I invest in REITs for income rather than capital gain (note that I am a non-resident which prevents me from participating in dividend reinvestment plans, share purchase plans and rights issues which makes the affects of a reconstruction even worse than it does for locally based investors) so even though fewer shares on offer should be reflected in a higher share price, in theory meaning that I am not out of pocket even though my shareholding has been reduced, the fact that I will have far fewer shares means that the amount of money I will receive in the way of distributions will decrease sharply.
As a way of illustrating this (before tax), let's use yesterday's distribution and pretend that the upcoming reconstruction had already occurred by the time the latest distribution was paid:
50,000 shares x 2c = $1000 (prior to the reconstruction)
10,000 shares x 2c = $200 (after the reconstruction)
My income from distributions has effectively been reduced by 80% as a result of the reconstruction.
Going forward I have lost four-fifths of the income I would have otherwise expected to receive had the reconstruction not taken place.
ALZ would have to raise their annual distributions from the current 4c to 20c for me to achieve the same income post-consolidation than I was receiving pre-consolidation, something that is not going to happen anytime soon and something I cannot imagine ever happening in my lifetime, meaning that such a reconstruction is very negative for long-term income-focused retail investors such as myself.
There are other issues surrounding reconstructions but as I am (change that to was) only interested in ALZ for income purposes that is the only issue I have touched upon in this post.
As the previous sentence alludes to I actually sold out of ALZ this afternoon.
Good luck to all remaining holders, but as for me, I'm out of here.
ALZ Price at posting:
$2.28 Sentiment: None Disclosure: Not Held
