Principal Real Estate Fund Announces Notification of Sources of Distribution
- The Fund distributed $0.1050 per share to shareholders, with 63.71% sourced from return of capital.
- Shareholders should be aware that a return of capital does not reflect the Fund's investment performance.
- Federal income tax implications may arise from the distribution, with final tax character determined in January 2025.
- Estimated distribution sources and percentages are provided for transparency and tax reporting purposes.
- NAV performance indicates a 19.50% cumulative total return for the Fund.
- Past performance does not guarantee future results, and shareholder value is determined by the Fund's market price.
- None.
Insights
The distribution announcement by the Principal Real Estate Income Fund (PGZ) reveals a significant portion of the payout (63.71%) is classified as a return of capital, rather than derived from net investment income or realized capital gains. This is a critical detail for investors, as a return of capital implies that the fund is not generating enough income from its investments to cover the distribution and is instead returning investors' principal. This could signal that the fund's current earnings are insufficient to support its distribution rate, potentially impacting its sustainability.
Moreover, the fund's fiscal year-to-date cumulative distribution rate on NAV of 3.70% compared to the cumulative total return on NAV of 19.50% suggests that the fund's performance has been strong over the short term. However, the negative five-year average annual total return of -2.51% indicates challenges in maintaining consistent long-term performance. Investors should consider these figures when assessing the fund's health and future prospects.
For tax purposes, the distinction between the sources of the fund's distribution is of paramount importance. The estimated distribution components may differ from the final tax character, which will be determined in January 2025. Investors should be aware that the return of capital portion of the distribution is not subject to immediate taxation but reduces the cost basis of the investment, which could potentially increase capital gains tax liability upon sale of the shares.
It is crucial for investors to understand that the 19(a) Notice provided is not for tax reporting purposes and the actual tax character of distributions could change based on the fund's investment experience and tax regulations. The issuance of IRS Form 1099-DIV will be the definitive source for tax reporting. This underscores the importance of tax planning and the need to consult with a tax professional to understand the implications of these distributions on personal tax situations.
It is important to note the distinction between NAV performance and market price performance. While the NAV reflects the value of the fund's underlying investments, market price is influenced by supply and demand dynamics. The discrepancy between the fund's NAV performance and its five-year average annual total return could indicate market sentiment that is not fully aligned with the underlying asset performance. This misalignment can create opportunities or risks for investors depending on whether the market price trades at a premium or discount to the NAV.
Investors should also consider the broader real estate market conditions and economic factors that may affect the fund's performance. Real estate investments are sensitive to interest rate changes, economic cycles and sector-specific developments, which can have material implications for the fund's income-generating capabilities and, by extension, its distribution payouts.
Statement Pursuant to Section 19(a) of the Investment Company Act of 1940
The following table sets forth the estimated amount of the sources of distribution for purposes of Section 19 of the Investment Company Act of 1940, as amended, and the related rules adopted thereunder. In accordance with generally accepted accounting principles ("GAAP"), the Fund estimates the following percentages, of the total distribution amount per share, attributable to (i) current and prior fiscal year net investment income, (ii) net realized short-term capital gain, (iii) net realized long-term capital gain and (iv) return of capital or other capital source as a percentage of the total distribution amount. These percentages are disclosed for the current distribution as well as the fiscal year-to-date cumulative distribution amount per share for the Fund.
Current Distribution from: | ||
Per Share ($) | % | |
Net Investment Income | 0.0381 | 36.29 % |
Net Realized Short-Term Capital Gain | 0.0000 | 0.00 % |
Net Realized Long-Term Capital Gain | 0.0000 | 0.00 % |
Return of Capital or other Capital Source | 0.0669 | 63.71 % |
Total (per common share) | 0.1050 | 100.00 % |
Fiscal Year-to-Date Cumulative | ||
Distributions from: | ||
Per Share ($) | % | |
Net Investment Income | 0.1630 | 38.81 % |
Net Realized Short-Term Capital Gain | 0.0000 | 0.00 % |
Net Realized Long-Term Capital Gain | 0.0000 | 0.00 % |
Return of Capital or other Capital Source | 0.2570 | 61.19 % |
Total (per common share) | 0.4200 | 100.00 % |
The Fund estimates that it has distributed more than its income; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with 'yield' or 'income'.
The timing and character of distributions for federal income tax purposes are determined in accordance with income tax regulations, which may differ from GAAP. As such, all or a portion of this distribution may be reportable as taxable income on your 2024 federal income tax return. The final tax character of any distribution declared in 2024 will be determined in January 2025 and reported to you on IRS Form 1099-DIV.
The amounts and sources of distributions reported in this 19(a) Notice are only estimates and not for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
Presented below are return figures, based on the change in the Fund's Net Asset Value per share ("NAV"), compared to the annualized distribution rate for this current distribution as a percentage of the NAV on the last day of the month prior to distribution record date.
Fund Performance & Distribution Information
Fiscal YTD (11/1/23 – 1/31/24) | |
Annualized Distribution Rate as % of NAV^ | 11.09 % |
Cumulative Distribution Rate on NAV^ | 3.70 % |
Cumulative Total Return on NAV* | 19.50 % |
Average Annual Total Return on NAV for the 5 Year Period Ended 1/31/2024** | -2.51 % |
^ Based on the Fund's NAV as of January 31, 2024.
*Cumulative fiscal year-to-date return is based on the change in NAV including distributions paid and assuming reinvestment of these distributions for the period November 1, 2023 through January 31, 2024.
**The 5 year average annual total return is based on change in NAV including distributions paid and assuming reinvestment of these distributions and is through the last business day of the month prior to the month of the current distribution record date.
While the NAV performance may be indicative of the Fund's investment performance, it does not measure the value of a shareholder's investment in the Fund. The value of a shareholder's investment in the Fund is determined by the Fund's market price, which is based on the supply and demand for the Fund's shares in the open market. Past performance does not guarantee future results. Shareholders should not draw any conclusions about the Fund's investment performance from the amount of this distribution or from the terms of the Fund's Managed Distribution Plan.
Furthermore, the Board of Trustees reviews the amount of any potential distribution and the income, capital gain or capital available. The Board of Trustees will continue to monitor the Fund's distribution level, taking into consideration the Fund's net asset value and the financial market environment. The Fund's distribution policy is subject to modification by the Board of Trustees at any time. The distribution rate should not be considered the dividend yield or total return on an investment in the Fund.
Please retain this document for your records.
ALPS Advisors, Inc. is the investment adviser to the Fund.
Principal Real Estate Investors LLC is the investment sub-adviser to the Fund. Principal Real Estate Investors LLC is not affiliated with ALPS Advisors, Inc. or any of its affiliates.
ALPS Portfolio Solutions Distributor, Inc. is the FINRA Member.
Media Contact:
Christopher Murphy* Director of Marketing SS&C ALPS Advisors 720.277.7861 christopher.murphy@sscinc.com *Registered Representative of ALPS Distributors, Inc. |
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PRE000406 2/28/2025
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SOURCE Principal Real Estate Income Fund
FAQ
What was the amount of distribution per share announced by Principal Real Estate Income Fund (PGZ)?
What percentage of the distribution was sourced from return of capital according to the PR?
What caution did the Fund provide regarding return of capital in the PR?
What tax implications were mentioned in the PR regarding the distribution?
What did the NAV performance indicate in terms of cumulative total return according to the PR?
Does past performance guarantee future results according to the PR?
How is shareholder value determined in the PR?
