1031 Private Placement Products: An Explanation of DSTs & 1031 Energy Products

Keith Lampi – Sr Vice President Mark Petersen – Moderator Dan Cullen – Partner Bryan Cave LLP Panelists Bill Winn – President Passco Keith Lampi – Sr Vice President Inland Private Capital Corporation Mark Petersen – Sandlapper Securities

DST Structures – tax issues §1031(a)(2)(D) prohibits acquiring partnership interests in like-kind exchanges §1031(a)(2)(E) prohibits acquiring certificates of trust or beneficial interests in like-kind exchanges If properly structured, TIC interest and DST interest are “like-kind” to direct fee ownership

Fixed Investment Trust: DST Structures – tax issues Fixed Investment Trust: Trustee must not have power to vary the investment Treas. Reg. § 301.7701-4 Case law and Rulings-- Chase National Bank, 122 F.2d 540 (CA-2, 1941) North American Bond Trust, 122 F.2d 545 (CA-2, 1941) Rev. Rul. 75 – 192 Rev. Rul. 78 – 371

DST Structures – tax issues If trustee engaged in prohibited activities trust would be treated as business entity, not investment trust If treated as business entity trust would be treated as partnership and beneficial interest would not qualify as replacement property in a like-kind exchange DST has limited application for some structures; but may be highly useful for others depending upon the underlying asset

DST – Acquisition Structure Investors Tenants Holdings LLC Sponsor/Depositor 3D Sub Lease 1 $X Sponsor Affiliate Master Lessee Sponsor Affiliate Manager Seller 3A $X + $Y Trustee 3C Trust Agreement Trust Agreement Master Lease Properties 3B Transfer of Properties Delaware Statutory Trust DST 2 $Y Lender 3E Security Interest

DST – Post Sale to Investors Holdings LLC Sponsor/Depositor Investors Sponsor Affiliate Manager Trustee Class B Beneficial Interest Sponsor Affiliate Master Lessee Trust Agreement Trust Agreement Delaware Statutory Trust DST Sub Lease Master Lease Lender Loan Tenants Properties Secured Interest

Current DST Trends: DST/TIC demand today? Projection for future? Structures used? Broker Dealer and Rep hot buttons/concerns? Underwriting – overcoming front end load, rent growth, going in and exit cap rates, acquisition strategies? Fees – to sponsor and BD's? Lenders available – Agencies, conduits and banks?

Current DST Trends: Loan work-out and restructuring options: springing the DST to an LLC, back to a DST after work out?   TIC roll ups into LLC or UPREIT use of UPREIT call options Investor communications: best practices?

Oil & Gas 1031 Structures: Royalty Interests Working Interests Profits Interests Production Payment Farm-out Arrangements

New Oil & Gas 1031 Alternatives: Salt water disposal wells?   Other?

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