While a number of nontraded real estate investment trusts have recently posted sharp decreases in valuations (including Behringer Harvard, Inland Western, Inland American, etc.), one of the largest, the $3 billion CNL Lifestyle Properties Inc., will steer clear of such results, according to reports and the REITs own CEO, Stephen Mauldin.
Nontraded REITs have 18 months after they stop selling shares to determine an estimated value, which essentially informs investors and advisers of an updated appraisal of the properties in the REIT’s portfolio. Most nontraded REITs are bought by investors for $10 per share, so a spate of new estimated valuations over the winter and spring that showed a 30% to 50% decrease in value from the original share price shocked some investors and advisers.
CNL Lifestyle stopped raising equity last year, so the REIT will be announcing a new valuation of its shares later this summer. Mauldin, speaking at the Nareit REIT-Week conference, stated that CNL Lifestyle Properties will avoid such a steep devaluation when it announces its new valuation.
The same reports indicate that the REIT may cut its dividend, however. The REITs chief financial officer is quoted as saying, “We’ve overdistributed for a while.” Any change in the distribution would be announced at the same time as a change in the REIT’s valuation in late summer.
The White Law Group continues to monitor the non-traded REIT sector. Due to the high commissions offered by these products, the firm has found that these products have been over sold to unsophisticated and retired investors who were attracted to the income component these investments claim to offer. It will certainly be interesting to see what CNL’s valuation is announced as later this summer.
If you have questions about a non-traded REIT that you purchased, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on the firm, please visit http://www.whitesecuritieslaw.com.