REIT Spin Magic: SWAN Or Ugly Duckling?

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Summary

  • The good news today is that REIT to REIT spins are perfectly legal.
  • We’ll look at some successes, failures, and curious bifurcations that split off the ugly ducklings from the magnificent SWANs.
  • “History does not repeat itself, but it rhymes.” Mark Twain.

wrote this week about the tax code “gift” that Congress gave to C-corporations, allowing them to spin off their real estate assets, tax free, into a publicly-traded REIT, and I showed recent examples; some of them good, some great.

It’s true – when smart companies can alter their capital structure and take rightful advantage of the REIT laws to lease back their real estate, companies can win, balance sheets can prosper, and investors can be victors.

Unfortunately, about two years ago, Congress passed a law that banned certain of these tax-free REIT spin-offs, and many corporations that own real estate along with their operating business (such as restaurants, casinos, and retailers) were left without a highly effective, tax-advantaged approach into the REIT sector. Loophole perhaps, but whatever you want to call it, it’s now closed, and not sure if that’s permanent (I’ll leave that to the highly-paid lobbyists).

The good news today is that REIT to REIT spins are perfectly legal, and their performance is the focus of this article. We’ll look at some successes, failures, and curious bifurcations that split off the ugly ducklings from the magnificent SWANs.

Before we start, here’s a necessary warning: looking too closely at some of these spins, and proposed spins, can make you a bit dizzy. I’m speaking from personal experience… some of these “un”-combinations are mind-numbingly awful investments, and worth avoiding. Remember, I’m a Commercial Real Estate doctor. You’re responsible for your own Dramamine. Ok?

Let’s begin…

Photo Source

VTR Spun CCP, Which Then Merged With SBRA

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