Principal R/E Fund Reports a Gain, Makes Another Payment

September 11, 2010 ( – The Principal has made another distribution from its frozen real estate fund – and a significant one at that. 

By PLANSPONSOR staff | September 11, 2010
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In an email to impacted participants, the Principal noted that on Friday, September 10, 2010, available payments were announced to partially satisfy approximately 67% of the value of transaction requests subject to the limitation on withdrawals imposed nearly two years ago.  The most recent payment was being applied to transaction requests made prior to 3 p.m. (CT) on Thursday, September 9, 2010.

As has been the case with previous distributions, payments are being made on a pro-rata basis and will be determined based on unit values at the time of payment.  As has also been the case in prior distributions, if total transactions requested for a participant were valued less than $300 on Thursday, September 9, 2010, they were satisfied in full.

As with previous announcements, the Principal noted that in the best interest of all Separate Account participants distributions were generally made on a pro-rata basis, rather than a first-in first-out basis.

Quarterly Returns

In its “Quarterly Flash Report”, Principal noted that the Principal U.S. Property Separate Account generated a total pre-fee return of 4.86% during the second quarter, with appreciation contributing 3.11% to the total return.  Moreover, Principal noted that this marked the first quarter of portfolio level appreciation in the fund since the fourth quarter of 2007.

Principal also noted that during the quarter, two payments were made available to investors whose redemption requests are subject to the fund’s Withdrawal Limitation, which the Principal has previously noted was the only time in the 28-year history of the fund that a contractual “Withdrawal Limitation” has been applied.  It was put in place on September 26, 2008 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.