THE MAGIC PAGE For a REIT, including a specific dividend amount post-IPO can be important in marketing the IPO. If a REIT does not have a history of paying dividends and intends to disclose in the IPO registration statement a specific dividend that it will pay after the IPO, the SEC staff has required the company to include what is referred to as the “Magic Page.” The Magic Page is where a REIT discloses its dividend policy and distribution plans using a pro forma presentation that shows anticipated dividend payouts relative to cash available for distribution. The issuer, the underwriters, and their respective advisors should begin contemplating the expected dividend policy and the Magic Page presentation early in the IPO process to give the SEC ample time to review the issuer’s presentation and avoid SEC comments challenging the presentation closer to the launch of the road show. The SEC has provided several comments addressing acceptable content for the Magic Page, including the application of both U.S. Generally Accepted Accounting Principles (“GAAP”) and non-GAAP financial measures. For more information about non-GAAP financial measures, please see our publication “FAQs About Non-GAAP Financial Measures for REITs.” ■ Risk Factors: Are the risks specific to the company and devoid of mitigating language? The following are risk factors as to which recent SEC comments have been issued: ■ Adequate disclosure of the consequences if one or more risks were to be realized; ■ With respect to externally managed REITs, risks related to the external manager such as internalization of management functions or difficulty in terminating or not renewing the contract of the manager due to poor performance; ■ Conflicts of interest; ■ Liquidity events; ■ Geographic or asset concentrations; ■ Any guarantee obligations in connection with related financing transactions; and ■ Changes in investment strategies and/or financing strategies without stockholder approval. ■ Use of Proceeds: Is there a specific allocation of the net proceeds among identified uses, and, if funding acquisitions is a designated use, are acquisition plans identified? Will debt be repaid with all or a portion of the net proceeds? ■ Financial Information: Are certain proposed acquisitions of real estate assets or businesses identified in the prospectus “probable” so that financial information relating to the acquisitions must be included in the prospectus? Does the presentation of Non-GAAP Financial Measures comply with SEC rules? Does the presentation of pro forma financial information comply with the SEC’s rules, including with respect to the appropriateness of the various adjustments? ■ MD&A: Does the discussion address known material trends, events, commitments, demands, or uncertainties, including the impact of the economy, trends with respect to liquidity, and critical accounting estimates and policies? ■ Business: Does the company provide support for statements about market position and other industry or comparative data? Is the disclosure free of, or does it explain, business jargon? Are the relationships with tenants and other third parties, including concentration risk, clearly described? ■ Conflicts of Interest: Are there related party contracts between the REIT and any of the sponsor and its affiliates or any officer and director or any significant (10% or greater) stockholder? Are any of these related parties receiving benefits in the IPO that other stockholders are not? ■ Management: Is the executive compensation disclosure clear and presented in compliance with SEC rules? ■ Prior Performance Information: Is the description of prior performance by related real estate entities complete, responsive to disclosure requirements, and balanced? ■ Exhibits: Do any other agreements need to be filed based on disclosure in the prospectus? ■ Distribution Policy: Are the adjustments that the company is making on the “Magic Page” appropriate and supportable? 2024 Guide to REIT IPOs and Listing Transactions | 16
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