The Impact of COVID-19 on Nontraded REIT NAVs and Distributions

June 16, 2020 | James Sprow | Blue Vault

Since March 1, 2020, some 20 nontraded REIT programs have announced changes in their net asset values per share (NAVs) amid the COVID 19 pandemic and its impacts upon the values of commercial real estate properties in their respective portfolios. Net asset values for continuously offered shares are typically revised monthly and those NAVs determine the prices at which shares are offered (and redeemed).  For REITs that have closed their public offerings, the NAV announcements serve to inform financial advisors and their clients regarding the value of their nontraded REIT common shares. Those NAVs form the basis for the nontraded REIT investments on client account statements.

While the NAVs for continuously offered REIT shares are relatively fresh, usually with less than several months between revisions, the NAVs for the shares of closed offerings can reflect changes in portfolio values over a considerable length of time. In the table below, several NAVs are updating from the published NAVs in 2018. In those cases, the percentage change in the NAVs are the result of portfolio appreciation in 2019 and the impacts of the pandemic on CRE values in the first quarter of 2020. Where the NAVs differ for different share classes offered by the REIT, the table specifies to which share class the NAV changes apply.

Table I

Nontraded REIT Offerings Suspended

In Table II are the nontraded REITs that have announced suspensions of their respective public offerings since January 2020. Three of these REITs also have announced suspensions of their share repurchase programs (SRPs) and two announced suspensions of their distributions as well. Many nontraded REITs have also changed their distribution policies to give the boards of directors more flexibility in responding to the potential liquidity problems brought about by the pandemic. Those REITs have announced that distribution declarations would be made monthly instead of quarterly.   

Table II

Table III lists the nontraded REITs that have made changes to their distributions, either suspensions or reductions, their share repurchase programs (SRPs) and their distribution reinvestment programs (DRIPs). In this table, 18 of the 28 nontraded REIT programs now have no distributions being paid. Four have continued their distributions at a lower annualized rate. Four REITs reduced their distribution rates during the first quarter of 2020. Eight REITs suspended their distributions during the quarter. Fifteen REITs announced suspensions of their share repurchase programs during the quarter. Clearly, not all of downward adjustments in distribution rates can be attributed to the pandemic. For example, Carter Validus Mission Critical REIT II, Healthcare Trust and Lightstone REIT reduced their distribution rates in previous years and seven REITs suspended their distributions altogether before 2020.

Table III

To learn more about nontraded REIT NAVs, click here. For more information on BDCs, click here.

Sources:  SEC, Blue Vault