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DDMPR offering price, a 14% premium over per share equity at fair value

DDMP REIT (DDMPR) like its sponsor and parent company Double Dragon (DD) has been recognizing as income the unrealized gains from changes in fair values of investment property. At the end of the day the unrealized gains from the increase in fair value of investment properties, although “not yet realized,” are added to the capital more particularly to the retained earnings.

The equity of DDMPR is therefore marked not at cost but at fair value. As of 30 September 2020, DDMPR reported a total capital of 35.2 Billion Pesos with total outstanding shares of 17,827,456,406. That would translate to a capital per share of 1.97 Pesos. That capital per share is propped-up by the gains not yet realized from the increase in fair value of the investment properties. Capital gains are realized when investment properties are sold at a price higher than the costs of the investment properties.

If DDMPR is just selling the investment properties, the investment properties will most likely just sell at their fair values. Through the REIT offering DD is able to realize the value of the investment properties above and beyond their fair values by pricing it at premium on top of their fair values. The 2.25 DDMP REIT public offering price is a 14% premium over the 1.97 net asset per share marked at fair value.

The DDMPR offering priced at 2.25 a share is analogous to Injap Sia selling you the investment properties at a 14% mark-up over their overly marked-up values. If Injap Sia can sell this DDMPR offering, then he would be the GOAT salesman in the country.

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