An Analysis of 2021 and 2022 SEC Comments Issued to REITs

Valuation, Distribution Information and Share Repurchase Programs For non-listed REITs, the SEC is, unsurprisingly, concerned about investors receiving transparency regarding valuation, the fact that distributions are often paid in excess of funds from operations and the lack of liquidity. Therefore, the Staff comments are focused on: ■ NAV calculation; ■ sources of funds available for distribution; ■ risks associated with perpetual life REITs; and ■ share repurchase programs. Sample Comments ■ We note your disclosure of the value of your real estate properties in Exhibit 99.1. Please tell us what consideration you gave to disclosing the valuation methodologies used, to disclosing significant assumptions and inputs that were used in your valuation, and to providing a sensitivity analysis for such assumptions and inputs. ■ We note your disclosure that until you generate operating cash flows sufficient to pay distributions, you may pay distributions from financing activities, which may include borrowings in anticipation of future cash flows or the net proceeds of your offerings (which may constitute a return of capital). Please revise to clarify whether proceeds from other offerings may be used to fund distributions and, if so, how you would account for such distributions. ■ We note your disclosure that you are a perpetual-life REIT and that while you may consider a liquidity event at any time in the future, you are not obligated by your charter or otherwise to effect a liquidity event at any time. Please disclose this in your risk factor bullet points on the cover page. ■ We note that you may conduct the share repurchase program during the offering period of the shares being registered under this registration statement. Please be advised that you are responsible for analyzing the applicability of Regulation M to your share repurchase program. We urge you to consider all the elements of your share repurchase program in determining whether the program is consistent with the class relief granted by the Division of Market Regulation in the class exemptive letter. To the extent you have questions as to whether the program is entirely consistent with that class exemption you may contact the Division of Trading and Markets. 13 | An Analysis of 2021 and 2022 SEC Comments Issued to REITs