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More retailers could end up in the coffers of their mall landlords if a bill introduced in the U.S. House of Representatives last month gains any traction. Proposed changes to the idiosyncratic rules governing publicly traded real estate investment trusts (REITs), which have bipartisan support, are being touted as good for retailers, though so far the backers are mostly landlords and their industry groups.
The spare text of the legislation belies how radically it would change REIT tax rules. Those are already complex and entail a host of limitations about their operations, though in return is a nice trade-off: REITs are also largely tax-exempt. If a REIT runs afoul of the rules, it falls out of REIT status, and may be liable for a hefty corporate income tax bill.
The share price of Sunstone Hotel Investors, operator of 17 hotels with over 19,000 rooms in mostly coastal areas, grew 20 percent last month. It was the stock’s best month of the pandemic except for November, when initial results of Covid-19 vaccine trials were announced.
The pandemic forced hotel REITs to conserve cash at a time when, according to Darling, operating income has fallen more than 100 percent.
Sunstone recently sold a 502-room property outside Los Angeles International Airport for $92.5 million, one of the largest pandemic-era deals of its kind, and handed ownership of the Times Square Hilton hotel in New York City back to its lender.