Practice Areas & Industries: Sutherland Asbill & Brennan LLP


Pension Fund and Tax Exempt Investments Return to Practice Areas & Industries

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Practice/Industry Group Overview

Sutherland helps pension funds and tax-exempt real estate investors navigate their regulated investment environment.

The representation of pension funds and other tax-exempt investors in real estate presents special challenges and requires the application of the distinct experience that Sutherland has acquired over more than four decades. In addition to real estate matters, we focus on regulatory considerations that drive the tax-exempt segment of the real estate investment world. Protecting the tax-exempt status of these investors and investments is our top priority. We familiarize ourselves with the internal policies of funds and the fiduciary duty of responsible parties.

Pension funds are subject to particular issues, such as ERISA matters (including fiduciary issues and plan asset rules), federal income tax (unrelated business taxable income – UBTI), debt financed income (fractions rule), risk management and risk mitigation, state and local tax, transfer taxes, compliance and governmental plan guidelines. Furthermore, where the fund is domiciled may add local law implications.

Nowhere is a strong tax practice more important than in tax-exempt investing, and that has been our firm's focus throughout its history. In addition to federal taxes, we regularly provide advice pertaining to state and local tax issues. Sutherland’s goal is always to assure that the tax-exempt investor will realize the full value and benefit of its tax exemptions.

Why Sutherland
Acquisition and financing experience.
Sutherland has been involved in transactions in this area totaling billions of dollars. In addition to our representation in acquisition and financing transactions, we often provide post-closing continuing legal services, particularly with respect to leasing, state and federal tax issues and ERISA compliance.

Joint venture experience. Sutherland regularly represents institutional, tax-exempt investors in forming joint ventures and other co-investment entities with large private and publicly-traded REITs and private equity funds to acquire commercial real estate projects and portfolios. We also have significant experience in connection with programmatic added value joint ventures with established developers to develop specific classes of assets. These transactions often involve the acquisition and development of portfolios in excess of one billion dollars in asset values.

Adept at equity formation. We regularly handle major equity formation transactions involving tax-exempt investors through joint ventures, syndicated partnerships, private placements and stock offerings.

Litigation. Sutherland has handled a number of litigation matters for pension fund investor clients, including substantial claims for latent defects and construction-related deficiencies, claims for refunds of state and local taxes and other litigation matters. We have found that a national reputation for excellence in litigation often improves chances of settlements before litigation is needed.

ERISA issues. For more than 30 years, we have advised pension plan sponsors and funds on compliance with applicable Department of Labor legal requirements. We currently provide experienced counsel on the full range of legal issues raised by pension investments, management and other arrangements for over 100 private employers, Fortune 100 and 500 companies, as well as major public and private pension plans.

Thought leaders. Our real estate lawyers are active members of key legal and professional associations, including the American College of Real Estate Lawyers, the American College of Mortgage Attorneys, NAIOP, ICSC, ULI, PREA and national, state and local bar association sections and committees.

Nuts and Bolts
The representation of tax-exempt investors in real estate presents unique challenges and requires the application of special analysis in the following areas:

  • Property operations to minimize unrelated taxable business income
  • Financing structures
  • Prohibited transaction rules
  • Plan asset rules
  • Structuring transactions
  • Qualification as real estate operating companies (REOC) or venture capital operating companies (VCOC)
  • Organization of title holding entities and title holding entity structures
  • Securing IRS determination of tax-exempt qualification for title holding entities
  • The fractions rule
  • State and local laws
  • Securities lending by a plan
  • Allocation of voting responsibility for stock owned by a plan
  • Joint investment by a plan and a party in interest
  • Timber and agribusiness investment and financing transactions
  • Pooled real estate investment vehicles
  • Fixed return products
  • Bank collective trust funds, variable insurance products and mutual funds

In mortgage-lending transactions, we advise tax-exempt sponsors of debt funds in all types of financing, including:

  • Construction and permanent loans
  • Multistate financings
  • Leasehold financing
  • Sale/leaseback transactions
  • Short-term variable rate financing
  • Participating mortgages
  • Subordinate and wrap-around financing
  • Mezzanine debt financing

Take Action
Sutherland protects the investors' tax-exempt status with an approach that goes beyond the usual financial considerations and focuses on the unique, regulation-driven challenges this class of real estate investor faces—ensuring the client receives the full benefit from its tax-exempt status.

Selected Experience
Sutherland represents the Florida State Board of Administration.
Sutherland handles a wide range of financial transactions on behalf of the Florida State Board of Administration as well as a large debt fund sponsored by the Board. The Board manages over 30 funds, some established as direct requirements of Florida law and others developed as client-initiated trust agreements.

Sutherland represents a major public employee pension plan in assembling two large portfolios of agribusiness properties.
Sutherland's major public employee pension plan client assembled two large portfolios of agribusiness properties, valued at approximately $300 million. Sutherland is now working with the client to expand the portfolio and to modify the existing management and advisory arrangements to facilitate the increased mandate.

Sutherland represents a private pension fund investor in a high-rise, central business district, office building investment in Miami.
Sutherland represents private pension fund investors and their discretionary advisers in connection with commercial real estate investments.