Delavaco has decided to go public as a public company rather than a REIT or LP

Delavaco, which is a privately-held Ontario corporation holding US single-family rental homes through Delaware partnerships, will be going public by merging into a small capital pool company (Sereno) under a triangular amalgamation with a Sereno subsidiary, so that Delavaco shareholders will receive approximately 99% of the shares of Sereno (whose name will be changed to Delavaco Residential Properties Inc.)

This transaction represents a change of heart from May 2013, when Sereno and Delavaco entered into a letter of intent for the acquisition by Sereno of all the Delavaco shares pursuant to a plan of arrangement, and for Sereno’s subsequent conversion into a REIT.

It likely would be advantageous for the new public entity to be a flow-through entity for Canadian and US purposes if the US operations could also be held in a US private REIT (see American Hotel and Granite).  However, such a structure might restrict options for disposing of the homes (and some have occurred already in Delavaco’s short life).  A US private REIT is subject to a 100% tax on any net income derived from the sale or other disposition of "dealer property" (other than foreclosure property), i.e., real estate held by the taxpayer primarily for sale to customers in the ordinary course of business.

Neal Armstrong and Abe Leitner.  Summary of Joint Delavaco and Sereno Circular under Mergers & Acquisitions – Amalgamations - Triangular Amalgamations.