PropCO (Property Company)
A PropCo, short for Property Company, is a subsidiary entity created by a business to hold and manage its real estate assets. It owns the physical properties and land used by the parent company or Operating Company (OpCo) and generates revenue by renting these properties back to OpCo or other tenants. PropCos enable businesses to separate property-related finances and debt from their core operations, offering financial flexibility and risk management. The property portfolio held by a PropCo can also be used as collateral to secure financing at competitive rates. In some cases, PropCos are structured as Real Estate Investment Trusts (REITs) to gain tax advantages. This setup is common in industries like the residential sector, hospitality, healthcare, and retail, where significant real estate assets are involved. While the OpCo-PropCo structure provides financial and operational benefits, it may introduce complexities in property management and business operations.
