Multifamily real estate is changing fast. Rents are cooling in some markets but rising in others. Investors are looking for stability in an uncertain economy. And developers are searching for smart ways to scale without overleveraging. One of the most talked-about solutions? Partnering with Real Estate Investment Trusts, or REITs.
These partnerships aren’t new, but how they’re used today looks very different. Developers once saw REITs as competitors. Now, they’re seeing them as allies.
Why REITs Matter More Than Ever
REITs control over $4.5 trillion in gross real estate assets across the U.S., according to Nareit. Of that, about $1.2 trillion is in public REIT portfolios that include multifamily housing. That’s a huge pool of capital — and a major opportunity for developers.
The appeal is simple: REITs offer access to long-term, patient capital. Developers get liquidity and flexibility, while REITs get access to new properties without starting from scratch. It’s a win-win when structured right.
Ben Roper, a REIT specialist who works with developers on 721 UPREIT transactions, says it’s all about timing and trust. “You can’t treat it like a one-off sale,” he explains. “A REIT partnership works when both sides understand each other’s goals and timelines. That’s where the real value is.”
How REIT Partnerships Work
Most developers are familiar with selling or syndicating properties. A REIT partnership is different. It’s not just about cashing out — it’s about converting ownership.
Through what’s known as a Section 721 UPREIT exchange, developers can contribute their property to a REIT and receive operating partnership (OP) units instead of cash. Those units function like shares in the REIT.
The advantages:
- Tax deferral: You don’t trigger capital gains at the time of contribution.
- Liquidity: Over time, OP units can be converted into shares, giving flexibility to exit or diversify.
- Passive income: Developers continue to benefit from distributions, without the day-to-day property management.
It’s like trading one big building for a small slice of a bigger, more stable portfolio. You’re diversifying without walking away from real estate altogether.
Why Developers Are Paying Attention
The past few years have changed the math for developers. Construction costs jumped over 35% between 2020 and 2024, according to the Bureau of Labor Statistics. Meanwhile, interest rates doubled. That combination squeezed margins and limited access to traditional financing.
REITs, with their lower cost of capital and steady investor base, became a lifeline. They can buy or contribute assets even when banks are tightening.
For many developers, REIT partnerships have become a way to unlock liquidity without selling under pressure. It allows them to keep building, expand into new markets, or retire debt.
And in a world where capital is cautious, that flexibility can make the difference between growth and stagnation.
Common Myths About REIT Deals
Let’s clear up a few misunderstandings:
“I’ll lose control of my assets.”
Not necessarily. Many UPREIT deals let developers stay involved in asset management or advisory roles. It’s about shifting from active management to strategic ownership.
“The REIT just wants to buy me out cheap.”
A good REIT deal isn’t a fire sale. It’s a contribution of value. Both sides negotiate based on fair market appraisals and long-term growth potential.
“It’s too complicated.”
Yes, it’s paperwork-heavy. But so is every major transaction. Developers who partner with advisors experienced in 721 exchanges often find it smoother than expected.
In short: it’s not about losing your business — it’s about transforming it.
The Market Outlook for Multifamily + REITs
The fundamentals of multifamily real estate are still strong. The U.S. needs about 4.3 million new apartments by 2035 to meet housing demand, according to the National Multifamily Housing Council. That’s a lot of room for growth.
But the growth won’t come from solo developers building independently. Rising costs and stricter lending standards are pushing the industry toward collaboration.
Public and private REITs are expanding aggressively into secondary and tertiary markets — places like Richmond, Charlotte, and Austin — because cap rates are higher and demand is stable.
Developers who know their local markets can use that to their advantage. REITs need partners with ground-level insight. You know the zoning board, the community, and the contractors. They know capital. Together, it works.
How to Approach a REIT Partnership
1. Know Your Numbers
Before any conversation, understand your property’s value, debt position, and NOI (net operating income). REITs are data-driven. You’ll need to show performance clearly.
2. Focus on Relationships
REIT partnerships are built on trust, not just returns. Build connections early. Attend conferences. Follow up after meetings. Show you understand their goals — not just your own.
3. Be Clear About Your Goals
Do you want to exit? Reinvest? Retire debt? The clearer you are, the easier it is to structure a deal that benefits both sides.
4. Find the Right Fit
Not all REITs are the same. Some focus on stabilized assets. Others want value-add or development opportunities. Align with the one that fits your business model.
5. Get the Right Advisors
You’ll need legal, tax, and financial experts who understand REIT structures. They can help you avoid pitfalls and maximize benefits.
What REITs Look for in Developers
REITs value consistency and credibility. They want partners who can deliver projects on time, within budget, and with strong fundamentals.
They also look for developers who think long-term. If you treat every deal as a short-term flip, you’ll struggle to gain traction. If you focus on quality, repeat partnerships, and local relationships, you’ll stand out.
Transparency is key. REITs have strict reporting requirements. Be ready to share data, answer questions, and stay organized.
Opportunities Ahead
As interest rates stabilize and demand for rental housing continues, REIT partnerships are likely to grow. The model works because it aligns incentives: REITs get access to inventory; developers get access to capital and liquidity.
Some forecasts suggest private REIT assets could grow by 20% in the next five years, driven by institutional investors looking for reliable income. That means more opportunities for developers to participate.
If you’re sitting on stabilized assets or preparing to exit a project, exploring a REIT contribution could open doors you didn’t know existed.
Final Thoughts
The future of multifamily investments isn’t about going solo. It’s about partnering smarter. Developers who embrace collaboration — and understand how REITs operate — will be in the best position to grow.
As Ben Roper says, “It’s not about selling out. It’s about scaling up with the right partners.”
For developers, that’s the takeaway: align your goals, know your worth, and treat partnerships like long-term relationships. The capital, stability, and opportunity are already there. You just need to make the connection.