The Delaware Statutory Trust (DST)
Client
Retiring Physician is selling his practice, and the acquiring doctor wants to purchase the office building that has housed the practice for many years.
Challenges of the traditional 1031 Exchange
Selling physician would like to defer taxes on the sale of the real estate using the 1031 Exchange, but is retiring and does not want property management and expense issues of another real estate asset in addition to the challenges of finding non-recourse debt for a replacement property
DST Solution
MercerLtd introduced the client and his CPA to the DST alternative 1031 exchange strategy. The size of the transaction allowed MercerLtd to diversify the equity into 5 DSTs, replace the debt with non-recourse financing, deliver monthly passive income, with a total return in excess of the net income from the building he sold.
Low Correlation taxable real estate fund
Client
The family received a significant inheritance and were looking for investment options with the taxable money.
Challenges in the equities market
The family had an existing allocation in equities that they did not want to increase, and, in fact, wanted to lower their exposure.
Reg-D Private placement real estate fund solution
MercerLtd introduced the family to real estate-related funds that deliver a low correlation to equities and bonds. The family has experienced total returns that have exceeded equity returns.
The Delaware Statutory Trust (DST)
Client
A family revocable trust was selling a ground leased asset the trust has owned for over a generation. They want to defer the capital gains tax given the appreciation the asset has experienced.
Challenges for the Trust using the traditional 1031 Exchange
The primary trustee, in his later years, did not want to deal with challenges and requirements of finding a replacement property for the trust. He decided that each of the beneficiaries would select an asset with their allocation of the proceeds. Two of the beneficiaries wanted passive income while the third wanted to actively manage an asset for the trust.
DST Solution
MercerLtd worked with two of the beneficiaries to identify DSTs they each ultimately wanted to inherit. The third beneficiary identified an asset he would manage for the trust and ultimately inherit. The primary trustee benefits from all of the income, which in this case was substantially greater than the relinquished ground lease and did not have to deal with asset selection. Through the DSTs, MercerLtd provided passive income and enhanced tax shelters. The primary trustee has peace of mind on the ultimate distribution of the trust assets and has significantly increased the Trust income.
Each investors experience may be different and there is no guarantee that any investment will achieve its objective.
