According to the Long Island Business News, Apple REIT Eight, a non-traded real estate investment trust sold exclusively by Syosset-based David Lerner Associates, recently announced that it has reduced its annual dividend from 7 percent to 5 percent, blaming a “slower than anticipated” recovery for some of its extended-stay hotels.
Apple REIT Eight, which owns 51 Marriott- and Hilton-brand hotels, said in a statement that “the company believes that it is prudent to lower the annualized distribution rate until such time as a recovery can be achieved.” The REIT had come under fire recently for defaulting on mortgages for five of its hotels. The company said it has renegotiated and reinstated two of those loans with payments resumed in full and the three other loans “remain under discussion.”
Apple Eight said it is currently working to replace outstanding lines of credit to take advantage of low fixed-rate debt, new term loans and a new reduced line of credit.
Apple Eight expects its debt to remain at or below $240 million through the rest of 2011, an average debt to total initial capitalization ratio of about 21 percent. The company predicts net income for the year of about $9 million to $16 million, or about 10 cents to 17 cents per share.
The changes to the Apple REIT dividends will take effect on July 15, according to the statement.
The Financial Industry Regulatory Authority complaint against DLA alleged that since at least 2004, the company’s non-traded REITs have unreasonably valued their shares at a constant price of $11 despite market fluctuations, performance declines and increased leverage. FINRA questioned the policy of maintaining outsized distributions of 7 to 8 percent by leveraging the REITs through borrowings and returning capital to investors.
Meanwhile, in a Securities and Exchange Commission filing last month, Apple Eight management reported the value of its shares at $7.57 per at the end of March, which contradicted the statement price of $11. Apple Eight had to restate its value so it could recommend that owners of the REIT not sell their shares in response to a $3 per share offer by a group of investment funds managed by Mackenzie Patterson Fuller, which buys illiquid real estate investments at deep discounts, according to published reports.
If you have questions about your Apple REIT investment, please feel free to contact the securities attorneys of The White Law Group.
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