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.