Capital Square Achieves 200% Return in DST-UPREIT Transition

Capital Square's Successful Investor Transition

Capital Square, a renowned name in tax-advantaged real estate investments, has announced the successful completion of the DST (Delaware Statutory Trust) to UPREIT (Umbrella Partnership REIT) transaction. This essential step saw over 61% of investors participate, allowing them to exchange their DST interests for limited partnership units in a real estate investment trust. The sale involved a multi-family property, CS1031 Bedford Parke Apartments, which consists of 232 units and is located in Georgia. The completion of this transaction enabled investors to benefit from a tax-advantaged transaction under Section 721 of the Internal Revenue Code.

Introduction to Bedford Parke Apartments

The Bedford Parke Apartments, originally acquired for $24.75 million in 2019, recently sold for $38.3 million through the UPREIT, resulting in a remarkable 200% total return for DST owners. This kind of return is a significant highlight for investors, showcasing the effectiveness of Capital Square’s initiatives in providing value and attractive investment options.

Louis Rogers on Individual Investor Benefits

Louis Rogers, the founder and co-CEO of Capital Square, noted that the DST-to-UPREIT transaction exemplifies a new phase in the evolution of real estate investments for smaller exchangers. Unlike traditional exchanges of rental properties, investors in this structure trade for interests in a Delaware statutory trust that owns substantial investment-grade properties. Once there is appreciation in the DST property, owners can contribute their interests to the UPREIT, enjoying increased cash flow and better property diversification.

Investor Options in the Capital Square Framework

Capital Square distinguishes its approach in several ways, granting investors the flexibility to choose from different options during the exchange process. They can exchange their DST interests for operating partnership units in the REIT, which allows for no immediate tax burden under Section 721. Additionally, investors opting for another exchange can continue their tax deferral through Section 1031, or they can choose to cash out some or all of their investment, even if it incurs taxes. No matter the selected route, fair treatment is afforded to all investors concerning the purchase prices based on appraised value.

Details of the Bedford Parke Community

The property itself encompasses a total of 277,240 rentable square feet, housing one-, two-, and three-bedroom apartments ranging from 850 to 1,438 square feet. It features several amenities, including an executive business center, fitness center, and even private garages for rent. Community features like playgrounds, pools, and a lounge area enhance the living experience, making Bedford Parke Apartments a desirable option for tenants.

Establishing the Fair Market Value

The fair market value of the Bedford Parke Apartments was firmly established through an independent appraisal, which confirmed its valuation at $38.3 million. Moreover, to ensure transparency and provide impartial advice, the board’s governance committee procured a fairness opinion from a reputed investment banking firm, underscoring Capital Square’s commitment to robust investor relations.

Strategic Growth in Multifamily Investments

Looking ahead, Capital Square Housing Trust is not just focusing on Bedford Parke but has expanded its portfolio significantly. Currently, the trust owns four multifamily communities valued at over $185 million based on purchase prices. The properties in the portfolio include Sapphire at Centerpointe Apartments, Saltmeadow Bay Apartments, and High Ridge Apartments, all strategically acquired to ensure growth and sustainability in the present market landscape.

Capital Square's Vision and Market Impact

Since its inception in 2012, Capital Square has been on a remarkable trajectory, having acquired more than 170 real estate assets, serving over 6,500 investors. Their diverse portfolio consists of 55 multifamily communities and 13 manufactured housing communities, marking an impressive total investment close to $5 billion. Their dedication to facilitating quality investments while assisting investors with tax deferral strategies has positioned them as leaders in this dynamic field.

Capital Square: A Comprehensive Real Estate Firm

As an integrated firm, Capital Square specializes in tax-advantaged real estate transactions and manages a wide array of services—due diligence, acquisition, property management, and more. Their efforts have not gone unnoticed, earning them recognition as one of the fastest-growing companies nationwide for several consecutive years. With a commitment to excellence and a clear vision for the future, they remain a key player in the real estate investment realm.

Frequently Asked Questions

What is Capital Square known for?

Capital Square is acclaimed for its tax-advantaged real estate investments and has garnered experience in managing a wide range of housing communities.

What is the significance of the DST to UPREIT transition?

The transition allows investors to exchange tax-deferred interests in a DST for shares in a REIT, enhancing cash flow and property diversification opportunities.

What are the benefits of investing in Capital Square?

Investing in Capital Square provides opportunities for tax deferral, stable cash flow, and capital appreciation, attracting numerous investors.

How does Capital Square determine property value?

Capital Square utilizes independent appraisals and fairness opinions from reputable firms to establish fair market values for its properties.

How many multifamily communities does Capital Square own?

Currently, Capital Square owns four multifamily communities valued collectively at over $185 million, emphasizing its commitment to growth in the sector.

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