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U.S. REITs' Interest in Investing Abroad Growing

04/26/2012 | By Matthew Bechard

Investing abroad appears to be "back on the agenda" of U.S. REITs, according to Bartjan Zoetmulder, tax partner with Loyens & Loeff.

In a video interview last month with REIT.com at REITWise 2012: NAREIT's Law, Accounting & Finance Conference in Hollywood, Fla., Zoetmulder offered his insights on the intricacies of cross-border investment in Europe. When investing in Europe, U.S. REITs are searching platforms that enable them to hold assets in a number of countries, he said. They're finding a more hospitable regulatory climate in the process, he said.

"Has it become easier? To a certain extent," Zoetmulder said. "European laws have become much more integrated."

However, governments have also tightened up their administration programs, according to Zoetmulder: "More countries, due to budget constraints, have also become much more aggressive on looking at substance, for example."

Zoetmulder also advised REITs to bear in mind that their tax status in the U.S. doesn't apply outside the country's borders. As such, they will be subjected to national and local taxes on their activities in European countries. That means accounting for transfer taxes and other such measures, all of which can take a bite out of the U.S. company's margins. REITs also should consider their leverage and depreciation schemes, according to Zoetmulder.

Currency issues also come into play, Zoetmulder added. He noted that it helps for companies to deal in the local currency's hedge risk.

"You try to have your financing as much as possible in the local currency, or at least in the currency of where the real estate is based," Zoetmulder said.