The REIT will correct its accounting for employee bonuses to accrue such bonuses during the period in which they are earned and will write off capitalized costs, including leasing costs, associated with former tenants, in the period in which the lease termination occurred. The company's management and its audit committee are reviewing the company's accounting for lease income recognition, which it says may not be in line with the Securities and Exchange Commission's views of accepted accounting practices, based on a Feb. 7 opinion letter.

The REIT says based on the SEC's interpretation, it should have accrued straight-line rent at the turnover date and not the contractual lease commencement date, which generally was later. The REIT is currently assessing the impact of this issue, if any, on the financial statements.

"Our company takes the restatement of our financial information and the delayed filing of our Form 10-K very seriously. Although the amounts associated with the bonus accruals and capitalized costs should not be material to our annual financial statements, we feel it prudent to correct our accounting policies, which should prevent any issues with future filings," says Dennis Gershenson, president and chief executive officer. "In addition, while we believe our accounting for lease income recognition is in conformance with industry practice, the SEC has expressed an opinion related to lessee accounting indicating that this treatment may not be in accordance with generally accepted accounting principles. Therefore, we are pro-actively addressing this issue through a thorough review of the affected leases, changing our accounting policies andstrengthening our controls over financial reporting."