A Credit Line For Your UPREIT Unit Shares
Tap your UPREITs for a line of credit funds without having to convert to a taxable standard REIT and sell.
A. B. Nicholas is one of the few firms to offer a credit line against tax-advantaged UPREIT/Operating Partnership Units. The product of over a year of careful, expert work, we are the only provider in that market that offers this facility as a standard line.
Expert licensed lender advisors, SIPC/FINRA institutional partners, loan managers, and account management; fully secure with an emphasis on respect and protection of client data.
If converting/selling your UPREIT partnership units would cost you in taxes and perhaps foregone appreciation, our credit line pound-for-pound is likely to save most borrowers an enormous amount over the alternatives.
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Credit Lines Using UPREIT Operating Partnership Units Put Cash at Your Disposal for Investment
(Umbrella Partnership Real Estate Investment Trusts)
Why Sell or Convert Your Operating Partnership Units into Taxable Assets When You Can Get a Convenient Line of Credit Against Them Instead?
Main point summary: For those with at least $10 million in non-taxable Operating Partnership Unit UPREIT assets, now there is no need to convert or sell them to taxable assets with our OPLine Credit Line, created in partnership with a major public U. S. brokerage/banking institution.
A. B. Nicholas is pleased to announce a new loan program for Operating Partnership Unit (OPU) owners we call OpLine. This new program provides credit line financing using tax-deferred Umbrella Partnership Real Estate Investment Trust (UPREIT) OPUs as collateral.
In an UPREIT, the parties of an existing partnership and a REIT become partners in a new “operating partnership” and the members receive non-taxable shares in the form of Operating Partnership Units equal to their % ownership in the UPREIT. The REIT from which the tax-advantaged UPREIT was derived usually acts as the general partner and majority owner of the operating partnership units. However, the partners who contributed properties have the right to exchange their operating partnership units for taxable REIT shares or cash.
Until A. B. Nicholas developed OPLine with its professional investment and lending partners over the span of a year in 2017, there was no practical way to obtain liquidity from tax advantaged UPREIT/OPUs other than to exchange for cash or marketable REITs, at which point they would become fully taxable for capital gains. Now, however, OPU owners need not sell or convert their OPU assets for liquidity, while complying fully with applicable tax law.
Many investors in commercial real estate are paid or otherwise own Operating Partnership Units for tax reasons. Taking payment, for example, in OPUs for the sale of a commercial building can make economic sense all around. But how to put those OPUs to work to expand your investment potential and net worth? OPLine provides an answer by leveraging for liquidity without having to sell or convert to obtain funds.
To be eligible for our OpLine program, you must be an Accredited Investor (see below) with at or near $10M in Operating Partnership Units at least. Borrowers may team together so that the sum of all of their assets together comes to the required $10M minimum, but each individual must have at least $5M to join together for one OPLine credit line. There is no limit to the number of partners that can group together for this purpose, provided they each have at least $5M and the total collateral OPU/REIT value is at least $10M. There is great flexibility too, in the form of cooperation: we accept trusts, S-corps, and partnerships as legal signatories too.
We also require that the underlying, publicly traded REIT for which the client can exchange have solid trading volume averaging at least $5 million in market value on average per day (e.g., a $5 REIT with an average of 1 million shares per day would quality). There are no other requirements, and no practical upward limit.
Accredited Investor Definition
You should be an “Accredited Investor” by SEC definition for our LeverageLine program. This qualification, however, is easy. An Accredited Investor:
- Has an individual annual income in excess of $200‚000 after taxes; OR
- Has a joint annual income (spouse included) over $300‚000 for each of the last two years; OR
- Has a net worth of at least $1 million (individually or jointly with spouse, incl. home); OR
- Owns or operates a Trust or approved Trust-like entity having assets in excess of $5‚000‚000.
- Note: If you have any question about this qualification, simply call us at 202.379.4744 ext 1.
Use our OPLine as part of your commercial real estate sales strategy by allowing your buyers to pay you in UPREIT/OPUs, knowing you can access liquidity without having to sell or exchange into taxable securities — an incentive buyers may find attractive. Use your dormant OPUs to generate cash to invest into other real estate projects or to pay off tax liabilities. Whatever your objective, our OPLine can be the key to achieving your goals.
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Whether to finish construction, buy a vacation home, or supplement/replace your existing high-interest financing, LeverageLine can be the answer you’ve been looking for.