How does the following sound to an investor looking to divest their assets? Why not defer the recognition of gain on the sale of your property, locking in your profit, and diversifying yourself in the process?
Such is just one potential benefit of UpREITs and DownREITs, largely unsung vehicles that can provide another way to defer the tax bite of an asset transfer. In that sense, they're not unlike 1031 exchanges, but given the target on the back of like-kind exchanges placed there by the current administration, Up and DownREITs should be on every investor's radar. Let's look more closely at each:
In an UpREIT (the "up" is for Umbrella Partnership) the REIT itself is at the top of the structure with a partnership–still the owner of the real estate–below it. Thus, the REIT simply owns an interest in the underlying partnership and not title to the actual properties themselves. A DownREIT, on the other hand, will acquire some properties outright, with an interest in a lower-tier partnership that directly owns the assets.
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Jonathan Hipp
Jonathan Hipp began his career in real estate over 25 years ago. In his early years as a broker, he ventured into the net lease industry and quickly began leading the US net lease market, closing over $3 billion in transactions. In 2005, Jon founded Calkain Companies, a company focused solely on net lease investment services. As President and CEO, he has been instrumental in building the firm into one of the leading Net Lease real estate companies, transacting over $12 billion of net lease deal volume over the past 13 years. He has expanded Calkain’s services to include brokerage, advisory, asset management, capital markets, and industry research. He has become a well-known resource, panelist, and speaker at various Net Lease and Industry conferences and is a regular contributor to GlobeSt.com on real estate trends. In June 2015, Jon’s passion for the real estate business was again recognized as he was nominated for the Top Real Estate Player in the DC area by SmartCEO magazine.
