Steadfast Income REIT Lowers NAV per Share and Distribution Rate
April 3, 2018 | James Sprow | Blue Vault
In a letter to shareholders on March 29, Steadfast Income REIT announced an updated net asset value per share for the company’s common stock of $10.84 per share. The company’s previous NAV per share was $11.65, as of December 31, 2016, representing a decrease of about 7 percent.
The Board also approved a new, lower distribution rate of 6% on an annual basis based on the purchase price of $10.24 per share. The decision to re-align the distribution rate was the result of multiple factors, including the fact that SIR has paid an all-cash distribution since suspending the distribution reinvestment plan (“DRIP”) in 2014. The new distribution rate will begin to accrue on April 1, 2018, and will be paid beginning with the May payment date.
In a letter to shareholders and a video to advisors outlining the reasons for the decline, the company explained that oil price volatility in recent years impacted markets like Houston and Oklahoma City where it maintains a significant presence. The company believes that these markets are improving and continue to exhibit upside potential.
Additionally, the REIT sold properties where the proceeds had not been deployed before the year-end valuation, and uninvested cash creates a drag on funds from operation until deployed.
Other reasons include transaction costs incurred from the joint venture sale with Blackstone REIT, 2017 redemptions calculated at the previous $11.65 NAV per share, and distributions were paid in cash rather than the industry average of 50 percent cash and 50 percent shares of common stock.
The board also authorized a tender offer for up to $100 million shares of common stock priced at $9.00 per share for shareholders who desire immediate liquidity. In connection with the offer, the company’s share repurchase program will be temporarily suspended at the end of the month.
Steadfast Income REIT invests primarily in the multifamily sector, including stable, income-producing and value-added properties. The company launched its initial public offering in July 2010 and concluded its sales of shares of common stock in December 2013 after raising $745 million in investor equity, including DRIP proceeds. The company owns a multifamily property portfolio of 48 properties with a total purchase price of $1.2 billion, comprising 12,156 apartment units. The units were 93.8% occupied as of December 31, 2017.
The Company engaged CBRE Capital Advisors, Inc., or CBRE Cap, a FINRA registered broker dealer firm that specializes in providing real estate financial services, to provide property-level and aggregate valuation analyses and a range for the estimated value per share of its common stock as of December 31, 2017. The valuation committee concluded that the range between $10.31 and $11.39 for the estimated value per share proposed in CBRE Cap’s valuation report was reasonable and recommended that the board of directors adopt $10.84 as the estimated value per share of common stock as of December 31, 2017. The estimated value per share represents the weighted average of the range reflecting the effect of using differing discount rates in the sensitivity analysis. On March 13, 2018, the board of directors accepted the recommendation of the valuation committee and approved $10.84 as the estimated value per share of common stock as of December 31, 2017.
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