PEACHTREE GROUP, THE newly formed affiliate of Peachtree Hotel Group created last week to handle its real estate investments, is launching its first initiative, the 1031 Exchange Delaware Statutory Trust program. The company also selected Tim Witt as president over the new program.
A DST is a single-purpose entity qualified for Section 1031 real estate exchanges, according to Peachtree. It allows investors to exchange replacement properties without incurring taxable gain on the sale of previously owned assets. Peachtree's 1031 Exchange DST program will invest in institutional-grade hotels in the U.S. through Peachtree Hospitality Management, another division of Peachtree, is expected to operate any properties acquired as part of the exchange.
"As we expand our array of high-quality, diversified investment strategies, we wanted to create 1031 Exchange DSTs to provide tax deferral strategies in the hospitality sector," said Greg Friedman, Peachtree's CEO and managing principal. “We anticipate significant growth and appreciation in the hospitality sector, driving values above pre-pandemic levels. Also, real estate offers an excellent alternative investment channel for those seeking an inflation hedge. We strongly believe hospitality is the most investable asset in the market today, and we anticipate being able to achieve outsized returns.”
Previously, Witt was chief investment officer of DAI Securities. Before joining DAI, Witt served as CIO of Concorde Investment Services and, before that, was a legislative director at the U.S. House of Representatives during the 113th Congress. He began his career as a Wall Street equity analyst and has been recognized by the Wall Street Journal as an All-Star Analyst. Witt holds several licenses and is a member of the Alternative & Direct Investment Securities Association and the Institute for Portfolio Alternatives.
"To strengthen our vertically integrated investment platform that will benefit our stakeholders, we knew Tim's experience building out alternative investment platforms would be the perfect fit to launch our program," Friedman said.
Witt said he was very excited to join Peachtree.
"They have a strong history of excellence and have built an outstanding integrated real estate investment platform,” Witt said. “I aim to build on these achievements by creating an industry-leading 1031 exchange DST program."
The 1031 exchange, in which one real estate investment property can be swapped for another to defer capital gains taxes, gets its name from Section 1031 of the Internal Revenue Code, according to Investopedia.com.
“An exchange can only be made with like-kind properties, and Internal Revenue Service rules limit its use with vacation properties,” Investopedia said. “There are also tax implications and time frames that may be problematic.”
Other tips provided by Investopedia.com include:
- You can sell a property held for business or investment purposes and swap it for a new one that you purchase for the same purpose, allowing you to defer capital gains tax on the sale.
- Proceeds from the sale must be held in escrow by a third party, then used to buy the new property. The investor cannot receive them, even temporarily.
- If used correctly, there is no limit on how frequently one can do 1031 exchanges.
- The rules can apply to a former principal residence under very specific conditions.
Peachtree Group is led by Peachtree Hotel Group managing principals, Friedman and Jatin Desai, serving as chief financial officer. It will manage and control investments and direct investment strategies across different divisions, including hospitality, commercial lending, residential development and capital markets, the company said in a statement.
