1031 Like-Kind Exchanges:
Tax Deferral Strategies for Real Estate
JLL Income Property Trust Fully Subscribes $100 Million Diversified DST
JLL Income Property Trust Fully Subscribes $120 Million Diversified DST
JLL Income Property Trust Completes Full Cycle Transactions in DST Platform
What Is a 1031 Exchange?
Section 1031 allows a taxpayer to invest the proceeds from the sale of appreciated commercial real estate into a “like-kind” property without recognizing a taxable gain. Most properties held for investment or use in a business qualify as “commercial real estate” under this definition. Delaware statutory trusts (DSTs) are trusts that may own income-generating, professionally managed commercial real estate. In 2004, the IRS issued Revenue Ruling 2004-86, which allows taxpayers to receive 1031 tax deferral treatment by investing the proceeds from the sale of their appreciated commercial real estate into DSTs.
1031 Exchanges give the investor 45 days from the date that real property is sold to identify replacement properties and 180 days from the sell date to close on a new property to complete an exchange. To qualify for the tax deferment, the investor must reinvest the entirety of the proceeds from the initial sale and acquire real estate with the same or greater amount of debt.
Potential Benefits of a 1031 Like-Kind Exchange
TAX DEFERRAL
INCOME
ESTATE PLANNING
DIVERSIFICATION
CAPITAL APPRECIATION
MANAGEMENT RELIEF
1031 Exchange: Three Basic Steps
Marketing/Pre-Sale Period
Investor sells appreciated property and deposits sale proceeds with Qualified Intermediary.
Identification Window
Investor identifies up to three potential replacement properties.
Exchange Period
Investor purchases at least one of the identified properties and begins receiving income generated from the property.
JLL Income Property Trust is an institutionally managed, daily NAV REIT that gives investors access to a growing portfolio of commercial real estate investments selected by an institutional investment management team and sponsored by one of the world’s leading real estate services firms. www.jllipt.com
LaSalle Investment Management, JLL Income Property Trust’s advisor and the investment management division of JLL, is one of the world’s leading real estate investment managers, with approximately $89.6 billion of assets under management as of Q3 2023. LaSalle, as Advisor, will be engaged to serve as the manager of each DST and will have primary responsibility for performing administrative actions in connection with the DST and any DST Property. www.lasalle.com.
JLL (NYSE: JLL) is the world’s second-largest professional services firm specializing in real estate and investment management. JLL is a Fortune 500 company with annual revenue of $18.0 billion, operations in over 80 countries, and a global workforce of more than 94,000 as of 2023. www.jll.com.
Drew Dornbusch
Exchange Platform
Mr. Dornbusch is a Managing Director at LaSalle Investment Management and manages the 1031 Platform for JLL Income Property Trust. Since entering the alternative investment industry in 2004, Mr. Dornbusch has served in various capacities with numerous sponsors and assisted in the syndication of more than $14 billion of commercial real estate, including more than $600 million of 1031 tax-deferred investments.
Most recently, Mr. Dornbusch managed product development for Colony Capital, one of the largest real estate operators in the United States. Mr. Dornbusch received a law degree from Cornell Law School. Mr. Dornbusch regularly speaks at industry conferences regarding product structuring and regulatory affairs.
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Joe Werner
1031 Exchange Platform
Mr. Werner is the 1031 specialist for the Private Wealth Group at LaSalle Investment Management. Joe facilitates the national distribution of JLL Exchange Delaware Statutory Trusts.
Prior to joining LaSalle Investment Management in 2017, Joe specialized in financial planning and portfolio management with a national broker-dealer. Joe has been active in commercial real estate investing for over 15 years and has prior professional experience in management and consulting. Joe has earned two baccalaureate degrees from the University of Wisconsin-Eau Claire and holds his Series 7, Series 63, and Chartered Retirement Planning Counselor (CRPC) designation.
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Kelly Bauer
1031 Exchange Platform
Ms. Bauer performs in an operations capacity for the JLL Exchange/1031/ DST Solutions business within the Private Wealth Group at LaSalle Investment Management. She supports the closing, record keeping, client service, and compliance responsibilities of the JLLX DST offerings.
Kelly has a long history in real estate and joined LaSalle in 2007. Prior to her role on the 1031 Platform, Ms. Bauer worked as an Executive Assistant, supporting the executive leadership team of JLL Income Property Trust. In addition to her experience with commercial real estate, Kelly previously held a real estate license for the State of Illinois and worked in Chicago’s residential market. Kelly holds the Series 7 and Series 63 licenses.
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Private Wealth Group
LaSalle Investment Management
Private Wealth Group
Phone: +1 (855) 823-5521
Email: jllipt@lasalle.com
Interested in finding out more?
The manager of the Trust, the Operating Partnership, JLLIPT and their affiliates are subject to conflicts of interest between their activities, roles and duties for other entities and the activities, roles and duties they have assumed on behalf of the Trust, the Master Tenant, the Operating Partnership and JLLIPT. Conflicts exist in allocating management time, services and functions between their current and future activities and the Trust. In addition, the manager of the Trust may have conflicts allocating leasing opportunities among competing properties.
The information herein has been prepared for educational purposes only and does not constitute a solicitation of an offer to purchase or sell securities real estate investments. Such offers are only made through a private placement memorandum (the “Memorandum”). The purchase of an interest in a DST involves a number of risks, which are set forth and described in the Risk Factors section of each Memorandum. You should carefully review the Risk Factors section of the Memorandum. Certain risks present in all DST offerings include:
Certain Risks Related to DST Offerings
Prospective purchasers must bear the economic risks of an investment in DST interests for an indefinite period of time and must be prepared to sustain a total loss of such investment. There is no public market for any of DST interests sponsored by JLL Exchange, and no public market is expected to develop. An investment in interests will not be appropriate for purchasers desiring or requiring liquidity in the near future. Each purchaser must bear the economic risks of an investment for an indefinite period of time and be prepared to sustain a total loss of such investment. Income / distributions from 1031 Exchanges are not guaranteed, and inflation and other increases in operating costs may affect the investor’s return. 1031 Exchanges give the investor 45 days from the date that real property is sold to identify replacement properties and 180 days from the sell date to close on a new property to complete an exchange. To qualify for the tax deferment, the investor must reinvest the entirety of the proceeds from the initial sale and acquire real estate with the same or greater amount of debt.
Certain Risks Related to Real Estate Held in a DST
There are limitations on the actions that the manager and trustee of the DST can take relative to the real estate. Revenue Ruling 2004-86 sets forth the Internal Revenue Service’s (“IRS”) standards for DST interests acquired in a Code Section 1031 exchange. In order for investors in the DST to be treated as acquiring a direct interest in real estate for federal income tax purposes, the DST must impose significant prohibitions on the powers of the DST’s manager and trustee. These prohibitions are explained in more detail in each Memorandum. If the manager and trustee of the DST are required to take action to conserve and protect the property held by the DST, but are unable to do so due to the prohibitions imposed on their powers under Revenue Ruling 2004-86, they may determine to terminate (or be required to terminate) the DST and transfer the property to a limited liability company. An interest in a limited liability company, unlike a DST interest, is not treated as a direct interest in the underlying real estate for tax purposes. You should consider the state tax consequences of acquiring, owning, holding and disposing of a DST interest. You must seek the advice of your own independent tax advisor as to state and local tax issues.
Certain Risks Related to Adverse Changes in General Economic Conditions
An economic downturn could adversely affect rental income generated from end tenants. From time to time, an economic downturn could occur that would result in slowed economic activity.