REIT M&A Transactions - Peculiarities and Complications

The emergence of REITs and the continuing consolidation in the real estate markets have resulted in an ongoing stream of mergers and acquisitions involving publicly traded REITs. While M&A transactions involving public REITs have much in common with M&A transactions involving other public companies, the special tax rules applicable to REITs and other peculiarities tend to complicate REIT transactions, often in unexpected ways. Business and strategic objectives typical of other industries often face friction in the REIT world, in both friendly and unsolicited transactions. This Article examines some of the peculiarities and complications which are unique to REIT transactions, with special focus on the effectiveness of REIT charters' ownership restrictions as takeover defenses (including a comparison with poison pills), special conflict of interest issues that arise in change of control transactions involving certain REITs, and various REIT tax qualification rules which raise potentially complex issues for prospective acquirers of REIT shares.