Skip to main content

Customized Exchange Solutions

Tic Co-Invest Strategy

For larger exchanges generally exceeding $5 million in equity, we will negotiate a carve-out allocation of equity from a property that may be part of a DST structure or private fund structure. Since the carveout piece will be registered as a tenant-in-common with the other investors in the property, it qualifies for 1031 exchange treatment. Oftentimes, we can negotiate improved terms for our clients in these deals. These opportunities are not always available, and they generally require more lead time. More information upon inquiry.

Zero -Coupon

When an exchanger has relinquished highly leveraged property, they will need to re-incur the same level of debt on their acquired property in order to have a fully tax deferred exchange. To the extent that debt exceeds the leverage in the cash flowing DST marketplace, we can offer ‘zero-coupon’ DST’s with which the exchanger can essentially “buy” the additional replacement debt they need, for 12-20 cents on the dollar. The ‘zero’ doesn’t pay current cash flow, but it does build equity over time through debt amortization and may result in a profit over time. The exchange math generally works well compared to paying taxes. If you can buy debt at 15% instead of paying taxes at 35%, you’re ahead of the game. Also, the 15% zero could result in a profit or a full return of capital whereas taxes once paid are gone forever.

Cash out Refinance Programs

If an exchanger wants to cash out and use a large portion of their exchange proceeds for other projects while avoiding the taxes on their exchange, we can negotiate a co-invest on a zero-coupon structure, where the exchanger can either refinance before the sale of his relinquished property and exchange into a ‘zero’, or instead, he may go on deed into a new property and be refinanced out shortly thereafter. This is less available to exchangers who already have pre-existing debt on their relinquished property. For more details, please call us to discuss.

Hybrid Solutions

Where an exchanger has more complex investment objectives besides stable cash-flow and capital preservation, we can build a blended portfolio which may comprise a DST portfolio for core capital and an OZ fund for tax advantaged growth. If an exchanger plans to buy private real estate with a portion of their proceeds, we can also silo that piece into our curated portfolio recommendation.

PTIF

[Post Tax Investment Portfolio] Rarely, an exchanger will choose to pay taxes instead of choosing the benefits of a 1031 exchange. More often, they’ve missed their 1031 deadline or suffered a broken exchange. In such cases, they can still qualify for limited tax deferral with an opportunity fund but only for the gain portion of their proceeds. For the balance, we will propose a diversified growth portfolio to help defray the tax liability through equity appreciation.