The Lexpert Special Editions profiles selected Lexpert-ranked lawyers whose focus is in Corporate, Infrastructure, Energy and Litigation law and relevant practices. It also includes feature articles on legal aspects of Canadian business issues.
Issue link: https://digital.carswellmedia.com/i/133445
24 REITs "THE REIT SECTOR IN PARTICULAR, IN OUR VIEW, IS POPULAR BECAUSE AT SOME POINT IN THEIR LIVES MOST INVESTORS ARE GOING TO OWN REAL ESTATE. SO THE ASSET CLASS IS UNDERSTOOD." them and those who buy them. For the issuers, provided that they comply with Canadian tax regulations requiring REITs to distribute at least 90 per cent of their net taxable income from rents, leases and so on to unit holders, they avoid paying corporate income tax. And unit holders, especially if central bank interest rates remain low in the coming year as expected, can expect superior yield from the distributions REITs pay out, usually monthly. With 10-year GICs paying at most 2.3 per cent at the moment, or Canadian government three- to five-year bonds yielding no more than 1.41 per cent, it's hard to ignore that Canadian REITs returned an average compound annual rate of 16 per cent, 10 points higher than the TSX Composite Index. "The REIT sector in particular, in our view, is popular," suggests Glass, "because at some point in their lives most investors are going to own real estate. So the asset class is understood. It has, as an asset class, exhibited a low correlation to the equity market, so it hasn't been as volatile as the overall market since the global financial crisis." Adds Patricia Koval at Torys: "In Canada REITs have been a poster child for success. When you look at the hallmark of what a REIT is, first of all it is stable and growing cash flow." Add to that, according to Koval, that almost every REIT issue in Canada has been able to deliver those income qualities. "If you look at REITs right now, for instance some that have just come out of the gate as IPOs, they come out of the gate at 7 per cent yield. There is one on the market now offering 9 per cent yield." And there are older REITs delivering 14 and 15 per cent yields. "And these aren't flashin-the pan, quick-turnaround returns, but sustaining high yields with growth potential," adds Koval. Should the Loblaw REIT be successful in raising capital, says Koval, who is acting for the huge grocery chain, expect to see companies with similar models to Loblaw looking to unlock value by offering up their real estate assets through REITs. Pincus, Koval and other lawyers have spoken to agree there are some strong REIT trends emerging in 2013. The primary one, says Pincus, is the "cross-border" REIT. That's a REIT issued on Canadian markets (whether the TSX or through private distribution) that contains both Canadian and US property assets. There are what Pincus – instrumental in creating these difficult-to-design cross-border in- st as fo as ca o an w tr an tr p in o er im is th o u w th A LEXPERT® RANKED LAWYERS RANKED LAWYERS Lloyd, Jeffrey R. Lorito, John G. Blake, Cassels & Graydon LLP (416) 863-5848 jeff.lloyd@blakes.com Stikeman Elliott LLP (416) 869-5272 jlorito@stikeman.com Mr. Lloyd's practice focuses on M&A and corporate finance transactions. He advises purchasers, targets, vendors and financial advisors on M&A transactions and public companies and underwriters on offerings of equity and debt securities. Mr. Lorito is a tax partner focused on cross-border M&A and corporate reorganizations. He represents domestic investment dealers on derivatives and structured products. Past member of CICA/CBA's Joint Committee on Taxation and Tax Panel of the IBC. ROB.indd 24 MacKay-Dunn, QC, R. Hector Farris, Vaughan, Wills & Murphy LLP (604) 661-9307 hmackay-dunn@ farris.com Mr. MacKay-Dunn practises corporate law in a broad range of industries. He focuses on partnering, cross-border and domestic tender offers, securities, M&A and licensing. His clients include companies, investors, investment banks and boards. Mar, Ron McCarthy Tétrault LLP (403) 260-3663 rmar@mccarthy.ca Mr. Mar's practice focuses on strategies intended to maximize the income tax efficiency of businesses. He regularly advises domestic and international clients on cross-border investments and the structure of energy ventures. Marshall, Douglas R. Osler, Hoskin & Harcourt LLP (416) 862-4218 dmarshall@osler.com Mr. Marshall, Co-Chair of the Corporate Group, advises on M&A, corporate finance and governance matters, including domestic and cross-border takeovers, share and asset transactions, privatizations and restructurings and equity and debt offerings. Matlow, David J. Ma Goodmans LLP (416) 597-4147 dmatlow@goodmans.ca Goo (41 nm Mr. Matlow practises corporate finance/ securities, private-equity and M&A law. He acts for public and private companies in a range of transactions, including financings, fund formation, initial public offerings, regulatory matters and divestitures. Mr. on s emp and and mem Advi an a the 13-04-23 12:09 PM