The REIT Alternative  
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 Georgia 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 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.

Georgia Malone & Co. represents Apartment Investment and Management Company, AIMCO (NYSE: AIV). AIMCO is the largest residential REIT in the United States with more than 200,000 apartments in 47 states, the District of Columbia, and Puerto Rico. Its stock was added to the Standard & Poors 500 in 2003.

For more information please call Georgia Malone at 212-838-6888.

Georgia Malone & Co., Inc.
147 East 61st Street
New York, NY 10065

AIMCO...

  • Is a real estate investment trust or "REIT"
  • Common stock is traded on the NYSE under the symbol AIV
  • Is an S & P 500 company
  • Is the largest owner/operator of apartment properties in the United States
  • Holds a well-diversified, nationwide portfolio of apartment communities that are owned or managed including:
  • More than 1,740 properties
  • Having more than 200,000 apartment homes
  • Located in 47 states plus Washington D.C. and Puerto Rico
  • Owns a broad range of assets including:
  • A to C conventional properties, with a focus on Bs
  • Affordable (primarily HUD subsidized) and student housing properties
  • Invests solely in multi-family properties and is not a developer
  • Became a publicly traded company in 1994
  • Has generated superior returns to its shareholders since inception


Officers

Terry Considine
Chairman, CEO and President
Peter Kompaniez
Vice Chairman and VP
Tom Herzog
CFO, Exec. VP
Harry Alcock
Exec. VP, CIO
Miles Cortez
Exec. VP, Gen. Counsel, Sec.



Top Institutional Holders

  • Stichting Pensioenfonds ABP
  • FMR Corporation (Fidelity Management & Research Corp)
  • Pacific Financial Research
  • Lasalle Investment Management Securities LP
  • AEW Capital Management, LP
  • Barclays Bank Plc
  • Morgan Stanley
  • European Investors Incorporated
  • Cohen & Steers Capital Management, Inc.
  • Taunus Corporation
Top Mutual Fund Holders
  • Fidelity Real Estate Investment Portfolio
  • Clipper Fund, Inc.
  • Vanguard Specialized-Reit Index Fund
  • Capital Income Builder, Inc.
  • Fidelity Low-Priced Stock Fund
  • Franklin Custodian Funds-Income Fund
  • Cohen & Steers Realty Shares Incorporated
  • Fidelity Balanced Fund
  • Columbia Real Estate Equity Fund, Inc.
  • Russell (Frank) Real Estate Securities Fund

Source: Yahoo/Multex

 

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