Section 721 of the Internal Revenue Code allows a property owner to contribute their real estate property to a Real Estate Investment Trust (REIT) in exchange for an interest in the REIT. The process is sometimes referred to as a 721 UPREIT or UPREIT transaction.

Consult a tax professional or refer to IRS publications for additional assistance with a 721 UPREIT. If you are interested in exploring a 721 UPREIT with Sterling Office and Industrial Trust, please email us at soitaq@sretrust.com or call 877-269-1031.


721 Flow Chart


  • Exit Strategy: provides an alternative process to sell/exchange their commercial properties

  • Reduce Risk: provides a means to eliminate liability risks associated with directly owning commercial real estate
  • Continue Income: provides a process to sell/exchange commercial properties, but still enjoy the benefit of regular income from income-producing real estate assets through ownership in a REIT
  • Diversification: provides the opportunity to own an interest in a portfolio of commercial real estate properties in multiple sectors and across a wide geographic area

  • Save Time: provides the opportunity to enjoy the benefits of professionally managed real estate
  • Defer Taxes: provides owners a process to defer taxes on capital gains and certain recapture taxes so long as the UPREIT holds the real property and the investor holds their interest in the REIT

What is an Operating Partnership?

    • The Operating Partnership is the entity through which many REITs operate. In addition to allowing for additional flexibility in terms of operations, having the Operating Partnership allows property owners to contribute their properties to the Operating Partnership in exchange for partnership interests without triggering taxable capital gains. The Operating Partnership is controlled by its general partner, the REIT. The Operating Partnership owns the properties, either directly or through one or more subsidiaries. The Operating Partnership is also the entity which receives all income from the properties. The limited partners of the Operating Partnership (called "OP Unit Holders") are individuals who contributed their properties in exchange for OP Units in the Operating Partnership