Blvd 20 1,000,000 50,000
Raley Blvd, Santa Ana 19 1,620,432 87,120
Admiral Lane and Gerber Rd 14 925,000 67,766
El Centro Rd 10 600,000 60,484
24th St at Florin Rd 4 195,000 53,867
Strawberry Ln and Hwy 99 3 135,000 54,000
Average $56,967
CIher FecenI Lcnc Sc|e Ccmp: /vci|cL|e
< 37 >
ln ccciIicn Ic Ihe SccrcmenIc rcw |cnc, GY c|:c cwn: 310,000 :ucre feeI cf
exce:: SccrcmenIc cffice :pcce IhcI iI |ec:e: Ic Ihirc pcrIie:
Ihi: |ec:ing ccIiviIy genercIec $5m cf cpercIing inccme in Ihe LIM {cnc hc:
genercIec c: much c: $10m Lefcre Ihe fincncic| cri:i:)
2008 2009 2010 2011 LTM
Sacramento Of f ice Space NOI $10.3 $4.4 $5.3 $5.6 $5.3
SccrcmenIc Cffice Spcce GenercIing >$5m cf NCl
We believe GYs excess
real estate is worth ~
$370m today, and
potentially much more
as real estate markets
recover and the
Company makes
progress on its
development plans
{1) Ihi: :iIe i: in Ihe prcce:: cf envircnmenIc| remecicIicn
< 38 >
Scurce: McrccIc e:IimcIe:
Excess Real Estate Valuation
Asset Value Methodology
Sacramento Land $302 6,044 acres @ $50k / acre
Sacramento Of f ice Space 66 LTM NOI @ 8% cap rate
Chino Hills Land 0 Conservatism
(1)
Total $368
Val ue / Share $5.99
% of Current Market Cap 61%
Exce:: Fec| E:IcIe Vc|ucIicn
Lcrge, Diver:ifiec, We||-Fc:iIicnec Frcgrcm FcrIfc|ic
WiIh hc|f cf revenue frcm cc:I-p|u: ccnIrccI:, pre-ccrpcrcIe E8lI mcrgin: in GY: cerc:pcce
:egmenI hcve ccn:i:IenI|y Leen LeIween .87 cnc 11.77 fcr Ihe pc:I 8 yecr:
'04 - '11
2004 2005 2006 2007 2008 2009 2010 2011 CAGR
Aerospace Sales 489.1 615.8 $614.6 $739.1 $725.5 $787.2 $850.7 $909.7 9.3%
% Growth 25.9% (0.2%) 20.3% (1.8%) 8.5% 8.1% 6.9%
Aerospace EBIT 56.6 60.2 61.2 84.8 78.0 84.4 99.6 99.7 8.4%
%Margi n 11.6% 9.8% 10.0% 11.5% 10.8% 10.7% 11.7% 11.0%
Grcwing Fevenue cnc SIcL|e Mcrgin:
$811 $804
$02
$380
$573
$520
$0
$200
$400
$00
$800
$1,000
$1,200
$1,400
$1,00
200 2010 2011
Unfuncec
Funcec
< 41 >
Company Backlog Provides Revenue Visibility
$1,191
$1,422
$1,377
% Growth 15.7% 3.2%
GenCcrp: Ccre 8u:ine:: i: Grcwing
GYs Free Cash Flow
significantly exceeds its
reported GAAP Net
Income, for four separate
reasons
1) Minimc| cc:h Icxe:
2) SuL:IcnIic| ncn-cc:h G//F pen:icn chcrge:
3) D&/ > Cngcing cc:h CcpiIc| ExpenciIure:
4) Ncn-cc:h inIere:I expen:e
< 42 >
Free Cc:h F|cw SignificcnI|y Exceec: G//F NeI lnccme
GAAP Adj. PF Cash Comment
Revenue $930 $930
OpEx (incl Pension) (862) 44 (818) Addback Non-Cash Pension
D&A (24) 4 (20) Replace D&A w/ Cash CapEx
EBIT $45 $48 $92
Unusual Items (6) 6 0
Interest (26) 16 (11) Addback Non-Cash, PF f or Ref i
Taxes (9) (9)
Net Income $4 $69 $73
P / E Multiple 142.8x 8.2x
Adjusting for the
combined effects of all of
these dynamics, it
becomes clear that GY is
trading at 8.2x the
recurring cash earnings
power of its aerospace
and defense business
< 43 > Scurce: Ccmpcny cccumenI:, McrccIc e:IimcIe:
Free Cc:h F|cw SignificcnI|y Exceec: G//F NeI lnccme
< 44 >
ln Ju|y, GY cnncuncec Ihe ccui:iIicn cf FrcII & WhiIney FcckeIcyne frcm UniIec
Iechnc|cgie: CcrpcrcIicn fcr $550m
Dec| expecIec Ic c|c:e 1C 2013
SignificcnI Fevenue cnc Cc:I Synergie:
Fincncing wiIh cc:h cn hcnc cnc new Lcrrcwing: Highly Accretive Transaction
Ircn:fcrmcIive /cui:iIicn
GY-Rocketdyne Pro Forma
GenCorp Rocketdyne Synergies PF Combined
Revenue $920 $792 $1,712
EBITDAP
(1)
$115 $149 $50 $314
% Margin 12.5% 18.8% 18.3%
Interest
(2)
(2) (36) (38)
Taxes
(3)
(10) (46)
Working Capital (10) (10) (20)
CapEx (25) (21) (46)
Free Cash Flow $68 $164
Adj. TEV / EBITDAP 4.7x
Adj. TEV / EBITDAP - CapEx 5.5x
% FCF Yi el d to Current Market Cap 27.3%
Free Cash Flow $164
Target FCF Yield 10.0%
Implied Equity Value $1,638
Plus: Excess Real Estate
(4)
368
Total Equity Value $2,006
FD Shares Out
(2)
83.7
Implied Share Price $23.96
%Premi um to Current 145.8%
< 45 > Scurce: McrccIc e:IimcIe:
{1) E8lID/F = Ecrning: Lefcre inIere:I,
Icxe:, ceprecicIicn & cmcrIizcIicn,
cnc ncn-cc:h pen:icn expen:e
{2) /::uming fu|| ci|uIicn frcm Ihe $200m
cuI:Icncing 4.0257 ccnverIiL|e
:uLcrcincIec ncIe: {:Irike price = $ /
:hcre)
{3) GY pcy: minimc| cc:h Icxe: cue Ic c
ccmLincIicn cf NCL: cnc vcricu: Icx
p|cnning :IrcIegie:. We
ccn:ervcIive|y cpp|y c 207 Icx rcIe Ic
Ihe ccmLinec enIiIy
{4) Mic-pcinI cf McrccIc e:IimcIec vc|ue
WhcI i: iI WcrIh
lll. 8rcckfie|c Fe:icenIic| FrcperIie: {8FF)
< 4 >
Ccmpcny Cverview
< 47 >
8rcckfie|c Fe:icenIic| FrcperIie: {8FF" cr Ihe Ccmpcny") i: c hyLric |cnc
ceve|cper cnc hcmeLui|cer
Frimcri|y acquires and develops land fcr re:icenIic| u:e
Cccc:icnc||y ce:ign: cnc ccn:IrucI: hcme: cnc ccmmercic| prcperIie:
CpercIe: LcIh in Canada and the United States
Scurce: Ccmpcny fi|ing:, re:ecrch, 8|ccmLerg, CcpiIc|lC, puL|ic ccmmenIcry cnc infcrmcIicn.
{1) Fepre:enI: :hcre price cf NYSE: 8FF. 8rcckfie|c Fe:icenIic| FrcperIie: i: c|:c Irccec cn Ihe ISX uncer Iicker 8FF."
{2) Exc|uce: ncn-recurring |cI :c|e: in 2011.
{3) Exc|uce: |cnc ccui:iIicn ccpex.
Ticker: 8FF"
Price: $14.3
{1)
Financials:
2011 Fevenue
{2)
$81M
2011 Free Cc:h F|cw
{3)
$13M
Valuation Multiples:
F / C2 2012 I8V 1.5x
F / 2011 FCF .0x
Capitalization
MkI. Ccp $1.58
IEV $2.88
Lcnc Hc|cing: DcmincIe Ihe 8c|cnce SheeI
< 48 >
Q2 2012 Balance Sheet
Q2 2012 Property Inventory by Type
Vast majority of the Companys $2.2B in property
inventory consists of long-lived land investments
!"#$%&
'()
*+,-
.$/$0"1#$,2
34,50$& (6)
*+,-
.$/$0"1#$,2
78024 9 :2;$<&
6)
=+> *+,-& ?()
Ihe Fe:icenIic| Deve|cpmenI Frcce::
< 4 >
Identify
Attractive
Land
Opportunities
Master Plan
Community
Acquire,
Convert and
Entitle Land
Sell Land to
3
rd
-Party
Homebuilders or
Begin
Homebuilding
Design and
Construct
Homes
Market and
Sell Finished
Homes
Land Development
Average ~10 Year Investment Cycle
Homebuilding
BRP principally participates here
Diver:ifiec NcrIh /mericcn Lcnc FcrIfc|ic
< 50 >
Diver:ifiec NcrIh /mericcn Lcnc FcrIfc|ic {ccnI.)
< 51 >
@+05+<A& (?)
B-#",2",& 'C)
D8%24,& '6)
.$,/$<& 'E)
F"<",2"& G)
3. H =4/$<%4-$&
I)
J"<2;$<, @D&
I)
K+%;4,52",
.L@L& M)
*D H 3"82;0+,-&
N)
:2;$<& E)
Q2 2012 Total Lots by Geography
Hcme SIcrI Irenc: cre Enccurcging
Ccnccicn hcme :IcrI: cre wiIhin |cng-Ierm cvercge: cnc hcve reccverec :ince Ihe ccwnIurn
U.S. hcme :IcrI: cre :Ii|| 507 Le|cw |cng-Ierm cvercge: LuI hcve Legun Ic ri:e
< 52 >
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QREEE% %2+<2%S QREEE% %2+<2%S
Scurce: U.S. Cen:u: cnc CMHC.
Historical Housing Starts by Country
Hcme Frice Irenc: cre Enccurcging
Ccnccicn hcme price: hcve grcwn :uL:IcnIic||y Ihi: pc:I ceccce, up cver 1007
U.S. hcme price: cre :Ii|| ~307 Le|cw peck LuI hcve Legun Ic :IcLi|ize
< 53 >
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Scurce: IercneI Ccmpc:iIe cnc S&F Cc:e-Shi||er Ccmpc:iIe 10.
{1) Jcnucry 2000 incexec Ic 100.
Historical Indexed Housing Prices
(1)
Ccnccc De|ivering Necr|y /|| Grc:: FrcfiI
< 54 >
2011 Gross Margin Breakdown
(1)
{1) Exc|uce: ncn-recurring |cI :c|e: in 2011.
;<==
QT7%S >/+/4/ ?@8@ A*'/0
B*'$2
=$/$,8$ T(MM TIE T66M
BU1$,%$% QTGIS QTIGS QT'ICS
C#*$$ D/#5(+ E E=FG HEIJ E=KL
C#*$$ D/#5(+ M N=@NM ==@OM KK@;M
6*P"$2
=$/$,8$ T6(6 T'?' TNIN
BU1$,%$% QT(?IS QT'N?S QTN'NS
C#*$$ D/#5(+ E EFF E=F EG<
C#*$$ D/#5(+ M =G@<M I@OM =K@FM
A*'/02
=$/$,8$ TMCI T(N' TI'G
BU1$,%$% QT6??S QT(6MS QT?E'S
A*'/0 C#*$$ D/#5(+ E E;=; EN E;=L
A*'/0 C#*$$ D/#5(+ M ON@GM ;@FM ;N@NM
M *Q A*'/0 C#*$$ D/#5(+ IG@;M ;@LM =<<@<M
CcncenIrcIec in Ihe 8e:I Ccnccicn McrkeI:
8FF: Ccnccicn |cnc inve:ImenI: cre >807 ccncenIrcIec in ci| :cnc:-rich /|LerIc
/|LerIc: GDF grew 5.27 in 2011, highe:I in Ccnccc
De:piIe :Ircnger eccncmic Irenc: cnc LeIIer cffcrccLi|iIy rcIic:, /|LerIc: hcu:ing price: hcve
uncerperfcrmec IcrcnIc cnc Vcnccuver :ince pecking in 2007
< 55 >
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@+05+<A B-#",2", F"<",2" W+,V"8/$<
Scurce: IercneI, SIcIi:Iic: Ccncc, CMHC cnc regicnc| rec| e:IcIe Lccrc:.
{1) SepIemLer 2007 incexec Ic 100. /|LerIc hcme price: peckec in SepIemLer 2007.
{2) /vg. hcme price / e:IimcIec mecicn fcmi|y inccme c: cf Ju|y 2012 .
NLCU
6LIU
?LMU
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ELEU
(LEU
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?LEU
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'ELEU
@+05+<A B-#",2", F"<",2" W+,V"8/$<
Historical Indexed Housing Prices
(1)
Housing Price to Median Family Income
(2)
8FF: Ccnccicn McrkeI: /re SIrcng
< 5 >
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Home Sales Backlog ($M) Net New Orders (Units)
U.S. Lcck: Ic Le Feccvering Fcpic|y
< 57 >
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@$,2<+0 9 B+%2$<, PL3L @+04Y"<,4+
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@$,2<+0 9 B+%2$<, @+04Y"<,4+
Home Sales Backlog ($Ms) Net New Orders (Units)
U.S. Lcck: Ic Le Feccvering Fcpic|y {ccnIc)
< 58 >
Scurce: S&F Cc:e-Shi||er.
6L()
6L6)
6LC)
(L')
?LC)
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6LI)
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(LE)
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.+00+% .$,/$< 3+, .4$5" 3+,
Z<+,V4%V"
K+%;4,52",
.L@L
*"% D,5$0$%
July 2012 YTD U.S. Housing Price Growth
McncgemenI i: Fcrecc:Iing SIrcng GrcwIh
{1) McncgemenI prcvicec hcme cnc |cI c|c:ing: figure cn|y. Fricing cnc mcrgin c::umpIicn: cre c::umec Ic Le f|cI frcm 2011.
McncgemenI Legcn Ic prcvice FY2012 guiccnce ccmmenIcry in C1 2012
McncgemenI: Icp-|ine guiccnce imp|ie: :Ircng funccmenIc| grcwIh fcr FY2012
We ccn:ervcIive|y c::ume f|cI pricing, mcrgin: cnc nc U.S. |cnc :c|e:
< 5 >
R&'1/0 !#* 3*#P/ C1(4/+&"
H=J
HED$J ;<== ;<== ;<=; >7/+5"
6*P" >0*$(+5$2
@+,-+ GN' GN' '&(EE (CLM)
PL3L 6MN 6MN MME MMLN)
B*' >0*$(+5$2
@+,-+ (&GNE '&C?C '&CEE 6LI)
PL3L M6N M6N 'EELE)
A*'/0 S")"+1" E=T<<L EL=I EI<G =<@LM
C#*$$ D/#5(+ E;NG E;=L E;KK =;@;M
! "#$%&' ()*+! ()*)! ()*,! -( ./0
FY2012 Management Guidance
Strong growth despite
management not
providing guidance on
U.S. land sales
Why i: 8FF Uniue v:. CIher HcmeLui|cer:
< 0 >
Other Homebuilders BRP
Inventory
Runway
ShcrI
Cc:h f|cw: neecec Ic refi||
cep|eIec |cnc invenIcry
Lcng
Le:: neec Ic recyc|e cc:h f|cw:
inIc new |cnc ccui:iIicn
Portfolio
Composition
Mc:I|y hcme:
FecenI|y ccuirec
Mc:I|y |cnc
C|c
Carrying Value
of Property
Mcrkec-Ic-mcrkeI
{impcirmenI:)
McrkeI price: hcve
fc||en/:IcgncIec :ince
purchc:e
8cck vc|ue {criginc| cc:I)
McrkeI price: hcve :ince
increc:ec :uL:IcnIic||y
Lcng Funwcy Minimize: Cc:h Neec:
8FF: :uL:IcnIic| |cnc cnc hcu:ing pcrIfc|ic prcvice: iI wiIh ~30 yecr: cf runwcy cI currenI
vc|ume:, c||cwing 8FF Ic genercIe :ignificcnI free cc:h f|cw whi|e reuiring minimc| |cnc ccpex
Ihi: i: cver 3x Ihe invenIcry cf cIher hcmeLui|cer: cI 2011: run-rcIe, ce:piIe 8FF: Ccnccicn
cpercIicn: running cI fu|| :peec v:. cIher hcmeLui|cer: currenI|y cepre::ec :c|e: vc|ume:
< 1 >
Land and Housing Inventory
{1) Definec c: IcIc| |cI: cr hcme :iIe: / IcIc| c|c:ing: cr hcme ce|iverie:.
{2) Exc|uce: ncn-recurring 2011 |cI :c|e:.
{3) Definec c: hcu:ing invenIcry + mcce| hcme: / IcIc| |cnc cnc hcu:ing invenIcry.
BRPs portfolio consists of
mostly mature land
investments vs. more recent
housing inventory for other
homebuilders
U"/#$ V+)"+'*#W
H=J
6*P"$ /$ / M
;<=< ;<==
H;J
*Q V+)"+'*#W
HOJ
[$+\$< !"#$% ?L?U IL(U 6E)
.= !"<2", ?L(U CLNU N')
!"/,+,4+, B,2$<1<4%$% ?LIU CLNU CC)
][ !"#$ MLNU ?LGU (C)
*$,,+< GLMU 'EL6U 66)
7$<42+5$ NL'U ML'U 6M)
^802$_<"81 IL?U IL?U (I)
32+,-+<- ^+V4Y4V ILCU 'EL6U 6()
F"00 [<"2;$<% '6L(U 'NLNU CE)
R)"#/5" G@GX L@GX K=M
,#**-Q("04 S"$(4"+'(/0 !#*%"#'("$ ;N@KX O<@=X =;M
Lcng-Livec /::eI: Uncer:IcIe Vc|ue
< 2 >
{1) McncgemenI ccmmenIcry.
8FF: |cnc cnc hcu:ing inve:ImenI: cre reccrcec cn iI: Lc|cnce :heeI cI |cwer cf ccrrying vc|ue
{cc:I) cr fcir vc|ue
We Le|ieve Ihe cgec ncIure cf Ihe Ccmpcny: |cnc c::eI: ccu:e: Ihem Ic Le uncer:IcIec cn Ihe
Ccmpcny: Lc|cnce :heeI
Ccnccicn |cnc hc: cn cvercge cge cf ~8 yecr: in EcmcnIcn cnc IcrcnIc cnc up Ic 15 yecr: in
Cc|gcry
U.S. |cnc hc: cn cvercge cge cf ~7-8 yecr:
During Ihi: Iimefrcme, Ccnccicn rec| e:IcIe hc: :een c hi:Icric cpprecicIicn in vc|ue
8FF hc: c|:c Icken impcirmenI: cf ~307 cf cc:I fcr iI: U.S. |cnc c::eI:, in-|ine wiIh cIher
hcmeLui|cer:
{1)
CIher HcmeLui|cer: lnvenIcrie: cre Mcrkec-Ic-McrkeI"
< 3 >
Scurce: S&F Cc:e-Shi||er Ccmpc:iIe 10, Ccmpcny fi|ing:, re:ecrch, 8|ccmLerg, CcpiIc|lC, puL|ic ccmmenIcry cnc infcrmcIicn.
{1) Jcnucry 200 incexec Ic 100.
Due Ic Iheir U.S. fccu: cnc invenIcry wriIe-ccwn: Icken curing Ihe recenI rece::icn, 8FF:
hcmeLui|cing peer: c::eI: cre |ike|y mcrkec necr mcrkeI vc|ue
Impairments as % of Beginning Inventory U.S. Home Prices Since 2006
(1)
ME
?E
CE
IE
GE
'EE
''E
O
+
,
E
?
7
+
A
E
?
3
$
1
E
?
O
+
,
E
C
7
+
A
E
C
3
$
1
E
C
O
+
,
E
I
7
+
A
E
I
3
$
1
E
I
O
+
,
E
G
7
+
A
E
G
3
$
1
E
G
O
+
,
'
E
7
+
A
'
E
3
$
1
'
E
O
+
,
'
'
7
+
A
'
'
3
$
1
'
'
O
+
,
'
(
7
+
A
'
(
6)
'()
(C)
G)
?)
6M)
'6)
'E)
M)
(()
(() (()
6)
'E)
'() '')
E)
M)
'E)
'M)
(E)
(M)
6E)
6M)
NE)
(EE? (EEC (EEI (EEG
.= !"<2", *$,,+< ^802$_<"81 F"00 [<"2;$<%
McrkeI Vc|ue cf 8FF: /::eI: i: SignificcnI|y /Lcve Ccrriec Vc|ue
< 4 >
Estimated Market Value of BRPs Assets
HE D$J
B/+4 /+4 6*1$(+5 V+)"+'*#W2
W+08$ "Y !"#$% TN?C
W+08$ "Y *+,- 34,50$ TCI6
W+08$ "Y *+,- 78024 9 :2;$< T(66
W+08$ "Y =+> *+,- T(&(NN
B/+4 /+4 6*1$(+5 V+)"+'*#W EOTG;G
!"#$% @"%2 2" @"#10$2$ QT'(NS
*+,- @"%2 2" @"#10$2$ QT(IGS
YD/#-"'Y B/+4 /+4 6*1$(+5 V+)"+'*#W EOTO=K
`[""a` *+,- +,- !"8%4,5 b,/$,2"<A T(&('(
M V+&#"/$" HZ"&#"/$"J KI@LM
A/+5(:0" ,**- ./01"2
`7+<a$2` *+,- +,- !"8%4,5 b,/$,2"<A T6&6'N
^08%c D00 :2;$< D%%$2% TNGG
*$%%c D00 *4+d40424$% 9 74,"<42A b,2$<$%2 QT'&?(?S
YD/#-"'Y A/+5(:0" ,**- ./01" E;T=LG
`[""a` F+,54d0$ [""a W+08$ TGGM
M V+&#"/$" HZ"&#"/$"J ==I@GM
De:piIe iI: pcrIfc|ic cf cIIrccIive |cnc ceve|cpmenI cnc prcfiIcL|e Ccnccicn cpercIicn:, 8FF
Ircce: cI c :uL:IcnIic| ci:ccunI Ic U.S. peer:
FuL|ic Irccing Ccmp:
< 5 >
{1) Fepre:enI: :hcre price cf NYSE: 8FF. 8rcckfie|c Fe:icenIic| FrcperIie: i: c|:c Irccec cn Ihe ISX uncer Iicker 8FF."
{2) /cju:Iec fcr cff Lc|cnce :heeI DI/:.
{3) /::ume: fu|| ccnver:icn cf preferrec.
Public Trading Comps
87/#" !#(&" M R:*)" H,"0*[J ! \ ,. ! \ A,. ! \ R4]@ ,.
H;J
! \ R4]@ A,.
H;J
! \ ^ M C#*['7
Q7% *"V+0 @8<<$,VA& $UV$12 1$< %;+<$ -+2+S I\;K\=; F;_ B F;_ 6 D-'@ >/% A^. DS` DS` DS` DS` ;<=; ;<=O ;<=;;<=O
B/#5">/%2
.= !"<2", T((LEN 'CN) 6) TC&E6C TC&G?C (LEU (LEU (LEU (LEU (CLCU (ELEU 6IL()
*$,,+< T6?LG? (EN) 6) T?&CN6 T'E&G'6 (L'U (L'U (LEU (LEU (ELGU (NLMU 'NLI)
^802$_<"81 T'?LC? NEG) N) T?&N6( TI&(CC 6L6U 6LMU 'LNU 'LMU 6(LMU 'IL6U CCL()
F"00 [<"2;$<% T6?L'6 'CM) 6) T?&ECC TC&'?I (L6U (L6U (LEU (LEU N?LIU 6'LCU NCLI)
D"/+ ;K=M OM ;@KX ;@FX =@LX =@IX O;@<X ;O@NX OG@=M
D"4(/+ =LIM OM ;@;X ;@;X ;@<X ;@<X O<@=X ;;@OX KO@<M
8P/00"#>/%2
[$+\$< !"#$% P3D T6LIM 'I?) N) T6I' T'&MG( (L'U (L'U EL?U EL?U J7 J7 J7
!"/,+,4+, B,2$<1<4%$% T6LI6 66E) M) TNIM T(&EEI J7 J7 'LEU 'LEU J7 J7 J7
][ !"#$ T'NL?6 'G') C) T'&'(I T(&N6? 6LEU 6LEU ELGU ELGU J7 J7 J7
7$<42+5$ !"#$% TN'LM6 (EN) () T'&NCE T'&GIM 6LEU 6LEU (LMU (LMU M'LCU ((LGU '(ML6)
32+,-+<- ^+V4Y4V
Q6S
TCLN6 (N() ?) T(&??E T6&NG6 NL'U NL'U (L6U (L6U 6NLMU ('L?U MGLI)
D"/+ ;O=M FM O@<X O@<X =@FX =@FX KO@=X ;;@;X I;@NM
D"4(/+ ;<KM FM O@<X O@<X =@<X =@<X KO@=X ;;@;X I;@NM
Total:
D"/+ ;OFM KM ;@GX ;@LX =@NX =@NX OF@GX ;O@;X FF@NM
D"4(/+ ;<KM KM ;@NX ;@NX ;@<X ;@<X OO@FX ;;@;X FO@LM
,#**-Q("04 S"$(4"+'(/0 !#*%"#'("$ H,**-J
H=J
E=K@OI =OGM NM E=TKGF E;TGFO =@FX =@FX =@OX =@OX aR aR aR
,#**-Q("04 S"$(4"+'(/0 !#*%"#'("$ HD/#-"'J <@GX <@GX <@NX <@NX
3"8<V$c @+1b X& V"#1+,A Y4 0 4 ,5% +,- <$%$+<V;
J"2$c D% "Y 3$12$#d$< (N& (E'(
WhcI: 8FF WcrIh
{1) /cju:Iec fcr cff Lc|cnce :heeI DI/:. < >
Illustrative Valuation Range
D"4(/+ *Q >*P%$
HED$J R4]@ A,.
H=J
A,.
`7+<a$2` F+,54d0$ [""a W+08$ T(&(IC T(&'IC
7802410$ (LEU (L?U
Be842A W+08$ TN&MC6 TM&?IM
F"2+0 Z. 3;+<$% :82L 'E(LNI 'E(LNI
VP%0("4 87/#" !#(&" EKK@NO EFF@KL
3;+<$ ^<4V$ QGH(NH'(S T'NL6G T'NL6G
M V+&#"/$" HZ"&#"/$"J '* >1##"+' ;=<@=M ;LF@FM
lgncrec Ly /nc|y:I:
< 7 >
Bulge Bracket Research Coverage
,b6 Z6V 69. c,6 B^a DA6 !6D 8!3 A9B R)5@ ,S!
[D7* f f f f f f
[+<V0+A% f f f f f f f
@424 f f f f f f f
@<$-42 384%%$ f f f f f f f f
.$82%V;$ [+,a f f f f f f f
_"0-#+, 3+V;% f f f f f f f f
O^ 7"<5+, f f f f f f f f f
P[3 f f f f f f f f f
A*'/0 K G F L L L L F L N@L <
!"#$%"&'()"$ *+ ,**- ./01"2
3(+4(+5 6(44"+ ./01" *+ '7" ,/0/+&" 87""'
9&'*:"# ;<=;

Mick McGuire Value Investing Congress Presentation Marcato Capital Management

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8th annual new york

value investing congress

CTOB! 1. 2012 N\ YO!K. NY

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