721 REIT conversions took one in five DST exits since 2024, and in 2026 distress has overtaken them

In 2019, nearly every documented exit in the securitized 1031 market ended the same way: 39 of the 40 dated Delaware statutory trust exit events that year were property sales, the fortieth a partial sale, and none was a conversion or a failure. Then the exit door changed, and it changed unevenly. Dated Section 721 conversions, which hand investors units in a REIT's operating partnership instead of cash from a sale, jumped to 16 in 2024, fell back to 4 in 2025, and reached 11 in 2026 through October 10: seven of them Cantor Fitzgerald trusts recorded in a single month.

That is the shape of the wave: real, recent, and lumpy enough that any single year overstates or understates it. Pooled across 2024–26, 56% of the 149 dated exits were property sales, 21% were 721 conversions, 15% ended in foreclosure or documented distress, and 7% were partial sales or outcomes still unresolved (Top1031.com analysis of SEC filings and sponsor-published materials). In 2026 the third door has grown fastest: 12 dated exits ended in distress, one more than converted. Advisors have argued about UPREIT exits for three years, mostly on anecdotes. This is a count of them from the public record.

Finding 1The count, year by year

Dated 721 conversions ran at two per year or fewer through 2022, across the 211 dated exits the record holds from 2011 through 2022. The count broke that pattern in 2023 with six and has not returned to it.

In total, 73 trusts have converted into REIT structures; 42 of those events carry a resolvable date, so the annual counts are floors, not ceilings. The 73 converting trusts had reported $3.92 billion of equity sold in their SEC filings, itself a lower bound, since several converted trusts never amended their Form D and show zero reported raise.

The undated remainder is not noise. Some conversions leave almost no public record: Ares folded its ADREX Diversified I DST, which reported $194 million of equity sold, into its non-traded REIT without a full-cycle release stating a date or a result. A trust that sells issues closing announcements; a trust that converts can simply reappear as a subsidiary on a REIT's exhibit list.

What a 721 conversion actually does

A Section 721 exchange contributes the DST's property to a REIT's operating partnership; investors receive operating-partnership units instead of sale proceeds. The tax deferral continues, but the 1031 chain ends there: partnership interests are excluded from like-kind exchange treatment, so OP units can never be exchanged into another property. A later sale or redemption of the units is generally taxable.

Everything else about the position changes too. A single named building becomes a slice of a diversified portfolio; a fixed-life trust becomes an open-ended holding; property-level debt becomes entity-level debt; liquidity depends on the REIT's redemption program rather than a sale date. None of that is inherently bad. It is a different investment, arrived at without a new investment decision.

Finding 2Three platforms account for 46 of the 73 conversions

Conversions do not spread evenly across the market's 146 sponsor names in Form D filings. They cluster tightly by platform, which means one firm's program decision can move an entire year's exit mix. Seven of 2026's eleven dated conversions are Cantor Fitzgerald trusts recorded as converted in February. The table below shows the platforms behind the wave; equity figures are cumulative raise as reported in SEC filings.

The 73 conversions reconcile like this: 46 sit in three platforms, 15 more in three mid-sized programs, and the remaining 12 are scattered one to three apiece across nine sponsors. Ares' four include the $316 million AIREX Portfolio VI, the second-largest converted trust in the filing record; Ares' two platforms are attributed together in this edition. But the three leaders are not contemporaries. Black Creek's 15 are historical and mostly unresolvable in time: 13 carry no public date, and the two that do fall in December 2021 and January 2022, before the wave began. The live series is largely two firms'. Of the 37 dated conversions since 2023, Cantor Fitzgerald accounts for 14 and JLL Exchange for 10. The largest single dated conversion in the exit record is JLLX Diversified II, a $198 million trust absorbed by JLL Income Property Trust in May 2025.

The names are not incidental. The firms running the conversion programs are largely the same institutional entrants that now lead fundraising: JLL filed its first DST in February 2020, Hines in September 2022 and Blue Owl in December 2023. Ares entered in July 2021 by acquiring Black Creek Group's real estate advisory and distribution business, and its ADREX platform filed its first DST that December. In 2023–26 vintages Ares's exchange platform is the market's largest raiser.

Who controls the conversion

What practitioners actually fight about is not whether the option exists but who holds it. In some structures the conversion is elective, with investors choosing among OP units, a fresh 1031, or cash at the trust's maturity; in others it is hardwired, and the DST converts on the sponsor's terms. The hardwired kind is what draws the criticism. An advisory memo on forced conversions from Kay Properties, a DST-focused brokerage, warns that in a forced conversion investors have no choice in the exit strategy, must take units on the sponsor's terms, and lose the ability to run another 1031 exchange on that equity. The offering documents disclose which kind an investor is buying. The record now shows why the question is worth asking before the wire, not after.

The steelman

The conversion wave also has a defensible reading, and the same exit table supplies it. The year conversions peaked was also the first year the record shows meaningful distress: in 2024, 6 of 52 dated exits, or 12%, ended in foreclosure or documented distress, against no more than two in any prior year. Dated property sales in that year fell to 28, from 62 in 2022, while conversions rose to 16. A trust that converted in 2024 handed its investors continued deferral, a diversified portfolio and entity-level debt rather than a sale into that market.

That co-movement is not proof of rescue, and the record does not run one way. Distress in 2025 was about a one-in-ten share of dated exits, 5 of 49 against 2024's 6 of 52, yet conversions that year fell to four. In 2026 distress has run to 12 of 48 dated exits while conversions number eleven. Two series peaked together once. We count outcomes rather than trusting reported returns, so what the record supports is narrower than either side of the argument would like: the 721 arrived in volume during the market's worst stretch for selling, but its count from year to year tracks which platforms pulled the trigger more closely than it tracks the market.

What the record shows next

Two numbers will tell the next chapter of this story, and both are checkable in filings. First, whether 2026's 23% conversion share climbs back toward 2024's 31% by year-end; if it does, the 721 becomes a co-equal exit door with the property sale, with everything that implies for investors who assumed their DST would end in cash. Second, whether the 31 undated conversions resolve to dates, which would likely raise, not lower, the counted wave. We will keep counting.

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