I agree with @Funkentelechy78 that the type of quality assets we...

I agree with @Funkentelechy78 that the type of quality assets we own hold their values better than office buildings. They are near impossible to replace due to their location and the construction costs -- which have increased significantly. The pubs and service stations in particular, but also the industrial assets and agriculture-related properties are sought after. If you've seen the Elders share price chart though, and noted the recent heavy fall in NTA of our agriculture assets, you'll be concerned about the near-term weather forecast (no rain) and its effect on our primary industries sector. Hopefully our agribusiness assets won't fall much further in value due to el nino.

That said, the CLW listed cap rate is a joke, and surely will reduce. It is an embarrassment in the recently-released annual report. However, I reject the possibility a 30% fall in asset value (perhaps at my peril). I doubt that happened even during the GFC. Also, covenants have been breached by REITs in the past (hardly ideal...) and banks have permitted it. Again, not great. I like to think that Charter Hall is not stupid, and any asset sales would happen well in advance of this happening. Even a ten to fifteen percent fall from here would be extreme.

Charter Hall has historically provided re-valuations six monthly in June and December. So I would expect to see a fresh NTA figure before Christmas.

What I anticipate over the next 18-24 months is: NTA falling another ten percent at the most. Rents to rise. Interest rates to flatten out, then fall in the medium term with bond yields falling. Perhaps another 0.5c haircut per quarter with our distribution. A few non-core properties sold to slightly reduce gearing. Unpleasant for holders, but nothing too dire. I base this view off the vibe of the thing, not any financial analysis. It's purely a guess. I suppose we could sell the entire pub portfolio to our superannuation fund partner and problem instantly solved. I am still annoyed at that unnecessary Bourke Street Myer property we bought in Melbourne in 2021 for $135m. I wonder if we could flog that off to someone along with the supposedly 'iconic' David Jones property in Sydney we own.

The Australian economy is in good shape and interest rates seem to have (almost) peaked here. Australia is apparently about 6 months behind the US, where inflation has fallen significantly. The negative commentary assumes rates will remain high indefinitely. Also, to state the obvious, the CLW unit price of $3.23 incorporates all the available knowledge of the past, present and future as of 11/10/23. Every assumption about higher for longer rates is factored in. Bond yields have fallen unexpectedly in the past. If/when this happens again, REITs will suddenly be the analysts new hot sector.

Thanks @Engerbretsen for the excellent analysis. I absolutely agree the best assets will trade nearer NTA, and paint an artificially rosy picture if sold; leaving us with lesser quality assets at dodgy stated valuations. That's the risk. A lot comes down to how good our portfolio is. Goodman's assets are unbeatable, but Charter Hall's properties would be (in my opinion) in the running for second place in Australia in terms of location and quality. We don't own 2nd tier office buildings. A lot has been spent on things like ESG upgrades (solar panels, etc.) which the best tenants demand.

Lots of respect, man, for the numbers and taking the time to post all of that. I'm not going to argue with them. I don't have the knowledge to do so. What you wrote all looks reasonable. I can see the distribution falling too. I do not know why the DRP was suspended 12+ months ago, which would have helped strengthen the balance sheet.

I've looked through their list of properties. The thing about real estate is we're not talking about identical items that perform the same function like an iPhone or a TV. Each asset is worth its replacement cost, its rental yield, and whatever someone is willing to pay to acquire it. The CLW unit price is at all-time lows by a large amount. The margin for safety in my view is pretty high. Yes, things could get much worse from here, but with REITs there are cycles and I choose to believe we're close to the bottom. Things can turn-around quickly (or get a lot worse!).

Perhaps I believe what I want to believe and am guilty of confirmation bias. I will continue to hold and choose to ride out the cycle as I have done before. Engerbretson's $2.85 target isn't far below where I'll be buying another small parcel. We shall see.