orbis is selling, page-23

Hi Lucas,

In the Q&A, they advised that cap rates in Australia are now pretty mych flat. They softened by 5 basis points only which was why Aust property growth was lower than the NOI recorded for the half year.

The CER crew actually reversed a question that was put to them when asked what writeups we should expect to see in Aust going forward and put it to the caller "well if cap rates are steady and NOI growth continues at 4.4% for the remainder of the HY, what writeups would we see"

Well assuming cap rates are constant at around 7.5% and NOI growth remains constant for the June 11 HY, we should see a (4.4% / 2 ) 2.2% writeup in the Aust portfolio for the HY.

With the portfolio valued at $1.6b (pg 15 presentation), a 2.2% writeup would result in a $35m writeup inthe Aust portfolio. This equates to an NTA increase of 1.5c per unit.

With CSF, REIT 1 and REIT 5, assuming a 5% writeup, and assuming the AUD/USD of 1.02 which was used at balance date at 31 Dec 10 is the same at 30 June 11, we would see a writeup in NTA of 4.06c (Please see page 16 of app 4d report in conjunction with my below workings)

.........Dec10 AUD$m...USD......5%incUSD.....AUD.....AUDinc
CSF......1,176,970.....1200509..1,260,535..1,235,819..58848
CWAR1.....249,939......254937...267,684....262,436....12496
CWAR5.....443,109.....451971...467,569.....465,264....22155

Total AUD inc: $93.5M
NTA inc: 4.06c

A writeup of 5% would assume cap rates would come back to around 8%. Given where the 10 year govt bond yield is at the moment, stabilisation of occupancy rates and NOI in the US and investors looking for more risk seeking ventures, one would assume a 5% writeup for this HY is not out of the question.

So with the Aust portfolio, CSF, REIT 1 and REIT 5 portfolios we could see a total writeup of 4c + 2.2c = 6.2c

Now re: Super LLC, a 5% writeup would see SuperLLC in a net equity position. Assets within SuperLLC currently stand at $5.28b. A 5% writeup would equate to approx a $260m increase in assets. Liabilities would decrease by $50m or so from CER, CNP and CMCS40 underlying profit used to pay down debt.

So Super's equity position would improve by $310m. This includes:

$260m increase in assets
and a $50m reduction in liabilities

As we have about a $220m negative equity position at the moment according to pg 29 of presentation, CER would be able to writeback $90m in impairment losses. This is about 4c per share.

So total increase in NTA would be:

4c Super + 2.2c Aust portfolio + 4c CSF,REIT1 and 5 = 10.2c


If the AUD falls back to 90c, then the equity position would be greater. however if the AUD goes to 1.10, the contrary would happen.

Anyways lots to get excited about!

Cheers