721 Exchange in Minneapolis:
sell the headaches, keep the cash flow, defer the taxes.
Contribute your building to AlphaDiv Real Estate Fund for Series A Units instead of selling it. No capital gains bill at contribution, no 45-day clock, no replacement property to find, and no more tenants calling you. We have done it seventeen times since January 2024, all in the Twin Cities.
The 721 exchange on a whiteboard.
How a contribution works step by step, what you give up, what you get, and why it simplifies an estate. Six minutes.
You own a building that has done its job.
You bought it in 1998, or your father did. It is worth three or four times what you paid, it has been fully depreciated, and every dollar of that gain is waiting for you at closing: federal capital gains, the 3.8% net investment income tax, 25% depreciation recapture, and Minnesota income tax on top. On a $4 million building with a low basis, that is often a seven-figure check to the government.
So you keep it. And you keep the roof, the parking lot, the vacancy, the lender renewal and the tenant who pays late.
A 721 exchange gives you a third option between "hold and manage" and "sell and pay." You contribute the building to our fund at appraised value, receive units, and step from active ownership into a diversified, professionally managed position with quarterly income. The tax is deferred, the work is gone, and the equity keeps compounding.
Five steps, one closing, no intermediary.
Thirty minutes on the building, the debt, your basis and what you want life to look like afterward. We tell you quickly whether it fits.
We underwrite, order a third-party appraisal or broker opinion, and send a written contribution offer: value, debt treatment, cash option, unit count.
Your CPA and attorney review the Operating Agreement, the §704(c) allocation and the §752 debt analysis. We answer every question in writing.
Title moves to the fund through our affiliated title company. Debt is paid off or assumed. You receive Series A Units at the then-current unit price.
Our crews take over the building. You receive quarterly distributions, a K-1 with depreciation, an annual valuation, and units you can divide among heirs.
How a contribution is priced (illustration)
| Appraised value of contributed building | $3,000,000 |
| Less mortgage paid off at closing | ($1,200,000) |
| Less closing costs | ($60,000) |
| Net asset value credited as capital | $1,740,000 |
| ÷ Series A unit price ($1.39, Sept 2026) | 1,251,799 units |
| Target dividend on $1,740,000 at 6% reinvested | $104,400 / yr |
Hypothetical. Your tax basis carries over to the units and built-in gain is allocated to you under §704(c). Targets are objectives, not guarantees.
Why owners choose it
- Defer the tax. Capital gain and depreciation recapture are generally deferred at contribution, subject to the debt-relief rules of §752. Deferred equity keeps working for you.
- Go passive. Tenants, roofs, lenders and leasing become our job. You receive distributions and a K-1.
- Diversify. One building becomes a share of 23 properties across office, flex, industrial, retail and residential.
- Plan the estate. Units are divisible among heirs and, under current law, eligible for a stepped-up basis at death. The deferred gain can be eliminated, not just postponed.
- Take some cash. Contributions can include partial cash at closing, generally taxable only to the extent of cash received.
Seventeen buildings, $15.2M of owner equity, twelve contributing owners.
3558 2nd Street North, Minneapolis
A long-time Minneapolis investor contributed a 91,430 SF single-tenant industrial building in February 2025 in exchange for $4.04M of Series A Units, deferring the gain on decades of appreciation. The building was valued at $8.0M within six months of closing. His units participate in the whole fund's appreciation and he has received quarterly distributions throughout. He also holds positions in two other CIG-sponsored vehicles.
5421 Feltl Road, Minnetonka
A 27,050 SF flex building contributed in June 2024 at $2.0M. Our construction team reconverted office space back to warehouse to match what Minnetonka tenants actually want, and the building was valued at $3.35M by 2026. The contributing owner went from managing five tenants to reading a quarterly statement.
Sponsor-reported. Valuations are Managing Member determinations supported by appraisals and broker opinions of value. Past performance is not indicative of future results.
Owners who did it.
Twin Cities building owners who contributed through a 721 exchange, on what they were worried about, how the closing went, and what the quarter after looked like.
What owners give up.
- Control. Property-level decisions belong to the Managing Member. You are a member of the fund, not the owner of a building.
- A future 1031. Partnership units are not like-kind property. The 721 is the last exchange; after that the plan is hold, collect and pass on.
- Liquidity. Redemptions are subject to a holding-period multiplier and Managing Member discretion, and are generally taxable events.
If you need the cash in two years, sell the building or do a 1031. If you want the income for the next twenty and a clean estate, keep reading.
721 exchange questions from Minneapolis owners.
What is a 721 exchange?
A 721 exchange is a contribution of real estate to a partnership in exchange for partnership interests, under Section 721 of the Internal Revenue Code. Done correctly, the contribution is not a taxable sale. In our case the partnership is AlphaDiv Real Estate Fund LLC, a Minnesota open-end fund that is the core of a 30-building Twin Cities portfolio, and the interests are Series A Units.
How is a 721 exchange different from a 1031 exchange?
A 1031 exchange swaps one property for another property you will own and manage, on a 45-day identification and 180-day closing clock, through a qualified intermediary. A 721 exchange swaps your property for units in a diversified partnership, with no clock and no replacement property to find. The trade-off is that partnership units cannot later be 1031 exchanged; the deferral continues as long as you hold the units, and under current law heirs receive a stepped-up basis at death.
Do I have to be in Minneapolis to do a 721 exchange with AlphaDiv?
The building needs to fit our portfolio, and our portfolio is concentrated in the Minneapolis–Saint Paul suburbs, so nearly every contribution we accept is in the metro. We look at multi-tenant office, flex, industrial, retail and residential buildings, typically $1M to $15M in value.
What happens to my mortgage in a 721 exchange?
Existing debt is either paid off at closing from fund proceeds or assumed by the fund, depending on the loan. Your net asset value, meaning appraised value less debt and closing costs, is what converts to units. Debt relief can have tax consequences under IRC §752, which is one of the reasons your CPA needs to be in the room early.
How are the units priced?
At the fund's unit price on the contribution date. The Managing Member sets the price from net asset value under the Operating Agreement and it is updated quarterly. The September 2026 unit price is $1.39 per unit.
What do I receive after contributing?
Quarterly distributions, a K-1 with your share of depreciation, an annual valuation supported by third-party appraisals or broker opinions, and units that are divisible among heirs. The fund targets a 5% annual dividend paid in cash, or 6% if reinvested, on unreturned capital. Targets are objectives, not guarantees.
Can I take some cash at closing?
Yes. Contributions can be structured with partial cash, which is generally taxable to the extent of the cash received. Many owners take a small amount of cash for taxes or liquidity and contribute the rest.
Who does 721 exchanges in Minneapolis?
Commercial Investors Group, through AlphaDiv Real Estate Fund, is a Minneapolis-based sponsor that accepts 721 contributions of commercial buildings directly from Twin Cities owners. Most 721 programs nationally are run by large non-traded REITs that want institutional-grade assets; AlphaDiv takes the multi-tenant suburban office, flex, industrial, multi-family and retail buildings that local owners actually have, and the same team that underwrites the contribution leases, builds and manages the building afterward.
What happens to depreciation recapture in a 721 exchange?
It is deferred along with the capital gain. In a sale, the depreciation you took is recaptured and taxed at up to 25% federally plus Minnesota income tax. In a 721 contribution there is no sale, so no recapture is triggered at contribution. Your basis carries over into the units, and the fund continues to depreciate the building. Tax is due only when you later redeem units for cash or the fund sells the asset in a taxable transaction.
How is my building valued for a 721 contribution?
We underwrite the building the same way we would to buy it: current rent roll, market rents, deferred maintenance and a third-party appraisal or broker opinion of value. The contribution value, less any debt paid off and closing costs, becomes your capital account, which converts to units at the current unit price. You see the number in writing before you commit, and your CPA and attorney can review every assumption.
Can I get out later?
Units can be redeemed at the Managing Member's discretion, subject to a holding-period multiplier that starts at 75–84% of unit price in year one and rises toward 94% by year ten. Redemptions are generally taxable events. AlphaDiv is built for owners who want to hold, collect and pass units on, not for a two-year trade.
Get a written 721 offer on your building.
Send us the address. Within three business days you will have a number, the debt treatment and the unit count, in writing, with no obligation.