Can someone kind write a comparison of these 2 in plain language? My practical knowledge of real estates is comparable to my knowledge of medieval history of, say, Ethiopia and I simply can’t get these two in my head…
Pool in funds… Manage them by investing in Real Estate and you have a REIT. Normally you can invest on properties directly…
or you can invest at another REIT company (which in turn invests in properties directly) owning a controlling interest it and becoming a partner. this scenario is UPREIT.
if you invest with more REITS, as well as invest directly on your own properties, then you have a DOWNREIT
This may sound stupid, i know, but i just don’t get this Upcrap, downcrap thing. So let’s say i have 200 dollars at the moment and i decide to buy a REIT…what have i got?
Made me laugh, but I feel the same:)
UPreit means UMBRELLA PARTNERSHIP… and they named it DOWNREIT because it looked convenient. but in fact it has nothing to with any form of upstream downstream flows… nothing to do with upcrap or downcrap…
It is simple a REIT structure. if a REIT owns a REIT ( the same way a company can own shares of another company) it is UPREIT. if it owns multiple REITS and owns its own property investments it is a DOWNREIT… that is it as far as the curriculum is concerned.
This “it” is a company, am I correct?
when I said “it is simply a REIT structure.” I was referring to the concept of UPREIT AND DOWNREIT in general.
A REIT is an entity, trust, corporation, company, that manages funds and specializes in investing in real estate properties.
Sorry, I was not clear. I mean the bold “it”.
it = The REIT. If this specific REIT’s has a widely diversified investment strategy and is investing in other REITS as well as owning its own properties. Its structure is called DOWNREIT.
thanks CarloRoco this helps
So does this mean that every DOWNREIT is an UPREIT, but every UPREIT is not a DOWNREIT?
Pretty sure schweser never mentioned this. If they did, it was VERY briefly.
yes. pg. 82, reading 39 in alternative investments book: “A DOWNREIT structure is a variation of the UPREIT”
Further, it is told in the context of the book that there are potential conflicts of interests between the partnership and the UPREIT or DOWNREIT that has ownership in the partnership. From my understanding the partnership may sell a property to receive tax benefits that the owners of the REIT don’t get. And this sort of thing would be more likely in a DOWNREIT because there may be so many partnerships involved.
I only see it on page 44 of the Schweser Alternative Investment book, but not much of an explanation.