As the law now stands, REITs
are legally bound to limit their business to real estate, their core business.
Meanwhile, Emirates REIT
has been building up a portfolio in Abu Dhabi.
I holds a portfolio of 14 assets comprised of 12 hotels and two notes receivable secured by real property.
If the property has retail tenants, the REIT
will also be concerned about rent based on the tenants' income: a percentage of gross income is acceptable, but a percentage of income net of certain expenses is not.
857(b)(3)(F) and 897(h)(1), as amended by AJCA Section 418(a) and (b), treat capital gain distributions on REIT
stock owned by foreign investors as dividends, if the foreign investor owns a sufficiently low percentage of the stock (5% or less).
Financing for assisted living facilities is undergoing a major change as REITs
(real estate investment trusts) enter the market in a substantial way.
It's a good way for small investors to get into real estate, just because it is more liquid than buying an office building," says Bedford Lydon, a REIT
analyst with Salomon Brothers in New York.
The subsidiary must be structured so the REIT
owns less than 10% of the subsidiary's voting stock, either through nonvoting common stock or a combination of nonvoting preferred stock and debt.
It follows that local expertise and substantial experience in developing and managing the type of properties the REIT
is acquiring are a big plus.
The gap in REIT
pricing between the public and private markets is expected to shrink in 2007, but not vanish.
Example: B, an investor in REIT
R, invested $10,000 for stock with a $10,000 current fair market value and a 10% dividend yield (i.
Nursing home operators looking at REITs
as potential sources of financing need to consider carefully what the REIT
is likely to be looking for.