PRINCIPAL REAL ESTATE INCOME FUND CONTINUES SHARE REPURCHASE PROGRAM
- The Fund's share repurchase program aims to enhance shareholder value and reduce the discount between market price and net asset value
- The Board and Advisor believe that the repurchase program will increase NAV and provide additional liquidity for shareholders
- The investment sub-adviser to the Fund is Principal Real Estate Investors LLC
- The Fund's share repurchase program is not guaranteed to purchase shares at specific discount levels or in specific amounts
- Investing in the Fund involves risks such as little or no return on investment, exposure to below-investment grade investments, and fluctuations in net asset value due to leverage
Insights
Initiating a share repurchase program is a strategic financial decision that can signal various underlying intentions by a company's management. In this case, the Fund's decision to repurchase up to 2.1% of its outstanding common shares may indicate a belief by the Board and the Advisor that the shares are undervalued. By buying back shares at a price below the net asset value, the Fund can potentially increase the NAV per share, which is beneficial for the remaining shareholders. This can be seen as a positive move, especially if the repurchase is executed at a time when the shares trade at a significant discount to NAV.
However, share repurchases are not without risks. They can be perceived as a lack of profitable investment opportunities within the Fund's strategy or a short-term approach to boost share price. Moreover, the implementation of such a program does not guarantee market price appreciation and it utilizes resources that could have been allocated to other investments. The discretionary nature of the repurchase also adds a layer of uncertainty, as there is no commitment to buy a specific number of shares or to support the market price at a certain level.
For investors, the announcement of a share repurchase program should be evaluated in conjunction with the Fund's overall performance, its investment strategy and market conditions. While it may offer a short-term price boost, the long-term value will depend on the Fund's ability to effectively manage its portfolio and deliver on its investment objectives.
From an investment strategy perspective, the renewal of a share repurchase program can be a multifaceted signal. On one hand, it may suggest that the Fund's management believes that the current market price does not fully reflect the underlying value of its assets, hence the repurchase could be a strategic move to capitalize on this perceived undervaluation. On the other hand, it's critical for investors to consider the opportunity cost associated with the repurchase program. The funds allocated for share repurchases could alternatively be invested in new properties or used for upgrading existing assets, which might offer a higher long-term return.
Investors should also be aware of the impact of leverage on the Fund's NAV. While repurchasing shares can increase NAV in the short term, the use of leverage can amplify fluctuations in NAV, potentially increasing the volatility of the investment. The Fund's exposure to below-investment grade investments, or 'junk bonds,' adds an additional layer of risk, as these assets can be more sensitive to economic downturns and changes in market interest rates.
Ultimately, the success of the share repurchase program in enhancing shareholder value will depend on the timing and execution of the buybacks, as well as the Fund's ability to maintain a strong portfolio performance. Investors should monitor the Fund's repurchase activity and NAV trends closely as part of their overall investment analysis.
When assessing the risk implications of a share repurchase program, it is essential to consider both the potential benefits and the inherent risks. While the program aims to enhance shareholder value by potentially narrowing the gap between market price and NAV, it also represents a commitment of the Fund's liquid resources, which could otherwise serve as a buffer against market downturns or be used for other investment opportunities. The discretionary nature of the program under the Advisor's direction means that repurchases are not guaranteed and their impact on the market price is uncertain.
Investors should also be cognizant of the risks associated with the Fund's investment portfolio, which includes exposure to commercial real estate assets and below-investment grade securities. These investments carry a higher risk of loss, particularly in volatile or declining markets. The use of leverage to finance share repurchases can further magnify these risks, potentially leading to greater volatility in the Fund's NAV.
It is crucial for investors to weigh the potential advantages of the share repurchase program against the Fund's overall risk profile and to consider how it aligns with their individual risk tolerance and investment objectives. A comprehensive understanding of the Fund's strategy, the risks of its underlying investments and the impact of leverage is necessary for making informed investment decisions.
The Board and the Advisor continually analyze options to enhance shareholder value and potentially reduce the discount between the market price of the Fund's common share and the net asset value per share ("NAV"). The Board and the Advisor believe that the share repurchase program may further these goals because the program allows the Fund to acquire its shares in the open market at a discount to NAV, which will increase the NAV and thereby benefit remaining shareholders while potentially providing additional liquidity in the trading of the fund shares. The Board will monitor the repurchase program and will continue to consider strategic options to enhance shareholder value in the long-term.
The Fund's repurchase program will be implemented on a discretionary basis under the direction of the Advisor. There is no assurance that the Fund will purchase shares at any specific discount level or in any specific amount or that the market price of the Fund's shares will increase as a result of any share repurchases.
RISKS
An investment in the Fund is not appropriate for all investors and is not intended to be a complete investment program. The Fund is designed as a long-term investment and not as a trading vehicle.
Investing in the Fund involves risks, including the risk that you may receive little or no return on your investment or that you may lose part or even all of your investment and exposure to below-investment grade investments (i.e., "junk bonds"). The Fund's net asset value will vary and its distribution rate may vary and both may be affected by numerous factors, including changes in the market spread over a specified benchmark, market interest rates and performance of the broader equity markets. Fluctuations in net asset value may be magnified as a result of the Fund's use of leverage. Therefore, before investing you should carefully consider the risks that you assume when you invest in the Fund's common shares.
Securities backed by commercial real estate assets are subject to market risks similar to those of direct ownership of commercial real estate assets including, but not limited to, declines in the value of real estate, declines in rental or occupancy rates and risks related to general and local economic conditions.
The Fund's investment objectives and policies are not designed to seek to return the initial investment to investors that purchase shares.
An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain an annual report or semi-annual report which contains this and other information visit www.principalcef.com or call 855.838.9485. Please read them carefully before investing.
Shares of closed-end investment companies frequently trade at a discount from their net asset value and initial offering prices.
NOT FDIC INSURED | May Lose Value | No Bank Guarantee
The Fund is a closed-end fund and does not continuously issue shares for sale as open-end mutual funds do. Since the initial public offering, the Fund now trades in the secondary market. Investors wishing to buy or sell shares need to place orders through an intermediary or broker. The share price of a closed-end fund is based on the market's value.
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 firm.
About SS&C Technologies
SS&C is a global provider of services and software for the financial services and healthcare industries. Founded in 1986, SS&C is headquartered in
About SS&C ALPS Advisors
SS&C ALPS Advisors, a wholly-owned subsidiary of SS&C Technologies, is a leading provider of investment products for advisors and institutions. With over
About Principal Real Estate Investors
Principal Real Estate Investors manages or sub-advises
PRE000396 12/18/2024
View original content:https://www.prnewswire.com/news-releases/principal-real-estate-income-fund-continues-share-repurchase-program-302018330.html
SOURCE Principal Real Estate Income Fund
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