A — October 25 - November 7, 2013 — Mid Atlantic Real Estate Journal
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Mid Atlantic R eal E state J ournal Publisher ............................................................................ Linda Christman Publisher ............................................................................... Joe Christman Publisher/Senior Account Executive ................................. Elaine Fanning Section Publisher .................................................................... Steve Kelley Section Publisher ...........................................................Janine Hennessey Senior Editor/Graphic Artist .................................................Karen Vachon Production Assistant ....................................................................Julie King Office Manager .................................................................... Joanne Gavaza Guest Columnists................... Scott R. Saunders, Joshua C. Quinter, Esq. Mid Atlantic R eal E state J ournal ~ Published Semi-Monthly P.O. Box 26 Accord, MA 02018 (Mail) 312 Market Street, Rockland, MA 02370 (Overnight) Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, P.O. Box 26, Accord, MA 02018 USPS #22-358 | Vol. 25 Issue 20 Subscription rates: $99 - one year, $198 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Toll-Free: (800) 584-1062 | MA: (781) 871-5298 | Fax: (781) 871-5299 www.marejournal.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
Mid Atlantic Real Estate Journal
By Scott R. Saunders DST: A 1031 Exchange Replacement Property Alternative
H
oney, who shrunk the inventory? When an investor sells invest-
ment property and would like to utilize IRC Section 1031 to defer the tax on that sale, the investor may find it challeng- ing in today’s market to locate a suitable replacement prop- erty. One possible solution for certain investors, particularly “accredited investors” (high net worth individuals and certain entities, as defined in Regula- tion D of the Securities Act of 1933) is to acquire an interest in a Delaware Statutory Trust (DST) as replacement property to complete the exchange. A DST is a type of trust formed under Delaware law. Provided that the DST’s governing docu- ments conform to the require- ments of Revenue Ruling 2004- 86, a DST investor’s ownership interest in the DST is treated as a fractional interest in the property owned by the DST. Consequently, if the DST owns like-kind replacement property, an exchanger can acquire a fractional interest in the DST to complete the tax deferred exchange. An ownership interest in a DST, sometimes called a “bene- ficial interest” or “DST units” is an indirect way of owning real estate for deferral income tax purposes. This can be appealing to investors who are interested in acquiring a managed real es- tate investment. The trustee of the DST initially purchases the property and holds title to the
property. A sponsor structures the investment and arranges for the issuance of beneficial interests in the DST. Although interests in the DST are treated as securities under federal se- curities laws, they are treated as ownership of real estate un- der Section 1031. The sponsor generally arranges the bank financing for the purchase of the property, and coordinates the property management. In order to comply with applicable securities laws, the sponsor will generally provide a written doc- ument called a Private Place- ment Memorandum (“PPM”) to the investor. The PPM provides information about the property, area demographics, tenants and leases, financial projec- tions, risks of the investment along with additional informa- tion about the sponsor, and other disclosures. An advantage of DST owner- ship over Tenant-in-Common (TIC) ownership is that a DST is not limited to 35 investors. The ability to spread the cost of the real estate among more
continued on page 3A • As a reliable backup prop- erty on the list of identified properties in the event the pri- mary identified property does not work out, or they have not investors can allow investors with smaller minimum invest- ment amounts to exchange into a DST. Many DST sponsors also have the flexibility to match the amount to be invested into the DST by exchange investors with the net amount received for the relinquished property, so those investors desiring full tax deferral can meet the necessary 1031 exchange requirements. When to Consider a Dst? • When the investor is inter- ested in passive ownership of high grade commercial prop- erty, but the investor lacks the financial wherewithal to purchase the property entirely on their own. • When the investor wants a pre-packaged replacement property where the financing is in place and the sponsor has already performed due diligence.
STATEMENT OF OWNERSHIP MANAGEMENT & CIRCULATION (required by 39 U.S.C.3526)
Title of Publication: Mid Atlantic Real Estate Journal. 2. Publication No. 22-358. 3. Date of Filing: 10/25/2013. 4. Frequency of Issue: Semi-Monthly. 5. No. of Issues Published Annually: 24. 6. Annual Subscription Price: $99.00. 7. Complete mailing address of known office of publication: 312 Market Street, Rockland, MA 02370. 8. Complete mailing address of the headquarters of general business offices of the publisher: Same as above. 9. Full names and complete mailing addresses of publisher, editor and managing editor: Publisher, Linda M. Christman, 19 Sunset Lane, Hingham, MA 02043. Editor: Karen Joy Vachon, 34 Nautical Way, Plymouth, MA. Managing Editor: Joseph A. Christman, 19 Sunset Lane, Hingham, MA 02043. 10. Owner (if the publication is owned by a corporation, give the name and address of the corporation immediately followed by the names and addresses of all stockholders owning or holding 1 percent or more of total amount of stock. If not owned by a corporation, give the names and addresses of the individual owners. If owned by a partnership or other unincorporated firm, give its name and address as well as those of each individual owner. If the publication is published by a nonprofit organization, give its name and address). Linda M. Christman, 19 Sunset Lane, Hingham, MA 02043; 11. Known bondholders, mortgagees and other security holders owning or holding 1 percent or more of total amount of bonds, mortgages or other securities. None. 13. Publication title: Mid Atlantic Real Estate Journal. 14. Issue date for circulation data below: 10/25/2013. 15. Extent and nature of circulation. A. Total no. copies (net press run) 5934, 6680. B. Paid and/or requested circulation. 1. Paid/requested outside-county mail subscriptions; 4279, 5694. 2. Paid in-county subscriptions: 0, 0. 3. Sales through dealers and carriers, street vendors, counter sale, and other non-USPS paid distribution: 0, 0. 4. Other classes mailed through the USPS: 0, 0. C. Total paid and/or requested circulation: 4279, 5694. D. Free distribution by mail: 0, 0. 1. Outside-county: 0, 0. 2. In-county: 0, 0. 3. Other classes mailed through the USPS: 1655, 986. E. Free distribution outside the mail: 0, 0. F. Total free distribution: 1655, 986. G. Total distribution: 5934, 6680. H. Copies not distributed: 33, 25. I. Total: 5967, 6705. J. Percent paid and/or requested circulation 72%, 85%. 16. Publication of Statement of Ownership: 10/26/2012. 17. Signature and title of editor, publisher, business manager or owner: Linda M. Christman, Publisher/CEO.
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