Thursday, January 29, 2009

REITs May Pay Dividends in Stock to Save Cash

In a Bloomberg story By Hui-yong Yu, REITs in U.S. Consider Paying Dividends in Stock to Save Cash, many publicly traded REITs may take advantage of a IRS ruling allowing them to pay dividends instead of cash.

On December 10, 2008 the Internal Revenue Service issued Revenue Procedure 2008-68 announcing that the IRS will treat a cash option stock dividend as satisfying a public REIT’s distribution requirements for 2008 and 2009 so long as shareholders can elect to take at least 10% of the dividend in cash.

According to a REIT Alert from Goodwin Procter, IRS Issues Guidance on Taxable Stock Dividends:

The Revenue Procedure provides that the IRS will treat a capped cash option stock dividend by a REIT as a taxable dividend, and will consider the amount of stock distributed to be equal to the amount of cash which could have been received instead, if:
  • the dividend is made by the REIT to its shareholders with respect to its stock;
  • the terms of the dividend allow each shareholder the right to elect to receive its entire distribution in either cash or stock of the REIT of equivalent value, provided that the REIT may impose a limitation on the amount of cash to be distributed in the aggregate to all shareholders of not less than 10% of the aggregate distribution; and
  • the number of shares to be distributed is determined as close as practicable to the payment date based upon a formula utilizing market prices.


Wednesday, January 28, 2009

Tenant-in-Common Interests are Securities

On January 14, the SEC issued a no-action letter to OMNI Brokerage, Inc., Argus Realty Investors, L.P., and PASSCO Companies, LLC regarding their tenant in common interest program. The SEC said no to the "no action."
"Based on the facts presented, the Division disagrees with your view that the proposed offer and sale of undivided tenant in common interests pursuant to the Master Lease Transactions and Property Management Transactions (each as defined in your letter) do not involve securities within the meaning of Section 2(a)(1) of the Securities Act of 1933. As a result, the Division is unable to assure you that it would not recommend enforcement action to the Commission unless such offers and sales are registered under the Securities Act or exempt from registration."
TIC sponsors will need to revisit their platform if they have not been treating their TIC interests like securities. In an article in National Real Estate Investor, Beth Mattson-Teig points out that the no-action letter is limited to the specific facts presented in the request for confirmation: SEC Confirms TICs as Securities.


Monday, January 26, 2009

Health Care REIT, Inc. Added to S&P 500

Standard & Poor's announced that Health Care REIT Inc. (NYSE:HCN) will replace Sovereign Bancorp Inc.(NYSE:SOV) in the S&P 500. Standard & Poor’s Announces Changes to U.S. Indices [.pdf] Sovereign is being acquired by Banco Santander SA, leaving a vacancy in the index.
Health Care REIT, Inc. is an equity real estate investment trust that invests across the full spectrum of senior housing and health care real estate, including independent living/continuing care retirement communities, assisted living facilities, skilled nursing facilities, hospitals, long-term acute care hospitals and medical office buildings.