April 24:
Huge news today with the confirmation of Charlotte Street being sold, above book value (albeit with a deferred settlement).
I calculate that about $0.57 per unit has now been sold. The remaining 3 assets have a book value of approx. $1.15 per share. I think they'll get something more like $0.95 per share, based on my analysis . This totals to $1.52
The final piece of the puzzle is the time it will take for everything to end up back in my pocket.
I think it will trickle back over the next two years, and average out to around 18 months.
Somewhere around 17-20% is probably a good IRR for 18 months, so this gets me a val of around $1.23-$1.27. Will keep any net income generated as my margin of safety.
Feb 24:
Nothing too surprising in the HY results.
St Kilda road maintained its WALE, however occupancy dropped.
64 Northbourne Ave dropped in occupancy with only a few minor lease extensions meaning WALE dropped to 1.5 years. There are two Government leases expiring in the next 18 months.
The value of the divested property (Beenleigh) and other assets on the balance sheet is about $0.20 per share. Stripping that out from reported NTA leaves you with about $1.50.
I think the market is pretty close to pricing in land value alone for the remaining assets at an implied SP of around $0.80 (stripping out the divestment mentioned above).
The wildcard is managements judgement. Every dollar spend on capex goes down the toilet unless they can attract some tenants.
Market is pricing in a cap rate of 13% for the portfolio, I'm still willing to take a punt at this valuation.
Nov 23:
Continued SP weakness on fairly solid volumes has made me circle back around and revisit my thesis.
The market is implying that the portfolio cap rate on AOF's assets is 12-13%, basically double what the FY23 valuations were (which, are absolute rubbish by the way).
I'm assuming divestments have been slower because management are reluctant to sell too far below book value, due to either the perception or possibly the legal implications (I'm purely speculating on the latter).
Assuming that the portfolio can still be divested for no less than 30% of a discount to NTA, which equates to a cap rate of somewhere around 8.45%. Discounting this back by 12% for two years gets me to around $1.10. You might also get some holding income as well.
Alternatively to divestments, AOF just needs one or two positive leasing outcomes and this could be back to yielding double figures in 12-24 months time, based on the current SP of $0.95ish.
Finally some action. The sale of the second smallest asset in the portfolio at a 7% discount to March 2023 book value. On the face of it, this is a good outcome, although I daresay this was the closest to book value that any asset in the portfolio will achieve
The sale represents just under 19% of AOF's market cap and I hope that some of the proceeds will be returned to unitholders at some stage.
The announcement is pretty vague, with the only other point worth noting being that the fund has apparently dipped into a debt facility to fund capex on it's Parramatta St or Charlotte Street Property. This was to be expected, however the amount the ale proceeds that will be held in cash would be good to know prior to the release of the half year results.
I daresay this will be as good as it gets for sales relative to book value. My hope is that some more sales flow quickly post Dec 23 write downs of somewhere around 20-30%.
Thesis intact.
Looks like I'm not the only one having a sniff. Old mate Nick Bolton appears to be kicking the tyres.
Nick Bolton’s new target with Keybridge Capital is Australian Unity Office Property Fund.pdf
The best part of the article is this though:
