i'm excited', page-3

I assume you spoke to the Tokyo management who run the business, not Sydney. I believe the question is not so much whether they are going to pay the next dividend, but the impact on the next set of property valuations over the next couple of months on the coverage of secured debt. As they decentralised the portfolio they have moved into some regions now severely impacted by the current economic downturn. If the property valuations go down (and not all tennancies are long term and Japanese valuers are ultra conservative during recessions), in order not to breach lending covenents they may need to pay down debt using funds which would otherwise pay dividends. Also, earlier tranches paid included chunky amounts returning capital on profitable asset sales, a key part of BJT business plan. Although they have a number of their properties on the market (including some considered at risk in a downturn), I understand that there is very little interest from buyers. Many REITS are trading at fractions of their current book net asset values, but are still exposed to some very onerous borrowing arrangements and are yet to update valuations on buildings bought during the property bubble, revalued and borrowed against at the height of the bubble. In this respect BJT is not too different from the Australian based REITs. BJT also has to extract itself from the BNB fee structure, although not as onerous as many satellites it adds no value. This will probably require some sort of net present value payout, another hit to the cash flow in the next few months.

I think BJT is undervalued against risk, but given the economic climate in Japan and debt structure not as undervalued as some believe.