But we both know they won't fully pay down all the debt so...

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optimistus

4,587 Posts.

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15/02/21

22:50

Post #: 51013564
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Originally posted by madamswer: ↑

"I'd be more than happy with 2 x 10c (or less) distributions per annum while they reduce their leverage and save for Capital improvements. That's a relatively undemanding 6%+ annual distribution on my purchase price without any Capital appreciation."

You clearly haven't run the numbers.

In simplistic terms:

Even if they are at full rent recovery, that amounts to Operating Cash Flow of around $28mpa. The center currently needs around $8m to $10m pa in "stay-in-business" type capex, a figure which is only going to go up over time.

So that leaves some $20m pa in surplus capital.

Even at your reduced 20c pa distribution ($14m pa), that leaves just $5m pa or $6m pa over for capital debt reduction or to save for capital improvements.

For context, $6m pa for debt reduction will mean that it will take almost 40 years to pay off the debt.

Or if they need to have $50m for the next major makeover (which is the very minimum they'll need), it will take them close to a decade of saving up to get there. And they don't have a decade up their sleeve before they'll need to commit.

So they are in a bit of an crappy fiscal position.

Recourse to shareholders for additional capital at some stage is unavoidable.

As for your comment "don't assume my shareholding is something over which I have control". You seemed to have control when you decided to buy CDP so if anyone else can work out what you're on about with that statement good luck to them.

I made the point to counter your inference of some sort of equivocation in the fact that we both happen to own the stock. There is none.

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But we both know they won't fully pay down all the debt so why even raise that red herring? If they want the $50m (or $100m) they could reduce the distribution further or do a Capital Raising. The asset would go up in value so I'd be happy either way.

Ultimately CDP is a relatively boring asset which (assuming decent stewardship which I don't doubt) will deliver a "relatively" stable appreciation over time given the price at which I acquired it.

CDP was at $6 before the pandemic. Stable and boring retail space will be flavour of the month again at some point and then I'll look to rotate.

I'm happy to wait but if you think CDP is such a crappy prospect why don't you sell?

Last edited by optimistus: 15/02/21

CDP Price at posting: $4.39 Sentiment: Hold Disclosure: Held
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0 Great analysis

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