On July 27, Cole Credit Property Trust II (CCPT2) filed an 8-K with an updated value of $9.35 per share. This is an increase of more than 16% over the valuation estimate of June 22, 2010. The filing gives a detailed explanation of the methodology, but leaves out the specific metrics and multiples used in arriving at the valuation.
I did a couple of quick desktop valuation estimate based on CCPT2's most recent 10-K and 10-Q. I applied multiples based on data available at REIT Watch, Realty Rates, and NNNEX. Book value of the shares is about $7.45 per share. Capitalized NOI suggests a Net Asset Value of approximately $7.72 per share. However, the public value estimate is between $9.02 and $9.58 based on $118 million of Funds From Operations and multiples of 16 to 17. The FFO multiples are consistent with the trading ranges of National Retail Properties (NNN) and Realty Income Corp. (O), the two publicly traded REITs with objectives and properties similar to CCPT2.
It would make some sense that the share valuation would come in close to the valuation metrics of publicly traded comparable. The REIT announced on June 28 that it was exploring exit strategies to execute within the next twelve months, and it is specifically considering the listing of the shares. As part of the due diligence process, management would be expected compare the values to be received under different strategies and pursue the one that provides the greatest net benefit to shareholders. My quick and dirty analysis suggest that the public listing, or something close, is likely to provide the highest valuation.
Special Thanks: The Rational Realist
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