04/10/2012 | by
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Public, Non-listed REITs Working With Regulators

The public non-listed REIT market is attracting attention from regulators over their pricing and valuation, according to Nathan Headrick, chief compliance officer and corporate counsel for CNL Securities.

In a video interview last month with REIT.com at REITWise 2012: NAREIT's Law, Accounting and Finance Conference in Hollywood, Fla., Headrick discussed some of the latest developments in the public, non-listed REIT market. "You have to say it's good to be living in interesting times," he quipped.

On the valuation side of their regulation, Headrick said public, non-listed REITs are addressing new requirements handed down by the Securities and Exchange Commission (SEC). "The SEC has given us a number of guidelines on how we can explain the prices for our shares as our funds mature and start to issue estimated per-share valuations," he said.

Similarly, the industry is dealing with new pricing notices from FINRA.

"Those notices, specifically, are addressing the frequency with which the valuations actually have to occur," he said. "It looks like we'll now start to see in the space the pricing of our offerings within two quarters of the end of an initial offering, which will shorten the time span that we actually get to an appraisal or per-share estimated value-based valuation."

Headrick also said public, non-listed REITs are working with stakeholders to enhance the industry's uniformity and transparency.

"When people talk about public, non-listed REITs, at times they can frame the question such that they focus on the non-listed part and not the public part," Headrick said.

"They are public companies, so in terms of uniformity and transparency, they're subject to the SEC reporting requirements that all publicly traded companies are. There's a lot of regulation of these products."

Headrick also covered the growth of NAV REITs, which he called "another example of the constant innovation that happens in the space."

"On the positive side, there are features of NAV REITs, particularly in the areas of pricing and liquidity, that are going to potentially open up new channels to our products that we've never had access to "“ investment advisor channels, wirehouse channels "“ great places for us to raise capital," he said.