1. A Delaware Statutory Trust is a common structure for investment companies like mutual funds, closed-end funds, interval funds and BDCs, due to favorable regulations afforded under Delaware law. 2. Under IRC §721, it is possible to convert property, including DST interests, to the underlying partnership of a REIT, in exchange for ownership units that later can be converted to REIT shares. Conversion to REIT shares is a taxable event, typically done in anticipation of a sale or redemption of REIT shares. UPREIT interests cannot be exchanged again in a tax-deferred transaction, and do not qualify for §1031 exchanges. 3. Under a GLIDE program, DST investors own a long-term ground-lease interest in vacant land, of which an affiliate of the sponsor is the master tenant and developer. The developer makes periodic rent payments to the DST during development and lease-up, ultimately with the intent to repurchase the ground-lease interest from the DST. 4. Investors invest in a “basket” of fractional oil/gas royalty interests in real estate, each of which is recorded individually. Income and asset values vary based on energy prices, current production and future well development, among other factors. 5. https://www.irs.gov/irb/2004-33_IRB#RR-2004-86 6. Mountain Dell Consulting, LLC 7. Notwithstanding stocks held in a qualified retirement account, of course 8. Diversification does not guarantee profits or guarantee protection against losses. 9. If the purchase price of a DST interest (including the investor’s share of nonrecourse liabilities) exceeds the fair market value of the interest, an investor may not be entitled to take depreciation deductions to the extent the interest is derived from nonrecourse liability. 10. We are aware of only one DST sponsor that offers flexible individual investment loans, to which the investor is a named party. 11. Most DST programs have stated minimum investment amounts between $100,000 and $500,000. Through our practice, we have found some syndicated DSTs allow for lower or odd investment increments down to the penny.
DISCLAIMER: FEES AND RISKS
loan amortization likely will result in reduced distributions to investors. Transaction Risk If the program property or portfolio has not yet closed, there is a risk that the purchase may not be consummated. Especially in the case of new or inexperienced program sponsors, it is possible that the program could be delayed in, or fail entirely to, raise the offering amount. Real Estate Risk Program investors are buying real estate, with all of the risks inherent in any real estate investment, including: • General acquisition, ownership and operational risks • Environmental, regulatory, zoning and easement issues • Increased competition and decreased occupancy • Unforeseen maintenance, repairs and capital expenditures • Macroeconomic changes, including interest and cap rates • Tenant acquisition, retention and re-leasing costs Although significant due diligence may be performed by sponsors, lenders, third-party consultants, appraisers, broker-dealers and registered investment professionals, this does not ensure that an investment will perform as projected. There may be issues that are not discovered through due diligence prior to or following an investor’s subscription in a passive §1031 program, which may cause an investor to incur losses up to the entire amount of the investment. The risks set forth herein are not exhaustive of all investment risks, and certain programs have greater or different risks than others. This is for informational purposes only, does not constitute as individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. DST 1031 properties are only available to accredited investors (typically defined as having a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years; or have an active Series 7, Series 82, or Series 65. Individuals holding a Series 66 do not fall under this definition) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney. There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. A REIT is a security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. There are risks associated with these types of investments and include but are not limited to the following: Typically no secondary market exists for the security listed above. Potential difficulty discerning between routine interest payments and principal repayment. Redemption price of a REIT may be worth more or less than the original price paid. Value of the shares in the trust will fluctuate with the portfolio of underlying real estate. Involves risks such as refinancing in the real estate industry, interest rates, availability of mortgage funds, operating expenses, cost of insurance, lease terminations, potential economic and regulatory changes. This is neither an offer to sell nor a solicitation or an offer to buy the securities described herein. Offerings are made only by Prospectus or PMM. Investors should read the PPM carefully before investing paying special attention to the risk section. Statements concerning financial market trends are based on current market conditions, which will fluctuate. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. 1031 Capital Solutions is independent of CIS and CAM.
Securitized §1031 investment programs are more expensive than buying and operating one’s own real estate. Yet investors potentially receive considerable value for such cost, including but not limited to: • Sourcing real estate from among thousands of listed properties around the United States and performing ongoing market research and data analysis • Conducting intensive property-specific due diligence and preparing complicated financial models • Securing optimal financing terms • Engaging top property-management companies or, in some cases, utilizing in-house property management • Monitoring the property and the market to optimize disposition timing • Years or decades of experience from firms that often are large operators of institutional-caliber real estate portfolios Illiquidity Risk • Executing value-add strategies on a massive scale • Providing ongoing accounting and tax reporting Most programs illustrate a hold period up to 10 years, but there is no guarantee of a liquidation date. Under a DSTàUPREIT strategy, investors may ultimately acquire shares of a non-traded public REIT with periodic redemptions. There is no public market for program investor interests. Once invested, there is only a limited possibility to seek a buyer for program investor interests from among the other owners, and at a significant discount to current value. Investors should assume their invested funds will be unavailable for the duration of the program. There is no specified time at which a program portfolio will be liquidated. Control Risk DST investors have no control over leasing, financing, management or disposition. Exchange Risk The §1031 DST industry relies on IRS guidance that dates back only to 2004. There is not a body of case law or subsequent regulations to provide additional assurances that these programs will comply fully with IRS requirements for §1031 exchanges. Investors are not guaranteed an interest in the program until all agreements are signed and the exchange proceeds are transferred to the program. A purchase may be delayed and may not satisfy the timeliness requirements of IRC §1031. Performance Risk There is no guarantee that investors will receive any return. Investment may result in loss of entire principal. There can be no assurance that the investment objectives described in the PPM will be achieved. Past performance of other properties cannot be relied upon to assess the future performance of any program. Distributions are not guaranteed and may be sourced from non- income items and constitute a return of capital. Sponsor Conflicts and Fees A program sponsor and its affiliates are subject to conflicts of interest between their activities, roles and duties for other entities and the activities, roles and duties they have assumed on behalf of the program. Conflicts exist in allocating management time, services and functions between their current and future activities and the program. None of the arrangements or agreements between affiliated entities, including those relating to the purchase price of program properties or compensation, is the result of arm’s length negotiations. A program sponsor and its affiliates receive substantial compensation in the form of fees for acquisition, financing, asset management, property management and disposition. Although a sponsor may have a long track record, the entities it creates to manage individual programs typically have no operating history. Leverage Risk Most programs rely on leverage—an acquisition loan or similar form of indebtedness—to acquire the property. These are generally non-recourse loans, though some loans allow for “bad boy carve outs” in the event an investor commits an act such as declaring bankruptcy or committing fraud. There can be no assurance that the disposition of the property will allow for the repayment of outstanding indebtedness. Leverage has the effect of amplifying any percentage gain or loss on invested equity. If a program does not liquidate before any applicable interest-only period ends (typically five to seven years),
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