It was a little over a week ago that RealtyMogul announced it wasn't going to make any changes to its redemption schedule for its two real estate investment trusts (REITs). This week, though, the real estate crowdfunding platform announced in its most recent filings with the Securities and Exchange Commission that it was cutting its dividend payout for MogulREIT I and lowering net asset values for both MogulREITs I and II in response to the novel coronavirus outbreak.
For those following the real estate crowdfunding market, this move shouldn't come as too much of a surprise. Other platforms have already announced lower cash payouts to investors as a way to maintain cash balances, and others have gone so far as to suspend investors' ability to cash out via redemptions. Here's a look at the moves RealtyMogul made and what investors should take away from the whole thing.
Lower payouts and adjusted asset values
In separate filings for the two Regulation A funds, RealtyMogul announced that its April 2020 payout to investors in MogulREIT I will be $0.0015491803 per share and payable on May 15. This month's payout is 26% lower than the payout the REIT made in the prior month. The filing also disclosed that it was lowering the net asset value (NAV) for each share in the REIT from $10 to $9.45 and that new investors purchasing MogulREIT I today will be able to acquire shares for the new NAV price.
In a separate filing, RealtyMogul announced that it was also lowering NAV for MogulREIT II from $10.42 per share to $9.77 per share and that new investors will be able to acquire shares in the REIT for the lower NAV price. There was no mention of a payout cut at MogulREIT II.
In both filings, RealtyMogul said that it made these changes as a result of "the novel coronavirus (COVID-19) crisis impacting both public and private capital markets and underlying asset valuations of our joint venture equity investments."
With so much happening in the real estate market right now as a result of the novel coronavirus outbreak, it shouldn't be too surprising that RealtyMogul is making these moves. Lowering its cash payout will help to keep cash on the balance sheet and allow it to both weather the storm and potentially make some opportunistic moves down the road. RealtyMogul's management team has so far done an excellent job of finding good deals that have met or exceeded expected rates of return.
It's also encouraging that management is maintaining its redemption plan. Other crowdfunding platforms and Regulation A offerings have already suspended their redemption plans, so the fact that RealtyMogul is keeping theirs open is a sign of strength in these turbulent times. While that option is still available, investors that have put money into these REITs should remember that there are financial penalties for withdrawing early. Nothing mentioned in today's filing should give investors too much concern.