Hedgie, I think you should spend more than 2 minutes analyzing the company. I have been an investor in AQQ for 3 years and previously held LP interests in their predecessor company Sierra Pacific.
first, read the 3/31/08 10Q and see that 1st quarter NOI is $4.736 million and annualized that is $18.95 million.
second, rents are increasing at a fast pace in Houston metro area --- not as fast at AQQ properties as in downtown CBD Class A properties --- but still rising more than 20% in past year.
Thus my guesstimate of stabilized NOI as 21 million (in a 2 year time frame) based on rental increases (and not assuming increases in occupancy).
3) mortgage debt as 3/31/08 was $186.7 million.
4) the bulk of their space is office or flex office/warehouse and not true industrial warehouse. The 7% cap rate is a good number based on the current rental market. 9% is ridiculous ---- I dare you to provide 2008 comps showing 9% cap rates for houston office sales.
5) the above analysis does not take into account G&A as I assumed a liquidation not does it include possible capital gains/depreciation recapture taxes. It also does not take into account the 2008 2401 fountainview acquisition.
Even annualizing the Q1 number doesn't get you anywhere near $21M. You stated $21M based on 2007. A total misrepresentation. Vacancy rates may be going down in Houston, but they are going up in the rest of the country where they still have 25% of their business. Oh, but I guess you just want to look at the part of this business that looks good.
As far as the cap rate, I used 8% in the analysis. Even if we include just the mortgage debt and annualize the Q1 number, you still have a valuation of $30. Or are you somehow going to value the company on an NOI that is supposed to occur 2 years from now and take a 7% cap rate. Good luck pulling that off.