Capital Square Completes DST to UPREIT Transaction with 61% Investor Participation and 200% Total Return

ATLANTA (Nov. 07, 2024) – Capital Square, one of the nation’s leading sponsors of tax-advantaged real estate investments and an active developer and manager of housing communities, announced today the successful sale of CS1031 Bedford Parke Apartments, DST, a 232-unit multifamily community in Warner Robins, Georgia, to Capital Square Housing Trust, a real estate investment trust sponsored by Capital Square. Through an umbrella partnership real estate investment trust (UPREIT) transaction, more than 61% of the Delaware statutory trust owners (by investment value) exchanged their DST interests for limited partnership units within the REIT’s operating partnership in a tax-advantaged transaction under Section 721 of the Internal Revenue Code.

Capital Square originally acquired the property for $24.75 million in 2019 as sponsor of the DST/Section 1031 exchange program. As a result of the $38.3 million UPREIT transaction, the DST owners realized a 200% total return.¹

“The DST-to-UPREIT transaction is the next phase in the institutionalization of real estate for smaller exchangers,” said Louis Rogers, founder and co-chief executive officer of Capital Square. “Instead of exchanging a rental house or duplex for another rental property, they exchange for an interest in a Delaware statutory trust that owns an investment grade property. Later, when the DST property has appreciated, they contribute their DST interests to the UPREIT for a number of benefits, including greater property diversification and increased cash flow, afforded to owners of the REIT’s operating partnership.”

Unlike many UPREIT transactions, Capital Square affords its investors multiple options to:

• exchange their DST interests for operating partnership units in the REIT without taxation under Section 721,
• structure another exchange to continue their tax deferral under Section 1031, or
• cash out all or a portion of their investment on a taxable basis.

Regardless of the option selected, all investors are treated equally, with the same fair market value purchase price based on appraised value.

Located at 1485 Leverette Road in Warner Robins, Georgia, Bedford Parke Apartments is comprised of 277,240 rentable square feet of space with one-, two- and three-bedroom units ranging in size from 850 square feet to 1,438 square feet of space. The property features 24 private garages available to rent. Community amenities include an executive business center, fitness center, resident lounge, grilling/picnic area, sauna, sand volleyball court, playground, pool with sundeck and picnic pavilion, laundry facility, covered car-care center, rentable storage units, fenced perimeter and gated community access. Constructed in 2008, Bedford Parke Apartments was 94% occupied at the time of sale.

The $38.3 million fair market value of Bedford Parke Apartments was established based on an independent MAI appraisal. Additionally, the nominating and corporate governance committee of the board of directors of Capital Square Housing Trust obtained a fairness opinion from Robert A. Stanger & Company, a third-party investment banking firm.

“The sale of Bedford Parke Apartments is another example of Capital Square’s ability to provide attractive options to our investors through the capabilities of our vertically integrated firm,” said Whitson Huffman, co-chief executive officer. “Investors who participated in the UPREIT transaction received enhanced portfolio diversification and greater cash flow along with numerous other REIT benefits.”²

Capital Square Housing Trust now owns four multifamily communities with a gross asset value of over $185 million based on purchase price:

• Sapphire at Centerpointe Apartments, a 192-unit multifamily community in Midlothian, Virginia, acquired by Capital Square Housing Trust in 2021.
• Saltmeadow Bay Apartments, a 229-unit multifamily community in Virginia Beach, Virginia, acquired by Capital Square in 2019 and Capital Square Housing Trust in an UPREIT transaction in 2023.
• High Ridge Apartments, a 160-unit multifamily community in Athens, Georgia, acquired by Capital Square in 2017 and Capital Square Housing Trust in an UPREIT transaction in 2024.
• Bedford Parke Apartments, a 232-unit multifamily housing community in Warner Robins, Georgia, acquired by Capital Square in 2019 and Capital Square Housing Trust in an UPREIT transaction in 2024.

Since its founding in 2012, Capital Square has acquired more than 170 real estate assets for over 6,500 investors seeking quality replacement properties that qualify for tax deferral under Section 1031 of the Internal Revenue Code and other investors seeking stable cash flow and capital appreciation. The firm has a portfolio of 55 multifamily apartment communities, 13 age-restricted manufactured housing communities in Florida and seven build-for-rent communities, with a total investment cost of nearly $5 billion.

About Capital Square

Capital Square is a vertically integrated national real estate firm 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 $7.9 billion in transaction volume. Capital Square’s mixed-used development projects total over 2,000 apartment units with a total development cost in excess of $800 million, and Capital Square Living, the firm’s property management division, now manages over 7,000 apartments across multiple states. Capital Square’s related entities provide a range of services – including due diligence, acquisition, loan sourcing, property/asset management and disposition – for a growing number of high-net-worth investors, private equity firms, family offices and institutional investors. The company has been recognized by Inc. 5000 as one of the fastest growing companies in the nation for eight consecutive years. Learn more at CapitalSq.com.

Disclosure: Securities offered through WealthForge Securities, LLC, Member FINRA/SIPC. Capital Square and WealthForge Securities, LLC are separate entities. There are material risks associated with investing in DST properties and real estate securities including illiquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation. This is not a solicitation or an offer to see any securities. Please read the Private Placement Memorandum (PPM) in its entirety, paying careful attention to the risk section prior to investing. Private placements are speculative. Diversification does not guarantee profits or protect against losses. FINRA Broker Check link: https://brokercheck.finra.org/.

1. The “total return” represents the ratio of total sales proceeds and distributions through the life of the asset over the total initial equity invested. The “annualized return” is defined as the difference between net sale proceeds and initial investment, plus the distributions over the holding period, divided by the initial investment; divided by the number of months; times 12. The ROE and annualized return are net of fees and represent a return to an individual investor. No representation is made that any investment will or is likely to achieve profits or losses similar to those achieved in the past or that losses will not be incurred.

2. Distributions are estimated based on historical operations of the DST and the REIT. Future distribution declarations of the REIT (and therefore the OP) are at the discretion of the REIT’s board of directors and are not guaranteed.