UPREITs and DownREITs
In studying different REITs, you might come across the terms UPREIT and DownREIT. These are terms used to describe differences in the corporate structure of REITs. The UPREIT concept was first implemented in 1992 by creative investment bankers. Its purpose is to enable long-established real estate operating companies to bring properties they already own into a new REIT structure, without having to sell the properties to the new REIT. Such a sale would likely cause the existing owners to incur significant capital gains taxes.
UPREIT just means “umbrella partnership REIT.” Generally, it works like this: The REIT itself might not own any properties directly; what it does own is a controlling interest in a limited partnership ...
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