Here is an excerpt from Behringer Harvard REIT I's 8-K that was filed Friday, May 15:
In light of the historically weak economic environment, our board has set the distribution rate for each of the months of April, May and June 2009 at $0.0271 per share, which is a 3.25% annualized rate based on a purchase price of $10.00 per share. As reported earlier to our shareholders, our board determined to maintain a monthly distribution schedule. These distributions will be payable to shareholders of record as of each of April 30, May 31, and June 30, 2009. We understand this decision directly affects your monthly income and assure you it was undertaken with careful consideration.To offset the distribution cut, the REIT's advisor is waiving its asset management fee for the second and third quarters. I read through the REIT's quarterly report and funds from operation was $28.5 million compared to distributions of $46.6 million. Over the same period a year ago, the REIT had FFO of $26.8 million and paid distributions of $32.5 million. Cash flow from operations was a negative $4.8 million in the first quarter of 2009, and it was negative $10.1 million in the first quarter of 2008. The distribution cut should not come as a big shock. This distribution should have been cut sooner, but distribution cuts are bad for marketing.
Of the $46.6 million in distributions, only $21.4 million was paid in cash, the remaining dividends were paid in REIT shares through the REITs dividend reinvestment program.
This REIT is highly leveraged. Its debt is approximately 75% of the value of properties listed on the balance sheet. The notes explain how the properties are accounted for, but the explanation is confusing and I am not sure if the properties' values reflect current valuations or are carried at cost. With leverage so high, this is an important question.