How can I use REITS on the QOZB level?

Answers

• 

  Marko Belej

  Taft

  October 19, 2022

  A REIT can also be a qualified opportunity business (QOZB), so long as it meet all of the tests. There's nothing incompatible between the two regimes. However, the principal benefits of a REIT may not be useful to a typical opportunity zone investor. One such benefit is that a REIT is a publicly traded entity with a single layer of taxation. However, any REIT shares that a qualified opportunity fund (QOF) acquires on the open market (or otherwise from a third person) will not be "good" qualified opportunity zone property. The QOF must acquire the REIT shares at their original issuance. A REIT is also useful for helping tax-exempt organizations avoid the recognition of unrelated business taxable income (UBTI), but a tax-exempt organization typically would get no benefit from investing in a QOF.

• 

  Matthew Rappaport

  Falcon Rappaport & Berkman

  October 19, 2022

  REITs are tax corporations, so they can be QOZBs, but practically speaking, I'm not sure you would do this. REITs were created to allow real estate portfolio companies much easier access to the capital markets. This means that REITs are set up for the financial purpose of attracting capital, and since a REIT can't really own another REIT, you would likely set up the REIT as QOF rather than QOZB. Instead, the QOZB would be something like a TRS (taxable REIT subsidiary) or an UPREIT (an umbrella partnership serving as an operating entity underneath the REIT).

DISCLAIMER: 

the information found on this website is intended to be general information; it is not legal or financial advice. Specific legal or financial advice can only be given by a licensed professional with full knowledge of all the facts and circumstances of your particular situation. You should seek consultation with legal and financial experts prior to participating in any aspect relating to Opportunity Zones. Posting a question on this website does not create an attorney-client relationship. All questions you post will be available to the public; do not include confidential information in your question.