721 Exchange

Allows investors to exchange an interest in an investment property (held in a Delaware Statutory Trust, or DST) for an interest in the operating partnership of a Real Estate Investment Trust (REIT) owning numerous properties without recognizing a taxable gain, so long as certain conditions are met. After a holding period, operating units may then be converted into REIT common shares if the partnership chooses to acquire the DST interests from investors. REIT common shares then may provide access to liquidity through a share repurchase program.

The 721 exchange is a tax-efficient opportunity for estate planning, with operating partnership units potentially transferred on a stepped-up basis to heirs, as the cost basis of units are adjusted to fair market value upon inheritance. It is named after section 721 of the U.S. Internal Revenue Code.