Although a number of nontraded real estate investment trusts recently posted sharp decreases in valuations, one of the largest, the $3 billion CNL Lifestyle Properties Inc., will steer clear of such results, according to its chief executive, Stephen Mauldin.
“You have seen some disasters in the nontraded space,” he said last Tuesday after addressing investors at the National Association of Real Estate Investment Trusts' conference in New York. “We're not one of them.”
According to guidelines from the Financial Industry Regulatory Auth-ority Inc., 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 at $10 a share, so when some of them came out over the winter with new estimated valuations showing a 30% to 50% decrease in value from the original share price, some investors and advisers were shocked.
THIRD-PARTY ASSESSMENT
CNL Lifestyle, which stopped raising equity last year, is using a third party to evaluate the portfolio and expects to post a new valuation in the third week of August, Mr. Mauldin said at the conference, which attracted more than 1,000 investors.
The REIT has recently seen some changes, after cutting back last year on the portfolio's exposure to golf courses and adding a new category, senior living, he said during the presentation.
Meanwhile, the REIT's management also is looking carefully at its distribution or dividend to investors, which is 6.25%.
“We've overdistributed for a while,” said Joseph Johnson, the REIT's chief financial officer.
Any potential change in the distribution would be announced at the same time as a change in the REIT's valuation in late summer, he said.
Such timing would give the REIT a clear indication of how well the summer season of attractions and theme parks, which account for 12% of the portfolio, was performing.
bkelly@investmentnews.com
