NexPoint Trust proposes to be a dual US REIT/non-SIFT MFT holding U.S. hotels
Nexpoint Hospitality Trust (the “REIT”) is proposing to use the proceeds of an IPO to invest in 11 U.S. hotels. An affiliate of its advisor also is the advisor to the NYSE-listed NexPoint Residential Trust. The hotels will be held through an LLC that will elect to be a REIT for Code purposes. In order to comply with the U.S. REIT rules, the hotels will be leased to a taxable REIT subsidiary and will be managed by a third party manager. Part of the consideration received by affiliates of the Advisor for transferring the hotels into the structure will be Class B redeemable units of the hotel LLC owner. The REIT itself will elect to be a REIT for Code purposes. There will be a resulting prohibition against any unitholder or deemed unitholder holding more than 5% of its units.
For Canadian SIFT taxation purposes, the REIT will rely on not holding any non-portfolio property. Anticipated distributions may be sufficient to avoid significant issues arising under the FAPI rules.
Neal Armstrong. Summary of Nexpoint Hospitality Trust Circular under Offerings – REIT and LP Offerings – Cross-Border REITs.