Ezra Dyckman, partner at Roberts & Holland LLP, sat down for a video interview at Nareit’s REITwise: 2026 Educational Conference in Hollywood, Florida on March 24-26.
Dyckman highlighted overlooked risks in REIT operating partnership (OP) transactions that can impact property owners both immediately and years later. Upfront, “disguised sale” rules pose a major hazard: if a REIT’s operating partnership pays deal costs or transfer taxes on behalf of the owner, it may be treated as cash received—potentially triggering unexpected taxable events and debt complications, he explained.
Long term, Dyckman emphasized the importance of Section 704(c) “built-in gain.” While this tax burden diminishes over time, it can still expose owners to significant taxes if a property is sold early. At the same time, as the gain burns off, owners may lose valuable debt allocation—creating a tradeoff that is often underappreciated.
In loan workouts, REITs face unique challenges because cancellation of debt income is generally taxable at the corporate level, with fewer relief provisions than those available to individuals, Dyckman said.
Finally, joint ventures—especially with foreign investors—introduce compliance complexities. REITs must carefully manage income qualification rules, particularly when they lack control or use preferred equity structures, which can create unintended tax exposure despite resembling debt economically, Dyckman noted.