ATHENS, Georgia, June 3, 2024 /PRNewswire/ — Capital Square, one of the nation’s leading sponsors of tax-advantaged real estate investments and an active developer and manager of housing communities, today announced the successful UPREIT transaction for High Ridge Apartments, a 160-unit multifamily community in Athens, Georgia. In the UPREIT transaction, more than 71% of DST owners (by value) exchanged their DST interests for operating partnership units in Capital Square Apartment REIT, Inc. in a tax-advantaged transaction under Section 721 of the Revenue Code Internal.
Capital Square originally acquired the property for $15.5 million in 2017 as a sponsor of the DST/Section 1031 exchange program. As a result of the $26.9 million UPREIT transaction, DST owners earned a 226% equity multiple. and a total performance of more than 185%.1
“The DST structure has worked exceptionally well over the past decade, but it has a number of limitations. DST properties must be sold when their loans come due and additional equity cannot be added, even when it is in the best interests of the owners,” said Louis Rogers. , founder and co-CEO of Capital Square, and also an advocate of the DST structure as a tax attorney and sponsor. “Capital Square has an excellent portfolio of DST properties, including High Ridge Apartments, which should be held longer than permitted as DSTs, gaining additional benefits such as cash flow, future appreciation, and numerous REIT benefits, including liquidity options.”
Unlike many UPREIT transactions, Capital Square uniquely provided its investors with multiple options to:
- exchange your DST interests for operating partnership units in the REIT tax-free under Section 721,
- structure another exchange to continue your Section 1031 tax deferral, or
- withdraw all or part of your investment on a taxable basis.
Rogers added: “UPREIT transactions have been around for a long time. Sam Zell is well known for the UPREIT strategy that allows owners to diversify and reduce risk by exchanging their sole ownership for units in a REIT operating partnership that owns a much larger portfolio. big.
“In the High Ridge UPREIT transaction, DST owners received full market value for their interests. Each owner had the option to choose (i) operating partnership units, (ii) cash to conduct another 1031 exchange, or (iii) ) withdraw cash from a taxable income. At Capital Square, we believe investors should have the right to choose; this ‘voluntary UPREIT’ is in the best interest of DST owners.”
Regardless of the option selected, all investors received the same treatment, with the same fair market purchase price based on MAI appraisals and an identical fee structure.
Located at 700 Mitchell Bridge Road, High Ridge Apartments is situated on 17.99 acres of land. The community is comprised of 11 two- and three-story residential apartment buildings consisting of one-, two- and three-bedroom units with an average size of 1,228 square feet. The community features a full amenity package, including a clubhouse, fitness center, grilling area, lighted tennis court, playground and swimming pool, as well as on-site management and maintenance. Individual unit amenities include custom cabinetry, energy-efficient appliances, private balcony or patio, and walk-in closets.
High Ridge Apartments are centrally located near Georgia State Route 10, US Route 78 and US Route 129. Residents benefit from access to nature parks, entertainment venues, exclusive shopping and numerous gastronomic options in the region. The property is less than a 15-minute drive from major Athens employers, including the University of Georgia, Piedmont Athens Regional Medical Center, Athens-Clarke County Government, and the Clarke County School District.
High Ridge’s $26.9 million fair market value was established based on the average of two independent MAI appraisals. Additionally, the board of directors of Capital Square Apartment REIT obtained a fairness opinion from Robert A. Stanger & Company, a third-party investment banking firm.
The REIT assumed the original Fannie Mae loan at a favorable interest rate and Fannie Mae provided a supplemental loan at closing. Walker & Dunlop, Inc. was instrumental in the origination of the original loan and the new supplemental loan.
“The sale of High Ridge Apartments demonstrates Capital Square’s ability to deliver attractive total returns to DST investors, providing significant value appreciation over a seven-year holding period,” said Whitson Huffman, Co-CEO. “The High Ridge DST investment provided investors with access to higher quality real estate than they could have afforded on their own through an efficient 1031 exchange process. Investors who participated in the UPREIT transaction received greater diversification of portfolio and increased cash flow along with numerous REIT benefits, including liquidity options.”2
Since its founding in 2012, Capital Square has acquired more than 170 real estate assets for more than 6,500 investors seeking quality replacement properties that qualify for tax deferral under Section 1031 of the Internal Revenue Code and other investors seeking a cash flow. of stable cash and capital appreciation. The firm has a portfolio of 53 multifamily apartment communities, 13 age-restricted manufactured housing communities in Florida, and seven build-to-rent communities, with a total investment cost of more than $4.8 billion.
About Capital Square
Capital Square is a vertically integrated national real estate company specializing in tax-advantaged real estate investments, including Delaware statutory trusts for Section 1031 exchanges, qualified opportunity zone funds for tax deferral and exclusion, and a real estate investment trust ( REIT). The company is also an active developer and manager of multifamily communities. Since 2012, Capital Square has completed more than $7.8 billion in transaction volume. Capital Square’s eight most recent mixed-use development projects total approximately 2,000 apartment units with a total development cost of more than $590 million, and Capital Square Living, the company’s property management division, now manages more than 7,000 apartments in various states. Capital Square’s related entities provide a range of services (including due diligence, acquisitions, loan sourcing, property/asset management and disposition) to a growing number of high net worth investors, private equity firms, family offices and investors. institutional. Recognized by Inc. 5000 as one of the fastest-growing companies in the country for seven consecutive years, Capital Square raises capital, buildings and expectations. Learn more at CapitalSq.com.
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