Case Studies.Avnet Technology Solutions R&D
and Assembly Facility

GRT’s creative equity structuring provided the Seller a tax advantaged disposition while permitting GRT to conserve its cash and expand the portfolio with an integral R&D facility leased to a quality credit tenant.

Avnet Technology Solutions R&D and Assembly Facility – Chandler, AZ

Product

Class “A” R&D Facility

Purchase Date

May 2013

Transaction Size

231,000
  • Challenge:
    • Investors seeking to defer capital gains taxes while increasing diversification in real estate should consider utilizing a “721” or an “UPREIT” exchange.
    • In 2013, a group of 21 Tenants-In-Common Investors (“TIC Group” or “Seller”) looked for a tax advantaged opportunity to monetize its equity position relative to an asset that was purchased in 2008.
  • Resolution:
    • GRT’s acquisition proposal contemplated the TIC Group consummating a “721” or an “UPREIT” exchange for GRTs Operating Partnership (“OP”) Units, in addition to a separate “all-cash” offer as an alternative to the OP Unit offer for those members of the Seller that elected to receive cash. GRT’s OP is the actual entity through which the REIT acquires and owns its properties.
      • The cash offer was at a 10% discount, which approximated GRT’s equity raise costs. Naturally, the large majority of the TIC Group elected to effectuate the “721” exchange.
    • The acquisition structure differentiated GRT’s bid and was highly effective in securing the asset.
  • Benefits:
    • This structuring provided a “win-win” scenario that allowed GRT to leverage its currency and conserve cash while providing the members of the Seller (many of whom had an extremely low basis in the investment) an efficient means of deferring taxes while enjoying the diversification benefits of owning a portion of a large portfolio of assets.
    • Considering GRT continued to make acquisitions, it allowed the Seller to benefit from future buying opportunities in the REIT without triggering any capital gains or depreciation recapture tax events.