21/11/24:

Wow, got caught out here a little bit. Net proceeds of $41.75 mil for St Kilda Rd and total capital return between $1.20 - $1.23, this was well below even my bear case. Management fees would have been charged on the the higher book value, even though management would have had a good idea that book value was horse shit.

Not much else to say except that management is going on the black list and I'm revising my valuation to account for lower capital returns and the $0.09 distribution.

August 24:

My assumptions were pretty good and my val looks ok post FY24 Results, maybe I was a tad high, considering the two months that have passed.

All of management have been added to my "naughty list". Absolutely dismal outcome for long term holders (of which I am not one).

Have a look at this, it appears that about $14mil about ($0.09 p/u) worth of capex was spent for the half year...

It's possible that they had to spend the money in order to achieve the sales that it did throughout the year, making certain upgrades and choosing to fork out pre sale to make the sale results look better.

It's also possible that some of this was pissed away on pointless capex when the Charlotte St, Parramatta St & 468 St Kilda Road assets were clearly going to be bought and repurposed anyway.

Either way it's pretty shitty IMO.

Current NTA:

$1.39

Going to assume breakeven cashflow (very small distribution forecast for Q1)

Going to subtract $0.05 ($8 mil) to allow for capex and disposal costs

Then the question is what sort of haircut are we looking at with St Kilda?

On the books at $62 mil ($5,500/ psqm).

Worst case is $50 mil. Best case maybe $60mil.

Equates to $0.07 p/u in NTAin the worst case and approx $0.01 in the best case.

Worst case scenario is around $1.27

Worst case you'll get the same return as cash rate, best case probably double digits annualised IRR.

July 24:

Huge news that AOF has exchanged contracts to sell 2 - 10 Valentine Avenue, Parramatta for $80.5 million: AOF Divestment.pdf

That's a 15% discount to it's Dec 23 valuation. For some reason the market got overly optimistic about the sales prices in June. As I predicted below, What's left on AOF's books was never going to get book value (although I thought the same about Charlotte St). I sold out in RL in June, for some reason I decided to hold on in Strawman.

I said below that around $1.52 would come out of this. Since then, $0.097 has been distributed, leaving around $1.42. I now think that this is looking slightly optimistic.

I was probably too harsh with the timelines surrounding when capital will be returned, although it looks like the bulk of it will still be about 10 months away.

Going to stick with the same val. as 3 months ago. Kicking myself for not selling in Strawman.

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.