Unlocking Capital: A Deep Dive into Real Estate Investment Vehicles and Tax-Advantaged Strategies

At a glance:

• The main takeaway: Faced with evolving market conditions, real estate investors and fund sponsors must seek innovative ways to raise and deploy capital.
• Impact on your business: To navigate these challenges, recap key insights from Aprio’s latest webinar on real estate investment vehicles (including REITs, DSTs, OZs, and joint ventures), and learn how to align these structures with your capital goals.
• Next steps: Contact Aprio’s Real Estate team to learn more about the most popular real estate investment structures and identify the option that works best for you.

Today’s real estate investment market is constantly evolving. To combat the uncertainty, many investors and stakeholders have started thinking outside the box to come up with new, innovative ways to raise and deploy capital.

In our latest webinar, thought leaders and subject matter experts from Aprio’s Real Estate team joined reputable industry leaders to discuss a range of financial structures fund sponsors and investors can use to unlock value, defer their tax liability, and grow their real estate portfolios strategically.

Keep reading for a full recap of the discussion.

Public vs. private markets: Know your path

Whether you are an individual real estate investor or a fund sponsor, one of the first investment decisions you need to make is whether to raise capital through the public market or the private market.

Put simply, public markets provide investors with substantial liquidity and access via exchanges. Conversely, private markets may be less liquid but allow investors to build more tailored relationships and benefit from fewer regulatory burdens.

In the public markets, there are several compliance rules investors should be aware of, including:

Regulation D: Rule 506(b) vs. Rule 506(c)

• 506(b): No general solicitation, and sales are limited to accredited investors with pre-existing relationships.
• 506(c): Allows for public marketing but requires verification of investor accreditation.

While 506(b) remains the dominant structure for deploying capital in the public real estate market, some investors and sponsors are starting to adopt the 506(c) model more frequently, especially in situations where they need broader reach and more flexibility.

Demystifying REITs and the UPREIT structure

Heralded as a democratizing force in real estate investing since their inception, real estate investment trusts (REITs) have been popular tools in the space for more than 60 years — and it’s easy to see why. REITs provide investors and fund sponsors with the opportunity to pass income to their shareholders with favorable tax treatment, so long as they meet specific IRS requirements.

Aside from standard REITs, investors and sponsors can also roll real property into REIT-controlled partnerships via an umbrella partnership real estate investment trust (UPREIT). A provision of IRS Section 721, UPREITs represent an innovative strategy you can use to gain access to more liquidity and diversification opportunities while also deferring capital gains tax.

DSTs: A passive real estate investment vehicle with optimal tax benefits

The Delaware statutory trust (DST) has gained steam among retiring investors and fund sponsors in recent years, particularly those who are looking for more passive investment opportunities. In fact, as of May 2025 the DST market has rebounded significantly, with syndicated equity up 50% year-over-year. 

With the DST, investors and sponsors can seize fractional ownership in institutional real estate assets while preserving tax efficiency. If you are preparing to retire and are interested in exploring the DST as a passive real estate investment solution, it’s important to consult with a credentialed CPA, experienced attorney, or advisor to navigate compliance requirements and operational limitations, such as restrictions on refinancing and property modifications.

Opportunity abounds with OZs

Introduced under the 2017 Tax Cuts and Jobs Act, Opportunity Zones (OZs) are regaining momentum in the real estate market, largely due to new provisions under the One Big Beautiful Bill. With the bill’s recent passage, the federal government aims to make OZ tax benefits permanent by introducing rolling 10-year designations and enhancing eligibility criteria. Investors in rural areas may also receive triple the basis step-up for their OZ investments depending on certain criteria and circumstances.

Exploring institutional capital and joint ventures

The presenters closed the webinar with a quick recap of best practices and key considerations related to institutional investment vehicles. Here is a summary of their most important takeaways:

• Investor Alignment: When exploring institutional investment opportunities and joint ventures, it’s important to match your business plans with investor profiles to help ensure alignment. For instance, many real estate pension funds seek stability when it comes to selecting investments, while many private equity firms prefer investments with higher risks and shorter holds.

• Capital Constraints: Before exploring institutional investment opportunities, keep in mind that many firms have lengthened their fundraising timelines due to increases in recent market volatility and capital lock-up in older vintages.
• Joint Ventures and Decision Rights: Note that most joint ventures (JVs) follow a 90/10 capital split with waterfall structures that define cash flow distribution, which could affect sponsor promotes and hurdle rates. When it comes to decision rates, keep in mind that modern JVs often include robust minority protections, reflecting a shift from legacy structures with limited LP oversight.

The bottom line

As the capital markets evolve and the real estate landscape changes, real estate investors and fund sponsors will need to adapt their investment strategies. Whether you are entering into the market, structuring a DST, or looking to leverage an OZ, you need to develop a complete understanding of the relevant rules and regulations and stay ahead of legislative and market trends.

It’s also essential to find the right partner. Aprio’s Real Estate team is here to provide the proactive guidance and strategies you need to increase equity and maximize the value of your real estate transactions. To learn more, schedule a consultation with our team today.