FirstBrief (July 17, 2013)

July 17, 2013


SEC Issues Interpretive Guidance on REIT Disclosure Issues

On July 16, the SEC staff published two pieces of interpretive guidance on REIT disclosures related to real estate acquisitions and to public, non-listed REITs (PNLRs).

The first piece of guidance is the latest update to the Division of Corporation Finance’s “Financial Reporting Manual.” This update includes significant revisions to the section relating to real estate acquisitions and Rule 3-14 financial statements. Notable revisions include:

  • Expanded guidance on when Rule 3-14 financials, Rule 3-05 financials or net lease/significant tenant financials apply to an acquisition transaction;
  • Confirmation that Rule 3-14 financials are not triggered at the time of a shelf takedown;
  • In certain cases, permitting use of pro forma assets when measuring the significance of an acquisition for purposes of Rule 3-14;
  • Limiting the scope of the “significant in the aggregate” test to acquisitions made after the most recent year for which audited financials are provided;
  •   Confirmation that: 1) 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; and, 2) Rule 3-14 financials may be unaudited if the property leasing history reflected in the Rule 3-14 financials covers less than nine months;
  •   Expanded guidance on when financial information for significant triple net lease tenants must be disclosed and how such information can be disclosed; and,
  •   Clarifications and changes related to the application of Rule 3-14 to PNLRs conducting blind-pool offerings subject to Industry Guide 5.
The second piece of guidance is the Division of Corporation Finance’s “Disclosure Guidance Topic No. 6”, which summarizes the Division’s observations in its review of Securities Act and Exchange Act filings by PNLRs. Notable items covered by the topic include:

  • Guidance on longstanding staff views related to various PNLR disclosure items, including dividend coverage, dilution, limitations on redemption programs and NAV estimates;
  • New guidance on current staff interpretations of Industry Guide 5, particularly with respect to prior performance disclosure; and,
  •   Guidance on prospectus readability.
Staff of the SEC’s Division of Corporate Finance have advised us that this guidance is effective immediately. Questions relating to this guidance may be directed to Michael McTiernan, Assistant Director or Cicely LaMothe, Senior Assistant Chief Accountant, each of the SEC’s REIT group.


If you have any questions, please contact Victoria Rostow at or Christopher Drula at