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

Curious

[Frankie10]

Has anyone ran the numbers on the impact on NAV, AFFO, and FFO if hypothetically the NCIB fills at max for 14 weeks at an average price of $6?

[babybunny]

If Artis retires 5% of outstanding units at half of NAV, or around $7, NAV per unit rises by 2.5%.  So it would rise by 35c, from $13.96 to $14.31.  I think $6 per unit is a pipe dream, but if Artis could pull it off, NAV would rise by 40c per unit, to $14.36.  Of course this assumes nothing else good happens, such as retirement of preferred shares, gain on bargain purchase, or

[Torontojay]

  If Artis retires 5% of outstanding units at half of NAV, or around $7, NAV per unit rises by approximately 2.5%.  So it would rise by 35c, from $13.96 to $14.31.  I think $6 per unit is a pipe dream, but if Artis could pull it off, NAV would rise by 40c per unit, to $14.36.  Of course this assumes nothing else good happens, such as retirement of preferred shares, gain

[Frankie10]

Love this. Thank you so much for posting this. Safe to assume same % increases for AFFO and FFO per unit? The math gets even more interesting when you do 20% of the outstanding at a 57% disocunt to NAV (current discount) - my base case. great post!

[Frankie10]

Correction - I meant 20% of os at 46% to 43% discount.  Following ncib, assuming price remains under $7. As one would assume, the math would also compound. Cheers.   

[Torontojay]

Let's use a concrete example to help try to make sense of the current situation.  Nav = $100m, total units = 10m  Nav/share = $10  The company retires 2 million units or 20% of the shares outstanding at $4.3/share or a 57% discount to Nav/share  New Nav = $100m - 2m*$4.3 = $91.4m  Total units = 8m  Nav/share =~ $91.4m/8m =~ $11.425 which is a 14

[babybunny]

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

[Torontojay]

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

[babybunny]

Well presented.  This is definitely the formula to use for large SIBs where the bought-back percentage x is significant. In the typical case where x=1%, it is not worth the trouble to divide by 0.99. Baby Bunny

[Frankie10]

Thanks for your input guys. I built a model that calculates the change in NAV as a result of buybacks based on this discussion. Using the following inputs: max NCIB at $6.5 (com) and $17.5 (pref); SIB1 for 15% of o/s at $7.5 (com) and 20% of o/s at $18 (pref); and, SIB2 for 20% of o/s at $9 (com) and 30% of o/s at $20 (pref). I get a NAV of $17.74 pu.

[babybunny]

Thanks for providing the calculations Torontojay ... I was just too lazy for a long post.   The shortcut estimate I use is nearly exact for small buybacks such as 1%.  As the size of the buyback increases, the boost to NAV grows even larger than my shortcut suggests.  For medium-sized buybacks such as 10%, the difference is noteworthy but not fundamentally different ... in

[Frankie10]

You might need to sharpen your pencil and bust out your calculator here soon -- hopefully!!  As I noted Bunny, the impact compounds - this is how I envision an upward price spiral through asset monetization to arbitrage the discolation between private valuation selling price and implied valuation of public unit price. 

[Frankie10]

For all the visual learners:  https://x.com/alphafortuna10/status/1768683329228783645?s=46&t=c3ZJB3W5JdjUXgGKfBn01g

[Frankie10]

Inputs are on the second tweet in a more readable way then how I presented them here for you. Would love anyone's thoughts including the Snake on the inputs. I have already reconciled the common math with your calculation TJ - I think prefs are simple enough that I didn't f it up. Cheers.

[garyreins]

I dont see the point in trying to determine how buybacks will bump nav....nav is meangingless really as we see.  AFFO per share is a better metric to calculate.