[Editor’s Note: The following update is authored by Goodwin Procter LLP]
On July 16, 2013, the staff of the SEC’s Division of Corporation Finance (the “Staff”) posted an updated Financial Reporting Manual on the SEC’s website. The Financial Reporting Manual contains a number of substantive updates to the Staff’s guidance on real estate acquisitions, including updates regarding the application of Rule 3-14 of Regulation S-X (“Rule 3-14”), which will be of interest to REITs that are SEC reporting companies.
Rule 3-14 sets forth the financial statement requirements for the acquisition or probable acquisition of real estate that generates revenues solely through leasing. The financial statement disclosure requirements in connection with a real estate acquisition and the related Staff interpretations can potentially have a significant impact on a REIT’s ability to buy and sell real estate, raise capital at a time of its choosing and generally comply with the SEC’s reporting requirements.
The Staff’s new guidance can be grouped into the following three categories:
- guidance that applies to REITs that are not conducting blind pool offerings;
- guidance that applies to REITs that are conducting blind pool offerings; and
- guidance that applies to all REITs, whether they are conducting blind pool offerings or not.
The new guidance for each of these categories is summarized in more detail below.
Non-Blind Pool Guidance
The following table summarizes the new Staff guidance as it applies to REITs that are not conducting blind pool offerings as compared to the Staff’s previous guidance.
Click here to read the table and the rest of the update.