Extract to table

The most significant of these conditions is the arm's-length requirement of IRC § 856(d)(7)(B), which mandates that the rents paid by the TRS must be substantially comparable to rents paid by other tenants for comparable space on the same or similar properties, or, if no comparable tenants exist, must be consistent with normal business practice in the area

The asset tests are measured at the close of each calendar quarter, and a REIT must satisfy all of the applicable tests at each such testing date to maintain its REIT status

Section 856(l)(2) sets forth a limitation providing that a TRS shall not directly or indirectly operate or manage a lodging facility or a health care facility

The asset tests must be satisfied at the close of each calendar quarter of the REIT's taxable year

However, if a REIT acquires assets during a quarter that would cause a failure of the asset tests at the close of that quarter, the REIT must either dispose of the offending assets or take other corrective action before the quarter-end to avoid a failure

This quarterly testing framework is significant for Fairwater's proposed transaction because the timing of the acquisition and the concurrent asset dispositions must be coordinated to ensure that all asset tests are satisfied at the close of the calendar quarter in which the transaction closes