Attached files
| file | filename |
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| 8-K - 8-K - Summit Healthcare REIT, Inc | v203822_8k.htm |
Exhibit
99.1
November
23, 2010
Dear
Investor,
We are writing to inform you of several
recent decisions made by the Board of Directors for the Cornerstone Core
Properties REIT, Inc. (“CCP”). As you know, CCP has invested primarily in
small-tenant industrial properties in California, Arizona and
Florida. As periodically disclosed in supplements to the prospectus
for our public offerings, over the period of time since the bulk of our
investments were made there have been significant negative changes in the
commercial real estate markets in which our industrial properties are
located. While these changes have not been uniform, the downturn in
the U.S. economy has had a negative impact on the CCP portfolio. For
instance, since the 4th quarter
of 2008 our portfolio has experienced higher vacancy rates, more tenant defaults
and lower rental rates as a result of the downturn, all leading to lower rental
income and reduced valuations. During this period, despite
entering into new leases or lease renewals for more than 300,000 square feet of
space, occupancy decreased from approximately 92% to 72% due to new vacancies.
This was accentuated by a vacancy in October 2010 caused by the bankruptcy of a
102,000 sq.ft. tenant representing 8.2% of the 1.2 million sq.ft.
portfolio.
Fortunately,
in the second quarter of 2008, the CCP REIT Board recognized the difficulties
forming in the commercial real estate market and CCP ceased buying properties.
CCP’s interim investment strategy then focused on investing in debt instruments.
This was done in anticipation that significant future buying opportunities in
commercial real estate would be caused by the recession. In August 2010, we
purchased a small multi-tenant industrial building in Santa Ana, CA on terms
accretive to shareholders. Unfortunately, in part due to the legacy assets in
the CCP portfolio the market has taken longer than anticipated to show interest
in providing additional equity for such acquisitions.
These
developments have led our Board to make the following decisions for the overall
health of the REIT.
The
Offering. Effective November 23, 2010, we are not currently
making or accepting offers to purchase shares of stock in the Cornerstone Core
Properties REIT, Inc., while our board of directors evaluates strategic
alternatives to maximize value.
Suspension of Distribution
Reinvestment Plan. Our offering included a distribution
reinvestment plan under which our stockholders could elect to have all or a
portion of their distributions reinvested in additional shares of our common
stock. Consistent with the above decision with respect to the
offering, we are suspending our distribution reinvestment plan effective on
December 14, 2010. Therefore all distributions paid after that date
will be in cash.
Distributions. We
have historically paid monthly distributions to our shareholders from several
sources, including funds from operations, borrowings and funds available from
sales of additional stock. It is important that we preserve capital
that may be needed for capital improvements, debt repayment or other corporate
purposes. Accordingly, our Board of Directors has resolved to lower
Cornerstone Core Properties REIT distributions to a current annualized rate of
$0.08 per share (1% based on a share price of $8.00) from the
current annualized rate of $0.48 per share (6% based on a share price
of $8.00), effective December 1, 2010. The rate and frequency of
distributions is subject to the discretion of our Board of Directors and may
change from time to time based on our operating results and cash
flow.
Stock Repurchase
Plan. As described in the prospectus related to our offering,
our stock repurchase program provides stockholders with a limited ability to
sell shares to us for cash until a secondary market develops for our
shares. One of the limitations of our stock repurchase program is
that during any calendar year we may redeem only the number of shares that we
could purchase with the amount of the net proceeds we received from the issuance
of shares under our distribution reinvestment plan during the prior calendar
year. As a specific example, during the calendar year ending December
31, 2010, the stock repurchase plan authorizes us to redeem the number of shares
that we could purchase with the amount of net proceeds received from shares
issued under the distribution reinvestment plan during 2009. However,
as disclosed in our quarterly report on Form 10-Q for the period ending June 30,
2010 and in a supplement to our prospectus, as of June 30, 2010, we had already
redeemed shares in an amount equal to our 2009 distribution reinvestment plan
net proceeds. Accordingly, we are unable to make further ordinary
redemptions under the stock redemption program during the remainder of
2010.
Furthermore, after careful
consideration of the proceeds that will be available from our distribution
reinvestment plan in 2010, and an assessment of our expected capital
expenditures, tenant improvement costs and other costs and obligations related
to our investments, our Board of Directors has concluded that we will not have
sufficient funds available to us to prudently fund any redemptions during
2011. Accordingly, our Board of Directors has approved an amendment
to our stock repurchase program to suspend redemptions under the program,
effective December 31, 2010. We can make no assurances as to when redemptions
will resume. The share redemption program may be amended, resumed,
suspended again, or terminated at any time based in part on our cash and debt
position.
Although the current economic climate
continues to exert pressure on the commercial real estate market in which we
operate, our Board of Directors and our management are constantly seeking ways
to maximize the value of our real estate portfolio and preserve the capital of
our stockholders. Senior management at Cornerstone has successfully navigated
prior recessions with industrial properties and small business tenants. The
entire team at Cornerstone continues to work very hard to increase occupancy
levels and rental incomes at each of our properties. We take your investment
with us very seriously, and we look forward to continuing to serve
you.
Sincerely,
Terry
Roussel
President
and CEO
cc:
Financial Advisor
Securities offered through Pacific Cornerstone Capital Incorporated,
member FINRA and SIPC.