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Origin Investments Launches 1031 Exchange DST Platform

Multifamily investment sponsor Origin Investments has launched Origin Exchange for direct investment by retail investors, as well as registered investment advisers that allocate their clients’ capital to Origin offerings. Origin Exchange allows qualified 1031 exchange investors to access “institutional-quality” multifamily property investment opportunities and enjoy the tax advantages and estate-planning efficiencies of a 1031 exchange at a fraction of what the company said are typical fee structures of Delaware statutory trust programs distributed via financial advisers.

“Our philosophy is to create financial solutions that help our investment partners grow and protect their wealth,” said Michael Episcope, co-chief executive officer of Origin Investments. “Launching Origin Exchange was an easy decision. The 1031 exchange industry is notorious for sky-high fees, and investors deserve a better choice. Our goal is to upend this market by cutting out the middleman, offering high-quality investments, and simplifying the lives of investors who no longer want to actively manage real estate.”

As it launches the program, Origin has appointed commercial real estate vet Michael O’Shea to the newly created position of vice president of Origin Exchange.

O’Shea is a chartered financial analyst who has nearly 17 years of experience working in various capacities for real estate and financial services firms. Most recently he was a senior vice president at Cantor Fitzgerald from 2020 to 2023. He began his career with Inland Securities Corp and has experience in investor relations, capital raising, portfolio management, and tax-based investing.

“With Origin Exchange, we are creating access for investors who can come directly to Origin Investments rather than having to add another step or point of contact,” O’Shea said. “Equally as important, Origin’s fee structure is a small fraction of what others typically charge. Ultimately that translates into a greater financial position that over a number of years can produce a substantial difference.”

Typically, DST investments have sales commission and management fees that can be as high as 14%, said O’Shea. Origin Exchange charges an acquisition fee of 1% to 1.5% and expenses for organizational and operating costs – such as third-party expense reimbursements at 0.5% to 1% – but it doesn’t pay brokerage sales commissions, which means more of an investor’s capital is going into the purchase of real estate.

“Given that Origin Exchange will provide direct access, it’s important for investors to understand that they will be responsible for conducting their own due diligence and suitability analysis on the offerings,” said Brett Evans, a noted securities attorney. “These are services typically performed by third-party due diligence providers, broker-dealers and their registered representatives, and paid for by some of those commissions and fees included in traditional securitized offerings. In other words, ‘buyer beware.’”

Origin is in final negotiations and due diligence for its first DST acquisition and will offer positions starting at $250,000. O’Shea said he expects Origin DST offerings may provide typical yields in the 4% to 5% range in the first year of the offering.

The operating partnership of Origin’s IncomePlus Fund – an open-end fund that provides income and appreciation by investing in direct finance mechanisms, core-plus, and build-to-core assets – retains an option to acquire the DSTs sponsored by Origin at fair market value two years after the final investor closes in exchange for units in the fund’s operating partnership.

Launched in early 2019, the fund’s targeted investment objectives are to provide a 5% to 7% net annual yield, paid monthly; 3% to 4% net annual appreciation; and a 9% to 11% net annual return. As of March 31, 2024, its NAV was $441.4 million based on investments in 31 projects.

If the IncomePlus Fund acquires the DST, the OP units exchanged for the DST interest will be eligible to participate in a redemption program for enhanced liquidity that mirrors the redemption program provided by Origin’s IncomePlus Fund.

Since its 2007 founding, Origin Investment has executed more than $3.5 billion in real estate transactions.

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