nta, page-6

Huntley's analysis doesn't read too well imo. I hold.

IIF plunged to 33 on Friday before its response to an ASX speeding ticket sent the stock price soaring back to finish at 63. However, we are not reassured by the announcement. The trust announced that it is in compliance with all lending covenants. We are skeptical about comments like this. Lending covenants are usually assessed twice a year – generally June 30 and December 31. Companies remain in compliance until the next assessment. IIF also announced that it is reviewing its capital management strategies, implying it would like to raise new equity. GPT has a high quality portfolio and was forced to raise equity at a 48% discount to its last traded price. This is bad news for IIF which owns a lower quality portfolio. We are not convinced it will be able to attract sufficient new investment. Gearing levels have risen for trusts with offshore debt due to the fall in the A$. The vast majority of IIF’s debt is denominated in Canadian dollars and Euro. The A$ has fallen about 15% against both these currencies, well below the 30% fall against the US$ but still a concern. We are also concerned with industrial property values and IIF’s large development pipeline. Progress on asset sales has been too slow. IIF was close to gearing covenants at June 30 and conditions have deteriorated since then. Any of these issues could tip it over. On Friday, Dexus Group (DXS) outlined the impact of currency movements on its gearing levels. It addressed obvious market concern by keeping investors informed. The lack of details in regard to gearing levels from IIF, and other high risk AREITs, speaks volumes.