PRINCIPAL REAL ESTATE INCOME FUND DECLARES MONTHLY DISTRIBUTIONS OF $0.105 PER SHARE
- Annualized distribution rate of 11.56%
- Net asset value share price of $10.90
- Investing in the Fund involves risks
- Securities backed by commercial real estate assets are subject to market risks
Insights
The declaration of monthly distributions by Principal Real Estate Income Fund (PGZ) at an annualized distribution rate of 11.56% is a significant indicator of the fund's current performance and strategy. This rate is substantially higher than the average dividend yield for real estate investment trusts (REITs) and income funds, which typically hovers around 4-6%. Such a high yield could be indicative of either a high-income generating portfolio or a potential strategy to return capital to shareholders to maintain investor interest.
Investors should be cautious, as high distribution rates can sometimes signal that the fund is returning capital rather than generating income, which may not be sustainable in the long run. It is also important to note that the fund's use of leverage could magnify fluctuations in net asset value, adding a layer of risk. The fund's exposure to below-investment grade investments ('junk bonds') could be a double-edged sword, offering the potential for higher returns but also carrying a higher risk of default.
The market risks associated with securities backed by commercial real estate assets, such as declines in property values or occupancy rates, are also crucial factors for investors to consider. These risks are compounded by broader market conditions, such as interest rate changes and general economic health. Investors should evaluate their risk tolerance and investment horizon before considering an investment in PGZ.
The performance of PGZ in the secondary market, where it trades at a potential discount or premium to its net asset value (NAV), can be influenced by investor perception of the fund's management and its underlying assets. Closed-end funds like PGZ often trade at a discount to NAV, which could represent an opportunity for investors if they believe the market has undervalued the fund's assets.
However, the market's valuation of such funds is also affected by the broader economic environment and sector-specific trends. Given that PGZ is backed by commercial real estate assets, its performance is closely tied to the health of the real estate market. Factors such as occupancy rates, rental income stability and the strength of the commercial real estate market will play a critical role in the fund's ability to sustain its distribution rate.
Investors would also do well to monitor the fund's distribution sources, as reliance on capital gains or return of capital, rather than net investment income, could affect the sustainability of distributions. The fund's forthcoming tax reporting and characterization of distributions will be an important consideration for tax-conscious investors.
The risks outlined in the fund's announcement are multifaceted, encompassing both market-specific and credit risks. The fund's strategy of investing in securities backed by commercial real estate exposes it to market volatility inherent in the real estate sector. This includes sensitivity to economic downturns, which can lead to decreased property values and reduced income from properties.
The mention of exposure to 'junk bonds' raises concerns about the credit quality of the fund's investments. While these higher-yielding investments can boost income, they come with an increased risk of default, which could impact the fund's performance and its ability to maintain its distribution rate. The use of leverage is another critical risk factor, as it can amplify losses as well as gains.
Investors should carefully consider these risks in conjunction with their investment goals and risk tolerance. The fund's strategy of not seeking to return the initial investment to investors indicates that it may be more suitable for those with a higher risk appetite and a focus on income generation over capital preservation.
The following dates apply to the distributions declared:
Ex Date | Record Date | Payable Date |
February 13, 2024 | February 14, 2024 | February 29, 2024 |
March 13, 2024 | March 14, 2024 | March 28, 2024 |
April 15, 2024 | April 16, 2024 | April 30, 2024 |
RISKS
This press release is not for tax reporting purposes but is being provided to announce the amount of the Fund's distributions. In early 2025, after definitive information is available, the Fund will send shareholders a Form 1099-DIV, if applicable, specifying how the distributions paid by the Fund during the prior calendar year should be characterized for purposes of reporting the distributions on a shareholder's tax return (e.g., ordinary income, long-term capital gain or return of capital). 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.
Sources of distributions to shareholders may include net investment income, net realized short-term capital gains, net realized long-term capital gains and return of capital. 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. If a distribution includes anything other than net investment income, the fund provides a Section 19(a) notice of the best estimate of its distribution sources at that time, available at www.principalcef.com. These estimates may not match the final tax characterization (for the full year's distributions) contained in shareholders' 1099-DIV forms after the end of the year. Past performance is not a guarantee of future results.
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
* Registered Representative of ALPS Distributors, Inc.
PRE000383 6/30/2024
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SOURCE Principal Real Estate Income Fund
FAQ
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