When I first looked at the headline number, my first reaction...

When I first looked at the headline number, my first reaction was "Wow, that sounds expensive - $22m!"

In principle, I don't have any problem with NCK buying this property from Scali Consolidated. In fact, this is a good development as it will remove the last of the related party relationship between NCK and Scali Consolidated.

My only concern is the valuation of the property. For me to be able to come up with an opinion, I need to first read the Independent Expert's Report that will be sent out soon.

I understand that this building is a two storey building and that NCK occupies the ground floor. I need to know if the first floor space is currently generating any lease income or not, and if it does, how much it is.

The rentals that NCK is currently paying on this property is about $700k. Assuming the first floor is empty, the cap rate for this property is $700k/$22m or approx. 3.2%, which in my opinion is too low.

But if NCK is able to lease out the first floor for a similar amount of rents, then the cap rate becomes slightly more palatable.

This transaction will put NCK's net cash balance in the red. This is why I believe NCK should have paid less dividends in the past 2 years and built a bigger cash balance. Had they done that, even after buying this property, they would still have a positive net cash balance.

Overall, I'm fine with the principle behind the property purchase, but not too keen with the price paid.