Legal Counsel Getting More Involved in REIT Operations, Lawyer Says

Pardis Zomorodi, partner at the law firm of Latham & Watkins LLP , joined REIT.com for a video interview at NAREIT’s 2013 REITWise 2013: NAREIT’s Law, Accounting & Finance Conference in La Quinta, Calif.

Latham & Watkins specializes in REIT transactions, handling all aspects of a REIT’s formation and operation.

Zomorodi discussed how she responds to clients who fear they may have violated one of the REIT legal requirements, putting their REIT status in jeopardy.

“The first thing I do is tell them, ‘Don’t panic, and let’s figure out if you’ve even, in fact, violated a requirement,’” she said. “Even if you do have a problem, there are so many cure provisions available statutorily and other ways, chances are you’re not going to lose your REIT status.”

Zomorodi also discussed how REITs can establish reasonable cause in such cases.

“In order to have reasonable cause, the REIT needs to have acted with ordinary business care and prudence. The REIT has to have made a good faith effort to learn about the REIT requirements and to try to comply with them. It means having a system of checks and balances in place that allows the REIT to not only identify foot faults and prevent them, but also when they identify them to cure them in a timely manner,” she said. “Another way that a REIT can have reasonable cause is to get a written opinion of counsel on an issue.”

Zomorodi described the most common concern expressed by her REIT clients.

“I think the most common concern is diligence readiness,” she said. “In the past, the time between when a REIT decided it was going to do a stock offering and the time that the stock offering actually launched tended to be longer, so they had more time to get their ducks in a row. These days they don’t have that luxury.”

Zomorodi added that “the practical implication is that REITs tend to have counsel more involved in day-to-day operations.”