Business Context and Reporting Period
This Form 8-K is filed by Inland American Real Estate Trust, Inc. (the "Company") on September 23, 2010, reporting events occurring on September 21, 2010. The filing addresses the establishment of an estimated value per share for the Company's common stock to comply with Financial Industry Regulatory Authority (FINRA) rules and Employee Retirement Income Security Act (ERISA) reporting requirements. The Company is a non-traded REIT that terminated its last "best efforts" offering on April 6, 2009.
Key Financial Metrics and Valuation
- Estimated Value per Share: $8.03 as of September 21, 2010.
- Declared Distribution: Monthly distribution for September 2010 declared at an annualized amount of $0.50 per share.
- Yield Metrics: The distribution represents a 5% annualized yield based on a $10.00 share price and a 6.2% annualized yield based on the $8.03 estimated value.
- Reinvestment Price: Effective September 21, 2010, shares purchased under the Distribution Reinvestment Plan will be priced at 100% of the estimated market price ($8.03) until the shares are listed for trading.
Note: This filing does not provide specific figures for total revenue, net profit, operating cash flow, debt levels, or liquidity ratios. The valuation is based on projected Funds From Operations (FFO) and cash flow using comparable capitalization rates and multiples.
Material Changes and Methodology
The primary material change is the establishment of the $8.03 estimated value per share, replacing the previous offering price which could no longer be used for reporting purposes under FINRA rules due to the 18-month limitation. The valuation was determined through a combination of methods, with primary reliance on projected FFO valuations, reviewed by an independent third party. The Company notes that the current economic downturn has depressed asset values, influencing this estimate.
Outlook, Risks, and Management Commentary
- Valuation Limitations: Management explicitly states that the $8.03 value is not the fair value under GAAP, nor does it represent the price at which shares would trade on an exchange or the amount realized upon liquidation.
- Future Updates: The Company expects to update the estimated value per share on a calendar year basis, beginning December 31, 2011.
- Risks: The filing highlights that the valuation relies on estimates and assumptions that may prove inaccurate. There is no assurance that stockholders can resell shares at this value or that the methodology will be accepted by regulators for all compliance purposes.
- Forward-Looking Statements: The report contains forward-looking statements regarding financial performance and distribution rates, which are subject to risks and uncertainties that could cause actual results to differ materially.
Investor Verification Checklist
- Verify the specific valuation methodology and assumptions used by the Business Manager and the independent third party.
- Confirm the impact of the current economic downturn on the Company's specific commercial real estate portfolio.
- Review the full text of the Second Amended and Restated Distribution Reinvestment Plan (Exhibit 4.1) for terms regarding share purchases.
- Monitor future filings for the next annual update to the estimated value per share expected after December 31, 2011.
- Assess the liquidity risk, as the estimated value does not guarantee a resale price for shareholders.