Alternative Investments

As part of our investment offerings, Dumaine Investments provides guidance in investing in alternative investments including private placements in real estate, primarily via 1031 Exchanges. These investments, typically conducted through Delaware Statutory Trusts (DSTs), are trusts created under Delaware law that are a means of passively investing in real estate for accredited investors.

Advantages:

• Investors can defer the capital gains tax from the sale of investment real estate indefinitely by re-investing the proceeds into a DST by undergoing a 1031 Exchange.
• By investing in multiple DSTs, there is an opportunity to significantly reduce risk by diversifying investments geographically as well as amongst the various types of different investment real estate such as apartments, individual housing, essential services retailers, medical facilities, self-storage, etc.
• DSTs allow for investors to passively invest in real estate without the many challenges of active real estate management and ownership.

Disadvantages:

• Lack of liquidity as funds can be locked up in a DST for up to 10 years with extremely limited means, if any, of selling the investment before the trust is liquidated.
• Fees due to the property’s third-party management as well as an additional layer of fees levied by the DST’s sponsor, primarily at the property’s purchase and sale, which reduces overall returns.
• Total lack of control over the investment’s operations and management as well as the timing of the investment’s sale.

Additionally, Dumaine Investments provides assistance to investors looking to shelter capital gains through investments in Opportunity Zone Funds (OZFs).  By investing in an OZF, capital gains may be deferred for up to 5 years at which stage 90-100% of the original capital gains tax must be paid. After 10 years, if the property is sold at a profit, ALL potential federal capital gains taxes are waived.

Opportunity Zone Funds (OZFs) invest in lower-income areas with special tax advantages established by the Tax Cuts and Jobs Act of 2017. The purpose of this program is to put capital to work that would otherwise be locked up due to the asset holder’s unwillingness to trigger a capital gains.

Periodically, Dumaine may identify other private placement investment opportunities that are anticipated to provide risk-appropriate returns. We spend substantial resources searching for additional investments that may be suitable for our clients. If such an investment is identified, accredited clients for whom the security is appropriate would be contacted to determine their interest in such an investment.

Note: the above investments are sophisticated investments and are ONLY suitable for accredited investors. The Securities and Exchange Commission defines an accredited investor as being and individual or couple with a net worth exceeding $1 million as an individual or couple OR having have earned an income surpassing $200,000 ($300,000 if combined with a spouse or its equivalent) during the last two years and have an expectation to earn a similar amount in the current year.

Dumaine’s founder, Clifford F. Favrot, has 19+ years of experience running both the asset and property management for multi-family apartment communities. In his role as the Managing Partner of Chateaux Dijon Apartments, he oversaw all aspects of daily activities as well as the financial and strategic operations for a 330+ unit residential apartment community. During his time with the apartment complex, he oversaw a $25+MM property reconstruction following Hurricane Katrina which resulted in a substantial increase in rental revenues. In the summer of 2019, and after selling the property for a premium to recent comparable sales, he re-invested the sales proceeds into a highly diversified portfolio of DSTs and OZFs which have yielded an appreciable increase in risk-adjusted cash flows.

In the last several years, Dumaine has invested in several private placements within the real estate sector which have provided meaningful risk-adjusted returns as bond proxies.

Please give us a call if you would like to discuss these unique investment opportunities further at (504) 521-7350.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. None of the information contained on this page or this website shall constitute an offer to sell or solicit or to buy any security or investment product.