CSA outlines disclosure expectations for REITs and REOCs

The CSA published its disclosure expectations regarding distributions and non-GAAP financial measures for real estate investing trusts (REITs) and real estate operating companies (REOCs).

Staff Notice 52-329 Distribution Disclosures and Non-GAAP Financial Measures in the Real Estate Industry reports the results of a review of 47 REITs and REOCs. The notice also provides guidance on disclosure expectations.

“Investors need sufficient information to understand what these measures represent and how they are calculated,” said Louis Morisset, chair of the CSA, in a release. “Real estate reporting issuers are expected to provide transparent disclosures regarding distributions and non-GAAP financial measures.”

The review found:

• Opportunities for better disclosure when distributions exceed operating cash flows
• Lack of transparency about various adjustments made in determining non-GAAP financial measures, specifically those related to maintenance capital expenditures and working capital
• Instances where non-GAAP financial measures were presented with greater prominence than the most directly comparable measure specified under the issuer’s GAAP

Given the findings of the review, CSA reminded real estate reporting issuers to review the guidance in National Policy 41-201 Income Trusts and Other Indirect Offerings and CSA Staff Notice 52-306 (Revised) Non-GAAP Financial Measures. The organization also reminded issuers to give appropriate disclosures when they are distributing more cash than they are generating from their operations, and when they are discussing their operating and cash flow performance with non-GAAP financial measures

The full notice can be read here.

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CSA seeks input on soliciting dealer arrangements

The CSA also published a notice on Thursday seeking input on the practice of soliciting dealer arrangements.

CSA Staff Notice 61-303 and Request for Comment Soliciting Dealer Arrangements outlines regulatory issues raised by soliciting dealer arrangements and seeks input on the practice, which generally involves an issuer paying a dealer to solicit securities from a security holder in connection with corporate transactions.

Soliciting dealer arrangements may be used to solicit securities from security holders to vote in connection with a matter requiring shareholder approval, or to tender securities for a takeover bid.

“The practice of soliciting dealer arrangements raises certain securities regulatory issues, notably around conflicts of interest and the integrity of the voting and tendering process,” said Louis Morisset, chair and president of CSA, in a release. “In light of these issues, we believe it is appropriate to assess how these arrangements are being used and whether further regulatory action is appropriate.”

Read the notice here.

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