mailout to cer shareholders, page-2

Hi cmwilson,

Havent had a chance to drop you a line yet. I like the idea. Please feel free to summarise any of the points Ive raised in my posts. These are 4 points of many which can be included:


- Assets values as at 31 Dec 2010 were used for the purposes of the amalgamation. Details of the amalgamation were officially announced to the market in August 2011, after financial year 2010-11. The cap rates on CNP's Aust properties have moved in from 7.74% (Refer to HY ann) to 7.6%. That equates to a favourable movement in cap rates of 1.8%.

In the same time, the cap rate on CER's Aust portfolio has moved in from 7.52% to 7.29%. That is a favourable cap rate movement of 3.2%.

So even though we have been provided with a more favourable valuation uplift on the portfolio, CNP will have leveraged some of the valuation uplift from CER.

- Looking at NTA solely as the variable dependent on the amount of equity issued is a completely flawed formula as gearing is not taken into account. CER’s gearing will increase from approximately 40% (taking into account the repayment of CMBS debt in Sep 2011) to 43.4%. Much of the syndicates have a higher gearing ratio than 40%.

- Unlisted syndicate investors are not being penalised for being provided with a liquid investment.

- The valuation of the management rights CNP is vending into the entity takes into account funds management and external property management fees which are irrelevant to CER. The RE generated revenue of only $13.6M for FY11 from CER of which the EBIT the RE generates from CER is approximately $5.4M (using the 60% overhead figure used on page 41 of the amalgamation presentation). Using a PE of 6 which is the mid point of the PE range used in the calculation, CER should only be paying $32m for the management rights. CER is instead paying the equivalent of $69M ($240m x 29% of issued capital) The $240M is taken from page 40 of the presentation. CER is paying significantly more than fair value and is in essence subsiding the unlisted syndicates.