For Immediate Release
May 17, 1999
Laura Armstrong or Jay Hyde
Washington, D.C. -- U.S. Senators Connie Mack (R-Fla.) and Bob Graham (D-Fla.) have introduced legislation that would modernize outdated real estate investment trust (REIT) rules that prevent REITs from offering the same types of services as their competitors.
Mack and Graham were joined by 17 other Senators in sponsoring the Real Estate Investment Trust Modernization Act of 1999. The measure, S. 1057, has the support of over two-thirds of the Senate Finance Committee.
Identical legislation (H.R. 1616) was introduced in the House of Representatives on April 29. The centerpiece of the two measures is similar to a proposal included in the President's Fiscal Year 2000 budget and the proposed legislation has the support of the entire REIT industry, according to Steven A. Wechsler, President and Chief Executive Officer of the National Association of Real Estate Investment Trusts® (NAREIT).
In a letter to Senate colleagues, Mack and Graham explained that under current law, REITs may provide only "customary services" to their tenants and must adhere to what the two Senators called "unworkable distinctions that defy logic and impede competitiveness. For example, REITs can have parking lots for shopping centers or offices they own, but cannot directly offer valet parking. REITs can own apartments, but cannot directly provide lifeguards or amenity services such as dog walking. Yet REIT competitors can - and do - provide all these services without any restrictions. As a result, REITs are increasingly placed at a competitive disadvantage," they wrote.
"This legislation would enable REITs to evolve while ensuring that they remain real estate oriented," Wechsler remarked. "It also would conform a REIT's distribution requirement to the 90% standard applicable to mutual funds. A return to this standard, which was in place from 1960 to 1980, would allow REITs to retain more after-tax capital. This increased flexibility is important because REITs are so capital intensive."
In addition, S. 1057 would provide health care REITs the opportunity to line up operators of health care facilities in certain circumstances.
Martin E. (Hap) Stein, Jr., Chairman and CEO of Jacksonville-based Regency Realty Corporation, said "Antiquated REIT rules have prevented us from offering the same 'leading-edge' services as our competitors and from providing services to third parties in an efficient manner. This legislation would untie our hands and allow us to create taxpaying subsidiaries to meet increasing tenant and third party needs."
"With REIT properties in the state valued at over $13 billion, publicly traded real estate is a big part of Florida's economic landscape," according to Gary Ralston, President and COO of Orlando's Commercial Net Lease Realty, Inc. "We appreciate our Senators' acknowledgement of the beneficial impact of REIT investment in Florida communities and their desire to see us become even more competitive -- here and throughout the nation."
The measure also has the support of the National Association of Realtors, International Council of Shopping Centers, the Mortgage Bankers Association of America, the National Apartment Association, the National Multi-Housing Council, National Association of Industrial and Office Properties, the American Resort Development Association, the American Seniors Housing Association and the National Realty Committee.
"The publicly traded real estate industry commends Senators Mack and Graham for their leadership in modernizing REIT rules. And we encourage the Senate to include this bill in any tax legislation it approves this year," Wechsler added.
For more detailed information on S. 1057, visit the Government Relations section of www.nareit.com.
The National Association of Real Estate Investment Trusts® (NAREIT) is the national trade association for real estate companies. Members are real estate investment trusts (REITs) and other businesses that own, operate and finance income-producing real estate, as well as those firms and individuals who advise, study and service those businesses. Visit our web site at www.nareit.com.