transactions, (umbrella partnership REIT), provide a tax-deferred exit strategy for owners of real estate who might otherwise recognise a significant taxable gain in a cash sale of a highly appreciated property with a low tax basis.
This work proved to be a turning point in the modern REIT era, with the UPREIT
structure paving the way for the tax advantaged initial public offerings of a large number of widely respected private real estate operating companies.
Finally, even where the REIT itself does not meet the PHC ownership test, TRSs or lower-tier REITs may meet it if they are owned through an UPREIT
operating partnership or if the REIT that owns them is a partner in any partnership.
22] The cash infusion can then be used to further the purposes of the UPREIT
and its properties.
Because most owners of real estate hope to control taxable gains, let's assume here that the suitor is an UPREIT
or down REIT and therefore able to issue OP units.
This conclusion is based on the inherent conflicts between individuals who became shareholders by contributing property to the UPREIT
and those who became shareholders through the stock market.
, or the umbrella partnership REIT, was developed to avoid the tax liability companies were facing in selling their real estate assets to a REIT.
A property owner may defer capital gains on the sale of its property by contributing that property to a partnership, including an UPREIT
or DownREIT formed by a REIT, in exchange for partnership interests.
is a REIT that holds all or substantially all of its properties through a single operating partnership with the REIT as the general partner and others as limited partners.
The choice of an UPREIT
(Umbrella Partnership Real Estate Investment Trust) structure meant that the interests of the old partnerships would be transferred to the UPREIT
with no immediate tax consequences.
CHAPTER 3 Directors' Duties in REIT and UPREIT
Betts focuses his practice on representing real estate investment trust (REITs) and has over 15 years of experience in structuring listed and nontraded public offerings, UPREIT
and DownReit acquisitions and REIT mergers.