DownREIT

A DownREIT (Down Real Estate Investment Trust) is a financial structure used in real estate investing where a property owner contributes their property to an operating partnership, in exchange for units in the partnership. The partnership then leases the contributed property to a newly formed REIT, which issues shares to the public and uses the proceeds to purchase the property from the partnership. The property owner can then exchange their units in the partnership for shares in the REIT, effectively "downstreaming" the value of their property into the REIT. This allows the property owner to defer capital gains taxes and diversify their investments while still maintaining an interest in the property. DownREITs were popularized in the 1990s as a tax-efficient way for property owners to monetize their real estate holdings.