Once I contribute my property to the Fund through the 721 Exchange, will the Fund continue to own and operate my asset on behalf of the Funds investors?

The Fund may continue to hold your property indefinitely or just for a period of time. The Sponsors of the Fund have a lot of experience in maximizing the value of real estate holdings, and more importantly repositioning assets over a period of time to increase the economic benefits offered through spendable income, principal reduction, tax shelter, and appreciation potential. When the Sponsor believes the equity in your asset is best served on the next acquisition, the Fund will elect to sell the asset and complete a 1031 exchange in order to increase the profits realized by the fund’s investors.


How does the Fund mitigate risk?

The Sponsors of the Fund have targeted a demographic of investors in which preservation of wealth is as important and more important than wealth accumulation. There is an intrinsic relationship between risk and reward, and all risk can never be alleviated. However, the Fund has been designed to substantially mitigate risk in several ways. First and foremost, the Fund invests primarily in income producing real estate, including apartments, self-storage, office, and retail. The Fund is not focused on real estate development, options, distressed notes, and other asset classes that are more exclusively growth focused and often lack spendable income (cashflow). Additionally, the Fund utilizes a more modest amount of total debt, with a global debt service ratio of no less than 150%. This means for every $100,000 in debt payments the fund obligates itself to, the Fund must maintain $150,000 in Net Operating Income. This is substantially higher than that which is required under prevailing lender underwriting guidelines. An increased Debt Service Coverage Ratio reduces volatility in distributable income, allowing the fund to more consistently distribute income to its investors. It also provides a greater hedge against other forms of volatility in the marketplace and debt environments.


Can my CPA and Attorney discuss directly with the Sponsors of the Fund.

Yes. The management team (sponsor) of the Fund is comprised of both a real estate and securities attorney, Garry Schnell, as well as a CPA, Adam Abplanalp. The professional fields of Accounting and Law are vast and specialized. It can often be helpful for your professional council to consult directly with the Sponsor to ensure there is an accurate comprehension of the process and tax codes affecting the 721 Exchange.

What fees does the Sponsor charge?

The Sponsor charges the Fund an administration fee equal to 3% of gross collected rents, similar to a typical arrangement with a professional property management company. The Sponsor shares in a portion of the profits realized by the Fund over the duration of the Funds operations. Investors are first entitled to receive 100% of profits realized through their membership units in the Fund until an 8% annual preferred return is achieved, often referred to as a “hurdle rate.” Once the hurdle rate is met, additional profits are split 70/30 in favor of the investor. For example, if an investor invested $100,000 in the fund, they would be entitled to 100% of the profits until they are earning $8,000 annually. Additional profits will be split 70% to the investor and 30% to the Sponsor. The Sponsor does not charge fees for specific events such as acquiring a property, refinancing an asset, or overseeing the substantial renovation of a property, as is often customary in a real estate syndication or fund offering. The sponsor’s fee agreement has been designed so that the sponsor participates exclusively in the long-term profits realized on behalf of its investors through its active and efficient management of the portfolio.


Can I “cash-out” a portion of my equity and complete a 721 Exchange for the rest?

Yes. Similar to completing a partial 1031 exchange, an investor may elect to complete a partial 721 Exchange to the Fund, and sell the remaining portion of the asset to the Fund. The portion that is sold to the Fund traditionally will not be tax-deferred, and the investor may realize a taxable event. It is very common that an investor elects to complete a partial 721 Exchange so that they may convert a portion of their equity to cash and defer the tax-basis of that portion they wish to contribute and invest into the Fund.


Does the Fund invest in properties outside of Oregon?

At this time the Fund is exclusively focused on Oregon and SW Washington. The Fund has the authority to expand its geographic territory. However, the managers of the Fund believe it is most prudent to invest in areas that they are most intimate with, allowing for the highest degree of accuracy in properly accessing acquisitions and the most efficiency in overseeing the day to day operations that are involved in maximizing the profitability of real estate assets.