Friday, June 22, 2012

The Real 1% - Div Cap Total Realty Trust Investors

Dividend Capital's Total Realty Trust (TRT), a non-traded REIT, filed an 8-K yesterday where it disclosed that it's going to redeem 130,000 shares in the second quarter as part of its quarterly share repurchase program.  The 8-K stated that TRT had received redemption requests for 12.8 million shares as of the second quarter's redemption request deadline date.  The amount of shares TRT will redeem is only 1% of redemption requests - or one cent for every one dollar of redemption requests.  In its benevolence, TRT announced it will redeem the 1%, pro rata.  Don't spend that whole penny in one location.  I casually watch non-traded REIT redemption requests, but I can't remember such a large disparity for a non-traded REIT with an open share repurchase plan like TRT's.

TRT's large gap between redemption requests and actual redemptions is not new, but it's progressively getting worse, as the requests increase and the number of shares TRT redeems decreases.  Here is a table from TRT's 2012 first quarter 10-Q:

The following table sets forth relationships between the amount of redemption requests received by us pursuant to our share redemption program, the resulting pro-rata redemption caps, and actual amounts of shares redeemed for each of the last four quarterly periods (share amounts in thousands).

   Total Number of
Shares Requested
   Redemption Cap    Pro-rata Percentage of
Redemption Requests
Redeemed by Us
Shares Redeemed
   Shares Redeemed
Pursuant to Death
and Disability Puts
   Total Number of
Shares Redeemed
Q2 2011
   10,000       890       9 850       379       1,229   
Q3 2011
   11,200       1,000       9 968       538       1,506   
Q4 2011
   11,400       826       7 810       446       1,256   
Q1 2012
   11,700       628       5 628       883       1,511   






   44,300       3,344       8 3,256       2,246       5,502   






See “Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” of this Quarterly Report on Form 10-Q for more information regarding redemptions of shares during the three months ended March 31, 2012

TRT's second quarter figures are worse than any quarter above, and if its Q2 statistics were added to the table above, they would show a 9.4% increase in share redemption requests to $12.8 million shares;  a 79.3% drop in actual redemptions to 130,000 shares; and an 80% drop in the pro rate redemption percentage to 1%.  

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