Artis Real Estate Investment Pref Shs Series E T.AX.P.E

RE:RE:RE:RE:RE:RE:Curious

[Torontojay]

babybunny wrote: The math really does get delectable when we get into the 20% range, and are able to keep the unit price suppressed throughout the entire buyback period.  Of course it is easy for the mathematician to make such an assumption, but much harder to effect in real life:  there are only so many weak hands  willing to sell at $6.  

In your example, my shortcut would indicate 57%x20% = 11.4% increase in NAV per unit vs. an exact amount of 14.25%.    As I said before, the shortcut method starts to diverge significantly when we get into the rare cases of huge buybacks.  It gets more conservative as the planned buyback becomes more ambitious, which I think is a good thing.

Baby Bunny

I will generalize this for different cases. 

Let x be the percentage of units purchased. 

Let y be the percentage discount to NAV

ΔNAV = x*y/(100% - x) 

In the example I gave we have, 

Δ NAV = 57%*20% / 80% = 0.1425 

To determine the percentage change to NAV we multiple 0.1425 by 100 to give us 14.25% 

Ex 2: Nav = $100m , total units = 10m 

Nav/share = $10

solution 1: The company retires 1 million units or 10% of the total at $5/share (50% discount to Nav) 

New Nav = $95m
total units = 9m

Nav/share =~ $95m/9m =~ $10.55 or an increase of 5.5% 

solution 2: using the formula I provided we get the following: 


ΔNAV = x*y / (100%- x) 

Δ NAV = 50%*10% / (100% - 10%) = 0.05/0.9 =~ 0.0555...

Multiply by 100 and we get a change in Net Asset Value by 5.55%.