Improving REIT Acquisition Analysis
Property acquisition due diligence performed by a real estate investment trust requires a deep understanding of the asset class being acquired, the geographical area in which that asset resides, and perhaps most importantly, the normal day-to-day operations of the property.
The ambiguous nature of the REIT rules governing tenant services, including the determination of whether such services rendered are customary, can result in a great deal of uncertainty. However, while tenant services are often the focus, the greater issues may lie in who is performing services at the property, how are they compensated, and what special amenities do tenants enjoy. Ultimately, to the extent revenue generated from impermissible tenant services (ITSI) exceeds 1% for a particular property, all amounts received with respect to such property will not be considered rents from real property.