Capital Square Delivers 152% Total Return to DST Investors in UPREIT Transaction with Capital Square Housing Trust

Capital Square, one of the nation's leading sponsors of tax-advantaged real estate investments and an active developer and manager of housing communities, announced today the sale of Mayton Transfer Lofts, a 223-unit multifamily community in Old Towne Petersburg, Virginia, located 25 miles south of Richmond, in an umbrella partnership real estate investment trust (UPREIT) transaction. Capital Square completed the sale on behalf of investors in CS1031 Old Towne Loft Apartments, DST, to Capital Square Housing Trust, a real estate investment trust sponsored by Capital Square. Twenty-four of the 38 DST owners exchanged their DST interests for limited partnership units in Capital Square Housing Trust's operating partnership in a tax-advantaged transaction under Section 721 of the Internal Revenue Code.

Capital Square originally acquired the property in 2018 for $21.5 million as sponsor of the DST/Section 1031 exchange program. As a result of the $27.25 million UPREIT transaction, the DST owners realized a total return of over 152%.1

"Capital Square Housing Trust is methodically building its portfolio with quality assets that reach maturity from the DST/1031 program," said Louis Rogers, founder and co-chief executive officer of Capital Square, the sponsor of Capital Square Housing Trust. "All DST investors receive fair market valuation in our UPREIT transactions and their choice of limited partnership units in Capital Square Housing Trust's operating partnership, cash for another exchange to continue the tax deferral under Section 1031 or cash on a taxable basis."

Unlike many UPREIT transactions, Capital Square affords its investors multiple options to:

• exchange their DST interests for limited partnership units in the REIT's operating partnership without taxation under Section 721,
• structure another exchange to continue their tax deferral under Section 1031, or
• cash out all or a portion of their investment on a taxable basis.

Regardless of the option selected, all investors are treated equally, with the same fair market value purchase price based on appraised value.

Located at 250-316 East Bank St., the Mayton Transfer Lofts building was originally constructed in 1911 and was formerly used as a warehouse and moving and storage facility. In 2008-2012, the property was renovated into a Class A apartment community featuring historic elements from its original construction, including exposed brick, hardwood and concrete floors, high ceilings and original beams.

Situated on 4.66 acres, Mayton Transfer Lofts is comprised of 16 studio apartments, 152 one-bedroom, one-bathroom apartments, 46 two-bedroom, one-bathroom apartments, four two-bedroom, two-bathroom apartments, and five two-story townhouse units. Community amenities include 299 gated, off-street parking spaces, controlled access, stacked washer and dryers in every unit and resident memberships at the adjacent YMCA. The property is centrally located in the heart of Old Towne Petersburg in close proximity to Interstate 95 with direct access to Interstate 85 and State Route 301. It is approximately two miles from Fort Gregg-Adams, formerly known as Fort Lee, and 25 minutes south of Richmond, the capital of the Commonwealth of Virginia, and a six-minute drive from Virginia State University.

The $27.25 million fair market value of Mayton Transfer Lofts was established based on an independent MAI appraisal. Additionally, the nominating and corporate governance committee of the board of directors of Capital Square Housing Trust obtained a fairness opinion from Robert A. Stanger & Company, a third-party investment banking firm.

"This transaction speaks volumes of our key differentiation as a vertically integrated investment sponsor and how we are able to deliver attractive options to our investors," said Whitson Huffman, co-chief executive officer. "Those who participated in the DST were able to realize a successful total return, and those who participated in the UPREIT transaction received enhanced portfolio diversification as well as  greater cash flow along with numerous other REIT benefits."2

Capital Square Housing Trust now owns five multifamily communities with a gross asset value in excess of $212 million, based on purchase price.

Since its founding in 2012, Capital Square has acquired more than 170 real estate assets for over 6,500 investors seeking quality replacement properties that qualify for tax deferral under Section 1031 of the Internal Revenue Code and other investors seeking stable cash flow and capital appreciation. The firm has a portfolio of 55 multifamily apartment communities, 13 age-restricted manufactured housing communities in Florida and seven build-for-rent communities, with a total investment cost of nearly $5 billion.

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