Structuring Real Estate Joint Ventures with Private REITs (Portfolio 743)


Scott Semer


Torys LLP


Michele Alexander


Barnes & Thornburg LLP

At a glance

I. Introduction
II. Summary of REIT Requirements
III. Issues with Private REITs
IV. Venture Structures with REITs
V. International Issues


Real estate investment trusts (REITs) create unique planning opportunities for private equity funds and other private investors seeking to invest substantial capital resources in U.S. real property. Bloomberg Tax Portfolio, Structuring Real Estate Joint Ventures with Private REITs, No. 743, addresses how the goals of these investors are achieved by entering into joint ventures using non-publicly traded or “private” REITs.

The purpose of this Portfolio is to provide a source of guidance to tax practitioners advising clients investing in U.S. real estate through or with a private REIT. It includes a discussion of the unique issues that a private REIT confronts in complying with the qualification requirements under the Code, including issues relating to forming the REIT and ensuring that the REIT earns qualifying income, while obtaining an ownership structure that serves the business objectives of the joint venture participants (including management of the property by a significant participant in the joint venture). It also addresses issues unique to UPREITs and DownREITs, issues that arise in taking a public REIT or UPREIT private, and issues presented in selling or otherwise exiting from a private REIT. In addition, it addresses the particular issues that arise for foreign investors, including withholding, the branch profits tax, issues under U.S. tax treaties, and issues for foreign governmental investors under §892 of the Code.

As U.S. real estate becomes an increasingly essential component of a well-diversified international investment Portfolio, private REITs are becoming an increasingly important tool in the arsenal of the tax professional seeking to help clients structure their investments in a tax-efficient manner. This Portfolio aims to serve as a useful primary tool in this regard.

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