Hi Gerling, I agree with your comments that it will be hard to...

Hi Gerling,

I agree with your comments that it will be hard to grow the TOT A-Reit to a large enough size to matter, particularly whilst they are trading at a big discount to NTA. They shouldn't raise cash as it dilutes existing shareholders, including TGP and they will not be an attractive merger partner for doing acquisitions as they will be coming at negotiations from a position of weakness. That leaves plodding along earning a yield and distributing cashflow from the 3 properties until someone takes a liking to them. Even that is hard because of TGP's holding and they may not want to lose the management fee stream. To get back to square 1 they will need to sell those properties for around $35 -$40m extra as they will have the upfront $20m buying cost plus selling costs etc.

I think taking those 3 properties into TOT is a good move for TGP, but a crap move for TOT. TGP obviously will enjoy receiving management fees on an enlarged asset base. TP, take the cash, pay the tax, distribute the credits with our distributions and go shopping for the next listed opportunity play. We all know they are out there and with interest rates on the rise, more opportunities for cashed up buyers will appear.

As posted previously, i will not be increasing my holding if they take the properties, but i am not selling at a silly discount either. So to the bottom drawer they will go and i will just collect the cash distributions.