why did insto take such a small discount??, page-9

Peppie
I don't think that most shareholders will take any up. I am not sure if the SPP can be underwritten. I agree however the same terms and conditions I read to be 40c and no interim distribution. So in fact the ex dividend date last year ( for the second q - as they paid quarterly) was 13 Jan 09 so they will in all likelihood only launch this post a similar date. that complies with that.

In the AFS the shareholder spread was:

NUMBER OF SECURITIES NUMBER OF SECURITYHOLDERS
1-1000 305
1,001-5000 1,272
5,001-10000 1,891
10,001-100000 8,050
100,001 – over 796

The category that makes sense is above the 10000 shares as they already have an investment of $4000 to $40000. However why purchase 37500 shares at a 2c discount - I wouldn't see that as a major coup for me I would need a compelling discount to drive that offer home for me. I could today buy AXA at $5.77 knowing that if the offer goes through I could get $6.22 that's 45c on $5.77 and a much shorter time frame.

Unless the SP is above 43c I cannot see many running to purchase and many would be seeking to offload to purchase on the SPP.

I must be missing something.

I agree that the AREITS are all looking to have low gearing (A mistake IMO) The one factor that has always made these property investments work has been the gearing that amplifies the return. The real test is cash flow. The problems are covenants and at around 40% the 60% should mean you are able to withstand even 88% occupancy and high interest rates. Having separated the development arm and no longer paying out profits that are needed to build a strong Balance sheet for the development side I don't see how having such a low gearing for such a long term asset makes sense. These cycles have been seen before you can pitch your discount rate at 9.5% to 10% and do your cash flows on 90% occupancy and that should be a perfect storm.

The 15% dilution doesn't make any sense to me and certainly this is not the same as the crises last year. So why dilute us now and the reason is poor at best. This issue was not known at the AGM on 12 November that's just over a month ago.

This share wont become a Westfield it wont have that rating - that's one of the reasons I am buying into it its purely Aussie.

The only chink in the armour I can see is the Abacus storage fund. Its been open for sale for a long time and in August 2010 $90m is up for renewal and in Nov 2010 a further $43m. There has been a flurry of activity on the fund website. New forms for broker requests, Blackwell storage indices report and the RG46 disclosure statement. The current offer closes later this month. My guess if I was looking for a problem would be that the bank wont roll the full loan so they are looking to reduce the external debt and are looking to shore up any other unlisted fund debt so that they have leverage over the bankers in such a circumstance. If this is the case its money that doesn't give capital growth as it doesn't generate more than the interest rate. However I am sure they will gouge that a bit.

Outside of these unlisted fund issues I can find nothing of interest.