Articles

    Webinar Provides Update on 1031 Exchanges

    Dan Wagner of Inland Real Estate Group, a sponsor of The Chicago Farmers, Nate Kuhn of Chicagoland 1031 Exchange and Lauren Speidel of Exeter 1031 Exchange Services provided a primer on the use of 1031 Like Kind Exchange Delaware Statutory Trust in a webinar prior to the regular February 8, 2021, meeting seminar.

    Dan explained that Inland has been heavily involved in 1031s for a number of years. He related that the Tax Reform Act of 1986 permanently changed tax sheltered limited partnerships. As a result, many sponsors walked away from these investments and lost investor capital. Inland salvaged some of the 1031s by moving its investors into 1031 exchanges using Walmart stores. In 1989, Inland became Walmart’s biggest landlord nationally.

    Lauren, regional manager of Exeter, said that Exeter was a nationwide qualified intermediary and she serves as an intermediary. Anyone engaged in a 1031 needs to hire a qualified intermediary to help advise, structure the exchange, prepare documentation, and to securely hold the funds, said Lauren.

    She noted that 1031s have been in existence for 100 years and are a great way for people to sell property that has been held for investment purposes, defer taxes, and have the full net sale price working for them in another investment. Lauren added that personal property such as stocks, bonds, cars, boats, or livestock no longer qualify for a 1031 Exchange due to the tax reform act of 2017. She said that a like/kind exchange, which is a 1031, addresses the sale of an investment property and the purchase of another investment property that the person intends to hold for a length of time.

    Nate, a financial adviser, helps investors identify what their goals are and helps determine which Delaware Statutory Trust (DST) makes sense for them. Dan pointed out that Inland purchases the property such as storage units, senior living facilities, grocery store, or Amazon distribution center but does not sell interests in the DST. It is not involved in structuring the 1031 Exchange, that is the work of people such as Nate and Lauren and their companies.

    Lauren reminded people that when doing a 1031 Exchange, the investor must identify the DST by name and address and they must indicate how much money they intend to invest. Nate noted he would walk clients through this process.

    Nate discussed the differences between DSTs and TICs (tenants in common):

    • DST investors own a percentage of beneficial interests in the DST that owns the real property; TIC owners have individual deeds for real property.
    • The DST is the sole borrower (investors do not have to apply for nor are they liable for any loan); each TIC investor is a borrower and responsible for loan liabilities.
    • DSTs are responsible for all property decisions; TICs offer voting rights, but require unanimous approval for a sale, lease and financing.
    • DSTs allow a higher number of investors (1,999 vs. 35 for a TIC) and typically require lower minimum investment amounts.


    “DSTs allow people to spread their assets and diversify,” added Nate. “The vast majority of deals in which we are involved are structured as DSTs.”

    He went on to say, “There is risk, assets are illiquid. DSTs are made to preserve wealth, but they don’t provide immediate access to your principal. An investor should be very sure that a DST fits into their financial plan.”

    Nate also noted that DSTs can accommodate both debt and no debt.

    Lauren and Nate stressed the importance of beginning the process or research early when considering a DST. “Having a conversation early is the key; a lot of structuring can be done in advance,” said Lauren. “Every 1031 Exchange is different. It is important to get educated. It also is important to engage a qualified intermediary prior to selling a property. The closing statement has to show that an intermediary is involved.”

    Their contact information is [email protected], (224) 505-2299, and the link to Chicagoland 1031 Exchange https://hubs.ly/H0GxQ110, and [email protected]., (630) 828-5200.

    Written by The Chicago Farmers Editor, Denise Faris

    Tillable Shares the 3-Part Formula for Farmland Management: Technology, Process, Relationships

    Good farmland management is based on three related components: data-forward processes, strong relationships, and the right technology.

    Excellent farmland management isn’t the result of guesswork and luck—staying on top of farmland maintenance requires strong organizational skills. You can develop these competencies over time, but as a general rule, you should pay attention to your farmland property with the same respect and commitment that you’d apply to any other asset. After all, for many landowners, their farmland is the most valuable asset they own.

    To do this, you’ll need to adopt data-driven processes, leverage technology and develop strong relationships to ensure that you and your farmer meet your goals next season and in the long-term. Here’s how to address these three pillars in your own operation:

    1. Establish data-driven processes for your farmland operation

    When you’re looking to clean up your farmland management practices, the first step is to carefully examine the processes you already have in place.

    Ask yourself how you expect to receive your rental payments and how you’ll decide whether or not to renew your current tenant’s lease. It’s important to think about how your farmer is doing and to keep tabs on your soil’s health.

    Once you’ve opened up the hood on your operations machine:

    1. Decide what data is necessary. Look at the data you have on hand. Does it answer your questions? If not, you’ll need to identify and seek out other sources of information, whether through soil analysis or adopting new data collection practices in the season ahead.
    2. Set benchmarks. Using the data you have, analyze the current state of your farmland’s health and productivity. This is the basis on which you’ll set your goals.
    3. Establish goals. Decide where you’d like to see changes or improvements. Be sure to include a timeline, as change won’t necessarily happen overnight or even in one growing season.

    This self-assessment is the first step in revamping your farmland operations, and it’s okay if you discover that you need more information. After all, there are more sources for farmland data available than ever before, which brings us to the second pillar.

    2. Pay attention to your evolving technology and data needs

    Technology is the number one tool for farmland management. Precision agriculture tools are widely available, and the data they generate can be an invaluable resource. Farmers today rely on this software to analyze the results of their operations, and this information is equally valuable to landowners.

    If you’re working with farmers who use precision agriculture equipment but you’re not asking them to share the data these tools generate, you’re missing a major opportunity. It’s simple to print out a report, and if you know you plan to incorporate this data into your annual analysis, be sure to include data delivery practices in your next farmland rental agreement.

    It’s also important to make sure you’re maintaining digital records of your farmland rental agreements and storing your records in an organized way. This can be as simple as establishing a naming convention for your digital files and entering data points into an Excel spreadsheet.

    There are new digital farmland management options on the market, and if you’re looking for a user-friendly platform, try using Tillable’s to set up your next Hassle-Free Lease and track your farm’s data.

    3. Build a strong relationship with your farmer

    Although this is the third element in the formula for farmland management, it goes hand-in-hand with the first. You can make all the plans you want for your property, but unless you have a strong relationship with your farmer, you’re unlikely to meet your goals.

    When you start to consider what your farmland management practices are and how you can improve them, don’t stop at asking yourself what your goals for the farm are. Reach out to your farmer and find out what they’re hoping to achieve in the next growing season and beyond.

    As part of this conversation, you may identify that you need to start using new or different technology to get the right data to measure your farm’s progress. If they don’t want to share data with you, it may be time to start thinking about changing farmland tenants.

    Your farmer will appreciate your investment in their stewardship of your land, and you’ll set yourself up for a committed relationship that supports executing a long-term plan for farmland success. It’s key that you develop a relationship built on loyalty and trust.

    Strong communication around the outcomes you hope to achieve will help you both meet your goals for sustainability and profitability.

    Use data to meet your goals for your farmland operation

    There’s a vast amount of information available on the internet today aimed at helping farmland owners figure out how to improve their operations. By leveraging new technologies and agtech improvements, you can independently improve your farmland management skills and grow your knowledge base.

    But this new information can be difficult to get a handle on and farmland management can be a lot of work. We understand that for some landowners it can feel overwhelming.

    Tillable can help you find the right tenants and establish organized data practices to take care of your farm into the future without taking you out of the loop. If you’d like to learn more about how you can leverage data to meet your goals for the next growing season, reach out today to get the tools you need.

    For more information, please visit https://tillable.com/the-3-part-formula-for-farmland-management-technology-process-relationships/

    2019-2020 Sponsor Spotlight: American Farmland Trust

    American Farmland Trust is a gold level sponsor of The Chicago Farmers and Michael Happ, gave attendees at the January 13, 2020, meeting a brief overview of the group. Happ is director of development, Midwest, for American Farmland Trust (AFT), which advocates for farming.

    AFT is an early advocate of agricultural conservation and strives to ensure that the country’s farmland is not lost to poor community planning and harmful farming practices, said Happ.

    “In the last 20 years, the United States has lost an amount of farmland that is equivalent to the state of Iowa,” said Happ. “If continued, this pattern will jeopardize our country’s ability to feed its growing population.”

    Happ said that AFT is helping communities grow strategically so that farmland is not decimated. At the same time, AFT directly works with farmers to guide them in initiating healthy farming practices. “We are available to give them the resources they need to succeed in maintaining healthy soil” he related.

    Happ also noted that the farming population is aging with the average age of the American farmer being over 58-years-old and 40 percent of this group 65-years-old or more.

    “We are involved with young farmers and provide them with resources that help the young farmer early in their careers and erase barriers. Our goal is to give young farmers a smooth transition into farming,” Happ shared.

    Happ related that AFT has begun a five-year fundraising campaign for farmland protection and gifts and pledges of all sizes are both necessary and appreciated.

    “We are a non-profit group so monetary donations are a great help,” said Happ. “Look into our programming offerings and take advantage of them. Also, if you have young farmers in your family or community who could benefit from more resources, please put them in touch with us.”

    Happ may be contacted at [email protected]

    Inland Sponsor Spotlight

    Dan Wagner, of the Inland Real Estate Group, LLC, a Platinum Sponsor of TCF, from left, Aubrey Kobernus, of Realtor Land Institute, Clayton Harris III, executive director of the Illinois International Port District, and Barbara Clark, past TCF president.

    The Inland Real Estate Group, LLC is the newest Chicago Farmers’ Platinum Sponsor. During the November 18, 2019, TCF meeting, Dan Wagner, Senior Vice President, Government Relations, provided a brief overview of the firm, which has offices in Oak Brook, Chicago, and Atlanta, Georgia.

    Dan explained that the group was founded 52 years ago by four Chicago public school teachers. Over the years it has purchased $47 billion in commercial real estate. In his discussion he focused on the Delaware statutory trust (DST) structure that is used in Section 1031 exchanges. Inland Private Capital Corporation’s counsel worked with the Internal Revenue Service to educate them on the DST structure and Revenue Ruling 2004-86 was issued as a result of the collaboration. Section 1031 of the Internal Revenue Code can provide a strategy for deferring capital gains tax that may arise from the sale of a business or investment real property.

    With a DST, a person could own farmland, an apartment building or another kind of rental property, sell it and then enter into a Section 1031 like-kind real estate exchange through a fractional ownership of a large condominium complex, for example.

    The DST structure allows the investor to continue to exchange real properties until the investor’s death. Upon the death of the investor, the heirs may receive a “step-up” in basis to avoid initial capital gains tax.

    “I have just skimmed the surface of the 1031 Delaware Statutory Trust, but I would be happy to discuss it at length with anyone,” said Dan.

    For more information go to these websites:

    Why I Teach about Food and Agriculture

    Why I Teach about Food and Agriculture
    By Beth Christian

    I grew up on a fifth-generation family farm in Bureau County. My siblings and I learned hard work and collaboration at a young age. My family raised corn and soybeans as well as wheat, oat, rye, and hay, most of which was used to feed our livestock.

    Growing up, my sisters, brother, and I were members of 4-H. 4-H is a nationwide program that offers young people the opportunity to learn through hands-on projects in areas like health, science, agriculture and citizenship. 4-H members are encouraged to take on proactive leadership roles and are given the guidance and mentorship they need to be successful. Even today, 4-H programs are in every county and parish in the country- even Cook County- through in-school and after-school programs, school and community clubs and 4-H camps.

    With eager anticipation to put some space and concrete between my farm background and my life, I relocated to Cook County. Despite the distance, my farm background followed me all the way to Oak Park/River Forest.  

    In my classroom, I was an advocate for project learning, inquiry-based discovery, and developing the curriculum-assessment cycle central to the interests of the child. As part of this teaching style, I’d ask parents to join us and serve as our “Project Experts” during our discovery of a topic. Once, a parent joined us for cupcake baking. The parent kindly brought the ingredients and introduced each item to the students. She proudly brought out brown eggs and stated they were brown because they were organic, not bleached, like white eggs. What she didn’t realize was that different breeds of chickens lay different colors of eggs. The chickens being raised used organic growing methods does not change the color of eggs that the chickens lay.

    I quickly realized that there was a considerable amount of mis-information or lack of information that we, as parents and teachers, unknowingly were giving our children. I believe that providing accurate information is my responsibility as a teacher. So many children don’t know where their food comes from and unfortunately, as our population has gotten more urban, many teachers and parents don’t know much about the sources of their food.

    Having grown up on the very same farm that my brother and father still farm, I sought help from the Cook County Farm Bureau’s Agriculture in the Classroom program (AITC). AITC works to ensure that Cook County teachers have the resources to enable them to incorporate agriculture into their existing curriculum and to provide agricultural opportunities for students in Cook County.

    Cook County Farm Bureau® is the county’s largest general farm organization and is dedicated to bridging the gap between farmers and urban consumers. Through education programs targeting youth and their parents and programs designed to connect farmers with potential consumers, Farm Bureau members are actively engaging in conversations about food and the shared values between farmers and consumers.

    Farm Bureau and AITC allowed me to share my love of the farm with students and enabled me to learn more about the care of animals and plants, farmers’ attention to sustainability using technology, and the shared values of farmers and consumers.

    Teaching about agriculture is in everything I teach. I have become a better early childhood, special education, and collegiate professor through the Cook County Farm Bureau.