Case Study: A Power Play Rewards Investors in Sale of Syracuse, NY Industrial Facility

Topics: Case Study

Correctly timing a Delaware statutory trust (DST) liquidation requires extensive market knowledge, as Inland Private Capital Corporation (IPC) investors recognized when the company's asset management subsidiary facilitated a DST property disposition in Syracuse, New York, in early 2022.

When IPC's New York Power Trust DST purchased a 124,980-square-foot industrial facility in 2011, the property was 100 percent leased to Niagara Mohawk Corporation and unencumbered by debt. 

At the time of purchase, the tenant had only five years remaining on the lease. Through timely engagement with Niagra Mowhawk, also known as National Grid, one of the largest investor-owned energy companies in the United States, IPC was able to keep the tenant in place for several more years, making a sale an attractive option.

"Through a proactive approach, we were able to successfully extend the tenant's lease and subsequently complete a sale capitalizing on the value created and current market conditions," said Rahul Sehgal, chief investment officer of IPC.

"We could not be more pleased with the overall performance of the investment, both in terms of providing a profit to our investors, as well as liquidity."

IPC’s timing and strategy proved astute when it sold the property for $13.4 million, a premium to the offering price paid by investors, resulting in a total return, taking into account the total funds received by investors during the hold period plus net sales proceeds, of 192.17 percent and an average annual return of 8.77 percent.*

As with other IPC dispositions, the sale of the Syracuse industrial property provided liquidity to its investors, affording them the option to receive their cash proceeds or to complete a subsequent tax-deferred exchange into another DST offering. A tax-deferred option is often preferred, especially for investors with significant capital gains from a DST liquidation.

IPC monetized more than $1.5 billion in real estate in 2021 on behalf of its 1031 exchange platform and remains a leading sponsor of securitized 1031 exchange offerings across the country. IPC also provides Qualified Opportunity Zone investments for investors looking for tax-advantaged opportunities without using a 1031 exchange structure.

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* Average Annualized Rate of Return" is a common performance metric of real estate investments and is the average annualized return which takes into account the duration of the program, cash flow from the property's operations and proceeds from the sale. Past performance is not a guarantee of future results. 

Important Risk Factors to Consider

An investment in a Delaware statutory trust (DST) involves certain risks including but not limited to tax risks, general real estate risks, risks relating to the ownership and management of the properties, risks related to the financings, risks relating to a private offering with an associated lack of liquidity, and risks relating to the DST structure.

Investments in real estate assets are subject to varying degrees of risk and are relatively illiquid. Several factors may adversely affect the financial condition, operating results and value of real estate assets. These factors include, but are not limited to:

  • changes in national, regional and local economic conditions, such as inflation and interest rate fluctuations;
  • local property supply and demand conditions;
  • ability to collect rent from tenants;
  • vacancies or ability to lease on favorable terms;
  • increases in operating costs, including insurance premiums, utilities and real estate taxes;
  • federal, state or local laws and regulations;
  • changing market demographics;
  • changes in availability and costs of financing;
  • acts of nature, such as hurricanes, earthquakes, tornadoes or floods
  • economic risks associated with a fluctuating U.S. and world economy, including those resulting from the novel coronavirus and resulting pandemic.