It is interesting reading all the posts. What you are all...

It is interesting reading all the posts. What you are all failing to grasp is the reality of what these companys do. In the current econimic climate with the housing market flat, people still need a roof over there head, hence if they are nor buying they are renting a property. rents may fluctuate slightly but the rent still needs to be paid. Both Companies earn a percentage of that rent - rain, hail or shine. That is the strength of this type of business. It is pure cashflow. They do not have to puchase widgets to sell to make a quid which expires like food. The problem with Run, in my opion. was that the business model was right the execution of centralization was wrong. they addressed that by opening up shopfronts (decentalization). There is a variety of other reosons as well. I know several agents that sold there rentrolls to Run in the early days, they recieved huge dollars for them and due to the fact that they shifted the property management to the City, they were easy pickings for the local agents to bring them back to the suburbs hence they had huge turn over in the early days. I believe they woke up to that and addressed the issue. This combined company is what people should be looking at. ie what is the current gross fees of the bidder add that to run's turnover etc. i dont believe they will have much trouble financing the takeover as the Banks love rentrolls. i will back it in that the Macquirie bank will be all over this as they specialise in Real Estate financing of Rentrolls. The fact that the bidder is a Private Company means that we will not know the true extent of the upside unless someone has a summary of there fees so we can do the calculations but traditionally rentrolls sell at 3.5 times the revenue (letting fees and others excluded) With interest rates at even 8-9% it is not hard to do the maths. That is why banks love it.

To those who still dont understand the businees model, I will give you a simple example.

Rentroll gross collection fees = $500,000
Value of rentroll = $1.5million (based on a multiplyer of 3)
Bank finance at 10% = $150,000pa
Free cashflow of $350,000 to pay the wages etc.

As they are effectively combining the business (selling in) the infrastructure is in place so although there may be some increase in costs there also will be a reduction in back end costs as the economies of scale kick in.

Keep in mind when Run listed the IPO was $1.00 and the banks saw value there, yes diferant times but rentroll business's are worth more today than then because sales are drying up.

These are my thoughts and I dont wont to try an influence anybody however the posts I am reading are all talking about tax liability etc and not questioning what the actually business is. Why has Telstra being rising in the last few weeks - probably because of its safe cashflow and 10% approx yield.

The combined entity of these two Companies could be a huge cash cow. And we all know cash is king.

All the best.