Liquidity At Last? NTR Says It’s Exploring Options

Monogram Residential Trust (Monogram), formerly known as Behringer Harvard Multifamily REIT I, is looking to list on a public exchange. The non-traded REIT began exploring public listing options last week in an effort to maximize stockholder value and provide liquidity.

Organized in 2006, Monogram Residential Trust invests in high-quality multifamily communities and develops and operates them. It seeks stabilized operating properties and developing properties with a focus on the top 50 Metropolitan Statistical Areas of the United States.

Since the company is exploring listing options, it has suspended its Share Redemption Program (SRP) and Distribution Reinvestment Plan (DRP). As a result of the suspension, all distributions paid on or after August 24, 2014 will be distributed in cash and not reinvested in the REIT’s common stock.

The company’s Board of Directors established an estimated per share valuation of its common stock of $10.41. It arrived at this figure through its audit committee and the aid of an independent, third party real estate valuation and appraisal firm, Duff & Phelps. The valuation is an increase from the previous estimated valuation of $10.03 that was established on March 1, 2013.

Like most REITs, Monogram sold the majority of its shares at $10 per share.

In a letter to stockholders, CEO and President Mark T. Alfieri cautioned, “We note that the Valuation may not represent the amount at which our shares would trade on a national securities exchange, the amount you would obtain if you were to sell your shares, or the amount you would obtain in a sale or liquidation of Monogram.”

One reason it may not command this price is due to its FFO. With $200 million in cash and other dollars deployed to projects that are yet to generate revenue, the REITs current distribution is at 113% of its funds from operations. FFO or funds from operations can be used to measure performance for both non-traded and traded REITs.

According to Taylor Garrett, Managing Director of Central Trade & Transfer, a secondary market provider for non-traded REITs and limited partnerships, putting a valuation on a REIT can be a challenge, especially one like Monogram that has $200 million in cash reserves and projects in development; Projects yet to generate revenue.

“Their valuation is a challenging process that requires a lot of projections for developments that are in process,” according to Garrett. He continued, “I am not aware of any apartment REITs that are doing the amount of developments that Monogram is doing. That makes it even harder to create an apples to apples comparison to the publicly traded markets.”

As of June 30, 2014, Monogram Residential Trust had equity and debt investments in 56 multifamily communities, 33 of which are stabilized operating multifamily communities, one is in lease up, and 22 are in various stages of pre-development and construction.

Of the 56 properties, the REIT wholly owns 10 investments; seven multifamily communities and three debt investments. The other 46 investments are held through Co-Investment Ventures, 45 of which are consolidated and one is reported on the equity method of accounting and holds a debt investment.