Principal R/E Fund Queues Up Another Payment

Almost exactly a month after the last payment (see Principal R/E Fund Makes Another Distribution), which, in turn, came within a month of another distribution. 

The most recent liquidation represented approximately 41% of the eligible transactions – transfers and/or distributions – requested prior to 3 p.m. CT on Thursday, July 22, 2010. As in prior distributions, payments are being made on a pro-rata basis, determined based on current unit values.  

The limitation was put in place after “market turmoil, compounded by an already challenging real estate market, resulted in a marked slowdown in the sale of commercial real estate assets,” according to the Principal, which also noted that this is the only time in the 28-year history of the fund that a contractual “Withdrawal Limitation” has been applied..   

Cancellation Volumes 

In a participant Q&A regarding the distributions, Principal notes that the dollar amount and frequency of these withdrawal requests “slowed considerably” during the second half of 2009 and through the second quarter of 2010, and that, since the implementation of the “Withdrawal Limitation” on September 26, 2008 and through July 13, 2010, the amount of cancelled requests, excluding those cancelled by plan participants, totaled approximately $350.3 million.  It noted that the volume of cancellations has “increased steadily throughout 2010 and the majority of such cancellations are from defined benefit institutional investors”.

As with previous distributions, transaction requests valued at less than $300 on the valuation date were satisfied in full. 

The most recent distribution was the latest in a series of distributions: 

• On Friday, June 18, 2010, payments were made available to partially satisfy approximately 29% of the value of transaction requests subject to the Withdrawal Limitation. 
• On Friday, May 14, 2010, payments were made available to partially satisfy approximately 18% of the value of transaction requests subject to the Withdrawal Limitation.  
• On January 29, 2010, payments were made available to partially satisfy approximately 13% of the value of transaction requests subject to the Withdrawal Limitation. 

As for the reasons for the timing behind this distribution, the Principal said that the Principal U.S. Property Separate Account “has sufficient liquidity available to make a distribution to investors whose withdrawal requests are subject to the Limitation, while maintaining compliance with covenants and Investment Policy Statement guidelines,” and thus, that Principal Life has determined it is in the best interest of all investors to fund a partial payment at this time. 

Principal says that all plan sponsors with at least one transaction subject to the Withdrawal Limitation were notified on Friday, July 23, 2010, via The Principal Message Center, and that an e-mail was sent to all plan sponsors, which we have a current e-mail address on file.  Additionally, a news article was posted on the Principal Sponsor Service Center for all plans sponsors with at lease one transaction via the Principal Message Center message.  Impacted participants were notified by e-mail, and online via their personalized retirement account information.