Non-GAAP The use of non-GAAP measures frequently results in comments from the SEC regarding compliance with Regulation G and Item 10(e) of Regulation S-K. Areas of focus have included: ■ presenting the most directly comparable GAAP measure with equal or greater prominence; ■ reconciliation of the most comparable GAAP financial measure; and ■ disclosure of why the issuer believes the non-GAAP presentation provides information that will be useful to investors. Additionally, the SEC issued guidance entitled “NonGAAP Financial Measures” in December 2022. This guidance has and will likely continue to trigger reviews and comment letters regarding the use of non-GAAP financial measures. Sample Comments ■ We note your presentation of the non-GAAP financial measure net spread and dollar roll income and further-adjusted measures, reconciled from net interest income as the most directly comparable GAAP financial measure. Given the inclusion of total operating expense as a component of these measures, it appears these measures are more akin to an operating measure. Therefore, please tell us why you believe net interest income, which contemplates only expenses used to fund your interestearning assets is the most directly comparable measure calculated in accordance with GAAP. In your response, specifically address your consideration of net income or similar measure calculated in accordance with GAAP as the most directly comparable measure to the non-GAAP financial measures addressed herein. ■ We note that your non-GAAP measure ‘economic net interest income from financial assets’ is reconciled to ‘net operating income from financial assets determined in accordance with GAAP,’ which also appears to be a non-GAAP measure. Please tell us how your presentation is consistent with Item 10(e) of Regulation S-K; specifically, tell us how you determined that you have reconciled ‘economic net interest income from financial assets’ to the most directly comparable GAAP measure. ■ We note your presentation of property operating expenses, excluding deferrals and property management and income from property operations, excluding deferrals and property management. Please tell us, and revise your disclosure to address, how you believe these non-GAAP financial measures provide useful information to investors. In addition, please clarify for us how you determined property management expense is not a normal, recurring, cash operating expense necessary to operate your business. Please refer to Item 10(e) of Regulation S-K and Question 100.01 of the NonGAAP C&DI. ■ We refer you to your non-GAAP financial measures FFO and Adjusted FFO. It appears that such non-GAAP measures are the result of a GAAP measure adjusted to add the change in your deferred revenue liability, having the effect of accelerating the recognition of revenues to recognize the entire amount of payments received as revenues in the current period, as opposed to recognizing the revenues over a •-year period. Please tell us how you have determined these measures are not tailored measures as contemplated in Question 100.04 of the Non-GAAP C&DI. Regulation S-X When a REIT acquires or disposes of a business or a significant amount of assets, the transaction may trigger financial disclosure under Regulation S-X. The SEC has issued multiple comments to ensure potential investors are able to assess the financial impact of certain real estate acquisitions such that they are able to make an informed investment decision. Sample Comments ■ We note your disclosure of the acquisition of property with a gross asset valuation of approximately $2 billion. It does not appear that financial statements and related pro forma financial information have ever been filed for this acquisition. Please clarify how you considered Rule 3-14 and Article 11 of Regulation S-X in determining that such financial statements and associated pro forma financial information are not required. Your response should include your detailed calculations of significance. Specifically, within your significance calculation, please highlight how the assumed debt secured by the acquired property factored into your calculation pursuant to the guidance in paragraph (b)(2)(ii) of Rule 3-14 of Regulation S-X. 9 | A Comparative Analysis of 2022 and 2023 SEC Comments Issued to REITs
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