07/17/2013 | By Allen Kenney
The Securities and Exchange Commission published guidance on July 16 regarding REIT disclosure issues related to real estate acquisitions.
The guidance is effective immediately. It includes updates on when Rule 3-14 financials, Rule 3-05 financials or net lease/significant tenant financials apply to an acquisition transaction, as well as confirmation that Rule 3-14 financials are not triggered at the time of a shelf takedown. The SEC also said that in certain cases, it is permissible to use pro forma assets when measuring the significance of an acquisition for purposes of Rule 3-14.
The SEC also limited the scope of the “significant in the aggregate” test to acquisitions made after the most recent year for which audited financials are provided.
The SEC confirmed that Rule 3-14 financials are not required if the property leasing history that would be reflected in the Rule 3-14 financials would cover less than three months. Additionally, the SEC said Rule 3-14 financials may be unaudited if the property leasing history reflected in the Rule 3-14 financials covers less than nine months.
The SEC also expanded the guidance on when financial information for significant triple net lease tenants must be disclosed and how such information can be disclosed. The SEC also provided clarifications and changes related to the application of Rule 3-14 to public non-listed REITs conducting blind-pool offerings subject to Industry Guide 5.
PNLR Guidance Covers Dividend Coverage, NAV
The SEC also issued guidance on disclosures applicable to public, non-listed REITs (PNLRs). The guidance includes items on dividend coverage, dilution, limitations on redemption programs and net asset value (NAV) estimates.
The SEC provided new guidance on current staff interpretations of Industry Guide 5, particularly with respect to prior performance disclosure. The SEC also issued guidance on prospectus readability.
The PNLR guidance is effective immediately.