UPREIT: Operating Partnership Unit Exchange

An owner transfers (contributes) a property into the Operating Partnership (“OP”) in exchange for OP units and a redemption option without tax consequences. The owner of the OP units can exercise its redemption option and force the OP to redeem its OP units either through the issuance of WHLR common shares or the payment of cash. Such payment option is the choice of the OP. Each OP unit receives the same dividends as common shares. Under IRC 721, the UPREIT provides tax deferral benefits to commercial property owners. WHLR shares trade on NASDAQ.

Benefits of OP Units

  • OP units earn monthly dividends;
  • Reduced risk because of a diversified real estate holdings in a larger portfolio (multiple assets minimize leasing risk and net income loss);
  • Geographically diverse: Mid-Atlantic, Southeast, Southwest;
  • Focus on neighborhood shopping centers;
  • Real upside potential in stock value;
  • Opportunity for estate planning: upon death, heirs avoid capital gains and are subject to estate taxes only;
  • Defer capital gains;
  • Experienced, professional Property Management staff;
  • Senior Leasing staff; totally focused on increasing income stream;
  • OP Units can be used as collateral for future loans;
  • After a one year holding period, OP units can be converted to common shares

Potential Properties to Exchange for OP Units:

  • Properties with multiple owners;
  • Properties that would generate income tax liabilities, if sold;
  • Properties that are fully or substantially depreciated;
  • Properties with maturing indebtedness;
  • Properties with high loan to value ratios;
  • Properties with debt that is personally guaranteed or recourse to general partners; or
  • Any combination of the above.

Contact Matt Reddy at email