What's The Opposite of Accretive?

De-cretive? Di-lutive?  Di-sappointing?  None a pretty word.  I posted Tuesday about Cole Credit Property Trust II's suspension of its distribution reinvestment plan and its share repurchase plan.  I speculated that the suspension of the two plans could be the initial steps toward CCPT II's liquidation.  Another idea floated through my brain after re-reading CCPT II's lawyerly disclaimer sentence in CCPT II's investor letter (emphasis added):

While no final decisions have been made, CCPT II anticipates being in a position to announce further updates regarding a potential liquidity event in the near future. 

What if all the entities supposedly looking at CCPT II were proposing values below its current distribution reinvestment price of $9.35 per share, and share repurchase price of $9.31 per share? If this is the case, the board's decision to suspend the distribution reinvestment program and share repurchase program makes sense and doesn't necessarily signal an imminent liquidity event.

Buying shares back at prices higher than the shares' value is bad business, the board cannot knowingly overpay for assets.  On the other hand, if the estimates of share value were higher than the share repurchase and reinvestment price, it'd be in CCPT II's shareholders' best interest to buy as many shares as possible at the undervalued price.  CCPT II's redemption requests have exceeded actual redemptions:

During the nine months ended September 30, 2012, we received valid redemption requests pursuant to the share redemption program, as amended, relating to approximately 15.2 million shares, including those requests unfulfilled and resubmitted from a previous period, and requests relating to approximately 4.6 million shares were redeemed for $43.2 million at an average price of $9.31 per share. The remaining redemption requests relating to approximately 10.6 million shares went unfulfilled, including those requests unfulfilled and resubmitted from a previous period. Requests for redemptions that are not fulfilled in a period may be resubmitted by stockholders in a subsequent period.

I reviewed redemption requests for both Dividend Capital's Diversified Property Fund (DPF) and CNL Lifestyle, both of which raised equity capital in the mid-2000s.  Like CCPT II, both redeem far fewer shares than requested.   But both REITs increased redemptions after recent revaluations revealed a lower net asset value per share than the previous redemption price.  DPF redeemed 1% of its shares in the second quarter, but redeemed 25% of requests in the third quarter after it lowered the value of its shares.   Lifestyle, after its August revaluation, increased the amount of shares it was willing to redeem per quarter.  The implication to me is that both DPF's and Lifestyle's boards were hesitant to repurchase too many over shares at prices greater than what the boards believed the respective REIT's actual net asset value.  There are many reasons for a non-traded REIT to limit redemptions and buying shares back at prices higher than a REIT's asset value is but one. 

I guess we'll know shortly whether CCPT II's board's decision to suspend CCPT II's distribution reinvestment and share repurchase plans were a precursor to a sale or an act of fiscal prudence.