In our series this week on GE Capital’s recent deep-dive investor meeting, we’ve been asking key presenters which slide from the detailed presentation they’d most like to have when making their case to critics. Next up: GE Capital Real Estate.
Tall order: GE’s holdings go through rigorous rounds of tests in which all of the assumptions about credit-worthiness are challenged.
Ron Pressman, President & CEO of GE’s Real Estate business, said, “Slides 40 and 41 outline our disciplined focus on risk-mitigation. Much of our discussion centered on how we conservatively underwrite and rigorously manage every asset to deliver a higher performing portfolio than competitors, even under the current challenging environment. GE Real Estate holdings are subject to rigorous risk-mitigation processes that include independent and third-party reviews and culminate in a roundtable asset valuation review in which all assumptions are challenged to test credit-worthiness.”
Another important slide, Ron said, was number 64, which explains why GE Capital’s unrealized losses appear ‘smaller’ in this environment than those of opportunity funds. The slide shows how GE’s real estate investments might perform under hypothetical scenarios and compares them with those of an opportunity fund that uses 3:1 leverage, which means it puts up one third of the purchase price (equity) and borrows the remaining two-thirds (debt). The opportunity fund’s percentage gain when the asset value grows — or the loss when its value falls — is magnified because it’s measured against the original equity investment (one third of the purchase price). GE, on the other hand, makes unlevered investments (that is, it does not use debt) so its gains or losses are measured on 100 percent of the historical cost — which makes the percentage gain, or loss, smaller.
* Read Part 1 of My Favorite Slide
* Read Part 2 of My Favorite Slide
* Read Part 3 of My Favorite Slide
* View the full slide deck on GE.com
* Read GE Reports coverage of the presentation
