There is welcome news for nontraditional real estate companies that have been looking to convert into real estate investment trusts (REIT). The Internal Revenue has recently given the approval for CBS Outdoor Americas Inc., an advertising company, to convert into a REIT. This decision is providing hope for other companies that are pursuing the same thing.
CBS Outdoor is an advertising company that rents ad space on billboards—it is also a publicly traded company. The organization announced that it obtained a “favorable private letter ruling,” from the IRS. Companies, such as Lamar Advertising Co., Iron Mountain Inc. and Equinix Inc. are awaiting a similar ruling.
One of the biggest draws to REIT conversion is the tax rate. REITs often pay little to no corporate income tax on their earnings, depending on how their income is generated. If the majority of the REIT’s income is from rent on real property and 90 percent of those earnings are paid as dividends to investors, there can be substantial tax savings.
There has been a recent trend, as seen with CBS Outdoor Americas, for nontraditional real estate companies to convert to REITs. However, general counsel for the National Association of Real Estate Investment Trusts Tony Edwards doesn’t believe the recent IRS rulings will spur more companies to convert to REITs, as REITs have not been as favored in the public markets. Edwards was quoted from an interview as saying, “the phenomenon that led a lot of companies to consider a conversion has really changed, and that is the yield environment.”
You can read more about CBS Outdoor and other REITs in a recent Wall Street Journal article.
Legal Help With REITs
The Dallas real estate attorneys at Ferguson, Braswell, Fraser & Kubasta, are experienced with REITs and can help you. Contact our law firm today by calling 972-378-9111 or filling out our online form.