Goodwin REIT Alert: Recent Developments In The Use Of "At-the-Market" Offering Programs By REITs

1. Overview

At-the-market (ATM) offering programs continue to provide public real estate investment trusts (REITs) and other issuers an efficient means of raising capital over time by allowing a listed company to tap into the existing trading market for its shares on an as-needed and when-needed basis. Under a typical ATM offering program, a listed company incrementally sells newly issued shares on the exchange through a designated broker-dealer at prevailing market prices, rather than via a traditional underwritten offering at a fixed price.

Over the past five years, the use of ATM programs by REITs across all sectors has surpassed traditional underwritten offerings in volume due to ongoing capital needs (e.g., to finance development activity or pending debt maturities), coupled with efficient and low-cost execution. As of early 2025, more than 100 publicly traded REITs maintained active ATM programs, covering the sale of more than $75 billion of new equity securities, reflecting broad acceptance of ATM programs as a strategic financing tool. In the fourth quarter of 2024, public REITs raised a record $8.4 billion through ATM programs, marking the largest quarterly total on record and highlighting the continued shift toward opportunistic, market-driven capital-raising strategies. Among the larger REITs by equity market capitalization, quarterly ATM issuances of $400 million to $500 million is not uncommon, with a handful of issuers approaching even $1.0 billion.

In this alert, we discuss unique aspects of and recent developments in the uses and structures of REIT ATM programs, including:

• Sizing the ATM program relative to market capitalization
• Commission rates and execution economics
• Expanding the sales syndicate: Managing execution
• Revenue- and cost-sharing arrangements
• Negotiated block trades within ATM programs
• Forward-Sale Proliferation and Execution Mechanics, and Changes in Dividend Considerations

See our alert "At the Market Offerings Raising Equity Capital in Volatile Markets" (2008) for a discussion of ATM program mechanics and attendant securities law and other considerations. See our alert "Developments in the Use of "At-the-Market" Offering Programs by REITs" (2019) for discussion of additional developments in use of ATM programs, including block trades, forward sales and timing considerations.

2. Sizing the ATM Program Relative to Market Capitalization

While REITs are under no obligation to sell the full amount registered under an ATM program, management teams should still consider the stated initial sizing of the program. Both oversizing and undersizing ATM programs relative to market capitalization can raise red flags for investors and analysts. An oversized program may suggest an imminent need for capital, signal unclear or dilutive intent, or simply create headline risk in earnings call Q&A. Conversely, undersizing an ATM program may constrain issuance capacity during favorable market windows and negatively affect the ability to nimbly pursue new investment opportunities. It can also signal a lack of commitment to disciplined balance-sheet management or long-term planning.

As a point of reference, we note that smaller and midcap REITs (equity market capitalizations below $10 billion) typically size ATM programs in a range of approximately 8-12% of market capitalization, while larger REITs (market capitalizations above $10 billion) more often size their ATM programs in the 5-6% range of market capitalization. At the same time, we have seen select larger REITs implement ATM programs in amounts over 15% of market capitalization and, in certain cases, sell equity under ATM programs amounting to approximately 3% of market capitalization in a single quarter.

Thus, there is no "one size fits all" ATM program size. Appropriate sizing should reflect a number of issuer-specific factors, including:

• Historical capital-raising activity: REITs with a track record of raising and deploying equity regularly may justify larger ATM programs without triggering concern.
• Anticipated use of proceeds: Capital needs tied to accretive corporate purposes, such as pipeline acquisitions and development/redevelopment projects or debt repayment plans, can support more robust ATM authorizations.
• Average daily trading volume: Sales under an ATM program should be executed in a manner right-sized for the stock's market liquidity; for example, on any given trading day, sales under an ATM program should generally not be more than 5-10% of the average daily trading volume (ADTV) of an issuer's shares.
• Investor communication strategy: Transparent disclosure of issuance strategy, including whether the ATM program is expected to be used opportunistically or as a primary capital tool, can mitigate concerns and reduce overhang-related volatility.

Accordingly, many issuers coordinate the launch or upsizing of ATM programs with investor days, earnings calls, or public filings that contextualize their capital plan.

3. Commission Rates and Execution Economics

Though ATM prospectuses routinely state commissions of "up to 2.0%," actual commission rates for REITs are generally significantly lower. In the past several years, commission rates have continued to compress, particularly as ATM program sizes increase and credit facility syndicates expand (see more on sales agent group expansion below). The competitive dynamics among broker-dealers, combined with growing issuer sophistication and enhanced execution experience, have contributed to a material decline in average commissions. This represents significant savings to REITs relative to the 3-5% gross spreads typical of traditional marketed follow-on offerings.

In our experience, typical commission ranges paid under REIT ATM programs today include:

• 50 to 75 basis points (bps) for routine equity ATM executions, with larger REITs and frequent issuers often negotiating rates at the lower end of this range.
• 75 to 100 bps or lower for forward sales, reflected as a discount to the initial forward price.
• For negotiated block trades or bespoke executions, commission rate may vary and fall outside of standard grids but still command materially lower fees, often 100 bps or less.

In some cases, REITs may negotiate tiered pricing structures with their agents, whereby lower commission rates apply once certain volume thresholds or execution milestones are met. This approach can further align incentives and reduce overall program costs as transaction size grows.

The continued cost efficiency of ATM programs, relative to marketed follow-ons and overnight block trades, remains a core driver of their widespread adoption.

4. Expanding the Sales Syndicate: Managing Execution

REITs historically executed ATM programs through a limited number of relationship banks, often one to three agents. However, over the past several years, the composition of ATM sales agent groups has expanded significantly. It is now common for REITs to name close to 15 broker-dealers as named sales agents on the cover of their ATM prospectus supplements.

REITs now include many of the banks that are lenders in their debt syndicates (or their affiliated broker-dealers) in the ATM program, which allows issuers to satisfy bank relationship expectations and deepen institutional engagement, and can motivate banks to enhance research coverage. Inviting more sales agents to participate in an ATM program can also increase market access and sales flexibility, allowing agents with varying investor networks to participate in discrete execution windows, and can offer specialization in the execution of forward sales (which not all banks have).

While inviting a larger number of sales agents to potentially participate in an ATM program can provide strategic advantages, a broader group of sales agents can create operational complexity. Without defined controls, overlapping diligence updates and inconsistent execution pacing can reduce efficiency and increase risk.

To manage the risks and inefficiencies associated with larger sales agent groups, issuers are increasingly implementing one or more market-driven solutions, including:

• Rotational execution schedules: Many ATM programs adopt formal rotation schedules (daily, weekly, monthly, or quarterly), assigning execution rights to different agents on a rolling basis. These schedules are often established up front (or managed by a lead administrative agent) to ensure equitable participation, reduce conflicts, and accommodate bank availability and investor flows.
• Lead administrative agent model: A lead bank can be designated as a de facto "administrative agent," tasked with maintaining the rotation calendar, coordinating diligence bring-downs, and overseeing compliance procedures. Although not formally designated in the offering documents, this role somewhat mimics the administrative agent role in a loan facility.
• Coordination role of sales agent counsel: The role of counsel to the sales agents takes on a broader scope in multidealer ATM programs, where even modest changes (e.g., updating a risk factor or tax disclosure) can require iterative sign-off from multiple sales agents' legal and compliance teams. Typically, a single law firm will represent all named sales agents and serve as the primary point of contact for the issuer and its counsel in managing diligence, documentation, and procedural workflows. This firm is responsible for gathering internal approvals and sign-offs from each participating broker-dealer, often requiring outreach to multiple deal teams and compliance personnel. In-house legal and regulatory staff at the individual banks are looped in on a need-to-know basis, preserving confidentiality and minimizing administrative burden on the issuer.

5. Revenue- and Cost-Sharing Arrangements

If the list of named sales agents is particularly long, then those agents toward the "back of the order" may have fewer opportunities to execute trades under the ATM program than other agents. In addition, not all broker-dealers will have equal levels of infrastructure and trading experience, particularly when it comes to executions on a forward basis. As a result, some ATM programs will include a form of revenue-sharing arrangement that will provide for all agents participating in the program to receive a portion of the sales agent commissions generated by trade executions, often irrespective of whether the particular agent was an executing agent. Some issuers might limit the active execution roster to, say, only the largest five to six banks in the lineup that have the infrastructure and liquidity to conduct frequent sales, while extending a revenue-sharing arrangement to the broader syndicate. This approach enables broader participation without sacrificing execution efficiency.

Revenue-sharing frameworks vary widely in structure and transparency. Common allocation mechanisms include:

• Pre-determined commissions: Division of commissions among all named agents allocated at program inception, regardless of execution volume.
• Execution-based sharing: Enhanced economics (e.g., higher commission splits) for the executing agent, with the remainder distributed among non-executing participants.
• Administrative allocation: Carve-outs for the lead administrative agent to compensate for coordination work, often through a flat percentage or per-sale fee.
• Reverse inquiry incentives: Agents that generate inbound investor interest or reverse inquiries may receive preferential economics for sourcing execution opportunities.

Again, there is no one-size-fits-all fee matrix applicable to all ATM programs and all REIT issuers. Each ATM program is structured individually in consultation with the sales agents and counsel to the needs of the specific issuer and the sales agent group.

A companion of the revenue-sharing framework is a system for allocating the cost of maintaining the active ATM program, which includes, at a minimum, quarterly due diligence review of disclosure documents and bring-down of deliverables such as auditors' comfort letters, issuer's and agents' counsel legal opinions, negative assurance letters, and the like. These costs and attendant operational burden in most cases are not insignificant. Cost-sharing frameworks also vary, with no one-size-fits-all matrix. One approach is to allocate costs over each quarterly selling period to those agents who have received commissions for sales in the period, typically proportionately to economics. Another approach, particularly if all agents benefit from a form of revenue-sharing arrangement, is to allocate costs equally across all named agents each quarter. Sometimes, an issuer might agree to bear a fixed amount of annual/quarterly cost itself, in recognition that program maintenance costs can be incurred irrespective of the volume of sales during a period.

Typically, neither revenue-sharing nor cost-sharing arrangements, as applicable, are disclosed or described in the issuer's public filings. Because the issuer pays the same commission rate and program costs, however allocated among the sales agents, this information is generally not considered significant to investors.

Regulatory and compliance considerations. In constructing possible revenue-sharing arrangements, issuers, sales agents, and their respective counsels must consider applicable Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) regulations that might impose constraints on how syndicate compensation can be allocated. This includes:

• Section 11(e) of the Securities Act of 1933, as amended, which sets forth the so-called "hold-down" provision limiting the liability of an underwriter to the total price of the securities sold by it to the public — unless the underwriter receives a benefit from the issuer that is disproportionate to its interests in the underwriting. This provision was almost certainly not drafted with ATM programs in mind, but some market participants have recently started to consider whether a sales agent receiving an allocation of commissions not directly correlated to the amount of securities it has sold may be said to be receiving a "disproportionate" benefit within the meaning of Section 11(e). Our view is that a properly drafted revenue allocation arrangement does not taint the Section 11(e) hold-down provision because, among other things, the issuer itself always pays the same flat agreed commission per trade; it is only the agents that then allocate that commission among themselves.
• FINRA Rule 2040, which prohibits payment of transaction-based compensation to unregistered persons. While most revenue-sharing among FINRA-member broker-dealers is permissible, caution is required when economic benefits flow to affiliates that may not be broker-dealers.
• FINRA Rule 5110, which requires all syndicate compensation to reflect bona fide services. Revenue sharing must correspond to a reasonable expectation of contribution to the offering (e.g., investor outreach, market making, or advisory input). Compensation arrangements that allocate proceeds solely for relationship reasons, without substantiated involvement, may raise concerns.

In light of these regulatory concerns, some Wall Street firms take a more conservative approach by electing not to participate in revenue-sharing arrangements as a non-executing agent unless a clear record of involvement exists. Other firms rely on structured frameworks and internal documentation to substantiate revenue splits. In all cases, legal and compliance teams should review syndicate compensation arrangements to ensure compliance with SEC and FINRA standards.

6. Negotiated Block Trades Within ATM Programs

Negotiated block trades executed within ATM programs have become an increasingly common feature of REIT capital-raising strategies. Block trades with institutional investors allow issuers to raise sizable amounts of equity capital in a single transaction while operating within the flexible framework of an existing ATM program. Rather than executing small daily sales through open-market activity, REITs use block trades to capitalize on inbound demand, minimize execution time, and preserve confidentiality.

See our alert "Developments in the Use of "At-the-Market" Offering Programs by REITs" for a more detailed description of block trades and bought deals under ATM programs, including discussion of applicable federal securities and NYSE regulations.

Issuers continued to favor block trades within ATM programs in recent periods for several key reasons, including:

• Accelerated/cheaper execution without deal prep: Block trades can be executed intraday, without the extended preparation timeline, underwriter diligence, or public marketing required for a marketed follow-on offering. This allows REITs to quickly access capital in response to time-sensitive acquisition, repayment, or refinancing needs. That said, if a proposed block trade is of significant size, some sales agents may request an accelerated diligence bring-down call prior to execution and settlement.
• Agent group infrastructure leverage: Because block trades are run through sales agents named under the ATM prospectus supplement, they can be executed with minimal additional documentation. Existing legal opinions, comfort letters, and due diligence protocols, which are refreshed quarterly for ATM programs, remain in place, eliminating the need for an extended underwriting process.
• Reduced market signaling risk: Traditional follow-on offerings often carry an implicit signal of equity need, which can weigh on market perception. Block trades within an ATM, by contrast, are often executed at tighter discounts to market closing prices and are disclosed after the transaction with all other ATM sales in the covering quarterly period report, helping reduce price pressure and investor speculation. As noted in our prior alert, when a proposed block trade is sufficiently large relative to the overall size of the ATM program, is priced at a significant enough discount to market (daily average percentage trading range is sometimes used as a reference point), or otherwise involves nonordinary facts and circumstances, additional disclosure might be warranted via a prospectus supplement or Current Report on Form 8-K.
• Investor-driven demand: Many block trades are facilitated via reverse inquiry (i.e., unsolicited interest from institutional investors seeking exposure at size). This dynamic can allow the issuer to negotiate more favorable terms and pricing.

While block trades may represent a minority of total ATM sales volume for some issuers, they frequently account for a disproportionate share of proceeds raised. In recent REIT ATM activity, trades ranging from $50 million to $250 million have been executed via this method, often at discounts of less than 100bps to prevailing market closing price.

7. Forward-Sale Proliferation and Execution Mechanics, and Changes in Dividend Considerations

Forward sales in REIT ATM programs have expanded dramatically over the past five years. Once a relatively niche tool used primarily by large-cap REITs with sophisticated treasury operations, forward sales have become a standard feature of ATM programs for a broad range of issuers. REITs increasingly view forward executions as strategic tools for capitalizing on favorable pricing environments while deferring both dilution and cash receipt, thus optimizing capital timing and financial metrics.

A typical forward sale under an ATM program involves the following steps:

• Long-form confirmation: The form of the forward contract is negotiated up front before filing of the ATM program. The forward confirmation will set out the key economic terms, settlement mechanics, and applicable adjustments for dividends and other corporate actions.
• Execution on the exchange: The bank acting as forward purchaser (through the forward seller or its agent) borrows and sells shares on the exchange to establish its hedge for the forward sale over a number of days. This forward-hedge selling period can range from a single day to up to several weeks, depending on the size of the forward sale relative to the ADTV of the shares. Similar to regular-way ATM sales, a bank's forward-hedge sales will generally range from 5% to 10% of ADTV.
• Pricing supplement: After completing its forward-hedge sales, the bank will send a pricing supplement to the issuer that documents certain pricing terms for the forward sale. The pricing supplement will include:
  
  • Base amount of shares (or gross dollar value) actually sold.
  • Initial forward-sale price (typically the volume-weighted execution price at which the banks sold the hedge shares, less the applicable commission rate).
  • Hedge completion date.
  • Borrow-cost assumptions (initial stock loan rate and maximum stock loan rate).
  • Maturity date (subject to earlier settlement by the issuer at its election).
• Physical, cash and net share settlement: Most REITs settle forward sales physically by issuing primary shares to the forward counterparty in exchange for a cash payment equal to the applicable forward price multiplied by the number of shares under the forward contract. However, confirmations for forward sales will also include an election by the issuer to settle the transaction through net shares or with cash. The forward-sale confirmations will also be structured to comply with ASC 815-40, "Derivatives and Hedging — Contracts in Entity's Own Equity," so that the issuer always has the right, even upon any early termination or default, to settle the contract in shares.

As noted above, not all banks participating in an ATM agent group can serve as forward counterparties. Only banks with a corporate equity derivatives desk, typically the larger investment banks, are able to effect forward executions. As a result, REITs often rely on a subset of their agents for forward transactions. Some banks or broker-dealers may partner with another bank to execute forward sales. This can result in additional disclosures in the prospectus supplement. As a result, REITs may adopt separate forward capacity limits or appoint exclusive forward counterparties.

Changes in dividends. When a forward purchaser executes a forward contract, the forward purchaser will, through its broker-dealer affiliate or its agent, borrow shares from a stock lender, then sell the borrowed shares on the exchange. When the REIT pays a dividend on the shares, the forward seller owes the dividend payable on the shares to its stock lender. To account for the forward seller's obligation to pay any dividends on the borrowed shares to its stock lender, the forward confirmation will include a schedule with the anticipated quarterly per-share dividend amounts and dividend payment dates during the expected term of the forward. These are termed Forward Price Reduction Dates because the forward price payable by the forward purchaser upon settlement will be reduced by a corresponding amount. Accordingly, the anticipated dividend amounts and dividend payment dates are priced into the cost of the forward sale. If the REIT increases its dividend during the term of the forward contract, most REITs and forward counterparties will choose to amend the forward contract to reflect the increased dividend. However, ASC 260, "Earnings Per Share," provides that adjustments by an issuer to a dividend reduction schedule could create variable economics linked to dividend timing or profitability, which may result in the contract being deemed a participating security. A participating security is any security that may participate in undistributed earnings with common stock. Participating securities must be included in the calculation of diluted EPS using the two-class method, which can have immediate and negative impacts on reported earnings metrics. As above, most issuers simply amend the dividend schedule in the forward confirmation rather than accelerate settlement and terminate. Nevertheless, REITs should discuss the accounting considerations with their advisers before making an election to amend or settle the forward sale.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.