The Realized Team’s Picks
UPREIT Structure Explained: Property, Operating Partnership, and REIT
An UPREIT structure lets a property owner contribute appreciated real estate to a REIT’s operating partnership in exchange for OP units instead of cash. In practical terms, your property moves into the partnership, the REIT controls that partnership, and you receive an ownership interest that may defer capital gains tax until a later taxable event.
An UPREIT Transaction Step by Step: From Property Contribution to OP Units
An UPREIT transaction generally works by contributing appreciated investment real estate to a REIT’s operating partnership under Section 721 in exchange for OP units rather than cash. That structure can defer capital gains recognition at contribution while shifting the owner from direct property ownership to partnership interests tied to the REIT.
What Is an UPREIT?
An UPREIT, or umbrella partnership real estate investment trust, is a structure that lets a property owner contribute appreciated real estate to a REIT’s operating partnership in exchange for operating partnership units instead of selling for cash. This can defer capital gains taxes until a later taxable event, such as converting units to REIT shares, selling the units, or the operating partnership selling the contributed property.
How Does an UPREIT Work?
An UPREIT lets an investment property owner contribute appreciated real estate to a REIT’s operating partnership in exchange for operating partnership, or OP, units instead of cash. Because the transaction is generally structured as a contribution rather than a sale, capital gains taxes may be deferred until a later taxable event.
Delaware Statutory Trust Companies: Sponsor, Broker, and Provider Differences
A Delaware Statutory Trust company isn't a single role. In most DST investments, the sponsor creates and manages the offering, the broker helps determine whether it fits an investor’s needs and facilitates access, and the provider is often used more loosely to describe the firm that makes the DST available.
Where Can 1031 Investors Find Available Delaware Statutory Trust Properties?
1031 investors typically find available Delaware Statutory Trust properties through DST sponsors and the broker-dealers or advisors that offer those sponsor programs. In practice, the search usually happens through a qualified securities professional who can review current offerings, explain timelines, and help match exchange proceeds to available DST interests.
How Are DST 1031 Brokers Paid, and What Conflicts Should Investors Check?
DST 1031 brokers are generally paid through selling commissions and related offering compensation built into the Delaware Statutory Trust offering, rather than by the investor writing a separate check at closing. That compensation can create conflicts, so investors should review how the broker, broker-dealer, and sponsor are paid, what fees are embedded in the deal, and whether the recommendation is based on fit or compensation.
What Does a DST 1031 Broker Do?
A DST 1031 broker helps investment property owners evaluate Delaware Statutory Trust offerings as potential replacement properties in a 1031 exchange. The broker assesses investor suitability, explains available offerings, coordinates parts of the exchange process, and helps investors review the structure, risks, fees, and timelines before deciding.
How Can You Sell Delaware Statutory Trust Shares?
You can sell Delaware Statutory Trust shares, but usually not easily, quickly, or on a public exchange. In most cases, selling means finding a qualified buyer through a limited secondary market, complying with sponsor restrictions and securities rules, and accepting that the sale price may differ from your original investment.
Delaware Statutory Trust News and Regulatory Updates
Delaware Statutory Trust news and regulatory updates matter because a DST’s tax treatment, offering structure, and investor suitability depend on strict legal and securities rules. For investment property owners, the key takeaway is practical: closely monitor IRS guidance, offering disclosures, and sponsor practices, because changes or noncompliance can affect tax deferral, liquidity, and overall risk.
