Inland Western struggles to pay down debt

One REIT sponsor attracting attention recently from independent broker-dealers is The Inland Real Estate Group of Companies Inc., which sponsors five publicly traded and non-traded REITs. One of Inland's non-traded REITs — Inland Western Retail Real Estate Trust Inc., which owns and manages retail properties — notified investors last week that it is cutting its dividend for a second time this year (see accompanying story). Like many other non-traded REITs, Inland Western shut down its share redemption program, which typically allows a limited number of investors to redeem shares each month. Inland plans to reopen the program next April. Debt-heavy Inland Western finds itself with $867 million coming due before the end of the year and an additional $1.3 billion coming due in 2010. So far this year, it has paid $213 million in obligations and refinanced another $180 million. “A difficult retail sector, high leverage and substantial near-term debt maturities will likely keep dividends low for some time,” Direct Investments Spectrum, an industry publication, reported. “The company appears to be having some success in re-leasing vacant space and refinancing debt.” In August, Inland Real Estate Group went to the market with a new non-traded REIT, Inland Diversified Real Estate Trust Inc. In its prospectus for that offering under the heading “Other conflicts of in-terest include,” Inland states that directors of the new REIT were empowered to make loans to other Inland REITs. Some REIT and brokerage executives and lawyers said such language is highly unusual for a non-traded REIT, although others said such a provision is not unusual. The language in the Inland Diversified prospectus gives the independent directors of the REIT more “flexibility to operate in the long-term best interests of the shareholders,” said Matthew Tramel, an Inland spokesman. The company maintains that it is taking appropriate and necessary actions. Cutting dividends was a difficult decision, but it was made in the long-term best interests of shareholders, Mr. Tramel said. Inland Western is using the cash flow to pay down debt. This summer, Inland Securities Corp.'s marketing efforts suffered a blow when Martel Day, its director of business development, who focused on the independent-brokerage business, left to join Empire American Holdings LLC. He was replaced by Inland executive Brian Conlon. E-mail Bruce Kelly at [email protected].