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 >>
  2. Why should you invest in tangible assets?

    Savers who deliberately buy tangible assets for investment purposes value their tangible goods as a form of value diversification ... Read Full Answer >>
  3. What role did securitization play in the U.S. subprime mortgage crisis?

    The securitization of subprime mortgages into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) ... Read Full Answer >>
  4. Which asset classes are the most risky?

    Equities is the riskiest class of assets. Dividends aside, they offer no guarantees, and investors' money is subject to the ... Read Full Answer >>
  5. How can you use a debt service coverage ratio (DSCR) to evaluate real estate investments?

    Historically, real estate has been an attractive way to achieve portfolio diversification for a wide range of investors due ... Read Full Answer >>
  6. What is the average annual dividend yield of companies in the banking sector?

    The average annual dividend yield of companies in the banking sector is 2.4%. This dividend yield is higher than the risk-free ... 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. Investing

    The 10 Biggest REITs in the U.S.: Dos and Don'ts

    Five of these REITs may offer potential over the next 1-3 years. Be careful with the other half.
  5. Mutual Funds & ETFs

    Non-Traded REITs: Risks and Rewards

    An overview of the risks and rewards of non-traded REITs and how they compare to exchange-traded REITs.
  6. Economics

    Where To Search For Yield Today

    It’s hard to miss that there has been a pronounced slowdown in the U.S. economy this year.
  7. Investing

    Top Alternative Investments To The Stock Market

    Dislike the stock market or want greater diversity? Here are some alternatives.
  8. Economics

    What is a Spinoff?

    Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs.
  9. Mutual Funds & ETFs

    At Look at REITS vs. Real Estate Mutual Funds

    REITs and real estate mutual funds have their differences, but they both offer liquidity and easy access to diversified real estate assets.
  10. Mutual Funds & ETFs

    Investing in REITs: What You Need to Know

    Thinking of investing in REITs? Here's what you need to know first.

You May Also Like

Hot Definitions
  1. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  2. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  3. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  4. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  5. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  6. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
Trading Center