DST: Central Washington Farmland Trust
STATUS
DST: Central Washington Farmland Trust
STATUS
Corn
Alfalfa
Potato
Onions
Wheat
Edible bean
Description
The Farms: Central Washington Farmland Trust consists of two high-quality agricultural assets consisting of 2,207 acres in Grant and Adams Counties, Washington, in the Columbia River Basin.
The DST: Central Washington Farmland Trust is a Delaware Statutory Trust offering accredited investors the opportunity to purchase beneficial interests in the DST, which is Section 1031 Exchange eligible, both into and out of the investment vehicle. With a minimum investment of $100,000, this offering is an opportunity to defer long-term capital gains tax on eligible capital gains while making a diversifying investment allocation to a productive farmland asset.
Region
The Columbia River Basin is a major agricultural region in the United States, accounting for approximately $3 billion in market value annually. With a combined two million acres in farms and over 3,500 registered producers, Grant and Adams Counties are home to a robust agricultural and tenant market.
Property
DST: Central Washington Farms Trust consists of two distinct properties to offer diversification between production systems, dryland and irrigated, as well as crop production.
The first property, WAE Farm, is a 298 acre farm that primarily grows traditional row crops and fresh market crops, including potatoes and onions. This property is irrigated with three center pivots and has historically maintained legally protected water rights within the East Columbia Basin Irrigation District. There is a five year sub-lease in place with an experienced local operator for $600 per acre.
The second asset, Hirst Farm, is a 1,908 acre dryland wheat farm. Dryland farming requires no irrigation and minimal capital expenditure. The property is farmed in a summer fallow rotation, growing winter wheat on approximately 50% of the cropland acres each year to preserve moisture. The Hirst Farm has been leased to a local father and son team that has been farming the ground since 2006 and is active in the Washington Wheat Growers’ Association. A six-year sub-lease is in place at $60 per acre.
Sponsor
This offering is prepared by DST Farmland, LLC, which will also serve as the DST’s Sponsor and Asset Manager. DST Farmland has engaged Peoples Company, a nationally recognized farmland transaction and advisory firm in operation since 1972, as the farm manager for the properties.
Structure
This offering provides investors with an opportunity to directly engage the farmland asset class through the Delaware Statutory Trust (DST) investment vehicle, which is Section 1031 Exchange eligible, both into and out of the structure. The minimum beneficial interest purchase requirement is $100,000, which is approximately equal to a 1.61% beneficial interest in the Trust.
The DST signed a long-term master lease (“Master Lease”) with PNW Farm Management, LLC (“PNW Farm Management” or “Master Tenant”), a Delaware limited liability company and an affiliate of the Sponsor. The Master Lease has been structured to generate a Base Rent to cover annual expenses, Stated Rent to provide annual returns, and Bonus Rent to provide additional inflationary benefits for Beneficial Owners. The Master Tenant will be responsible for all costs of operating, managing, leasing, and maintaining the Farms during the term of the Master Lease other than capital expenses, which are the responsibility of the Trust. The Master Tenant has the ability to sublease the farms to the operators conducting the farming on the WAE Farm and Hirst Farm.
What is a DST?
The purpose of a DST as an investment trust is to hold and manage real estate property investments. A DST is set up by a Sponsor, in this case DST Farmland, LLC, who creates a trust agreement which governs the operations and management of the trust. Investors purchase beneficial interests in the trust and are “Beneficial Owners” of the trust. The DST is managed by a Signatory Trustee, in this case PNW Ag Management, LLC (an affiliate of DST Farmland, LLC), who is responsible for overseeing the operations of the trust. A Delaware Statutory Trust also has a Delaware Trustee which in this case is SMC 3807 Services, LLC. Each of the Delaware Trustee and the Signatory Trustee has certain responsibilities and authority over the Trust and its properties. Please see the Trust Agreement in the Documents tab for more details. This structure allows the Beneficial Owners to participate as passive investors. The rental income generated by the farmland held by the DST is expected to be distributed to the Beneficial Owners of the trust.
DSTs are eligible for Section 1031 exchanges, both into and out of the ownership structure, which allow investors to defer eligible capital gains when selling one investment property and acquiring another through a qualified intermediary. Section 1031 exchanges may also serve to provide qualified investors with increased buying power due to the associated tax deferral, along with the ability to diversify a real estate portfolio. In addition to these potential benefits of a 1031 exchange, qualifying investors may also realize certain estate planning benefits, as heirs, subject to satisfaction of certain criteria and the non-occurrence of any disqualifying events, may inherit properties on a stepped-up basis, potentially reducing or eliminating capital gains taxes.
Why We Chose This Investment
Delaware Statutory Trust
DST: Central Washington Farmland Trust provides investors with opportunities to directly engage the farmland asset class through the Delaware Statutory Trust (DST) investment vehicle, which is Section 1031 Exchange eligible, both into and out of the ownership structure.
Expert Sponsorship
This offering is sponsored by DST Farmland, LLC.
Farmland Diversification
The property consists of two diverse properties, an irrigated farm in Grant County producing fresh market crops and traditional row crops and a dryland wheat farm in Adams County. By combining highly desirable irrigated acreage with dryland wheat farming it creates the opportunity for balanced appreciation and relatively high cash yields.
Additional Details
Maximum Subscription Amount: $6,210,000
Please note retirement accounts are not eligible to invest in this offering (SDIRA, solo 401(k), etc.)
Please see the Financials tab, the Purchase Agreement and the Trust Agreement for additional information. The Confidential Disclosure Memorandum (PPM) is available in the Documents tab to be viewed or downloaded. The PPM and offering descriptions should be read carefully to fully understand the objectives, risk factors, charges, and expenses of an investment.
This offering is sponsored by DST Farmland, LLC. Central Washington Farms DST is an opportunity for 1031 exchange investors to invest in a diversified Delaware Statutory Trust consisting of both irrigated and dryland assets in a prominent agricultural region. Please carefully review PPM as well as the associated offering documents for more details. AcreTrader Financial, LLC, and DST Farmland, LLC, cannot provide investors with tax advice, nor can we guarantee any particular tax outcomes. This summary description should not be interpreted as tax advice. Please consult with your tax advisor before investing eligible gains into a Delaware Statutory Trust.
Please note that an affiliate of the Issuer, Peoples Company, is a customer of Acres.com, which is an affiliate of AcreTrader Financial, LLC.
Risk Factors
Please refer to the PPM for the full list of risk factors.
Reliance on Farm Tenants
The Farm Tenants are obligated to pay rent to the Master Tenant on a semi-annual basis only. In the event the Farm Tenants’ rent payments are less than expected, interrupted and/or delayed, the Master Tenant may be required to defer payment of Stated Rent and/or Bonus Rent until the Farm Tenants pay sufficient rent to the Master Tenant to enable the Master Tenant to pay accrued Stated Rent and/or Bonus Rent. The Farm Tenants’ ability to make rent payments to the Master Tenant is subject to certain risk factors including the Farm Tenants’ crop production and ability to sell crops for adequate prices.
Farm Operations
The Farm Tenants shall utilize the Properties as farmland. Farming operations carry a variety of risks that the Trust cannot mitigate. There is a risk that the Properties will not yield any crops due to inclement weather, drought, flooding, pest infestation, hail, diseases, tenant vacancy or abandonment and other natural or human caused disasters. Due to the nature of crops as a commodity, there is a risk that crop prices could fall to levels that will not sustain an ongoing operation and may result in a Farm Leases payment default or payment delays. Similarly, farming has historically been a marginally profitable business and, therefore, projected profits or variable rent payments may not materialize. Any of these risks may adversely affect Investor’s investment in the Interests.
Investors Have Limited Control over the Trust
The Trustees (and in particular the Signatory Trustee) are solely responsible for the operation and management of the Trust. The Investors have no right to participate in the management of the Trust, or in the decisions made by the Trustees. Even though the Investors will be canvassed prior to the Signatory Trustee entering into a binding contract to sell the Properties, and even though such Signatory Trustee will take the opinions of the Investors concerning such prospective sale into account in good faith, the Signatory Trustee is under no obligation to make its decision with respect to such prospective sale in accordance with the wishes of the Investors. Pursuant to the Trust Agreement, the decision to sell one or both the Properties is in the sole discretion of the Signatory Trustee and may be made at any time. The Trustees may only be removed if they have engaged in willful misconduct, fraud or gross negligence by Investors holding a majority of the Interests. Investors should not purchase Interests unless they are willing to entrust nearly all aspects of the management of the Trust to the Trustees.
Acquisition of the Interests May Not Qualify as a Section 1031 Exchange
An Interest may not qualify under Section 1031 for tax-deferred exchange treatment and a portion of the proceeds from an Investor’s sale of his or her property to be relinquished could constitute taxable boot. Whether any particular acquisition of an Interest will qualify as a Section 1031 Exchange depends on the specific facts involved, including, without limitation, the nature and use of the Relinquished Properties and the method of its disposition, the use of a qualified intermediary and a qualified exchange escrow and the lapse of time between the sale of the Relinquished Properties and the identification and acquisition of the replacement property. Neither the Sponsor nor its Affiliates or agents are examining or analyzing any Investor’s particular circumstances to determine whether such Investor’s acquisition of the Replacement Properties qualifies as a Section 1031 Exchange. Moreover, no opinion or assurance is being provided to the effect that any individual Investor’s transaction will qualify under Section 1031. Such examinations or analyses are the sole responsibility of each Investor, who must consult with his or her own independent legal, tax, accounting and financial advisors before purchasing an Interest. If the factors surrounding an Investor’s disposition of the Relinquished Properties and his or her acquisition of the Interests do not meet the requirements of Section 1031, the disposition of the Relinquished Properties will be taxed as a sale and the IRS will assess interest and possibly penalties for failure to timely pay such taxes. See Tax Risks in the PPM for more information.
Specific Risks of 1031 Exchanges
1031 exchanges are complex and subject to significant conditions, restrictions, limitations, time constraints, fees and expenses, and other risks. See Tax Risks in the PPM for more information.
Specific Risks of Delaware Statutory Trusts
DSTs are subject to unique risks including, but not limited to regulatory risk and potentially negative tax consequences. Please see the risk factor section in the PPM for more information.
Note that Investors are purchasing shares in an entity that will purchase this farm but are not purchasing actual acreage of the farm directly.
Disclosures
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