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1875 I Street, NW, Suite 600, Washington, DC 20006-5413

Phone 202-739-9400 Fax 202-739-9401 REIT.com

NATIONAL 

ASSOCIATION 

OF 

REAL ESTATE

INVESTMENT

TRUSTS®

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REITS:

BUILDING 

DIVIDENDS 

AND 

DIVERSIFICATION®

July 21, 2015

VIA Email: e-ORI@dol.gov and e-OED@dol.gov

 

Office of Regulations and Interpretations

Office of Exemption Determinations

Employee Benefits Security Administration 

U.S. Department of Labor 

200 Constitution Ave., NW 

Washington, DC 20210 

Re: Definition of the Term “Fiduciary” (RIN 1210-AB32); 

Best Interest Contract Exemption (ZRIN 1210-ZA25)

Ladies and Gentlemen: 

Thank you for the opportunity to review the Department’s regulatory package 

expanding the definition of fiduciary investment advice and preventing conflicts 

of interest in advice provided to ERISA-covered retirement plans and Individual 

Retirement Accounts (“IRAs”). 

We share the Department’s goal of improving the quality of investment advice 

provided to plans, plan participants and IRA owners. Retirement investors 

should receive advice in their best interests. We believe that this goal is best 

achieved without limiting retirement investors’ access to the full range of 

investment products and services available to plans and IRAs. 

One of the legal obligations of a prudent investment fiduciary is to diversify 

investments within the investment portfolio, taking into account the role various 

asset classes play within the portfolio’s investment strategy.1 Preserving the 

ability of retirement plan investors and their advisors to construct portfolios 

from a wide array of asset classes, including a broad range of real estate 

investments, is vitally important to proper diversification

About REITs:

REITs were established by Congress in 1960 to enable all Americans to enjoy 

the benefits of investment in real estate. There are two main types of REITs, 

generally referred to as equity REITs and mortgage REITs. Equity REITs invest 

in “bricks and mortar” real estate by acquiring leasable space in properties, such 

as apartments, shopping malls, office buildings, and other properties, and 

collecting rents from their tenants. Mortgage REITs primarily invest in 

 1 See ERISA §404(a)(1)(C) and 29 CFR §2550.404a-1(b).
Employee Benefits Security Administration 

July 21, 2015

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1875 I Street, NW, Suite 600, Washington, DC 20006-5413

Phone 202-739-9400 Fax 202-739-9401 REIT.com

mortgages and mortgage-backed securities, providing financing for residential 

and commercial properties. More than 2 million single-family homes are 

estimated to be currently financed by mortgages owned by mortgage REITs. 

REITs in the United States may be public companies whose securities are 

registered with the Securities and Exchange Commission (SEC) and listed on a 

stock exchange (so-called Listed REITs); public companies whose securities are 

registered with the SEC, but which are not listed on a stock exchange (socalled, “Public Non-Listed REITS” or PNLRs); or private companies2

. At the 

end of June 2015, 327 REITs were registered with the SEC, and 229 of these 

REITs were Listed REITs on U.S. stock exchanges, primarily the New York 

Stock Exchange (NYSE).

Like Listed REITs, PNLRs own, manage and lease investment-grade, incomeproducing commercial real estate in nearly all property sectors. PNLRs are 

subject to the same IRS requirements that a Listed REIT must meet, including 

distributing all of their taxable income to shareholders annually to be subject to 

just one level of taxation. In addition, PNLRs are required to make regular SEC 

disclosures, including quarterly and yearly financial reports. All of these PNLR 

filings are publicly available through the SEC’s EDGAR database. PNLRs are 

primarily sold by broker-dealers registered with and regulated by the SEC, the 

Financial Industry Regulatory Association (FINRA), and the relevant state 

securities regulatory authorities.

About NAREIT:

The National Association of Real Estate Investment Trusts (“NAREIT”) is the 

worldwide voice for REITs and real estate companies with interests in U.S. real 

estate and capital markets. NAREIT’s members are REITs and other real estate 

businesses throughout the world that own, operate and finance commercial and 

residential real estate.

PNLRs participate at NAREIT through the Public Non-Listed REIT Council 

(the “PNLR Council”), which consists of 44 NAREIT PNLR corporate 

members. The mission of the PNLR Council is to advise NAREIT’s Executive 

Board on matters of interest and importance to PNLRs.

NAREIT’s PNLR Council has carefully reviewed the proposed regulation 

redefining fiduciary investment advice under ERISA §3(21)(A)(ii) (the 

“Proposal”),3 and the new proposed prohibited transaction class exemption, the 

 2 Private REITs are not traded on stock exchanges or registered with the SEC. They are 

regulated by the SEC, and are sold to accredited investors under Regulation D and to qualified 

institutional buyers (QIBs) under Rule 144A.

3 80 Fed. Reg. 21,928 (Apr. 20, 2015).
Employee Benefits Security Administration 

July 21, 2015

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1875 I Street, NW, Suite 600, Washington, DC 20006-5413

Phone 202-739-9400 Fax 202-739-9401 REIT.com

Best Interest Contract Exemption (the “BIC Exemption”),4 and has developed 

the attached comment letter for submission and consideration by the 

Department.

NAREIT and its PNLR Council look forward to working with the Department as 

it continues its work on this important regulatory project, and we would be 

pleased to answer any questions the Department may have.

Please feel free to contact me if you would like to discuss our positions in 

greater detail.

Respectfully submitted,

Steven A. Wechsler

President & CEO

 4 Id at 21,960.