Regulations related to lodging real estate investment trusts (REIT), unrelated business taxable income (UBTI) and other policies require that "arms-length" leases among ownership entities (a REIT or OwnCo) and their wholly-owned subsidiaries (a taxable REIT subsidiary or LeaseCo) be structured based on revenue from operations and not operating income. As your investment vehicle acquires lodging and other asset types with operational business components, PwC can assist you.
Lodging and other service-related real estate assets are management intensive and have unique fixed and variable components to their operating revenues and expenses. Knowledge of these revenues and expenses is critical in properly calculating the potential effects on taxable income of changes in such metrics as occupancy or average daily rate.
Understanding that each asset is different, PwC can assist you efficiently account for renovations, seasonality, brand changes and other property-level anomalies, allowing you to assess lease parameters that meet your expectations and minimize fluctuations in tenant income over the term of the lease. Additionally, our sensitivity analyses, which account for deviations in top line performance, help clients develop a level of confidence in their lease parameters.
Our analyses include:
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