CSA calls for better disclosure, more transparency from real estate issuers

TORONTO – A national body representing provincial securities regulators is calling for more transparency from real estate industry issuers after a review found that the quality of disclosures related to financial measures and distributions “needs improvement.”

The Canadian Securities Administrators say in a staff notice published Thursday that they came to this conclusion after a recent review of real estate investment trusts and real estate operating companies.

Both types of real estate industry issuers pay out the majority of their income in the form of distributions to unitholders or shareholders.

The CSA said the review found that REITs and REOCs — both of which invest in real estate and whose shares trade on a public exchange — reviewed provided adequate disclosure, except for when “excess distributions” were made.

In these cases, in which distributions during a period exceed cash flows from operating activities, many real estate issuers did not disclose the source of cash used to fund that excess.

As well, the CSA’s review found a “lack of transparency” about the various adjustments made when calculating certain financial measures to explain their operating performance and/or cash flows.