{"id":5063,"date":"2018-04-12T13:00:02","date_gmt":"2018-04-12T17:00:02","guid":{"rendered":"http:\/\/business.financialpost.com\/?p=1574475"},"modified":"2018-04-12T13:00:02","modified_gmt":"2018-04-12T17:00:02","slug":"canadian-regulators-want-better-disclosure-from-real-estate-investment-companies","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2018\/04\/12\/canadian-regulators-want-better-disclosure-from-real-estate-investment-companies\/","title":{"rendered":"Canadian regulators want better disclosure from real estate investment companies"},"content":{"rendered":"<p>Canadian securities regulators are demanding better disclosures about accounting and distributions in real estate investments after a review found the sector, which includes REITs and real estate operating companies, \u201cneeds improvement.\u201d<\/p>\n<p>\u201cGiven strong investor interest in this sector and the inherent pressure on issuers to pay distributions, the sustainability of distributions and the accompanying disclosures are important to investors,\u201d the Canadian Securities Administrators, an umbrella organization for Canada\u2019s provincial securities watchdogs, said Thursday.<\/p>\n<p>The CSA review, which included 47 REITs and real estate operating companies, identified \u201ca lack of transparency\u201d when various adjustments are made to financials using non-GAAP (generally accepted accounting principles) measures.<\/p>\n<ul class=\"related_links\">\n<li><a href=\"http:\/\/business.financialpost.com\/news\/fp-street\/market-watchdogs-eye-new-rules-on-how-companies-disclose-material-risks-like-climate-change-cyber-attacks\">Market watchdogs eye new rules on how companies disclose \u2018material\u2019 risks like climate change, cyber attacks<\/a><\/li>\n<li><a href=\"http:\/\/business.financialpost.com\/news\/fp-street\/market-watchdogs-pitch-tougher-rules-for-syndicated-mortgages-to-protect-investors\">Market watchdogs pitch tougher rules for syndicated mortgages to protect investors<\/a><\/li>\n<li><a href=\"http:\/\/business.financialpost.com\/news\/fp-street\/regulation-is-adapting-to-a-world-with-cryptocurrencies-and-pot\">Regulation is adapting to a world with cryptocurrencies and pot<\/a><\/li>\n<\/ul>\n<p>The regulators also found that the non-GAAP measures tend to be presented with \u201cgreater prominence\u201d than comparable measures specified under generally accepted accounting principles.<\/p>\n<p>Of the issuers reviewed, six per cent were required to restate the management discussion and analysis (MD&amp;A) section of their financial disclosure, while 62 per cent agreed to \u201cenhance\u201d their disclosure going forward.<\/p>\n<p>\u201cInvestors need sufficient information to understand what these measures represent and how they are calculated,\u201d said Louis Morisset, chair of the CSA and chief executive of Quebec\u2019s market watchdog, the Autorit\u00e9 des march\u00e9s financiers. \u201cReal estate reporting issuers are expected to provide transparent disclosures regarding distributions and non-GAAP financial measures.\u201d<\/p>\n<p>At the conclusion of the review, the regulators issued &nbsp;\u201cadditional guidance\u201d to ensure real estate issuers provide better disclosure when distributions from the investments exceed operating cash flows.<\/p>\n<p>\u201cGenerally, REITs and REOCs provided adequate disclosure about their distributions, except when \u2018excess distributions\u2019 were made and in those cases, many issuers did not disclose the sources of cash used to fund the excess,\u201d the CSA said.<\/p>\n<p>Around two-thirds of the issues in the review did not disclose a description of the sources of cash used to fund the excess distributions, or their description was \u201cboiler plate,\u201d the CSA said.<\/p>\n<p>\u201cThe risk profile of an issuer that relies on sources other than operating cash flows to fund distributions, such as capital raising, debt financing or sale of properties, is inherently different than an issuer that funds distributions solely through operating cash flows,\u201d the CSA said. \u201cWe expect the disclosure about distributions to address these risks.\u201d<\/p>\n<p>Going forward, real estate investment issuers are expected to quantify excess distributions funded by sources other than operating activities, identify specific sources including debt or recent equity raise, and acknowledge if and why distributions are being provided that partly represent a return of capital.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A CSA review found the sector, which includes REITs and real estate operating companies, &#8216;needs improvement&#8217;<\/p>\n","protected":false},"author":578,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/5063"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/578"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=5063"}],"version-history":[{"count":1,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/5063\/revisions"}],"predecessor-version":[{"id":5065,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/5063\/revisions\/5065"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=5063"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=5063"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=5063"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}