Principal R/E Fund Makes a Distribution

January 30, 2010 (PLANSPONSOR.com) – Sixteen months after imposing a withdrawal freeze, the Principal has made a partial distribution to participants.

According to a notice provided to plans invested in the Principal U.S. Property Separate Account, on January 29, 2010, payments were made available to partially satisfy approximately 13% of the value of transaction requests subject to the withdrawal limitation imposed by the real estate fund on September 26, 2008 (see Principal Real Estate Fund Hold Draws Lawsuit).  Principal said that this payment was applied to transaction requests made prior to 3:00 p.m. CT on January 28, 2010.   

Pro-Rata Payouts       

Payments are being made on a pro-rata basis and will be determined based on unit values at the time of payment, according to the announcement.  Distributions were made on a pro-rata basis, rather than “first in, first out”, a decision that Principal described as being “in the best interest of all Separate Account participants.”  If a participant’s total transactions requested were valued at more than $300, the participant received a pro-rata share of the requests. The pro rata percentage was approximately 13%.   

If a participant’s pro rata share totaled less than $300, $300 was pro-rated across all of their requests subject to the withdrawal limitation, according to the announcement.  Principal noted that some participants made more than one withdrawal request, and if the total transactions requested for a participant were valued less than $300 on Thursday, January 28, 2010, they were satisfied in full.      

The proportion of the liquidity that the participant will receive is determined using the unit value on Thursday, January 28, 2010. The payments will be made effective on Friday, January 29, 2010. Values may differ due to the one-day change in unit value, according to the communication.      

Liquidity Sources       

In making the announcement, the Principal said that the fund now had sufficient liquidity to allow partial payments for a variety of reasons, two important ones being “successful property sales and proceeds from those sales that exceed near-term current and projected obligations”.  Principal cautioned that nationwide property sales volume is still below the 2007 peak by approximately 90%, but said that “despite this, the Separate Account closed nearly $630 million in sales during the second half of 2009.”