The Canadian Securities Administrators (CSA) says that real estate investment trusts (REITs) and real estate operating companies (REOCs) should be more transparent.

Following a review, it has issued a notice which includes guidance on disclosure expectations relating to distributions and non-GAAP financial measures for real estate reporting issuers.

Key findings include:

  • For distributions, staff found opportunities for better disclosure when distributions exceed operating cash flows.
  • For non-GAAP financial measures, staff identified a lack of transparency about various adjustments made in arriving at non-GAAP financial measures, particularly those relating to maintenance capital expenditures and working capital.
  • Staff also noted instances where non-GAAP financial measures were presented with greater prominence than the most directly comparable measure specified under the issuer's GAAP.

"We continue to closely monitor non-GAAP financial measures in the real estate sector," said Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers. "Investors need sufficient information to understand what these measures represent and how they are calculated. Real estate reporting issuers are expected to provide transparent disclosures regarding distributions and non-GAAP financial measures."

Non-GAAP financial measures and distribution disclosures continue to remain areas of focus for the CSA, and real estate reporting issuers are encouraged to refer to the guidance published on CSA members’ websites.

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