Jones Lang LaSalle Income Property Trust Inc. launched a 1031 tax-deferred exchange program to raise up to $500 million.
The program will help investors defer taxes on gains from the sales of appreciated real estate. It will involve JLL offering a series of private placements through the sale of interests in Delaware statutory trusts, or DSTs, that will hold real properties owned by JLL or third parties.
The 1031-exchange model being applied in the program is based on The Revenue Act of 1921, which authorized taxpayers selling appreciated investment real estate to defer taxes on capital gains by investing sale proceeds in similar "like-kind" properties. The tax code of the act was revised over time to include investments in fractional or co-ownership interests in real property, which qualified DSTs as replacement property.
The DSTs will be governed by a yet-to-be-signed trust agreement between JLL Exchange, JLL's external adviser LaSalle Investment Management Inc., and JLL's operating partnership JLLIPT Holdings LP. LaSalle will serve as the manager of each DST and will have primary responsibility for performing administrative actions, while the operating partnership will have an option to acquire the DST property at a future date.
Each DST property will also be leased back by a unit of the operating partnership for up to 10 years.