Updated views on TOT

I had a good read over last weeks TGP presentation last week and was thinking that would mean we'd have a TOT one coming up too.

If it was online I was hoping to join in and ask some questions but unfortunately after writing to management I received a response from the 360 compliance person saying pointing to me chairman's address (which was released) and then saying that they aren't legally required to have an AGM so won't be having one. I've written back saying that regardless of whether it's a legal requirement it would be positive to give the smaller shareholders a forum to ask questions. When I spoke with James Storey a few months ago I gave him some similar feedback and he said they might look at doing some webinars but nothing seems to have materialised in that respect so far.

Never the less I have some updated views on TOT and 360 more broadly off the back of last weeks presentation and thought I would write them out to help clarify my thinking and hopefully spark some discussion.

The Positives

There was more acknowledgement than there has been in the past of the recent poor performance and horribly timed acquisition which has now been described as "less than ideal". I've tracked back to January last year to read through the statements around the time of the Irongate deal as there was a line in the presentation (referring to the purchase of the properties) that "albeit TOT was contracted to purchase those assets as part of the Irongate Transaction". Could they not have taken cash for their shares instead of property like TGP did? It's a bit pointless now but I feel like I might be misunderstanding something).

In terms of asset quality I think we've got the best of a very out of favour sector. The buildings are in really good shape with stable tenancies on a WALE of around 9 years

I also have some admiration for TGP increasing their stake to nearly 30 percent amongst the recent extreme share price weakness

The Negatives

There was a 2.8 million acquisition fee (this is the one I feel like should be partially refunded as a gesture of good will) paid on a deal that has been a big contributor to the NTA dropping from $1.26 to a very shaky 93 cents that will probably look more like between 80 and 85 cents after the next round of valuations are complete in early next year (even 80 cents would still put as at an NTA discount of 35% so it's gotten pretty extreme).

I know it's microscopic compared to the size of their total portfolio but SOL selling out at such a low price rather than hanging in there is pretty concerning to me.

We've constantly heard that non core asset sales will be used for capital management initiatives when the only non core asset is the minority stake in Home HQ Artamon which they just can't seem to sell for love nor money. I'm not sure whether the majority owner has unrealistic expectations on price? It seems like this is a puzzle piece towards some positive change happening at TOT but it just isn't falling into place.

General Views

More broadly there was even more aggressive wording on expansion stating that TOT will "look for potential M and A activity across ASX listed and unlisted property trusts" but I just can't see how this is going to be possible considering the balance sheet is already stretched and dividends aren't covered by rental income. I still think there may be some kind of merger between TGP and TOT in the future.

Whilst management having a big stake is usually a huge green tick for me I think it works against us in some senses here because (particularly now SOL is gone) there isn't really much hope for an activist investor. I also unfortunately get the sense that small shareholders like myself are seen as a bit of a source of irritation and just there to provide funding rather than being partners in the business. Having had a really good investment record and been a bit of a corporate raider towards small underperforming REITS themselves it's probably also a bit difficult going from being the hammer to being the nail in the last 18 months.

I'm down 40% at the moment but will keep holding as I very rarely sell shares and prefer to just slowly accumulate over time (Plus the fully franked dividends are easing the pain for as long as they can last). I actually don't have the confidence to average down either though.