Operating Company/Property Company Deal - Opco/Propco Deal

AAA

DEFINITION of 'Operating Company/Property Company Deal - Opco/Propco Deal'

A type of business arrangement in which a subsidiary company (the property company) owns all the revenue-generating properties instead of the main company (operating company). Opco/propco deals allow all financing and credit rating related issues for the companies to remain separate.

INVESTOPEDIA EXPLAINS 'Operating Company/Property Company Deal - Opco/Propco Deal'

In the U.K., opco/propco deals are a very popular method in which a parent company can create a real estate income trust (REIT). This can be done by initially selling income-generating assets from the operating company to a subsidiary. The subsidiary then leases the property back to the operating company. The operating company can then spin off the subsidiary as an REIT. The advantage of doing this is that the company can then avoid the double taxation on its income distributions.

RELATED TERMS
  1. Real Estate

    Land plus anything on it, including buildings and natural resources.
  2. Propco

    An abbreviation for property company. Propcos are most often ...
  3. Double Taxation

    A taxation principle referring to income taxes that are paid ...
  4. Real Estate Investment Trust - ...

    A security that sells like a stock on the major exchanges and ...
  5. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  6. Parent Company

    A company that controls other companies by owning an influential ...
RELATED FAQS
  1. What are the differences between affiliate, associate and subsidiary companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. In most cases, ... Read Full Answer >>
Related Articles
  1. Home & Auto

    How To Assess A Real Estate Investment Trust (REIT)

    Find out why funds from operations is a superior measure of REIT performance.
  2. Investing Basics

    Sneaky Subsidiary Tricks Can Cloud Financials

    Use consolidated financial statements to uncover a parent company's true performance.
  3. Investing

    Use Breakup Value To Find Undervalued Companies

    Find out a company's worth if it were sold in pieces - it may be more than you think.
  4. Personal Finance

    Why These Could Be 2015's 10 Best REITs

    If you want to get on the REIT money train, then you better hurry up. However, the REITs covered here have potential beyond 2015.
  5. Mutual Funds & ETFs

    How To Build A Bond Ladder?

    Bond laddering is a strategy used when building a portfolio: an investor can spread out interest rate risk and create a stream of cash flows for income.
  6. Personal Finance

    How To Buy A Beach Condo In The Philippines

    Foreigners can't buy land in the Philippines – but they can buy condos. Here's how to get one at the beach.
  7. Economics

    What is the Income Effect?

    In economics, the income effect is the change in the consumption of goods caused by a change in income, whether income goes up or down.
  8. Credit & Loans

    Is Now the Right Time to Buy a House?

    Thinking of buying a home? Consider these factors first.
  9. Mutual Funds & ETFs

    ETF Bubble Or No Bubble?

    ETFs might be the recommendation of choice for the unimaginative financial advisor, but that doesn’t mean that the industry is in a bubble.
  10. Personal Finance

    Manhattan Luxury Condos As Investments

    New York City real estate is a trending investment for foreign investors.

You May Also Like

Hot Definitions
  1. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  2. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  3. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  4. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  5. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
  6. Currency Carry Trade

    A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase ...
Trading Center