Grandmaster, I havent followed up on my initial post as I...

Grandmaster, I havent followed up on my initial post as I thought that no one else was interested. However, I see you took the time to respond, so I should do the same.

Looking at your post I am guessing that you got out of IEF for approx 15-18c given pricing approx 1 year ago. (all though if it was pre that it could well have been higher)

You point out that there was another large loss for the half, which was true however I think its a bit simplistic to look at that on its own.

The revaluations of IEF's assets were off another 27.7m which is approx 10%. The weighted av cap expanded by 50bps to approx 9.1%. To me, I see this as close to the bottom of the cycle for them and whilst I admit they have some issues, (ICON, Aus Rules, Bourbon - bearing in mind the Aussie Rules and Bourbon are fantasic pieces of real estate in their own rights) they also hold some really fantastic assets. (Commodore, Dolphin, Empire, Three Weeds).

I have been keeping an eye on the LEP sales and they are really encouraging for the sector as a whole, however as you point out they are at the pointy end given the covenant strength (a secondary reason the vic pubs are so tight is the change to the poker machine licenses likely to happen within the next 24 months).

Re sales, just to clarify, IEF has transacted assets to the value of 24.5m on a weighted avg cap of 9.4% (slightly lower than the recent vals) during the period.

Now moving on to debt. During the period IEF has made very good progress in suring up the debt side of the balance sheet with reduction in total debt from 280.5 to 230m and refinancing of 180m for a further five year term (which is much longer than most other trusts, with typical terms from 1-2yrs max).
The basics of the extension are 8.6 all in cost of debt, LVR cap increased to 70% until Dec 2010, after which it drops to 60%. Interest cover covenant is 1.4 times until July 2011, at which time it becomes 1.5x.
There are some conditions attached including refurb of Icon properties with signed agreements by IEF and Icon. Also, and most importantly for us is the LVR requirement of sub 50%LVR before financiers will allow distributions.
Grandmaster I think you will find the LVR is circa 60% not 70%.

I will put my hand up here and say that I am not sure about the conditions surrounding the convertible notes, however I would suspect they will be rolled over (given Dan's hard work and success to date). I hope they can give some guidance on this in the short term.

IEF have committed to improving the Icon properties with a capex plan of 8m over the next 3 years. Couple with this is a package of reducing Icons rent by 1m with no increases in rent for the next 3 years and a rental deferral for 3 months.
For this generous package IEF will take a call over 50% of Icons business with the ability to exercise at any time over the next 5 years, leveraging themselves to predicted improvements in the operators business conditions (I see this as a positive, however I think it will take some very close interaction between the businesses will be required). In addition IEF will take put/call options over Icons FF&E, which provides protection should the worst occur with Icon and should allow IEF to move on very quickly.
I see the whole deal with Icon as being very supportive of a key partner in trouble and I think Dan has done a great job at protecting our position in every way possible.

I agree that there are definite challenges and this year will be another tough one for IEF with a hawk eye on business required. I take heed in the fact that Dan has held off raising fresh capital given the undervalued nature of the fund in relation to the NTA. I do hope Dan can turn things around without having to raise any capital at these prices.
There are some bright sparks in the future; Improvement of the economy, Panthers continuing to grow and the potential of unlocking real value through that partnership as the Aus business conditions improve, replacement of Alchemy with new operators.

Bottom line is that I see some challenges yes, however looking at it from a purely downside versus upside story I think there is allot more on the upside than the downside. Just an improvement in the Bourbon and Aussie Rules would provide some good gains + tightening in the Panthers cap would provide significant movement.

I still rate it as a buy as Liquidation at these levels would leave unit holders with significant gains.

Hope this post was helpful for some. All is just my opinon and I am not a financial advisor or REIT analyst, however in the spirit of full disclosure I do work in the commercial RE industry and my qualifications are RE based. I do not work for or have any association with ING and I do hold this stock. Please DYOR as I am often wrong (at least thats what my last girlfriend always said)