Contributing a DST interest into a REIT can unlock diversification and a path to liquidity — at the cost of a one-way door.
A 721 exchange lets an investor contribute property or DST interests into a REIT's operating partnership for OP units, deferring gain while gaining exposure to an entire portfolio. For DST holders nearing a full-cycle sale, it can be an elegant next step.
The benefits are real: diversification across many assets, distributions comparable to REIT shares, and a route to staged liquidity through conversion of units to shares. Heirs also receive units that are easier to divide than a single building.
The catch is that the move is generally permanent — once in OP units, you usually cannot 1031 back into direct real estate, and converting and selling shares ends the deferral. It is a decision to make deliberately, with your CPA.
This article is for general educational purposes only and is not investment, tax, or legal advice, or an offer to sell or solicitation to buy any security. DST, Opportunity Zone, and other private placements are speculative, illiquid, and sold only to accredited investors via private placement memorandum. Consult your own CPA and attorney.
