SEC's Reporting Rule Change Could Have REITs Balancing Transparency With Convenience

The Securities and Exchange Commission this week finally unveiled its proposal to allow publicly traded companies to report financial results twice a year instead of on a quarterly basis. 

The proposal would upend a decades-old disclosure requirement and could leave investors waiting up to six months at a time for key data. But real estate firms that reduce the frequency of their reporting could save costs and pivot investors away from short-term thinking.

“In general, for companies to grow over time, you want people to focus on long-term trends,” said Alexander Goldfarb, managing director and senior research analyst at multinational investment bank Piper Sandler.

The public has 60 days to comment on the SEC’s proposal. A Nareit spokesperson told Bisnow the group will submit responses generally supporting the rule, but declined to comment further.

Any shift will likely happen gradually as companies assess the best strategy for maintaining their investors’ trust, experts said. It will take time to weigh how to reap the rule’s benefits while preserving transparency.

“We're kind of cautioning teams to kind of think about whether cutting disclosure would have an unintended consequence,” Tim Bodner, global real estate deals leader at PwC, told Bisnow. 

Fewer reporting periods could impact the timing of when investors are able to access key information, potentially hampering their readiness to act on some strategic transactions, Bodner said.

Real estate companies, particularly REITs, typically disclose more detailed financial information than firms in other industries because their performance is so granular, he said. 

“Transparency is really part of the product,” Bodner added.

Public U.S. REITs own about $2.5T in real estate assets, according to Nareit, a Washington, D.C.-based trade group. The overall U.S. commercial real estate market is worth roughly $25T, according to Clarion Partners research. 

Each fiscal year, public companies are required to file three quarterly reports and one annual, which provide investors with earnings information and material business risks. The proposed rule would allow companies to instead elect to file one semiannual and one annual report per year.

SEC Chairman Paul Atkins said in a statement on Wednesday the new rule could reduce some of the administrative burdens and costs associated with being a publicly traded company and encourage more companies to go and remain public.

That would be a reversal of recent trends in the real estate industry. Fewer REITs are going public, and the ones that are already public are increasingly being taken private. 

Last year, just one new REIT held an initial public offering after three IPOs in 2024 and none in either 2023 or 2022. In 2004 alone, by comparison, nearly 30 REITs went public. 

There’s also been a string of take-private acquisitions shrinking the pool of public landlords. Last month, Ares Management Corp. announced it would buy retail specialist Whitestone REIT in a $1.7B deal that’s set to close in the third quarter. Veris Residential, a New Jersey multifamily REIT, announced a take-private deal in March by a group led by Affinius Capital.

If the new SEC rule is finalized, some large firms might decide to “blaze their own trail” and make the change, Goldfarb said. Smaller companies might take a wait-and-see approach and follow the general consensus, he said.

Bodner, meanwhile, thinks smaller companies may be more likely to opt in because the cost of quarterly reporting hits them proportionately harder. Larger companies often already have strong reporting processes and the technology in place to streamline them, he said.

Bisnow reached out to a half dozen large public REITs for comment, but none responded in time for publication. 

Goldfarb said the proposal may be beneficial to real estate companies because it will encourage investors to think long term. Moving to semiannual reporting would promote that, he added.

In March, Goldfarb wrote in an industry note that the potential for fewer reports could spur REITs to have more engagement with the market. That’s because each quarterly earnings period comes with a “blackout period,” in which company insiders are prohibited from conducting transactions. Eliminating first- and third-quarter reports would let companies engage with investors for two extra months each year, he wrote.

But quarterly reporting likely isn't going away within the industry, in particular in situations where bond covenants require it.

“There is also a whole industry built around quarterly reporting that has a vested interest in not seeing this revenue stream upended,” Goldfarb wrote.