Nontraded real estate investment trusts (REITs) have long been the subject of scrutiny by regulators for their valuation complexities, illiquidity, risks and restrictive redemption structures – something investors in the Columbia Property Trust are now experiencing first hand.
As reported yesterday by Investment News, before the $5.7 billion REIT went public last week, Columbia Property Trust embarked on a reverse 4-for-1 share split, raising its price to approximately $29 a share, from just over $7.33. That means investors who bought into the REIT at $10 a share essentially were given the opportunity to cash out at a net asset value of around 45% less than the price they paid at the time of their initial purchase.
The Columbia REIT also has cut its distributions to shareholders twice since 2009.
Columbia Property Trust began raising money 2004 before going public at $22.50 a share last week.
As noted in the Investment News story, Columbia Property Trust is one of several nontraded REITs to go public in 2013. Two other REITs – Chamber Street Properties (CSG) and Cole Real Estate Investments – also went public. Chamber Street Properties fell from $10.10 a share to $9.08 a share Tuesday.
Meanwhile, Cole Real Estate Investments is faring better, trading at $12.26 as of Tuesday morning.