New Financial Statements Provision Should Cover REITs, Lawyer Says

Ettore Santucci, a partner with law firm Goodwin Procter LLP, joined REIT.com for a video interview at REITWise 2016: NAREIT’s Law, Accounting and Finance Conference at the Marriott Marquis in Washington, D.C.

Santucci said that the Fixing America’s Surface Transportation (FAST) Act, signed into law in December, grants emerging growth companies with relief from including certain historical financial statements in an initial public offering (IPO) registration statement. Santucci said that he believes that the Securities and Exchange Commission (SEC) is not allowing REITs to use the new law and he urged the SEC to reconsider this position.

“There’s absolutely no reason why REITs shouldn’t be included,” Santucci said.

Santucci also discussed a recent Supreme Court case, Americold Realty Trust v. ConAgra Foods, in which NAREIT filed an amicus curiae brief. Goodwin Procter represented NAREIT in the filing.

Santucci explained that the case revolved around the ability to bring a private suit in federal court. One method to achieve this is known as diversity jurisdiction, whereby the parties involved must be from different states in order for the case to proceed.

Corporations have not been deemed citizens of the states where their shareholders reside, Santucci said, which has granted them access to federal court. Partnerships, meanwhile, are considered citizens of the states in which the partners reside, Santucci said.

“If they have partners in 50 states, they are considered to have no diversity and can’t get into federal court,” he noted.

The Americold case concerned whether business trusts should be treated as corporations or partnerships. NAREIT argued that listed REITs should be treated as corporations, as they are for most other purposes, Santucci said.

On March 7, the Court held that for purposes of diversity jurisdiction, a trust’s citizenship--including that of a Maryland REIT--is based on the citizenship of its members, which includes its shareholders.