The SEC’s Division of Corporation Finance posted an updated Financial Reporting Manual on the SEC’s website on July 16. The Manual contains a number of substantive updates to the Staff’s guidance on real estate acquisitions, including regarding the application of Rule 3-14 of Regulation S-X.
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 here.