SEC Finalizes Reg AB Rules: open XML, no rent rolls

Today the SEC announced its final decision on Reg AB. They held firm by requiring XML data for CMBS to be posted on EDGAR. That is a big deal and a huge win for transparency: each CMBS loan will require wide open disclosure of about 160 data elements.

The Asset-Backed Securities Disclosure and Registration document is 650 pages. The CMBS section starts on page 147. Download the document here >>>

For the key issue of rent rolls, the SEC came up short by requiring only basic info on the top three tenants. But there is some hope: If you read their rationale on page 156, it seems to leave room for increased tenant disclosures if the how-to-implement issue is resolved.

From the document:

“We are adopting as proposed data points about the three largest tenants (based on square feet), including square feet leased by the tenant and lease expiration dates of the tenant. While some commenters requested several changes to the tenant disclosures for CMBS, the consensus among commenters was that rent roll information for each property supporting the mortgages underlying the CMBS was needed. We are not adopting a requirement within the asset-level requirements to require rent roll information at this time because it is not clear how to standardize detailed schedules of lease payments for each tenant over time on an asset-level basis, and we did not receive comment suggesting how this could be done.”

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Jim Flaherty is CEO of CMBS.com and the creator of the Backshop loan origination system. He is a trained credit professional with experience installing enterprise underwriting systems for commercial real estate lenders, rating agencies and investors.