yet another new aja poster with a view...

Firstly, I apologise for not having had the time to read back through the previous posts on AJA this month - there were quite a few - so perhaps my thoughts might have already been countered in previous discussions. However, just going to offer a fresher's view.

I thought it might be worth a look at AJA yesterday. The leverage in it would make for a great rebound, particularly with the built in discount to NTA.

However, call me a pansy, but the risk horrified me!

Okay, they can afford to operate with more leverage than most as the ratio of cap rates to borrowing interest is pretty high and gives good interest cover. But at about 72% gearing, they only need another 8% move in valuations for this to trigger the 80% debt covenant.

The last half valuations fell 4.8%, but they only re-valued 15 of their 43 properties - does this mean that re-valuing the other two-thirds might result in double the fall?

Crucially, the answer probably depends on where Japan's property values have been moving in the last 6 months... my research was NOT reassuring. Here's what I was reading:

Office vacancy rate in central Tokyo hits record-high 8.94%+
This was based on data from end of May, so quite recent. It also included the following news:
The average office rent in the area dropped 12.45 percent from the same month last year

The next one had a more reassuring headline:
Analysts indicate property prices in Japan may be near bottom
Unfortunately, it turned out to be that part of the basis of this statement was the following:
According to Yuji Hashimoto, a director at ratings agency Standard & Poors the market is starting to see some property transactions taking place at discount of about 20 to 40%.
Yikes, 20-40%! No wonder they are suggesting it is a good time to buy property - much like how it's a good time to buy shares on a steep fall off all those stuck with a margin call... but not a good time to be the guy who bought higher on margin.

None of this offered me any certainty that AJA wasn't about to hit serious trouble at the next valuation review - i.e. sometime over the next month.

Now I am hoping all the friendly posters on AJA will be able to point out what I've got wrong...