721 UPREIT Exchanges

Why investors use a 721/UPREIT

• Diversification. Operating-partnership (OP) units represent a stake in the REIT’s whole portfolio rather than a single asset.
• Potential liquidity. OP units can typically convert to REIT shares over time, which may then be sold — a path a single DST does not offer.
• Continued deferral at the moment of contribution, which is generally not a taxable event.
• Estate planning, since units divide among heirs more readily than a building.

What to weigh

• You generally cannot 1031 again. Once you hold OP units or REIT shares you own a security, not direct real property — usually ending future 1031 eligibility. This is the key consequence.
• Converting or selling units is taxable and can trigger the deferred gain.
• Loss of asset-level control and a generally irreversible move into the REIT.

The full mechanics are in the 721 exchange guide.

How Baker 1031 helps

We help you evaluate UPREIT-eligible programs, model the tradeoffs — diversification and liquidity against the loss of future 1031 flexibility — with your tax and legal advisors, and coordinate the two-step from exchange to OP units.

Is a 721/UPREIT right for you?

It may suit an investor who wants to move from a single property to a diversified portfolio with an eventual route to liquidity, and who is comfortable giving up future 1031 exchanges. Because it is largely irreversible, it warrants careful planning.