Iron Mountain Shares Plummet On REIT Conversion Risks


Iron Mountain Incorporated (NYSE:IRM) shares fell as much as 15 percent in trading on Friday after it was revealed that the Internal Revenue Service is scrutinizing the firm’s plans to convert into a real estate investment trust (REIT).


JPMorgan’s Response to Iron Mountain’s Problem

JPMorgan analysts Andrew C. Steinerman, Jeffrey Y. Volshteyn and Molly R. McGarrett issued a report to investors providing more explanation for the intensified scrutiny from the IRS. The analysts said that due to JPMorgan’s involvement in the transaction, which was announced last June, their rating and price target for the company’s stock have been suspended. Therefore, they said their prior rating and price target should not be relied upon.

They did, however, provide an update on the situation involving Iron Mountain Incorporated (NYSE:IRM), reporting that there was a delay in the IRS responding to the company’s private letter ruling request.

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Iron Mountain Seeks to Designate Racking Assets as Real Estate

Thursday evening, Iron Mountain revealed that the IRS had told it that there was a new internal working group which would scrutinize the legal standard which the agency uses to define real estate under a REIT conversion. The company now believes that the IRS will not provide a definitive answer to its pending private letter ruling request until the group finishes its study.

At this point, the IRS said it is “tentatively adverse” to offering a favorable response to Iron Mountain. JPMorgan said its internal efforts toward a REIT conversion for Iron Mountain Incorporated (NYSE:IRM) will continue. Iron Mountain plans to keep moving forward with its internal efforts to be ready to elect REIT status starting Jan. 1 of next year.

According to JPMorgan, the IRS’ hesitancy in grating a favorable answer to Iron Mountain could be due to one or more issues and may simply require more information from the company. The company did meet with the IRS to discuss previous rulings which relate to how racking is characterized, and it believes it made a compelling case that its racking assets are real estate under the terms of a REIT. The racking assets in question in this particular case are the company’s warehouses which are filled with servers.