William Ackman, who runs hedge fund Pershing Square Capital Management LP, said he projected a “$2 billion potential profit opportunity” in the co-op conversion of Manhattan’s Stuyvesant Town and Peter Cooper Village.
His joint venture with Winthrop Realty Trust, which invested in junior debt of Manhattan’s largest apartment complex, offered to split the anticipated conversion profits with the more than 25,000 current tenants, giving them $1 billion, Ackman said today at the Bloomberg Link Hedge Funds 2010 Conference in New York.
It was “an inducement for the tenants to go along for the ride,” he said.
Pershing Square and Winthrop paid $45 million for $300 million worth of defaulted junior debt on 80-acre (32-hectare) property and attempted to foreclose on the 11,000-unit complex. While a New York state court thwarted their plan, they recovered their $45 million investment from senior lenders.
The Pershing Square venture received “a wrong ruling,” Ackman said of the court case.
Ackman has a history of buying stock in companies he deems undervalued -- particularly in the retail, restaurant and real estate industries -- and urges changes he says will boost shareholder returns. He pushed for a share buyback at Target Corp. in 2007 and persuaded Wendy’s International Inc. to spin off its Tim Hortons doughnut chain after acquiring a 9.3 percent stake in the fast-food company.
Pershing Square disclosed in October that it had a 16.5 percent stake in J.C. Penney Co., whose sales have shrunk 45 percent in the past decade.
General Growth Investment
Ackman was part of an investor group that committed more than $8 billion to bring mall owner General Growth Properties Inc. out of bankruptcy last month. He is chairman of Howard Hughes Corp., a firm that owns a collection of partially built malls and housing developments and was spun off from Chicago-based General Growth in the reorganization.
“It was shareholder activism in a bankruptcy context,” Ackman said. “We needed to extend the maturity of the company’s debts.”
Pershing Square’s equity stake in General Growth is now worth $1.6 billion, according to Ackman. It was the “best investment we’ve made,” he said.