UPREIT

An Umbrella Partnership Real Estate Investment Trust or UPREIT implements the use of both The Internal Revenue Code Section 1031 and 721. In an UPREIT structure, the investor executes a 1031 exchange TIC into one property in which he/she will co-own for about 12-18 months. At that time the investor will implement a 721 exchange in which he/she will contribute a property to a partnership. At this point the investor receives interest in the partnership called operating partnership units (OP units). 721 exchanges are often used by real estate investment trusts (REITs), which typically own all or substantially all of their assets through a subsidiary partnership with the REIT acting as general partner.

In a 721 exchange or UPREIT structure, rather than taking possession of another property, the investors receive OP units that carry the economic benefits of the REIT’s entire portfolio, including any capital appreciation and distributions of operating income. OP units can be converted later into shares of the associated REIT, and may only be taxable when such a conversion or liquidation takes place.

Download your Free Guide on UPREIT Benefits:

UPREIT Benefits:

Defer 100% capital gains tax or depreciation recapture tax

Upgrade property holdings into institutional quality real estate

Eliminate “hands-on” property management responsibilities

Diversify among various properties across the country

Potential for increased income and capital appreciation

Removes or minimizes real estate holdings from taxable estate

Estate planning considerations

“OP” units may be transferable, divisible or gifted

“OP” units may become liquid assets upon conversion

Risks:

As with any investment in real estate, there are risks associated with UPREIT investments including fluctuations in the real estate market that may impact the value of the property. The following risks may also be associated with investment: illiquidity, economic risks due to vacancy rates, default if unable to pay mortgage and possible loss of principal. There may be various tax consequences that an investor may need to closely consider with his/her tax advisor. It is not possible to address all relevant risk factors in this forum. Risk factors are outlined in the Private Placement Memorandum for each offering. Investors should thoroughly understand all risk factors and discuss them with their financial representative prior to investing.

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Securities offered through GF Investment Services, LLC. Member FINRA/SIPC. 2080 Ringling Blvd., Third Floor Sarasota, FL 34237 (941) 441-1902. Investment Advisory Services offered on a fee basis through Global Financial Private Capital, LLC, an SEC Registered Investment Advisor. GFA Wealth Design is a DBA of Global Financial Private Capital and GF Investment Services. 1031 Alternatives Group is a DBA of GF Investment Services.

This material is neither an offer to sell nor the solicitation to purchase any security. The information is for discussion and information purposes only. It is not intended to replace competent legal, tax or financial planning advice. The applicable tax codes apply to and relate to federal law only. Individual states may have their own additional tax codes. Please contact the appropriate tax and legal professional in your state. This information is provided from sources believed to be reliable but should be used in conjunction with professional advice that is consistent with your personal situation. Properties represented here are not current offerings and properties of this nature may not always be available for purchase.