Impacts of Pandemic on Nontraded REIT Distributions and Redemptions

April 22, 2020 | James Sprow | Blue Vault

Nontraded REIT investors are starting to feel the impact of the COVID-19 pandemic on their distributions and the share redemption programs available. Recently, six nontraded REIT offerings have been suspended due to the uncertain conditions in the U.S. economy brought on by the virus. Among the 21 open offerings, two NTRs have suspended distributions, three have suspended share redemption programs and four have suspended DRIP programs. Among 37 closed NTR programs, three have suspended distributions, three have reduced their distribution rates, and two have suspended DRIP programs within the past month. Additionally, five of the closed programs have suspended their share redemption programs since February.

Thus far in 2020, six nontraded REIT offerings have been suspended or announced suspensions. The uncertainty created by the economic impacts of the pandemic on commercial real estate valuations has caused the boards of directors to re-evaluate their offering prices and their capital raise efforts in general. Some nontraded REIT advisers have issued letters to shareholders cautioning about the risks of re-investing distributions via DRIP programs, since the DRIP pricing may not be representative of future estimated net asset values per share.

The following table shows those effective nontraded REIT programs that have recently suspended their offerings and made other changes to their distributions, share redemption programs (SRP), and distribution reinvestment programs (DRIP).

Table II lists the closed nontraded REIT programs that have recently reduced distribution rates, suspended distributions, suspended share redemptions and suspended distribution reinvestment programs. Inland Real Estate Income Trust’s board reduced the distribution rate and delayed the payment of distributions from April 1, 2020 to June 1, 2020.

The decisions by nontraded REIT boards to suspend offerings, distributions, redemption programs and distribution reinvestments will likely continue during the coming weeks.

Sources: SEC Filings