I've been taking another look at TOT recently as we've got the...

I've been taking another look at TOT recently as we've got the all important independent property valuations coming up In August and we're also approaching the second half of the year when they flagged up "opportunities emerging" with a particular focus on merging with single asset unlisted funds.

I still think the WACR is a little tight unfortunately (Centuria is around 6.7% all though they do have a larger but lower grade portfolio with a significantly lower WALE). I would expand some minor expansion in the cap rate to be partially offset by the fixed 3% rental increases. I'd expect we might see a 5% reduction in the gross asset values and that should be the bottom in this cycle.

Finally working in our favour is the 100% floating rate debt of 70 million which should see our interest expense come down considerably in FY26.

This combined with a slightly reduced management fee (now sitting at 0.6%) being charged against a lower gross asset figure and the hopeful renting of the Cremorne space sometime in FY26 should see us turn cash flow positive and actually cover the 3c dividend out of operating earnings. I did some rough back of the envelope calculations and had us coming in at 3.3cps without factoring in any extra rental for Cremorne (amazing to think that vacant floor has been sitting luxuriously fitted out but empty since October 2023).

Something will happen in the next 6 months and we will receive a couple more fully franked dividends while we are waiting but my biggest concern is whether it will be in the interests of small shareholders? Or do we end up stuck with a stake in some unlisted vehicle? There's no way they can issue shares at such an NTA discount (currently 35%) and they don't have the cash or the room in their gearing ratios to make an acquisition so it's hard to see how they are going to pull off their "growth" objectives in practice.

If you take a look at what's going on at TGP they've just conducted a very significant buy back and massively shrunk their all ready small free float so we're now looking at two separate 360 capital vehicles that almost too small for it to be worth being listed? I've floated this before but I think either a merger between TGP and TOT or a wind up of TOT would be the two best options by far.