The value has not dropped. Each IRA Partnership unit continues to represent the right to participate pro-rata in future distributions from the Partnership and the Partnership’s value has remained relatively steady. The units did not significantly change from last week, last month, last quarter or from when they were issued.
What has happened is that the IRA custodians have changed the manner in which they show your LPI investments. Until recently, the IRA custodians showed the value of your LPI securities at cost, i.e. the price you paid for them, regardless of their actual current fair value. The Partnership’s quarterly and annual securities filings provide the custodians with a reasonable approximation of the Partnership units’ current fair value. These filings are publicly available on the PHT’s website under Investor Relations and on SEC.gov. Accordingly, many of the custodians have changed these value shown on their records for these securities from your cost to “book value,” i.e., each unit’s pro-rata share of the Partnership’s net worth.
As discussed in the first FAQ in the IRA section, a unit’s book value is simple to calculate. As of right now (December 2017), a IRA Partnership unit is practically equivalent to and has the same value as a PHT unit. Thus, to determine how the book value of a IRA Partnership unit, we need to calculate the value of a PHT unit. The formula is a simple one: Divide the PHT’s net worth (assets minus liabilities) by the number of units outstanding. All of this information is available in the PHT’s annual and quarterly securities filings (Forms 10-K and 10-Q).
Today’s book value does not determine how much you will receive. It is not a cap on or otherwise limit your participation in future distributions. You own units in a limited liability company. Those units entitle you to a pro rata share of distributions made by the IRA Partnership, whatever they may be and whenever they may occur.
Book value is “a” value, not necessarily “the” value. Book value is not the only way that the units can be valued. Accountants, financial/tax advisors, or valuation experts may make a good case for a higher or lower valuation. But, book value is readily available as it is based on information provided by the Partnership in its quarterly and annual securities filings. You can expect that the book value of the units – assets minus liabilities divided by the total outstanding units – to change every quarter. You can track these changes by reading the Partnership’s quarterly and annual statements on the PHT’s website or on SEC.gov.
For more information as regarding this issue (as well as an example of the calculation), please read the December 2017 newsletter.