The NTA is based on the capitalisation rate of the income on...

The NTA is based on the capitalisation rate of the income on each asset in the fund.

If the board decides to increase the capitalisation rate on each asset the book value of the asset falls.

If the capitalisation rate increases sufficiently it will reduce the value of each asset substantially and may mean that bank covenants around the
NTA to borrowings would be breached.

With interest rates increasing the capitalisation rate will increase and as such the NTA will fall. These are non cash entries in the books, but a loss will be recorded against the funds equity.

The big unknown is how high will rates go and how high cap rates will be increased by the board.

That is why the share price is trading to a big discount to the NTA. The market expect cap rates to increase. This has already occurred in some REIT's.

COF seems oversold, but who can predict the future.

GLTA

DYOR