As a parent, I am always telling my children to show their work when doing math homework. I think Inland Western needs to be admonished with the same advice. Here is the brief statement on Inland Western's fourth quarter distribution:
Enclosed is your portion of the third quarter 2009 distribution to Inland Western Retail Real Estate Trust, Inc. (“Inland Western”) stockholders. The board of directors declared a third quarter 2009 distribution of 2 ½ cents per share, payable on October 12, 2009, to stockholders of record at the close of business on September 30, 2009. Including this distribution, stockholders have received a total of 17 ½ cents in distributions in calendar year 2009. Assuming a purchase price of $10.00 per share, this level of distribution translates to a 1.75% annualized return. As each distribution is determined quarterly by our board of directors, the annualized yield is not necessarily indicative of future distributions. If you have invested through a trustee or participate in Direct Deposit or the Distribution Reinvestment Program, a distribution statement is enclosed in lieu of a check.First off, the letter is confusing calendar year with the fiscal year, as it combines the fourth quarter 2008's distribution with 2009's distribution. How else could a 1.75% annual rate be determined if the third quarter's distribution was just paid? Second, a $.025 cent dividend on a $10 share price does not translate into a 1.75% annualized return. It translates into a 1% annualized return: ($.025 dividend X 4 quarters) = $.10 per share annual dividend, and ($.1 annual dividend / $10 per share) = 1% annualized dividend rate. Third, the letter does not state that the dividend has been cut, when it's clearly been slashed.
When sponsors play with numbers and language like Inland, it makes everything they publish suspect. I am open to and expect some sponsor spin, but this letter was too much for me. Inland's pronouncements on the mountain of debt Inland Western has coming due over the next year need to be read very closely. I hope Inland Western is not using the same obfuscated math as it figures out its debt payments.