USING AN S-11 OR REGULATION A OR A+ IPO FOR A DOWNREIT

A DownREIT is similar to the UPREIT previously discussed. In an UPREIT, the property is transferred to a   partnership owned in part by the investor and in part by the REIT.

In a DownREIT, typically the REIT obtains a partnership interest in the property by paying down mortgage debt. The investor continues receiving a return and can convert into shares of the REIT later. A DownREIT is also an excellent estate planning device, just as is the UPREIT, because the basis in the investor’s limited partnership shares is stepped up on the death of the investor.

DownREITs can be complicated to carry out, but can provide significant tax savings. It can be an interesting addition to a go public transaction.

One particular situation which is particularly apt for a DownREIT transaction is when there are several owners of real property, some of which want to liquidate and others which want to hold. A DownREIT transaction permits each investor to choose when to liquidate the investment.