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Gurtofen,
If you feel my reply was defensive and condescending then I can only say it is a mirror of your posts.
On some occasions people join, ask a leading question, only to really post a later reply for what they really wanted to say. In your case, no previous history, no apparent real name, and clearly an agenda to sow doubt.
In any event, my focus and priority is to serve the 1,300 people who are investors in the Fund. I’m not perfect, but I try very hard to be ultra transparent and do things that other Fund managers would never do. Those who are investors in the Fund will testify that this is the case.
Now down to business…
Director’s Valuation
The value in the accounts for the Fund’s US properties are the ‘fair value’ (as per IAS). The Director’s are charged with the responsibility for trying to ascertain what that might be, and in our case, even though our PDS says we will get an independent valuation (or appraisal, if you prefer that term) at least every three years, to be above reproach, we do it every six months.
We engage an expert appraiser, who is experienced and qualified, to do this. The appraiser looks at the net operating income generated and applies an industry cap rate AND also looks at comparable sales.
As Director’s we then review and (and in all cases thus far) adopt their recommendation. I have to say that in my opinion, the values given are on the low side, which is normal as appraiser’s are a conservative lot, but so be it. Those investors still in the Fund at the end will get the benefit, if any, at the time of sale.
Capright’s website is: http://www.capright.com/
Redemption Price
Your suggestion that The Redemption Price vs Buy In Price seems to be heavily waited to ‘adjustments’ which once indicates to me a significant discount to ‘true value’ implies the ‘true value’ in the accounts is incorrect. If so, then the in-house accounting team and the external auditors are all wrong. With respect, I will defer to those who know more, which has to be the trained accounting experts with access to the relevant information rather your accusation.
Accounting standards say we have to carry at fair value and in doing so we cannot include any sales costs. I personally think ignoring sales costs overvalues the property and also causes the provision for deferred income tax to be overstated (I have had this discussion at length with our auditors), but the rules are the rules.
However for redemption unit pricing we do adjust to add in sales costs (as is permitted under the Fund’s constitution when calculating the Redemption Unit Price), which can be as high as 10% of an asset’s value (6% sales commission, stamp duty, etc). If we didn’t make this adjustment then an investor could cash out before an asset is sold, get the gross value / higher price, and leave the sales costs to those who remain at the time of sale. This is not fair.
Now, what you (or I) consider to be a fair value, and what the accounting standards define it as, may differ. In any event, the accounts are audited to see if they are true and fair in accordance with accounting standards, so what we may think personally doesn’t count for much.
Final Comment
You stretch a long bow with your conclusion about estimates and assumptions which seldom represent actual results. That may be your opinion based on your experience, but it is not mine, especially when it comes to this Fund.
The numbers reported are not fictitious nor pulled from thin air. They are based on reliable data and opinions. But who is to truly know what a property is worth until it is sold? Up until that time, the best you can give is an informed opinion.
I thank your for your well wishes for the Fund. You can keep an eye on how it performs (and read the published financial reports if you’d like) at: http://www.passiveincomefund.com/performance/
– Steve
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This reply was modified 8 years, 3 months ago by
Steve McKnight.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
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This reply was modified 8 years, 3 months ago by
