Barriers to Reit spin-off success

Author: Gemma Varriale | Published: 10 Sep 2014

US telecommunications company Windstream Holdings' spin off of assets into a publicly traded real-estate investment trust (Reit) marks the fourth tax-free Reit spin-off in less than two years. More are in the pipeline, but the regulatory barriers to conversion mean the structure only makes sense for certain companies.

Windstream Holdings will spin off its fibre and copper networks, as well as other real estate, into a Reit. This will lease use of these assets back to Windstream through what is known as an opco-propco structure.

"These deals couple a corporate spin-off that takes one company and divides it into two with a Reit conversion where a company converts from a regular operating company into a reit," said Neil Barr, a tax partner with Davis Polk & Wardwell in New York.