RE:RE:My analysis of anticipated returnRead the Management Discussion and Analysis for 2018 carefully. Here are statements from the MD&A as I read it:
"Net asset value is a measure of the REIT’s total assets less its liabilities, and is represented on the balance sheet as unitholders' equity. As at December 31, 2018, the REIT’s net asset value was $2.16 per unit, a decrease of $1.84 per unit from $4.00 at December 31, 2017. This decrease was a result of the $0.87 per unit special distribution paid in November 2018 combined with the impact to equity from the $47 million of realized and unrealized fair value losses on income producing properties."
And
"Fair Value Gains and Losses
The fair value loss of $33.2 million for the three months ended December 31, 2018 was mainly due to the $33.5 million reduction in the fair value of income producing properties. The REIT’s reduction to the fair value of its income producing properties was mainly the result of adjusting for increases to capitalization rates (“Cap Rates”) for the REIT’s Ontario and Quebec assets from a weighted average Cap Rate of 6.85% as at September 30, 2018 to a weighted average Cap Rate of 7.31% as at December 31, 2018, together with management’s current expectations regarding future tenancies (in particular, anticipated timing, cost and rental rates). In determining the increase to the REIT’s weighted average Cap Rate, the REIT considered a number of relevant factors, including, among others, general industry, retailer and economic conditions in the markets in which the REIT operates and, in particular, negative market conditions in Ontario particularly for retail properties in secondary and tertiary markets such as those owned in Ontario by the REIT; the results of the marketed sale process undertaken by the REIT in respect of its Quebec properties with the assistance of the REIT’s independent financial advisor, and the terms of the Quebec Sale Transaction; independent property appraisals prepared for the REIT in respect of certain of its Ontario assets; and the results of an independent Cap Rate review report prepared for the REIT.
Fair value losses of $43.4 million for 2018 are composed of $43.6 million in fair value losses on the REIT’s property portfolio and $0.2 million on interest rate swaps utilized on three of the REIT’s property mortgages, partially offset by a $0.4 million gain on the liability owed to deferred unitholders. Included in the $43.6 million of fair value losses on the REIT’s property portfolio are $7.6 million in properties sold during 2018, $16.1 million in properties classified as held for sale and $19.9 million on the remaining portfolio. These fair value losses on the REIT’s property portfolio were as a consequence of upward pressure on Cap Rates and managements assumptions regarding future tenancies (timing, cost and rental rates). During 2018, the REIT obtained fifteen independent external appraisals representing 59.0% of the fair value of the income producing portfolio and also an independently prepared Cap Rate review report. During the year ended December 31, 2017, external appraisals were obtained for twelve of the REIT’s properties representing 41.2% of the fair value of the income producing property portfolio as of that date."
My view is that management has adequately discounted the value of the remaining assets, but make you own judgment. To be safe I have applied an additional 10% discount in my analysis.