PTN - Prime Retirement and Age Care Property Trust

[hartley]

Mmm I agree prawn, I feel like it's one of those stocks you put 10% of your portfolio in and forget about for 5 years. Unfortunately I'm too impatient for that and sold out recently for more volatile stocks.

I think your signature says it all
"so many stocks ... so little capital"

 

[DionM]

I've had PTN on my watchlist since it was $1+.

Lack of capital prevented me from hopping on.

Closed yesterday 47c. Not that I like picking bottoms but that is cheap!

prawn_86 wrote:

They are not making enough cash to cover distributions

Going on from this, the balance sheet intrigues me.

-$53m of their $71m income last half-year was from revaluations.
- They have $1.4b of property and 154m in cash (total assets of 1.6b).
- They have $1b in liabilities ... mostly $400m in loans and $660m in "payables to residents" - what is "payables to residents", exactly?

 

[DionM]

Okay, it appears that "payables to residents" is money given to PTN by residents to "own" a property, and then when they leave they (residents) get the money back less some fees.

I'm trying to work out where the other part of the story is then, if this is money received by PTN that is to be paid back - where is it kept on the balance sheet (i.e. if they received that 600m, what did they do with it to balance this liability they now have?). I'm guessing it is (partly) the source of the $154m cash (which derives the 5m interest income). And the rest has gone on acquisitions/asset purchase I guess.

So in effect, they (PTN) are treating it as another source of debt.

This also leads me to wonder - is the debt/asset ratio thus 400m/1.4b (~30%) or is it really (400m+660m)/1.4b (~71%)?

To take the story to the next level, their management fees were 2m at Dec 06, but nil Dec 07? And Sundries income has gone from 75k to 2m?

"I want to believe" but this is concerning. 6-8mths ago I would have just plonked my money down, but since I've lost so much of that money (on paper) due to debt issues, I pay more attention to financials these days (and less on dividends/growth potential than I used to).

 

[prawn_86]

Hey Dion,

I agree, on the surface it looks interesting, but once you start digging then it doesnt look as good.

Its also worth noting that they have not confirmed the dividend for next year, stating something along the lines of "at the end of 2008 a review of our dividend will be carried out". That to me means to be ready to not recieve one next year...

 

[DionM]

Hey Dion,

I agree, on the surface it looks interesting, but once you start digging then it doesnt look as good.

Its also worth noting that they have not confirmed the dividend for next year, stating something along the lines of "at the end of 2008 a review of our dividend will be carried out". That to me means to be ready to not recieve one next year...

Correct about divvides. They pay quarterly and have said they will release guidance on the next one in a few weeks, I might wait for that.

I've been burnt with ZFX (severe drop in divvies) and BBP (none!) so I am always cautious about dividends and their stability now ...

 

[Gunlom]

What does everyone think of the fact that Lend Lease has lobbed a bid at FKP property last week, and today it has announced that it has acquired a 6% stake in BBC, both major players in the retirement property market.

Whats the chance of this lifting PTN as well??

the interest in the industry is good? hopefully the increased interest will settle the SP, although I agree the in depth finances of PTN is abit worrying. Although this industry is set to boom over the next decade as the baby boomers retire, I guess it's just the problem of finding a quality company to invest in!!

 

[alfaracing]

I've had ptn since they listed, yes i'm in the red.
I believe this stock is good for the long term. Good quarterly dividends, low gearing, lot of new buildings to fill, and lots more people ageing.

Cheap

 

[prawn_86]

I've had ptn since they listed, yes i'm in the red.
I believe this stock is good for the long term. Good quarterly dividends, low gearing, lot of new buildings to fill, and lots more people ageing.

Cheap

What about the fact their profits come from re-valuations, the dividend is not guaranteed going forward, and their gearing level may be suspect as DionM pointed out.

I would agree they are cheap if they could prove they can be profitable without revaluations...

 

[alfaracing]

What about the fact their profits come from re-valuations, the dividend is not guaranteed going forward, and their gearing level may be suspect as DionM pointed out.

I would agree they are cheap if they could prove they can be profitable without revaluations...

Hi Prawn
Is it such a bad thing that they are showing "profits" coming from valuations, after all they are in the property market? eg the valuation will reflect the income they make on the retirement property position. Hope the dividend doesn't drop?? but i'm trying to look at this as the icing on the cake. Gearing thing....mmm. I may need to take this up with my f/adviser.

like i said, in for long term on this one

 

[ROE]

Hi Prawn
Is it such a bad thing that they are showing "profits" coming from valuations, after all they are in the property market? eg the valuation will reflect the income they make on the retirement property position. Hope the dividend doesn't drop?? but i'm trying to look at this as the icing on the cake. Gearing thing....mmm. I may need to take this up with my f/adviser.

like i said, in for long term on this one

Yes it a bad thing counting profit from revaluation ... look what's doing to the property trust sectors... and all the infrastructural funds.

Basically you counting money you have on paper but not on hand...shall I say asset rich cash poor... but you need cash to pay dividend and since you dont have cash so you borrow and that will wiped out your revaluation value because now you got more debt... then bang comes asset price drop.. you got no cash and you got little asset and lot of debt

what follows is up to the market to punish

Anything that follow this model I stay the hell away.. all Macbank funds, all BNB funds, some property trusts etc.. and this too

 

[Logique]

Yes PTN sits in a sector that is being punished for this model, with property trust peer group companies with either past shock annoucements like Centro, or are having trouble breaking out of downtrends like BBC, AVE, BNB etc. The revaluation and gearing scenario is too confusing to me and makes me nervous of whether share prices or dividends will be maintained in this sector.

 

[Dr Zaius]

i'd like to thank everyone who posted here on the PTN thread. i should
have known to check if profits/dividends were coming from revaluations
rather than net income. the financial report for year ended june30
2008 had $47m in distributions in the past year, profit of $57m and
'increment in fair value of investment properties' of $55m, so if there
were not this revaluation then profit would be around $2m for the year.

i'm the kind of guy who wants to buy into a firm and leave it there
for many many years, this eating of the future is not for me.

the saving grace for buying PTN now would be the heavily
diminished share price leading to a very nice discount to NTA, where
some 'future eating' could be sustained, for a while, so long as that
NTA does not go down (if the value of their property drops) too much.

 

[RustyK]

I hate to say it but this stock is starting to look like a real dog!!!

Dividends slashed from 2.1c per quarter to 1c. Biggest problem is the fact that they don't even generate enough cashflow to pay the 1c per quarter which means they will need to keep eating into their cash reserves. I was once a believer in this stock but recent events make you question Management and the business model.

Management advised 9 July 2008 that 2009 earnings are expected to be in line with 2008 and dividends/distributions would also be in line with 2008 and how they have had such a great year with a great future ahead. Then on 28 August (7 weeks later) they say because of the economic environment it would be prudent to lower the distrbution. Bingo 22nd Sept they slash the dividend by 52%.

My diagnosis crap management!!! I find it hard to believe that business altered so materially in the last 7 weeks that distributions need to be slashed by 50+%. NTA backing has declined by 11 cents ($1.05 to 94c) in the last year. Well 8.5c of that is reduction in cash reserves caused by distributions paid to investors that they could not afford to pay but did so to induce idiots like me into market for their securities. You can chalk the rest up to interest expense over an above their cash earnings for the period!!! They pat themselves on the back for paying a distribution for the year in line with their advice upon listing, big deal guys you paid back the money raised in the prospectus. You should have just asked us all for 91.5 cents per unit and told us there was not going to be a distribution this year at least we could have put our 8.5c to good use!!!

I am still holding but will exit upon some degree of a price recovery.

40 cents hurts.

 

[concerned]

Hello to all PTN unit holders. This is my first post ever so forgive me f I do not get it all right.

I am writing because I have grave concerns about the way the Prime Trust is being run by the current Responsible Entity (RE), as there is no direct correlation between the distributions and unit price of the fund. The RE is acting in away that will maximise it's income by way of gross NTA and gross operating incomes, with no concern about the affect that these actions are having in decreasing the NTA and distribution per unit.

To illustrate this, take the current script offer for the 40% BBC. I am sure that this will have a positive effect on the income being paid to the RE as the gross amount NTA of the group will go up as will the gross amount of income, of which the RE will be paid 0.25% and 4 % respectively, however is this really in the best interests of the unit holder? BBC pays 7.6 cents per unit, if 40% of the BBC unit holders respond this will have a large dilution affect on the distribution pool from which Prime Unit holders are paid, plus the NTA of BBC is substantially less that that of Prime, lowering the NTA per unit after the 40% offer to approximately 79 cents (from the offer document).

How is this in the best interest of the current unit holder?

How will this increase the value of the units that I hold and the income generated by them?

I believe it will infact have a negative impact on the unit price and distributions! It can be construed that the RE is not acting in the best interests of current unit holders. If I am wrong please inform me of how this transaction will be positive in terms of distribution, unit price and NTA per unit.

If you agree with me please write by way of complaint to the RE and if not satisfied continue with the Financial Ombudesman. With the string of annoucements re-distribution also question their competence to conduct the affairs of the Unit Trust.

I ahve written to The Hon Dr Michael Wooldridge, over a month ago expressing these concerns but have heard nothing. I ahve also raised these concerns by phone to Mr Philip Powell and told was told that I can just sel my shares, locking in a huge loss that te REs actions have contributed too. We the unit holders need to get togther and call this RE to account.

Regards

Concerned

 

[Gunlom]

I agree...

anyone looked into what it would take to remove them as the RE ??

might be worth looking into...

or at least giving them a scare into acting abit more in the unit holders interest

 

[concerned]

Hi All


I believe that removing them would be expensive and another would need to found. I firmly believe that we unit holders should exercise our rights and start by writing formal letters of complaint to the RE. The RE has a financial services license and will have 45 days to respond. At the moment they believe that the unit holders are individuals that are not networked and therefore no concerted action can be taken against them. Please write to them on two grounds:

1. Incompetence

a. The way the communications on distributions have been handled and the about face in what they would deliver by way of distributions. This has been misleading and anyone who bought (or indeed held as I did) were mislead by the earning outlook and the frequency of distributions that was published on 9/7/2008, and this is before the current financial meltdown.

The first notification of a reduction occurred in the Preliminary Final Report on the 28/8/2008 6 days later the script offer for BBC was announced. How much could projects have changed in that 6 weeks and even if they have what does it say about how well the RE understands the business.

b. The document that was submitted to ASX for the 40% offer had so many errors (35 in all) that it need to be resubmitted, and number of these could have been addressed by proof reading (eg insert date here).

Note also that at no time did the RE when embarking on this course of action to dilute our holdings ever having used the data room of BBC, how then do they have a good idea of what they are attempting to acquire.


2. Destruction of Unit holder value.

The actions of the RE are not consistent with building unit value and that that the REs actions are destroying unit value in terms of NTA and Distributions by the script offer for BBC. As I have described early. The “target statement” there is an interesting analysis of the amount of fees that would be paid to the current RE is it managed all of BBC look at page 14.

Please note that the source of all information that I quote is public domain, and I ahve gotten this information from Commsec.

Please write to the RE and complain, if there response is not satisfactory refer the matter to the financial Ombudsman.

By the way did you realise that the RE was paid approximately $7.5 million in custodian and responsible entity fees (not to mention a $32.9 million fee for listing the trust) and the total distribution to us was approximately $47,396,000. Ever wonder where your money is going.

 

[concerned]

Dear All

Here is the letter of complaint that I am wring to the RE. If you think 20 cents by way of unit prices is bad, (now at an 8% discount to the company the RE are trying to trying to obtain a 40% stake in) please read below and voice your dissatisfaction.

*********************************************************

Australian Property Custodian Limited
Level 2, 613 St Kilda Road
Melbourne 3004
Victoria
Formal Complaint

I am writing because I have grave concerns about the way the Prime Trust is being run by the current Responsible Entity (RE).

My concerns are in two areas, destruction of unit holder value and managerial competence.

1. Destruction of Unit Holder Value
As there is no direct correlation between the distributions and unit price of the fund. The RE is acting in away that will maximise its income by way of gross NTA and gross operating incomes, with no concern about the affect that these actions are having in decreasing the NTA and distribution per unit.

To illustrate this, take the current script offer for the 40% BBC. I am sure that this will have a positive effect on the income being paid to the RE as the gross amount NTA of the group will go up as will the gross amount of income, of which the RE will be paid 0.25% and 4 % respectively; however is this really in the best interests of the unit holder? BBC pays 7.6 cents per unit, if 40% of the BBC unit holders respond this will have a large dilution affect on the distribution pool from which Prime Unit holders are paid, plus the NTA of BBC is substantially less that that of Prime. This script offer will have the affect of lowering the NTA per unit after the 40% offer to approximately 79 cents (from the offer document).

1.1 How is this in the best interest of the current unit holder, in quantifiable terms?
1.2 What modelling was done?
1.3 How will this increase the value of the units that I hold and the income generated by them?

I believe it will in fact have a negative impact on the unit price and distributions! It can be construed that the RE is not acting in the best interests of current unit holders, which is a violation of the constitution. If I am wrong please inform me of how this transaction will be positive in terms of distribution, unit price and NTA per unit.

As of this date in a little over a year the RE have overseen the loss of approximately 80% of unit holder value in terms of unit price, to the extent that the units now trade a 8% discount to BBC. How can the RE justify taking the higher than industry norm management fees in the face of such appalling performance. Even BBC with the much publicised problems of its parent is performing better.

2. Competance

My complaint against the RE by way of competence falls in three areas firstly communication of distribution information and secondly the manner in which the 40% script offer for BBC was launched and finally discrepancies in documentation.

Communication of distribution information

These communications have been misleading and anyone who bought (or indeed held this stock as I did) was misleading by the earning outlook that was published on 9/7/2008, and this is before the current financial meltdown. So I have been financial impacted by the incompetent and badly delivered earnings guidance.

The first notification of a reduction occurred in the Preliminary Final Report on the 28/8/2008 6 days later the script offer for BBC was announced is it linked? The excuse given was that there was a delay in projects being completed. How much could projects have changed in approximately 7 weeks and even if they have what does it say about how well the RE understands the business.

40% script offer for BBC

The document that was submitted to ASX for the 40% offer had so many errors (35 in all) that it need to be resubmitted, and number of these could have been addressed by proof reading (e.g. insert date here).

At no time did the RE when embarking on this course of action to dilute our holdings ever use the data room of BBC. How then does the RE have a good idea of what they are attempting to acquire?. In the Bidders statement you state this as a risk, which could have been mitigated by due diligence, in effect you are buying something in the Units holders name of which the RE does not have an in-depth understanding.

Misrepresentations

In the full year Statutory Accounts on page 7 you state that the return per unit for FY 2007 was 6.84 cents but in the Bidders Statement on page on page 111 you state that the return to unit holders was 9.4 cents per unit for FY 20007. I will be taking this issue to the ASX, and ASIC if adequate explanation is not given for these anomalies.

Additionally in the earning guidance of 9th of July 2008 you stated that quarterly distributions would continue with no end date stated in fact you mentioned giving rolling guidance and in an example stated “In October 2008, Directors will again provide guidance, this time for the December and March quarters” yet in the Bidders statement of 4th of September 2008 you state that “Distributions are presently being paid on a quarterly basis and this frequency is expected to remain for the 2008 calendar year”.

Questions

2.1 Why has there been no communication of a change to quarterly distribution frequency or that change in the continuation of quarterly distributions was now at the discretion of the directors?
2.2 In the last financial year the RE was paid approximately $7.5 million in custodian and responsible entity fees and the total distribution to unit holders was was approximately $47,396,000. What have you done to earn it?
2.3 When do you envisage that Stapling will take place and how much is this going to cost unit holders?
2.4 The IPO raised some $100 million in new capital for the trust, by creating new shares, which had the affect of diluting my holdings by way of NTA and Distribution. What does the RE intend to do use this money to create organic growth?
2.5 Does the RE have plans to grow this unit holder NTA and distributions, rather than just the fees that it collects?
I understand that the RE has a financial services license and is a member of FICS; as such the RE has 45 days to respond to this complaint. Please acknowledge this complaint in writing to the above address so that the 45 days can commence.

One last point, the fact that the RE continues to congratulate itself at delivery double digit returns on against a greatly depreciated unit price does not endear it to unit holders who paid $1.00 for there units.

 

[numbercruncher]

I hate to say it but this stock is starting to look like a real dog!!!

Dividends slashed from 2.1c per quarter to 1c. Biggest problem is the fact that they don't even generate enough cashflow to pay the 1c per quarter which means they will need to keep eating into their cash reserves. I was once a believer in this stock but recent events make you question Management and the business model.

Management advised 9 July 2008 that 2009 earnings are expected to be in line with 2008 and dividends/distributions would also be in line with 2008 and how they have had such a great year with a great future ahead. Then on 28 August (7 weeks later) they say because of the economic environment it would be prudent to lower the distrbution. Bingo 22nd Sept they slash the dividend by 52%.

My diagnosis crap management!!! I find it hard to believe that business altered so materially in the last 7 weeks that distributions need to be slashed by 50+%. NTA backing has declined by 11 cents ($1.05 to 94c) in the last year. Well 8.5c of that is reduction in cash reserves caused by distributions paid to investors that they could not afford to pay but did so to induce idiots like me into market for their securities. You can chalk the rest up to interest expense over an above their cash earnings for the period!!! They pat themselves on the back for paying a distribution for the year in line with their advice upon listing, big deal guys you paid back the money raised in the prospectus. You should have just asked us all for 91.5 cents per unit and told us there was not going to be a distribution this year at least we could have put our 8.5c to good use!!!

I am still holding but will exit upon some degree of a price recovery.

40 cents hurts.

Down to like 14 cents - with nose diving interest rates ... well I jumped in already .....

Anyone have input ?

 

[prawn_86]

Down to like 14 cents - with nose diving interest rates ... well I jumped in already .....

Anyone have input ?

I did look at these guys a while back but didnt buy as they dont seem to be able to become profitable on what they have, hence the need to pay distributions from borrowings.

Definite potential, but still a bit 'wait and see' for my liking

 

[basilio]

Its a bit mean but after reading the concerns of shareholders it looks as if the Prime Retirement trust was all about providing a prime retirement for the management.

Really hope you can get some justice.