An UPREIT (Umbrella Partnership Real Estate Investment Trust) is a structure that permits real estate owners to exchange their property holdings for limited partnership (LP) units in a REIT as a tax deferred exchange. UPREITs are often the most attractive option for real estate owners looking to dispose of real estate while deferring capital gains.

The Dakota UPREIT is an umbrella partnership that allows investors an opportunity to exchange equity in real estate for units of the LP on a tax deferred basis using an Internal Revenue Code (IRC) 721 transaction or in combination with an IRC 1031 exchange. As a Limited Partner in an UPREIT transaction, Unitholders receive the same per unit distribution as Dakota REIT Shareholders receive in dividends. Since 1998, Dakota REIT has provided consistent quarterly dividends to its Shareholders and currently invests in income‐producing properties throughout the Upper Midwest.

How it Works

How an UPREIT works.

UPREIT Benefits


Tax Advantages:

Tax Deferral

Deferral of capital gains taxes so long as individual holds their LP units in the UPREIT.

Increased Buying Power

As a result of tax deferral, individuals can use 100% of the tax savings on sale to acquire more LP units.

 


Estate and Tax Strategy:

Estate Simplification

LP units that receive a stepped up tax basis can be distributed among heirs.

 


Passive Management:

LP unitholders benefit from professional REIT management providing freedom to enjoy life activities.

 

Steady Income
Steady Income:

Income from rental property can vary significantly. REITs can provide more predictable income through quarterly dividends.

 

Diversify and Protect
Diversify & Protect:

Diversification

LP unitholders own an interest in a geographically diverse portfolio comprised of multiple asset classes rather than a single asset.

Reduce Risk

Elimination of recourse debt associated with directly owning real estate.

 

Liquidity
Liquidity:

Real estate is illiquid. However, LP units can be converted to REIT shares (taxable event) and sold for cash. Additionally, LP units can be pledged as collateral for bank loan purposes as another source of cash.