Real Estate Investment Trust

Real Estate Investment Trust BA 280 February 10, 1999 Fred Cavenaugh, Paine Webber

I. History of Real Estate Investment Trusts (REIT) A. Congressional Intent B. Mortgage REITs C. Birth of "the modern REIT Era"

II. What is a REIT? (IRC § 856-860) A. Corporation or Business Trust B. Elects REIT Status C. Ownership Requirements 1. 100 shareholders 2. 5 or fewer rule D. Asset Tests (Quarterly) 1. 75% Test 2. 25% Test E. Gross Income Tests (Annual) 1. 75% Test 2. 95% Test F. Distribution Requirements

III. Formation Tax Issues A. UPREIT B. Non - UPREIT

IV. Limitations on REIT Vehicle A. Ancillary income B. Lack of retained earnings C. Difficult to recycle capital D. Lack of dedicated investor base V. Definitions A. Funds from Operations B. Cash Available for Distribution C. FFO Multiple D. CAD Multiple E. Dividend Payout Ration F. Street Estimates

VI. Pricing A. Existing REITs B. New REITs

VII. I.P.O. Process A. Meet management B. Feasibility C. Negotiate with partners D. Select Professionals E. Draft Prospectus (Form S-11) F. Prepare Roadshow G. Roadshow H. Pricing Meeting I. Commerce Trading