RFF Webinar, page-155

@canonman

Actually a lot.

Just assume Charter Hall buy a shopping centre and they establish a Shopping Centre REIT. They then rent the shops to tenants. The tenants are independent retail operators. They pay rent. Charter Hall distribute dividends to investors. The market likes that and values the REIT at a sharp (low) cap rate say 6%. Happy days.

Now lets assume Charter Hall have a problem leasing out to independent retail operators. Instead of Coles or WOW as the supermarket operator or tenant Charter Hall go into the business of supermarket retailing in joint venture with a management team, and the joint venture leases the space. The market doesn't like that, sees it for what it is, and revalues the REIT.

Worse still if Charter Hall had to get funky and get involved in joint ventures for the butcher, bakery and pharmacy.

If around half the agri assets are leased to themselves then there is a problem. The market has not understood that and has valued the REIT incorrectly.