New LICs often trade at NAV for a while, lots of marketing spin...

New LICs often trade at NAV for a while, lots of marketing spin behind them but that shine comes off and most then come off the boil.

However in the case of QRI, its a similar reason why banks are off 20% in the last month, Charter Long Wale REIT is trading at a 30% discount to NTA.....people believe property prices will fall and banks loans will get impaired and the CLW NTA is based off phoney valuations.

There's a reason why there's no pre-2008 non-banks still around.......they get wiped out every credit cycle.

If you've been around long enough, you'll know a few things:

1. Non banks mostly lend against development sites or residential construction
2. These types of assets are leveraged to the end product (apartments or house/land) and when the value of the end product (apartments or house/land) goes down 10%, the value of the development site goes down 20-30%. This is the same reason why leveraged developers go bankrupt all the time.
3. The valuations these loans are based off are always "pumped". It suits both the developer and non-bank for this to happen. The non-bank then gets to tell its investors that it's lending on a lower LVR. I've seen some obscenely inflated valuations in my time.
4. Non-banks lend to the least credit worthy counter parties who can't get debt from the major banks at cheap rates. Often inexperienced developers or those who are already VERY leveraged.

Combine all these factors and if this downturn continues, there will be serious impairments to the portfolio. Remember, even though the stated LVR is 66%, knowing the above, based on fair valuations not pumped ones, I would guess the LVR is closer to 75-80%.

Then remember for every 10% apartment/house prices come back, the value of development site values to fall by 20-30%.

Then remember that QRI also has mezzanine debt which in a downturn could likely be a 0.

The time to even begin thinking about buying QRI is when they announce they've put their first loan into administration and are appointing receivers and are "temporarily" stopping distributions. The price will be much more attractive then.