Clarifying “Book Value”

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We’ve had a few investors ask us to clarify what is meant by the PHT’s “book value” and how that relates to their likely recovery from the PHT.

To clarify, as we pointed out in the December 2017 investor newsletter, a company’s book value is simply the total value of its assets minus its outstanding liabilities at a particular point in time. A number of IRA Custodians have calculated the PHT’s book value in order to value the IRA Partnership units that they hold. As we’ve said before, book value is not “the” value of a company, it’s just “a” value that can be readily calculated from the available financial statements.

Essentially, book value of a share is determined by (A) starting with a current value of the total assets; then (B) subtracting the company’s liabilities; and then (C) dividing that number by the total number of shares (or, in our case, the number of “units”) outstanding. So for example, as of the end of 2017: (a) the PHT’s assets were $369,765,664; and (b) its liabilities were $130,824,276; yielding a net worth of $238,941,388. If we divide that figure by (c) the number of units outstanding (1,162,059,511), we come up with a book value for the PHT of $0.206/unit. The PHT’s Form 10-K annual statement has more details on the PHT’s assets and liabilities.

The book value of a PHT unit does not determine how much an investor will receive from the PHT. The units’ book value is neither a cap nor another limitation on the distributions that the PHT will make over its life. We still the portfolio to return about 85% of the amount invested in LPI as projected in the June 2017 Disclosure Statement.