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Power of REITs

Oct 4, 2004

Roberto Ordorica, CEO of the Latin American arm of US real estate company Prudential Real Estate Investors, explains how REITs could help finance housing and commercial property projects.

What is a REIT? Real Estate Investment Trusts were created in 1960 as a tax-efficient corporate structure for the US property market, but it wasn't until the early 1990s that the market capitalization of REITs exploded, largely because real estate investors could replace and restructure their existing investment vehicles into REITs and defer capital gains taxes.  The introduction of the Umbrella Partnership REIT (UPREIT) in 1992 allowed, for the first time, the roll up of private real estate partnerships without triggering capital gains taxes for the selling parties. REITs could use UPREIT shares as currency for the acquisition of other real estate partnerships and their assets. Which are the biggest markets for REITs? In addition to the US, REIT-like structures exist in Australia, Belgium, Brazil, Canada, France, Hong Kong, Japan, Mexico, the Netherlands and Singapore.  In the...

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