The Real Deal New York

REIT fees, values likely to face greater transparency

December 19, 2013 01:57PM

New rules requiring real estate investment trusts to open up about fees are aiming to make the value of the companies clearer for investors.

Currently, REITs and their brokers can tack on fees of as much as 12 percent, but that amount doesn’t have to be reflected in stock valuation reports, and REITs can wait 18 months before disclosing a a fund’s true asset values. But the new rules, pushed by the Financial Industry Regulatory Authority, would force the funds to include any such fees and report a third-party valuation to investors two years after starting to purchase properties.

Of the 108 REITs that have sold shares since the industry gathered steam in the 1990s, 38 continue to value their shares at the IPO price.

“If you just invested $10,000 and you look at your account statement and it says $8,800, you’re going to be motivated to ask some questions about the fees and expenses,” Joseph Price, FINRA’s senior vice president for corporate finances, told the Wall Street Journal.

FINRA hopes to get the proposed rule change, dubbed an industry “game changer” by lawyer Michael McTiernan, a former head of the U.S. Securities and Exchange Commission’s REIT group, before the SEC by the end of the year. The SEC is expected to approve the amendments to the fee rules. [WSJ]Julie Strickland

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