OSC Releases Results of REIT Distributions Disclosure Review

TORONTO – The Ontario Securities Commission (OSC) today published OSC Staff Notice 51-724 Report on Staff’s Review of REIT Distributions Disclosure. The Notice provides further guidance on staff’s disclosure expectations as outlined in National Policy 41-201 Income Trusts and Other Indirect Offerings. Based on the findings of the review, the quality of disclosure for some issuers requires improvement in certain areas.

Real estate investment trusts (REITs) provide investors with cash flow in the form of distributions. However, REITs are subject to a number of factors that may negatively affect their cash available for distributions. In these cases, some portion of distributions may come from a REIT’s own capital, or financing sources other than cash flows from operations. As such, it is critical to provide investors with sufficient disclosure regarding sources of cash used for distributions.

“Investors are entitled to know the sources of distributions, especially when distributions exceed cash flow from operations” said Huston Loke, Director of Corporate Finance. “These disclosures should highlight the risks and their impact on the issuer as well as the sustainability of distributions. We encourage issuers and their advisers to refer to the guidance in this Notice as they prepare their annual and interim filings.”

In conducting the review, OSC staff assessed the disclosures of the 30 Ontario-based reporting issuers against staff expectations outlined in NP 41-201, particularly where distributions exceeded the cash generated by operations. Half the issuers received comments from OSC staff seeking clarification about their distributions and/or their disclosure. Of those, 67% were asked to enhance their disclosure prospectively, which they did.

OSC Staff Notice 51-724 can be found on the OSC’s website at www.osc.ca.

 

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