National Association of Real Estate Investment Trusts
1875 Eye Street, NW
Suite 600
Washington, DC 20006

August 26, 2002

Mr. Jonathan G. Katz
Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

Re: File No. S7-22-02

Dear Mr. Katz:

The National Association of Real Estate Investment Trusts ("NAREIT") is pleased to have the opportunity to respond to the Securities and Exchange Commission ("Commission") regarding the proposals set forth in Release Nos. 33-8106 and 34-46084. NAREIT is the national trade association for real estate investment trusts ("REITs") and other publicly traded real estate companies. Members include REITs and other businesses that develop, own, operate, and finance income-producing real estate, as well as those firms and individuals who advise, study, and service such businesses.

Executive Summary

NAREIT supports the Commission's efforts to provide investors with enhanced and "real-time" disclosure of important corporate events. NAREIT agrees with most of the Commission's proposals relating to Form 8-K. However, NAREIT is concerned that certain aspects of the proposals could be counterproductive to the interests of investors and prefers some of the alternative rules and standards that the Commission has suggested in its proposal. For instance, NAREIT believes that the proposed two-day time frame for filing of Form 8-K would not allow companies sufficient time both to deal with the event giving rise to the filing requirement and to fully document the event for disclosure to the investing public.

With respect to an issue critical to the real estate industry, NAREIT believes that requiring companies to disclose terms of material non-binding agreements could severely hinder the negotiating positions and competitiveness of its member companies.

NAREIT also is concerned that certain proposals would put an unnecessary administrative burden on companies without providing the public with useful information. This includes the requirement that companies disclose: (1) decisions of all rating agencies even if the rating agency is not in privity with the registrant, and (2) information in a Form 8-K that previously had been disclosed in a proxy or information statement. Finally, NAREIT does not believe that Form 8-K is the proper forum for discussion of correspondence regarding personal and professional relationships between a company and its auditors or directors and principal officers.

Shortened Filing Deadline for Form 8-K; Extensions; Amendments

A significant issue regarding the proposed rules concerns the new two-day filing deadline for Form 8-K Current Reports. NAREIT believes that requiring a reporting period of two days for Form 8-K disclosure would adversely affect the quality, accuracy and sufficiency of disclosures. NAREIT is of the opinion that the accuracy of the disclosure is more valuable than, and should not be sacrificed for, the speed of the disclosure. NAREIT also believes that hurried disclosure may result in the increased use of "boilerplate" disclosure, which would have little value, and could potentially be misleading to investors.

NAREIT believes that the requirement compelling management to provide an analysis under certain of the new Items would require significant preparation and review time by registrants and their advisors. We believe that executives and lawyers may not have time to document events and report on them sufficiently and that companies may not have time to prepare and file agreements or other documents called for as exhibits to the Form 8-K as required. NAREIT also believes that companies would have less time to consult with their outside counsel and accountants regarding the accuracy and sufficiency of disclosure, which would make the disclosure less useful to investors.

NAREIT suggests that the Commission consider allowing registrants to file supplements or amendments to Form 8-K Current Reports to fill in all required disclosure and analysis within a certain time frame so long as the event required to be disclosed under an Item was reported on a timely basis, but was not accompanied by the required extensive analysis.

In the context of the disclosure requested under new Form 8-K Items 2.05 and 2.06, NAREIT believes that there may be events or situations such as unforeseen casualty or catastrophic losses when estimates may not be available within the filing deadline, be it two or five business days. We believe that casualty or catastrophic losses should be permitted to be disclosed in a two-step format. First, the registrant would be required to disclose the event itself within five business days. Then, the disclosure of the analysis of the event would have to be disclosed within ten business days of the event.

In addition, amendments should be allowed to provide for changes in estimates of the write-offs, charges, impairments or managements' analysis called for under the new items to Form 8-K.

Item 1.01 - Entry into a Material Agreement

While NAREIT generally supports the Commission's position to require a company to disclose when it enters into a material agreement that is not made during the ordinary course of its business, we strongly believe that letters of intent, non-binding agreements and other similar documents should not be required to be disclosed. By their very nature as non-binding, preliminary, or letters of intent, we do not feel that such "agreements to agree" can be deemed to be material until they become binding contracts. In addition, contracts to purchase real estate typically contain many due diligence conditions that allow the purchaser to walk away from the contract if its due diligence is not completed to its satisfaction. Until such due diligence is satisfactorily concluded, these contracts are not binding and therefore should not have to be disclosed.

In addition, NAREIT is concerned that disclosure of such non-binding agreements would cause companies to disclose competitive terms and would otherwise disrupt the ability of companies to negotiate agreements on their own behalf and for the benefit of their investors. Companies would be disclosing negotiating terms that their competitors could review, which could harm a company's future negotiating position. Public companies would be at a particular competitive disadvantage relative to privately held companies that are not required to disclose the terms of their agreements. Furthermore, NAREIT feels that the confidentiality provisions that normally apply to such non-binding agreements would be rendered ineffective.

In order to promote uniform standards, NAREIT believes that Item 1.01 should be kept consistent with the current requirements of Exhibit 10 under Regulation S-K, Item 6.01(b)(10) which does not require the filing of non-binding agreements. Additionally, NAREIT supports the position that registrants should not be required to file the material agreements that are subject to the Form 8-K disclosure requirements as exhibits, because such agreements are required to be filed in Form 10-Q and/or Form 10-K. NAREIT suggests that if Item 1.01 becomes a part of Form 8-K, the Form should include a box on the cover page that would allow a registrant to satisfy obligations under Rule 165, Rule 14d-2(b) and/or Rule 14a-12, as suggested by the Commission in its proposed rule.

Item 1.02 - Termination of Material Agreement

While NAREIT generally supports the Commission's position with respect to this Item, we are concerned that requiring management to analyze the effect of termination of an agreement imposes a significant burden on a company, as management would not have enough time to both terminate a material agreement and prepare an analysis thereof within the proposed two-day time frame.

Further, NAREIT requests that the Commission clarify that if an issuer is reporting an event under Item 1.03, such as lease terminations by a tenant in a bankruptcy proceeding, it also would not need to report the same event under Item 1.02. NAREIT is concerned that the standards of "material" under Item 1.02 and "10% of revenues" under Item 1.03 could be interpreted differently and may cause different and confusing disclosure. NAREIT believes that clarification could enhance consistency of application.

Item 1.03 - Termination or Reduction of a Business Relationship with a Customer

NAREIT supports the adoption of this Item.

Item 2.01 - Completion of Acquisition or Disposition of Assets

NAREIT supports the adoption of this Item.

Item 2.02 - Bankruptcy or Receivership

NAREIT supports the adoption of this Item.

Item 2.03 - Creation of a Direct or Contingent Financial Obligation that is Material to the Registrant

NAREIT supports the adoption of this Item. However, NAREIT suggests that if a contingency is considered to be "remote" pursuant to the definition of remote in paragraph 3 of Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies, it should not require disclosure.

Item 2.04 - Events triggering a Direct or Contingent Financial Obligation that is Material to the Registrant

NAREIT supports the adoption of this Item, except where the contingency is "remote" as more fully discussed in the response to Item 2.03 above.

Item 2.05 - Exit Activities including Material Write-Offs and Restructuring Charges

NAREIT supports the adoption of this Item, with the same comments regarding events or situations such as unforeseen casualty or catastrophic losses when estimates may not be available prior to the filing deadline as described under the heading "Shortened Filing Deadlines for Form 8-K; Extensions; Amendments" above.

Item 2.06 - Material Impairments

NAREIT supports the adoption of this Item, with the same comments regarding events or situations such as unforeseen casualty or catastrophic losses when estimates may not be available prior to the filing deadline described under the heading "Shortened Filing Deadlines for Form 8-K; Extensions; Amendments" above.

Item 3.01 - Rating Agency Decisions

NAREIT supports the adoption of this Item. In accordance with the suggestion by the Commission, however, NAREIT believes that this disclosure should be limited to decisions made by nationally recognized rating agencies that have a contractual relationship with the registrant. Otherwise, we believe a registrant could fail to be provided notice on a timely basis from a rating agency not in privity with the registrant and could be in violation of the Form 8-K requirements if a rating agency issued a decision of which the registrant had no knowledge.

Item 3.02 - Notice of Delisting or Failure to Satisfy Listing Standards: Transfer of Listing

NAREIT supports the adoption of this Item.

Item 3.03 - Unregistered Sales of Equity Securities

NAREIT supports the adoption of this Item. However, NAREIT prefers the Commission's alternative proposal that disclosure under this Item only should be required as to large unregistered sales, such as sales by a company in excess of 5% of the company's market float. NAREIT does not believe that investors would benefit from reporting sales below such a threshold on a real-time basis on Form 8-K Current Reports.

Item 3.04 - Material Modification to Rights of Securityholders

NAREIT supports the adoption of this Item. Similar to the standard the Commission set forth with respect to new Item 5.03, however, NAREIT would suggest that the Commission only require material modifications to be filed if such modifications were not subject to disclosure previously in a proxy or information statement. NAREIT believes that most modifications to the rights of securityholders that are material would be subject to approval by the securityholders and, if disclosed in a proxy or information statement, such information should not be required to be disclosed again in a Form 8-K. NAREIT does not believe that such a duplicative disclosure would benefit securityholders.

Item 4.01 - Changes in Registrant's Certifying Accountant

NAREIT supports the adoption of this Item.

Item 4.02 - Non-Reliance on Previously Issued Financial Statements or a Related Audit Report

NAREIT generally supports the Commission's position with respect to this Item. However, NAREIT is of the view that a public filing is not the proper forum for disclosing correspondence between a registrant and its accountant. This Item could elicit the disclosure of events of a non-financial nature such as business, professional or personal relationships that may not be the proper subject of a Form 8-K. Additionally, NAREIT believes that the knowledge by an accountant or a company that a letter may be filed could possibly unduly affect the negotiations between a registrant and its accountant relating to these matters and tamper with or exacerbate the tone and substance of the letter in a manner that could be deemed detrimental to the process. If the Commission does require such correspondence to be filed, NAREIT believes that the accountant should be asked to respond to a company's request for a letter by a specific date, rather than as soon as possible after the company makes a request.

Item 5.01 - Changes in Control of Registrant

NAREIT supports the adoption of this Item.

Item 5.02 - Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

NAREIT generally supports the Commission's position with respect to this Item. However, similar to our comments regarding Item 4.02, NAREIT believes that a public filing may not be the proper forum for candid correspondence between a registrant and its officers and directors.

Item 5.03 - Amendments to Articles of Incorporation and Bylaws; Change in Fiscal Year

NAREIT supports the adoption of this Item.

Item 5.04 - Material Events regarding the Registrant's Employee Benefit, Retirement and Stock Ownership Plans

NAREIT is generally supportive of the policy rationale for requiring this disclosure, which we assume is to shed light on the trading patterns of management during blackout periods. However, due to the adoption of Section 306 of the Sarbanes-Oxley Act which requires that executive officers and directors halt trading during blackouts under benefit and retirement plans, NAREIT believes that this Item is no longer necessary to achieve these policy goals. Now that such trading is prohibited, the Item no longer adds useful disclosure to the mix of information for investors. Accelerated Section 16 reporting presumably would provide real-time disclosure of any violations of this prohibition. We would respectfully suggest that this Item not be included in the final rule.

Item 6.01 - Regulation FD

NAREIT supports the adoption of this Item.

Item 7.0 - Other Events

NAREIT supports the adoption of this Item.

Materiality Standard

NAREIT supports the use of a materiality standard as the threshold for disclosure throughout the Items, rather than a numerical or percentage threshold, except with respect to Items 1.03 and 2.01, where we believe that the existing threshold is appropriate and one to which registrants have become accustomed.

Critical Accounting Policies

NAREIT suggests that revisions to the critical accounting policies of a company are not the types of historical events that are best suited for real-time disclosure in a Current Report on Form 8-K. NAREIT believes that the critical accounting policies are customarily examined and evaluated, and revised if necessary, in the context of the preparation of financial statements. Therefore, we believe the best place for disclosure of revisions to such policies is in the disclosure accompanying periodic financial statements included in Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and respectfully submit that the Commission not require disclosure of revisions to critical accounting policies in Current Reports on Form 8-K.

Reorganization of Items

NAREIT supports the Commission's reorganization of the Items and believes it is clear and concise.

Liability Issues in the Proposed Safe Harbors

NAREIT generally supports the Commission's position with respect to this Item. NAREIT supports the position that registrants should not lose eligibility for short form registration statements if they meet the safe harbor requirements. NAREIT believes that, as the Commission has suggested, registrants should be required to furnish all required Form 8-K items, even if they are late, as a precursor to effecting a takedown or, in the alternative, remove Form 8-K filing compliance from short form registration statement eligibility, again as the Commission suggested. NAREIT also agrees with the Commission's suggestion to extend the safe harbor to Rule 10b-5 and Section 11.

Amendments to Rule 12b-25 and Form 12b-25

NAREIT generally supports the Commission's position with respect to this proposal. In accordance with our comment to extend the filing deadline for Form 8-K items to five business days, we also request that the Rule 12b-25 filing extension period be set at five business days correspondingly. In addition, in the event of a casualty or catastrophic loss discussed above, NAREIT requests that the automatic filing extension under Rule 12b-25 be extended to ten business days. Again, NAREIT believes that the Commission may want to consider allowing a registrant to file supplements or amendments to Current Reports on Form 8-K to fill in all required disclosure and analysis within a certain time frame so long as the event required to be disclosed under an Item is reported on a timely basis, but is not accompanied by the required analysis.

Audit Committees

In general, NAREIT does not believe that audit committees typically make any of the decisions discussed in the new items unilaterally without full Board or management input. NAREIT therefore believes it is best to omit references to audit committees from the proposed items.

Provide Conformity and Avoid Redundancy with 1934 Act Requirements

NAREIT recommends that the Commission's rule-making efforts in this area provide as much conformity and avoid repetition between the Form 8-K requirements and other 1934 Act disclosure requirements as possible.

Conclusion

NAREIT thanks the Commission for the opportunity to comment on its proposals. Please contact Robert Cohen, NAREIT's National Policy Counsel, or me at (202) 739-9400 if you have any questions regarding this letter.

Respectfully submitted,

Tony M. Edwards
Senior Vice President & General Counsel