New legislation, the Protecting Americans from Tax Hikes Act of 2015, halts tax-free REIT spinoffs and reforms the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)—which had been regarded by the commercial real estate community as impeding foreign investment in real estate in the United States. These changes have been regarded as the most significant in the 35-year history of FIRPTA, and may spark measurable, new foreign investment in U.S. real estate assets.

According to Wayne Strasbaugh, who described the legislation as “a little harsh” for the provisions that limit REIT spinoffs, there still will be a few spinoffs this year as applications prior to December 7, 2015, are allowed to proceed.

“Why should a public investor not be able to access real estate investment? REITs have always provided a way to do this,” he said. “The fact that the real estate has had some prior history of being within [a larger company], why should that somehow foreclose investors from getting into that market?... The idea that you can break up business and benefit shareholders—I think that’s a good principle. If shareholders want to get into pure-play investments, REITs are one way to do that.”

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