721 FARMLAND EXCHANGE

A dense row of tall green corn plants grows in a field under a cloudy sky, with lush grass at the base of the plants.

What is a 721 Farmland Exchange?

A section 721 Farmland Exchange is a type of property acquisition transaction in which a property owner who is an accredited investor contributes their property to an Umbrella Real Estate Investment Trust (an “UPREIT”) in exchange for ownership in the UPREIT. It is similar to a 1031 Exchange in that it can allow property owners to defer capital gains on appreciated real estate.

Diagram showing the flow of property from owner to REIT, with operating partnerships managing units, and properties forming a portfolio, depicted with arrows and icons of a building and silo.

How does a 721 Farmland Exchange work?

In a typical 721 Farmland Exchange, property owners contribute their real estate directly to an Operating Partnership (“OP”) subsidiary of a REIT in exchange for REIT OP units. These OP units can, in most cases, be converted to REIT shares on a one-to-one basis, providing the property owner with an interest in a diversified portfolio of properties and the potential for future liquidity. If the owner had sold his/her appreciated property for cash, that transaction would trigger an immediate capital gain tax liability.

In a 721 Farmland Exchange, owners of these OP units are typically able to defer gains on any appreciated property until such time as either the OP units or the underlying property are sold. 721 Farmland Exchange property owners can be individuals or partnerships. OP units would be entitled to the same dividends as the parent REIT’s shares. To the extent the value of REIT shares changes, OP unit value will also change, resulting in potential further appreciation prior to redemption.

Why consider a 721 Farmland Exchange?

A 721 Farmland Exchange makes sense for a variety of properties and situations. Here are a sample of advantageous opportunities:

➤ Families or partnerships looking to sell jointly-owned properties to address unresolved succession issues.
➤ Families or partnerships faced with structuring, divergent interests, estate planning or complicated administration.
➤ A property owner looking to sell appreciated real estate, but not wanting to trigger a large capital gain and pay the related taxes, especially if they have a low basis.
➤ A property owner interested in passive income from real estate but no longer wants to assume the property management responsibilities of their real estate portfolio.
➤ A property owner with few commercial properties looking for diversification provided by a larger REIT portfolio.
➤ Surplus property generated by M&A activity.
➤ Debt maturities approaching or sub-optimal terms.
➤ Property owners with a large portion of their net worth tied up in direct real estate holdings.

A man wearing a black cap, white shirt, and jeans stands in a field, inspecting green plants growing in neat rows on a sunny day.

Close-up of green soybean pods growing on a plant with large, green leaves and visible fine hairs on the pods. The background shows more leaves and stems, indicating a healthy, thriving soybean plant.

What are the benefits?

➤ TAX ADVANTAGES – Deferral of capital gains, especially beneficial for properties with a low tax basis.
➤ LIQUIDITY – 5-year commitment, shares are eligible for redemption thereafter through the Company Redemption Program. Private Shares – not listed on an exchange. REIT Shares and OP units are not publicly listed on any exchange.
➤ CONTINUED PASSIVE INCOME – Often, a seller of appreciated property not only faces a material tax bill but must source, evaluate, and acquire another investment to provide passive income. By becoming a holder of OP units, the owner automatically receives REIT distributions and has the opportunity to liquidate their investment in parts over time, rather than all at once.
➤ DIVERSIFICATION – As a shareholder in the REIT, owners benefit from investment in a large portfolio that is diversified via tenant mix, geographies, etc, while still prioritizing U.S. organic farmland.
➤ FUTURE LIQUIDITY – As the OP units are typically convertible to REIT shares, the owner has some ability to control his/her timing for future liquidity (although it may trigger capital gains recognition and liquidity may be limited).
➤ SIMPLIFICATION – 721 Farmland Exchanges also allow for a simplification of the property owners estate, as OP units and REIT shares can be divided amongst heirs in a way that a single property cannot. Also, in certain circumstances, some owners can receive cash and others OP units without triggering capital gains.

Why partner with Amber on a 721 Farmland Exchange?

Amber Farmland Investments is a Public Benefit Corporation, with a permanent capital base that balances organic, regenerative farmer needs and financial returns to investors. We offer farmers and landowners 721 Farmland Exchange opportunities, long-term lease structures and flexible mortgages. With a breadth of experience in real estate acquisitions, capital markets, finance, investor relations, and organic farmland management, the Amber team seeks to assemble and manage a portfolio of income-generating properties

By executing a 721 Farmland Exchange transaction with Amber, a property owner can convert existing real estate interests into OP Units of a growing private real estate offering. Compared to cash sales and 1031 exchanges, our 721 Farmland Exchange offer your family financial advantages with custom tailored products specifically to your needs.

A close-up view of yellow corn kernels being loaded into a large metal grain truck under a conveyor, with a green field and blue sky in the background.

A man wearing a cap and jeans steps onto a platform between a white and orange semi-truck and a silver grain trailer, with corn pouring into the trailer. Green fields and a partly cloudy sky are in the background.

How does a cash sale stack up?

Every 721 Farmland Exchange is customized to our partners’ needs. Contact us to discuss an example calculation of the comparison of yields between a 721 Farmland Exchange versus a Cash Sale.

Interested to learn more about partnering on a 721 Farmland Exchange?

Click here to contact our farmer relations team