Ann: Weekly NAV Estimate, page-5

In theoryyes, but there are many reasons why investors feel negative about URF,especially reputation, competence etc- and continue to sell. The market is also being realistic in applyinga substantial discount for the time value of money, as it may take at least 2 years(maybe much longer) to sell all the properties and return all the cash toinvestors, in the absence of a takeoveror other wholesale asset disposal. It’s rational to discount the stated NTAfor the time it will take to convert property into cash, even assuming ahoped-for uplift in asset prices. Also URF will continue to leak small amountsof cash each year for net operating costs. On the other hand, buying back unitsat such a big discount will slowly help NTA to creep up.

Despitecost savings over the last 2 years, URF is still generating negative cash flow“funds from operations”. Ie it doesn’t, and probably won’t, generate positivecash flow as a business: it will only create net cash by selling assets. This isthe RE’s plan, but so far it is frustratingly slow, although theyhope it will speed up soon. After allowing cash for working capital and a debt covenantreserve, URF is now making surplus cash from asset sales, which will be used tofund the buyback or make distributions. I guess it will take 2 years (but maybemuch longer) to return all the cash to investors, unless the rate of asset salesgreatly increases. Unless we get a takeover for the fund or large bulk sales,it will take a long time for investors to receive the 66c/60c (latest value) incash.

The taxamount is, as others say, a provision calculated at 15% for the amount of capitalgains tax that would be charged if the assets are sold at book value. URF is not subject to US corporate tax, as aREIT, but this tax would be is levied as US withholding tax when the gains/proceedsare remitted to Australia.

I haveasked URF about this, and the losses. As Lordolean says, most (perhaps all) of the tax losses (amountnever disclosed and not recorded on the balance sheet as an asset) are for interestand operating losses, not capital losses. These losses can’t be offset againstthe (withholding) tax arising on (remitted) capital gains. I understand that there may be some limited circumstances(including a wholesale disposal) that might mitigate this, but the RE believes theseare so unlikely that they put no value on recovering the tax losses against theCGT liability. It’s annoying- the tax losses (perhaps large) will probably beforever wasted.

NB theasset values in the accounts don’t allow for property selling costs, so the true netvalue (on conversion into cash) would be lower, by deducting 6 or 7% from thegross asset values. This would be about 7 cents per unit pre tax. Hence IF the currentasset values are in line with the market, the proforma after tax NTA in cash would be about 54c. Despite these cautious comments, I'm a big holder and still a buyer.

Not adviceDYOR