Tuesday, September 18, 2007

NovaStar no longer a REIT

NovaStar has decided not to distribute a $157 million dividend related to its 2006 income. As a REIT (Real Estate Investment Trust), NovaStar would have to distribute at least 90% of its income to shareholders, but the company is dropping its REIT status, thus losing some tax exemptions. The company is also in danger of suspension or delisting from the NYSE due to the change in its status, but officials said the company is “in continuing discussions with the NYSE”.

Back in February, NovaStar said it was considering dropping its REIT status, but this summer it announced plans to distribute dividends to satisfy REIT distribution requirements. The new decision suggests that those plans are no longer relevant. The termination of NovaStar’s status is retroactive, effective January 1, 2006.

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