2012 Marcato Brookfield

8/9/2019 2012 Marcato Brookfield

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8th annual new york value investing congress

Perspectives on Book Value

Mick McGuire, Marcato Capital Management

Join us for the 8th Annual Spring Value Investing Congress in Las Vegas!

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10/70

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A bottoms-up analysis

requires an assessment of

three different categories

of assets

Easy to Value

Harder to Value

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Recent

Occupancy Owned Market

2009 2010 2011 Sq. Ft. Price / Sq Ft. Value

Industrial 96% 86% 89% 564,800 $100 $56

Off 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

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Recent

Occupancy Ow ned Market

2009 2010 2011 Sq. Ft. Price / Sq Ft. Value

Industrial 82% 83% 95% 4,466,800 $50 $223

Office 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

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13/70

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Balance Sheet Market

Value Value Per Share

Commercial RE Portfolio

Haw aii $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

% Premium / (Discount) to Current (54.9%)

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Kukui’ula

Wailea

Maui Business

Park II

Haliimaile

Maui Kaua’i

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15/70

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16/70

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17/70

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257 units sold as of August 2012 (236 binding sales averaging >$700 / sq.

ft.)

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18/70

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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

Bluffs 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 Tow n Center (Residential) 19 440 0.5 220.0 200.0 20.0 202.0 35% 4 15% 9.8

Kahului Tow n 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

Brydesw ood 24 1.8 43.2 15.0 28.2 17.0 35% 3 15% 14.5

Total Fully Owned Development 441 $294

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19/70

EntitledAcres Value

Wailea 167 $142

Maui Business Park II 179 45

Waihonua - Honolulu 2 32

Kahului Tow n Center 19 17

Haliimaile 63 15

Brydesw ood 14Kane Street 4 12

Port Allen Residential 4 11

Keola Lai 3 6

Total Fully Owned Development 441 $294

K Mc N

We believe ALEX’s fully

owned development

projects are worth

roughly ~$294 million

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20/70


21/70


22/70

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We believe ALEX’s 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

kg E*B*/&3)*+, P1&X*',$


23/70

Balance Sheet Market

Value Value Per Share


Haw aii $425 $10.02

Mainland 493 11.62

Total $819 $917 $21.63

Property Under DevelopmentWholly Ow ned $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

% Premium to Current (0.0%)

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24/70

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25/70

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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

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26/70

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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 Com ps - 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

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27/70

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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

2007 683 29,136 Upcountry Maui

2006 2,200 15,227 Upcountry Maui

2005 640 44,063 Upcountry Maui (2)

Q1-2002 9 70,112 Upcountry Maui

Total 3,860 $23,267

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28/70

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2007 2008 2009 2010 2011 Average

NOI from leasing unimproved land in Haw aii $8.5 $6.2 $4.6 $3.8 $3.5

Unimproved land leased to third parties in Haw aii 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

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29/70

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Value of Ag LandAdjusted

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 $734Value 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

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30/70

Balance Sheet Market Value Per Share

Value Low High Low High


Haw aii $425 $425 $10.02 $10.02

Mainland 493 493 11.62 11.62

Total $819 $917 $917 $21.63 $21.63

Property Under Development

Wholly Ow ned $159 $294 $294 $6.93 $6.93JV 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

% Premium to Current 45.7% 57.7%

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31/70

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32/70

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T*+7&139 G+'?


33/70

K UM NJ&(1'*Q 7&)3.+0 %&'()*+,$

R./.+'* J"**, J+.3$"&, &- T^ O*./ \$,.,* g./(*


34/70

K UZ NJ&(1'*Q 7&)3.+0 %&'()*+,$

12,000 acres of contiguous, developable raw land adjacent to a major highway in

Sacramento

T^ &1#8#+.//0 .'A(#1*% ,"#$ /.+% #+ ,"* MdiW$ ,& ,*$, #,$ 31&3(/$#&+ $0$,*)$9 2(, $,&33*% .//

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.+% '#B#/#f.,#&+

310k square feet of excess Sacramento office space leased to third parties

580 acres in Chino Hills, CA

T^ D4+$ J*B*1./ \5'*$$ O*./ \$,.,* @$$*,$


35/70

K UU N

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36/70

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

K U_ NJ&(1'*Q ",,3QHH*.$,&+a'.?'&)

\.$,&+ E*B*/&3)*+, #+ P1&81*$$


37/70

In late 2010, prominent

Sacramento developer

AKT paid $49,000 / acre

for 17,000 acres of

comparable raw land, in

a less desirable location

K Ui NJ&(1'*Q J.'1.)*+,& R($#+*$$ k&(1+./

GY Land

O*'*+, :.+% J./* 7&)3 @B.#/.2/*


38/70

K UV N

7(11*+, /#$,#+8$ &- (+-#+#$"*%9 (+a*+,#,/*% /.+% 3.1'*/$ #+ ,"* J.'1.)*+,& .1*.'&+-#1) ,"* 1.+8* &- hiW9WWW a hVW9WWW H .'1*

J&(1'*Q P(2/#' %&'()*+,$9 444?/&&3+*,?'&)

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 50,000Raley 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

Straw berry Ln and Hw y 99 3 135,000 54,000

Average $56,967

D,"*1 O*'*+, :.+% J./* 7&)3$ @B.#/.2/*


39/70

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J&(1'*Q 7&)3.+0 %&'()*+,$

2008 2009 2010 2011 LTMSacramento Office Space NOI $10.3 $4.4 $5.3 $5.6 $5.3

J.'1.)*+,& D--#'* J3.'* T*+*1.,#+8 Nhi) &- mDG


40/70

We believe GY’s 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

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J&(1'*Q 6.1'.,& *$,#).,*$

Excess Real Estate Valuation

Asset Value Methodology

Sacramento Land $302 6,044 acres @ $50k / acre

Sacramento Off ice Space 66 LTM NOI @ 8% cap rate

Chino Hills Land 0 Conservatism(1)

Total $368

Value / Share $5.99

% of Current M arket Cap 61%

\5'*$$ O*./ \$,.,* g./(.,#&+


41/70

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42/70

n#," "./- &- 1*B*+(* -1&) '&$,a3/($ '&+,1.',$9 31*a'&13&1.,* \RG! ).18#+$ #+ T^C$ .*1&$3.'*

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K _W NJ&(1'*Q 7&)3.+0 %&'()*+,$

'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%

% M argin 11.6% 9.8% 10.0% 11.5% 10.8% 10.7% 11.7% 11.0%

T1&4#+8 O*B*+(* .+% J,.2/* 6.18#+$


43/70

hbMM hbW_hdWZ

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hbWW

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hM9ZWW

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S+-(+%*%

F(+%*%

K _M N

Company Backlog Provides Revenue Visibility

$1,191

$1,422$1,377

J&(1'*Q 7&)3.+0 %&'()*+,$

% Growth 15.7% 3.2%

T*+7&13C$ 7&1* R($#+*$$ #$ T1&4#+8


44/70

GY’s Free Cash Flow

significantly exceeds its

reported GAAP Net

Income, for four separate

reasons

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45/70

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 for Refi

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

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46/70

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!1.+$-&1).,#B* @'A(#$#,#&+


47/70

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 Yield to Current M arket 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

% Premium to Current 145.8%

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48/70

GGG? R1&&Y-#*/% O*$#%*+,#./ P1&3*1,#*$ ;ROP>

K _V N


49/70

7&)3.+0 DB*1B#*4

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Ticker:

Financials:

ZWMM O*B*+(* ;Z> hbMd6

ZWMM F1** 7.$" F/&4 ;U> hMVU6

Valuation Multiples:

P H pZ ZWMZ !Rg M?i5

P H ZWMM F7F d?W5

Capitalization

6Y,? 7.3 hM?iR

!\g hZ?bR


50/70

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K _b N

Q2 2012 Balance Sheet

Q2 2012 Property Inventory by Type

Vast majority of the Company’s $2.2B in property

inventory consists of long-lived land investments

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51/70

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K _d N

IdentifyAttractive

LandOpportunities

Master PlanCommunity

Acquire,Convert andEntitle Land

Sell Land to3rd-Party

Homebuilders orBegin

Homebuilding

Design andConstruct

Homes

Market andSell Finished

Homes

Land Development

Average ~10 Year Investment Cycle

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Homebuilding

BRP principally participates here


52/70

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53/70

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54/70

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55/70

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Historical Indexed Housing Prices (1)


56/70

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K i_ N

2011 Gross Margin Breakdown (1)

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57/70

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58/70

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59/70

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60/70

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61/70

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62/70

n"0 #$ ROP S+#A(* B$? D,"*1 `&)*2(#/%*1$s

K VW N

Other Homebuilders BRP

InventoryRunway

J"&1,

7.$" -/&4$ +**%*% ,& 1*-#//%*3/*,*% /.+% #+B*+,&10

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PortfolioComposition

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63/70

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K VM N

Land and Housing Inventory

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BRP’s portfolio consists of

mostly mature land

investments vs. more recent

housing inventory for other

homebuilders

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K V_ N

Estimated Market Value of BRP’s Assets

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Public Trading Comps

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n".,C$ ROP n&1,"s

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Illustrative Valuation Range

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Bulge Bracket Research Coverage

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Documents

2012 Marcato Brookfield