Highlands REIT Announces $0.36 Estimated NAV per Share
January 14, 2020
At a full meeting of the Board of Directors of Highlands REIT, Inc. held on January 8, 2020, the Audit Committee made a recommendation to the Board that the Board adopt and the Company publish an estimate of per share value as of December 31, 2019, equal to $0.36 per share on a fully diluted basis. The Board unanimously adopted this recommendation of estimated per share value, which falls within the range of per share net asset values for the Company’s common stock that Real Globe Real Estate Advisors, LLC provided in its report. The Real Globe report, dated as of January 6, 2020, reflects values as of December 31, 2019.
On January 4, 2018, the Board of Directors of Highlands REIT, Inc. approved an estimated value of common stock equal to $0.33 per share on a fully diluted basis. On January 10, 2019, the Board of Directors of Highlands REIT, Inc. met and approved an estimated value of common stock equal to $0.35 per share on a fully diluted basis.
Generally, the net asset value per share was estimated by subtracting the fair value of total liabilities from the fair value of total assets and dividing the result by the number of common shares outstanding on a fully diluted basis as of December 31, 2019. Real Globe then applied a discount rate and terminal capitalization rate sensitivity analysis by adding and subtracting 50 basis points to the terminal capitalization rate and discount rate for assets where the concluded value was solely derived based on the discounted cash flow methodology, resulting in a value range equal to $0.37 – $0.44 per share on a fully diluted basis. The mid-point in that range was $0.40 per share. For reporting purposes, all per share numbers are rounded to the nearest cent.
In establishing the estimated per share value below the midpoint of the range, the Audit Committee and Board considered many factors, including difficulties the Company has encountered in liquidating particular assets, unfavorable market conditions and trends affecting the Company’s retail assets, significant leasing risk associated with certain assets in the portfolio, and the lack of robust comparable sales for many of the Company’s assets, including its correctional facility.
The following table summarizes the individual components of the Company’s estimate of per share value, rounded:
(1) The Company’s value of the real properties reflects a selection below the midpoint of the value range reflected in Real Globe’s report.
(2) The fair value of debt instruments was estimated by Real Globe using discounted cash flow models, which assume a weighted average effective interest rate of 6.11% per annum to estimate the midpoint of the value. The Board believes that this assumption reflects the terms currently available on similar borrowing terms to borrowers with credit profiles similar to the REIT’s.
Source: SEC
