Thursday, December 03, 2009

Big Week In The Non-Traded REIT World
There have been three big news items so far this week. First was the news that Piedmont Office Realty Trust has filed an S-11 as the first step in listing its shares on an exchange. I encourage you to go to Piedmont's website and follow the link to the SEC's website and read the S-11. The listing is not as straight word as you'd think. It involves a reverse stock split and dividing Piedmont's shares into four classes, where only a quarter of the shares will have liquidity initially, and the remaining shares will have delayed conversions to liquidity options.

On the heels of this news, Wells has filed Wells Real Estate Investment Trust III, a $5 billion office and industrial REIT. I don't think these two events are unrelated. I would question the financial advice to sell Piedmont, when it is listed, and buy Wells REIT III.

Inland's troubled Western Retail REIT refinanced %625 million of debt, and $500 million of it will be sold as Commercial Mortgage Backed Securities. Here is a link to the Wall Street Journal article and a key passage:
Inland Western Retail Real Estate Trust Inc., which owns some 300 retail properties nationwide, closed on Tuesday $625 million in new financing from J.P. Morgan Chase & Co. to pay down its existing debt. The bank is expected to convert the $500 million first-mortgage part of the financing into a CMBS offering and sell through private placements the remaining $125 million in "mezzanine," or junior, debt to investors hunting for higher returns, according to people familiar with the matter. A spokesman at J.P. Morgan declined to comment.
This reads like good news:
For Inland, of Oak Brook, Ill., the $625 million in new financing represents a big relief as it has about $789 million in debt coming due by the end of this year and another $1.5 billion maturing in 2010, according to the company's third-quarter report. So far, the company has refinanced almost all the debt maturing this year and a sizable portion of the debt coming due next year.
The debt is secured by 55 properties, has a 10-year term and a 75% loan to value, with the underwriting taking into account the current market values and potential for leases renewing at lower rates. I have not read what yield is expected on this deal.


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REIT Wrecks said...

Big news indeed. In addition to Piedmont's sleight of hand (what IS that REIT worth, anyway?), other Non-Traded REITs are busy cutting dividends and eliminating redemption programs. FINRA has also sent out "sweep letters" targeting deceptive sales practices.

Piedmont's little game of three card monte with shareholders is so typical of this market. Investors looking for answers as well as to trade views with fellow shareholders should visit the new Non-Traded REIT Forum. Equipped with the right information, investors can always make the decision that's best for them. Don't rely on your broker. They are not paid to look out for your best interests; they are paid to sell Non-Traded REIT shares