UPREIT: Difference between revisions
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'''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 <ref>Block R.L. 2012, p. 35-37</ref>. | '''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 <ref>Block R.L. 2012, p. 35-37</ref>. | ||
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 <ref>Arffa R.C. 2001, p. 308-309</ref>. This is the REIT that owns a [[controlling]] interest in a limited partnership that owns the REITs real estate <ref>Block R.L. 2012, p. 420</ref>. Therefore, this operation gives a possibility for sellers to defer capital gains taxes <ref>Block R.L. 2012, p. 35-37</ref>. | 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 <ref>Arffa R.C. 2001, p. 308-309</ref>. This is the REIT that owns a [[controlling]] interest in a [[limited partnership]] that owns the REITs real estate <ref>Block R.L. 2012, p. 420</ref>. Therefore, this operation gives a possibility for sellers to defer capital gains taxes <ref>Block R.L. 2012, p. 35-37</ref>. | ||
Amongst REITs, we can distinguish also DOWNREIT, which is considered to be a variation on the UPREIT <ref>Chan S.H., Erickson J., Wang K. 2003, p. 48-51</ref>. | Amongst REITs, we can distinguish also DOWNREIT, which is considered to be a variation on the UPREIT <ref>Chan S.H., Erickson J., Wang K. 2003, p. 48-51</ref>. | ||
Revision as of 03:17, 23 May 2020
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| See also |
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
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
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
