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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!
To register and benefit from a special discount go to www.ValueInvestingCongress.com/SAVE
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Use discount code: S13MF
http://www.valueinvestingcongress.com/MARKETFOLLYhttp://www.valueinvestingcongress.com/MARKETFOLLYhttp://www.valueinvestingcongress.com/MARKETFOLLYhttp://www.valueinvestingcongress.com/MARKETFOLLYhttp://www.valueinvestingcongress.com/MARKETFOLLY
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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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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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257 units sold as of August 2012 (236 binding sales averaging >$700 / sq.
ft.)
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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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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
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We believe ALEX’s fully
owned development
projects are worth
roughly ~$294 million
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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
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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 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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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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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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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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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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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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Balance Sheet Market Value Per Share
Value Low High Low High
Commercial RE Portfolio
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 $30.00
% Premium to Current 45.7% 57.7%
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K UZ NJ&(1'*Q 7&)3.+0 %&'()*+,$
12,000 acres of contiguous, developable raw land adjacent to a major highway in
Sacramento
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.+% '#B#/#f.,#&+
310k square feet of excess Sacramento office space leased to third parties
580 acres in Chino Hills, CA
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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
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In late 2010, prominent
Sacramento developer
AKT paid $49,000 / acre
for 17,000 acres of
comparable raw land, in
a less desirable location
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GY Land
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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
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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
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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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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%
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'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 $909.7 9.3%
% Growth 25.9% (0.2%) 20.3% (1.8%) 8.5% 8.1% 6.9%
Aerospace EBIT 56.6 60.2 61.2 84.8 78.0 84.4 99.6 99.7 8.4%
% M argin 11.6% 9.8% 10.0% 11.5% 10.8% 10.7% 11.7% 11.0%
T1&4#+8 O*B*+(* .+% J,.2/* 6.18#+$
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K _M N
Company Backlog Provides Revenue Visibility
$1,191
$1,422$1,377
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% Growth 15.7% 3.2%
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GY’s Free Cash Flow
significantly exceeds its
reported GAAP Net
Income, for four separate
reasons
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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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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 $23.96
% Premium to Current 145.8%
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Ticker:
Financials:
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ZWMM F1** 7.$" F/&4 ;U> hMVU6
Valuation Multiples:
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Capitalization
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K _b N
Q2 2012 Balance Sheet
Q2 2012 Property Inventory by Type
Vast majority of the Company’s $2.2B in property
inventory consists of long-lived land investments
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K _d N
IdentifyAttractive
LandOpportunities
Master PlanCommunity
Acquire,Convert andEntitle Land
Sell Land to3rd-Party
Homebuilders orBegin
Homebuilding
Design andConstruct
Homes
Market andSell Finished
Homes
Land Development
Average ~10 Year Investment Cycle
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Homebuilding
BRP principally participates here
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6.+.8*)*+, 2*8.+ ,& 31&B#%* F^ZWMZ 8(#%.+'* '&))*+,.10 #+ pM ZWMZ
6.+.8*)*+,C$ ,&3a/#+* 8(#%.+'* #)3/#*$ $,1&+8 -(+%.)*+,./ 81&4," -&1 F^ZWMZ
n* '&+$*1B.,#B*/0 .$$()* -/., 31#'#+89 ).18#+$ .+% +& S?J? /.+% $./*$
K id N
R&'1/0 !#* 3*#P / C1(4/+ &"
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@+,-+ GN' GN' '&(EE (CLM)
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n"0 #$ ROP S+#A(* B$? D,"*1 `&)*2(#/%*1$s
K VW N
Other Homebuilders BRP
InventoryRunway
J"&1,
7.$" -/&4$ +**%*% ,& 1*-#//%*3/*,*% /.+% #+B*+,&10
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:*$$ +**% ,& 1*'0'/* '.$" -/&4$#+,& +*4 /.+% .'A(#$#,#&+
PortfolioComposition
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O*'*+,/0 .'A(#1*%
6&$,/0 /.+%
D/%
Carrying Valueof Property
6.1Y*%a,&a).1Y*,;#)3.#1)*+,$>
6.1Y*, 31#'*$ ".B*-.//*+H$,.8+.,*% $#+'*3(1'".$*
R&&Y B./(* ;&1#8#+./ '&$,>
6.1Y*, 31#'*$ ".B* $#+'*#+'1*.$*% $(2$,.+,#.//0
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:&+8 O(+4.0 6#+#)#f*$ 7.$" m**%$
ROPC$ $(2$,.+,#./ /.+% .+% "&($#+8 3&1,-&/#& 31&B#%*$ #, 4#," eUW 0*.1$ &- 1(+4.0 ., '(11*+,
B&/()*$9 .//&4#+8 ROP ,& 8*+*1.,* $#8+#-#'.+, -1** '.$" -/&4 4"#/* 1*A(#1#+8 )#+#)./ /.+% '.3*5
!"#$ #$ &B*1 U5 ,"* #+B*+,&10 &- &,"*1 "&)*2(#/%*1$ ., ZWMMC$ 1(+a1.,*9 %*$3#,* ROPC$ 7.+.%#.+
&3*1.,#&+$ 1(++#+8 ., -(// $3**% B$? &,"*1 "&)*2(#/%*1$C '(11*+,/0 %*31*$$*% $./*$ B&/()*$
K VM N
Land and Housing Inventory
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;M> E*-#+*% .$ ,&,./ /&,$ &1 "&)* $#,*$ H ,&,./ '/&$#+8$ &1 "&)* %*/#B*1#*$?;Z> \5'/(%*$ +&+a1*'(11#+8 ZWMM /&, $./*$?
;U> E*-#+*% .$ "&($#+8 #+B*+,&10 t )&%*/ "&)*$ H ,&,./ /.+% .+% "&($#+8 #+B*+,&10?
BRP’s portfolio consists of
mostly mature land
investments vs. more recent
housing inventory for other
homebuilders
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:&+8a:#B*% @$$*,$ S+%*1$,.,* g./(*
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ROPC$ /.+% .+% "&($#+8 #+B*$,)*+,$ .1* 1*'&1%*% &+ #,$ 2./.+'* $"**, ., /&4*1 &- '.110#+8 B./(*
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7.+.%#.+ /.+% ".$ .+ .B*1.8* .8* &- eb 0*.1$ #+ \%)&+,&+ .+% !&1&+,& .+% (3 ,& Mi 0*.1$ #+
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6.1Y*, g./(* &- ROPC$ @$$*,$ #$ J#8+#-#'.+,/0 @2&B* 7.11#*% g./(*
K V_ N
Estimated Market Value of BRP’s Assets
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E*$3#,* #,$ 3&1,-&/#& &- .,,1.',#B* /.+% %*B*/&3)*+, .+% 31&-#,.2/* 7.+.%#.+ &3*1.,#&+$9 ROP
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K Vi N
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;M> O*31*$*+,$ $".1* 31#'* &- m^J\Q ROP? R1&&Y-#*/% O*$#%*+,#./ P1&3*1,#*$ #$ ./$& ,1.%*% &+ ,"* !J] (+%*1 ,#'Y*1 @%X($,*% -&1 &-- 2./.+'* $"**, E!@$?
;U> @$$()*$ -(// '&+B*1$#&+ &- 31*-*11*%?
Public Trading Comps
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n".,C$ ROP n&1,"s
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Illustrative Valuation Range
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Bulge Bracket Research Coverage
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