Unique Risks Posed By REIT Acquisition

By Jade Newburn, Heather Adkerson, Jeffrey Bruns, David Malinger and Matthew McDonald (January 7, 2019, 1:37 PM EST) -- Private equity real estate funds and other sophisticated investors in U.S. real estate assets may raise capital from foreign investors. To achieve tax structuring objectives for these investors, these investment vehicles are often structured to hold one or more real estate assets in a private real estate investment trust. In many cases, the exit strategy for these investments consists of selling the common shares of the REIT itself, rather than the underlying asset(s), to reduce tax liability for non-U.S. investors upon the sale. A prudent buyer should understand and seek to mitigate the unique risks posed by a REIT share acquisition....

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