Ann: Update on Independent Review of Asset Valuations, page-22

I'm more surprised that they didn't write down the student accommodation more. Given the way they have written up the investment on paper, its still got a long way to go to justify their construction prices.

The issue I have with BAF is the amount of debt they have inside the respective funds makes it too difficult to properly understand whats going on inside each fund. If you have an asset say worth 10 mil, with 5 mil in debt / 5 mil equity - if it goes up to 11 mil, you have made a 10% increase in the asset, but a 20% increase in your investment, however if there is a slight miscalculation with your numbers and the asset drops to 9 mil, then you have lost 20% of your investment... hence the risk / reward of debt.

Translate that to the student accommodation, there have been very few real market transactions out there to base the real yields on for the assets, accordingly the only real valuation metric they can rely upon is an extrapolation of other classes (ie residential, comparable strata, etc) or based on the projected income. But none of those will accurately reflect the sale value in a normal market. While they have disclosed that they are not achieving the occupancy they anticipated but they recon, its a wait and see - it will take time. Well seriously given that the student population has a tenancy lifecycle of circa 2 to 4 years then if you don't start getting critical mass by year 2/3 you got problems.

Im personally not convinced that there is the demand for student accommodation in the volume that they are expecting for the growth in the supply and that they are going to get absolutely smashed in this space - except maybe in Sydney or Melbourne where there are greater accommodation issues.