Tuesday, March 31, 2009

Inland American Stops Subscriptions
Here is the entirety of a letter being sent to shareholders in Inland American:

Dear Stockholder:

There is no need for us to remind you of current economic conditions. The state of this economy requires prudent people to make difficult decisions. As you know, Inland’s primary responsibility is the protection of shareholder value.

Accordingly, we made a determination today that the cash position that we are in is sufficient for the effective execution of our business plan, and that additional capital could have the potential to dilute the overall returns.

Furthermore, we have a large amount of cash in banks. The only F.D.I.C. insured accounts that cover the amount of cash held by our REIT are not allowed to pay interest. Yet, we pay distributions on that amount. Also, given the economy, stock sales for March exceeded our expectations. Accordingly, other than the Distribution Reinvestment Plan, we believe that it is prudent to cease raising capital at this time.

Therefore, ten days after the date of this letter, new investors will not be accepted into Inland American after 5:00 p.m. Central time on Monday, April 6, 2009. All documents and funds must be received in good order by that date and time at our corporate headquarters at 2901 Butterfield Road, Oak Brook, Illinois 60523.

As always, we thank you for your continued investment in Inland American.

This a strange letter. It is a mystery to me why a company with so many legacy assets - i.e. real estate bought before the middle of 2008 - would stop raising money in what sure looks like one of the best buying opportunities in years. If stock sales are exceeding expectations, why not put some of that capital to work by buying real estate and real estate companies. Cap rates today are much higher than when the bulk of Inland American's assets were acquired. Raising the overall cap rate of the portfolio would not be a bad thing for Inland American. I have a feeling that there is more news coming from Inland American.

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