Michael J. Choate
Direct: (312) 836-4066
Facsimile: (312) 275-7554
E-mail: mchoate@shefskylaw.com
026829-00001
June 17, 2005
Ms. Elaine Wolff
Legal Branch Chief
Division of Corporation Finance
United States Securities and Exchange Commission
Mail Stop 0409
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Inland American Real Estate Trust, Inc.
Registration Statement on Form S-11/A-1 Filed April 21, 2005
Registration No. 333-122743
Dear Ms. Wolff:
We are writing on behalf of our client, Inland American Real Estate Trust, Inc. (the “Company”), in response to comments contained in the Staff’s letter dated May 13, 2005. The headings and paragraph numbers below correspond to the headings and paragraph numbers in your letter. In addition, for your convenience we have reproduced your comments in this letter and included our responses directly below each comment.
General
RESPONSE:
The disclosure in the “Distribution Reinvestment Plan and Share Repurchase Program – Distribution Reinvestment Plan” section has been expanded to include the requested information.
RESPONSE:
The first paragraph of the cover page now states that 40,000,000 shares of the Company’s common stock also are being offered at a price of $9.50 per share to stockholders who elect to participate in the distribution reinvestment plan.
RESPONSE:
The sixth bullet point has been revised to clarify that the Company may borrow up to 300.0% of net assets.
RESPONSE:
We acknowledge your comment.
RESPONSE:
The table of contents has been updated accordingly.
RESPONSE:
We have clarified in the first question and answer and throughout the Form S-11 that the Company may invest in REITs or other “real estate operating companies,” such as real estate management companies and real estate development companies. Also included is a cross-reference to the “Management – Property Acquisition Agreement” section for a more complete definition of “real estate operating company.” As stated in the “Business and Policies – Investment Strategy” section, the Company does not have, and does not expect to adopt, any policies limiting its acquisitions of REITs or other “real estate operating companies” to those conducting a certain type of real estate business or owning a specific property type or real estate asset.
RESPONSE:
We have revised the “Questions and Answers about the Offering” and “Business and Policies” sections of the Form S-11 to describe in more detail the Company’s investments in collateralized mortgage-backed securities and the risks related to such investments. We also have added risk factor disclosure to this effect in the “Risks Related to Our Business” section. The “Prospectus Summary” and first paragraph of the “Business and Policies” sections state that the Company does not have, and does not expect to adopt, any policies as to the amount or percentage of assets that will be invested in commercial real estate, entities owning commercial real estate or other real estate assets such as collateralized mortgage-backed securities. As requested, we have revised the discussion regarding hedging in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures about Market Risk” section, and the corresponding risk factor disclosure, to include that the Company may use derivative financial instruments to hedge interest rate risks associated with these investments. Also included is a brief description of the types of derivative financial instruments that may be used by the Company in its hedging activities.
RESPONSE:
The disclosure in this bullet point and throughout the Form S-11 was changed to clarify that the Company’s business manager could recommend investments in an attempt to increase its fees because the fees paid to it are based upon a percentage of the Company’s invested assets and, in certain cases, the purchase price for these assets.
RESPONSE:
Although the Company’s dealer manager and any soliciting dealer may, to the extent permitted under NASD regulations, purchase shares of common stock in the offering, those purchases will not be counted toward satisfying the minimum offering threshold. The same is true for purchases by the Company’s officers, directors and affiliates. We have further clarified the “How does a ‘best efforts’ offering work?” and “After I subscribe for shares, can I change my mind and withdraw my money?” questions accordingly. This same disclosure also has been added to the first full paragraph in the “Plan of Distribution – General” section.
RESPONSE:
The “Plan of Distribution – Compensation We Will Pay for the Sale of Our Shares” section explains that the Company will not pay selling commissions, marketing contributions or due diligence expense allowances in connection with the initial sale of common stock to the Company’s dealer manager or any of its directors, officers, employees or affiliates; however, the discount on any subsequent sales of common stock to these entities or individuals may not exceed five percent. This section of the Form S-11 also explains that the seven percent reallowable selling commission will not be paid in connection with the initial sale of common stock to soliciting dealers and any of their respective directors, officers, employees and affiliates; however, the discount on any subsequent sales of common stock to these entities or individuals may not exceed five percent. In either case, the Company expects that any purchases of common stock by the Company’s dealer manager or any soliciting dealer will be made for investment purposes only.
RESPONSE:
Shares purchased by the Company’s dealer manager and any soliciting dealer will not be counted toward satisfying the minimum offering threshold. Please see our responses to Comments 9 and 10.
RESPONSE:
The summary risk factor disclosure now begins on the first page of the Prospectus Summary.
RESPONSE:
We have expanded the “If I buy shares, will I receive distributions and, if so, how often?” question to clarify that distributions will be deemed a return of capital to the extent that the aggregate amount of cash distributed in any given year exceeds the amount of the Company’s “REIT taxable income” generated during the year.
Prior Performance of IREIC Affiliates – Page 57
RESPONSE:
The disclosure in the “Prior Performance of IREIC Affiliates – Prior Investment Programs” section has been expanded to include the requested information.
RESPONSE:
The Company’s business manager does not consider either of these events to be a materially adverse business development given the size of Inland Retail’s asset portfolio. According to Inland Retail’s Form 10-K, interest expense increased because the company began paying interest on funds borrowed to acquire properties in 2003 and 2004. These activities are consistent with Inland Retail’s business plan as described in its Form 10-K. The net loss recognized by Inland Retail is primarily attributable to one-time non-cash expenses incurred by the company as a result of the merger with its advisor and property managers on December 29, 2004. Specifically, Inland Retail recorded approximately $144 million in “terminated contract costs” in connection with the merger. The “Prior Performance of IREIC Affiliates” section of
the Form S-11 includes a discussion of merger between Inland Retail and its advisor and property managers.
With respect to hurricane damage, Inland Retail estimated total repair and clean-up costs to be approximately $780,000, of which approximately $250,000 will be reimbursed by insurance coverage. The Company does not consider these amounts to be material and, therefore, has not discussed hurricane damage incurred by Inland Retail in the Form S-11.
Appendix A
RESPONSE:
The stated investment objectives are exclusive to the programs disclosed in the prior performance tables.
RESPONSE:
Per our telephone conversations, we have included appropriate prior performance disclosure for each prior program, whether public or non-public, sponsored by IREIC over the last three to five year period. Prior performance data for the 1031 programs has been grouped together in Tables I through IV.
RESPONSE:
Operating expenses include property operating expenses such as real estate tax expense, insurance expense, property management fees, utilities, repairs, maintenance and any provisions
for asset impairment. Program expenses include advisor fees and general and administrative costs such as salaries, audit and tax services, D&O insurance, printing and postage. In 2004, program expenses also included one-time “terminated contract costs” incurred by Inland Retail as a result of the merger with its advisor and property managers. As such, operating expenses and program expenses include management fees and other fees paid to affiliates of Inland Retail. We have added two footnotes to Table III describing operating expenses and program expenses in more detail.
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Please contact me if you have any questions regarding the foregoing. Also, please advise whether the Staff has any additional comments to the Form S-11. Kind regards.
| Very truly yours, | |
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| SHEFSKY & FROELICH LTD. | |
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| /s/ Michael J. Choate |
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| Michael J. Choate | |
cc: | Charito A. Mittelman (SEC) |
| Brenda G. Gujral |
| Roberta S. Matlin |
