14A — March 10 - 23, 2017 — Financial Digest — 1031 Exchange — M id A tlantic
Real Estate Journal
www.marejournal.com
1031 E xchange
By Edward Fernandez, 1031 Crowdfunding, LLC A Surge in Syndicated 1031 Exchanges
D uring the last two years, the syndicated 1031 exchange mar-
dustry Regulatory Authority, syndicated Based on the numbers, this trend should continue through 2018. Here’s how we know this: Between 2002 and 2007, syn- dicated 1031 exchange pro- grams raised over $12.4 bil- lion of equity. The majority of these investment programs used Commercial Mortgage- Backed Securities (CMBS) to finance the acquisition of their assets. With a 10-year term on these mortgages, billions of dollars in CMBS loans have matured over the
last several years and billions more will mature over the next couple years. Reports estimate approximately $300 billion in CMBS loans will have matured between 2015- 2018. The recent surge in the market is the result of these maturing loans forcing the syndicated programs from the early 2000s to come full- cycle and the investors from these programs to exchange their equity into new syndi- cated programs to continue their capital gain tax deferral cycles.
As has been the case for programs with loans that have matured in the last two years, programs with loans that will mature in 2017 and 2018 will also be forced to sell their properties because of CMBS lending guideline changes that now prohibit TIC ownership on collateral- ized property and DST gov- ernance, commonly referred to as the Seven Deadly Sins of DSTs, that restricts DSTs from refinancing. It can be expected that when these properties sell, in- vestors involved will respond as others have – by returning to syndicated programs to find suitable replacement prop- erties to complete 1031 ex- changes. As this happens over the next two years, syndicated 1031 exchange programs will again experience record amounts of equity raised. Fo r e s e e i ng t he l a r g e amounts of equity that would re-enter the market, program sponsors have been pressed to make enough investment- grade real estate available to accommodate the needs of exchange investors. In re- sponse, some sponsors have increased the portfolio size of their DSTs. Instead of syndi- cating separate DST offerings for single real estate assets, sponsors are saving time and money while increasing offer- ing maximums by combining multiple real estate assets into single DSTs. At 1031 Crowdfunding, investors are experiencing additional benefits from these types of DSTs. Not only have multiple asset DSTs become a vehicle to increase DST avail- ability faster and at a lower cost, they have also increased investment diversity. Without having to seek out multiple properties and divide equity to diversify a real estate port- folio, investors are acquiring diversified portfolios with a single purchase of beneficial interest in a multiple asset DST. DSTs popularity continues to grow as investors seek an easier way to navigate the 1031 exchange process and compete in a competitive market, and now DSTs are providing a simpler way to diversify. Edwa r d Fe rnande z is founder/CEO of 1031 Crowdfunding, LLC based in Orange County, CA. n
actual transaction amounts exceeded expectations. Syndicated 1031 exchange programs were expected to raise an estimated $800 million in 2015. The actual amounts raised by these pro- grams in 2015 exceeded $1 billion. Midway through 2016, estimates for the year’s equity raise reached $1.4 billion. The actual amount was $1.46 billion, according to Moun- tain Dell Consulting, LLC, an independent consulting firm and affiliate of Orchard Securities, LLC, a registered member of the Financial In-
ket, primar- ily existing of Delaware S t a t u t o r y Trust (DST) p r o g r a m s with a few Tenant - in- C o m m o n (TIC) pr o -
Edward Fernandez
grams, has experienced a surge in transactions, raising record amounts of equity. Though real estate analysts anticipated this surge, the
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(844) 533-1031 • WWW.1031CROWDFUNDING.COM 1031Crowdfunding.com is an investment plaaorm owned by 1031 Crowdfunding, LLC. (“Plaaorm”). 1031 Crowdfunding is not a registered broker-dealer. Private investment markeeng and other broker-dealer services are offered on the Plaaorm through Boustead Securiies, LLC a registered broker-dealer. Certain principals of 1031 Crowdfunding are affiliated with Boustead Securiies, LLC and when offering invest- ment services such offers are made in their capaciies as registered representaaves of Boustead Securiies, LLC. IRC Seccon 1031, IRC Seccon 1033, and IRC Seccon 721 are complex tax codes; therefore, you should consult your tax and legal professional for details regarding your situaaon. There are material risks associated with invessng in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properres. These include, but are not limited to, tenant vacancies; declining market values; potennal loss of ennre investment principal; that past performance is not a guarantee of future results; that potennal cash flow, potennal returns, and potennal appreciaaon are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment. This material does not consstute an offer to sell nor a solicitaaon of an offer to buy any security. Such offers can be made only by the confidennal Private Placement Memorandum. Please be aware that this material does not replace the ppm. Are you in your 45 day ID period? Login to our extensive online plaaorm of 1031 exchange approved properres today. Our deals can close in as liile as 3 days, taking the worry out of your 1031 exchange.
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