REITS

G Malone & Co, has represented various REITs in purchases in excess of $1.7 billion of multifamily real estate, including AIMCO and UDR.

From this extensive experience, we fully understand the benefits and intricacies of doing business with REITs

Frequently Asked Questions About Selling To A Real Estate Investment Trust:

Q. Why sell your property to a REIT?

A. To defer capital gains taxes, to secure steady income, to resolve partnership and family issues, to diversify your portfolio, and for estate planning.

 

Q. What is a REIT?
A. A Real Estate Investment Trust is a form of stock company that owns, operates, or finances real estate and does not pay corporate income taxes as long as it returns at least 90% of its income to shareholders as dividends.

 

Q. How do you avoid taxes when you sell to a REIT?

A. Essentially, you merge your holdings into a partnership with the REIT, receiving Operating Partnership units. The REIT takes over operating responsibility and liability and you collect a dividend on your OP units as if they were stock.

 

Q. No taxes?

A. Not until you convert your units to actual stock. There is often a one year-lock up period before you can do so, but generally no limit on how long you can hold the units without incurring a gain – and then only on the portion of the units you trade.

 

Q. No taxes at all?

A. Gains could be incurred if you take a portion of the sales price in cash, or pay off a mortgage. There are a variety of strategies to minimize or defer these taxes as well.

 

Q. Why sell to a REIT vs. a 1031 exchange?

A. Both are good strategies and G Malone & Co, can help you with either, but REITs offer more flexibility. With a 1031 exchange you still own property, retain ultimate liability even on a net leased property, and you haven’t completely addressed estate planning or partnership issues.

Selling to a REIT, however, securitizes your real estate interest so that partners can make their own financial decisions independently. There is no longer direct liability. Operating units may be used as collateral for other investments. And, your heirs enjoy a stepped-up basis if you die.

 

Q. Why not just net lease your property?

A. As with a 1031 exchange, net leasing your property still leaves you with ultimate liability and an indivisible interest with any partners or family members. Perhaps more importantly, your real estate is still in one place. If the economy is weak where you own property your holdings can plummet. Many REITs own property from coast-to-coast, offering greater protection from local market conditions.

 

Q. What can go wrong?

A. REIT shares are a stock investment. You want to partner with a reliable company with a diverse portfolio, secure dividend, and a relatively low stock price compared with net asset value.