Investing in REITs: Real Estate Investment Trusts, 4th Edition

REIT Modernization Act and RIDEA

In December 1999, President Clinton signed into law the REIT Modernization Act (RMA). The most important feature of this new legislation enables every REIT organization to form and own a “taxable REIT subsidiary” (TRS). Thus, a REIT, through ownership of up to 100 percent of a TRS, can develop and quickly sell properties and provide substantial services to its property tenants, as well as others, without jeopardizing the REIT's legal standing; this had been a major issue in the past. This law also greatly expanded the nature and extent of activities that a REIT may engage in, which may now include concierge services to apartment tenants, “merchant” property development, and engaging in a variety of real estate–related ...