Investor Lawyers Blog
Since the August announcement that CNL Lifestyle Properties REIT I’s value significantly dropped, investors of this product have been seeking avenues for recovering their REIT losses. In many cases, the answer may be Financial Industry Regulatory Authority securities arbitration. The $7.31 adjusted price per share, which is down from the original $10 per share price, represents a decline of over 25 percent of the investment’s value. The REIT had raised around $3.2 billion at the time the public offering was closed, so the decline in value represents investor losses of more than $870 million.
According to a letter to CNL Lifestyle Properties shareholders, James Seneff, the CHL Lifestyle Properties Chairman, and Stephen Mauldin, CEO, indicated that the loss in value was primarily a result of their “discontinued mezzanine program” and a $2.3 million reduction of income in their “golf and lodging portfolios.” This reduction in income is reportedly a result of a lower operating net income and lease modifications. However, a press release filed with the Securities and Exchange Commission indicates that the value decline was also a result of a $1.9 million increase in asset management fees and general administrative expenses, a $0.5 million increase in bad debt expenses, a $2.6 million increase in depreciation expenses and a $1 million increase in loan costs amortizations and interest expenses. Reportedly, these increases are due to the increase in the number of properties.
Because CNL Lifestyle Properties is managed and advised by CNL Lifestyle Advisor, its own affiliate, management fees, advisory fees and other administrative expenses are paid to another CNL entity. In fact, an annual report stated that in 2011, $74.1 million was paid to CNL Lifestyle Advisor in asset management fees, acquisition fees and other expenses. Meanwhile, net income losses were reported for three years in a row.