Tuesday, November 15, 2016

One of the saddest MD&As in recent memory.  I too have insulated myself "from the accelerating decline of the Mongolian economy," but by choosing not to invest in YAK.TSE in the first place.

"Our revenues in Mongolian Tögrög terms have continued to slide  throughout 2016, with this slide further exacerbated by the 21% decline against the Canadian Dollar since the beginning of 2016. Additionally, high tenant  turnover is forcing us to increase tenant improvement spending and we are re-leasing properties at mostly lower rates.

Unfortunately, our AFFO continues to be negative and trends in  the Mongolian economy indicate that this negative AFFO will accelerate from here over the next few quarters—even  before factoring in the rapidly depreciating  Mongolian Tögrög. We’ve done all that we could to reduce costs, find new sources of revenue and insulate shareholders from the accelerating decline of the Mongolian economy. Unfortunately, I suspect that this will not be enough to get us to positive AFFO and the next few quarters will be quite bleak before the Mongolian economy hopefully bottoms. Following this, I suspect that the large quantity of commercial property that has recently come online and is expected to come online over the next few years, will lead to an oversupply in property that will take at least a few years and likely quite longer to be absorbed, leading to stubbornly high vacancy and dramatically lower rental rates than we have had to contend with over the past few years. These factors will likely forestall any recovery in property values for many years into the future.

Unfortunately, we have not reached the scale needed to support the cost structure of being a publicly traded company and are unlikely to do so without raising substantial additional capital—which is unlikely to be available to us on acceptable terms for quite some time. As a result of this, I do not see a logical event path that gets us beyond roughly break-even AFFO for the foreseeable future, even if rental rates recover dramatically from here. As CEO and largest shareholder, I clearly recognize that owning a pool of property that continues to have negative AFFO, while depreciating in value is a very unattractive outcome."

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