--- title: Why Were UPREITs Created? description: An Umbrella Real Estate Investment Trust (UPREIT) is a type of REIT where investors can trade a property that has appreciated for units in a REIT. image: https://www.realized1031.com/hubfs/Images/photo/abstract/urban-buildings-sky-IS-1188742957.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Why Were UPREITs Created? Posted Mar 9, 2021 ![urban-buildings-sky-IS-1188742957](https://www.realized1031.com/hs-fs/hubfs/Images/photo/abstract/urban-buildings-sky-IS-1188742957.jpg?width=753&name=urban-buildings-sky-IS-1188742957.jpg) Real Estate Investment Trusts (REITs) were introduced in 1960 to allow smaller investors access to income-producing real estate investments that were previously only attainable for the wealthy or large investors.  An [Umbrella Real Estate Investment Trust](https://www.realized1031.com/glossary/upreit) (UPREIT) is a type of REIT where investors can trade a property that has appreciated for units in a REIT.  In 1960, the law under the Cigar Excise Tax Extension allowed for REITs to own and finance real estate investments. However, in 1986, the capabilities of a REIT were expanded with the Tax Reform Act of 1986, which gave the ability for a REIT to operate and manage investment properties as well.  ### What are REITs and UPREITs? A REIT is a company formed to own, finance, and manage groups of income-producing real estate investments. These investments can be across sectors, or stay within one category, like office buildings or shopping centers.  An UPREIT is when a property owner partners with a REIT by exchanging ownership in their property that has appreciated for Operating Partnership units (OPs) in the REIT. The OP units can be converted to shares in the REIT, most of which are publicly traded. This partnership allows the exchanger the potential to benefit financially even after the property is exchanged.  The benefit to an UPREIT is that capital gains taxes are deferred when the property is exchanged into the REIT, called a [721 exchange](https://www.realized1031.com/glossary/721-upreit-exchange). This type of exchange is governed under the tax shields for property to share exchanges by the IRS.  The capital gains taxes are deferred until one of three things happen:  - The exchanger sells the OP units - The exchanger converts the OP units to shares in the REIT  - The acquiring OP sells the property  A 721 exchange is similar to a [1031 exchange](https://www.realized1031.com/1031-exchange), but instead of exchanging an investment property into a like-kind real estate investment like in a 1031 exchange, the property is exchanged into units of the REIT. Both have the benefit of capital gains tax deferment.  This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. A Guide to UPREIT Transactions [![A Guide to UPREIT Transactions](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/UPREIT-eBook-250b.png?width=250&height=250&name=UPREIT-eBook-250b.png "Learn more about the UPREIT ...") ](https://www.realized1031.com/blog/why-were-upreits-created#blogform) Download eBook ---   --- ### A Guide to UPREIT Transactions ![A Guide to UPREIT Transactions](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/UPREIT-eBook-550b.jpg?width=550&height=600&name=UPREIT-eBook-550b.jpg) Learn more about the UPREIT process. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "Real Estate Investment Trusts (REITs) were introduced in 1960 to allow smaller investors access to income-producing real estate investments that were previously only attainable for the wealthy or large investors. An Umbrella Real Estate Investment Trust (UPREIT) is a type of REIT where investors can trade a property that has appreciated for units in a REIT. In 1960, the law under the Cigar Excise Tax Extension allowed for REITs to own and finance real estate investments. However, in 1986, the capabilities of a REIT were expanded with the Tax Reform Act of 1986, which gave the ability for a REIT to operate and manage investment properties as well. What are REITs and UPREITs? A REIT is a company formed to own, finance, and manage groups of income-producing real estate investments. These investments can be across sectors, or stay within one category, like office buildings or shopping centers. An UPREIT is when a property owner partners with a REIT by exchanging ownership in their property that has appreciated for Operating Partnership units (OPs) in the REIT. The OP units can be converted to shares in the REIT, most of which are publicly traded. This partnership allows the exchanger the potential to benefit financially even after the property is exchanged. The benefit to an UPREIT is that capital gains taxes are deferred when the property is exchanged into the REIT, called a 721 exchange. This type of exchange is governed under the tax shields for property to share exchanges by the IRS. The capital gains taxes are deferred until one of three things happen: The exchanger sells the OP units The exchanger converts the OP units to shares in the REIT The acquiring OP sells the property A 721 exchange is similar to a 1031 exchange, but instead of exchanging an investment property into a like-kind real estate investment like in a 1031 exchange, the property is exchanged into units of the REIT. Both have the benefit of capital gains tax deferment. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.", "articleSection" : [ "UPREIT" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2021-03-10T01:00:00+0000", "datePublished" : "2021-03-10T01:00:00+0000", "description" : "An Umbrella Real Estate Investment Trust (UPREIT) is a type of REIT where investors can trade a property that has appreciated for units in a REIT. ", "headline" : "Why Were UPREITs Created?", "image" : { "@type" : "ImageObject", "height" : 502, "url" : "https://f.hubspotusercontent10.net/hubfs/733513/Images/photo/abstract/urban-buildings-sky-IS-1188742957.jpg", "width" : 753 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/why-were-upreits-created", "name" : "Why Were UPREITs Created?", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://f.hubspotusercontent10.net/hubfs/733513/Images/photo/abstract/urban-buildings-sky-IS-1188742957.jpg" } ```