Our eREITs elect to be taxed as REITs in order to receive the tax benefits of paying no taxes at the corporate level and thereby maintaining tax efficiency and returns for investors. In order to qualify as a REIT, these funds must meet certain REIT requirements, including distributing a minimum of 90% of their taxable income. In certain circumstances, when an eREIT sells an asset for a higher value than it originally purchased, it incurs a taxable gain.
In order to maintain tax efficiency, our eREITs may choose to distribute such a gain to investors through a one-time distribution. This distribution will have the effect of reducing an eREIT’s NAV by the proportionate amount of the distribution and is defined therefore as a “NAV Distribution”.
In most quarters we do not expect the eREITs to sell many assets and, as a result, in most quarters there may be no “NAV Distribution.”
Investors who have requested a redemption from an eREIT will have the amount of their redemption reduced by the proportionate amount of any NAV Distribution they receive. For investors requesting redemption from an eREIT, the total aggregate value of their redemption plus the NAV distribution will end up being equal to the full amount of their shares based upon NAV at the time of their request.
NAV distributions are not expected to have any impact on standard dividend declarations.
