MAY 2024

2A — May 2024 — M id A tlantic Real Estate Journal

M id A tlantic Real Estate Journal

M id A tlantic R eal E state J ournal Publisher, Conference Producer ..............Linda Christman VP, Conference Producer .............................Lea Christman Editor/Graphic Artist ......................................Karen Vachon Contributing Columnists ...........................Dwight Kay. KPI; Shaun Keegan, Solar Landscape Mid Atlantic R eal E state J ournal ~ Published Monthly Periodicals postage paid at Hingham, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal 117 HMS Halsted Dr., Hingham, MA 02043 USPS #22-358 | Vol. 36, Issue 5 Subscription rates: 1 year $99.00, 2 years $148.50, 3 years $247.50 & $4.00 single issue - plus postage REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Phone: 781-740-2900

Dwight Kay

The 721 Exchange UPREIT Exit Strategy for DST Investors Explained ne of the most impor- tant questions Dela- ware Statutory Trust real estate investors need to ask themselves is, “What is my long-term, exit strategy? Most Delaware Statutory Trust (DST) investments are typically held for approxi- mately 5-10 years (although it could be shorter or longer). Af- ter that, the DST investment will typically go “Full-Cycle”, a term used to describe a DST property that is purchased on behalf of investors and then after a period of time is sold on behalf of investors. While the two most common exit strategies for DST inves- tors include cashing-out and paying taxes or continuing with another 1031 Exchange, Kay Properties can potentially offer investors a third exit option: a 721 UPREIT. Once your DST investment goes full-cycle, investors need to evaluate what their next investment move should be, O

including considering the 721/ UPREIT option. What is a 721 UPREIT Exchange? The term “UPREIT” is short for Umbrella Partner- ship Real Estate Investment Trust, which is an operating partnership subsidiary of a REIT that holds and operates real property. Section 721 of the Internal Revenue Code allows own- ers of real estate property to contribute, on a tax deferred basis, their physical property to a partnership, in exchange for interests in the partner- ship (a 721 Transaction). This structure allows holders of real estate to exchange real property for economic inter- est in the REIT in the form of

operating partnership units by contributing that property to the partnership in a 721 Transaction. The operating partnership units have eco- nomic rights that are identical to the rights of the shares of the REIT, and after a designated holding period can be, if the investor chooses to, converted into shares of the REIT (in a taxable transaction) for liquid- ity purposes. Investors seeking to defer capital gains taxes while increasing diversification in real estate should consider using a 721 Exchange to realize the following potential benefits. Tax Advantages - When real estate is typically sold, the investor pays taxes on the capital gains realized as well continued on page 20A

Firmly Rooted in the Law and in the Community We are well grounded in every facet of real estate law, from acquisition to construction. We are committed to serving the needs of our clients and our communities.

Contact: NEIL A. STEIN • 910 Harvest Drive, Blue Bell, PA 19422-0765 • 610-941-2469 • Other Offices: • Cherry Hill, NJ 856-675-1550 • Philadelphia, PA 215-567-3120 Kaplin Stewart Attorneys at Law

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