Listing Obligations for Spanish REIT (SOCIMI)
One of the primary requirements a Spanish REIT (SOCIMI) consists of being listed in a regulated market such as the stock exchange or in a multilateral trading system such as the Alternative Stock Exchange Market (MAB).
The difference between listing on a regulated market such as the stock exchange or in a system like the MAB is essential. Companies whose shares are admitted to the MAB are not listed companies strictly speaking, since this is not an official secondary market. Consequentially, the regulations applicable to listed companies and the stock market, in particular with regard to the requirements for admission for trading, maintenance, and transparency, are not applicable to these companies.
For this, the MAB is an appropriate trading system for Spanish REIT (SOCIMI), given more flexibility than the stock market and not subjecting SOCIMI to the extensive and arduous regulation of official markets. It is ultimately a stock exchange, which by its nature and operational regulation is aimed at small and medium sized businesses. Its costs and processes are adapted to the characteristics of these businesses, facilitating access to finance while maintaining adequate levels of transparency and information, thereby generating the confidence of investors for their participation in the market.
The MAB, as a multilateral system of negotiation, has extensive self-regulation abilities, which is reflected in the approval of several circulars. In particular, it should be emphasized that Circular 2/2013 of 15 February 2013, regulates the requirements and procedures applicable to Spanish REIT (SOCIMI) whose shares are listed in the MAB. This Circular is part of the existing regulation for growing companies (Circular 5/2010), while developing some specific conditions for the SOCIMI segment.
Hence, the aforementioned circulars establish a series of conditions for listing and maintaining SOCIMI in the MAB:
- Formal requirements: this segment allows the listing of both Spanish public limited companies that are SOCIMI and foreign public limited companies whose corporate purpose and investment regime are analogous to that established for SOCIMI. In addition, for listing, the share capital must be fully paid and the shares must be represented by book entries without any restriction that may affect their transferability.
- Accounting requirements: the accounting regime of Spanish REIT and the financial information they submit to the MAB must comply with the International Financial Reporting Standards (Normas Internacionales de Información Financiera) or national accounting standards.
- Initial information: a Spanish REIT (SOCIMI) must submit a written application for admission to trading to the MAB, along with an informational booklet entitled the Information Document of Incorporation containing detailed information on the company, its business, and prospects.
The document consists of four main information segments; a.- information regarding the company and its business; b.- information concerning the shares; c.- other information of interest; d.- designation of the nominated advisor and other experts and advisors.
In section a), in addition to identifying the company and the person responsible for the information, it must include in summary, the company’s business plan, its auditors, exhibition of the company history, reasons for requesting inclusion in the MAB, position in the market, competitive strategies, diversification, production information, sales and costs, quantification of predictions or estimations, etc.
This informative document has some resemblance to the information booklet of listed companies set out in Article 26 of the Stock Market Law, but it is a version more tailed to the MAB.
- Appointment of registered advisory and liquidity provider: SOCIMI must appoint a Registered Advisor who liaises with the supervisory authorities during the initial listing and subsequently during the period that the company is listed. The advisor shall assess the suitability of SOCIMIs interested in joining this segment of the MAB and advise them on the new trading regime as well as the preparation and presentation of the financial and business information required in order to trade in this segment.
Additionally, the Spanish REIT or its reference shareholders shall sign a contract with a liquidity provider, which may be an investment service company or a credit entity, to facilitate the liquidity of transactions affecting shares in these companies, achieve an adequate trading frequency, and reduce price variations that are not caused by market trends themselves.
- Distribution requirements (free float): there must be a minimum diffusion (free float) of the shares at the time of joining the MAB. In detail, shareholders owning less than 5% of the company’s share capital must hold a number of shares with either an estimated market value greater than 2 million euros or, alternatively, representing at least 25% of the total shares issued by the company.
- Independent expert valuation: among the requirements introduced for listing this type of company in the MAB is the obligation to provide an independent expert valuation at the time of admission. The valuation shall determine the value of the company as a whole, not just the property provided.
- Web page: the company must also have a website to make available the public documents submitted to the MAB for listing its shares and any information regularly sent to the MAB.
Meanwhile, there are certain additional requirements relating to reference shareholders that are shown below:
- Commitment to permanence: once shares have been listed in the MAB, Circular 2/2013 prohibits principal shareholders and senior officers from selling shares or carrying out trading operations during the company’s first year of listing (lock-up).
- Communication of relevant facts, significant shares, and operations of administrators and directors: the company must make available to the MAB all the relevant information of the company’s legal nature, acquisitions or loss of significant shares (understood as anything that reaches above or below 5% of the share capital and successive multiples), as well as operations carried out by directors and executives of the issuer’s share that reach, exceed or fall below a rate of 1 per 100 of its capital or any multiple.
- Publication of the shareholder agreement: as soon as they become aware of them, SOCIMIs must send to the MAB for publication the agreement, extension, or termination of any shareholder agreement that affects the transfer of shares or the voting rights of shareholders.
- Change of control of the company: any shareholder who receives a purchase offer which would result in the acquirer obtaining control of the company (>50%) shall not accept unless the acquirer makes the same offer to all shareholders under the same conditions.
It should also be noted that Spanish REIT (SOCIMI) listed in the MAB must pay a series of annual costs, which vary depending on aspects like size of the company, asset size, or traders they work with. These costs can range between approximately 50,000 euros and 100,000 euros annually (albeit the costs during the first year may be even higher due to the costs associated with being listed in the MAB) and come from concepts such as the fixed tariff for being listed in the MAB and the fees for appointing a registered advisor and liquidity provider, auditor, real property appraisal, corporate website, etc.
José María Mesa