360 Capital is somewhat between a rock and a hard place if it hopes to grow its ASX-listed REIT business over the next year or two.
Closing down TOT is very unlikely because it is 360's main ASX-listed REIT, and it just spent transaction costs on the 3-property acquisition from the Charter/IAP deal. 360 will likely wind up TCF (enhanced income fund), as they recently suggested, which makes a wind up of TOT even less likely.
Also difficult to grow REITs through capital raising in the near future. And definitely ill-advised when the share price is so far below NTA (TOT's price is about 35% below NTA). TOT also has debt with the three properties, so not much wiggle room to buy more properties with debt.
Good news is that the three properties TOT is acquiring are long wale, TOT's return is far above most other REITs (due to depressed share price), and TOT has a fair bit of franking credit to distribute (which is rare for REITs).
Will TOT's share price re-rate? Probably to some extent when (or if) inflation wanes (investors regain confidence in REIT returns). For TOT in particular, I suspect investors also want to see the acquisitions settle in and there is better information about net income, distributions, and expected capital gains from these properties.
TOT Price at posting:
77.0¢ Sentiment: None Disclosure: Held
