Ann: Dividend/Distribution - TOT, page-13

Hi Tim

Addressing your points in order
- Income of $11.9m for the year is right for 2023 (also backsolves to $225m NAV for the three properties times the current 5.3% cap rate( )
- plus $0.125m of income from Artarmon (per the annual report - see income from distributions line)
- plus $0.2m of interest income on cash in the bank

we can also inflate the $11.9m of rental income from properties by the 3% rent review given we are in a new financial year (FY24) - therefore another $350k

Accordingly I see total FY24 revenue as $12.52m. That is before the new floorspace in Cremorne (1000sqm) was leased to PZ Cussons. Based on the disclosure at the annual results, 1000sqm at Cremorne is equivalent to 3% of group revenue, so we could add another $350k to get us to $12.87m of revenue locked-in for FY24

As for costs, FY23 average interest cost of 4.70% is likely to be slightly higher given the RBA hikes were in 2H - if we call it 5.00% now, on $83m of debt, we have $4.15m of interest

That goes with $1.4m of management fees (0.65% of NAV) and $1.0m of property and admin costs to get to $7.75m of annualised costs (noting the property costs are very hard to estimate given the FY23 accounts contain a lot of fitout for Cremorne and Canberra space which is now fully-fitted, and also some expenses for the properties since sold in early-FY23), so i think it could be much lower than $1.2m

In all i get to A$5.3m of free cash generated by the properties, to go with the $3m we started the year with, to give A$8.3m all-together - which is enough to afford the dividend for all of FY24

Now there is upside risk to this - for example if TOT's effective interest rate is lower than 5%, if Artarmon gets sold for A$4m, or if the space at Cremorne is leased this year, the dividend will be far more secure

there is also downside - if property costs or interest costs go up unexpectedly, most notably, then it feels unlikely that the dividend would be sustainable past FY24

I feel assured by management's guidance as recently as 4 weeks ago that they're confident the FY24 guidance of 6cps payout is achievable.

It also wouldnt surprise me if TOT is a takeover or privatisation target, either from Tony himself or another REIT, given how high quality the assets and tenants are, and how deeply discounted TOT is trading