--- title: "DST Exit Scenarios: Refinance, Sale, or UPREIT Conversion" description: "Learn more about DST exit scenarios: refinance, sale, or UPREIT conversion." image: https://www.realized1031.com/hubfs/iStock-2231325944-modified-367474e6-6e7a-4441-b851-94428a64178c.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # DST Exit Scenarios: Refinance, Sale, or UPREIT Conversion Posted Jan 22, 2026 ![iS-2231325944](https://www.realized1031.com/hs-fs/hubfs/iStock-2231325944-modified-367474e6-6e7a-4441-b851-94428a64178c.jpg?width=2121&height=1193&name=iStock-2231325944-modified-367474e6-6e7a-4441-b851-94428a64178c.jpg) As an investor, your usual primary focus when investing in Delaware Statutory Trusts (DSTs) is the cash flow and tax-deferral benefits. However, there is one other aspect worth your scrutiny: the exit strategy. How and when you transition from the DST is crucial to your investment planning, especially if you’re entering through a 1031 Exchange.  The [exit strategy](https://www.realized1031.com/blog/can-you-exit-a-delaware-statutory-trust-early) is predetermined by the sponsor, so you should have an idea even before you enter one. There are three common avenues: a refinance, a sale, or an UPREIT conversion. Realized 1031 discusses each option in-depth to help you understand the framework and how each one fits your overall investment strategy. Keep reading to learn more. ### Delaware Statutory Trust Refinance A DST refinancing is a rare event that violates one of the seven deadly sins outlined by Revenue Ruling 2004-86. In particular, DSTs eligible for 1031 Exchanges aren’t allowed to renegotiate debt terms, as this constitutes “active” management. However, there is one specific circumstance where refinancing is the only exit strategy available: the loan matures, but the debt remains unpaid.  Sponsors typically align the end of the [DST’s holding period](https://www.realized1031.com/blog/what-is-the-holding-period-for-a-delaware-statutory-trust-dst) with the loan maturity date. However, there are cases when the underlying properties fail to perform and provide enough income to cover debt services. Refinancing becomes necessary in this case, but the DST will need to convert into a [springing LLC](https://mf.freddiemac.com/docs/multifamily_legal_fyi_delaware_statutory_trust_august_2014.pdf) to be able to make this process possible. In such an event, the DST loses its 1031 Exchange eligibility. You will be liable for all the previous tax-deferred capital gains, but you’ll still be able to save your investment thanks to this mechanism. Still, a refinancing is not the ideal scenario. Under normal circumstances, either a sale or an UPREIT contribution is the preferred choice. ### DST Sale Process: How It Works The most standard DST exit strategy is the property sale or disposition. Once the holding period is over, the sponsor begins listing the assets, negotiating with buyers, and closing sales. The income from these sales, along with the rest of the cash reserves and your initial investment, will be distributed back to you.  On your end, as an investor, you can go with either of these two options.  1. **Cash Out: **You simply receive the proceeds as is and use them however you want. However, this option is a taxable event. You’ll now be liable for previously deferred capital gains taxes and depreciation recapture.  2. **Reinvest in Another DST: **The other choice is to continue tax-deferrals by investing in another DST. This practice is one of the most popular 1031 exchange exit options since it helps you maintain the tax advantages for longer. Keep in mind that the same rules apply in a regular 1031 Exchange. Most importantly, you [cannot take direct control of the sales proceeds](https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx). As such, it’s important to communicate with your sponsor ahead of time, so they won’t deposit the funds directly into your personal accounts. It should be your qualified intermediary who receives the proceeds. ### UPREIT Conversion Explained The other route sponsors take is contributing the underlying properties to an umbrella partnership real estate investment trust (UPREIT). An UPREIT is another trust vehicle that owns underlying income-generating properties. However, instead of beneficial interests, investors own operating partnership (OP) units that are the economic equivalent of REIT shares. You earn dividends based on the OP units you own.  This contribution is called the [721 Exchange](https://www.investopedia.com/terms/u/upreit.asp), and it’s also tax-deferred. As such, UPREITs are suitable avenues for investors who no longer want to continue the 1031 Exchange cycle but would like to have more control over capital gains tax payments. That’s because converting OP units to REIT shares is a taxable event. However, you have full control of how many units you convert, helping you manage tax payments. UPREITs and DSTs have similar enough structures, so exiting a [DST into an UPREIT](https://www.realized1031.com/blog/dst-upreits-a-tax-deferred-path-toward-potential-liquidity) won’t make as much of a difference for investors. You still enjoy benefits like the following. - Passive income and hands-off management - Heightened diversification occurs when the UPREIT portfolio contains properties from various asset classes or geographic locations - No more 1031 Exchange deadlines since the 721 Exchange effectively ends the 1031 cycle ### Wrapping Up: DST Exit Strategies Refinancing, property sale, and UPREIT contributions are the three primary ways of exiting a DST. Each one is more applicable than the other under unique circumstances, but the latter two are the most conventional and preferred options. Understanding how each strategy affects your overall investment plans is crucial to ensure continuity and avoid unplanned tax hits. As such, reviewing the exit strategy of the DST offerings becomes a critical step to determine if the investment aligns with your long-term wealth preservation goals. ## Sources: [https://www.investopedia.com/terms/u/upreit.asp](https://www.investopedia.com/terms/u/upreit.asp) [https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx](https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx)  [https://mf.freddiemac.com/docs/multifamily_legal_fyi_delaware_statutory_trust_august_2014.pdf](https://mf.freddiemac.com/docs/multifamily_legal_fyi_delaware_statutory_trust_august_2014.pdf)  Download The Guide To DSTs [![The Investor's Guidebook To DSTs](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/DST-eBook-250.png?width=250&height=250&name=DST-eBook-250.png "See if Delaware Statutory ...") ](https://www.realized1031.com/blog/dst-exit-scenarios-refinance-sale-or-upreit-conversion#blogform) Download eBook ---   --- ### The Investor's Guidebook To DSTs ![Download The Guide To DSTs](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/DST-eBook-550.jpg?width=550&height=650&name=DST-eBook-550.jpg) See if Delaware Statutory Trusts are right for you. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "As an investor, your usual primary focus when investing in Delaware Statutory Trusts (DSTs) is the cash flow and tax-deferral benefits. However, there is one other aspect worth your scrutiny: the exit strategy. How and when you transition from the DST is crucial to your investment planning, especially if you’re entering through a 1031 Exchange. The exit strategy is predetermined by the sponsor, so you should have an idea even before you enter one. There are three common avenues: a refinance, a sale, or an UPREIT conversion. Realized 1031 discusses each option in-depth to help you understand the framework and how each one fits your overall investment strategy. Keep reading to learn more. Delaware Statutory Trust Refinance A DST refinancing is a rare event that violates one of the seven deadly sins outlined by Revenue Ruling 2004-86. In particular, DSTs eligible for 1031 Exchanges aren’t allowed to renegotiate debt terms, as this constitutes “active” management. However, there is one specific circumstance where refinancing is the only exit strategy available: the loan matures, but the debt remains unpaid. Sponsors typically align the end of the DST’s holding period with the loan maturity date. However, there are cases when the underlying properties fail to perform and provide enough income to cover debt services. Refinancing becomes necessary in this case, but the DST will need to convert into a springing LLC to be able to make this process possible. In such an event, the DST loses its 1031 Exchange eligibility. You will be liable for all the previous tax-deferred capital gains, but you’ll still be able to save your investment thanks to this mechanism. Still, a refinancing is not the ideal scenario. Under normal circumstances, either a sale or an UPREIT contribution is the preferred choice. DST Sale Process: How It Works The most standard DST exit strategy is the property sale or disposition. Once the holding period is over, the sponsor begins listing the assets, negotiating with buyers, and closing sales. The income from these sales, along with the rest of the cash reserves and your initial investment, will be distributed back to you. On your end, as an investor, you can go with either of these two options. Cash Out: You simply receive the proceeds as is and use them however you want. However, this option is a taxable event. You’ll now be liable for previously deferred capital gains taxes and depreciation recapture. Reinvest in Another DST: The other choice is to continue tax-deferrals by investing in another DST. This practice is one of the most popular 1031 exchange exit options since it helps you maintain the tax advantages for longer. Keep in mind that the same rules apply in a regular 1031 Exchange. Most importantly, you cannot take direct control of the sales proceeds. As such, it’s important to communicate with your sponsor ahead of time, so they won’t deposit the funds directly into your personal accounts. It should be your qualified intermediary who receives the proceeds. UPREIT Conversion Explained The other route sponsors take is contributing the underlying properties to an umbrella partnership real estate investment trust (UPREIT). An UPREIT is another trust vehicle that owns underlying income-generating properties. However, instead of beneficial interests, investors own operating partnership (OP) units that are the economic equivalent of REIT shares. You earn dividends based on the OP units you own. This contribution is called the 721 Exchange, and it’s also tax-deferred. As such, UPREITs are suitable avenues for investors who no longer want to continue the 1031 Exchange cycle but would like to have more control over capital gains tax payments. That’s because converting OP units to REIT shares is a taxable event. However, you have full control of how many units you convert, helping you manage tax payments. UPREITs and DSTs have similar enough structures, so exiting a DST into an UPREIT won’t make as much of a difference for investors. You still enjoy benefits like the following. Passive income and hands-off management Heightened diversification occurs when the UPREIT portfolio contains properties from various asset classes or geographic locations No more 1031 Exchange deadlines since the 721 Exchange effectively ends the 1031 cycle Wrapping Up: DST Exit Strategies Refinancing, property sale, and UPREIT contributions are the three primary ways of exiting a DST. Each one is more applicable than the other under unique circumstances, but the latter two are the most conventional and preferred options. Understanding how each strategy affects your overall investment plans is crucial to ensure continuity and avoid unplanned tax hits. As such, reviewing the exit strategy of the DST offerings becomes a critical step to determine if the investment aligns with your long-term wealth preservation goals. Sources: https://www.investopedia.com/terms/u/upreit.asp https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx https://mf.freddiemac.com/docs/multifamily_legal_fyi_delaware_statutory_trust_august_2014.pdf", "articleSection" : [ "Delaware Statutory Trusts (DST)" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2026-01-22T15:00:02+0000", "datePublished" : "2026-01-22T15:00:02+0000", "description" : "Learn more about DST exit scenarios: refinance, sale, or UPREIT conversion.", "headline" : "DST Exit Scenarios: Refinance, Sale, or UPREIT Conversion", "image" : { "@type" : "ImageObject", "height" : 1193, "url" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/iStock-2231325944-modified-367474e6-6e7a-4441-b851-94428a64178c.jpg", "width" : 2121 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/dst-exit-scenarios-refinance-sale-or-upreit-conversion", "name" : "DST Exit Scenarios: Refinance, Sale, or UPREIT Conversion", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/iStock-2231325944-modified-367474e6-6e7a-4441-b851-94428a64178c.jpg" } ```