Wednesday, May 09, 2012

When It Rains, It Pours

It's been a tough six weeks for Inland.  In early April, Retail Properties of America's initial public offering was priced below expectations.   I just read the passage below that was disclosed in Inland American REIT's 10-Q, which was filed on May 7, 2012:
The Company has learned that the SEC is conducting a non-public, formal, fact-finding investigation to determine whether there have been violations of certain provisions of the federal securities laws regarding the business manager fees, property management fees, transactions with affiliates, timing and amount of distributions paid to investors, determination of property impairments, and any decision regarding whether the Company might become a self-administered REIT. The Company has not been accused of any wrongdoing by the SEC. The Company also has been informed by the SEC that the existence of this investigation does not mean that the SEC has concluded that anyone has broken the law or that the SEC has a negative opinion of any person, entity, or security. The Company has been cooperating fully with the SEC.
The Company cannot reasonably estimate the timing of the investigation, nor can the Company predict whether or not the investigation might have a material adverse effect on the business.
Inland American Business Manager & Advisor, Inc. has offered to the Company’s board of directors that, to the fullest extent permitted by law, it will reduce the business management fee in an aggregate amount necessary to reimburse the Company for any costs, fees, fines or assessments, if any, which may result from the SEC investigation, other than legal fees incurred by the Company, or fees and costs otherwise covered by insurance. On May 4, 2012, Inland American Business Manager & Advisor, Inc. forwarded a letter to the Company that memorializes this arrangement.
I am not going to comment on the above, other than to say that the first sentence appears serious.

Update:  Here is an InvestmentNews article on the investigation.  It doesn't have much insight beyond what Inland American disclosed in its 10-Q.

1 comment:

Ashton Jones said...

John I Dickerson Alpine Capital knows good business, speaking from personal experience.