UPREIT
UPREIT - is an acronym for Umbrella Partnership Real Estate Investment Trust. Otherwise called Umbrella Partnership or Umbrella Partnership REIT. A term concerning investing in the real estate market, first used in 1992 by investment bankers [1].
It is one of the alternative structures of REIT's - type of the investment funds, so that proprietors can get shared ownership (units) in the UPREIT in exchange for their property [2]. This is the REIT that owns a controlling interest in a limited partnership that owns the REITs real estate [3]. Therefore, this operation gives a possibility for sellers to defer capital gains taxes [4].
Amongst REITs, we can distinguish also DOWNREIT, which is considered to be a variation on the UPREIT [5].
UPREIT structure
The UPREIT consists of the following components [6]:
- the REIT
- an operating partnership (also known as OP)
In order to clarify this issue once and for all, in particular, through operating partnerships, the REIT is the owner of its properties [7]. UPREIT is the REIT that owns the majority of operating partnership units at the same time serving as the general partner of an operating partnership [8].
Advantages of UPREIT
The main advantages of UPREIT are [9] [10] [11]:
- special tax advantages (e.g. deferment)
- reduction of taxes
- possibility to acquire the property partially by using partnership units
- direct investment opportunity
- operating partnership units can constitute a currency for new acquisitions
- an opportunity to acquire additional assets without the need to obtain loans or publicly issue shares
- simplification of real estate
- diversification of investment forms
Disadvantages of UPREIT
For the most fundamental weakness of UPREIT we can consider[12]:
- the conflict of interest between original owners and REIT shareholders
Examples of UPREIT
- American Realty Capital Properties (ARCP) was one of the first REITs to be structured as an UPREIT. It was formed in 2004 to acquire and redevelop properties in the United States.
- Ventas, Inc. is one of the largest healthcare REITs in the United States. It is structured as an UPREIT and was founded in 1999.
- Hines REIT is another example of an UPREIT. It was founded in 1993 and is one of the largest real estate investment trusts in the United States. It invests in both commercial and residential real estate.
- The Blackstone Group is an example of a private UPREIT. It was founded in 1985 and is one of the world's largest alternative asset managers. It invests in real estate, private equity, and other alternative asset classes.
A UPREIT is an Umbrella Partnership Real Estate Investment Trust, otherwise known as an Umbrella Partnership or Umbrella Partnership REIT. This term was first used in 1992 by investment bankers and is related to investing in the real estate market. Other approaches related to UPREIT include:
- Joint Ventures - This approach uses joint venture partnerships between a REIT and an outside investor to acquire and develop new properties.
- Tenant-in-Common (TIC) - This strategy allows multiple investors to own a share of real estate, with each investor owning a fractional interest in the property.
- Private REITs - This is an umbrella structure that allows an investor to combine multiple entities into a single REIT structure, allowing the investor to pool capital and take advantage of tax and operational efficiencies.
In summary, UPREIT is an acronym for Umbrella Partnership Real Estate Investment Trust, which is related to investing in the real estate market. Other approaches related to UPREIT include joint ventures, tenant-in-common (TIC) structures, and private REITs.
Footnotes
- ↑ Block R.L. 2012, p. 35-37
- ↑ Arffa R.C. 2001, p. 308-309
- ↑ Block R.L. 2012, p. 420
- ↑ Block R.L. 2012, p. 35-37
- ↑ Chan S.H., Erickson J., Wang K. 2003, p. 48-51
- ↑ Chan S.H., Erickson J., Wang K. 2003, p. 30, 48-51
- ↑ Kelley W.A. 1998, p. 154
- ↑ Chan S.H., Erickson J., Wang K. 2003, p. 30, 48-51
- ↑ Chan S.H., Erickson J., Wang K. 2003, p. 48-51
- ↑ Arffa R.C. 2001, p. 308-309
- ↑ Block R.L. 2012, p. 35-37
- ↑ Arffa R.C. 2001, p. 308-309
| UPREIT — recommended articles |
| Rollover relief — Stock insurance company — Controlled company — Syndicate — Investment fund — Equity instrument — Umbrella fund — Private reit — Property Dividend |
References
- Arffa R.C. (2001), Expert Financial Planning: Investment Strategies from Industry Leaders, John Wiley & Sons
- Block R.L. (2012), Investing in REITs: Real Estate Investment Trusts, John Wiley & Sons
- Chan S.H., Erickson J., Wang K. (2003), Real Estate Investment Trusts: Structure, Performance, and Investment Opportunities, Oxford University Press
- Garrigan R.T., Parsons J.F.C. (1997), Real Estate Investment Trusts: Structure, Analysis and Strategy, McGraw-Hill
- Glickman E.A. (2013), An Introduction to Real Estate Finance, Academic Press
- Kelley W.A. (1998), Real Estate Investment Trusts Handbook, ALI-ABA
Author: Oksana Szłapowska
