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 lending partners over the span of a year in 2017, there was no way to obtain liquidity from the 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.
Many investors in commercial real estate are paid or otherwise own Operating Partnership Units for tax reasons. OPLine provides a means to leverage 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. 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.
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 value on average per day (e.g., a $5 REIT with an average of 1 million shares per day), or a $10 There are no other requirements, and no practical upward limit.
Accredited Investor Definition
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 a Trust or approved Trust-like entity having assets in excess of $5‚000‚000.
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. 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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