How does an UPREIT function and what benefits does it provide?
Answer: In a 721 UPREIT (Umbrella Partnership REIT) transaction, property is contributed to a REIT’s operating partnership (OP) in exchange for a combination of liquidity and equity-equivalent OP units. By contributing their asset into the OP, the property owner can reduce risk, achieve stabilization and preserve capital for their other projects. The transaction mechanism also provides tax benefits to contributors and allows them to preserve equity during a recession.
