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Real Estate Investment Trusts (REITs) 

The formation and operation of a REIT involves a variety of complex tax, accounting, securities and legal requirements. From organizational and operational matters to distributions and compliance, REITs require special consideration. RSM provides clients with valuable insight on REIT-specific accounting and tax rules, as well as objective guidance to address an ever-changing marketplace and regulatory environment.

Our experience with both public and private REITs across various property types, combined with our commitment to provide, proactive advice and pragmatic, cost-effective solutions can help you stay ahead of industry challenges and capitalize on market opportunities.

Tax

We understand the complexities associated with obtaining and maintaining REIT status and the unique structuring and tax reporting needs of a REIT. This experience helps RSM tax specialists identify and address potential issues so that you can make informed business decisions and design efficient tax strategies. Our tax services include:

  • Federal, state, local and international tax compliance and consulting
  • Tax structuring to accommodate investors and preserve REIT
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  • Preparation or review of quarterly and annual REIT testing
  • REIT property and entity acquisition due diligence
  • Earnings and profits
    • Annual computations and Form 1099-DIV reporting
    • Cumulative historical calculations for REIT conversions
  • Transfer pricing
  • ASC 740 calculations and documentation
  • Analysis of ownership changes and related attribute limitations
  • REIT distribution requirements and cash management strategies
    • Cost segregation studies
    • Planning and implementing tax-free exchanges
  • Umbrella partnership real estate investment trust (UPREIT) compliance and consulting

Due diligence and transaction advisory

When considering an acquisition, you want to ensure it makes good business sense. Leveraging our experience in real estate transactions, we can help you identify the value drivers, REIT pitfalls and deal breakers essential to your investment decision— from acquisitions to dispositions, loan transactions to ongoing property ownership and management. Our due diligence and transaction advisory services include assistance with:

  • Acquisition, financial and tax due diligence
  • REIT spin-offs
  • Initial public offering (IPO) readiness
  • Lease abstraction and lease testing
  • Lease REIT income verification and data validation
  • ARGUS™ cash flow analyses
  • Historical revenue and expense analyses
  • Net operating income and capital expenditures verification
  • Property reimbursement and cost allocation method  pool verification
  • Property accounting system uploads for systems such as MRI, CTI, JD Edwards and Yardi
  • Estoppel certificate preparation and review

Internal controls and risk advisory

Since the Sarbanes-Oxley Act of 2002 (SOX) was enacted, publicly traded companies—including REITs—have had to adjust to tougher reporting requirements, including the evaluation of controls, processes and compliance. Our risk advisory team offers the following services to help REITs mitigate risk and increase the effectiveness of their operations without stifling growth opportunities: 

  • Internal audit
  • SOX compliance
  • Contract compliance
  • Business process control assessments
  • Construction cost audit
  • Information security consulting
  • Information technology audit
  • Property manager audit
  • Service organization control (SOC) reporting

Assurance

Our assurance professionals have extensive experience with the complex financial reporting issues encountered by REITs, allowing you to resolve issues on a timely basis to meet your reporting deadlines. Our services include:

  • Acquisition audits required by SEC Regulation S-X Rule 3-05 (for operating businesses such as hotels) and Rule 3-14 (for real estate properties)
  • Stand-alone building audits
  • Audits, reviews and compilations (of financial statements prepared in accordance with U.S. generally accepted accounting principles, the tax basis of accounting or other special purpose financial reporting frameworks)
  • ASC 805 purchase price allocations

Property and portfolio valuation

An increased focus on independence and governance—along with a number of regulatory changes—has forced many REITs to seek third-party valuation advice. Our team delivers quantitative and qualitative insight on the fundamentals of a real estate entity, asset or portfolio, competitors, and the overall market dynamics that affect value. Our property and portfolio valuation services include: 

  • Independent, third-party valuations of assets for compliance
  • Analyses of the methods, assumptions and data used to develop valuations by REIT management
  • Market and feasibility studies
  • Operating business and intangible asset valuations
  • Operating and portfolio analyses
  • Valuation and purchase price allocation
  • Tax appeals
  • Portfolio benchmarking

How can we help you?

To discuss how our team can help your business, contact us by phone 800.274.3978 or