Liquidity Options for High-Net-Worth Investors

High-net-worth investors often seek more than simple tax deferral when completing a 1031 exchange. They want a structured path to liquidity that aligns with retirement planning, multigenerational wealth transfer, and portfolio diversification. The 721 UPREIT structure offers one of the clearest liquidity pathways available within the 1031 ecosystem.

How Liquidity Works in a 721 UPREIT

After contributing DST interests into a REIT’s Operating Partnership, investors hold OP units that can later be converted into REIT shares. Once converted, those shares can be sold at the REIT’s net asset value through the sponsor’s share repurchase program, subject to quarterly capacity limits. This process gives investors a measured, sponsor-supported exit strategy that is generally not available with traditional DSTs.  Please note that liquidity is not guaranteed.

Primary Liquidity Options Available

High-net-worth investors typically utilize 721 UPREITs in one of three ways:

• Gradual Liquidity – Convert and sell a portion of OP units each year to spread capital gains and manage tax brackets.
• Full Portfolio Transition – Convert all OP units into REIT shares all at once or over time and sell all the shares subject to capacity constraints.
• Estate Liquidity Planning – Retain OP units during the investor’s lifetime and allow heirs to benefit from the step-up in basis, then convert and sell shares as needed.

Advantages for High-Net-Worth Families

This structure provides several strategic benefits:

• Controlled timing of capital gains recognition
• Access to a professionally managed, multi-billion-dollar REIT portfolio
• Simplified estate administration compared with multiple DST positions
• Potential to diversify away from single-property concentration risk

Considerations for Investors

While attractive, investors should evaluate:

• Lock-up periods and conversion windows
• Quarterly repurchase capacity limits – liquidity is not guaranteed
• Net asset value fluctuations
• Tax implications
• Loss of future 1031 eligibility

How 721 UPREIT Solution presented by Corcapa 1031 Advisors Can Help

At 721 UPREIT Solution presented by Corcapa 1031 Advisors, we work with high-net-worth clients to design liquidity strategies that complement their overall wealth plan. We compare sponsor programs, model staged conversion scenarios, and coordinate with tax and estate advisors to ensure the chosen path supports both current income needs and long-term legacy goals.

For high-net-worth investors seeking both continued tax deferral and a realistic path to liquidity, the 721 UPREIT structure offers a powerful combination of flexibility and simplicity. By converting DST interests into OP units, investors gain access to a professionally managed REIT portfolio with defined liquidity options that can be tailored to their unique financial timeline.