What is an Upreit structure?

What is an Upreit structure?

The term UPREIT (short for “Umbrella Partnership Real Estate Investment Trust”) refers to an entity structure that has been used by REIT’s since 1992 to allow selling property owners the ability to convert their ownership of one or more of their specific real estate properties into an interest which is‚ immediately‚ or …

How is a REIT structure?

Most REITs have a straightforward business model: The REIT leases space and collects rents on the properties, then distributes that income as dividends to shareholders. Mortgage REITs don’t own real estate, but finance real estate, instead. These REITs earn income from the interest on their investments.

What is a Upreit?

UPREIT means umbrella partnership real estate investment trust. An UPREIT is a unique REIT structure that allows property owners to exchange their property for share ownership in the UPREIT.

What is an DownREIT?

A DownREIT is a partnership agreement between an REIT and a real estate owner that enables deferring of tax on sale of appreciated real estate. DownREITs are more complicated as compared to UPREITs and can have tax implications, if the operating unit is considered a security by the IRS.

Can you 1031 into a real estate fund?

The investor can do a 1031 and purchase an interest in real estate held by a REIT. The investor isn’t buying shares of the REIT. They’re buying fractional ownership as a tenant in common (TIC) in the property. The REIT and the investor become tenants in common.

How do I invest in a statutory trust in Delaware?

How To Buy Into A Delaware Statutory Trust

  1. Purchasing a Security From a DST Sponsor. The DST Sponsor, or affiliate of the Sponsor, is the Trustee of the DST.
  2. 1031 Exchange. Investors can buy into a DST through a 1031 exchange.
  3. DST Secondary Marketplace.

What happens when a REIT sells a property?

Capital gains distributions occur when a REIT sells real estate assets and realizes a profit. Unlike ordinary dividends, these distributions are treated like any other capital gain and subject to preferential rates.

What is the difference between an Upreit and DownREIT?

An UpREIT allows investors to contribute their real estate investment holdings to an umbrella partnership in exchange for limited partnership units. A DownREIT allows investors to become partners in a partnership agreement with a REIT.

Are UPREITs publicly traded?

The majority of UPREITs are publicly traded and are structured like a corporation. When shares are sold and the UPREIT sees profit, the investor will earn the difference between the value of their original share and the value of the share when it’s sold.

What is the difference between an UpREIT and DownREIT?

How does a 721 exchange work?

The 721 exchange, similar to the 1031 exchange, allows an investor to defer capital gains taxes while relinquishing control of a property held for business or investment purposes. In a 721 exchange a real estate investor may defer capital gains taxes on the disposition of a property while acquiring shares in a REIT.

How are upreits structured?

In the standard UPREIT structure, all acquired properties are owned directly by the operating partnership, and a real estate investment trust (“REIT”), generally itself a public company, owns a substantial interest in the operating partnership as a limited partner and as the sole general partner of the operating partnership.

What does UPREIT stand for?

UPREIT means umbrella partnership real estate investment trust. An UPREIT is a unique REIT structure that allows property owners to exchange their property for share ownership in the UPREIT. However, UPREITs are generally subject to Internal Revenue Code (IRC) Section 721 exchanges.

What are the proceeds of a UPREIT used for?

The proceeds are used to reduce debt or acquire additional property or used for any other REIT purposes. The limited partners also receive rights to “put” their partnership interest to the umbrella partnership or to the REIT in exchange for cash or REIT shares. A diagram of a typical UPREIT structure is set forth in the figure below.

What are the requirements for a UPREIT?

Requirements for UPREITs An UPREIT is an REIT under all standard accounting and tax guidelines. UPREITs were created to allow for the contribution of property into the REIT in exchange for ownership shares. This structuring is therefore guided by the standards of IRC Section 721 which discusses tax shields for property to share exchanges.


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