Hines Global REIT Plans to Liquidate
April 25, 2018 | James Sprow | Blue Vault
On April 23, 2018, the board of directors of Hines Global REIT, Inc. (“the Company”) unanimously approved a plan of liquidation. The plan is subject to the approval of the Company’s shareholders at the Company’s annual shareholder meeting scheduled on July 17, 2018. The Company filed a preliminary proxy statement with the Securities and Exchange Commission (“SEC”) describing the proposed plan on April 25, 2018, and will submit it to the shareholders of the Company for their consideration along with the Company’s definitive proxy statement following its filing with the SEC.
According to the Company’s press release, assuming the approval of the plan by shareholders, the Company currently expects that initial shareholders will have received aggregate distributions totaling $15.62-16.62 per share upon successful execution of the plan. As described in the Company’s preliminary proxy statement, this amount includes $5.62 per share of operating distributions received or to be received from November 2009 through June 2018, the $1.05 per share special distribution received by shareholders in January 2018, $0.12 per share return of invested capital distributions for the six months ending June 30, 2018, and the board of directors’ estimate of the range of liquidating distributions to be made pursuant to the Plan of $8.83 to $9.83 per share of the Company’s common stock. The Company expects to continue making regular distributions as it seeks shareholder approval of the plan of liquidation and also intends to make multiple liquidating distributions pursuant to the plan.
Hines Global REIT raised $3.1 billion in equity through April 2018. In total, the Company acquired interests in 45 diversified properties, representing approximately 17.5 million square feet in the U.S. and abroad in Great Britain, Germany, France, Poland, Russia and Australia. The Company has made strategic asset dispositions, including selling properties for a gross sales price of $998 million in 2017, as well as completing the sale of One Westferry Circus for a gross sales price of $153.5 million on April 12, 2018.
“Because we’re seeing strong capital markets interest at the portfolio, sub-portfolio, and individual asset level for our remaining high-quality assets, we believe the time is right to recommend a plan of liquidation for the Company in an effort to bring liquidity and maximize value to our shareholders,” said Sherri Schugart, President and Chief Executive Officer of Hines Global REIT. The Hines Global REIT portfolio currently consists of 33 assets –representing 13.9 million square feet that is 90% leased, of which, approximately 61% is located throughout the United States and 39% is located internationally.
Blue Vault’s Q4 2017 NTR Review reports that Hines Global REIT, Inc. issued shares at $10.00 per share in an offering that closed April 11, 2014. Distributions have been at the rate of 6.50% annualized based on the original offering price.
In December 2017, the Company declared a distribution of $1.05 per share to all stockholders of record as of December 30, 2017, which was paid in January 2018. This distribution was designated by the Company as a special distribution. The special distribution reduced the previous per share NAV determined as of December 31, 2016, from $10.03 to $8.98.
On February 26, 2018, the board of directors determined a new per share net asset value of $9.04 as of December 31, 2017. This new per share NAV is slightly higher than the previously determined estimated per share NAV of $8.98 as of December 30, 2017.
The Company has declared distributions of approximately $0.65 per share, per year for the years ended December 31, 2017, 2016 and 2015. The ratio of distributions to modified funds from operations (MFFO) was 100% for 2017 but rose to 152% in Q4 2017.
The REIT declared distributions at the rate of 7.00% annualized based on the $10.00 offering price from October 2009 through December 2011. The distribution rate was decreased to 6.50% annualized beginning in 2012.
Depending upon the timing of interim partial portfolio sales and when the final portfolio liquidation occurs, Blue Vault estimates that early investors who paid $10.00 per share in Q4 2009 and received all regular distributions as well as the $1.05 special distribution in January 2018 and a receive the midpoint ($9.33) of the Board’s estimated liquidating value of $8.83 to $9.83 hypothetically at year-end 2018, should have an annualized average holding period rate of return of approximately 7.3%. Those investors who purchased shares nearer the end of the offering period will have an estimated annualized average rate of return that is above 7.3%. These estimated rates of return would be higher if liquidations occur earlier than year-end 2018 or are at a rate above the midpoint of the Board’s estimated range.
Sources: Hines Global REIT, Inc. Press Release April 25, 2018; Blue Vault
Learn more about Hines Securities, Inc. on the Blue Vault Sponsor Focus page
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