CNL Lifestyle will avoid valuation shock: CEO

While a number of nontraded real estate investment trusts have recently posted sharp decreases in valuations, one of the largest, the $3 billion CNL Lifestyle Properties Inc., will steer clear of such results, according to its CEO, Stephen Mauldin.
“You have seen some disasters in the nontraded space,” he said after a presentation to investors Tuesday afternoon in New York. “We’re not one of them.”
According to guidelines from the Financial Industry Regulatory Authority Inc., nontraded REITs have 18 months after they stop selling shares to determine an estimated value, which essentially informs investors and advisers of an updated appraisal of the properties in the REIT’s portfolio. Most nontraded REITs are bought by investors for $10 per share, so a spate of new estimated valuations over the winter and spring that showed a 30% to 50% decrease in value from the original share price shocked some investors and advisers.
CNL Lifestyle stopped raising equity last year, is currently using a third party to evaluate the portfolio and expects to post a new valuation in the third week of August, said Mr. Mauldin, who was speaking at the Nareit REIT-Week conference, which attracted more than 1,000 investors this year. The REIT has recently seen some changes, he said in his presentation, after cutting back last year on the portfolio’s exposure to golf courses and adding a new category, senior living.
Meanwhile, the REIT’s management is also looking carefully at its distribution or dividend to investors, which is currently 6.25%. “We’ve overdistributed for a while,” said Joseph Johnson, the REIT’s chief financial officer. Any potential change in the distribution would be announced at the same time as a change in the REIT’s valuation in late summer, he added. Such timing would give the REIT a clear indication of how well the summer season of attractions and theme parks, which account for 12% of the portfolio, was performing.