Andrea Whiteway, principal at EY, participated in a video interview in conjunction with Nareit’s REITwise: 2023 Law, Accounting & Finance Conference held March 21-23 in Phoenix, Arizona.
Whiteway said that anti-abuse rules implemented in 2019 by the IRS are one of the issues that REITs, and especially UPREITs, need to be aware of when it comes to partnership liability allocations.
“The anti-abuse rules set forth factors that the government can look at to recast and recourse debt obligation as non-recourse,” she said. “The second part of that anti-abuse rule was a requirement that there would be a reasonable likelihood of payment by the obligor of that obligation in order for it to be respected.”
Whiteway added that five to 10 years ago, there was a trend where public REITs were forming joint ventures with sovereign wealth funds and foreign pension funds because it was seen as an attractive cost of capital.
“It may well be [now] that transactional flow has slowed down, and I think once the debt markets settle out and interest rates level off, we might see an additional trend there,” she said. “Obviously sovereign wealth funds and qualified foreign pension funds have a lot of capital that they are still looking to deploy.”
Whiteway also said that attorneys at law firms have day-to-day, direct contact with their clients; but for attorneys working at accounting firms, the day-to-day connection is missing—although the issues are more difficult and the questions that arise are more sophisticated.