Brookfield, Wis. (February 14, 2022) – When owners of appreciated real estate assets are ready to divest their portfolio, they often find themselves in a bind, not wanting to completely separate from their properties and facing significant potential capital gains taxes if they sell them. The few tax-deferred exit strategies that have been available to these investors, like 1031 exchanges, Delaware Statutory Trusts or UPREIT transactions, all carry shortfalls including: potentially high fees, the requirement of ongoing active management, public market volatility and more.
MLG Capital, an investment firm with decades of experience in real estate investment, asset management and tax-deferred exit strategies, recently created a first-of-its-kind, tax-efficient solution for owners of appreciated real estate assets who are ready to divest. It’s called the MLG Legacy Fund, and it allows accredited investors to contribute real property in exchange for units in a diversified fund. After making an asset contribution, investors receive a membership interest in the Legacy Fund and annual returns through the Fund’s diverse investments in multifamily, industrial, office and retail assets.
Key benefits of the Legacy Fund include:
- Transitioning from active to passive real estate ownership and escaping the burdens of being a landlord
- Risk reduction through diversification across different property types and geographies
- Tax benefits, including potential capital gains savings, income tax savings and estate tax savings
“We’ve helped many investors navigate the waters of tax-deferred exit strategies like 1031 exchanges, and we knew firsthand the need for a solution that avoids time constraints, high fees and other challenges. Matching our unique asset management and investing expertise with individuals who are ready to take a step back from the day-to-day burdens of active ownership, we developed the Legacy Fund,” said Billy Fox, Vice President at MLG Capital. “We’re thrilled to be the first firm to offer this unique solution and are excited about the early success of it.”
After years of planning, the Legacy Fund’s first closing was in early 2021. It has grown rapidly to already include more than $425 million in assets and $160 million of equity.
“We were looking for a real estate investment firm that has the tax and legal expertise and years of experience to meet the complex needs of our ownership group and investor partners,” said Gina Williams, President and CFO of Southstar Capital Group. “After engaging with the brokerage community and our tax and legal advisors, we determined the ability of the Legacy Fund to offer flexible redemption in a tax-deferred solution is the best fit to manage our investors’ wealth.”
While established as a perpetual fund, the Legacy Fund also offers flexibility and liquidity for investors and their heirs if either would like to cash out of the fund in the future.
The MLG Capital team can help guide asset owners through the divesting options available to them, including the Legacy Fund. For more information, visit www.mlgcapital.com/legacyfund.