Each ruling issued by the IRS with respect to a REIT conversion has simply confirmed that the taxpayer’s assets are real estate, an often misunderstood asset class.

Many fellow financial bloggers and columnists have even suggested that the IRS is expanding the REIT rules to allow companies outside the intended parameters of REIT status to become REITs. Some critics even argue that having too many REITs could be harmful to the economy and that Congress may one day shut them all down.

That’s ridiculous. The true demand for increased REIT formation has been in direct response to the demand for yield-producing investments – at a time when alternative investment returns are at record lows. It really boils down to the quest for yield, as fixed income investments are in short supply due to the Federal Reserve’s policy of quantitative easing (and record low rates).

Conversely, for many investors, REITs have always presented a unique investment alternative across a wide range of sectors : Hotels. Self-Storage, Data Centers, Restaurants, Casinos, and even Prisons have always been able to transfer real estate that they own into a REIT (if they separate their active business operations into a taxable entity).

So to be clear, the definition of “real estate” has NOT changed. The increase in the number of companies electing to become REITs is attributable to one simple thing: the current economic climate.

(Photo by Alexander Koerner/Getty Images)

Welcome to the Bold New World of Electric Power Distribution

On January 30^, 2015 InfraREIT (HIFR), a Texas-based electric transmission entity, became the first utility company to convert to a REIT structure.

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