On March 1, 2012, Terry Roussel, Chairman and CEO of Cornerstone Core Properties REIT sent a letter to shareholders informing them that shares of Cornerstone, previously valued at $8 , are now worth just $2.25. If you would like to read the letter follow this link and click on the SEC 8K filing dated 3/1/2012.
At $2.25, this calculates to a drop in value of about 72%. That is if you can sell the shares at all. Since this is a non-traded REIT, there is no conventional market where investors who need cash can liquidate their shares. The only option presently available are the various secondary market makers, which I have previously written about here and here.
Previously, secondary market makers have advised that non-traded REITs typically sell for 70-80% of the then current estimated value. Assuming that is the case with Cornerstone, then it will currently sell in the range of $1.57-$1.80, which is no doubt a surprise and a disappointment to investors who until just recently believed their shares were worth $8.
Mr. Roussel's letter goes on to explain that Cornerstone sold three properties in the final quarter of 2011. Proceeds were used to pay down debt and build cash reserves. Debt has been reduced substantially and the company anticipates selling more properties to eliminate debt further. Occupancy, critically important to real estate leasing projects, is down to 69% from 92% at the end of 2008.
A table included in the letter summarizes the "primary components of the decline in per share value", as follows:
Original issue price 8.00
Commissions paid (.80)
Organizational/offering costs (.24)
Cash distributions to shareholders (1.43)
Share Redemptions (.59)
Decline in value of real estate (2.69)
Revised value 2.25
This means 13% of the decline went to pay commissions and offering costs. Most investors will probably be surprised to know that the distributions (1.43) they received, prior to being curtailed, reduced the value of the investment by a corresponding amount.
Many investors were sold REITs like Cornerstone Core with the promise of steady distributions of income, vs. a distribution of capital, and a promise that the value of the investment would remain constant, or increase.
If you have losses on non-traded REITs , you may be able to recover some or all of those losses. Contact us at 561 391 1900. We have been helping investors recover stock market losses for over 20 years. Nationwide representation. Free consultation.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.