Mr A Dixon Exits, page-14

The way to think about the discount to NAV may be to draw an analogy to one single investment property.

If you own an investment property valued at $1m earning $50,000 in annual rental, you should be able to sell it for that $1m amount.

However if you own that investment property in a company or trust, and you have behaved like URF, you have :

- loaded the company up with so much debt that you pay out as much in interest ($50,000) as you earn in rental income, and
- you've employed a whole lot fancy staff and entered into all sorts of management contracts which cost another $50,000

Anyone looking at buying shares in the company, will further discount the NAV by the fact that you're shipping $50,000 out the door each year because of the way you have set the whole thing up.

Stem the losses, by reducing the debt or slashing your management costs, and then you might get something approximating NAV. URF seem to be unable to do this. Better to own the debt because when the legal entity goes belly up you at least have security over the underlying property.