Overview of Alternative Investments (Non-1031)

“Alternative” is a general category of investments which includes such investments as private Real Estate Investment Trusts (REITs), real estate funds, energy-based offerings, private equity, private debt and various tax advantaged investments. While illiquidity is a feature and risk of most of these offerings, they can compare favorably to exchange traded investments in terms of cash flow, appreciation potential, and insulation from market volatility.

The cash flow of alternative investments is based on the rental income, the actual income of the business if private equity, the income from the service of the loan if private debt, oil and gas income, or royalty income. Many alternative investments can provide 6-8% of cash on cash return with attractive risk return profiles and often an element of tax shelter.

The appreciation potential of these offerings is largely based upon the actual increase in net operating income of the real estate/business or upon an aggregation strategy wherein a number of cash flowing assets are aggregated together under one management structure and sold to an institutional buyer at a premium.

These are mostly private placement offerings available only to accredited investors. They are not publicly traded and should be considered illiquid investments. Each of these investments is sold based upon a private placement memorandum or prospectus and undergoes a due diligence review similar to that for DST and TIC offerings. These investments are not eligible for 1031 exchange with the exception of certain oil and gas based investments.

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