DST-to-721 / UPREIT

Some DST pro­grams con­tem­plate a future Sec­tion 721 / UPREIT trans­ac­tion as a poten­tial exit strat­e­gy. In a typ­i­cal UPREIT struc­ture, real estate may be con­tributed to the oper­at­ing part­ner­ship of a REIT in exchange for oper­at­ing-part­ner­ship units, sub­ject to the applic­a­ble struc­ture and tax rules.

For cer­tain investors, the strat­e­gy may pro­vide con­tin­ued real estate expo­sure, a broad­er port­fo­lio, pro­fes­sion­al man­age­ment, and poten­tial future liq­uid­i­ty fea­tures. How­ev­er, a future 721 trans­ac­tion is not guar­an­teed and may be option­al or manda­to­ry depend­ing on the offer­ing.

Investors should under­stand the pro­posed REIT, val­u­a­tion process, fees, lock­ups, redemp­tion pro­vi­sions, tax con­se­quences, and how con­ver­sion may affect future Sec­tion 1031 flex­i­bil­i­ty.

Key Point: Eval­u­ate a DST-to-721 strat­e­gy as a long-term tran­si­tion strat­e­gy, not sim­ply as a promise of future liq­uid­i­ty.

Relat­ed DSTNews.org Arti­cles

• IRC Sec­tion 721 Exchange — Two Roads to Trav­el

• DST Exit Strate­gies: What Investors Can Expect at Sale

• Div­ing into Non­trad­ed REIT Struc­tures

Edu­ca­tion­al use only. This mate­r­i­al is not tax, legal, account­ing, or invest­ment advice. Pri­vate real estate invest­ments involve risk, includ­ing pos­si­ble loss of prin­ci­pal and illiq­uid­i­ty.