Thanks to recent legislation regarding the structure of real estate investment trust (REIT) ownership of health care facilities, restrictions on REIT ownership have been modified to the benefit of REITs.
A taxable REIT subsidiary may now lease a health care facility directly from its parent REIT, hold the licenses applicable to operating such a facility, and then use an independent contractor to operate the facility.
Formerly, REITs had to lease a health care facility through a third-party tenant, who would then utilize an independent contractor to manage the facility. This new legislation allows REITs to stop using third-party tenants as accommodation parties and thus enjoy the cost savings associated with eliminating what in some cases is an unnecessary party from the health care facility ownership structure.
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Michael A. Okaty