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But are the shareholders demanding something reasonable? I've looked into this and can't find anything that isn't just a trick to make the books look better.

by R0b0t1 6y ago

lmm 6y ago
A basket of options is worth more than an option on a basket; that's not just accountancy. Shareholders would rather the business and the building were in separate pockets so that if one loses money they can walk away from it and keep everything from the other.
CountSessine 6y ago
Reasonable is whatever you want it to be. Shareholders want the share price to go up, and they can make life difficult for the board and the management team. It's awful, but as a shareholder, once that real estate has been sold, the share price went up, and you've liquidated your position, do you really care what happens next?
Scoundreller 6y ago
Shovelling the real estate to a REIT does make the books better. Pension plans will pay more money for real estate in a REIT than a Corp because pension plans don’t pay taxes, and REITs don’t either (when the recipient is a pension). Sometimes the “sale” is a separate fund and they simply give each shareholder a REIT unit for every share they have. Big corps with high family ownerships like these anyway because it helps isolate the RE from getting dragged down by the retail division. And it provides this diversification via tax-deferred spin-off.
bregma 6y ago
Land generates no revenue on its own. Shareholders are not interested in 100 square feet of dirt. They're interested in a slice of the revenue generated by seeking rent on the dirt someone else is using.
- R0b0t1 6y ago
  Ownership provides insulation from cash flow problems. It seems like it's just a book trick and real estate speculation is so lucrative that any investor wants to optimize businesses against their best interest as long as they own real estate.
  - kmeisthax 6y ago
    In the defense of the "spin off a REIT" crowd, a business with cash flow problems is making uneconomic use of commercially zoned land by keeping restauraunts nobody owns on it, and could make more money by either selling or renting the land to a more profitable competitor. My personal retort to that would be some long-winded complaint about how America's cities deliberately mismanage land to inflate it's value, but radical political explanations don't make businesses profitable. If the land is going to be ridiculously expensive, you might as well try to make something off of it, eh? That doesn't excuse the fact that most restauraunt REITs are nearly-transparent scams for well-connected shareholders to siphon off land from valuable businesses, though.

But are the shareholders demanding something reasonable? I've looked into this and can't find anything that isn't just a trick to make the books look better.

by R0b0t1 6y ago

But are the shareholders demanding something reasonable? I've looked into this and can't find anything that isn't just a trick to make the books look better.

lmm 6y ago

A basket of options is worth more than an option on a basket; that's not just accountancy. Shareholders would rather the business and the building were in separate pockets so that if one loses money they can walk away from it and keep everything from the other.

CountSessine 6y ago

Reasonable is whatever you want it to be. Shareholders want the share price to go up, and they can make life difficult for the board and the management team. It's awful, but as a shareholder, once that real estate has been sold, the share price went up, and you've liquidated your position, do you really care what happens next?

Scoundreller 6y ago

Shovelling the real estate to a REIT does make the books better. Pension plans will pay more money for real estate in a REIT than a Corp because pension plans don’t pay taxes, and REITs don’t either (when the recipient is a pension). Sometimes the “sale” is a separate fund and they simply give each shareholder a REIT unit for every share they have. Big corps with high family ownerships like these anyway because it helps isolate the RE from getting dragged down by the retail division. And it provides this diversification via tax-deferred spin-off.

bregma 6y ago

Land generates no revenue on its own. Shareholders are not interested in 100 square feet of dirt. They're interested in a slice of the revenue generated by seeking rent on the dirt someone else is using.

R0b0t1 6y ago
Ownership provides insulation from cash flow problems. It seems like it's just a book trick and real estate speculation is so lucrative that any investor wants to optimize businesses against their best interest as long as they own real estate.
- kmeisthax 6y ago
  In the defense of the "spin off a REIT" crowd, a business with cash flow problems is making uneconomic use of commercially zoned land by keeping restauraunts nobody owns on it, and could make more money by either selling or renting the land to a more profitable competitor. My personal retort to that would be some long-winded complaint about how America's cities deliberately mismanage land to inflate it's value, but radical political explanations don't make businesses profitable. If the land is going to be ridiculously expensive, you might as well try to make something off of it, eh? That doesn't excuse the fact that most restauraunt REITs are nearly-transparent scams for well-connected shareholders to siphon off land from valuable businesses, though.