On January 26, 2015, the OSC published Staff Notice 51-724: Report on Staff’s Review of REIT Distribution Disclosure following a review of the public disclosure of 30 Real Estate Investment Trusts (“REITs”) with head offices in Ontario. The Report focuses on disclosure relating to cash flow and situations in which a REIT distributes more cash than it generates from operations, referred to as “excess distributions.”
The OSC believes that investors should be provided with more transparent disclosure about the risks of excess distributions and identifies four target areas for improvement:
- the content of disclosure where excess distributions are paid;
- the consistency of disclosure about excess distributions;
- timely disclosure where a reduction or termination of distributions occurs; and
- presentation of non-GAAP metrics, such as adjusted funds from operations.
The OSC will continue to monitor reporting, and REITs that do not comply with the updated disclosure expectations will be expected to take corrective action.