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While real estate syndicates are formed for a variety of reasons, the typical reason is to create a tax shelter. More specifically, the purpose of a Real Estate Investment Trusts or REIT is to reduce

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

or eliminate corporate income taxes. In the United States, where they are generally more widespread as investment vehicles, REIT pay little or no federal income tax but are subject to a number of special req

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

uirements set forth in the Internal Revenue Code, one of which is the requirement to distribute annually at least 90 percent of their taxable income in the form of dividends to shareholders.

The firs

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

REIT was introduced in the United States in 1960. The vehicle was designed to facilitate investments in large-scale income-producing real estate by smaller investors. The US model was simple, enabling small

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

investors to acquire equity interests in vehicles holding large-scale commercial property. In order to ensure that REIT are widely held, they must have at least one hundred shareholders, no five or fewer in

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

ividual shareholders can own more than 50 percent of the equity value of the REIT’s shares, and the REIT must be managed by one or more trustees or directors. At least 75 percent of the gross income of the v

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ehicle must come from real estate related sources, and at least 95 percent of the REIT’s gross income must come from real estate related and other passive income sources.

To maintain competitiveness, many R

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

EIT have distributed in recent times among investors all or even more than their annualized earnings, often resulting in dividend yields comparable to bond yields. This is not, however, a practice that can b

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

sustained for long even during times of appreciation of real capital assets and market values, much less when values are dropping. In fact, if an investment company such as a REIT distributes more than its

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

taxable income, the excess distribution is considered "return of capital" for tax purposes, which is taxed to the individual investors as a capital transaction, rather than regular income. The end result is,

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

therefore, that the distribution requirement may hamper a REIT's ability to retain earnings and generate growth.

Because of this, the shift to privatization is driven by the realization that private buyers

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

will pay more for the company than stock market investors will. In addition, rising costs of being publicly-traded companies are another factor enticing REIT to pull out of the stock market. And finally, bei

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

ng private gives Real Estate Investment Trusts a freer hand to reach out for deals in an increasingly competitive market. The reason is that public companies find it very difficult to grow through acquisitio

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

, as investors invariably do not justify the risk of development alternatives. The combined power of reduced expenses, consolidated pools of capital and abating real property values are exactly the perfect r

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

ecipe for making a kill in real estate – and they are doing it!

The inverse relationship between interest rates and prices of REIT’s shares plays a role as well. On average, it is safe to assume that intere

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

t rate increases are likely to be met by REIT’s price declines in the Stock Exchange, because increasing rates correspond to a slowdown in the economic growth and less demand. But out of the context of the f

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

rantic buy and sell of Wall Street, even slowdown in the market for single-family houses can actually benefit REIT. This is so, because even though real property prices are in decline, it is still cheaper to

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

rent than to own, especially during a period of rising interest rates. And REIT thrive on rentals. No city is a better environment for REIT to operate in than New York City, where some 70 percent of residen

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

s rent.

Bottom line is that the privatization trend has taken off this year, and that it is likely to continue for the next foreseeable future. For a list of the Top 100 US REIT, visit

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

="http://www.forbes.com/2006/02/15/real-estate-REITS-cz_sf_0215reits.html?partner=msn">http://www.forbes.com
/2006/02/15/real-estate-REITS-cz_sf_0215reits.html?partner=msn

Luigi Frascati

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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