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Survey: REITs worries include taxes, interest, mergers


Chicago – Real estate investment trusts (REITs), which represent a sizable share of retail real estate activity, are worried about possible increases in interest rates. According to a report by consulting firm BDO USA LLP, 97% of REITs mention risks related to increases in interest rates and hedging.

This is up from 90% in 2014 and 88% in 2013, according to the 2015 BDO RiskFactor Report for REITs, which analyzes the most recent SEC 10-K filings for the 100 largest publicly traded REITs in the U.S.

Nearly all REITs (97%) also mention risks associated with mergers and acquisitions, joint ventures and partnerships in the report, up from 85% in 2014. Ninety-nine percent of REITs mention tax laws and increases in rates as a risk, up from 85% in 2014.

Other top concerns of REITs include competition for prime real estate (98%), environmental liability (92%), natural disasters, war, conflicts and terrorist attacks (90%), cybersecurity (89%), operating expenses and costs of capital improvements (88%), and property development and construction activity (80%)

Additionally, mention of risks related to internal controls, financial reporting and accounting rule changes also continues to rise, with 73% of REITs citing it as a risk this year, up from 50% in 2014, and 36% the year before. Forty-five percent of respondents say uncertainty about foreign, federal and state tax legislation is the primary tax issue they face at this time.

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