Inland American cuts NAV after asset sale

In the wake of spinning off its hotel portfolio, nontraded REIT cuts estimated share value by 42.4%; new estimated value is $4 per share

Feb 26, 2015 @ 12:26 pm

By Bruce Kelly

In the wake of spinning off its hotel portfolio, Inland American Real Estate Trust Inc. has cut its estimated share value by 42.4%.

In a filing Wednesday with the Securities and Exchange Commission, the giant nontraded real estate investment trust said its latest estimated per share value was $4. At the end of 2013, its most recent valuation, the company deemed its per share value to be $6.94. The company also said it was cutting its annual distribution, or dividend, to 13 cents from 50 cents.

The dramatic drop in Inland American's estimated value is due to the company selling or spinning off various assets over the past year, including most recently, its hotel portfolio on Feb. 3. That group of properties became a listed REIT, Xenia Hotels & Resorts Inc.

“Xenia represented a significant portion of our assets, which are no longer included in our estimated share value calculation,” wrote Thomas P. McGuinness, Inland American's president and chief executive on Wednesday in a letter to shareholders. Each Inland American stockholder received one share of Xenia common stock for every eight shares of Inland American common stock they held at the close of business on Jan. 20, the record date of the spin-off, according to Inland American. Inland American stockholders now own shares of common stock in both Inland American and Xenia.

“In 2014, our company's dispositions consisted of over $2 billion in assets in both individual property and portfolio transactions, including the company's select service hotel portfolio for approximately $1.1 billion,” wrote Mr. McGuinness. “While the asset values of our core retail and student housing platforms increased, these gains were offset by a drop in the value of our non-core portfolio.”

In the letter, the company also said its chairman, Robert Parks, had resigned; J. Michael Borden was appointed interim chairman.

At the end of September, before the listing by Xenia, Inland American had $8.3 billion of assets. Inland American was initially sold at $10 a share, the industry's standard pricing structure. Launched in 2004, Inland American raised $8.9 billion in equity, the most ever for a nontraded REIT.

Like other nontraded REITs that raised equity before the real estate collapse of 2006 and 2007 and bought properties at the height of the market, Inland American was hurt by the real estate crisis.

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