Exchange your building, not your gains.
Own a dental office building? Clove's 721 Real Estate Program offers eligible owners a way to contribute their property to Clove's real estate partnership in exchange for operating partnership (OP) units, potentially deferring capital gains tax on the units received.
A different option for dental building owners considering a sale or practice transaction.
A different way to think about your building
For many dentists, the office building is a substantial part of their wealth. When it's time to sell, however, the amount left to reinvest may be lower than the sale price suggests once taxes are considered.
Clove's 721 Real Estate Program offers another route for eligible owners. Rather than receiving the entire transaction value in cash, you may contribute your building to Clove's real estate partnership and receive OP units. A qualifying Section 721 exchange may defer capital gains tax on those units at the time of contribution.
The right structure depends on your property, tax position and transaction details.
What is a REIT?
A real estate investment trust, or REIT, is a company that owns or finances income-producing properties. Investors can hold an interest in a portfolio of real estate rather than owning and managing each property themselves.
For a dental building owner, a portfolio structure offers a way to participate in real estate beyond a single property. The investment's rights, income and liquidity depend on its specific terms.
Meet Dentistre
Dentistre is described in Clove's program materials as Clove Dental's REIT, comprising dental office buildings owned by partner dentists. When a doctor contributes an eligible building, it can become part of a shared portfolio of properties associated with Clove practices nationwide.
From one building to a broader portfolio
Your building
One property
Shared property portfolio
Many dental buildings
Why dental building owners consider the 721 program
Six potential benefits, subject to the transaction structure and governing documents.
Diversification
Your interest can extend beyond one building to a broader portfolio of dental properties. Diversification may reduce reliance on a single property but it doesn't remove investment risk.
Potential rental income
The partnership may make distributions from rental income across its portfolio. Payments depend on the portfolio's performance, available funds and the governing documents. They aren't guaranteed.
A leaseback arrangement
The program describes a long-term triple-net (NNN) leaseback to the Clove practice with a stated 10-year term plus options. The lease defines the parties' obligations including applicable property expenses.
Potential tax deferral
A qualifying Section 721 exchange may defer capital gains tax on the OP units received at contribution. The treatment depends on the transaction, applicable tax rules and your circumstances.
Potential redemption options
The one-pager describes options to redeem units for cash or REIT shares after 12 months. Actual redemption rights, timing and restrictions depend on the final agreements. This shouldn't be treated as guaranteed liquidity.
Estate planning considerations
The program materials state that units may pass to heirs with a stepped-up tax basis. This depends on applicable law and individual circumstances, so review the implications with your estate planning and tax advisors.
Your building may have another option.
If you're a dentist who owns a dental office building and you're considering a sale or practice transaction, start with a conversation about your property and your goals.
Discuss your buildingSee how the numbers may work
Illustrative example: a $2 million building. Change the assumptions to match your own.
Option 1: Sell for cash
Option 2: Qualifying 721 exchange
Under these assumptions, approximately $450,000 more remains invested at closing instead of being paid in tax at that time.
How the 721 program works
Value your building
Clove prices the building based on market rent, confirmed by an independent appraisal.
Choose your mix
Select OP units, cash or a combination, subject to the transaction terms.
Complete the transaction
Contribute the building alongside your practice transaction with Clove subject to the required agreements and conditions.
Receive distributions and review your options
Collect distributions if declared. After the stated 12-month holding period, you may explore redemption for cash or REIT shares under the applicable terms.
Frequently asked questions
Do I have to sell my building for cash?
No. For eligible transactions, the program offers the option to contribute a dental building to Clove's real estate partnership in exchange for OP units. Cash or a combination may also be available, depending on the transaction terms.
Will I owe capital gains tax?
A qualifying Section 721 exchange may defer capital gains tax on the OP units received. Debt, disguised-sale rules and other tax considerations can affect the result. Consult your tax advisor before proceeding.
Will I still receive income?
The program describes distributions from rental income across the portfolio. Distributions depend on the partnership's performance, and governing documents and aren't guaranteed.
Can the dental practice continue operating in the building?
The program describes a long-term NNN leaseback to the Clove practice. The stated term is 10 years plus options with the final lease setting out the agreed terms and responsibilities.
When can I redeem my units?
The one-pager describes potential redemption for cash or REIT shares after 12 months. The final agreements determine the actual rights, restrictions and process.
Is this program right for every building owner?
No single structure suits everyone. Property value, tax basis, debt and your future plans all matter. A discussion with Clove and advice from your tax and legal professionals can help you assess the available options.
Let's talk about your building
We can discuss the program with you and outline the next steps for evaluating a potential transaction.
Start with a conversation about your property and your goals.