Maryland and their REIT's

April 19 2016

Maryland and their REIT's

Maryland has several great qualities, crabs, Cal Ripken and The Wire, just to name a few.  From a business perspective, it is a friendly place to incorporate especially if you are a REIT.  Unofficially known as the "Delaware for REITS", this corporate-friendly state has been proactive about attracting these corporate structures since the early 1960's.

So, what the hell is a REIT, and why is Maryland so good for them?

A Real Estate Investment Trust aka REIT, is a way for people to invest in real estate like apartment buildings, offices, hospitals, malls, hotels etc.  Depending on the REIT, it may concentrate on specific property types (office complex vs shopping mall) or it may diversify.  Investors own shares in it, can trade it and get paid dividends.  They can be bought and sold just like stocks.  It's sort of like a mutual fund for real estate.

What makes REITs attractive is that at least 90% of its earnings have to be distributed back to shareholders.  So if you are looking for an income-based investment, these are for you. 

Back in 1962, Maryland created 'state' statutes that took the Federal legislation even further (that being passed a couple of years earlier).  With these state statutes, the REIT's are better protected against a hostile takeover (i.e. Simon Property Group trying to acquire Macerich in March 2015), more flexible voting provisions and liability protection (like a corporation or LLC would offer). 

These statutes have helped Maryland become third on the list of states for companies to incorporate in (Delaware and Nevada being 1 and 2 respectively).

Today's tables:

1 and 2: % of Maryland REITS vs Total US REIT Incorporation (taken from SEC EDGAR filings)

3:  U.S. Publicly traded Announced REIT acquisitions over $10 mil (SIC code 6798).

1

2

3

Data provided by Spectrum Analytics LLC

 Not a lot of M&A or executive compensation data today, but an interesting topic.
Mark Siciliano (msiciliano10@gmail.com)

Never forget to cite your sources!!!

Harlan, H. (2000). Maryland is the right place for plenty of REITs. Washington Business Journal, 18(47), 18. 

Sherman, N. (2015, Sep 05). For some businesses, Maryland is actually very friendly. TCA Regional News