another eg of cnp riding off cer. a disgrace

Below is an extract from the amalgamation announcement:

"The basic principle of the Aggregation is that CER, CAWF, DPF and CNP will contribute their assets based upon 31 December 2010 valuations"

Tell me how is it possible that the assets be contributed based on 31 Dec 10 values when the US sale didnt occur until end of Feb and the sale didnt settle until the end of June, just prior to the end of the financial year.

The amalgamation proposal for an Australian only REIT was announced in August so wouldnt it have made sense that assets be contributed based on 30 June values?

Anyway, the point is CER has once again been taken to the cleaners by CNP.

Ive looked at the movements in cap rates on the Aust portfolio for each of CNP and CER from 31 Dec 10 to 30 June 11.

The cap rates on CNP's Aust properties have moved in from 7.74% (Refer to HY ann) to 7.6%. That equates to a favourable movement in cap rates of 1.8%.

In the same time, the cap rate on CER's Aust portfolio have moved in from 7.52% to 7.29%. That is a favourable cap rate movement of 3.2%.

So even though we have been blessed with a more favourable valuation uplift on our portfolio, as the 29% equity we'll be given in the pending merger (which of course all of us will vote no) is based on Dec 10 valuations, CNP will milk some of the valuation uplift from us.

As we have discussed on here, looking at NTA solely as the variable dependent on the amount of equity issued is a completely flawed formula as gearing is not taken into account.

If the CNP debt holders want to milk off anyone, why not the shareholders of its own company! Never in my life have I heard of junior stakeholders being set aside money in favour of secured holders. In normal circumstances, an administrator/receiver would preside over the operations of the company and should there be a shortfall of secured debt holders, junior stakeholders/shareholders get nothing.

CER's gearing at 30 June 11 is in actual fact 40.9% as CER has $168M cash which it will use for the repayment of the
CMBS 2006-1 which is expected to occur on 20 September 2011. (Refer to results ann today pg 4)

Ironically, this gearing ratio will increase after the merger to the "low 40s". Yes that makes perfect sense to me..


There are quite a few significant reasons now this merger proposal is a disgrace and I'll summarise them all in one point shortly in high level dot point form. They have all been discussed on here in various posts but it is a matter of combining them and ensuring every single CER holder is made aware. If you can think of any that has not been mentioned, please make note.

We have sensational assets, great tenants and a solid capital structure.

CER deserves better than this and together we can ensure this happens.

Cheers