The recent passing into law of the Protecting Americans From Tax Hikes (PATH) Act has dealt a significant blow to the ability of most companies to undergo tax-free REIT spinoff transactions, says Alvarez & Marsal managing director Tyler Horton.
Tyler, who will be moderating the Rockville Pike panel at Bisnow's Montgomery County State of the Market on Feb. 17 adds that it is unfortunate that some of the scrutiny from the general public and/or lawmakers surrounding nontraditional REIT spinoffs may be based upon a flawed perception that such transactions are an unfair abuse that must be curbed to preserve tax revenues. Corporate taxpayers in real estate-intensive industries are now severely limited in their options to maximize shareholder value through REIT conversion transactions because of the PATH Act and its misguided political spin.
In light of this, Jeff recommends that owners with a sizable real estate component to their traditional operating businesses consider alternative means of developing real estate on their own balance sheet and alternative means of unlocking the value of the real estate they already own. This may include additional use of joint ventures, transactions with existing REITS or other tax-exempt entities and, in certain instances, the use of captive REITs, among other alternatives. For more information on our Bisnow partner, click here.
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