Here's a Way to Cut Business Taxes: Tech Firms Become Real Estate Trusts

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Corporate-Americans scamming on paying their fair share of taxes

Here's a Way to Cut Business Taxes: Tech Firms Become Real Estate Trusts

Companies in technology and related fields are testing a way to avoid paying taxes: persuading the government that their real business is real estate.

American Tower Corp., AMT +0.72% which operates cellphone towers, will save more than $400 million a year by 2017, analysts estimate, thanks to its new tax status as a real-estate investment company. Equinix Inc, EQIX +2.32% whose warehouses are full of computer servers, is expected to avoid taxes of around $150 million a year. Iron Mountain Inc., IRM +0.52% which helps clients shred do ents and store data, may save nearly as much.

The key: getting approval from the Internal Revenue Service to convert from a corporation into a real-estate investment trust, a type of company that generally doesn't pay taxes.
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As both traditional landlords and an increasingly diverse array of other businesses have adopted the structure, the total market value of REITs jumped to $451 billion in 2011 from $9 billion in 1990, according to the National Association of Real Estate Investment Trusts.

Investors typically cheer when companies turn themselves into REITs. But some real-estate executives and analysts worry that the new wave of applicants—including a pair of companies that run private prisons—could spark a political backlash at a time when deficits and taxes are high on Washington's agenda.

"The real-estate companies correctly are nervous about this phenomenon," says Kenneth T. Rosen, a real-estate economics consultant and former manager of a hedge fund that invested in REITs. "The more it looks like a tax loophole, the more likely it is to affect them negatively."
That concern came to the fore last month after Jim Taiclet, American Tower's chief executive,touted the tax benefits of his company's conversion to a REIT in a television interview on business channel CNBC.

http://online.wsj.com/article/SB1000...778578720.html

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What’s at Stake in the Fight Over a REIT

If you want to see one possible dystopian future for takeovers, you should take a gander at what is going on in the takeover bid for CommonWealth REIT, a real estate investment trust that owns more than 500 office buildings. It’s not pretty, and it’s all a result of CommonWealth’s claim that all its disputes with shareholders must be arbitrated.

In some ways, the contest for CommonWealth is a fairly normal hostile bid with heated rhetoric, lots of litigation and managers who have grown rich from operating the company and who do not appear to want to go quietly.

In February, Corvex Management, a hedge fund headed by a former employee of Carl C. Icahn, and the Related Companies announced the acquisition of 9.8 percent of CommonWealth and an offer for the REIT at $25 per share, threatening to go hostile if CommonWealth failed to enter into negotiations to sell to the two new shareholders. The two shareholders also demanded that CommonWealth halt a stock offering of 27 million shares.


http://dealbook.nytimes.com/2013/04/...onwealth-reit/