These acquisitions reduce two minor concerns about TIX that I mentioned in March. One minor issue with TIX was it's lack of growth (because properties for sale have been overpriced). This acquisition brings back in some growth without compromising too much of the long-term investment returns (but there is some compromise, IMO). The second minor issue was the above average debt (43%). This cap raising will bring that debt down a notch (to 40%).
One issue with the acquisitions is their low fixed rent increase (2.5% -- versus the usual range of 3.25% to 3.5%). These low rental increases may explain why TIX says the actual (passing) rent is well below their "economic rent" (i.e. less than cost recovery and reasonable economic return). Interesting that the PDS does not mention this, just in the presentation. At the same time, TIX says (in the PDS and presentation) that the the larger (NSW) property is significantly below replacement cost.
My guess is that TIX will have VERY early lease renewal negotiations with Woolworths, in which it will leverage the passing vs economic rent discrepancy (discounting a wallop of an increase in 2021) and discuss "major operational cost savings" for Woolworths through capital investment in a usable rear truck entry. TIX will invest in capital works so the tenant reduces operational costs in return for an early lease extension with something closer to market rate rentals and rental increases.
WOW Price at posting:
$36.05 Sentiment: None Disclosure: Not Held
TIX Price at posting:
$2.24 Sentiment: None Disclosure: Held
