Arleen Jacobius of PIonline.com reports on institutional investors entering into joint ventures with REITs to as an alternative to direct real estate investments: Joint Ventures Emerging as New Vehicle for REITs.
The nice match of pension funds and REITs is that they are both used to dealing with the complexities of the tax code and other regulatory schemes that affect their investments in real estate. The rules for REITs on their income tests and asset tests are similar to the UBIT rules in compliance.
The pension funds get the benefit of a large professional REIT manging and operating the portfolio, but the additional control rights they would expect if they own the real estate outright. In exchange for the convenience of not having day-to-day management of the asset, they trade a piece of the upside on the real estate by giving the REIT a promote on the increase in value of the property.
I see that the article also quotes Steve Lyons of Reed Smith. Steve and I have worked together on a few REIT joint ventures.